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<TITLE>Form S-1</TITLE>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>As filed with the Securities and Exchange Commission on April 18, 2011 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Registration&nbsp;No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;</B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>FORM S-1 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4"><B>REGISTRATION STATEMENT </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>UNDER</I></B><B> </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B></B><B><I>THE SECURITIES ACT OF 1933</I></B><B> </B></FONT></P> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>FRANCESCA&#146;S
HOLDINGS CORPORATION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Exact name of registrant as specified in its charter) </B></FONT></P>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>5632</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>20-8874704</B></FONT></TD></TR>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(State or other jurisdiction of incorporation or organization)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Primary Standard Industrial Classification Code Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(I.R.S. Employer<BR>Identification Number)</B></FONT></TD></TR></TABLE> <P STYLE="font-size:3px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>c/o Francesca&#146;s
Collections, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px;padding-bottom:0px;" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>3480 W. 12<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> Street </FONT></B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Houston, Texas 77008 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(713)
864-1358 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive
offices) </B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>John De Meritt </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>President
and Chief Executive Officer </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px;padding-bottom:0px;" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>3480 W. 12<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> Street </FONT></B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Houston, Texas 77008 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(713)
864-1358 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(Name, address, including zip code, and telephone number, including area code, of agent for service) </B></FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Copies of Communications to: </I></B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Gregory Ezring, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Sung Pak, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>O&#146;Melveny&nbsp;&amp; Myers LLP</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>7 Times Square</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>New York, New
York 10036</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(212) 326-2000</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>LizabethAnn R. Eisen, Esq.</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>Cravath, Swaine &amp; Moore LLP</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Worldwide Plaza</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>825 Eighth Avenue</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>New York,
New York 10019</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(212) 474-1000</B></FONT></P></TD></TR></TABLE>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Approximate date of commencement of proposed sale to public:</B> As soon as practicable after the effective date of this Registration Statement.
</FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the
Securities Act, check the following box.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT> </FONT></P>
<P STYLE="margin-top:3px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If this Form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT> </FONT></P>
<P STYLE="margin-top:3px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT> </FONT></P> <P STYLE="margin-top:3px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If delivery of the prospectus is expected to be made pursuant to Rule 434, check the
following box.&nbsp;&nbsp;<FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT> </FONT></P>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>CALCULATION OF REGISTRATION FEE </B></FONT></P> <P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="14%"></TD>
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<TD WIDTH="16%"></TD></TR>
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<TD VALIGN="bottom" ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Title&nbsp;of Each Class&nbsp;of<BR>Securities to be Registered</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Proposed<BR>Maximum<BR>Aggregate<BR>Offering&nbsp;Price(1)</B></FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Amount of<BR>Registration&nbsp;Fee(2)</B></FONT></TD></TR>
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<TD VALIGN="top" STYLE="BORDER-TOP:1px solid #000000"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Common Stock, par value $0.01 per share</FONT></P></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1">$150,000,000</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000; BORDER-TOP:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="BORDER-TOP:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1">$17,415</FONT></TD></TR>
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<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR STYLE="font-size:1px">
<TD COLSPAN="5" VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR></TABLE>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. The proposed maximum offering
price includes amounts attributable to shares that may be purchased by the underwriters to cover the underwriters&#146; option to purchase additional shares of our common stock from the selling stockholders at the initial public offering price less
the underwriters&#146; discount. See &#147;Underwriting&#148;. </FONT></TD></TR></TABLE>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended </FONT></TD></TR></TABLE>
<P STYLE="font-size:2px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:2px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file&nbsp;a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine. </B></FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="line-height:2px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2" COLOR="#cc062a"><B>The information in this preliminary prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2" COLOR="#cc062a"><B>Subject to Completion. Dated April 18, 2011 </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">

<IMG SRC="g160201g42h61.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Francesca&#146;s Holdings Corporation </B></FONT></P> <P STYLE="margin-top:20px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="4">Common Stock </FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">This is an initial public
offering of shares of common stock of Francesca&#146;s Holdings Corporation. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are offering
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of the shares to be sold in the offering. The selling stockholders, which includes certain of our officers and directors, identified in this prospectus are offering an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders, including any shares sold by the selling
stockholders in connection with the exercise of the underwriters&#146; option to purchase additional shares. </FONT></P> <P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering,
there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. We intend to list our common stock on The NASDAQ Global Select Market under the symbol &#147;FRAN.&#148; </FONT></P>
<P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>See &#147;<A HREF="#toc160201_2">Risk Factors</A>&#148; on page 11 to read about factors you should consider before buying shares of our common
stock. </I></FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. </B></FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">Per&nbsp;Share</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Initial public offering price</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Underwriting discount</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds, before expenses, to us</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds, before expenses, to the selling stockholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD></TR></TABLE> <P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">To the extent that the underwriters sell more than
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock, the underwriters have the option to purchase up to an additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares from
the selling stockholders identified in this prospectus at the initial public offering price less the underwriting discount. </FONT></P> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:10px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters expect
to deliver the shares against payment in New York, New York on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011 </FONT></P>
<P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="45%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="20%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Goldman,&nbsp;Sachs&nbsp;&amp;&nbsp;Co.</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>J.P.&nbsp;Morgan</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Jefferies</B></FONT></P></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="30%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="34%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:ARIAL" SIZE="3"><B>RBC&nbsp;Capital&nbsp;Markets</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>Stifel&nbsp;Nicolaus&nbsp;Weisel</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="3"><B>KeyBanc&nbsp;Capital&nbsp;Markets</B></FONT></TD></TR></TABLE> <P STYLE="font-size:10px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:10px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Prospectus dated
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011. </FONT></P>

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<IMG SRC="g160201g85o20.jpg" ALT="LOGO"> </P>


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 <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><A NAME="toc"></A>TABLE OF CONTENTS </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="94%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_1">PROSPECTUS SUMMARY</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_2">RISK FACTORS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_3">SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_4">USE OF PROCEEDS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_5">DIVIDEND POLICY</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_6">CAPITALIZATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_7">DILUTION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_8">SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_9">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_10">BUSINESS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">68</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_11">MANAGEMENT</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_12">EXECUTIVE COMPENSATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">87</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_13">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_14">PRINCIPAL AND SELLING STOCKHOLDERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_15">DESCRIPTION OF CAPITAL STOCK</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_16">DESCRIPTION OF CERTAIN INDEBTEDNESS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">120</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_17">SHARES ELIGIBLE FOR FUTURE SALE</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_18">MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON&#150;U.S. HOLDERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">125</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_19">UNDERWRITING (CONFLICTS OF INTEREST)</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">129</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_20">LEGAL MATTERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">134</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_21">EXPERTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">134</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_22">CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">134</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#toc160201_23">WHERE YOU CAN FIND MORE INFORMATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Through and including
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer&#146;s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription. </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any
free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but
only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Basis of Presentation
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January&nbsp;31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January&nbsp;29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January&nbsp;30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January&nbsp;31, 2009. For fiscal year 2007, which ended on December&nbsp;31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December&nbsp;31st. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>

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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Industry and Market Data </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We obtained the industry, market and competitive position data throughout this prospectus from our own internal estimates and research as well as
from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been prepared from sources believed to be reliable, although they do not
guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal
company research is reliable and the definitions of our market and industry are appropriate, neither this research nor these definitions have been verified by any independent source. Further, while we believe the market opportunity information
included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily
subject to a high degree of uncertainty and risk due to a variety of factors, including those described in &#147;Risk Factors&#148;. These and other factors could cause results to differ materially from those expressed in the estimates made by the
independent parties and by us. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Trademarks </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT
STYLE="font-family:ARIAL" SIZE="2">We operate under our trademark &#147;francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>&#148; which is
registered under applicable intellectual property laws. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this
prospectus may appear without the <FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> or </FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">TM</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under
applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies&#146; trade names, trademarks or service marks to imply a relationship with, or
endorsement or sponsorship of us by, any other companies. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_1"></A>PROSPECTUS SUMMARY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should
consider before investing in our common stock. You should read this entire prospectus carefully, especially the &#147;Risk Factors&#148; section of this prospectus and our consolidated financial statements and related notes appearing at the end of
this prospectus, before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements. See &#147;Special Note Regarding Forward-Looking Statements&#148; for more information. </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>We are a holding company and all of our business operations are conducted through our wholly owned indirect subsidiary, Francesca&#146;s
Collections,&nbsp;Inc. (&#147;Francesca&#146;s Collections&#148;), a corporation formed and existing under the laws of the State of Texas. Francesca&#146;s Collections is wholly owned by Francesca&#146;s LLC (&#147;Parent&#148;), a limited liability
company formed and existing under the laws of the State of Delaware. Parent is a wholly owned subsidiary of Francesca&#146;s Holdings Corporation (&#147;Holdings&#148;). Except where the context otherwise requires or where otherwise indicated, the
terms &#147;Francesca&#146;s,&#148; &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; &#147;the company,&#148; &#147;our company&#148; and &#147;our business&#148; refer to Holdings and its consolidated subsidiaries as a combined entity. Some
differences in the numbers in the tables and text throughout this prospectus may exist due to rounding. </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Company
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> is one of the fastest growing specialty retailers in the United States. Our retail locations are designed and merchandised to feel like independently owned, upscale
boutiques and provide our customers with an inviting, intimate and differentiated shopping experience. We believe we offer compelling value with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts
at attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious, female customer, although we find that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique
setting. We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our boutiques have been successful across a wide variety of geographic markets and shopping venues. We believe we have an opportunity
to continue to grow our boutique base from 236 locations in 38 states as of April&nbsp;2, 2011 to approximately 900 boutiques in the United States over time. Our merchandise is also available through our e-commerce website,
<I>www.francescascollections.com</I>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that through the strength of our business model and our disciplined operating
philosophy, we have achieved strong financial performance and growth that is among the best in the specialty retail sector: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between fiscal year 2008 and 2010, our net sales increased from $52.3 million to $135.2 million, representing a compound annual growth rate of 60.8%.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in fiscal year 2009. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between the end of fiscal year 2008 and 2010 our boutique count increased from 111 to 207, representing a compound annual growth rate of 36.6%.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between fiscal year 2008 and 2010 our income from operations increased from $7.0 million to $29.6 million, representing a compound annual growth rate of 106.2%.
</FONT></P></TD></TR></TABLE>
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 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">1 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Competitive Strengths </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe the following strengths differentiate us from our competitors and are key drivers of our success: </FONT></P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Proven Trend-Right Merchandise Delivered at a Compelling Value</I>.&nbsp;&nbsp;&nbsp;&nbsp;We believe our ability to quickly identify and respond to emerging
fashion and lifestyle trends positions us to consistently offer high-quality, trend-right apparel, jewelry, accessories and gifts at prices that &#145;surprise and delight&#146; our customers. We offer a broad selection of merchandise, but
intentionally purchase small quantities of individual items for each boutique such that we frequently replenish our boutiques with new merchandise, keeping the shopping experience fresh and exciting for our customers. Our ability to make decisions
quickly on trend-right items combined with the short lead times of our vendors, maximizes our speed to market, as it generally takes only four to twelve weeks from the time an order is placed to the time merchandise is available on the boutique
floor. With these short lead times, we are able to make more informed buying decisions to meet customers&#146; merchandise expectations, and to react quickly to changing fashion trends. This approach, combined with our uniquely balanced product mix
of approximately 50% apparel and 50% jewelry, accessories and gifts, is designed to encourage more frequent visits by our customers and reduce the seasonal fluctuations and margin erosion experienced by many other specialty retailers.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Differentiated Shopping Experience.</I>&nbsp;&nbsp;&nbsp;&nbsp;We believe our warm and inviting boutiques and eclectic merchandise create a unique
environment. Our passionate boutique managers and associates are encouraged to infuse each boutique with their personality, which increases their motivation and enhances the feel of an independent, upscale boutique shopping experience. We believe
these attributes, along with our strategy of carrying a broad selection but limited quantities of individual styles, create a unique &#145;treasure hunt&#146; atmosphere that strongly appeals to our customers and differentiates us in the
marketplace. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Powerful Boutique Economics and Rigorous Real Estate Selection Process</I>.&nbsp;&nbsp;&nbsp;&nbsp;We have a proven boutique format that works across a wide
variety of shopping venues, market sizes, climates and demographics. Our boutiques average approximately 1,400 square feet, which is meaningfully smaller than most specialty retailers. The performance of our boutiques and our flexible real estate
format enhance our ability to secure prominent, highly visible locations in regional malls, lifestyle centers, street locations and strip centers. We deploy a rigorous real estate selection process with all new boutique opportunities measured
against specific financial and geographic criteria. Over the previous two fiscal years our new boutiques have generated first year cash on cash returns in excess of 150% and payback periods of less than one year, allowing the company to fund growth
from internally generated cash flow. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Solid and Scalable Infrastructure.</I>&nbsp;&nbsp;&nbsp;&nbsp;We continually invest in systems, controls and human resources to support our growth. In recent
years we have made significant improvements to the infrastructure of our finance, buying and planning, real estate and IT departments. For instance, we believe that we have developed an integrated sourcing, distribution and merchandising process
that is scalable and will facilitate the continued growth in the number of boutiques we operate. As we focus almost exclusively on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image, we do not believe
that we will require significant investments in traditional marketing and advertising initiatives as we expand our boutique base. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Experienced Management Team with a Disciplined Operating Philosophy.</I>&nbsp;&nbsp;&nbsp;&nbsp;Our senior management has extensive experience across a broad
range of disciplines in the retail industry, including merchandising, real estate, supply chain and finance. Our highly skilled </FONT></P></TD></TR></TABLE>
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executive team includes two of our Founders (as defined below), John De Meritt, our President and Chief Executive Officer, and Kyong Gill, our Executive Vice Chairperson. Together they lead a
dynamic team with a strong background at companies such as David&#146;s Bridal, Chico&#146;s, CVS, Banana Republic, Nordstrom and J.C. Penney. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Growth Strategy </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe we can continue to grow our revenues and earnings by executing on
the following strategies: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Grow Our Boutique Base</I>.&nbsp;&nbsp;&nbsp;&nbsp;We believe we have the potential to grow our base from 236 boutiques in 38 states as of April&nbsp;2, 2011
to approximately 900 boutiques in the U.S. over time. We opened 62 new boutiques in fiscal year 2010 and plan to open approximately 75 new boutiques in each of fiscal year 2011 and 2012. Going forward, we expect the economics of our new boutiques to
continue to be compelling. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Drive Comparable Boutique Sales</I>.&nbsp;&nbsp;&nbsp;&nbsp;We intend to drive comparable boutique sales by maintaining our distinctive approach to
merchandising, refining our differentiated boutique experience and increasing the sophistication of our buying and planning infrastructure. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expand the Penetration and Presence of our E-Commerce Business</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our e-commerce sales grew by 85% in fiscal year 2010 but only
represented 1.4% of our total net sales. We expect sales from this channel to continue to grow as consumers become more aware of our e-commerce capabilities and we open boutiques in new markets. </FONT></P></TD></TR></TABLE>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Enhance Operating Margins.&nbsp;&nbsp;&nbsp;&nbsp;</I>Our strong expected boutique growth should permit us to take advantage of economies of scale in
merchandising and sourcing and to also leverage our existing infrastructure, corporate overhead and other fixed costs. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Summary Risk Factors </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are
subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider these
risks, including all of the risks discussed in the section entitled &#147;Risk Factors,&#148; beginning on page 11 of this prospectus, before investing in our common stock. Risks relating to our business include, among others: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may not be able to effectively anticipate, identify and respond quickly to changing fashion trends and customer preferences; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may not be able to execute our growth strategy if we are unable to identify suitable locations to open new boutiques, obtain favorable lease terms, attract
customers to our boutiques, hire and retain personnel and maintain sufficient levels of cash flow to support our expansion; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">in connection with the audit of our consolidated financial statements as of and for the fiscal year ended January 31, 2009, the Company identified a material
weakness in our internal control over financial reporting for such period which related to accounting for convertible redeemable preferred stock. We have taken steps to remediate our internal control deficiencies, however, there are no assurances
that the measures we have taken were completely effective or that similar weaknesses will not recur; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may face disruptions in our current or planned new information systems; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may not be able to effectively manage our operations, which have grown rapidly, or our future growth; </FONT></P></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">3 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may be adversely impacted by economic conditions and the lack of success of the malls and shopping centers where our boutiques are located;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we operate in the highly competitive specialty retail apparel and accessories industry and may face increased competition; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may not be able to maintain or improve levels of comparable boutique sales; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we may not be able to obtain merchandise quickly and at competitive prices if any deterioration or change occurs in our vendor relationships or their businesses.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Principal Stockholders </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, affiliates of CCMP Capital Advisors, LLC (collectively referred to as &#147;CCMP&#148;), on the one hand, and Mr.&nbsp;Chong Yi, Ms.&nbsp;Kyong Gill, Ms.&nbsp;Insuk Koo and
Mr.&nbsp;John De Meritt (collectively referred to as the &#147;Founders&#148;), on the other hand, are expected to own approximately &nbsp;&nbsp;&nbsp;&nbsp;%, and &nbsp;&nbsp;&nbsp;&nbsp;%, respectively, of our outstanding common stock, or
&nbsp;&nbsp;&nbsp;&nbsp;%, and &nbsp;&nbsp;&nbsp;&nbsp;%, respectively, if the underwriters&#146; option to purchase additional shares is fully exercised. As a result, CCMP and the Founders will be able to exert significant voting influence over
fundamental and significant corporate matters and transactions. See &#147;Risk Factors&#151;Risks Related to this Offering and Ownership of Our Common Stock&#151;Concentration of ownership among our existing executive officers, directors and
principal stockholders may prevent new investors from influencing significant corporate decisions.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">CCMP is a private equity firm
specializing in buyouts and growth equity investments in companies ranging from $500 million to more than $3 billion in size. With offices in New York, Houston and London, CCMP focuses on four primary industries: Consumer, Industrial, Energy and
Healthcare. Investments under management in its current fund, CCMP Capital Investors II, L.P. include, in addition to the investment in our company, ARAMARK Holdings Corporation, Chaparral Energy Inc., Edwards Group PLC, Generac Holdings Inc.,
Infogroup Inc. and LHP Hospital Group. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Corporate and Other Information </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">We opened our first boutique in Houston, Texas in 1999. John De Meritt, our President and Chief Executive Officer, and Kyong
Gill, our Executive Vice Chairperson, are two of the original four Founders of francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>. In February
2010, CCMP acquired a controlling interest in the company with the goal of supporting Mr.&nbsp;De Meritt and the management team in accelerating our growth. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Holdings was incorporated in Delaware in 2007. We are a holding company and all of our business operations are conducted through Francesca&#146;s Collections, our wholly owned operating subsidiary. Francesca&#146;s
Collections was formed in 2006 and is the successor-in-interest of PFD II, Inc., a corporation incorporated in 1999 under the laws of the State of Texas. In 2002, we incorporated Francesca&#146;s Collections of CA, Inc., under the laws of California
to own and operate our boutiques in California. In 2008, Francesca&#146;s Collections of CA, Inc., was merged into Francesca&#146;s Collections and as a result of such merger, Francesca&#146;s Collections of CA, Inc. ceased to exist. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Office Location </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
principal executive office is located at 3480 W. 12th Street, Houston, Texas 77008, our telephone number is (713)&nbsp;864-1358 and our fax number is (713)&nbsp;426-2751. We maintain a website at <I>www.francescascollections.com</I>. We do not
incorporate the information contained on, or accessible through, our website into this prospectus, and you should not consider it part of this prospectus. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>THE OFFERING </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="63%"></TD></TR>
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<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Common stock offered by us</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Common stock offered by the selling stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT SIZE=0><BR></FONT> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares.</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares if the underwriters exercise their option to purchase additional shares in full.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Common stock to be outstanding immediately after this offering</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT SIZE=0><BR></FONT><br><FONT SIZE=0><BR></FONT>
<P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</FONT></P></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Use of proceeds</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">The net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us,
will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million, assuming an initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, the midpoint
of the price range set forth on the cover page of this prospectus.</FONT></P> <P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">We will not
receive any proceeds from the sale of shares by the selling stockholders. For a sensitivity analysis as to the offering price and other information, see &#147;Use of Proceeds.&#148;</FONT></P>
<P STYLE="font-size:4px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect to use approximately $41.4 million of the net proceeds we receive from this offering,
together with approximately $50.0 million of indebtedness under a new revolving credit facility, to repay our existing senior secured credit facility in full. This refinancing transaction is referred to in this prospectus as the
&#147;refinancing&#148;. We intend to use the remaining proceeds from this offering, if any, to provide funds for working capital and other general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business,
sales and marketing activities and other capital expenditures. See &#147;Use of Proceeds&#148; and &#147;Description of Certain Indebtedness&#148;.</FONT></P></TD></TR>
<TR>
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<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Principal Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, CCMP will own a controlling interest in us. We currently intend to avail ourselves of the controlled company exemption under the corporate governance rules
of The NASDAQ Stock Market.</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Dividend Policy</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the
foreseeable future. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition,
earnings, capital requirements, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. See &#147;Dividend Policy&#148;.</FONT></TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Risk factors</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Investing in our common stock involves a high degree of risk. You should carefully read the information set forth under &#147;Risk Factors&#148; beginning on page 11 of this prospectus,
together with all of the other information set forth in this prospectus, before deciding to invest in shares of our common stock.</FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">5 </FONT></P>


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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Proposed symbol for trading on The NASDAQ Global Select Market</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT SIZE=0><BR></FONT><br><FONT SIZE=0><BR></FONT> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">&#147;FRAN&#148;</FONT></P></TD></TR>
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<TD HEIGHT="5" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Conflicts of Interest</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">One or more affiliates of J.P. Morgan Securities LLC beneficially own more than 10% of CCMP Capital Investors II, L.P., which is a stockholder in the company. Because J.P. Morgan Securities
LLC is an underwriter and its affiliates beneficially, through CCMP Capital Investors II, L.P., own more than 10% of the company, J.P. Morgan Securities LLC is deemed to have a &#147;conflict of interest&#148; under Rule 5121 (&#147;Rule 5121&#148;)
of the Financial Industry Regulatory Authority. Furthermore, as described under &#147;Use of Proceeds&#148;, the company expects to use approximately $41.4 million of the net proceeds it receives from this offering, together with $50.0 million of
indebtedness under a new revolving credit facility, to repay its existing senior secured credit facility in full. Affiliates of Goldman, Sachs &amp; Co., J.P. Morgan Securities LLC and Jefferies &amp; Company, Inc. and the other underwriters are
lenders under the company&#146;s existing senior secured credit facility and will each receive their pro rata share of such repayment. Because it is possible that each of Goldman, Sachs &amp; Co., J.P. Morgan Securities LLC and Jefferies &amp;
Company, Inc. or their affiliates could receive more than 5% of the proceeds of this offering in connection with the repayment of the company&#146;s existing senior secured credit facility, each of Goldman, Sachs &amp; Co., J.P. Morgan Securities
LLC and Jefferies &amp; Company, Inc. is deemed to have a &#147;conflict of interest&#148; under Rule 5121. Accordingly, this offering will be conducted in accordance with Rule 5121. Rule 5121 requires that a &#147;qualified independent
underwriter&#148;, meeting certain standards, to participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Stifel, Nicolaus &amp; Company, Incorporated has
served as &#147;qualified independent underwriter&#148; within the meaning of Rule 5121 in connection with this offering. For more information, see &#147;Underwriting.&#148;</FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Unless otherwise indicated, all information in this prospectus relating to the number of shares
of our common stock to be outstanding immediately after this offering: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">excludes 2,416,446 shares of common stock issuable upon the exercise of options outstanding as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, at a weighted average exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per
share; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">excludes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock reserved for future issuance under our 2011 Stock
Incentive Plan, which plan will be in effect upon completion of this offering. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Unless otherwise indicated, all
information in this prospectus assumes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the repayment of all amounts outstanding under our existing senior secured credit facility immediately upon completion of this offering, with approximately $41.4
million of the net proceeds of this offering and $50.0 million of indebtedness under a new revolving credit facility; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">no exercise of the underwriters&#146; option to purchase additional shares; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the adoption of our amended and restated certificate of incorporation, or certificate of incorporation, and our amended and restated bylaws, or bylaws, to be
effective upon completion of this offering. </FONT></P></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">7 </FONT></P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our summary consolidated financial information and operating data as of the dates and for the periods indicated. Our
summary consolidated financial data for each of the years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;31, 2009 and the selected consolidated balance sheet data as of January&nbsp;29, 2011 and January&nbsp;30, 2010 has been
derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated balance sheet data as of January&nbsp;31, 2009 has been derived from our audited consolidated balance sheet, which
is not included in this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period
ending on the Saturday closest to January&nbsp;31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January&nbsp;29, 2011,
52 weeks of operations in fiscal year 2009, which ended January&nbsp;30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January&nbsp;31, 2009. For fiscal year 2007, which ended on December&nbsp;31, 2007, and prior periods, the
company operated on a fiscal calendar year ending December&nbsp;31st. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The historical results presented below are not necessarily
indicative of the results to be expected for any future period and the results for any interim period may not necessarily be indicative of the results that may be expected for a full year. The following summaries of our consolidated financial and
operating data for the periods presented should be read in conjunction with &#147;Risk Factors&#148;, &#147;Selected Consolidated Financial and Operating Data&#148;, &#147;Capitalization&#148;, &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; and our consolidated financial statements and the related notes, which are included elsewhere in this prospectus. </FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">8 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of Operations</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except share and per<BR>share amounts)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of goods sold and occupancy costs(2)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">65,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,244</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,358</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">42,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Selling, general and administrative expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,962</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,643</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,482</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,970</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Interest income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,633</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income before income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,918</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,382</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in redemption value of convertible redeemable preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock accrued dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,965</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: income attributable to participating securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to common shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic earnings (loss) per common share(3)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted earnings (loss) per common share(3)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends declared per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted average shares outstanding:</B>(4)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="12"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Balance Sheet Data</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 29,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,721</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">22,318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,036</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,830</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">114,592</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,242</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,556</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock&#151;series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23,561</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total shareholders&#146; deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(55,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(62,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(11,287</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Operating data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Comparable boutique sales growth for period(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Number of boutiques open at end of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales per average square foot for period (not in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">508</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">429</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">384</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Average square feet (in thousands)(6)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">266</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">185</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">136</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total gross square feet at end of period (in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">210</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales plus shipping and handling fees. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Cost of goods sold and occupancy costs include the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for
merchandise shipped directly from our vendors to our boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation, and boutique repair and
maintenance costs, and shipping costs related to e-commerce sales. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Please see note 2 to our consolidated financial statements included elsewhere in this prospectus, for an explanation of per share calculations. </FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">9 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1pt solid #000000;BORDER-LEFT:1pt solid #000000;BORDER-RIGHT:1pt solid #000000;BORDER-TOP:1pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">On April&nbsp;28, 2010, the company authorized a split of its outstanding and authorized common stock in the ratio of four hundred to one. Accordingly, our consolidated financial
data included elsewhere in this prospectus have been adjusted to reflect the effects of the stock split on common shares and per share amounts for all periods presented. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique&#146;s opening. When a boutique that is included in
comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no
longer consider sales from that boutique to be comparable boutique sales. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a)&nbsp;the sum of the total gross square feet at the end of each fiscal quarter, divided by (b)&nbsp;the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers. </FONT></TD></TR></TABLE>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P></div></div>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">10 </FONT></P>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">10 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_2"></A>RISK FACTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the
other information included in this prospectus, before making a decision to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition, results of operation, cash flow and prospects could be
materially and adversely affected. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Risks Related to Our Business </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our success depends on our ability to anticipate, identify and respond
quickly to new and changing fashion trends, customer preferences and other factors, and our inability to anticipate, identify and respond to these changes and trends could have a material adverse effect on our business, financial condition and
results of operations. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our core market, apparel, jewelry, accessories and gifts for women from 18 to 35-years old, is subject to
rapidly shifting fashion trends, customer tastes and demands. Accordingly, our success is dependent on our ability to anticipate, identify and respond to the latest fashion trends and customer demands, and to translate such trends and demands into
appropriate, saleable product offerings in a timely manner. A small number of our employees are primarily responsible for performing this analysis and making product purchase decisions. Our failure to anticipate, identify or react swiftly and
appropriately to new and changing styles, trends or desired image preferences or to accurately anticipate and forecast demand for certain product offerings is likely to lead to lower demand for our merchandise, which could cause, among other things,
sales declines, excess inventories and a greater number of markdowns. Further, if we are not able to anticipate, identify and respond to changing fashion trends and customer preferences, we may lose customers and market share to those of our
competitors who are able to better anticipate, identify and respond to such trends and preferences. In addition, because our success depends on our brand image, our business could be materially adversely affected if new product offerings are not
accepted by our customers. There can be no assurance that our new product offerings will be met with the same level of acceptance as our past product offerings or that we will be able to adequately respond to fashion trends in a timely manner or the
preferences of our customers. If we do not accurately forecast or analyze fashion trends and sales levels, our business, financial condition and results of operations will be adversely affected. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>If we are not able to successfully maintain a broad and shallow merchandise assortment, we may be unable to attract a sufficient number of customers to our
boutiques or sell sufficient quantities of our merchandise through our e-commerce business, which could result in excess inventories and markdowns. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We use the term broad and shallow to refer to a diverse merchandise assortment with relatively small inventory of each product. We believe that our strategy to offer our customers a broad and shallow merchandise
assortment has contributed significantly to the success of our business. Among other things, we believe that this strategy creates a constant sense of newness and scarcity value, which drives repeat boutique visits and increased sales. In addition,
we believe that this strategy helps us reduce markdowns. There can be no assurance that we will be able to continue to adequately stock our boutiques with a sufficiently broad and shallow assortment of merchandise. As we increase order volumes in
connection with opening new boutiques and expanding our e-commerce business, it may become increasingly difficult for us to accurately forecast the optimal amount of merchandise to order from our vendors and continue to offer a broad and shallow
merchandise assortment at each boutique. If we are unable to offer a broad and shallow merchandise assortment, customers may choose to visit our boutiques less frequently, our brand could be impaired, our market share may decline and our
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">11 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
results of operations could deteriorate. Further, any failure to maintain a broad and shallow merchandise assortment could lead to excess inventories which could lead to markdowns. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our growth strategy depends in large part upon our ability to successfully open and operate new boutiques each year in a timely and cost-effective manner.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our strategy to grow our business depends in large part on continuing to successfully open a substantial number of new boutiques
each year for the foreseeable future. The success of this strategy will depend largely upon our ability to find a sufficient number of suitable locations, our ability to recruit, hire and train qualified personnel to operate our new boutiques and
our ability to scale our infrastructure to successfully integrate our new boutiques. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our ability to successfully open and operate new
boutiques depends on many factors that may be outside of our control including, among others, our ability to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">identify desirable boutique locations, primarily in malls, lifestyle centers, street locations and strip centers, as well as other types of shopping venues and
outlet malls, which may be difficult and costly, particularly in an improving real estate environment; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">negotiate acceptable lease terms, including favorable levels of tenant allowances, which may be difficult, particularly in an improving real estate environment;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">maintain out-of-pocket, build-out costs in line with our boutique economic model, including by receiving expected levels of tenant allowances for a portion of
our construction expenses, and managing these construction expenses at reasonable levels, which may be difficult, particularly in an improving real estate environment; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">efficiently source and distribute additional merchandise; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">hire, train and retain a growing workforce of boutique managers, boutique associates and other personnel; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">successfully integrate new boutiques into our existing control structure and operations, including our information technology systems;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">efficiently expand the operations of our distribution facility to meet the needs of a growing boutique network; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">identify and satisfy the merchandise and other preferences of our customers in new geographic areas and markets; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">address competitive, merchandising, marketing, distribution and other challenges encountered in connection with expansion into new geographic areas and markets.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our near-term expansion plans have us opening new boutiques in or near the areas where we have existing boutiques. To
the extent that we open boutiques in markets where we already have existing boutiques, we may experience reduced net sales at those existing boutiques. Also, if we expand into new geographic areas, we will need to successfully identify and satisfy
the fashion preferences of customers in those areas. In addition, we will need to address competitive, merchandising, marketing, distribution and other challenges encountered in connection with any expansion and our limited brand recognition in new
markets may limit our expansion strategy and cause our business and growth to suffer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Finally, we cannot assure you that any newly
opened boutiques will be received as well as, or achieve net sales or profitability levels comparable to those of, our existing boutiques in our estimated time periods, or at all. If our boutiques fail to achieve, or are unable to sustain,
acceptable net sales </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">12 </FONT></P>


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and profitability levels, our business may be materially harmed and we may incur significant costs associated with closing or relocating boutiques. In addition, our current expansion plans are
only estimates, and the actual number of boutiques we open each year and the actual number of suitable locations for our new boutiques could differ significantly from these estimates. If we fail to successfully open and operate new boutiques and
execute our growth plans, the price of our common stock could decline. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We may not be able to efficiently source and distribute the additional
merchandise quantities necessary to support our growth. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our success depends on our ability to source and distribute merchandise
efficiently. The sourcing of our merchandise is dependent, in part, on our relationships with our vendors. If we are unable to maintain these relationships we may not be able to continue to source merchandise at competitive prices that appeal to our
customers. If we do not succeed in maintaining good relationships with our vendors or if our growth outpaces the ability of our vendors to scale up and the company cannot identify new vendors to meet the demand for additional merchandise production,
the company could see its costs go up or the delivery time on its new orders substantially increase. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Increases in the cost of the raw materials
or other inputs used in the production of our merchandise could result in the loss of suppliers, increase our cost of goods sold and occupancy costs and adversely affect our financial results. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The success of our business is in part driven by the compelling price-value proposition we offer our customers. If the costs of the raw materials,
particularly cotton, leather and synthetics, used in producing our merchandise increase, our vendors would look to pass these cost increases along to us. The price and availability of such raw materials may fluctuate significantly, depending on many
factors which are outside of our control, including commodity prices, crop yields and weather patterns. If our vendors attempt to pass any cost increases on to us and we refuse to pay the increases, we could lose certain vendors as suppliers,
resulting in the risk that we could not fill our orders in a timely manner or at all. If we pay the increases, we could either attempt to raise retail prices, which could adversely affect our sales and our brand image, or choose not to raise prices,
which could adversely affect the profitability of our merchandise sales. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We are planning to replace several core information technology systems,
which could disrupt our operations and adversely affect our financial results. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recently completed the process of upgrading
our existing merchandising, warehousing and point-of-sale applications to the latest supported software releases for these applications. The purpose of the upgrade is to allow the company to scale for the boutique growth planned during calendar year
2011 and 2012. Additionally, this upgrade will allow us to continue to operate our business while we are preparing to launch our new enterprise technology platform. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Since the beginning of fiscal year 2011, we have begun the process of replacing our current merchandise management, merchandise planning and allocation and merchandise analytics systems with a new enterprise
technology platform. These replacements are expected to be completed in the third quarter of fiscal year 2011. In the near-term, delays and disruptions could arise, either of which might negatively impact our business, prospects, financial condition
and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During the first quarter of fiscal year 2012, we plan to replace our boutiques&#146; point-of-sale software
system which will complete the implementation of our new enterprise technology platform. Also, our accounting system may need to be upgraded and replaced over time depending on our growth. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">13 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The risks associated with the above information technology systems changes, as well as any failure of
such systems to operate effectively, could disrupt and adversely impact the promptness and accuracy of our merchandise distribution, transaction processing, financial accounting and reporting, including the implementation of our internal controls
over financial reporting, the efficiency of our operations and our ability to properly forecast earnings and cash requirements. We could be required to make significant additional expenditures to remediate any such failures or problems. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that other companies have experienced significant delays and cost overruns in implementing similar systems changes, and we may encounter
problems as well. We may not be able to successfully implement these new systems or, if implemented, we may still face unexpected disruptions in the future. Any resulting disruptions could harm our business, prospects, financial condition and
results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our current growth plans will place a strain on our existing resources and could cause us to encounter challenges we have
not faced before. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As our number of boutiques and our e-commerce sales grow, our operations will become more complex. While we
have grown substantially as a company since inception, much of this growth occurred recently in fiscal year 2010. As we move forward, we expect our growth to bring new challenges that we have not faced before. Among other difficulties that we may
encounter, this growth will place a strain on our existing infrastructure, including our distribution facilities, information technology systems, financial controls, real estate and boutique operations staffs, may make it more difficult for us to
adequately forecast expenditures, such as real estate and construction expenses, budgeting will become more complex, and we may also place increased burdens on our vendors, as we will likely increase the size of our merchandise orders. The increased
demands that our growth plans will place on our infrastructure may cause us to operate our business less efficiently, which could cause a deterioration in the performance of our existing boutiques. New order delivery times could lengthen as a result
of the strains that growth will place on our existing resources and our growth may make it otherwise difficult for us to respond quickly to changing trends, consumer preferences and other factors. This could impair our ability to continue to offer
trend-right merchandise which could result in excess inventory, greater markdowns, loss of market share and decreased sales. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
addition, our planned expansion is expected to place increased demands on our existing operational, managerial, administrative and other resources. Specifically, our inventory management systems and personnel processes may need to be further
upgraded to keep pace with our current growth strategy. We cannot anticipate all of the demands that our expanding operations will impose on our business, and our failure to appropriately address these demands could have an adverse effect on us.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our business is sensitive to consumer spending and economic conditions. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Consumer purchases of discretionary retail items and specialty retail products, which include our apparel, jewelry, accessories and gifts, may be
adversely affected by economic conditions such as employment levels, salary and wage levels, the availability of consumer credit, inflation, high interest rates, high tax rates, high fuel prices and consumer confidence with respect to current and
future economic conditions. Consumer purchases may decline during recessionary periods or at other times when unemployment is higher or disposable income is lower. These risks may be exacerbated for retailers like us that focus significantly on
selling discretionary fashion merchandise. Consumer willingness to make discretionary purchases may decline, may stall or may be slow to increase due to national and regional economic conditions. Our financial performance is particularly susceptible
to economic and other conditions in regions or states where we have a significant number of boutiques. There remains considerable uncertainty and volatility in the national and global economy. Further or
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">14 </FONT></P>


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future slowdowns or disruptions in the economy could adversely affect mall traffic and new mall and shopping center development and could materially and adversely affect us and our growth plans.
We may not be able to maintain our recent rate of growth in net sales if there is a decline in consumer spending. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, a
deterioration of economic conditions and future recessionary periods may exacerbate the other risks faced by our business, including those risks we encounter as we attempt to execute our growth plans. Such risks could be exacerbated individually or
collectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We operate in the highly competitive specialty retail apparel and accessories industry and the size and resources of some of our
competitors may allow them to compete more effectively than we can, which could adversely impact our growth and market share. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We
face intense competition in the specialty retail apparel and accessories industry. We compete on the basis of a combination of factors, including price, breadth, quality and style of merchandise, as well as our in-boutique experience and level of
customer service, our brand image and our ability to anticipate, identify and respond to new and changing fashion trends. While we believe that we compete primarily with specialty retailers and internet businesses that specialize in women&#146;s
apparel and accessories, we also face competition from department stores, mass merchandisers and value retailers. We believe our primary competitors include specialty apparel and accessories retailers that offer their own private labels, including,
among others, White House&nbsp;|&nbsp;Black Market, Ann Taylor Loft, Charlotte Russe and Anthropologie. In addition, our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our
markets could have an adverse effect on our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also compete with a wide variety of large and small retailers for customers,
vendors, suitable boutique locations and personnel. The competitive landscape we face, particularly among specialty retailers, is subject to rapid change as new competitors emerge and existing competitors change their offerings. We cannot assure you
that we will be able to compete successfully and navigate the shifts in our market. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Many of our competitors are, and many of our
potential competitors may be, larger and have greater name recognition and access to greater financial, marketing and other resources. Therefore, these competitors may be able to adapt to changes in trends and customer desires more quickly, devote
greater resources to the marketing and sale of their products, generate greater brand recognition or adopt more aggressive pricing policies than we can. As a result, we may lose market share, which could reduce our sales and adversely affect our
results of operations. Many of our competitors also utilize advertising and marketing media which we do not, including advertising through the use of direct mail, newspapers, magazines, billboards, television and radio, which may provide them with
greater brand recognition than we have. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our competitors may also sell certain products or substantially similar products through the
Internet or through outlet centers or discount stores, increasing the competitive pressure for those products. We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Our expansion into
markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on us. Competitive forces and pressures may intensify as our presence in the retail marketplace
grows. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not possess exclusive rights to many of the elements that comprise our in-boutique experience and merchandise offerings.
Some specialty retailers offer a personalized shopping experience that in certain ways is similar to the one we strive to provide to our customers. Our competitors may seek to emulate facets of our business strategy and in-boutique experience, which
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">15 </FONT></P>


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could result in a reduction of any competitive advantage or special appeal that we might possess. In addition, some of our merchandise offerings are sold to us on a non-exclusive basis. As a
result, our current and future competitors, especially those with greater financial, marketing or other resources, may be able to duplicate or improve upon some or all of the elements of our in-boutique experience or merchandise offerings that we
believe are important in differentiating our boutiques and our customers&#146; shopping experience. If our competitors were to duplicate or improve upon some or all of the elements of our in-boutique experience or product offerings, our competitive
position and our business could suffer. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our inability to maintain or increase our comparable boutique sales could adversely impact our net sales,
profitability, cash flow and stock price. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We may not be able to sustain or increase the levels of comparable boutique sales that
we have experienced in the recent past. If our future comparable boutique sales decline or fail to meet market expectations, our profitability could be harmed and the price of our common stock could decline. In addition, the aggregate comparable
boutique sales levels of our boutiques have fluctuated in the past and can be expected to fluctuate in the future. A variety of factors affect comparable boutique sales, including fashion trends, competition, current national and regional economic
conditions, pricing, changes in our merchandise mix, prior period comparable boutique sales levels, inventory shrinkage, the timing and amount of markdowns, the success of our marketing programs, holiday timing and weather conditions. In addition,
it may be more challenging for us to sustain high levels of comparable boutique sales growth during and after our planned expansion. These factors may cause our comparable boutique sales results to be materially lower than in recent periods and
lower than market expectations, which could harm our business and our earnings and result in a decline in the price of our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our
inability to maintain or increase our operating margins could adversely affect the price of our common stock. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to
continue to increase our operating margins through scale efficiencies, improved systems, continued cost discipline and enhancements to our merchandise offerings. If we are unable to successfully manage the potential difficulties associated with our
growth plans, we may not be able to capture the scale efficiencies that we expect from expansion. If we are not able to continue to capture scale efficiencies, improve our systems, continue our cost discipline and enhance our merchandise offerings,
we may not be able to achieve our goals with respect to operating margins. In addition, if we do not adequately refine and improve our various ordering, tracking and allocation systems, we may not be able to increase sales and reduce inventory
shrinkage. As a result, our operating margins may stagnate or decline, which could adversely affect the price of our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our ability to
attract customers to our boutiques that are located in regional malls and other shopping centers and venues depends heavily on the success of these venues, and any decrease in customer traffic to these venues could adversely affect our net sales.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our boutiques are principally located in malls, lifestyle centers, street locations and strip centers, and we would expect this
to continue as we grow. Net sales at our boutiques are derived, to a significant degree, from the volume of traffic in these shopping venues and the surrounding areas. Our boutiques benefit from the ability of other tenants to generate consumer
traffic near our boutiques and the continuing popularity of these venues as shopping destinations. Our sales volume and traffic may be adversely affected by, among other things, economic downturns nationally or regionally, high fuel prices,
increased competition, unfavorable weather conditions, changes in consumer demographics and store closures and/or a decrease in popularity of shopping venues in which our boutiques are located. A reduction in customer traffic as a result of these or
any other factors, or our inability to obtain or maintain desirable boutique locations within desirable shopping venues, could have an adverse effect on our business. In addition, store closings in malls or other shopping venues, particularly stores
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">16 </FONT></P>


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that attract similar customers, or deteriorations in the financial condition of mall or other shopping venue operators could limit their ability to finance our tenant improvements, which could
have an adverse impact on our ability to open profitable boutiques. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our business depends on a strong brand image, and if we are not able to
maintain and enhance our brand, particularly in new markets where we have limited brand recognition, we may be unable to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our brand image and brand awareness has contributed significantly to the success of our business. We also believe that maintaining
and enhancing our brand image particularly in new markets where we have limited brand recognition is important to maintaining and expanding our customer base. Maintaining and enhancing our brand image may require us to make substantial investments
in areas such as merchandising, marketing, boutique operations, community relations, boutique promotions and employee training. These investments may be substantial and may not ultimately be successful. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We do not use traditional advertising channels and if we fail to adequately continue to connect with our customer base, our business could be adversely
affected. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We focus on organic, viral and in-boutique marketing to capture the interest of our customers and drive them to our
boutiques and website. We do not use traditional advertising channels, such as newspapers, magazines, billboards, television and radio, which are used by some of our competitors. We expect to increase our use of social media, such as Facebook and
Twitter, in the future. If our marketing efforts are not successful, there may be no immediately available or cost effective alternative marketing channel for us to use to build or maintain brand awareness. As we execute our growth strategy, our
ability to successfully integrate new boutiques into their surrounding communities or to expand into new markets will be adversely impacted if we fail to connect with our target customers. Failure to successfully connect with our target customers in
new and existing markets could harm our business, results of operations and financial condition. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We depend on our senior management personnel and
may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
future success is substantially dependent on the continued service of our senior management, particularly Mr.&nbsp;De Meritt, one of our Founders and our Chief Executive Officer and a member of our board of directors, and Ms.&nbsp;Gill, another of
our Founders and the Executive Vice Chairperson of our board of directors. These employees have extensive experience both with our company and in our industry and are familiar with our business, systems and processes. The loss of services of one or
more of our key employees could impair our ability to manage our business effectively and could have an adverse effect on our business, as we may not be able to find suitable individuals to replace them on a timely basis or at all. In addition, any
departures of key personnel could be viewed in a negative light by investors and analysts, which could cause our common stock price to decline. We do not maintain key person insurance on any employee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to these key employees, we have other employees in positions, including those employees responsible for our merchandising and
operations departments, that, if vacant, could cause a temporary disruption in our business until such positions are filled. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>If we are unable to
find, train and retain key personnel, including new boutique employees that reflect our brand image and embody our culture, we may not be able to grow or sustain our operations. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our success depends in part upon our ability to attract, motivate and retain a sufficient number of boutique employees, including boutique managers,
who understand and appreciate our customers, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">17 </FONT></P>


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brand and corporate culture, and are able to adequately and effectively represent our culture and establish credibility with our customers. Like most retailers, we experience significant employee
turnover rates, particularly among boutique employees. Our planned growth will require us to hire and train even more personnel to manage such growth. If we are unable to hire and retain boutique personnel capable of consistently providing a high
level of customer service, as demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the merchandise we offer, our ability to open new boutiques may be impaired, the performance of our existing and new
boutiques could be materially adversely affected and our brand image may be negatively impacted. There is a high level of competition for experienced, qualified personnel in the retail industry and we compete for personnel with a variety of
companies looking to hire for retail positions. Historically, we have prided ourselves on our commitment to employee growth and development and we focus on promoting from within our team. Our growth plans will strain our ability to staff our new
boutiques, particularly at the boutique manager level, which could have an adverse effect on our ability to maintain a cohesive and consistently strong team, which in turn could have an adverse impact on our business. If we are unable to attract,
train and retain employees in the future, we may not be able to serve our customers effectively, thus reducing our ability to continue our growth and to operate our existing boutiques as profitably as we have in the past. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Union attempts to organize our employees could negatively affect our business. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">None of our employees are currently subject to a collective bargaining agreement. As we continue to grow and enter different regions, unions may
attempt to organize all or part of our employee base at certain boutiques or within certain regions. Responding to such organization attempts may distract management and employees and may have a negative financial impact on individual boutiques, or
on our business as a whole. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We have one corporate headquarters and distribution facility and have not yet implemented disaster recovery
procedures. Disruptions to the operations at that location could have an adverse effect on our business operations. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
corporate headquarters and our only distribution facility are co-located in Houston, Texas. Our distribution facility supports both our boutiques and our e-commerce business. A majority of our merchandise is shipped from our vendors to the
distribution facility and then packaged and shipped from our distribution facility to our boutiques and our e-commerce customers. The success of our boutiques depends on the timely receipt of merchandise because they must receive merchandise in a
timely manner in order to stay current with the fashion preferences of our customers. The efficient flow of our merchandise requires that we have adequate capacity and uninterrupted service in our distribution facility to support both our current
level of operations, and the anticipated increased levels that may follow from our growth plans. We believe that our current distribution facility is capable of supporting our growth through approximately 450 boutiques without significant additional
capital investment. In order to accommodate future growth beyond approximately 450 boutiques we will either need to expand and upgrade our existing distribution facility or move our distribution operations to a new facility with greater capacity.
Upgrading our existing facility or transferring our operations to a facility with greater capacity may require us to secure additional favorable real estate or may require us to obtain additional financing. Appropriate locations or financing for the
purchase or lease of such additional real estate may not be available at reasonable costs or at all. Our failure to provide adequate order fulfillment and secure additional distribution capacity when necessary could impede our growth plans, and the
further increase of this capacity would increase our costs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, if we encounter difficulties associated with our distribution
facility or if it were to shut down for any reason, including fire, hurricanes or other natural disaster, we could face inventory shortages resulting in &#147;out-of-stock&#148; conditions in our boutiques, and delays in shipments to our direct
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">18 </FONT></P>


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customers, resulting in significantly higher costs and longer lead times associated with distributing our merchandise. Also, most of our computer equipment and senior management, including
critical resources dedicated to merchandising, financial and administrative functions, are located at our corporate headquarters. Our management and our operations and distribution staff would need to find an alternative location, causing further
disruption and expense to our business and operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recognize the need for, and are in the early stages of, developing disaster
recovery, business continuity and document retention plans that would allow us to be operational despite casualties or unforeseen events impacting our corporate headquarters or distribution center. Without disaster recovery, business continuity and
document retention plans, if we encounter difficulties or disasters with our distribution facility or at our corporate headquarters, our critical systems, operations and information may not be restored in a timely manner, or at all, and this could
have an adverse effect on our business. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our business requires that we lease substantial amounts of space and there can be no assurance that we
will be able to continue to lease space on terms as favorable as the leases negotiated in the past. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not own any real
estate. Instead, we lease all of our boutique locations, as well as our corporate headquarters and distribution facility in Houston, Texas. Our boutiques are leased from third parties, with lease terms of five to ten years. Many of our lease
agreements also have additional five-year renewal options. We believe that we have been able to negotiate favorable rental rates and tenant allowances over the last few years due in large part to the state of the economy and higher than usual
vacancy rates in a number of regional malls and shopping centers. These trends may not continue, and there is no guarantee that we will be able to continue to negotiate such favorable terms. Many of our leases have early cancellation clauses, which
permit the lease to be terminated by us or the landlord if certain sales levels are not met in specific periods or if the shopping venue does not meet specified occupancy standards. In addition to fixed minimum lease payments, most of our boutique
leases provide for additional rental payments based on a percentage of sales, or &#147;percentage rent,&#148; if sales at the respective boutiques exceed specified levels, as well as the payment of common area maintenance charges, real property
insurance and real estate taxes. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our already substantial occupancy costs and difficulty in identifying economically suitable
new boutique locations could have significant negative consequences, which include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">requiring that a greater portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes and reducing our
profitability; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increasing our vulnerability to general adverse economic and industry conditions; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limiting our flexibility in planning for, or reacting to changes in, our business or in the industry in which we compete. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient
cash flow from operating activities to fund these expenses and needs and sufficient funds are not otherwise available to us, we may not be able to service our lease expenses, grow our business, respond to competitive challenges or fund our other
liquidity and capital needs, which could harm our business. Additional sites that we lease may be subject to long-term non-cancelable leases if we are unable to negotiate our current standard lease terms. If an existing or future boutique is not
profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an
early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have an
adverse effect on our results of operations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">19 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our ability to obtain merchandise on a timely basis at competitive prices could suffer as a result of any
deterioration or change in our vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We have many important vendor relationships that we believe provide us with a competitive advantage. We do not own or operate any manufacturing facilities. Instead, we purchase all of our merchandise from
third-party vendors. Two of our vendors accounted for approximately 23% of our purchases in fiscal year 2010, with no single vendor accounting for more than 15% of our purchases. One of these vendors is owned and operated by two of our Founders who
are the brother and sister of Ms.&nbsp;Kyong Gill, our Executive Vice Chairperson. The other vendor is owned and operated by the brother-in-law of one of our Founders. See &#147;Certain Relationships and Related Party Transactions&#151;Stony Trading
Relationship.&#148; Other than the two largest vendors, no vendor accounted for more than 5% of our purchases during fiscal year 2010. Our business and financial performance depend in large part on our ability to evaluate merchandise quickly for
style and then modify any undesirable designs or to improve the quality, look, and fit of the item. We do not have long-term contracts with any of these vendors and we generally operate without any contractual assurances of continued supply, pricing
or access to new products. Rather, we receive and review samples almost daily for fit and fashion evaluation. Any of our vendors could discontinue supplying us with desired products in sufficient quantities for a variety of reasons. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The benefits we currently experience from our vendor relationships could be adversely affected if our vendors: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">choose to stop providing merchandise samples to us or otherwise discontinue selling merchandise to us; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">raise the prices they charge us; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our vendors have with
their various lending institutions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reduce our access to styles, brands and merchandise by entering into broad exclusivity arrangements with our competitors or otherwise in the marketplace;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">sell similar merchandise to our competitors with similar or better pricing, many of whom already purchase merchandise in significantly greater volume and, in
some cases, at lower prices than we do; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">lengthen their lead times; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">initiate or expand sales of apparel and accessories to retail customers directly through their own stores, catalogs or on the internet and compete with us
directly. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We historically have established good working relationships with many small- to mid-size vendors that often
have more limited resources, production capacities and operating histories. Market and economic events that adversely impact our vendors could impair our ability to obtain merchandise in sufficient quantities. Such events include difficulties or
problems associated with our vendors&#146; business, finances, labor, ability to import merchandise, costs, production, insurance and reputation. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities
on acceptable terms or at all in the future, especially if we need significantly greater amounts of inventory in connection with the growth of our business. We may need to develop new relationships with larger vendors, as our current vendors may be
unable to supply us with needed quantities and we may not be able to find similar merchandise on the same terms from larger vendors. If we are unable to acquire suitable merchandise in sufficient quantities, at acceptable prices with adequate
delivery times due to the loss of or a deterioration or change in our relationship with one or more of our key vendors or events harmful to our vendors occur, it may adversely affect our business and results of operations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">20 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>A failure in our e-commerce operations could significantly disrupt our business and lead to reduced sales,
growth prospects and reputational damage. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">While accounting for only 1.4% of our net sales in fiscal year 2010, our e-commerce
business is rapidly growing and is an important element of our brand and relationship with our customers. Expanding our e-commerce business is an important part of our growth strategy. In addition to changing consumer preferences, shifting traffic
patterns and related customer acquisition costs and buying trends in e-commerce, we are vulnerable to certain additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other
technical failures, security breaches, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities. Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales,
increase our costs, diminish our growth prospects, and damage our brand, which could negatively impact our results of operations and stock price. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition, there is no guarantee that we will be able to expand our e-commerce business. Many of our competitors already have e-commerce businesses that are substantially larger and more developed than ours,
which places us at a competitive disadvantage. If we are unable to expand our e-commerce business, our growth plans will suffer and the price of our common stock could decline. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>System security risk issues, including our failure to protect our customers&#146; privacy and disruption of our internal operations or information technology systems, could harm our reputation and adversely
affect our financial results and stock price. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Experienced computer programmers and hackers, or even internal users, may be able
to penetrate or create systems disruptions or cause shutdowns of our network security or that of third-party companies with which we have contracted to provide services. We generally collect and store customer information for marketing purposes and
any compromise of customer information could subject us to customer or government litigation and harm our reputation, which could adversely affect our business and growth. Moreover, we could incur significant expenses or disruptions of our
operations in connection with system failures or data breaches. An increasing number of websites, including several large internet companies, have recently disclosed breaches of their security, some of which have involved sophisticated and highly
targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable
to anticipate these techniques or to implement adequate preventative measures. In addition, sophisticated hardware and operating system software and applications that we buy or license from third-parties may contain defects in design or manufacture,
including &#147;bugs&#148; and other problems that could unexpectedly interfere with the security and operation of the systems. The costs to us to eliminate or alleviate security problems, viruses and bugs, or any problems associated with the
outsourced services provided to us, could be significant, and efforts to address these problems could result in interruptions, delays or cessation of service that may impede our sales, distribution or other critical functions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, almost all states have adopted breach of data security statutes or regulations that require notification to consumers if the security
of their personal information is breached, and at least one state has adopted regulations requiring every company that maintains or stores personal information to adopt a comprehensive written information security program. Governmental focus on data
security may lead to additional legislative action, and the increased emphasis on information security may lead customers to request that we take additional measures to enhance security or restrict the manner in which we collect and use customer
information to gather insights into customer behavior and craft our marketing programs. As a result, we may have to modify our business systems and practices with the goal of further improving data security, which would result in reduced net sales,
increased expenditures and operating complexity. Any compromise of our security or accidental loss or </FONT></P>
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theft of customer data in our possession could result in a violation of applicable privacy and other laws, significant legal and financial exposure and damage to our reputation, which could
adversely impact our business, results of operations and stock price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>The current geographic concentration of our boutiques creates an exposure
to local economies, regional downturns and severe weather or other catastrophic occurrences that may materially adversely affect our financial condition and results of operations. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operated 28 boutiques in Texas as of April 2, 2011, making Texas our largest market, representing approximately 12% of our total boutiques. We
also have boutique concentration in California and Florida, operating 24 boutiques and 16 boutiques in those states, respectively, as of April 2, 2011. As a result, our business is currently more susceptible to regional conditions than the
operations of more geographically diversified competitors, and we are vulnerable to economic downturns in those regions. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect our sales and
profitability. These factors include, among other things, changes in demographics and population. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Further, our corporate headquarters
and only distribution center are located at a single facility in Houston, Texas. This single distribution center receives, stores and distributes merchandise to all of our boutiques and fulfills all sales for our e-commerce business. Most of our
computer equipment and senior management, including critical resources dedicated to merchandising and financial and administrative functions, are located at our corporate headquarters. As described elsewhere in the risk factors in this prospectus,
we do not have adequate disaster recovery systems and plans at our corporate headquarters and distribution facility. As a result, our business may be more susceptible to regional natural disasters and catastrophes than the operations of more
geographically diversified competitors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, a substantial number of our boutiques are located in the southeastern United
States The southeastern United States, Texas and other states along the Gulf Coast, in particular, are prone to severe weather conditions. For example, hurricanes have passed through Texas, Florida and other states along the Gulf Coast causing
extensive damage to the region. Adverse weather conditions impacting Texas and other states along the Gulf Coast, and the southeastern United States generally, could harm our business, results of operations and financial condition. All of our
boutique locations expose us to additional diverse risks, given that natural disasters or other unanticipated catastrophes, such as telecommunications failures, cyber-attacks, fires or terrorist attacks, can occur anywhere and could cause
disruptions in our operations. Extensive or multiple disruptions in our operations, whether at our boutiques or our corporate headquarters and distribution center, due to natural disasters or other catastrophes could have an adverse effect on our
business, results of operations and stock price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our results may be adversely affected by fluctuations in energy costs. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Energy costs have fluctuated dramatically in the past and may fluctuate in the future. These fluctuations may result in an increase in our
transportation costs for distribution, utility costs for our retail boutiques and costs to purchase product from our vendors. A continual rise in energy costs could adversely affect consumer spending and demand for our merchandise and increase our
operating costs and we may be unable to pass along to our customers such increased cost, all of which could have a material adverse effect on our business, results of operations and stock price. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our net sales and merchandise fluctuate on a seasonal basis, leaving our operating results susceptible to adverse changes in seasonal shopping patterns,
weather and related risks. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Due to the seasonal nature of the retail industry, we have historically experienced and expect to
continue to experience some fluctuations in our net sales and net income. Our net sales and earnings </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">22 </FONT></P>


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are typically highest in the fourth fiscal quarter due to the year-end holiday season. Net sales during this period cannot be used as an accurate indicator of annual results. Likewise, as is the
case with many retailers of apparel, jewelry, accessories and gifts, we typically experience lower net sales in the first fiscal quarter relative to other quarters. If for any reason, including for example poor weather conditions, soft economic
environments and loss of consumer confidence, our net sales were below seasonal norms or expectations during typically higher-volume time periods, our net sales, inventory levels and results of operations could be adversely affected. In addition, in
order to prepare for these periods, we must order and keep in stock significantly more merchandise than we carry during other parts of the year. This inventory build-up may require us to expend cash faster than is generated by our operations during
these periods. Any unanticipated decrease in demand for our merchandise during peak shopping periods could result in excess inventory levels which could require us to sell excess inventory at a substantial markdown, which could have an adverse
effect on our business, profitability and brand image. In addition, we may experience variability in net sales as a result of a variety of other factors, including the timing of new boutique openings, boutique events, other marketing activities,
sales tax holidays and other holidays, which may cause our results of operations to fluctuate on a quarterly basis and relative to corresponding periods in prior years. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>If our vendors fail to comply with applicable laws, including a failure to use acceptable labor practices, or if our vendors suffer disruptions in their businesses, we could suffer adverse business
consequences. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our vendors source the merchandise sold in our boutiques from manufacturers both inside and outside of the United
States. Although each of our purchase orders is subject to our vendor manuals, which require compliance with labor, immigration, manufacturing safety and other laws, we do not supervise, control or audit our vendors or the manufacturers that produce
the merchandise we sell. The violation, or perception of any violation, of any labor, immigration, manufacturing safety or other laws by any of our vendors or their U.S. and non-U.S. manufacturers, such as use of child labor, or the divergence of
the labor practices followed by any of our vendors or these manufacturers from those generally accepted in the United States, could damage our brand image or subject us to boycotts by our customers or activist groups. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Any event causing a sudden disruption of manufacturing or imports, including the imposition of additional import restrictions, could interrupt, or
otherwise disrupt the shipment of finished products to us by our vendors and materially harm our operations. Political and financial instability outside the United States, strikes, adverse weather conditions or natural disasters that may occur or
acts of war or terrorism in the United States or worldwide, may affect the production, shipment or receipt of merchandise. These factors, which are beyond our control, could materially hurt our business, financial condition and results of operations
or may require us to modify our current business practices or incur increased costs. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Changes in laws, including employment laws and laws related
to our merchandise, could make conducting our business more expensive or otherwise cause us to change the way we do business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We
are subject to numerous regulations, including labor and employment, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally or govern the promotion and sale of merchandise and the
operation of boutiques and warehouse facilities. If these regulations were to change or were violated by our management, employees or vendors, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be
subject to fines or penalties or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">23 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to increased regulatory compliance requirements, changes in laws could make the ordinary
conduct of our business more expensive or require us to change the way we do business. Laws related to employee benefits and treatment of employees, including laws related to limitations on employee hours, immigration laws, child labor laws,
supervisory status, leaves of absence, mandated health benefits or overtime pay, could also negatively impact us, such as by increasing compensation and benefits costs for overtime and medical expenses. Moreover, changes in product safety or other
consumer protection laws could lead to increased costs to us for some merchandise, or additional labor costs associated with readying merchandise for sale. It is often difficult for us to plan and prepare for potential changes to applicable laws,
and future actions or payments related to these changes could be material to us. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We will require significant capital to fund our expanding
business, which may not be available to us on satisfactory terms or at all. We plan to use cash from operations to fund our operations and execute our growth strategy. If we are unable to maintain sufficient levels of cash flow, we may not meet our
growth expectations or we may require additional financing which could adversely affect our financial health and impose covenants that limit our business activities. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We plan to continue our growth and expansion, including opening a number of new boutiques, remodeling existing boutiques and upgrading our information technology systems and other infrastructure as opportunities
arise. Our plans to expand our boutique base may not be successful and the implementation of these plans may not result in expected increases in our net sales even though they increase our costs. To support our expanding business and execute on our
growth strategy, we will require significant capital. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently primarily depend on cash flow from operations and the revolving
credit facility under our existing senior secured credit facility to fund our business and growth plans. Upon completion of this offering and our refinancing we expect that we will primarily depend on cash flow from operations and our new revolving
credit facility to fund our business and growth plans. If our business does not generate sufficient cash flow from operations to fund these activities, and sufficient funds are not otherwise available to us from our new revolving credit facility, we
may need additional equity or debt financing. If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business or respond to competitive pressures would be curtailed and we may need
to delay, limit or eliminate planned boutique openings or operations or other elements of our growth strategy. If we raise additional capital by issuing equity securities or securities convertible into equity securities, your ownership would be
diluted. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>The refinancing of our existing senior secured credit facility may not be completed on the terms that we expect or at all. The failure
to complete the refinancing as currently contemplated would require us to use more of the proceeds of this offering to repay our existing senior secured credit facility, leaving less of the proceeds for working capital and other general corporate
purposes. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">While we are engaged in discussions with financing sources regarding the terms of a new revolving credit facility and
expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering, to date we do not have any binding commitments from any financing sources. There can be no assurance that we will be
able to enter into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior secured credit facility requires that the proceeds of this offering be used to repay all amounts
outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the refinancing, we will be required to apply more of the proceeds of this offering to repay our existing indebtedness and will
have less available to use for working capital </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">24 </FONT></P>


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and general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business, sales and marketing activities and other capital expenditures. As of April 2,
2011, approximately $92.6 million was outstanding under our existing senior secured credit facility. See &#147;Use of Proceeds&#148; and &#147;Description of Certain Indebtedness&#148;. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>We may incur additional indebtedness in the future, which may require us to use a substantial portion of our cash flow to service debt and limit our financial and operating flexibility in important ways.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We may incur additional indebtedness in the future. Any borrowings under any future debt financing (including our new revolving
credit facility) will require interest payments and need to be repaid or refinanced, could require us to divert funds identified for other purposes to debt service and would create additional cash demands and could impair our liquidity position and
add financial risk for us. Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. If we cannot generate sufficient cash flow from operations to service our debt, we may need to
refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our level of indebtedness has important consequences to you and your investment in our common stock. For example, our level of indebtedness may:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">require us to use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to us
for working capital, capital expenditures and other general corporate purposes; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limit our ability to pay future dividends; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans and other investments, which may limit our ability to
implement our business strategy; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">heighten our vulnerability to downturns in our business, the specialty apparel and accessories retail industry or in the general economy and limit our
flexibility in planning for, or reacting to, changes in our business and the specialty apparel and accessories retail industry; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prevent us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our boutique base and product
offerings. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We cannot assure you that our business will generate sufficient cash flow from operations or that future
borrowings will be available to us in amounts sufficient to enable us to make payments on our indebtedness or to fund our operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>The terms
of our existing senior secured credit facility do, and the terms of any additional debt financing (including our new revolving credit facility) may, restrict our current and future operations, which could adversely affect our ability to manage our
operations and respond to changes in our business. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our existing senior secured credit facility contains, and any additional debt
financing we may incur (including the new revolving credit facility) would likely contain, covenants that restrict our operations, including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock,
make certain investments and engage in certain merger, consolidation or asset sale transactions. A failure by us to comply with the covenants or financial ratios contained in our existing senior secured credit facility or any additional debt
financing we may incur (including the new revolving credit facility) could result in an event of default, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of
default, the lenders could elect to declare all amounts outstanding to be due and payable and exercise </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">25 </FONT></P>


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other remedies. If the indebtedness under our existing senior secured credit facility or any additional debt financing we may incur (including the new revolving credit facility) were to be
accelerated, our future financial condition could be materially adversely affected. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>There are claims made against us from time to time that can
result in litigation that could distract management from our business activities and result in significant liability or damage to our brand. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">As a growing company with expanding operations, we increasingly face the risk of litigation and other claims against us. Litigation and other claims may arise in the ordinary course of our business and include
employee claims, commercial disputes, landlord-tenant disputes, intellectual property issues, product-oriented allegations and slip and fall claims. These claims can raise complex factual and legal issues that are subject to risks and uncertainties
and could require significant management time. Litigation and other claims against us could result in unexpected expenses and liabilities, which could materially adversely affect our operations and our reputation. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We may be unable to protect our trademarks or other intellectual property rights. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our trademarks are integral to our boutique design, our e-commerce business and our success in building our brand image and customer
loyalty. We rely on trademark registrations and common law trademark rights to protect the distinctiveness of our brand and have registered those trademarks that we believe are important to our business with the United States Patent and Trademark
Office. We cannot assure you that these registrations will prevent imitation of our name, merchandising concept, boutique design or private label merchandise, or the infringement of our other intellectual property rights by others. In most cases,
the merchandise we sell is purchased on a non-exclusive basis from vendors that also sell to our competitors. While we use our brand name on these items, our competitors may seek to replicate aspects of our business strategy and in-boutique
experience, thereby diluting the experience we offer and adversely affecting our brand and competitive position. Imitation of our name, concept, boutique design or merchandise in a manner that projects lesser quality or carries a negative
connotation of our brand image could have an adverse effect on our business, financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are not
aware of any claims of infringement upon or challenges to our right to use any of our brand names or trademarks in the United States. Nevertheless, we cannot be certain that the actions we have taken to establish and protect our trademarks will be
adequate to prevent imitation of our merchandise by others or to prevent others from seeking to block sales of our merchandise as a violation of the trademarks or proprietary rights of others. Although we cannot currently estimate the likelihood of
success of any such lawsuit or ultimate resolution of such a conflict, such a controversy could have an adverse effect on our business, financial condition and results of operations. If disputes arise in the future, we may not be able to
successfully resolve these types of conflicts to our satisfaction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are currently in the process of registering our trademarks in
several foreign countries to seek protection outside the United States. However, international protection of our brand image and the use of these marks may be unavailable or could be limited. Also, other entities may have rights to trademarks that
contain portions of our marks or may have registered similar or competing marks for merchandise in foreign countries in which our vendors source our merchandise. There may also be other prior registrations of trademarks identical or similar to our
trademarks in other foreign countries of which we are not aware. Accordingly, it may be possible for others to prevent the manufacture of our branded goods in certain foreign countries or the sale or exportation of our branded goods from certain
foreign countries to the United States. If we were unable to reach a licensing arrangement with these parties, our vendors may be unable to manufacture our merchandise in those countries. Our inability to
</FONT></P>
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register our trademarks or purchase or license the right to use our trademarks or logos in these jurisdictions could limit our ability to obtain supplies from less costly markets or penetrate new
markets should our business plan change to include selling our merchandise in those foreign jurisdictions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Litigation may be necessary
to protect our trademarks and other intellectual property rights or to enforce these rights. Any litigation or claims brought by us could result in substantial costs and diversion of our resources, which could have a material adverse effect on our
business, financial condition, results of operations or cash flows. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We may be subject to liability and other risks if we, our vendors or the
manufacturers of our merchandise infringe upon the trademarks or other intellectual property rights of third parties, including the risk that we could acquire merchandise from our vendors without the full right to sell it. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We purchase merchandise that may be subject to design copyrights, design patents or otherwise may incorporate protected intellectual property. While
we are not involved in the manufacture of any of the merchandise we purchase from our vendors for sale to our customers, we may be subject to liability if our vendors or the manufacturers of our merchandise infringe upon the trademarks or other
intellectual property rights of third parties. We do not independently investigate whether our vendors or the manufacturers with whom they do business legally hold intellectual property rights to the merchandise we purchase. Third parties may bring
legal claims, or threaten to bring legal claims, against us that their intellectual property rights are being infringed or violated by our use of intellectual property. Litigation or threatened litigation could be costly and distract our senior
management from operating our business. If we were to be found liable for any such infringement, we could be required to pay substantial damages and could be subject to injunctions preventing further infringement. In addition, any payments we are
required to make and any injunctions with which we are required to comply as a result of infringement claims could be costly and thereby adversely affect our financial results. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If a third party claims to have licensing rights with respect to merchandise we purchased from a vendor, or if we acquire unlicensed merchandise,
we may be obligated to remove this merchandise from our boutiques, incur costs associated with this removal if the distributor or vendor is unwilling or unable to reimburse us and be subject to liability under various civil and criminal causes of
action, including actions to recover unpaid royalties and other damages and injunctions. Additionally, we will be required to purchase new merchandise to replace any we remove. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>We rely upon independent third-party transportation providers for substantially all of our merchandise shipments. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We currently rely upon independent third-party transportation providers for substantially all of our merchandise shipments, including shipments to all of our boutiques and our direct customers. Our use of outside
delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather, which may impact a shipper&#146;s ability to provide delivery services that
adequately meet our shipping needs. If we change shipping companies, we could face logistical difficulties that could adversely impact deliveries and we would incur costs and expend resources in connection with such change. Moreover, we may not be
able to obtain terms as favorable as those received from the independent third-party transportation providers we currently use, which would increase our costs. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Our ability to source our merchandise efficiently and profitably could be hurt if new trade restrictions are imposed or existing trade restrictions become more burdensome. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently purchase all our inventory from domestic vendors, who source our merchandise both domestically and internationally. In fiscal year
2010, we believe most of the merchandise sourced </FONT></P>
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by our vendors was produced outside the United States. These vendors, to the extent they obtain merchandise from outside of the United States, are subject to trade restrictions, including
tariffs, safeguards or quotas, changes to which could increase the cost or reduce the supply of merchandise available to us. Under the World Trade Organization Agreement, effective January&nbsp;1, 2005, the United States and other World Trade
Organization member countries removed quotas on goods from World Trade Organization members, which in certain instances we believe affords our vendors greater flexibility in importing textile and apparel products from World Trade Organization
countries from which they source our merchandise. However, as the removal of quotas resulted in an import surge from China, the United States imposed safeguard quotas on a number of categories of goods and apparel from China, and may impose
additional quotas in the future. These and other trade restrictions could have a significant impact on our vendors&#146; sourcing patterns in the future. The extent of this impact, if any, and the possible effect on our purchasing patterns and
costs, cannot be determined at this time. We cannot predict whether any of the countries in which our vendors&#146; merchandise is currently manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed
by the United States or foreign governments, nor can we predict the likelihood, type or effect of any restrictions. Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions against items we offer in
our boutiques, as well as United States or foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce the supply of merchandise to our vendors, and we would expect the costs to be passed along in increased prices to us,
which could hurt our profitability. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We may be subject to sales tax in states where we operate our e-commerce business, which could have an
adverse effect on our business, financial condition and results of operations. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Under current state and federal laws, we are not
required to collect and remit sales tax in some states where we sell through our e-commerce business . Legislation is pending in some states that may require us to collect and remit sales tax on e-commerce sales or institute use tax reporting. If
states pass sales or use tax laws, we may need to collect and remit current and past sales tax and could face greater exposure to income tax and franchise taxes in these states. Any increase in sales tax or use tax reporting on our internet sales
could discourage customers from purchasing through our e-commerce business, which could have an adverse effect on growth prospects. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Increases in
the minimum wage could have an adverse effect on our financial results. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">From time to time, legislative proposals are made to
increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states. Base wage rates for many of our employees are at or slightly above the minimum wage. As federal or state minimum wage rates
increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well. Any increase in the cost of our labor could have an adverse effect on our operating costs,
financial condition and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>The additional financial, legal and regulatory requirements imposed on public companies may strain
our resources, divert management&#146;s attention and affect our ability to attract and retain qualified board members. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have
historically operated our business as a private company. As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), the Sarbanes-Oxley Act and the rules of
The NASDAQ Stock Market. The requirements of these rules and regulations will significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, make some activities more difficult,
time-consuming or costly and may also place undue strain on our personnel, systems and resources. </FONT></P>
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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Exchange Act will require, among other things, that we file annual, quarterly and current reports
with respect to our business and financial condition. Public disclosure of our business results and other company information could make us less competitive in the market place as our competition gains a better understanding of how we do business.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Sarbanes-Oxley Act will require, among other things, that we maintain additional disclosure controls and procedures and internal
control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. Section&nbsp;404 of the
Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm auditing the effectiveness of our internal control over
financial reporting beginning with fiscal year 2012. Both we and our independent registered public accounting firm will be testing our internal controls in connection with the Section&nbsp;404 requirements and could, as part of that documentation
and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors,
officers and employees, require the hiring of additional finance, accounting and other personnel, involve substantial costs to modify our existing accounting systems and take a significant period of time to complete. These changes may not, however,
be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially
impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of
Section&nbsp;404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors&#146; and
officers&#146; liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors&#146; and officers&#146; insurance, our ability to
recruit and retain qualified officers and directors, especially those directors who may be deemed independent for purposes of rules of The NASDAQ Stock Market, will be significantly curtailed. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>In the past, a material weakness in our internal control over financial reporting had been identified. If material weaknesses or significant deficiencies
arise in the future or if we fail to maintain proper and effective internal controls going forward, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect our business, results of operations
and financial condition. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with the audit of our consolidated financial statements as of and for the fiscal year
ended January&nbsp;31, 2009, the Company identified a control deficiency that constituted a material weakness in our internal control over financial reporting for such period. This material weakness related to accounting for convertible redeemable
preferred stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company&#146;s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or combination of
deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have taken steps to remediate our internal control deficiencies. However, there are no assurances that the measures we have taken to remediate
these internal control weaknesses were </FONT></P>
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completely effective or that similar weaknesses will not recur. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to
address any other matters we identify. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">No material weaknesses were identified for the fiscal year ended January&nbsp;29, 2011, and,
accordingly, we believe that our remediation efforts were successful.<B><I> </I></B>However, we did not perform an assessment of our internal control over financial reporting nor did our auditors perform an audit over our internal control over
financial reporting; we therefore cannot assure you that these or other similar issues will not arise in future periods. We anticipate that we will next evaluate our internal control over financial reporting in connection with management&#146;s
preparation of our financial statements for the fiscal year ending January&nbsp;28, 2012. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, if we are unable to conclude
that we have effective internal control over financial reporting, our independent auditors are unable to provide us with an unqualified report as required by Section&nbsp;404 of this Sarbanes-Oxley Act or we are required by Section&nbsp;404 of the
Sarbanes-Oxley Act to restate our financial statements, we may fail to meet our public reporting obligations and investors could lose confidence in our reported financial information, which could have a negative impact on the trading price of our
stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Certain historical financial information included in this prospectus has been derived from unaudited financial statements and, as such,
may contain errors that might have been detected in an audit. Accordingly, our reported financial results may not be reflective of our actual results for these prior periods. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our consolidated financial statements as of and for the fiscal years ended December&nbsp;31, 2007 and December&nbsp;31, 2006, as well as our
consolidated financial statements as of and for the months ended January&nbsp;31, 2007 and January&nbsp;31, 2008, have not been audited. The financial data for those periods included in this prospectus is based on management accounts only and has
not been reviewed or audited by an independent registered public accounting firm. Although management believes that these unaudited consolidated financial statements have been prepared on a basis that is consistent with our audited consolidated
financial statements, there is a risk that this unaudited financial information may contain errors that might have been detected in an audit and such financial information may not be reflective of our true historical results for those periods. Any
differences between the financial information presented for these unaudited periods in this prospectus and our actual historical results may be material. Accordingly, you are cautioned not to place undue reliance on such information. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our management has limited experience managing a public company and our current resources may not be sufficient to fulfill our public company obligations.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following the completion of this offering, we will be subject to various regulatory requirements, including those of the SEC and
The NASDAQ Stock Market. These requirements include record keeping, financial reporting and corporate governance rules and regulations. Our management team has limited experience in managing a public company and, historically, has not had the
resources typically found in a public company. Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside
consultants or professionals to overcome our lack of experience or employees. Our business could be adversely affected if our internal infrastructure is inadequate, we are unable to engage outside consultants or are otherwise unable to fulfill our
public company obligations. </FONT></P>
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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Risks Related to this Offering and Ownership of Our Common Stock </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>No market currently exists for our common stock, and there can be no assurance that a viable public market for our common stock will develop.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common
stock will be determined through negotiations between us and the representatives of the underwriters and may not be indicative of the market price of our common stock after this offering. If you purchase shares of our common stock, you may not be
able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on The NASDAQ Global Select Market or otherwise or how
liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of
common stock at a price that is attractive to you, or at all. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Our stock price may be volatile or may decline regardless of our operating
performance, and you may not be able to resell your shares at or above the initial public offering price. Additionally, because we are a specialty retailer whose business is cyclical, the price of our common stock may fluctuate significantly.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been
traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">fashion trends and changes in consumer preferences; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the retail sales environment;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the timing and level of expenses for new boutique openings, relocations and remodels and the relative proportion of our new boutiques to existing boutiques;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the performance and successful integration of any new boutiques that we open; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the success of our e-commerce business and sales levels; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in our merchandise mix and vendor base; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in key personnel; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">entry into new markets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our levels of comparable boutique sales; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">announcements by us or our competitors of new product offerings or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital
commitments; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">actions by competitors or other mall, lifestyle center, street locations and strip center tenants; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">weather conditions, particularly during the holiday shopping period; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the level of pre-opening expenses associated with new boutiques; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">inventory shrinkage beyond our historical average rates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in operating performance and stock market valuations of other retail companies; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">investors&#146; perceptions of our prospects and the prospects of the retail industry; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">31 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the public&#146;s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">announcements relating to litigation; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those
analysts to initiate or maintain coverage of our common stock; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the development and sustainability of an active trading market for our common stock; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">future sales of our common stock by our officers, directors and significant stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">other events or factors, including those resulting from system failures and disruptions, hurricanes, war, acts of terrorism, other natural disasters or responses
to these events; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in accounting principles. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering
price. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, the stock markets, including The NASDAQ Global Select Market, have experienced extreme price and volume
fluctuations that have affected and continue to affect the market prices of equity securities of many retail companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were
involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could
adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, we will have approximately
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock outstanding. The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any
shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may
not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">After this offering, CCMP, the Founders and certain other stockholders that are the part of our executive management team will have rights to
require us to file registration statements registering additional sales of shares of common stock or to include sales of such shares of common stock in registration statements that we may file for ourselves or other stockholders. In order to
exercise these registration rights, these stockholders must satisfy the conditions discussed in &#147;Certain Relationships and Related Party Transactions&#151;Stockholders&#146; Agreement&#148;. Subject to compliance with applicable lock-up
restrictions, shares of common stock sold under these registration statements can be freely sold in the public market. In the event such registration rights are exercised and a large number of
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">32 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
shares of common stock are sold in the public market, such sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital.
Additionally, we will bear all expenses in connection with any such registrations (other than stock transfer taxes and underwriting discounts or commissions). See &#147;Certain Relationships and Related Party Transactions&#151;Stockholders&#146;
Agreement&#148; and &#147;Shares Eligible for Future Sale&#151;Registration Rights&#148;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We and each of our executive officers,
directors, all of the selling stockholders and substantially all of our other existing stockholders will have agreed with the underwriters, that for a period of 180&nbsp;days after the date of this prospectus, we or they will not offer, sell,
assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock, or any options or warrants to purchase any shares of our common stock or any securities convertible into or exchangeable for shares of common
stock, subject to specified exceptions. The representatives of the underwriters may, in their discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such agreement. See
&#147;Underwriting&#148; for more information. All of our shares of common stock outstanding as of the date of this prospectus may be sold in the public market by existing stockholders 180&nbsp;days after the date of this prospectus, subject to
applicable volume and other limitations imposed under federal securities laws. See &#147;Shares Eligible for Future Sale&#148; for a more detailed description of the restrictions on selling shares of our common stock after this offering. Sales by
our existing stockholders of a substantial number of shares in the public market, or the perception that these sales might occur, could cause the market price of our common stock to decrease significantly. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in
connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional
dilution to you. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share because the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is the midpoint of the price
range set forth on the cover page of this prospectus, is substantially higher than the pro forma net tangible book value per share of our outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid
substantially less than the initial public offering price when they purchased their shares. In connection with this offering, we expect to issue stock options to directors, officers and key employees under the 2011 Stock Incentive Plan. We plan to
reserve &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock under the 2011 Stock Incentive Plan for future issuances. You may experience additional dilution upon future equity issuances or the exercise of
stock options to purchase common stock granted to our employees, consultants and directors under our stock incentive plans. See &#147;Dilution&#148; for a more detailed description. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our
business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively
impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our
</FONT></P>
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business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which
could cause our stock price and trading volume to decline. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We do not expect to pay any cash dividends for the foreseeable future.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our
business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any contractual
provisions, including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and
other factors that our board of directors deems relevant. Further, because we are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay
dividends as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants under future indebtedness we may incur. Accordingly, if you purchase shares in this offering, realization of a gain on your
investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant
corporate decisions. </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, and assuming no exercise of the underwriters&#146; option to purchase
additional shares, our executive officers, directors and principal stockholders will own, in the aggregate, approximately &nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock, or approximately &nbsp;&nbsp;&nbsp;&nbsp;% assuming the exercise of
outstanding options owned by our executive officers and directors. As a result, these stockholders will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors, amendment of our
amended and restated certificate of incorporation and approval of significant corporate transactions and will have significant control over our management and policies. This concentration of influence could be disadvantageous to other stockholders
with interests different from those of our officers, directors and principal stockholders. We currently expect that, following this offering, three of the seven members of our board of directors will be principals of CCMP, one member will be
Mr.&nbsp;De Meritt, President and Chief Executive Officer of the company and one member will be Ms.&nbsp;Kyong Gill, the Executive Vice Chairperson of our board of directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, and assuming no exercise of the underwriters&#146; option to purchase additional shares, CCMP is expected to hold approximately &nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common
stock and the Founders are expected to collectively hold approximately &nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock. As a result of these ownership positions, these stockholders could take actions that have the effect of delaying or
preventing a change-in-control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. The
concentration of voting power held by CCMP may have an adverse effect on the price of our common stock. The interests of these stockholders may not be consistent with your interests as a stockholder. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">34 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>We will be a &#147;controlled company&#148; within the meaning of The NASDAQ Stock Market corporate governance
standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, affiliates of CCMP will continue to control a majority of our outstanding common stock. As a result, we will
be a &#147;controlled company&#148; within the meaning of The NASDAQ Stock Market corporate governance standards. As a controlled company, certain exemptions under The NASDAQ Stock Market corporate governance standards will free us from the
obligation to comply with certain corporate governance requirements of The NASDAQ Stock Market corporate governance standards, including the requirements: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">that a majority of the board of directors consist of &#147;independent directors&#148; as defined under The NASDAQ Stock Market corporate governance standards;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">that our director nominees be selected, or recommended for our board of directors&#146; selection, either (1)&nbsp;by a majority of independent directors in a
vote by independent directors, pursuant to a nominations process adopted by a board resolution, or (2)&nbsp;by a nominating and governance committee comprised solely of independent directors with a written charter addressing the nominations process;
and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">that the compensation of our executive officers be determined, or recommended to the board for determination, by a majority of independent directors in a vote by
independent directors, or a compensation committee comprised solely of independent directors. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following this
offering, we intend to utilize these exemptions. Accordingly, for so long as we are a &#147;controlled company&#148;, you will not have the same protections afforded to stockholders of companies that are subject to all of The NASDAQ Stock Market
corporate governance standards. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Conflicts of interest may arise because some of our directors are principals of our principal stockholder.
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the completion of this offering, representatives of CCMP and its affiliates will occupy three seats on our board of
directors. CCMP or its affiliates could invest in entities that directly or indirectly compete with us or companies in which CCMP or its affiliates are currently invested may already compete with us. As a result of these relationships, when
conflicts arise between the interests of CCMP or its affiliates, on the one hand, and the interests of our stockholders, on the other hand, these directors may not be disinterested. The representatives of CCMP and its affiliates on our board of
directors, by the terms of our amended and restated certificate of incorporation, are not required to offer us any transaction opportunity of which they become aware and could take any such opportunity for themselves or offer it to other companies
in which they have an investment, unless such opportunity is expressly offered to them solely in their capacity as our directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Anti-takeover
provisions in our charter documents and provisions of Delaware law might discourage, delay or prevent change in control of our company and may result in an entrenchment of management and diminish the value of our common stock. </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be effective upon completion of this
offering, will contain provisions that make it difficult for our stockholders to change the composition of our board of directors, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or
prevent a merger or acquisition that our stockholders may consider favorable. See &#147;Description of Capital Stock&#148;. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">35 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">These provisions, among other things: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establish a staggered, or classified, board of directors so that not all members of our board of directors are elected at one time; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prohibit cumulative voting in the election of directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">authorize the issuance by our board of directors of &#147;blank check&#148; preferred stock, the terms of which may be established and the shares of which may be
issued without stockholder approval, and which may include super-majority voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">limit the persons who may call special meetings of stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">establish advance notice requirements for stockholder nominations for elections to our board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">These anti-takeover provisions and other provisions under Delaware law,
together with the concentration of ownership of our common stock discussed above under &#147;Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing
significant corporate decisions,&#148; could substantially impede the ability of our common stockholders to benefit from a change in control and, as a result, could materially adversely affect the market price of our common stock and your ability to
realize any potential change-in-control premium. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">36 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_3"></A>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition as well as our
plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are
forward-looking statements. These statements may include words such as &#147;aim&#148;, &#147;anticipate&#148;, &#147;assume&#148;, &#147;believe&#148;, &#147;can have&#148;, &#147;could&#148;, &#147;due&#148;, &#147;estimate&#148;,
&#147;expect&#148;, &#147;goal&#148;, &#147;intend&#148;, &#147;likely&#148;, &#147;may&#148;, &#147;objective&#148;, &#147;plan&#148;, &#147;potential&#148;, &#147;positioned&#148;, &#147;predict&#148;, &#147;should&#148;, &#147;target&#148;,
&#147;will&#148;, &#147;would&#148; and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends. For example, all statements we make
relating to our estimated and projected earnings, sales, costs, expenditures, cash flows, growth rates, market share and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or
impact of pending or threatened litigation are forward-looking statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">These forward-looking statements are based on current
expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management&#146;s beliefs and assumptions. These statements are not guarantees of future performance or development and involve known
and unknown risks, uncertainties and other factors that are in many cases beyond our control. All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations.
Factors that may cause such differences include, but are not limited to, the risks described under &#147;Risk Factors,&#148; including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to identify and respond to new and changing fashion trends, customer preferences and other related factors; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to maintain a broad and shallow merchandise assortment; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">failure to execute successfully our growth strategy; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">disruptions to our information systems in the ordinary course or as a result of systems upgrades; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in consumer spending and general economic conditions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increasing cost of raw materials and other inputs used in the production of our merchandise; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in the competitive environment in our industry and the markets we serve, including increased competition from other retailers;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">failure of our new boutiques or existing boutiques to achieve sales and operating levels consistent with our expectations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the success of the malls and shopping centers in which our boutiques are located; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our dependence on a strong brand image; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">failure of our e-commerce business to grow consistent with our growth strategy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our dependence upon key senior management or our inability to hire or retain additional personnel; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">disruptions in our supply chain and distribution facility; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our indebtedness and lease obligations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our reliance upon independent third-party transportation providers for all of our merchandise shipments; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">hurricanes, natural disasters, unusually adverse weather conditions, boycotts and unanticipated events; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">37 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the seasonality of our business; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increases in costs of fuel, or other energy, transportation or utilities costs and in the costs of labor and employment; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the impact of governmental laws and regulations and the outcomes of legal proceedings; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">restrictions imposed by our indebtedness on our current and future operations; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our failure to maintain effective internal controls; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our inability to protect our trademarks or other intellectual property rights; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">increased costs as a result of being a public company. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and it is not possible for us to predict all of them. We derive many of our forward-looking
statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is
impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under &#147;Risk Factors&#148;
and &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly
qualified in their entirety by the cautionary statements contained in this prospectus as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking
statements made in this prospectus in the context of these risks and uncertainties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as
required by law, we undertake no obligation to update or revise any forward-looking statements publicly whether as a result of new information, future developments or otherwise. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">38 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_4"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We estimate that we will receive net proceeds from this offering of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming an initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the price range set
forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of our common stock by the selling
stockholders, which includes certain of our officers and directors, including any shares sold by the selling stockholders in connection with the exercise of the underwriters&#146; option to purchase additional shares. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to use approximately $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a
new revolving credit facility, to repay our existing senior secured credit facility in full. We intend to use the remaining proceeds from this offering, if any, to provide funds for working capital and other general corporate purposes, including the
growth of our boutique base, the growth of our e-commerce business, sales and marketing activities and other capital expenditures. We have not determined the specific portion of any net proceeds to be used for these purposes, and the net proceeds
from this offering have not been accounted for in our normal budgeting process. The amounts actually expended for these purposes may vary significantly and will depend on a number of factors, including the amount of cash we generate from future
operations, the actual expenses of operating our business, opportunities that may be or become available to us, the consummation of the refinancing and the other factors described under &#147;Risk Factors.&#148; If the refinancing is not consummated
as expected, a greater amount of the proceeds from this offering would be required to be used to repay our existing senior secured credit facility. See &#147;Risk Factors&#151;Risks Related to our Business&#151;The refinancing of our existing senior
secured credit facility may not be completed on the terms that we expect or at all. The failure to complete the refinancing as currently contemplated would require us to use more of the proceeds of this offering to repay our existing senior secured
credit facility, leaving less of the proceeds for working capital and other general corporate purposes.&#148; Notwithstanding the uses described above, we will retain broad discretion in the allocation of any remaining net proceeds from this
offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Affiliates of Goldman, Sachs&nbsp;&amp; Co., J.P. Morgan Securities LLC, Jefferies&nbsp;&amp; Company, Inc., RBC Capital
Markets, LLC, Stifel, Nicolaus&nbsp;&amp; Company, Incorporated and KeyBanc Capital Markets Inc., underwriters for this offering, are lenders under our existing senior secured credit facility and will receive a portion of the net proceeds used to
repay amounts outstanding under our existing senior secured credit facility. See &#147;Underwriting&#148;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our existing senior secured
credit facility consists of a $95.0 million term loan facility and a $5.0 million revolving credit facility, each with a scheduled maturity date of November&nbsp;17, 2013. As of January&nbsp;29, 2011, we had $93.8 million outstanding under our term
loan facility and $5.0 million available under our revolving credit facility. Immediately prior to the completion of this offering, we anticipate that there will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million of
term loans and no amounts of revolving loans outstanding under our existing senior secured credit facility. We used all of the term loan borrowings, along with cash on hand, to pay a dividend of $100.0 million on our common stock during November
2010. The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a)&nbsp;in the case of base rate borrowings, a rate equal to the highest of (1)&nbsp;the higher
of (i)&nbsp;the prime rate of Royal Bank of Canada and (ii)&nbsp;the federal funds rate plus 1/2 of 1%, (2)&nbsp;the LIBOR for an interest period of one month plus 1.00% and (3)&nbsp;2.75% or (b)&nbsp;in the case of LIBOR borrowings, a rate equal to
the higher of (1)&nbsp;1.75% and (2)&nbsp;the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings under both the revolving credit facility and the term loan facility is 5.00% with respect to base
rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for base rate borrowings increases to 6.50% and 9.00% on June&nbsp;1, 2012 and
June&nbsp;1, 2013, respectively. The applicable margin for borrowings under both the revolving </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">39 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
credit facility and the term loan facility for LIBOR borrowings increases to 7.50% and 10.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. As of January&nbsp;29, 2011, the loans
under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%. See &#147;Description of Certain Indebtedness&#151;Existing Senior Secured Credit Facility&#148; for more information on our existing senior
secured credit facility. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A $1.00 increase or decrease in the assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds we receive from this offering by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriter discounts and
commissions and estimated offering expenses payable by us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">40 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_5"></A>DIVIDEND POLICY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We did not declare or pay any dividends on our common stock during fiscal year 2009. We declared and paid a dividend of $2.39 per share on our
common stock (on a fully diluted basis) during November 2010. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the
foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any contractual provisions, including under agreements for indebtedness we may incur,
that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and other factors that our board of directors deems relevant. Because we
are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization,
agreements of our subsidiaries or covenants under future indebtedness we may incur. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">41 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_6"></A>CAPITALIZATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our cash, cash equivalents and capitalization as of January&nbsp;29, 2011 on: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">an actual basis; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a pro forma as adjusted basis to give effect to the following: </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the sale by us of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock in this offering at an assumed initial public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the use of $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a new revolving credit facility, to
repay our existing senior secured credit facility in full. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">You should read the following table together with our
consolidated financial statements and the related notes appearing elsewhere in this prospectus and the sections of this prospectus titled &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148;,
&#147;Use of Proceeds&#148; and &#147;Selected Consolidated Financial and Operating Data&#148;. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of January&nbsp;29, 2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Actual</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Pro Forma<BR>As&nbsp;Adjusted(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($ in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current portion of long-term debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">87,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Shareholders&#146; deficit:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock, $0.01 par value, 80,000,000 shares authorized; 40,457,343 shares issued and outstanding, actual;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares issued and outstanding, on a pro forma as adjusted basis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">405</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,232</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accumulated deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(83,105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total shareholders&#146; deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(55,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total capitalization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">38,345</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint
of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds from this offering available to us to prepay our existing senior secured credit facility and would increase or decrease cash and cash
equivalents by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, additional paid-in capital by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, total shareholders&#146; deficit by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million and total capitalization by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. See &#147;Use of Proceeds.&#148; The pro forma as adjusted
information discussed above is illustrative only and following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">42 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_7"></A>DILUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Dilution is the amount by which the offering price paid by the purchasers of our common stock in this offering will exceed the pro forma net
tangible book value per share of our common stock upon completion of this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If you invest in shares of our common stock in this
offering, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share you pay in this offering and the pro forma net tangible book value per share of our common stock upon completion
of this offering. Our net tangible book value as of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011 was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of common stock. Net tangible book value or deficiency per share of our common
stock is determined at any date by subtracting our total liabilities from our total assets, less our intangible assets, and dividing the difference by the number of shares of common stock outstanding at that date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our pro forma net tangible book value per share, after giving effect to this offering, set forth below represents our total tangible assets less
our total liabilities, divided by the number of shares of our common stock outstanding on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,&nbsp;2011, after giving effect to the
sale by us of shares of common stock in this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">After giving effect to our issuance and sale
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share,
which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,&nbsp;2011 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of our common stock. This represents an immediate increase in pro forma net tangible book value to our existing stockholders of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and an immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new investors who purchase shares of our common
stock in this offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table illustrates this per share dilution to new investors purchasing shares of our common stock
in this offering: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Assumed initial public offering price per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net tangible book value per share as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in pro forma net tangible book value per share attributable to new investors purchasing shares in this offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Pro forma net tangible book value per share after this offering (without giving effect to the refinancing)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dilution per share to new investors</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Assuming the number of shares offered by
us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the
assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net tangible book
value attributable to new investors purchasing shares in this offering by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share and the dilution to new investors by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share and increase or decrease the pro forma net tangible book value per share after this offering by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales by the selling stockholders in this offering
will cause the number of shares held by existing stockholders to be reduced to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares or,&nbsp;&nbsp;&nbsp;&nbsp;%, in the aggregate, of the total number of shares of our common
stock outstanding upon completion of this offering, and will increase the total number of shares held by new investors to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares or,&nbsp;&nbsp;&nbsp;&nbsp;%, in the aggregate,
of the total number of shares of our common stock outstanding upon completion of this offering. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">43 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If the underwriters exercise their option to purchase additional shares in full, our existing
stockholders would own&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares or,&nbsp;&nbsp;&nbsp;&nbsp;%, in the aggregate, and our new investors would
own&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares or,&nbsp;&nbsp;&nbsp;&nbsp;%, in the aggregate, of the total number of shares of our common stock outstanding upon completion of this offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes, as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, as adjusted to give effect to this offering, the difference between the number of shares of our common stock purchased
from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors, at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the range set forth on the cover page of this prospectus, before deducting the underwriting discounts and commissions and estimated offering expenses
payable by us in connection with this offering: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="57%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="4" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares&nbsp;Purchased</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total&nbsp;Consideration</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Average<BR>Price</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Per&nbsp;Share</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom">&nbsp;<FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percent</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percent</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Existing stockholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">New investors in the offering</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same,
after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease total consideration paid by new investors and total
consideration paid by all stockholders by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The foregoing discussion and tables assume no exercise of stock options to purchase
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock issuable upon the exercise of stock options outstanding as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, at a weighted average exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. To the extent that any options are exercised, new investors will experience further dilution. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">44 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_8"></A>SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following selected consolidated financial data for each of the years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;31,
2009 and the selected consolidated balance sheet data as of January&nbsp;29, 2011 and January&nbsp;30, 2010 have been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected
consolidated balance sheet data as of January 31, 2009 has been derived from our audited consolidated balance sheet, which is not included in this prospectus. The selected consolidated financial data for each of the years ended December&nbsp;31,
2006 and December&nbsp;31, 2007 and the selected consolidated balance sheet data as of December&nbsp;31, 2006 and December&nbsp;31, 2007 have been derived from our unaudited consolidated financial statements, which are not included in this
prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In February 2010, CCMP acquired a controlling interest in the company from the Founders and Bear Growth Capital Partners,
LP (&#147;BGCP&#148;). In connection with the acquisition, the company considered the application of push-down accounting to the company&#146;s financial statements. The company determined that given the percentage of the equity interest acquired in
the acquisition, the push-down accounting treatment was optional but not required. The company elected not to apply the push-down accounting treatment as a result of the acquisition. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January&nbsp;31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January&nbsp;29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January&nbsp;30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January&nbsp;31, 2009. For fiscal year 2007, which ended on December&nbsp;31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December&nbsp;31st. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The historical results presented below are not necessarily indicative of the results to be
expected for any future period and the results for any interim period may not necessarily be indicative of the results that may be expected for a full year. You should read the selected consolidated financial and operating data for the periods
presented in conjunction with &#147;Risk Factors&#148;, &#147;Capitalization&#148;, &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and our consolidated financial statements and the related
notes, which are included elsewhere in this prospectus. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">45 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Statements of<BR>Operations</B>(1)<B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2006(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except share and per share amounts)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales(3)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,210</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of goods sold and occupancy costs(4)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">65,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,244</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,358</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,312</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,225</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">42,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,898</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,483</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Selling, general, and administrative expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,962</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,671</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,643</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,482</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,970</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,227</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,650</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(159</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Interest income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,633</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income before income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,070</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,654</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,918</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,382</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,379</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,691</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in redemption value of convertible redeemable preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock accrued dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,703</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,965</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: Income attributable to participating securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(552</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to common shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,436</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic earnings (loss) per common share(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted earnings (loss) per common share(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.06</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends declared per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted average shares outstanding:</B>(6)<B></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="12"></TD>
<TD HEIGHT="16" COLSPAN="8"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Consolidated Balance Sheet Data</B>(1)<B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>As of Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 29,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January 31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December 31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>December 31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2006(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,721</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">22,318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,036</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,860</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,396</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,830</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,797</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,912</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">114,592</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,242</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,556</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,107</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,335</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock&#151;series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23,561</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,703</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total shareholders&#146; (deficit) equity</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(55,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(62,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(11,287</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(12,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,577</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Operating data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Comparable boutique sales growth for period(7)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Number of boutiques open at end of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">78</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales per average square foot for period (not in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">508</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">429</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">384</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">401</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">399</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Average square feet (in thousands)(8)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">266</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">185</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">136</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total gross square feet at end of period (in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">210</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">89</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">46 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">In January 2008, we changed our fiscal year end from December&nbsp;31st to the Saturday closest to January&nbsp;31st. The following table presents selected unaudited consolidated
financial and other selected data as of and for the months ended February&nbsp;2, 2008 and January&nbsp;31, 2007: </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="85%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Month Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>February&nbsp;2,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Consolidated Statements of Operations Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net revenues</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2,794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,593</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(506</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(262</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Consolidated Balance Sheet Data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Total assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">14,913</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">8,478</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Convertible Redeemable Preferred Stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">21,920</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">For the year ended December&nbsp;31, 2006, we operated as a Subchapter &#147;S&#148; Corporation and therefore were not subject to Federal Income Tax. If we had been a
&#147;C&#148; Corporation as of January&nbsp;1, 2006, assuming a combined federal, state and local effective tax rate of 39%, we would have incurred total income tax of $2,205. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales plus shipping and handling fees. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Cost of goods sold and occupancy costs includes the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for
merchandise shipped directly from our vendors to our boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation, and boutique repair and
maintenance costs and shipping costs related to e-commerce sales. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Please see note 2 to our consolidated financial statements included elsewhere in this prospectus, for an explanation of per share calculations. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">On April&nbsp;28, 2010, the company authorized a split of its outstanding and authorized common stock in the ratio of four hundred to one. Accordingly, our consolidated financial
data included elsewhere in this prospectus have been adjusted to retroactively reflect the effects of the stock split on common shares and per share amounts for all periods presented. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique&#146;s opening. When a boutique that is included in
comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no
longer consider sales from that boutique to be comparable boutique sales. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a)&nbsp;the sum of the total gross square feet at the end of each fiscal quarter, divided by (b)&nbsp;the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">47 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_9"></A>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>AND RESULTS OF OPERATIONS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>You should read the following discussion and analysis of our financial condition and results of operations together with &#147;Selected Consolidated Financial and Operating Data&#148; and our consolidated
financial statements and the related notes and other financial information and operating data, which are included elsewhere in this prospectus. Some of the information contained in this discussion and analysis, including information with respect to
our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the &#147;Risk Factors&#148; and &#147;Special Note Regarding Forward-Looking Statements&#148; sections of this
prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. </I></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January&nbsp;31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January&nbsp;29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January&nbsp;30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January&nbsp;31, 2009. For fiscal year 2007, which ended on December&nbsp;31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December&nbsp;31st. </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Overview </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> is one of the fastest growing specialty retailers in the United States. Our retail locations are designed and merchandised to feel like independently owned, upscale
boutiques and provide our customers with an inviting, intimate and fun shopping experience. We believe we offer compelling value with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts at
attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious, female customer, although we find that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique setting.
We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week in order to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">By offering a differentiated shopping experience and high-quality merchandise at a compelling value, our boutiques have been successful
across a wide variety of geographic markets and shopping venues. We believe we have an opportunity to continue to grow our boutique base from 236 locations in 38 states as of April&nbsp;2, 2011 to approximately 900 boutiques in the United States
over time. Our merchandise is also available through our e-commerce website, <I>www.francescascollections.com</I>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our company was
founded in 1999 by the Founders. We opened our first boutique that same year in Houston, Texas selling fashion jewelry and accessories. In April 2007, the Founders sold a minority ownership interest in the company to BGCP. Early that same year,
Mr.&nbsp;De Meritt was appointed the President and Chief Executive Officer of our company. Since 2007, Mr.&nbsp;De Meritt has augmented our strong founding management team with additional highly skilled and deeply experienced executives across key
areas of our business. In February 2010, CCMP acquired an approximately 84% controlling interest in the company from the Founders and BGCP (the &#147;CCMP Acquisition&#148;) with the goals of providing liquidity to the Founders and BGCP and
supporting Mr.&nbsp;De Meritt and his management team in accelerating our company&#146;s growth. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our strong growth and operating
results reflect the initiatives taken by our management team which include accelerating the rate of new boutique openings, and further investing in our distribution capability and in our internet site and e-commerce capability, as well as the
acceptance of our brand </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">48 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
and merchandise as we have expanded into additional regions of the United States. Our net sales increased from $29.7&nbsp;million in fiscal year 2006 to $135.2 million in fiscal year 2010, a
compound annual growth rate of 46.1%. Over the same period, we grew income from operations from $5.7&nbsp;million to $29.6 million, a compound annual growth rate of 51.3%. While revenue increased at a compound annual growth rate of 46.1%, our total
retail square footage growth increased at a compound annual growth rate of 35.0% over that same period, as our boutique sales productivity improved. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Since the beginning of fiscal year 2011, we have increased our boutique base from 207 boutiques to 236 boutiques as of April&nbsp;2, 2011. We expect to continue our strong growth in the future. We believe there is
a significant opportunity to grow our boutique base to approximately 900 boutiques over time. We plan to open approximately 75 boutiques in fiscal year 2011 (29 of which were opened as of April&nbsp;2, 2011). We expect to continue to drive our
comparable boutique sales by featuring high-quality, trend-right merchandise at attractive prices and by maintaining our broad and shallow merchandising approach that we believe will result in increased units and dollars per transaction while also
protecting margins. We also expect to increase our e-commerce sales by more fully utilizing the functionality of our core e-commerce software that we licensed in 2010, improving our cross-selling and up-selling capability, emphasizing the purchase
of coordinated outfits to increase average dollars per sales transaction, and by increasing site traffic by utilizing better search engine optimization tools, email campaigns and social media marketing. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our broad and shallow merchandising strategy and the differentiated shopping experience we offer to our customers contributes to
the success of our boutiques, which generate attractive returns. Over the previous two fiscal years, we opened 98 boutiques which averaged approximately 1,400 square feet and, of the locations open 12 or more months, boutique sales averaged
approximately $750,000 in the first year. On average, these boutiques delivered first-year, pre-tax cash-on-cash returns in excess of 150% and payback periods of less than one year. Consistent with recent openings, our new boutique operating model
assumes a net investment of $155,000 consisting of $110,000 of build-out costs, including equipment and fixtures net of tenant allowances, and $45,000 of initial inventory. We expect new boutique economics to be consistent with our recent history
and, based on first-year boutique sales of $650,000 to $750,000, our boutiques achieve a payback period of less than a year and pre-tax cash-on-cash returns of approximately 150%. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We pursue various initiatives to build brand awareness and create relationships with customers. These initiatives include in-boutique visual
merchandising and presentation, periodic promotions including email marketing campaigns, the use of social networks and the building of a customer database. Our website was redesigned in October of 2010 to deliver improved functionality as well as a
stronger brand and fashion sensibility to our customers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We continue to invest capital to build the corporate and distribution
infrastructure necessary to support our growth. We also continue to invest in our systems infrastructure, including implementation of technology for retail merchandise management, point-of-sale software and software applications to support our
e-commerce initiatives. We are currently implementing an integrated merchandise management, warehouse management and point-of-sale system. Our plan calls for the merchandise and warehouse components to be implemented during 2011 and the new
point-of-sale system to be deployed chain-wide by mid-2012. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>How We Assess the Performance of Our Business </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our
business is performing are net sales, comparable boutique sales, gross profit, selling, general and administrative expenses and operating income. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">49 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Net Sales </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Net sales constitute gross sales net of merchandise returns. Net sales consist of sales from comparable boutiques and non-comparable boutiques and sales and shipping revenue from our e-commerce business.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Comparable Boutique Sales </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique&#146;s opening, which is
when we believe comparability is achieved. When a boutique that is included in comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or
longer for a remodel or as a result of weather damage, fire or the like, we no longer consider sales from that boutique to be comparable boutique sales. There may be variations in the way in which some of our competitors and other retailers
calculate comparable, &#147;same store&#148; or &#147;same boutique&#148; sales. As a result, data in this prospectus regarding our comparable boutique sales may not be comparable to similar data made available by other retailers. Non-comparable
boutique sales is comprised of new boutique sales, e-commerce sales, sales from closed boutiques and other sales not included in comparable boutique sales. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Measuring the change in year-over-year comparable boutique sales allows us to evaluate how our boutique base is performing. Various factors affect comparable boutique sales, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">consumer preferences, buying trends and overall economic trends; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to identify and respond effectively to fashion trends and customer preferences; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to provide an assortment of distinctive, high-quality product offerings to generate new and repeat visits to our boutiques;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">competition; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in our merchandise mix; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">changes in pricing and average unit prices; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the number of items purchased per transaction or boutique visit; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the timing of promotional events and holidays; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the timing of introduction of new merchandise and customer acceptance of new merchandise; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the level of customer service that we provide in our boutiques; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our opening of new boutiques in the vicinity of our existing boutiques; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">our ability to source and distribute merchandise efficiently; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the number of boutiques we open, close, remodel or relocate in any period. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Opening new boutiques is an important part of our growth strategy. As we
continue to pursue our growth strategy we expect that a significant percentage of our net sales will continue to come from new boutiques not included in comparable boutique sales. Accordingly, comparable boutique sales is only one measure we use to
assess the success of our growth strategy. Our rapid pace of new boutique openings may affect the comparability of our results of operations, particularly our comparable boutique sales growth, to similar data made available by other retailers. We
also anticipate that sales from our e-commerce business will become a more significant contributor to net sales. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The specialty retail
apparel and accessories industry is cyclical, and consequently our net sales are affected by general economic conditions. Purchases of apparel, jewelry, accessories and gift items </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">50 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
are sensitive to a number of factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and
consumer confidence. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our business is mildly seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are
usually highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal quarter. While December generally experiences the highest level of net sales, January is typically the month with the least net sales.
Both months are included in our fourth fiscal quarter. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Gross Profit </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit is equal to our net sales less our cost of goods sold and occupancy costs. Gross margin measures gross profit as a percentage of our
net sales. Cost of goods sold and occupancy costs includes the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for merchandise shipped directly from our vendors to our boutiques,
allowances for inventory shrinkage and obsolescence, boutique occupancy costs, including rent, utilities, common area maintenance, property taxes, depreciation and boutique repair and maintenance costs, and shipping costs related to e-commerce
sales. The components of our cost of goods sold and occupancy costs may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers. As a result, data in this prospectus regarding our gross
profit and gross margin may not be comparable to similar data made available by our competitors and other retailers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The variable
component of our cost of goods sold and occupancy costs is higher in higher volume quarters because the variable component of our cost of goods sold and occupancy costs generally increases as net sales increase. Changes in the mix of our merchandise
sold, such as changes in the percentage of apparel sold, may also impact our overall cost of goods sold and occupancy costs. We review our inventory levels on an ongoing basis to identify slow-moving merchandise, and generally use markdowns to clear
that merchandise. The timing and level of markdowns are not principally seasonal in nature but are driven by customer acceptance of our merchandise. If we misjudge the market for our merchandise, we may be faced with significant excess inventories
for some merchandise and be required to mark down such merchandise in order to sell them. These markdowns may result in selling merchandise below cost. Markdowns have reduced our gross profit in some prior periods and may have a material adverse
impact on our earnings for future periods depending on the extent of the markdown discount and the amount of merchandise affected. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Selling,
General and Administrative Expenses </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Selling expense includes boutique payroll, employee benefits, freight from distribution
centers to boutiques, boutique pre-opening expense, credit card merchant fees, costs of maintaining our internet presence and operating our e-commerce business while general and administrative expenses includes payroll and benefits for our
headquarters and distribution operations, management incentives, professional fees, travel and administration costs and other expenses related to operations at our corporate headquarters, as well as share-based compensation. While selling expense
generally varies proportionally with net sales, general and administrative expenses does not generally vary proportionally with net sales. As a result, general and administrative expenses as a percentage of net sales is usually higher in lower
volume quarters and lower in higher volume quarters. The components of our selling, general and administrative expenses may not be comparable to those of our competitors and other retailers. We expect that our selling, general and administrative
expenses will increase in future periods due to our continuing growth and in part to additional legal, accounting, insurance and other expenses we expect to incur as a result of being a public company. Among other things, we expect that compliance
with the Sarbanes-Oxley Act and related rules and regulations will result in significant legal and accounting costs. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">51 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Share-based compensation expense related to stock options was $2,400,000, $99,000 and $8,000 for
fiscal years 2010, 2009 and 2008, respectively. We granted options to purchase an aggregate of 1,994,430, 406,000 and 100,000&nbsp;shares of common stock in fiscal years 2010, 2009 and 2008, respectively. These and any future stock option grants
will increase our share-based compensation expense in fiscal year 2011 and in future fiscal years compared to fiscal year 2010. See &#147;&#151;Critical Accounting Policies&#148;. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Income from Operations </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations is gross profit less selling, general and
administrative expenses. We use operating income as an indicator of the productivity of our business and our ability to manage selling, general and administrative expenses. We believe that our operating income, expressed as a percentage of net
sales, compares favorably to other specialty retailers. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Results of Operations </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of net
sales: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" COLSPAN="9" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;<BR>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;<BR>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;<BR>&nbsp;&nbsp;</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" COLSPAN="9" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except percentages and<BR>number of boutiques)</B></FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;<BR>&nbsp;&nbsp;</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">135,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">79,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Cost of goods sold and occupancy costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">65,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">37,244</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">25,358</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">70,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">42,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">26,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Selling, general and administrative expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">40,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">24,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">19,962</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">29,643</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">17,482</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6,970</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Interest income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(1,633</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income before income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">28,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">17,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">11,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6,918</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2,382</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percentage of sales:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">100.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">100.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">100.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Cost of goods sold and occupancy costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">48.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">46.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">48.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">51.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">53.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">51.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Selling, general and administrative expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">30.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">31.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">38.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">21.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">22.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">13.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">0.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">0.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">0.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Interest income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(1.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">0.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">0.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income before income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">20.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">22.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">13.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">8.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">8.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">12.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">13.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">8.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Operating data:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Comparable boutique sales growth for period(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">15.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">9.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">(6.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">)%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Number of boutiques open at end of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales per average square foot for period (not in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">508</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">429</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">384</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Average square feet (in thousands)(2)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">266</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">185</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">136</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Total gross square feet at end of period (in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">210</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique&#146;s opening. When a boutique that is
included in comparable boutique sales is relocated, we continue to consider sales from </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">52 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:ARIAL" SIZE="1">
that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no longer consider sales from
that boutique to be comparable boutique sales. </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a)&nbsp;the sum of the total gross square feet at the end of each fiscal quarter, divided by (b)&nbsp;the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes the number of boutiques open at the beginning and
the end of the periods indicated: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Number of boutiques open at beginning of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">80</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Boutiques added</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">62</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Boutiques closed</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number of boutiques open at the end of period</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have determined our operating segments on the same basis that we use internally to evaluate performance. Our
reporting segments are our boutiques and e-commerce business, which have been aggregated into one reportable financial segment. We aggregate our operating segments because (i)&nbsp;the merchandise offered at our retail locations and through our
e-commerce business is largely the same, (ii)&nbsp;we believe that the majority of our e-commerce customers are also customers of our retail locations and (iii)&nbsp;the merchandise margin of both segments is similar. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Fiscal Year 2010 Compared to Fiscal Year 2009 </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Net Sales </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales increased 70.3%, or $55.8&nbsp;million, to $135.2 million in fiscal
year 2010 from $79.4&nbsp;million in fiscal year 2009. Comparable boutique sales increased 15.2% for fiscal year 2010 compared to fiscal year 2009. Comparable boutique sales increased $10.5&nbsp;million and non-comparable boutique sales increased
$45.3 million, with $33.4 million from boutiques that opened in fiscal year 2010. There were 137 comparable boutiques and 70 non-comparable boutiques open at January&nbsp;29, 2011 compared to 106 and 41, respectively, at January&nbsp;30, 2010.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">Our net e-commerce sales increased to $1.9 million in fiscal year 2010 from $1.0 million in fiscal year 2009.
E-commerce sales increased due to our use of a more robust e-commerce technology platform, expanded marketing efforts to a larger customer base and a growing awareness of francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> resulting from growth in our boutique base. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Apparel</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,326</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45,540</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,786</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Jewelry</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,764</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accessories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,567</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,560</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gifts</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,949</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,418</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Merchandise sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135,171</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">55,911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The preceding table was prepared from our internal merchandise system and presents sales by merchandise category
excluding shipping revenue and allowance for returns. In fiscal year 2010, shipping revenue and allowance for returns approximately offset each other while shipping revenue </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">53 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
totaled $107,000 in fiscal year 2009. As shown in that table, sales increased in all of our merchandise categories, but growth was particularly high in the accessories and gift categories.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Gross Profit </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Gross profit increased 66.6%, or $28.0&nbsp;million, in fiscal year 2010 to $70.2 million from $42.1&nbsp;million in fiscal year 2009. Gross margin decreased 116 basis points to 51.9% for fiscal year 2010 from
53.1% for fiscal year 2009. This decrease was primarily attributable to a decline in merchandise margin, which decline was primarily due to sales of markdown merchandise accounting for a larger proportion of net sales in fiscal year 2010 as well as
a correction to rent expense of $0.7 million, or 50 basis points of gross margin, for rent incurred from time of possession to boutique opening, for boutiques opened in prior fiscal years. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Selling, General and Administrative Expenses </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Selling, general and administrative expenses increased 64.5%, or $15.9 million in fiscal year 2010 to $40.5 million, from $24.6&nbsp;million in fiscal year 2009. The increase in selling expense was primarily
attributable to an increase in the number of boutiques in operation during fiscal year 2010, compared to fiscal year 2009, which led to higher overall boutique-level labor expenses and other costs to operate our boutiques. We also experienced
increased costs associated with the expansion of our e-commerce initiative. General and administrative expenses increased due to the cost of adding headquarters and distribution employees to manage the larger boutique base and increased net sales.
Additionally, general and administrative expenses increased as we paid higher employee and management incentives. As a percentage of net sales, selling, general and administrative expenses decreased to 30.0% in fiscal year 2010 from 31.0% in fiscal
year 2009, primarily due to lower boutique-level labor expenses as a percentage of sales. The selling expense portion declined as a percentage of net sales to 17.8% in fiscal year 2010 from 19.0% in fiscal year 2009, while the general and
administrative portion increased to 12.2% from 12.0% in fiscal year 2010. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Income from Operations </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As a result of the foregoing, income from operations increased $12.2 million, or 69.6%, to $29.6 million in fiscal year 2010 from $17.5 million in
fiscal year 2009. Income from operations was 21.9% of net sales in fiscal year 2010 compared to 22.1% in fiscal year 2009. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Interest Expense, Net </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Interest expense, net increased by $1.6 million in fiscal year 2010 compared to fiscal year 2009 because the company made initial borrowings under
its senior secured credit facility during fiscal year 2010. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Provision for Income Taxes </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The increase in provision for income taxes of $4.2 million in fiscal year 2010 from fiscal year 2009 was due primarily to a $10.5&nbsp;million
increase in pre-tax income. The effective tax rate of 39.7% in fiscal year 2010 was comparable to the effective tax rate of 39.5% in fiscal year 2009. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Net Income </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income increased 59.3%, or $6.3&nbsp;million, to $16.9&nbsp;million in
fiscal year 2010 from $10.6&nbsp;million in fiscal year 2009. This increase was due primarily to a $28.0 million increase in gross profit, partially offset by increases in selling, general and administrative expenses of $15.9&nbsp;million, and a
higher provision for income taxes of $4.2&nbsp;million. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">54 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Fiscal Year 2009 Compared to Fiscal Year 2008</I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Net Sales </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales
increased 51.8%, or $27.1 million, to $79.4 million in fiscal year 2009 from $52.3 million in fiscal year 2008. Comparable boutique sales increased 9.8% for fiscal year 2009 compared to fiscal year 2008, as a result of particularly strong growth in
clothing and accessories categories, as presented in the following table. Comparable boutique sales increased by $4.5 million and non-comparable boutiques sales increased $21.7 million with $15.0 million from boutiques that opened in fiscal year
2009. There were 106 comparable boutiques and 41 non-comparable boutiques open at January&nbsp;30, 2010 compared to 70 and 41, respectively, at January&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our net e-commerce sales increased to $1.0 million from $0.7 million in the prior fiscal year. E-commerce sales increased as we expanded our assortment of merchandise available for online purchase and as our
customer database that we market to increased. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="70%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Apparel</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45,540</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,829</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,711</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Jewelry</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,764</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,281</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,483</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accessories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,391</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,616</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gifts</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,949</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,789</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,160</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Merchandise sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,970</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The preceding table was prepared from our internal merchandise system and presents sales by merchandise category
excluding shipping revenue which totaled $107,000 and zero in fiscal years 2009 and 2008, respectively. While percentage growth rates were highest for apparel and accessories, our jewelry category was also a key contributor to the total net sales
increase. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Gross Profit </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Gross profit increased 56.4%, or $15.2&nbsp;million, in fiscal year 2009 to $42.1&nbsp;million from $26.9&nbsp;million in fiscal year 2008. Gross margin increased 156&nbsp;basis points to 53.1% for fiscal year 2009
from 51.5% for fiscal year 2008. This increase was primarily attributable to the absorption of fixed boutique occupancy costs over increased net sales as well as lower inventory shrinkage costs. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Selling, General and Administrative Expenses </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Selling, general and administrative expenses increased 23.4% or $4.7 million to $24.6 million in fiscal year 2009, from $20.0 million in fiscal year 2008. The increase in selling expense was primarily attributable
to an increase in the number of boutiques in operation during fiscal year 2009, compared to fiscal year 2008, which led to higher overall boutique-level labor expenses and other costs to operate our boutiques. General and administrative expenses
increased due to the cost of adding headquarters and distribution employees to manage the larger boutique base and increased net sales as well as professional fees relating to the CCMP Acquisition. As a percentage of net sales, selling, general and
administrative expenses declined to 31.0% in fiscal year 2009 from 38.2% in fiscal year 2008. The selling expense portion declined to 19.0% from 23.1% as a percentage of net sales, principally as a result of improved boutique labor scheduling. The
general and administrative portion declined to 12.0% in fiscal year 2009 from 15.1% in fiscal 2008 as headquarters payroll was absorbed over higher net sales, partially offset by increased professional fees. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">55 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Income from Operations </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As a result of the foregoing, income from operations increased $10.5 million, or 150.8%, to $17.5 million in fiscal year 2009 from $7.0 million in
fiscal year 2008. Income from operations was 22.0% of net sales in fiscal year 2009 compared to 13.3% in fiscal year 2008. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Provision for Income Taxes </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The increase in provision for income taxes of $4.5 million in fiscal year 2009 from fiscal year 2008 was due primarily to a $10.5 million increase in pre-tax income and an increase in the effective tax rate. For
fiscal year 2008, the provision for income taxes was reduced by $0.2 million due to adjustments made to deferred income taxes for differences between estimates used in recording the income tax provision in the prior year and the actual federal and
state tax returns. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Net Income </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Net income increased 130.2%, or $6.0&nbsp;million, to $10.6 million in fiscal year 2009 from $4.6 million in fiscal year 2008. This increase was due primarily to a $15.2&nbsp;million increase in gross profit,
partially offset by increases in selling, general and administrative expenses of $4.7&nbsp;million, and a higher provision for income taxes of $4.5&nbsp;million.</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Quarterly Results and Seasonality </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth our historical quarterly
results of operation as well as certain operating data for each of our most recent eight fiscal quarters expressed as a percentage of our net sales. This unaudited quarterly information has been prepared on the same basis as our annual audited
financial statements appearing elsewhere in this prospectus, and includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary to present fairly the financial information for the fiscal quarters presented.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The quarterly data should be read in conjunction with our audited consolidated financial statements and the related notes appearing
elsewhere in this prospectus. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">56 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Quarterly Results of Operations </I></B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="36%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year 2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year 2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fourth</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Third</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Second</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>First</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fourth</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Third</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Second</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>First</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="30" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(unaudited)</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands, except percentages and number of boutiques)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,073</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,804</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,501</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,251</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,592</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,149</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,782</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,645</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,204</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,919</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,068</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,912</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,401</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,709</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,621</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,580</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,053</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,591</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,258</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,328</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,861</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,591</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,788</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,390</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,976</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Year-Over-Year Increase</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">62.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">74.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">66.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">69.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">33.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">77.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">72.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">56.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">99.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">43.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Percent of Annual Results</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">30.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Operating Data</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Comparable boutique sales change</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3.6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)%&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Number of boutiques open at end of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">206</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">197</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">172</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">145</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">129</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">118</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="1">Percentage totals in the above table may not equal the sum of the components due to rounding. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Seasonality </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our business is mildly seasonal in nature and demand is generally the
highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal quarter. In addition, to prepare for these periods, we must order and keep in stock more merchandise than we carry during other parts of the year.
We expect inventory levels, along with an increase in accounts payable and accrued expenses, generally to reach their highest levels in anticipation of the increased net sales during these periods. As a result of this seasonality and generally
because of variation in consumer spending habits, we experience fluctuations in net sales and working capital requirements during the year. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Liquidity and Capital Resources </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our primary sources of liquidity are cash flows from
operations and borrowings under our senior secured credit facility. Following completion of this offering, we expect that our primary sources of liquidity will be cash flows from operations and borrowings under a new revolving credit facility. Our
primary cash needs are for capital expenditures in connection with opening new boutiques and remodeling existing boutiques, investing in improved technology and working capital required for the increases in merchandise inventories associated with
our growth. We also occasionally use cash or our senior secured credit facility to issue letters of credit to support merchandise imports or for other corporate purposes. Cash is also required for investment in information technology and
distribution </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">57 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
facility enhancements and funding normal working capital requirements. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts
payable and other current liabilities. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within several days of the related
sale and we typically have up to 30 days to pay our vendors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">While we believe we have sufficient liquidity and capital resources to
meet our current operating requirements and expansion plans, we may elect to pursue additional expansion opportunities within the next year which could require additional debt or equity financing. If we are unable to secure additional financing at
favorable terms in order to pursue such additional expansion opportunities, our ability to pursue such opportunities could be materially adversely affected. Additionally, during the recent recession, we experienced negative comparable boutique sales
from the third quarter of fiscal year 2008 through the first quarter of fiscal year 2009, which reduced our cash flow from operations. We could experience a similar effect in a future recessionary period. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We were in compliance with all covenants under our existing senior credit facility as of January&nbsp;29, 2011. At January&nbsp;29, 2011, we had
$12.5 million of cash and cash equivalents and $5.0 million in borrowing availability under our revolving credit facility. There were no letters of credit outstanding at the end of fiscal year 2010. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Cash Flow </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A summary of our
operating, investing and financing activities are shown in the following table: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Provided by operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,277</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Used for investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(16,208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Used for financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase (decrease) in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,251</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,739</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">170</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">58 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Operating Activities </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization, deferred taxes, the
effect of working capital changes and tenant allowances received from landlords. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Adjustments to reconcile net income to net cash provided by operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,215</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">700</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Excess tax benefit from stock-based compensation </FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,757</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Loss on sale of assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Amortization of debt issuance costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(54</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Changes in assets and liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,557</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(126</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Inventories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,581</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">310</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Prepaid expenses and other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(407</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,443</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,434</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(298</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,874</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred and accrued rents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,440</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">315</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income taxes payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">978</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(196</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,462</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,277</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by operating activities was $21.0 million and $13.3&nbsp;million for fiscal years 2010 and 2009,
respectively. The $7.7&nbsp;million increase in fiscal year 2010 compared to fiscal year 2009 was primarily due to improved operating results given our significant revenue growth. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net working capital decreased $3.1 million in fiscal year 2010 as merchandise inventory increased in connection with both new as well as existing
boutiques; accounts receivable, principally from credit card providers increased in connection with the increase in net sales as well as from higher tenant allowances and federal income tax refund receivable; and prepaid assets increased as a result
of higher prepaid rent and prepaid insurance. Those working capital decreases were partially offset by increases in accounts payable, accrued liabilities and deferred rent. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Merchandise inventory increased $5.6 million in fiscal year 2010 compared to an increase of $0.8&nbsp;million in fiscal year 2009. Merchandise inventory increased during the year due to and in preparation for new
boutique openings, and in anticipation of sales increases in comparable boutiques. We estimate inventory levels and capital requirements based on historical boutique sales performance and new boutique opening plans as well as planned merchandise
assortment. To the extent that inventory levels substantially increase, we may rely upon various promotional events or pricing strategies to sell through the inventory levels. Management believes that at January&nbsp;29, 2011, merchandise inventory
is at an appropriate level, from both a business and capital structure perspective, and properly planned for the prospective selling season. While management remains watchful in the current economic environment, we do not believe it will have a
negative effect on our present business strategy. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">59 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Investing Activities </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Investing activities consist primarily of capital expenditures for new boutiques, improvements to existing boutiques, as well as investment in
information technology and our distribution facility. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Capital expenditures for:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">New boutiques</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,872</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,676</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Existing boutiques</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">850</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">153</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Technology</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Corporate and distribution</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">474</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">419</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">199</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash used in investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our total capital expenditures for fiscal year 2010 were $16.2 million with new boutiques accounting for the majority
of spending at $13.2 million. While capital expenditures for new boutiques were $13.2 million, we received tenant allowances of $5.0 million. Tenant allowances were $1.4 million and $0.3 million for fiscal years 2009 and 2008, respectively. Tenant
allowances are amortized as a reduction in rent expense over the term of the lease. The remaining capital expenditures of $3.0 million in fiscal year 2010, $0.7 million in fiscal year 2009 and $0.3 million in fiscal year 2008 were primarily for
investments in information technology, our corporate offices and for distribution facility enhancements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Management anticipates that
capital expenditures in fiscal year 2011 will be approximately $16.5&nbsp;million to $21.0 million, including approximately $12.0 million to $14.0 million in connection with the opening of approximately 75 new boutiques in 2011 and approximately
$3.0 million to $4.5 million in connection with boutiques we plan to open in early fiscal year 2012. In connection with these capital expenditures for new boutiques, we anticipate receiving similar amounts of tenant allowances as in fiscal year
2010. The remaining capital expenditures are expected to be used for investments in information technology and distribution center enhancements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Financing Activities </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Financing activities consist primarily of borrowings and payments
under our existing senior secured credit facility and distributions to our stockholders. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Excess tax benefit from stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,757</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">95,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Repayments on debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,187</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Payment of debt issuance costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,137</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from the exercise of stock options</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">504</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">S-Corporation distributions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash used for financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash used for financing activities was $6.1 million in fiscal year 2010. This included net proceeds of $95.0
million from borrowings under our existing senior secured credit facility, offset by the payment of a $100.0 million cash dividend and the repayment of $1.2 million of indebtedness outstanding
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">60 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
under our existing senior secured credit facility. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not
anticipate paying any cash dividends in the foreseeable future. See &#147;Dividend Policy&#148;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During fiscal year 2010, we made $1.2
million of scheduled principal payments on the term loans outstanding under our existing senior secured credit facility, reducing outstanding term loan to $93.8 million at fiscal year-end. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">There were no revolving credit borrowings outstanding under our existing senior secured credit facility at January&nbsp;29, 2011. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Preferred Stock </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26,
2010, CCMP acquired approximately 84% of our outstanding equity from various stockholders. As a part of the CCMP Acquisition, the Series A Preferred Stock of the company was converted into common shares on a one-for-one basis and all related rights
and preferences were terminated. Accordingly, no preferred stock was outstanding at year-end. See note 10 to our consolidated financial statements included elsewhere in this prospectus. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Existing Senior Secured Credit Facility </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On November&nbsp;17, 2010, Francesca&#146;s
Collections, our wholly owned indirect subsidiary, entered into a $100.0 million senior secured credit facility with a syndicate of financial institutions. The existing senior secured credit facility consists of a $95.0 million term loan facility
and a $5.0 million revolving credit facility, each with a scheduled maturity date of November&nbsp;17, 2013. The revolving credit facility includes borrowing capacity available for letters of credit. As of January&nbsp;29, 2011, we had $93.8 million
outstanding under our term loan facility and $5.0 million available under our revolving credit facility. There were no outstanding letters of credit at the end of fiscal year 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">All obligations under the existing senior secured credit facility are unconditionally guaranteed by, subject to certain exceptions, Parent and each
of Francesca&#146;s Collections&#146; existing and future direct and indirect wholly owned domestic subsidiaries. All obligations under our existing senior secured credit facility, and the guarantees of those obligations (as well as cash management
obligations and any interest rate hedging or other swap agreements), are secured by substantially all of Francesca&#146;s Collections&#146; assets as well as those of each subsidiary guarantor. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either
(a)&nbsp;in the case of base rate borrowings, a rate equal to the highest of (1)&nbsp;the higher of (i)&nbsp;the prime rate of Royal Bank of Canada and (ii)&nbsp;the federal funds rate plus 1/2 of 1%, (2)&nbsp;the LIBOR for an interest period of one
month plus 1.00% and (3)&nbsp;2.75% or (b)&nbsp;in the case of LIBOR borrowings, a rate equal to the higher of (1)&nbsp;1.75% and (2)&nbsp;the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings
under both the revolving credit facility and the term loan facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term
loan facility for base rate borrowings increases to 6.50% and 9.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for LIBOR
borrowings increases to 7.50% and 10.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. As of January&nbsp;29, 2011, the loans under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Additionally, we are required to pay a fee to the lenders under the revolving credit facility on the un-borrowed amount at a rate equal
to 1/2 of 1%. We are also required to pay customary letter of credit fees. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">61 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The term loan facility amortizes each year in an amount equal to 1.25%&nbsp;per annum from closing
until September&nbsp;30, 2011 (payable in four equal installments beginning on December&nbsp;30, 2010) and 2.50%&nbsp;per annum from October&nbsp;1, 2011 to September&nbsp;30, 2012 (payable in four equal installments beginning on December&nbsp;31,
2011), with the remaining amount payable on November&nbsp;17, 2013. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, the existing senior secured credit facility requires
Francesca&#146;s Collections to maintain the following financial ratios: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending January&nbsp;29, 2011, a consolidated leverage ratio which shall not be more than the maximum consolidated leverage
ratio, which is based upon the ratio of (i)&nbsp;consolidated total debt (as defined in the credit agreement) to (ii)&nbsp;consolidated EBITDA (as defined in the credit agreement). The maximum consolidated leverage ratio, depending on the fiscal
quarter, ranges from (a)&nbsp;4.50 to 1.00, to (b)&nbsp;3.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending January&nbsp;29, 2011, a senior leverage ratio which shall not be greater than the maximum senior leverage ratio, which
is based upon the ratio of (i)&nbsp;senior debt (as defined in the credit agreement) to (ii)&nbsp;consolidated EBITDA (as defined in the credit agreement). The maximum senior leverage ratio, depending on the fiscal quarter, ranges from (a)&nbsp;3.50
to 1.00, to (b)&nbsp;2.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending October&nbsp;31, 2011, a consolidated fixed charge coverage ratio which shall not be less than the minimum consolidated
fixed charge coverage ratio, which is based upon the ratio of (i)&nbsp;consolidated EBITDA (as defined in the credit agreement) for the prior four fiscal quarters minus certain capital expenditures (as defined in the credit agreement) minus taxes
payable with respect to such period minus permitted tax distributions (as defined in the credit agreement) to (ii)&nbsp;consolidated fixed charges (as defined in the credit agreement). The minimum consolidated fixed charge coverage ratio, depending
on the fiscal quarter, ranges from (a)&nbsp;1.00 to 1.00, to (b)&nbsp;2.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We were in compliance with all
covenants under our existing senior credit facility as of January&nbsp;29, 2011. Our ability to declare dividends from Francesca&#146;s Collections to Holdings at January&nbsp;29, 2011 was subject to restrictions under our senior credit facility.
See &#147;Description of Certain Indebtedness&#151;Existing Senior Secured Credit Facility&#148; for additional details on our senior secured credit facility. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We believe that our cash position, net cash provided by operating activities and availability under our existing senior secured credit facility will be adequate to finance working capital needs and planned capital
expenditures for at least the next twelve months. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>New Revolving Credit Facility </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are engaged in discussions with financing sources regarding the terms of a new $65.0 million revolving credit facility (of which $50.0 million
would be drawn concurrently with the consummation of this offering to effect the refinancing) and expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering. The new revolving
credit facility is expected to have a five-year maturity and include borrowing capacity available for letters of credit. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect that
the new revolving credit facility will contain affirmative and negative covenants substantially similar to those in our existing senior secured credit facility, and will subject us to financial maintenance covenants upon terms to be agreed.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">To date we do not have any binding commitments from any financing sources and there can be no assurance that we will be able to enter
into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior secured credit facility requires </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">62 </FONT></P>


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that the proceeds of this offering be used to repay all amounts outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the
refinancing, we will be required to apply more of the proceeds of this offering to repay our existing indebtedness and will have less available to use for general corporate purposes, including the growth of our boutique base, the growth of our
e-commerce business, sales and marketing activities and other capital expenditures. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Critical Accounting Policies </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Management&#146;s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities,
net sales and expenses, and disclosure of contingent assets and liabilities. Management bases estimates on historical experience and other assumptions it believes to be reasonable given the circumstances and evaluates these estimates on an ongoing
basis. Actual results may differ from these estimates under different assumptions or conditions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that the following critical
accounting policies involve a higher degree of judgment and complexity. See note&nbsp;1 to our consolidated financial statements, which are included elsewhere in this prospectus for a complete discussion of our significant accounting policies. The
following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Revenue Recognition
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recognize revenue upon purchase of merchandise by customers, net of estimated merchandise returns and discounts. Revenue is
recognized for boutique sales at the point at which the customer receives and pays for the merchandise at the register. For on-line sales, revenue is recognized upon delivery and includes shipping charges. Management estimates future returns on
previously sold merchandise based on return history and current sales levels. The estimated sales returns are periodically compared to actual sales returns and adjusted, if appropriate. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Gift Cards and Gift Card Breakage </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We account for the sale of gift cards as a liability
at the time a gift card is sold. The liability is relieved and revenue is recognized upon redemption of the gift card. Our gift cards do not have an expiration date. We will recognize income from the breakage of gift cards when the likelihood of
redemption of the gift card is remote based on historical redemption patterns. We do not have accumulated adequate historical data to reasonably estimate the amount of gift cards that will never be redeemed. Consequently, we have not recognized gift
card breakage income in fiscal years 2010, 2009 or 2008. We do not anticipate recognizing gift card breakage until it accumulates additional data beyond fiscal year 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Inventory Valuation </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We value merchandise inventory at the lower of cost or market on a
weighted average cost basis. Inventory costs include freight-in. We record merchandise receipts at the time they are delivered to our distribution center or to our boutiques from vendors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We review our inventory levels to identify slow-moving merchandise and generally use promotional markdowns to clear slow-moving merchandise. Each
period we evaluate recent selling trends and the related promotional events or pricing strategies in place to sell through the current inventory levels. Promotional markdowns or additions to the lower of cost or market reserve may occur
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">63 </FONT></P>


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when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition or if it is determined
that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have an adverse impact on earnings, depending on the extent and amount of inventory affected. The anticipated deployment of new merchandise is reflected
within the estimated future promotional markdown plan, as such new inventory in certain circumstances will displace merchandise currently on-hand. Additions to the lower of cost or market reserve are recorded as an increase to cost of goods sold and
occupancy costs in the accompanying consolidated statements of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We also estimate a shrinkage reserve for the period of time
between the last physical inventory count and the balance sheet date. The estimate for shrinkage reserve can be affected by changes in merchandise mix and changes in actual shrinkage trends. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Impairment of Long-lived Assets </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We periodically evaluate long-lived assets held for use
and held for sale whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows,
which is generally at a boutique level. Boutique assets are reviewed for impairment using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an
estimate of undiscounted future cash flows directly related to that boutique, compared to the carrying value of the assets. We recognize impairment if the sum of the undiscounted future cash flows of a boutique does not exceed the carrying value of
the assets. For impaired assets, we recognize a loss equal to the difference between the net book value of the asset and its estimated fair value. Fair value is based on discounted future cash flows of the asset using a discount rate commensurate
with the risk. In addition, at the time a decision is made to close a boutique, we record an impairment charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. Based on the analysis performed, there was no
impairment for each of the fiscal years ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Income Taxes
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We account for income taxes using the liability method. Under this method, the amount of taxes currently payable or refundable
is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of the company&#146;s assets and
liabilities. Valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate
is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We recognize tax liabilities for uncertain tax positions and adjusts these liabilities when the company&#146;s judgment changes as a result of the
evaluation of new information not previously available. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">64 </FONT></P>


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Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These
differences will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which the new information becomes available. Interest and penalties related to unrecognized tax benefits are recognized in
income tax expense. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock-based Compensation </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In connection with our stock based compensation plans, the Board of Directors considers the estimated fair value of the Company&#146;s stock when setting stock option exercise price as of the date of each grant.
Because the company is privately held and there is no public market for its common stock, the fair market value of its common stock is determined by our board of directors at the time the option grants are awarded. In determining the fair value of
its common stock, the board of directors considered such factors as the company&#146;s actual and projected financial results, the principal amount of the company&#146;s indebtedness, valuations of the company performed by third parties and other
factors it believes are material to the valuation process. Stock options granted in the first and second quarters of fiscal 2010 were valued using the implied enterprise value paid by CCMP for its acquisition of the equity securities of the company
in February 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation expense related to stock options was $2,400,000, $99,000 and $8,000 for fiscal years 2010,
2009 and 2008, respectively. We granted options to purchase an aggregate of 1,994,430, 406,000 and 100,000 shares of common stock in fiscal years 2010, 2009 and 2008, respectively. These grants and any future stock option grants will likely increase
our stock-based compensation expense in fiscal year 2011 and in future fiscal years compared to fiscal year 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We account for
stock-based compensation in accordance with FASB ASC&nbsp;718, <I>&#147;Compensation-Stock Compensation</I>&#148;, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of this statement,
stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee&#146;s requisite service period (generally the vesting period of the equity grant). As required under
this guidance, we estimate forfeitures for options granted which are not expected to vest. Changes in these inputs and assumptions can materially affect the measurement of the estimated fair value of our stock-based compensation expense. We estimate
the grant date fair value of stock option awards using the Black-Scholes option pricing model. For fiscal years 2010, 2009 and 2008, the fair value of stock options was estimated at the grant date using the following assumptions: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected volatility</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">54.21%&nbsp;&#150;&nbsp;60.59%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85.43%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">53.45%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Risk-free interest rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.63%&nbsp;&#150;&nbsp;3.24%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.90%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.21%</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average term</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.27&nbsp;&#150;&nbsp;6.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected dividend yield</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The risk-free interest rate was
determined based on the rate of Treasury instruments whose maturities are similar to those of the expected term of the award being valued. The expected dividend yield was based on our expectations of not paying dividends on our common stock for the
foreseeable future. The expected volatility incorporates historical volatility of similar entities whose shares prices are publicly available. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">As of January&nbsp;29, 2011, we had outstanding vested options to purchase approximately 685,340 shares of common stock, at a weighted average exercise price of $2.71 per share, and outstanding unvested options to
purchase 1,757,748 shares of common stock, at a weighted average exercise </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">65 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
price of $6.21 per share. The per share value of each share of common stock underlying the vested and unvested options at the dates of the grant of the options range from $0.48 to $5.97 per
share. The average exercise prices per share for the vested and unvested options are less than the anticipated initial public offering price, adjusted for the anticipated shares to be offered. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For stock options granted from March&nbsp;25, 2010 through July&nbsp;1, 2010, the fair values of the shares at the dates of grant were based on the
price paid by CCMP in an arms-length transaction to acquire the controlling interest in our company. There were no options granted from January&nbsp;31, 2010 through March&nbsp;24, 2010. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For stock options granted after July&nbsp;1, 2010, an analysis was performed to estimate the fair values of the shares at the dates of grant. The
objective of the analysis was to determine the fair market value of the company, its common stock and stock options, as of the valuation date, on a controlling interests basis. The probability-weighted expected return method was used to estimate the
fair value of our common stock which, in turn, represented the stock option exercise price on the date of grant. This method was selected based on management&#146;s current expectation for either an initial public offering or a sale or merger of the
company in the near future. There were three future scenarios incorporated into the valuation: (i)&nbsp;the company being sold to another company (the &#147;M&amp;A Scenario&#148;), (ii)&nbsp;the company engaging in an initial public offering (the
&#147;IPO Scenario&#148;), and (iii)&nbsp;the company remaining an independent, privately-held company (the &#147;Private Scenario&#148;). The estimated fair value of our common stock in each scenario was affected by the use of certain assumptions
and valuation methodologies. The fair value of the stock was assessed based on the probability weighted potential for each scenario on the date of grant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The estimated fair value under the M&amp;A Scenario considered the projected value of the company upon sale or merger. To arrive at the fair value of common equity under the M&amp;A Scenario, the discounted value
of the cash flow leading up to the date of an assumed merger or sale was added to values from comparable merger and acquisition transactions applying the observed paid-multiples to our financial performance to determine enterprise value. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">To determine the estimated fair value of our common stock under the IPO Scenario, the public market valuations of other high-growth specialty
retailers were reviewed using a variety of methods. For such firms, a number of multiples and ratios such as revenue, earnings before interest, taxes, depreciation and amortization, or EBITDA, and net income to enterprise value were calculated. Then
those multiples were applied to both our historical and projected financial performance to determine our estimated enterprise value. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The estimated fair value under the Private Scenario was determined considering valuations based on three different fair value models: (i)&nbsp;an
income valuation model that incorporates the calculation of the present value of future cash flows discounted at an appropriate rate applicable given the risks associated with the company and related forecast, (ii)&nbsp;a market valuation model that
considers recent sales or offerings of comparable assets between third parties and (iii)&nbsp;the guideline public company method that focuses on comparing the company&#146;s economic performance to guideline publicly traded entities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During first and second quarters of fiscal 2010 we granted stock options with an exercise price of $6.13 per share. During the fourth quarter of
fiscal 2010 we granted stock options with an exercise price of $10.19 per share. The difference between the estimated fair value of our underlying stock from the time of the first and second quarter grants to the fourth quarter grants was impacted
by significant increases in comparable boutique sales; including a 21.1% comparable boutique sales increase in the third quarter. Additionally, the new boutique openings during fiscal year 2010 exceeded the forecast by more than 10%. The accretive
factors were partially offset by the impact of the recapitalization of the company in November 2010, the issuance of our existing senior secured credit facility and the related $100 million cash dividend. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">66 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Off Balance Sheet Arrangements </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are not party to any off balance sheet arrangements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Contractual Obligations </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes our contractual obligations as of
January&nbsp;29, 2011 and the effect such obligations are expected to have on our liquidity and cash flows in future periods. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="63%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Payment Due by Period</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Less&nbsp;than<BR>1 year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>1-3 years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>3-5 years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>More&nbsp;than<BR>5 years</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt obligations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">87,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Operating lease obligations(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,285</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,292</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23,611</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Merchandise purchase commitments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,066</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Contract for software application implementation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">888</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">664</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Excludes common area maintenance charges, real estate taxes and certain other expenses which amounted to approximately 35.1% of minimum lease obligations in fiscal year 2010. We
expect this percentage to be relatively consistent for the next three years. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Impact of Inflation </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial. We cannot assure you, however, that our results of operations
and financial condition will not be materially impacted by inflation in the future. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recent Accounting Pronouncements </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For a description of a complete list of recent accounting pronouncements, see the notes to our consolidated financial statements included elsewhere
in this prospectus. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Quantitative and Qualitative Disclosures about Market Risk </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our principal exposure to market risk relates to changes in interest rates. Our existing senior secured credit facility carries floating interest
rates that are tied to LIBOR, the federal funds rate and the prime rate, and therefore, our statements of operations and our cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in
place. We historically have not used interest rate swap agreements to hedge the variable cash flows associated with the interest on our existing senior secured credit facility. At January&nbsp;29, 2011, the weighted average interest rate on our
borrowings was 7.75%. Based on a sensitivity analysis at January&nbsp;29, 2011, assuming the entire term loan would be outstanding for a full fiscal year, a 100 basis point increase in interest rates would increase our annual interest expense by
approximately $938,000. We do not use derivative financial instruments for speculative or trading purposes, however, this does not preclude our adoption of specific hedging strategies in the future. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">67 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_10"></A>BUSINESS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Company </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT
STYLE="font-family:ARIAL" SIZE="2">francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> is one of the fastest growing specialty retailers in the
United States. Our retail locations are designed and merchandised to feel like independently owned, upscale boutiques and provide our customers with an inviting, intimate and differentiated shopping experience. We believe we offer compelling value
with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts at attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious female customer, although we find
that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique setting. We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week
in order to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">By offering a
differentiated shopping experience and high-quality merchandise at a compelling value, our boutiques have been successful across a wide variety of geographic markets and shopping venues. We believe we have an opportunity to continue to grow our
boutique base from 236 locations in 38 states as of April&nbsp;2, 2011 to approximately 900 boutiques in the United States over time. Our merchandise is also available through our e-commerce website, <I>www.francescascollections.com</I>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that through the strength of our business model and our disciplined operating philosophy, we have achieved strong financial performance
and growth that is among the best in the specialty retail sector: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between fiscal year 2008 and 2010 our net sales increased from $52.3 million to $135.2 million, representing a compound annual growth rate of 60.8%.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in fiscal year 2009. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between the end of fiscal year 2008 and 2010 our boutique count increased from 111 to 207, representing a compound annual growth rate of 36.6%.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Between fiscal year 2008 and 2010 our operating profit increased from $7.0 million to $29.6 million, representing a compound annual growth rate of 106.2%, driven
by increased net sales and an 860 basis points increase in our operating margin to 21.9% in fiscal year 2010. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our
Competitive Strengths </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe the following strengths differentiate us from our competitors and are key drivers of our success:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Proven Trend-Right Merchandise Delivered at a Compelling Value</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our boutiques carry a broad but shallow selection of high-quality,
trend-right apparel, jewelry, accessories and gifts at attractive prices. Our buyers closely monitor the marketplace to identify and source proven fashion trends that will appeal to our core customers. We primarily offer exclusive items under our
proprietary labels, but carry a small selection of third-party, nationally recognized brands that we use opportunistically in certain categories. We offer a broad selection of merchandise, but intentionally purchase small quantities of individual
items for each boutique such that we frequently replenish our boutiques with new merchandise, keeping the shopping experience fresh and exciting for our customers. The short lead times of our vendors, maximizes our speed to market, as it generally
takes only four to twelve weeks from the time an order is placed to the time merchandise is available on the boutique floor. With these short lead times, </FONT></P></TD></TR></TABLE>
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we are able to make more informed buying decisions to meet customers&#146; merchandise expectations, and to react quickly to changing fashion trends. This approach, combined with our uniquely
balanced product mix of approximately 50% apparel and 50% jewelry, accessories and gifts, is designed to encourage more frequent visits by our customers and reduce the seasonal fluctuations and margin erosion experienced by many other specialty
retailers. We believe the expertise of our buyers and our broad base of vendors allows us to quickly identify and respond to emerging fashion trends in apparel, jewelry, accessories and gifts to offer quality merchandise at prices that
&#145;surprise and delight&#146; our customers. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Differentiated Shopping Experience.</I>&nbsp;&nbsp;&nbsp;&nbsp;Each of our retail locations are uniquely designed and merchandised to feel like an
independently owned, upscale boutique. Contemporary music, scented candles, small hand-made signs and vintage yet vibrant fixtures create a warm and inviting environment that showcases our eclectic assortment. Our open floor design enables customers
to easily view merchandise and we use a number of body forms to provide full outfit ideas to encourage customers to buy multiple items. Merchandise presentations, including display windows, tables and walls, are refreshed every two to three weeks to
keep our boutiques new and exciting. Our passionate boutique managers and associates, with the support of corporate guidelines, are encouraged to infuse each boutique with their personality, which increases their motivation and enhances the shopping
experience. We believe these attributes, along with our strategy of carrying a broad selection but limited quantities of individual styles, create a unique &#145;treasure hunt&#146; atmosphere that strongly appeals to our customers and
differentiates us in the marketplace. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Powerful Boutique Economics and Rigorous Real Estate Selection Process</I>.&nbsp;&nbsp;&nbsp;&nbsp;We have a proven boutique format that works across a wide
variety of shopping venues, market sizes, climates and demographics. Our boutiques average approximately 1,400 square feet, which is meaningfully smaller than most specialty retailers. The performance of our boutiques and our flexible real estate
format enhance our ability to secure prominent, highly visible locations in regional malls, lifestyle centers, street locations and strip centers. We deploy a rigorous real estate selection process with all new boutique opportunities measured
against specific financial and geographic criteria. Over the previous two fiscal years, our new boutiques have generated first year cash on cash returns in excess of 150% and payback periods of less than one year, due to our ability to consistently
obtain best-in-class locations combined with relatively low capital investment and operating cost requirements, allowing us to fund all of our growth from internally generated cashflow. We believe the financial characteristics of our new boutiques,
coupled with our proven ability to operate across different shopping venues and geographies, provide us with a wide scope of new boutique opportunities and enhance our ability to profitably expand our boutique base. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Solid and Scalable Infrastructure.</I>&nbsp;&nbsp;&nbsp;&nbsp;We continually invest in systems, controls and human resources to support our growth. In recent
years we have made significant improvements to the infrastructure of our finance, buying and planning, real estate and IT departments. For instance, we believe that we have developed an integrated sourcing, distribution and merchandising process
that is scalable and will facilitate the continued growth in the number of boutiques we operate. This process starts with our buyers who work closely with an established and diverse group of vendors to identify trend-right, high-quality merchandise
for our boutiques. From on-hand inventories or special orders and their international networks of manufacturers, our vendors make frequent deliveries of merchandise consisting of floor-ready, pre-tagged items to our warehouse. We then sort, allocate
and distribute the pre-packs to our boutiques five days a week based on current inventory levels and sales trends. Our boutique managers are able to readily merchandise the product and tailor the displays to differentiate their boutiques and reflect
local market tastes. As we focus on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image we do not believe that we will require significant investments in traditional marketing and advertising initiatives
as we expand our boutique base. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Experienced Management Team with a Disciplined Operating Philosophy.</I>&nbsp;&nbsp;&nbsp;&nbsp;Our senior management has extensive experience across a broad
range of disciplines in the retail industry, including merchandising, real estate, supply chain and finance. Our highly skilled executive team includes two of our Founders, John De Meritt, our President and Chief Executive Officer, and Kyong Gill,
our Executive Vice Chairperson. Together they lead a dynamic team with a strong background at companies such as David&#146;s Bridal, Chico&#146;s, CVS, Banana Republic, Nordstrom and J.C. Penney. Our management team has built a solid operating
foundation based on sound retail principles that define our culture. Our disciplined operating philosophy is grounded in a relentless focus on providing great merchandise and a best-in class boutique experience supported by uncompromising site
selection and continual enhancements to our infrastructure. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Growth Strategy </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe we can continue to grow our revenues and earnings by executing on the following strategies: </FONT></P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Grow Our Boutique Base</I>.&nbsp;&nbsp;&nbsp;&nbsp;We believe there is an opportunity to significantly increase the number of boutiques we operate. Based on
our proven ability to open our flexible retail format in various shopping venues in new and existing markets, and supported by a third party research study, we believe we have the potential to grow our base from 236 to approximately 900 boutiques
over time. We opened 62 new boutiques in fiscal year 2010 and plan to open approximately 75 new boutiques in each of fiscal year 2011 and 2012. We expect to open boutiques in both new and existing markets and in regional malls, lifestyle centers,
street locations and strip centers. In the short term, we see a particular opportunity to open new boutiques with attractive lease terms in regional malls. As of April&nbsp;2, 2011, 29 of the approximately 75 new boutiques planned for fiscal year
2011 had been opened with leases signed for another 39. We expect our new boutiques to generate first year cash-on-cash returns of approximately 150% and payback periods of less than one year. Below is a representation of our current boutique
coverage as of April&nbsp;2, 2011. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Drive Comparable Boutique Sales</I>.&nbsp;&nbsp;&nbsp;&nbsp;Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in
fiscal year 2009. We intend to drive comparable boutique sales by featuring high-quality, trend-right merchandise at a compelling value and refining our distinctive boutique experience. We intend to maintain our broad but shallow merchandising
approach, which we believe will result in increased units and dollars per transaction and protect margins. In addition, we are increasing the sophistication of our buying </FONT></P></TD></TR></TABLE>
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and planning infrastructure, enhancing our buying team with additional category-specific buyers, and augmenting boutique-level management. </FONT></P></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Expand the Penetration and Presence of Our E-Commerce Business</I>.&nbsp;&nbsp;&nbsp;&nbsp;We complement our boutiques with a growing e-commerce business. We
use the same successful business principles deployed in our boutiques by offering limited assortment of individual styles to create a sense of scarcity and newness, which increases the frequency of customer visits to the site. Our e-commerce
business not only generates incremental sales and profits but also builds brand awareness and boutique traffic, and helps us access markets where we do not currently have a boutique. Our e-commerce sales grew by 85% in fiscal year 2010 and
represented 1.4% of our total net sales. We expect e-commerce sales growth to continue to outpace the growth of boutique sales as consumers discover the complementary nature of shopping with us online and through our boutiques.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Enhance Operating Margins.&nbsp;&nbsp;&nbsp;&nbsp;</I>Our strong expected boutique growth should permit us to take advantage of economies of scale in sourcing
and to also leverage our existing infrastructure, corporate overhead and other fixed costs. In addition, we expect to benefit from the implementation of a new enterprise software platform that we plan to introduce in stages between August 2011 and
the second half of 2012. This will enable us to more efficiently operate and manage our point-of-sale, management reporting, merchandise planning, ordering and allocation, and related inventory management functions. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our History </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT
STYLE="font-family:ARIAL" SIZE="2">We opened our first boutique in Houston, Texas in 1999. Initially, we focused on selling fashion jewelry, accessories and selected home d&eacute;cor but as our boutique base grew across the United States we
expanded our merchandise offering to include apparel, which has become our largest category and, we believe, a significant driver of growing customer loyalty and return visits. John De Meritt, our President and Chief Executive Officer, and Kyong
Gill, our Executive Vice Chairperson, are two of the original four Founders of francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>. In recent
years, we have augmented our strong management team with additional skilled and experienced executives who now lead our buying, merchandise planning, boutique operations, finance, real estate, information technology, e-commerce and corporate support
activities. In February 2010, CCMP acquired a controlling interest in the company with the goal of supporting Mr.&nbsp;De Meritt and the management team in accelerating our growth. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Market </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our distinct
boutique environment and carefully selected, trend-right merchandise attract a wide demographic. While our broad assortment appeals to women of varying ages and diverse backgrounds, from value-conscious to the more affluent, our primary customer is
a fashion conscious woman between the ages of 18 and 35. She is college educated and has moderate to high disposable income. She enjoys shopping for the latest fashions and is attracted to our upscale boutique shopping environment, compelling value
proposition and highly personalized customer service. Our core customer represents a growing segment of the U.S. population and we believe she spends a higher proportion of her income on fashion than the general population. According to the United
States Census Bureau&#146;s 2009 American Community Survey 1-Year Estimates, approximately 35.1&nbsp;million women between the ages of 18 to 35 live in the United States. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our unique merchandise combination of apparel, jewelry, accessories and gifts allows us to participate in a number of large market segments. The apparel and women&#146;s wear segment, which represents approximately
50% of our sales, had a market size of approximately $160&nbsp;billion in 2010, according to Data Monitor, an international market research firm. </FONT></P>
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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Merchandise Offering and Merchandising Strategy </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We offer a broad and shallow selection of fashion apparel, jewelry, accessories and gifts targeted to our core customer, who seeks trend-right,
high-quality merchandise at attractive prices. We have a well-balanced assortment of product categories with approximately 50% of our fiscal year 2010 sales generated by non-apparel items. Our diverse merchandise contributes to the &#145;treasure
hunt&#146; atmosphere in our boutiques and is one which we aim to maintain as we grow. We carry a broad selection but limited quantities of each style and we deliver new merchandise to our boutiques five days a week. This contributes to a sense of
scarcity and newness within our boutiques, mitigates fashion risk, reduces the seasonality of the inventory and protects margins. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
wide range of apparel, jewelry, accessories and gifts fills the various casual and dressy fashion needs of our customers and our selection of gifts ranges from the elegant to the irreverent. Our 1,400 square foot boutiques carry approximately 3,000
SKUs at any one time and we stock about 15,000 different styles during the course of a year. The majority of our merchandise is sold under our proprietary labels (85% of apparel sales in fiscal year 2010) and we also sell a select assortment of
third-party, nationally recognized brands. Our e-commerce business features an edited selection of our boutique merchandise. The table below shows the breakdown of our fiscal year 2010 net sales by product category: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="23%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="23%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Apparel</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>52% of Net Sales</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Jewelry</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>21% of Net Sales</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Accessories</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>14% of Net Sales</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Gifts</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>13% of Net Sales</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Dresses, Tops, Denim, Skirts, Pants, Outerwear, Jackets &amp; Coats, Layering Essentials, Intimates</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Necklaces, Earrings, Bracelets, Rings</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Handbags, Totes, Shoulder-Bags, Clutches, Wallets, Shoes, Belts, Hats, Scarves, Sunglasses, Umbrellas, Watches</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Candles, Cards, Stationary, Coasters, Hand Cr&egrave;mes, Soaps, Magnets, Wall Art, Miscellaneous Items</FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">Our buying and planning team is responsible for selecting and sourcing our merchandise, managing inventory levels and
allocating items to boutiques. Each product category has a set of dedicated buyers with oversight provided by our Chief Merchandising Officer. The buying and planning team holds weekly meetings to review merchandise performance and identify new
fashion trends. Our buyers also make regular trips to important industry markets and trade shows and visit Asia several times per year. We have access to the expertise of hundreds of designers employed by our large vendor base who provide us with a
large selection of new styles for review each week. Our buyers collaborate with vendors to place special orders and to modify presented styles based on current fashion trends and their in-depth knowledge of our customers&#146; preferences, which
means most of our merchandise is unique to francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>. Before placing an order, every item is evaluated
for style, quality, fit, value and profitability to ensure it meets standards consistent with our francesca&#146;s
collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> brand. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our Sourcing Strategy </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our ability to quickly make decisions on trend-right items combined
with the short production lead times of our vendors maximizes our speed to market. We use vendors based in the United States that source from both domestic and overseas markets and it generally takes only four to twelve weeks from the time an order
is placed to the time merchandise is available on the boutique floor. With these short lead times, we are able to make more informed buying decisions in terms of customers&#146; merchandise expectations, and to quickly react to changing fashion
trends. This also supports our merchandise strategy of offering a broad but limited assortment that is infused with new items five days a week. Due to the limited quantity of our buys in any one style, we avoid material inventory positions in
individual </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">72 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
styles and this enhances our ability to quickly deliver trend-right merchandise and minimizes the risk of fashion misses, which can lead to increased inventory markdowns and diminished gross
margins. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not own or operate any manufacturing facilities. We have relationships with a diverse base of over 200 vendors and our
top 10 vendors sourced approximately 45% of our merchandise in fiscal year 2010, while no single vendor accounted for more than 15% of our purchases. We do not enter into exclusive contracts with our vendors and we continue to expand our vendor
network. This provides us with access to an even more extensive variety of merchandise from a greater number of vendors at competitive prices. We believe our vendors view us as an important retail partner given our growth and market position. Our
vendors utilize a network of domestic and overseas factories, providing them access to significant capacity. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Each of our vendors is
required to adhere to our vendor standards, which are designed to ensure that our vendors conduct their business in a legal, ethical and responsible manner. This also includes the requirement that all of our vendors comply with the applicable laws
and regulations of the United States, those of the respective country of manufacture or exportation and all state and local laws and regulations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Our Sales Channels </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We conduct our business through boutiques and our e-commerce website,
<I>www.francescascollections.com</I>. We do not incorporate the information contained on, or accessible through, our website into this prospectus, and it should not be considered a part of this prospectus. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Boutiques </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">In fiscal year 2010, our boutiques generated net sales of $133.2 million, which represented 98.6% of total net sales. As of
April&nbsp;2, 2011, we operated 236 boutiques under the name francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> in 38 states throughout the
United States. The following list shows the number of boutiques operated by state as of April&nbsp;2, 2011, and demonstrates that we have been successful in opening boutiques in a wide range of geographies. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="41%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="37%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of<BR>Boutiques</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of<BR>Boutiques</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Alabama</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Minnesota</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Arizona</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Mississippi</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Arkansas</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Missouri</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">California</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nebraska</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Colorado</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nevada</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Connecticut</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">New Jersey</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Delaware</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">New Mexico</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Florida</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">New York</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Georgia</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">North Carolina</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Illinois</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Ohio</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Indiana</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Oklahoma</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Iowa</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Pennsylvania</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Kansas</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Rhode Island</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Kentucky</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">South Carolina</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Louisiana</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Tennessee</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Maine</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Texas</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Maryland</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Virginia</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Massachusetts</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Washington</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Michigan</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Wisconsin</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">73 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Boutique Design and Environment </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">The differentiated shopping experience offered through our boutiques is central to the francesca&#146;s collections<FONT
STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> brand. Our boutiques are designed and merchandised to deliver a warm and inviting atmosphere that creates the sense for our
customers that they are shopping in an independently owned, upscale boutique. Although we strive to maintain a relatively consistent look and feel in all of our boutiques, the intricacies of each boutique&#146;s physical properties, geographic
market and shopping venue, as well as the autonomy we provide to our boutique managers in visually merchandising the boutiques, make each feel different and in tune with its local clientele. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our boutiques typically range in size from 1,000 to 1,800 square feet, with an average size of approximately 1,400 square feet. We seek locations
that have a boutique front at least 20 feet wide, which we adorn with visually appealing architectural lighting, signage and display window presentations. Inside, we use a warm earth tone color palette and soft lighting. We include rugs, lush
fabrics and table cloths to create a sense of depth and richness. Chandeliers and antique displays such as ottomans, dressing room chairs and wall mirrors reinforce the unique ambiance and add to the sense of sophistication and style. All of this
provides a dense canvas for our colorful displays of trend-right merchandise. Each boutique&#146;s merchandise presentation, including display windows, tables and walls, is refreshed every two to three weeks to keep our shopping experience new and
exciting. We believe by constantly changing our visual merchandising and floor sets, we give our customers a reason to shop our boutiques frequently, building customer loyalty. Our boutique managers also use our intranet website to share
best-practices with each other, such as ideas for displays. We believe these grass-root interactions improve the sense of community among our boutique managers and enhance the shopping experience for our customers. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Staffing in our boutiques consists of a salaried boutique manager, an assistant manager and a minimum of four part-time associates. Our
compensation structure for non-salaried employees consists of an hourly wage plus a monthly bonus based on performance, paid in cash or gift cards to all associates immediately upon achievement of the stated monthly sales goal. We endeavor to hire
boutique personnel that are friendly and customer-service driven individuals. In addition to a comprehensive training program for visual merchandising, customer service and operations, boutique managers benefit from ongoing field-level support and
training updates as well as guides and manuals. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Boutique Economics </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that our broad and shallow merchandising strategy and the differentiated shopping experience we offer to our customers contributes to the
success of our boutiques, which generate attractive returns. Over the previous two fiscal years, we opened 98 boutiques which averaged approximately 1,400 square feet and, of the locations open 12 or more months, boutique sales averaged
approximately $750,000 in the first year. On average, these boutiques delivered first-year, pre-tax cash-on-cash returns in excess of 150% and payback periods of less than one year. Consistent with recent openings, our new boutique operating model
assumes a net investment of $155,000 consisting of $110,000 of build-out costs, including equipment and fixtures net of tenant allowances, and $45,000 of initial inventory. We expect new boutique economics to be consistent with our recent history
and, based on first-year boutique sales of $650,000 to $750,000, our boutiques achieve a payback period of less than year and pre-tax cash-on-cash returns of approximately 150%. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">74 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Boutique Growth and Site Selection </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have a proven track record of increasing our boutique base at a compound annual growth rate of approximately 34% over the previous four years.
The table below indicates certain historical information regarding our boutiques as of the end of each of the periods indicated below: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>April&nbsp;2,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal<BR>Year<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal<BR>Year<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fiscal<BR>Year<BR>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Calendar<BR>Year<BR>2007(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Calendar<BR>Year<BR>2006</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Mall</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">90</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">69</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-Malls</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">146</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">122</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">107</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">77</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">63</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total Boutiques</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">236</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">207</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">147</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">111</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">78</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">64</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Boutiques Opened</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">62</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Boutiques Closed</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total Gross Square Feet (in thousands)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">336</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">296</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">210</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">89</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Average Gross Square Feet Per Boutique</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,424</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,428</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,428</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,419</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,408</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,392</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net Sales Per Average Gross Square Foot(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">508</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">429</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">384</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">401</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">399</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Net sales per average gross square foot calculated as the sum of quarterly average sales per square foot (total quarterly revenue / avg. quarterly gross square feet).
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Please see note 1 to the &#147;Selected Consolidated Financial and Operating Data&#148; section. In January 2008, we changed our fiscal year end from December&nbsp;31st to the
Saturday closest to January&nbsp;31st. We opened two boutiques in the month of January 2008, which is a time period not captured in Calendar Year 2007 nor Fiscal Year 2008. These two boutiques are included in Boutiques Opened in the calendar year
ended December&nbsp;31, 2007 , but are not in included in Total Boutiques or calculations of Total Gross Square Feet, Average Gross Square Feet per Boutique or Net Sales Per Average Gross Square Foot in the calendar year ended December&nbsp;31,
2007. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our flexible boutique format has enabled us to successfully open boutiques across a variety of shopping venues,
market sizes, climates and demographics. We believe this provides us with a wide scope of real estate opportunities and enhances our ability to profitably expand our boutique base. Based on third party research we commissioned with a nationally
recognized retail real estate consulting firm, we believe we have the potential for approximately 900 boutiques in the United States. In fiscal year 2010, we opened 62 new boutiques and in each of fiscal year 2011 and 2012 we plan to open
approximately 75 new boutiques (so far in fiscal year 2011, we have already opened 29 new boutiques and have executed leases for another 39). We believe we can continue to successfully open new boutiques at an annual rate of at least 75 for the next
three to five years. We expect to open boutiques in both new and existing markets and across regional malls, lifestyle centers, street locations and strip centers. In the short term, we see a particular opportunity to open new boutiques with
attractive lease terms in regional malls. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our real estate committee utilizes a disciplined approach to site selection, which analyzes
the prospective shopping venue for factors such as overall shopping venue productivity, competitive environment and specific sales of other retailers deemed most relevant as well as the configuration of available space for potential new boutique
locations. We seek prominent locations in high-traffic areas of the shopping venue and in close proximity to other retailers targeting similar customers. We also evaluate each new boutique location based on projected sales and determine whether the
capital investment and estimated boutique four-wall contribution satisfies our targeted return threshold, occupancy costs, and boutique contribution. As a result of our powerful boutique economics and our rigorous site selection process, we have
only closed two boutiques since we began business in 1999. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">75 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>E-Commerce </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our e-commerce business consists of our <I>www.francescascollections.com </I>website. Through our website, our customers are able to purchase individual items or recommended full outfits, shop the latest jewelry,
gift or fashion merchandise and special promotions, create a wish list, sign up for our mailing list, connect and follow us on social media sites such as Facebook and Twitter, as well as obtain current information on our boutique locations. This
channel enables us to reach customers in all states and further build our brand. We currently obtain and collect customer email information from our boutiques and website and use it to generate marketing programs, such as our weekly &#145;Pick of
the Week&#146; email campaign. During fiscal year 2010 we made several improvements to our website to enhance our e-commerce business capabilities and its growth. These improvements have allowed us to support a more dynamic presentation of
merchandise, process more orders and enhance our marketing efforts. In fiscal year 2010, our e-commerce sales increased 85% relative to fiscal year 2009, but still only represented 1.4% of total net sales. We believe there is significant potential
to expand this channel over time. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Marketing and Advertising </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">We focus on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image. By locating our
boutiques in prominent, high-traffic locations and refraining from traditional television, radio and print advertising, we encourage people to &#145;discover&#146; francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>. We believe that many of our customers develop a personal connection with our boutiques and become our ambassadors in the local community by spreading the word about
francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>. We also use email communications, our website and, increasingly, social networking sites
Facebook and Twitter and fashion related blogs to achieve our marketing goals. Our boutique managers are passionate about francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> and contribute to our marketing effort by hosting in-boutique activities, such as fashion shows and private parties, and also independently promote their own boutique
via blogs, YouTube and social networking sites. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Distribution </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We distribute all of our merchandise from our distribution center (located within our corporate headquarters) in Houston, Texas. Our combined
facility occupies approximately 100,000 square feet, consisting of approximately 70,000 square feet of warehouse and distribution space, which services our boutiques and e-commerce business, and approximately 30,000 square feet of office space for
our corporate headquarters. Our merchandise are received, inspected, managed, stored and distributed through our distribution warehouse, with the exception of approximately 20% of our merchandise which are drop-shipped by our vendors directly to our
boutiques. The majority of our merchandise are currently pre-ticketed and pre-sorted by our vendors, which allows us to efficiently ship from our distribution center directly to our boutiques, thereby reducing labor costs. We use third-party
providers to ship new items to our boutiques five days a week, which ensures a steady flow of new styles. Our distribution center can support at least 450 boutiques and is sufficient to support our expected growth plans for the foreseeable future.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Management Information Systems </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our management information technology systems provide support and timely information to our management team. We believe our current systems provide us with operational efficiencies, scalability, management control
and timely reporting that allows us to identify and respond to operating trends in our business. We use a combination of customized and industry-standard software systems to support boutique point-of-sale, merchandise planning and buying,
e-commerce, inventory management, financial reporting and administrative functions. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">76 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are in the process of upgrading several of our systems to provide improved support for our current
operations and position us for continued growth. This includes the implementation of a fully integrated enterprise software platform from JDA, which we plan to introduce in stages between August 2011 and the second half of 2012. Throughout the
installation and stabilization of JDA, we will continue to run our existing platform to ensure continuity during the conversion. We expect the new JDA system will enhance customer service, improve operational efficiency, enhance management reporting
and control and increase synergies between our e-commerce business and our boutiques. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Competition </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The women&#146;s apparel, jewelry, accessories and gifts market is highly competitive, encompassing department stores, specialty retailers and mass
marketers, as well as local and regional players. We compete primarily with other specialty retailers and internet businesses that specialize in women&#146;s merchandise, such as White House&nbsp;|&nbsp;Black Market, Ann Taylor Loft, Charlotte
Russe, Brighton Collectibles and Anthropologie. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The principal basis upon which we compete is by offering a differentiated shopping
experience through high-quality, trend-right merchandise at attractive prices in a warm and inviting boutique environment with excellent customer service. In addition, our manageable boutique size and flexible but disciplined real estate strategy
provide us with a competitive advantage that is not easily replicated by our major competitors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Intellectual Property </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">We have registered our trademark francesca&#146;s collections<FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> with the United States Patent and Trademark Office. In addition, we own domain names, including <I>www.francescascollections.com</I>, and we own unregistered
copyright rights in our website content. We believe our trademarks have value, and we diligently protect them against infringement. For instance, we have recently filed applications to register our trademark internationally. We will also continue to
file new applications as appropriate to protect our intellectual property rights. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Regulation and Legislation </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are subject to labor and employment laws, laws governing advertising and promotions, privacy laws, safety regulations, consumer protection
regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and the operation of boutiques and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with
applicable laws. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Insurance </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We use insurance for a number of risk management activities, including workers&#146; compensation, general liability, automobile liability and employee-related health care benefits, a portion of which is paid by
the employees. We evaluate our insurance requirements on an ongoing basis to maintain adequate levels of coverage. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Properties
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not own any real property, but rather lease our properties. Our corporate headquarters, warehouse and distribution center are
located in an approximately 100,000 square foot facility in Houston, Texas. The buildings in the facility are leased under agreements expiring in 2013, with </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">77 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
options to extend for an additional 5 years. Approximately 70,000 square feet are dedicated to warehouse and distribution space, with the balance used as our corporate offices. We believe that
our Houston facility will be able to support our growth plans for the foreseeable future, although we may from time to time lease new facilities or vacate existing facilities as our operations require. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of April&nbsp;2, 2011, we had 236 boutiques in 38 states and had executed leases for 39 new boutiques we plan to open in 2011. In total we have
approximately 336,000 gross square feet across all of our boutiques. Our boutiques are leased from third parties with lease terms of five to ten years and many of our lease agreements have additional five-year renewal options. A majority of our
leases have early termination clauses, which permit the lease to be terminated by us if certain sales levels are not met in specific periods or if a shopping center does not meet specified occupancy standards. In addition to fixed minimum lease
payments, most of our boutique leases provide for additional rental payments based on a percentage of sales if sales at the respective boutiques exceed specified levels. In addition, a majority of our leases also provide for additional payments
associated with common area maintenance, real estate, taxes and insurance. In addition, many of our lease agreements have defined escalating rent provisions over the initial term and extensions. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Our Employees </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of
April&nbsp;2, 2011, we had approximately 1,560 total employees. Of our total employees, approximately 102 were based at our corporate headquarters in Houston, Texas, and approximately 1,458 were boutique employees. We had approximately
462&nbsp;full-time employees and approximately 1,098 part-time employees, who are primarily boutique employees. None of our employees are represented by a labor union, and we have had no labor-related work stoppages as of April&nbsp;2, 2011. Our
relationship with our employees is one of the keys to our success, and we believe that relationship is satisfactory. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Seasonality
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our wide-range of merchandise and our strategy of carrying a broad selection but limited quantities of each item reduces our
overall seasonality relative to other specialty retailers. Nevertheless, our business is mildly seasonal in nature and demand is generally the highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal
quarter. As a result of this seasonality and generally because of variation in consumer spending habits, we experience fluctuations in net sales and working capital requirements during the year. See &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#151;Quarterly Results and Seasonality&#151;Seasonality&#148; for more information. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Legal Proceedings </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are
subject to various legal proceedings and claims, including employment claims, wage and hour claims, intellectual property claims, contractual and commercial disputes and other matters that arise in the ordinary course of our business. While the
outcome of these and other claims cannot be predicted with certainty, we do not believe that the outcome of these matters will have a material adverse effect on our business, results of operations or financial condition. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Privacy Policy </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In the
course of our business, we collect information about our customers, including customer data submitted to us in connection with purchases of our merchandise at boutiques as well as from our e-commerce business. We respect the privacy of our customers
and take steps to safeguard the confidentiality of the information that they provide to us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">78 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_11"></A>MANAGEMENT </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Executive Officers and Directors </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Below is a list of our executive officers and directors and their respective ages and positions and a brief account of the business experience of each of them. Upon completion of this offering, our board of
directors will consist of seven members. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="60%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:27pt"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Age</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Position</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">62</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, Chief Financial Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">53</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, Chief Operating Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, General Counsel</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director, Executive Vice Chairperson</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Greg Brenneman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director, Non-Executive Chairman</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Neill Davis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">54</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Richard Emmett</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">55</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Joseph Scharfenberger</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Richard Zannino</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Executive Officers </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>John De Meritt </I>is one of the Founders of the company and has served as our President and Chief Executive Officer since March 2007 and has
been a member of our board of directors since the inception of the company. Prior to becoming President and Chief Executive Officer of Francesca&#146;s, Mr.&nbsp;De Meritt worked for many years in the real estate investment industry, most recently
as Vice President, Director of Leasing in the Eastern United States for Weingarten Realty Investors. Mr.&nbsp;De Meritt holds a Bachelor of Arts degree in Political Science and a minor in Economics from the University of Houston and a Juris
Doctorate from the South Texas College of Law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Gene Morphis</I> has served as our Chief Financial Offer since October 2010. Prior to
joining Francesca&#146;s, Mr.&nbsp;Morphis was the Chief Financial Officer of David&#146;s Bridal from March 2006 to September 2010. Prior to David&#146;s Bridal, from 2002 to March 2006, Mr.&nbsp;Morphis served as the Chief Financial Officer of The
Rowe Companies, a company that filed voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in September 2006. Mr.&nbsp;Morphis also served as Chief Financial Officer of ClientLogic from 1999 to 2001, as Chief Financial Officer
of Stream International, Inc. from 1995 to 1999, and as Executive Vice President and Chief Financial Officer of CVS Caremark Corporation from 1992 to 1995. He also held various executive positions at Zales Corporation, American Woodmark and Holiday
Inns. He currently serves on the advisory board of Serality. Mr.&nbsp;Morphis holds a Bachelor of Business Administration degree and a Master of Business Administration degree from the University of Memphis. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Theresa Backes </I>has served as our Chief Operating Officer since 2009. Prior to joining Francesca&#146;s, from 2004 to 2007, Ms.&nbsp;Backes
was the Vice President, Store Operations of David&#146;s Bridal. From 2002 to 2004, Ms.&nbsp;Backes was the Senior Director, Store Operations, at Banana Republic. Ms.&nbsp;Backes has also held positions with IBM Global Services from 2000 to 2002 and
she was the Senior Vice President, Stores, at Gymboree Corporation from 1996 to 2000. She held various management positions at Target Corp. and Mervyn&#146;s Stores from 1981 to 1996. Ms.&nbsp;Backes graduated from Arizona State University in 1981
and attended both the Graduate Studies in Retail Finance program at the University of Michigan and Leadership Studies program at the Aspen Institute. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Kal Malik </I>has served as our General Counsel since October 2009. Prior to joining Francesca&#146;s, Mr.&nbsp;Malik was an attorney in private practice from August 2007 through September 2009 as a partner
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">79 </FONT></P>


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(of counsel during 2009) at the law firm of Condon Thornton Harrell Malik LLP. Prior to that, he was a Senior Director at Kane Russell Coleman&nbsp;&amp; Logan, P.C. from April 2001 to July 2007.
Mr.&nbsp;Malik holds a Bachelor of Science degree in Accounting from The University of Texas at Dallas, a Juris Doctorate from the South Texas College of Law and a Master of Laws in Taxation from Southern Methodist University Dedman School of Law.
Prior to entering the practice of law, Mr.&nbsp;Malik practiced as a Certified Public Accountant in Dallas, Texas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Kyong Gill</I> is
one of the Founders of the company and has served as a member of our board of directors since the inception of the company and has served as the Executive Vice Chairperson of our board of directors since March 2010. Ms.&nbsp;Gill previously served
as our Chief Merchandising Officer from 2003 until March 2011 and continues to oversee our merchandising operations in her capacity as Executive Vice Chairperson. Prior to founding Francesca&#146;s, Ms.&nbsp;Gill worked in the finance departments of
Continental Airlines and Northwest Airlines. Ms.&nbsp;Gill holds a Bachelor of Arts degree from the University of Houston and a Master of Business Administration degree from the University of Georgia. Ms.&nbsp;Gill was previously licensed as a
Certified Public Accountant. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Directors </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following information pertains to the directors, principal occupations and other directorships for at least the last five years and information regarding their specific experience, qualifications, attributes or
skills. In selecting directors, we consider factors that are in our best interests and those of our stockholders, including diversity of backgrounds, experience and competencies that our board of directors desires to have represented. These
competencies include: independence (with respect to independent directors); adherence to ethical standards; the ability to exercise business judgment; substantial business or professional experience and the ability to offer our management meaningful
advice and guidance based on that experience; ability to devote sufficient time and effort to his or her duties as a director; and any other criteria established by our board of directors together with any core competencies or technical expertise
necessary for our committees. We believe that each director possesses these qualities and has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to us and to our board of directors. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Greg Brenneman </I>has served as a member of our board of directors since February 2010 and is the Chairman of our board of directors.
Mr.&nbsp;Brenneman is the Chairman of CCMP and a member of its investment committee. Mr.&nbsp;Brenneman served as Chief Executive Officer of Quiznos from January 2007 until September 2008 and as President of Quiznos from January 2007 until November
2007. He also served as Executive Chairman of Quiznos from 2008 to 2009. Prior to joining Quiznos, from 2004 to 2006, Mr.&nbsp;Brenneman was Chairman and Chief Executive Officer of Burger King Corporation. In 2002, Mr.&nbsp;Brenneman was named
President and Chief Executive Officer of PwC Consulting, where he restructured the business which led to a strategic sale to IBM. From 1995 to 2001, Mr.&nbsp;Brenneman was Continental Airlines as President, Chief Operating Officer and a member of
its board of directors. In 1994, Mr.&nbsp;Brenneman founded Turnworks, Inc., his personal investment firm that focuses on corporate turnarounds. Prior to founding Turnworks, Mr.&nbsp;Brenneman was a Vice President for Bain and Company.
Mr.&nbsp;Brenneman holds a Bachelors Administration of Business in Accounting and Finance from Washburn University of Topeka, Kansas and a Master of Business Administration degree with distinction from Harvard Business School. He was also awarded an
honorary Doctor of Commerce degree from Washburn University. Mr.&nbsp;Brenneman currently serves on the board of directors of Edwards Group PLC, The Home Depot, Inc., Automatic Data Processing, Inc. and Quiznos. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Neill Davis</I> has served as a member of our board of directors since May 2007. Mr.&nbsp;Davis joined Men&#146;s Warehouse in 1997 as Vice
President and Treasurer. In November 2000, he was named Senior Vice President, Chief Financial Officer and Treasurer, and in March 2001 he was named Principal </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">80 </FONT></P>


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Financial Officer. In March 2002, he was promoted to Executive Vice President and remained Chief Financial Officer, Treasurer and Principal Financial Officer. In March 2003, he was named
Executive Vice President, Chief Financial Officer and Principal Financial Officer. In April 2006, he was again named to the additional office of Treasurer. Mr.&nbsp;Davis holds a Bachelor of Business Administration degree from Southern Methodist
University and a Master of Business Administration degree from the University of Arkansas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Rich Emmett</I> has served as a member of
our board of directors since November 2009. Mr.&nbsp;Emmett was named Senior Vice President, General Counsel and Secretary of Dunkin Brands in 2009. Prior to joining Dunkin Brands, Mr.&nbsp;Emmett served as Executive Vice President, Chief Legal
Officer and Secretary of Quiznos from May 2007 to April 2009. Mr.&nbsp;Emmett also served as a member of the Quiznos leadership team and worked a wide array of issues ranging from the development of the overall business strategy to managing U.S. and
international franchise relations. Prior to joining Quiznos, Mr.&nbsp;Emmett served as Senior Vice President, General Counsel and Secretary of Papa John&#146;s International, Inc. from 1992 to May 2007. Mr.&nbsp;Emmett holds a Bachelor of Arts
degree from Colgate University and a Juris Doctorate from The Marshall-Wythe School of Law, College of William&nbsp;&amp; Mary. Mr.&nbsp;Emmett currently serves on the board of directors of Capital Pizza, Inc. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Joe Scharfenberger </I>has served as a member of our board of directors since April 2007. Mr.&nbsp;Scharfenberger is a managing director of
CCMP. Prior to joining CCMP in December 2008, Mr.&nbsp;Scharfenberger worked at Bear Stearns Merchant Banking. Prior to joining Bear Stearns Merchant Banking, Mr.&nbsp;Scharfenberger worked in the private equity department at Toronto Dominion
Securities. He holds a B.A. from The University of Vermont. Mr.&nbsp;Scharfenberger currently serves on the board of directors of Crestcom International, Harlem Furniture, JAG flocomponents and New Chapter. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Rich Zannino </I>has served as a member of our board of directors since February 2010. Mr.&nbsp;Zannino is a managing director of CCMP and a
member of its investment committee. Prior to joining CCMP in 2009, Mr.&nbsp;Zannino was Chief Executive Officer and a member of the board of directors of Dow Jones&nbsp;&amp; Company. He joined Dow Jones as Executive Vice President and Chief
Financial Officer in February 2001 and was promoted to Chief Operating Officer in July 2002 and then to Chief Executive Officer and Director in February 2006. Prior to joining Dow Jones, Mr.&nbsp;Zannino was Executive Vice President in charge of
strategy, finance, M&amp;A, technology, and a number of operating units at Liz Claiborne. He originally joined Liz Claiborne in 1998 as Chief Financial Officer. In 1998, he served as Executive Vice President and Chief Financial Officer of General
Signal, where he led the sale of that company. From 1993 until early 1998, he was at Saks Fifth Avenue, ultimately serving as Executive Vice President and Chief Financial Officer, where he oversaw the company&#146;s strategy, finance, business
development, merchandise planning and technology and helped lead its successful IPO. Mr.&nbsp;Zannino is currently a member of the board of directors of IAC, Estee Lauder, Hanley Wood and Infogroup and is a trustee of Pace University. He holds a
Bachelor of Science degree in finance and economics from Bentley College and a Masters of Business Administration in finance from Pace University. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Board Composition and Election of Directors </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Board Composition </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our business and affairs are managed under the direction of our board of directors. Our board of directors currently consists of seven members. Upon
completion of this offering, our board of directors will consist of seven members. Our amended and restated bylaws which will be in effect upon completion of this offering will provide that, subject to any rights applicable to any then outstanding
preferred stock, our board of directors will consist of a number of directors to be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total directors then in office. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">81 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of the completion of this offering, our amended and restated certificate of incorporation and
amended and restated bylaws will provide for a staggered, or classified, board of directors consisting of three classes of directors, each serving a staggered three-year term and with one class being elected at each year&#146;s annual meeting of
stockholders as follows: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the Class I directors will be Mr.&nbsp;Scharfenberger and his term will expire at the annual meeting of stockholders to be held in 2012;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the Class II directors will be Ms.&nbsp;Gill and Messrs. Emmett and Zannino and their terms will expire at the annual meeting of stockholders to be held in 2013;
and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the Class III directors will be Messrs. Brenneman, Davis and De Meritt and their terms will expire at the annual meeting of stockholders to be held in 2014.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon the expiration of the term of a class of directors, directors for that class will be elected for a new
three-year term at the annual meeting of stockholders in the year in which the term expires. Each director&#146;s term is subject to the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Subject
to any rights applicable to any then outstanding preferred stock, any vacancies on our board of directors may be filled only by the affirmative vote of a majority of the directors then in office. Any increase or decrease in the number of directors
will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors will make it more difficult for a third party to acquire control of our
company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our stockholders&#146; agreement has provided, among other things, that five members of our board of directors were to be
designated by CCMP, and two members were to be designated by the majority of the shares held by management so long as management held at least 7% of the total equity interest in the company. Currently, Messrs.&nbsp;Brenneman, Zannino,
Scharfenberger, Emmett and Davis have had the right to serve on our board of directors pursuant to the terms of this stockholders&#146; agreement as appointees of CCMP and Mr.&nbsp;De Meritt and Ms.&nbsp;Gill have the right to serve on our board of
directors as appointees of the holders of a majority of the shares held by management. These related board representation rights will terminate upon completion of this offering and will no longer be in effect. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Director Independence and Controlled Company </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We intend to avail ourselves of the &#147;controlled company&#148; exception under the corporate governance rules of The NASDAQ Stock Market. Accordingly, we will not have a majority of &#147;independent
directors&#148; on our board of directors nor will we have a compensation committee and a corporate governance and nominating committee composed entirely of &#147;independent directors&#148; as defined under the rules of The NASDAQ Stock Market.
Further, compensation for our executives and selection of our director nominees will not be determined by a majority of &#147;independent directors&#148; as defined under the rules of The NASDAQ Stock Market. The &#147;controlled company&#148;
exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of Sarbanes-Oxley and The NASDAQ Stock Market, which require that our audit committee be composed of at least three
members, one of whom will be independent upon the listing of our common stock on The NASDAQ Global Select Market, a majority of whom will be independent within 90 days of listing and each of whom will be independent within one year of listing.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If at any time we cease to be a &#147;controlled company&#148; under the rules of The NASDAQ Stock Market, our Board of Directors will
take all action necessary to comply with The NASDAQ Stock Market corporate governance rules, including appointing a majority of independent directors to the board and establishing certain committees composed entirely of independent directors,
subject to a permitted &#147;phase-in&#148; period. Our board of directors has determined that Messrs.&nbsp;Davis and Emmett each qualify as an &#147;independent director&#148; under the corporate governance rules of The NASDAQ Stock Market.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">82 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Board Committees </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our board of directors has established an audit committee, a compensation committee and a corporate governance and nominating committee. The composition and responsibilities of each committee are described below.
Members will serve on these committees until their resignation or until otherwise determined by our board of directors. In the future, our board of directors may establish other committees, as it deems appropriate, to assist with its
responsibilities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Audit Committee </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our audit committee currently consists of Messrs.&nbsp;Davis, Zannino, Emmett and Scharfenberger. Upon completion of this offering, our audit committee will consist of Messrs.&nbsp;Davis, Emmett and Scharfenberger.
Mr.&nbsp;Davis is the chairperson of our audit committee. Our audit committee will have responsibility for, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">selecting and hiring our independent registered public accounting firm and approving the audit and non-audit services to be performed by our independent
registered public accounting firm; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">evaluating the qualifications, performance and independence of our independent registered public accounting firm; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or
accounting matters; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing the adequacy and effectiveness of our internal control policies and procedures; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered
public accounting firm our interim and year-end operating results; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">preparing the audit committee report required by the SEC to be included in our annual proxy statement. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The SEC and The NASDAQ Stock Market rules require us to have one independent audit committee member upon the listing of our common stock on The
NASDAQ Global Select Market, a majority of independent audit committee members within 90&nbsp;days of the date of such listing and all independent audit committee members within one year of the date of such listing. We expect to have two independent
audit committee members upon the listing of our common stock on The NASDAQ Global Select Market, thereby constituting a majority of independent audit committee members, and we expect to have an entirely independent audit committee within one year
from the date of listing. Our board of directors has affirmatively determined that Messrs.&nbsp;Davis and Emmett meet the definition of &#147;independent directors&#148; under applicable SEC and The NASDAQ Stock Market rules. In addition, our board
of directors has determined that Mr.&nbsp;Davis qualifies as an &#147;audit committee financial expert&#148;, as such term is defined in the rules and regulations of the SEC. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our board of directors has adopted a written charter for our audit committee, which will be available on our website at <I>www.francescascollections.com</I> upon completion of this offering. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Compensation Committee </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
compensation committee currently consists of Messrs.&nbsp;Brenneman, Emmett and Scharfenberger. Mr.&nbsp;Brenneman is the chairperson of our compensation committee. Upon completion of this offering, our compensation committee will remain unchanged.
The compensation committee will be responsible for, among other things: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing and approving compensation of our executive officers, including annual base salary, annual incentive bonuses, specific goals, equity compensation,
employment agreements, </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">83 </FONT></P>


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<TD VALIGN="top"> <P><FONT STYLE="font-family:ARIAL" SIZE="2">
severance and change-in-control arrangements and any other benefits, compensation or arrangements; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing succession planning for our executive officers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing and recommending compensation goals, bonus and stock compensation criteria for our employees; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">determining the compensation of our directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing and discussing annually with management our &#147;Compensation Discussion and Analysis&#148; disclosure required by SEC rules;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">administrating, reviewing and making recommendations with respect to our equity compensation plans. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to avail ourselves of the &#147;controlled company&#148; exception under The NASDAQ Stock Market rules which exempts us from the
requirement that we have a compensation committee composed entirely of independent directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors has adopted a
written charter for our compensation committee, which will be available on our website at <I>www.francescascollections.com </I>upon completion of this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Corporate Governance and Nominating Committee </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our corporate governance and nominating
committee currently consists of Messrs.&nbsp;Brenneman, Zannino and Davis. Mr.&nbsp;Zannino is the chairperson of our corporate governance and nominating committee. Upon completion of this offering, our corporate governance and nominating committee
will remain unchanged. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The corporate governance and nominating committee is responsible for, among other things: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">assisting our board of directors in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to our board of
directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">overseeing the evaluation of our board of directors and management; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">recommending members for each board committee of our board of directors; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">approving related party transactions. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We intend to avail ourselves of the &#147;controlled company&#148; exception under The NASDAQ Stock Market rules which exempts us from the requirement that we have a corporate governance and nominating committee
composed entirely of independent directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors will adopt prior to completion of this offering a written charter
for our corporate governance and nominating committee, which will be available on our website at <I>www.francescascollections.com</I> upon completion of this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Compensation Committee Interlocks and Insider Participation </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During the last fiscal year,
Messrs.&nbsp;Brenneman and Scharfenberger served on our compensation committee. Messrs.&nbsp;Brenneman and Scharfenberger both have relationships with us that require disclosure under Item&nbsp;404 of Regulation&nbsp;S-K under the Exchange Act. See
&#147;Certain Relationships and Related Party Transactions&#148; for more information. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">84 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During the past fiscal year, Mr.&nbsp;De Meritt and Ms.&nbsp;Gill, each an executive officer of the
company, served as members of our board of directors. However, none of the executive officers of the company, served on the compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive
officers who served as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor have they ever been an officer or employee of our company.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Code of Business Conduct and Ethics </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Prior to the completion of this offering, we will revise our code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial
reporting. Our code of business conduct and ethics will address, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company funds and assets, confidentiality and corporate opportunity
requirements and the process for reporting violations of the code of business conduct and ethics, employee misconduct, conflicts of interest or other violations. Our code of business conduct and ethics will be available on our website at
<I>www.francescascollections.com</I> upon completion of this offering. Any amendments to the code, or any waivers of its requirements, will be disclosed on our website. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Board Leadership Structure and Board&#146;s Role in Risk Oversight </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Brenneman, a
non-employee, serves as Non-Executive Chairman of our board of directors. We support separating the position of Chief Executive Officer and Chairman to allow our Chief Executive Officer to focus on our day-to-day business, while allowing the
Chairman to lead our board of directors in its fundamental role of providing advice to, and oversight of, management. Our board of directors recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his
position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as our board of directors&#146; oversight responsibilities continue to grow. Our board of directors also believes that this
structure ensures a greater role for the non-management directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our board of
directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">While our amended and restated bylaws, which will be in effect upon the completion of this offering, will not require that
our Chairman and Chief Executive Officer positions be separate, our board of directors believes that having separate positions and having a non-employee director serve as Chairman is the appropriate leadership structure for us at this time and
demonstrates our commitment to good corporate governance. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Risk is inherent with every business and we face a number of risks as
outlined in the &#147;Risk Factors&#148; section of this prospectus. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its audit committee, is responsible for overseeing
our management and operations, including overseeing its risk assessment and risk management functions. Our board of directors has delegated responsibility for reviewing our policies with respect to risk assessment and risk management to our audit
committee through its charter. Our board of directors has determined that this oversight responsibility can be most efficiently performed by our audit committee as part of its overall responsibility for providing independent, objective oversight
with respect to our accounting and financial reporting functions, internal and external audit functions and systems of internal controls over financial reporting and legal, ethical and regulatory compliance. Our audit committee will regularly report
to our board of directors with respect to its oversight of these important areas. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">85 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Director Compensation </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our independent directors, Messrs.&nbsp;Davis and Emmett, currently receive an annual retainer from us for their services as members of our board of directors. In addition, on March&nbsp;26, 2010, we granted
Mr.&nbsp;Emmett a stock option under the Francesca&#146;s Holdings Corporation Stock Incentive Plan to purchase 40,000 shares of our common stock. Subject to his continued service through the applicable vesting date, the grant will vest in equal
annual installments on each anniversary of the award date over a five-year period. The terms and conditions of the stock option grant are similar to the terms and conditions of the stock options granted to employees generally. The CCMP Acquisition
was treated as a change in control for purposes of the 2007 Stock Incentive Plan (the &#147;2007 Plan&#148;) on February&nbsp;26, 2010, thereby causing an acceleration of vesting of all awards outstanding pursuant to the 2007 Plan, including
Mr.&nbsp;Davis&#146; stock options granted on December&nbsp;1, 2007. In addition, on November&nbsp;17, 2010, we paid a cash divided to our shareholders. Pursuant to the terms of the 2007 Plan, our board of directors adjusted the exercise price of
outstanding stock options to neutralize the dilutive effect of the dividend payments. However, our board of directors determined that in the case of Mr.&nbsp;Davis, and certain of our named executive officers, they should receive a cash payment in
lieu of an adjustment. Accordingly, Mr.&nbsp;Davis received a gross cash payment of $239,450, which was calculated as the product of the proposed reduction in the exercise price of outstanding options of $2.39 multiplied by the number of
fully-vested but unexercised options granted to Mr.&nbsp;Davis under the 2007 Plan at the time of the dividend payment. The stock options remain outstanding at their original exercise price. For a discussion of the Francesca&#146;s Holdings
Corporation Stock Incentive Plan and the terms and conditions of stock options granted thereunder, please see &#147;Executive Compensation&#151;Compensation Discussion&nbsp;&amp; Analysis&#151;Elements of Compensation&#151;Equity-Based Awards,&#148;
below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect to enter into indemnification agreements with all our directors effective upon completion of this offering. See
&#147;Certain Relationships and Related Party Transactions&#151;Indemnification of Officers and Directors&#148; for more information. All members of our board of directors receive reimbursement of reasonable and documented costs and expenses
incurred by directors in connection with attending any meetings of our board of directors or any of our committees. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our executives who
are members of our board of directors do not receive compensation from us in connection with their service on our board of directors. This arrangement will remain unchanged following the completion of this offering. Accordingly, Mr.&nbsp;De Meritt
and Ms.&nbsp;Gill will not receive compensation from us for their service on our board of directors. Only those directors who are non-executives are eligible to receive compensation from us for their service on our board of directors. Upon
completion of this offering, we expect that the non-executive directors will be paid: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth information
regarding the compensation of our non-executive directors for their service on our board of directors for the most recently completed fiscal year: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="49%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Fees&nbsp;Earned&nbsp;or<BR>Paid in Cash</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option&nbsp;Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All Other<BR>Compensation</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Rich Emmett</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">137,600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">177,600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Neill Davis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">239,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">259,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board (&#147;FASB&#148;)
Accounting Standards Codification Topic 718 (&#147;FASB ASC Topic 718&#148;). The assumptions made in the valuation of the awards are set forth in note 6 to the company&#146;s consolidated financial statements included elsewhere in this prospectus.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">For Mr.&nbsp;Davis, amount reported represents a cash payment received in lieu of an adjustment to the exercise price of his outstanding stock options. See the narrative above
for more details. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">86 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_12"></A>EXECUTIVE COMPENSATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Compensation Discussion and Analysis </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Introduction </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">This Compensation
Discussion and Analysis describes the compensation arrangements we have with our named executive officers as required under the rules of the SEC. The SEC rules require disclosure for the principal executive officer, or PEO (our Chief Executive
Officer) and principal financial officer, or PFO (our current and former Chief Financial Officer), regardless of compensation level, and the three most highly compensated executive officers in our last completed fiscal year, other than the PEO and
PFO. All of these executive officers are referred to in this Compensation Discussion and Analysis as our &#147;named executive officers.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to January&nbsp;31st. We refer to the period from January&nbsp;31, 2010 to
January&nbsp;29, 2011, our previous fiscal year, as &#147;fiscal year 2010.&#148; For fiscal year 2010, our named executive officers were: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="21%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="76%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:27pt"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:20pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Title</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer (PEO)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, Chief Financial Officer (PFO, who joined the company effective October 18, 2010)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Vice President of Accounting (who served as PFO until October 18, 2010)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, Chief Operating Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Chief Merchandising Officer (who, as of March 8, 2011, serves as our Executive Vice Chairperson)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Vice President, General Counsel and Corporate Secretary</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, we were a privately held company with a relatively small number of shareholders, including our principal shareholder, CCMP. As a result, we have not previously been subject to any stock
exchange listing or SEC rules requiring a majority of our board of directors to be independent or relating to the formation and functioning of board committees, including audit, compensation and nominating committees. Prior to the CCMP Acquisition,
compensation policies and determinations for our named executive officers, including our Chief Executive Officer, were made by our board of directors in consultation with our Chief Executive Officer. In connection with the CCMP Acquisition, our
board of directors established a compensation committee composed of Greg Brenneman (Committee Chair) and Joseph Scharfenberger (the &#147;Compensation Committee&#148;). During fiscal year 2010, the Compensation Committee was responsible for the
oversight, implementation and administration of all of our executive compensation plans and programs. The Compensation Committee determined all of the components of compensation of our Chief Executive Officer, and, in consultation with our Chief
Executive Officer, the compensation of our remaining named executive officers. Our board of directors reviewed the Compensation Committee&#146;s recommendations for the compensation of our Chief Executive Officer and approved his final compensation.
On March&nbsp;8, 2011, Richard Emmett became a member of the Compensation Committee as well. The duties of the Compensation Committee and our board of directors will remain same as they were prior to this offering. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Compensation Philosophy and Objectives </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The key objectives in designing our executive compensation program, both historically and following this offering, are to: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">align the interests of our named executive officers with our shareholders&#146; interests; and </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">87 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">provide a total compensation package for each of our named executive officers that is commensurate with our peers in the specialty retail industry.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We seek to accomplish these objectives by providing a total compensation package which includes three main
components: base salary, annual performance-based cash awards and long-term equity-based awards. Of these components, base salary and annual performance-based cash awards have been historically, and will continue to be, at or below-market when
compared to our peers in the specialty retail industry. However, our long-term equity-based awards, which have been in the form of stock options, have been significantly above-market when compared to our peers in the specialty retail industry. As a
result, the total compensation package for each of our named executive officers is generally above the median of our peers in the specialty retail industry due to the outstanding performance of the company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that by providing a substantial portion of our named executive officers&#146; total compensation package in the form of equity-based
awards through stock option grants which vest over a period of four or five years, we create an incentive to build shareholder value over the long-term and closely align the interests of our named executive officers to those of our shareholders by
incentivizing our named executive officers to produce value. Additionally, our annual performance-based cash awards, while a less significant portion of our total compensation package, are also contingent upon the achievement of financial
performance metrics and the amount of compensation ultimately received for these awards vary with our company&#146;s annual financial performance, thereby providing an additional incentive to maximize shareholder value. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have adhered to this philosophy historically and intend to continue to do so going forward. We believe that this philosophy has been successful
by motivating, retaining and incentivizing our named executive officers and providing value to our shareholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Following this
offering, we intend to continue to follow the compensation objectives and philosophy we have maintained historically. We intend to continue to provide at- or below-market fixed compensation in the form of base salary and annual performance-based
cash awards, while providing the majority of our total compensation package in the form of long-term equity-based incentives. For example, in conjunction with this offering we intend to grant Mr.&nbsp;De Meritt and Ms.&nbsp;Backes a one-time grant
of additional stock options, each with a five-year vesting period, to provide a long-term incentive for them to continue to grow our company. We believe Mr.&nbsp;De Meritt&#146;s grant will serve to provide an additional incentive in the event
certain of his outstanding stock options vest upon completion of this offering. See &#147;&#151;Equity-Based Awards,&#148; below, for additional information regarding any potential vesting of Mr.&nbsp;De Meritt&#146;s outstanding awards upon
completion of this offering. Ms.&nbsp;Backes currently has no outstanding unvested equity awards, and therefore the grant in connection with this offering will provide her with a long-term incentive opportunity. Following these grants, all of our
named executive officers will have outstanding equity-based awards with multi-year vesting periods. (With the exception of Mr.&nbsp;De Meritt and Mmes. Gill and Backes, each of the option awards granted in 2010 will not fully vest until 2015, or
2014 in the case of Mr.&nbsp;Malik, provided that the executive remains employed through each applicable vesting period.) Additionally, none of these grants provide for accelerated vesting except in certain circumstances (such as the potential
accelerated vesting of a portion of Mr.&nbsp;De Meritt&#146;s options in connection with this offering, described under &#147;&#151;Elements of Compensation&#151;Equity-Based Awards,&#148; below), thereby insuring that our executives have continued
incentive to drive shareholder value. This is in line with our compensation objective of aligning our executive officers&#146; interests with the long-term interests of our shareholders. For additional information regarding stock option awards to be
made in conjunction with this offering, see &#147;&#151;Actions Taken Subsequent to Fiscal Year 2010&#151;Stock Option Grants in Conjunction with this Offering,&#148; below. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">88 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Historically, we have not used a third-party consultant to assist us with determining compensation
levels. Additionally, our Compensation Committee has not benchmarked our compensation levels and their decisions with regard to compensation levels have been subjective. However, in conjunction with this offering, we have engaged Pearl
Meyer&nbsp;&amp; Partners, LLC to compile a report of benchmark data for executive positions for similar companies, including summaries of base salary, annual cash incentive plan opportunities and long-term incentive award values. The analysis
completed by Pearl Meyer&nbsp;&amp; Partners, LLC has provided support that the current total compensation packages provided to our named executive officers are in line with our objective of providing below-market cash compensation but above-market
long-term equity compensation if, and only if, the company outperforms compared with our peers in the specialty retail industry. We expect that the Compensation Committee will compare our compensation practices and overall compensation levels and
components thereof with our peers in the specialty retail industry and, where appropriate, with non-retail organizations when establishing our compensation guidelines. We expect that the Compensation Committee will review compensation elements and
amounts for our named executive officers on an annual basis, at the time of a promotion or other change in level of responsibilities, as well as when competitive circumstances or business needs may require. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Role of the Compensation Committee and our Executive Officers </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Historically, our compensation has been highly individualized, the result of arm&#146;s-length negotiations and based on a variety of informal factors including, in addition to the factors listed above, our
financial condition and available resources, our need for a particular position to be filled and the compensation levels of our other executive officers. In addition, we informally considered the competitive market for corresponding positions within
the specialty retail apparel industry based on the general knowledge possessed by members of our Compensation Committee and our Chief Executive Officer regarding the compensation given to some of the executive officers of other companies in our
industry through informal benchmarking. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Going forward, we expect that our Chief Executive Officer will continue to provide compensation
recommendations to the Compensation Committee for base salary, annual incentive targets and other compensation awards for executives other than himself based on this data and the other considerations mentioned in this Compensation Discussion and
Analysis. The Compensation Committee will likely give significant weight to our Chief Executive Officer&#146;s judgment when assessing each of the other named executive officers&#146; performance and determining appropriate compensation levels and
incentive awards and will seek to base the compensation objectives on the achievement of our annual business plan. We expect that the Compensation Committee will recommend a total compensation package that is consistent with our described
compensation philosophy and competitive within the specialty retail industry. We expect that the Compensation Committee will then discuss these recommendations with the Chief Executive Officer and will make a recommendation to our board of
directors, which our board of directors will consider and approve, if appropriate. With regard to the compensation of our Chief Executive Officer, our Compensation Committee, without the input of our Chief Executive Officer, will determine the
compensation of our Chief Executive Officer, including the targets for his annual performance-based cash award. Our board of directors will review the Compensation Committee&#146;s recommendation and will be ultimately responsible for approving such
recommendation with or without modification. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Elements of Compensation </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As discussed throughout this Compensation Discussion and Analysis, the compensation policies and programs applicable to our named executive officers
are reflective of our objective of aligning the interests of our executive officers with our shareholders&#146; interests in enhancing shareholder value over the long term. Applying this philosophy, a significant portion of overall compensation
offered to our </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">89 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
named executive officers is in the form of (i)&nbsp;equity-based compensation linked to enhanced shareholder value and (ii)&nbsp;annual performance-based cash awards contingent upon achievement
of measurable financial objectives. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The elements of our compensation program are: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">base salaries; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">annual performance-based cash awards; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">equity-based incentive awards; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">certain additional executive benefits and perquisites. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition to these elements, in 2010 certain of our named executive officers received additional compensation as a reward for the successful completion of the CCMP Acquisition and to acknowledge their efforts in
creating the underlying enterprise value, as described below under &#147;&#151;CCMP Acquisition-Related Payments.&#148; We strive to achieve an appropriate mix between the various elements of our compensation program to meet our compensation
objectives and philosophy; however, we do not apply any rigid allocation formula in setting our named executive officers&#146; compensation, and we may make adjustments to this approach for various positions after giving due consideration to
prevailing circumstances. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Base Salary </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We provide a base salary to our named executive officers to induce talented executives to join or remain with our company, to compensate them for their services during the year and to provide them with a stable
source of income. For fiscal year 2010, each of our named executive officers, other than Ms.&nbsp;Thomassee, had an employment agreement or letter agreement which set his or her minimum base salary. While our base salary amounts are generally
below-market when compared to our peers in the specialty retail industry, the total compensation package provided to our named executive officers, including equity-based awards, is commensurate with our peers. For more information regarding the
current terms and conditions of our named executive officers&#146; employment, please see the narrative following the &#147;Grants of Plan-Based Awards&#148; table, below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The base salary levels of continuing named executive officers are reviewed annually by our Compensation Committee to determine whether an adjustment is warranted or necessary and this practice will be maintained by
our Compensation Committee following this offering. The Compensation Committee takes into account numerous factors in making its determination, none of which are dispositive or individually weighted, including our financial performance, the state of
our industry and local economies in which we operate, the executive officer&#146;s relative importance and responsibilities, the executive officer&#146;s track record in meeting his or her performance objectives and comparable salaries paid to other
executives of similar experience in our industry. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">90 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In 2010, the base salaries of Mmes. Thomassee and Backes were increased by $10,000 and $15,000,
respectively, upon recommendation of our Chief Executive Officer, to be more reflective of market salaries for their respective positions. Our Compensation Committee also considered the base salaries of our other named executive officers, but
concluded that their base salaries were appropriate at their current levels. The base salaries paid to our named executive officers during fiscal year 2010 are reported in the &#147;Summary Compensation Table,&#148; below. The annual base salaries
in effect for each of our continuing named executive officers as of January&nbsp;29, 2011 are as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Annual&nbsp;Salary</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">375,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">325,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">250,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">275,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">225,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Annual Performance-Based Cash
Awards </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">While a large portion of the total compensation package provided to our named executive officers is in the form of
long-term equity-based awards, we also provide our named executive officers with annual performance-based cash award opportunities linked to our annual financial performance and the achievement of individual goals and objectives. Annual
performance-based cash awards are tied specifically to the achievement of our annual financial objectives and individual performance. Our awards are designed to align each executive&#146;s annual goals for his or her respective area of
responsibility with the financial goals of the company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The target annual performance-based cash award opportunity for each eligible
executive is set at a percentage of base salary. Pursuant to their employment agreements or letter agreements, as applicable, our named executive officers were eligible to receive a target annual performance-based cash award in fiscal 2010 equal to
100% of base salary for Mr.&nbsp;De Meritt, 25% for Ms.&nbsp;Thomassee, 40% for Ms.&nbsp;Backes and Mr.&nbsp;Malik, and 75% for Ms.&nbsp;Gill. The target annual performance-based cash award amounts were determined by our Compensation Committee with
recommendations by our Chief Executive Officer, and such target amounts generally reflect the executive&#146;s position and market conditions. Mr.&nbsp;Morphis was not eligible for an annual performance-based cash award for fiscal year 2010 because
he joined with us at the end of the 3rd fiscal quarter of 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The award payable for fiscal year 2010 to Mr.&nbsp;De Meritt and
Ms.&nbsp;Gill were based on the achievement of the company&#146;s budgeted EBITDA goals. The award payable to Mmes. Thomassee and Backes and Mr.&nbsp;Malik were based 75% on the achievement of the company&#146;s budgeted EBITDA goal and 25% on the
achievement of individual goals. The weighting of individual goals versus the company&#146;s budgeted EBITDA goals, as well as the determination of the individual goals, were established by our Chief Executive Officer and approved by our board of
directors. The individual goals chosen for Mmes. Thomassee and Backes and Mr.&nbsp;Malik were intended to measure the performance of the tasks and activities each executive is asked to perform in their respective roles. The individual goals for
Ms.&nbsp;Thomassee included consistent timely preparation of financial reports, identification and implementation of internal controls and processes and cross-training individuals with related functions. The individual goals for Ms.&nbsp;Backes
included successful leadership of our boutique operations and e-commerce divisions and sales and merchandising teams, continued development of our business model and oversight of development of our regional management team. Finally, the individual
goals for Mr.&nbsp;Malik included management of our litigation exposure and associated risks, streamlining of our lease negotiation process, revisions to our capital structure and leadership of various team building initiatives. The target annual
performance-based cash award opportunities of our named executive officers for fiscal year 2010 are set forth in the &#147;Grants of Plan-Based Awards&#148; table, below. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">91 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The pre-established objective financial incentive target goal for fiscal year 2010 was budgeted
EBITDA. The Compensation Committee chose EBITDA as the objective financial incentive target goal as this metric tracks both company earnings and cash flow and is indicative of our overall market value. For purposes of determining award amounts
payable to our named executive officers, budgeted EBITDA means the targeted consolidated earnings of the company and its subsidiaries before interest, taxes, depreciation and amortization, established at the beginning of each accounting period. For
fiscal year 2010, the target budgeted EBITDA was $24.8 million and we achieved EBITDA of $32.1 million, which was above our budgeted amount. Although budgeted EBITDA was used as the financial measure for fiscal year 2010, in the future the
Compensation Committee may use other objective financial performance indicators. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The table below indicates the total award payment for
fiscal year 2010 for our named executive officers (other than Mr.&nbsp;Morphis), as well as the weighted components used to determine award payments. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Annual<BR>Salary</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Target<BR>Award&nbsp;As&nbsp;a<BR>Percentage<BR>of
Base<BR>Salary</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(%)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighting&nbsp;
of<BR>Budgeted<BR>EBITDA<BR>Goal</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(%)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Weighting&nbsp;
of<BR>Individual<BR>Goals</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(%)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Actual&nbsp;Award<BR>Payment</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt(4)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">375,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">450,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cindy Thomassee(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">160,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">55,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes(5)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">235,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">275,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">206,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">225,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">90,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">As the company achieved the budgeted EBITDA goal for fiscal year 2010, each of our named executive officers received the full amount of this component. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Each of our named executive officers either met or exceeded their individual goals for fiscal year 2010 as determined by our Compensation Committee with recommendations by our
Chief Executive Officer. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The annual performance-based cash awards paid to our named executive officers during fiscal year 2010 are reported in the &#147;Summary Compensation Table,&#148; below.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Mr.&nbsp;De Meritt received a payment which represents 120% of his base salary, or 20% more than the amount provided for in his employment agreement. This increased award payment
was determined by our Compensation Committee in its discretion, and approved by our board of directors, in recognition of the company exceeding the budgeted EBITDA goal, significant increases in boutique count, and successful implementation of
various corporate infrastructure expansion initiatives. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Mmes. Thomassee and Backes received payments which represent approximately 34% and 43% of their base salary amounts, respectively, or 9% and 3% more than their target award
amounts, respectively. The excess award payments were recommended by our Chief Executive Officer in his discretion, and approved by our Compensation Committee, in recognition of their outstanding performance and delivering above each and every
metric and special assignment. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For fiscal year 2011 and going forward, annual performance-based cash awards for our named
executive officers will be paid under the Francesca&#146;s Holdings Corporation Executive Bonus Plan, which will be adopted in conjunction with this offering. Performance goals and objectives for our named executive officers, other than our Chief
Executive Officer, will be determined by our Chief Executive Officer, approved by our Compensation Committee and reviewed by our board of directors. Performance goals and objectives for our Chief Executive Officer will be determined by our
Compensation Committee and approved by our board of directors. For more information on awards for fiscal year 2011 please see the section entitled &#147;&#151;Actions Taken Subsequent to Fiscal Year 2010&#151; Plans Adopted in Connection with Our
Initial Public Offering&#151; Francesca&#146;s Holdings Corporation Executive Bonus Plan,&#148; below. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">92 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Equity-Based Awards </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As discussed throughout this Compensation Discussion and Analysis, in order to align the interests of our named executive officers with those of the
company and its shareholders, the Compensation Committee has determined that a significant portion of each named executive officer&#146;s compensation should be in the form of equity-based awards. The option grants awarded over the last four years
had no public market and no certain opportunity for liquidity until the completion of this offering, making them inherently long-term compensation. Prior to the CCMP Acquisition, awards were granted under the Francesca&#146;s Holdings Corporation
2007 Stock Incentive Plan (the &#147;2007 Plan&#148;) in the form of options to acquire our common stock. In conjunction with the CCMP Acquisition, the company adopted the Francesca&#146;s Holdings Corporation Stock Incentive Plan (the &#147;2010
Plan&#148;). Equity awards granted to our named executive officers for fiscal year 2010 under the 2010 Plan are set forth in the &#147;Grants of Plan-Based Awards&#148; table, below. In conjunction with this offering, we intend to adopt the 2011
Francesca&#146;s Holdings Equity Incentive Plan (the &#147;2011 Plan&#148;), and all future awards going forward will be granted under this plan. For a description of the 2007 Plan and the 2010 Plan, see &#147;&#151;Equity-Based Awards,&#148; below.
For a description of the 2011 Plan, see &#147;&#151;Actions Taken Subsequent to Fiscal Year 2010&#151; Plans Adopted in Connection with Our Initial Public Offering&#151;2011 Plan,&#148; below. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In general, all stock option grants under the 2010 Plan to our named executive officers are determined at the discretion of our Compensation
Committee. Our Compensation Committee has chosen to make equity-based awards in the form of stock options as opposed to other forms of equity-based awards because stock options provide a compensation opportunity only when we have created additional
shareholder value, which is consistent with our compensation philosophy. In addition, our Compensation Committee also considers a named executive officer&#146;s current position with our company, the size of his or her total compensation package and
the amount of existing vested and unvested stock options, if any, then held by the executive officer. Historically, based upon the Compensation Committee&#146;s knowledge of the company and the market, and the fact that the company was private and
therefore our shares were illiquid, no formal benchmarking efforts were made by our Compensation Committee with respect to the size of option grants made to executive officers. In conjunction with this offering, we intend to grant Mr.&nbsp;De Meritt
and Ms.&nbsp;Backes additional stock options, as discussed in &#147;&#151;Actions Taken Subsequent to Fiscal Year 2010&#151;Stock Option Grants in Conjunction with this Offering,&#148; below. Because the grants made pursuant to 2010 are fairly
recent, we do not currently anticipate making any additional grants other than those to Mr.&nbsp;De Meritt and Ms.&nbsp;Backes described in the previous sentence. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our board of directors adopted and our shareholders approved the 2007 Plan effective December&nbsp;1, 2007. Our board of directors adopted and our shareholders approved the 2010 Plan effective February&nbsp;27,
2010. The 2007 Plan and the 2010 Plan were amended effective April&nbsp;28, 2010 to adjust the number of shares available for issuance to account for a 400-for-1 stock split. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">As of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, 406,000 shares of common stock had been issued upon the exercise of options granted under the 2007 Plan.
As of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, 500,000 shares were vested and unexercised under the 2007 Plan. As of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, 2,020,400 shares of common stock had been authorized and reserved for potential issuance, 77,984 shares of common stock had been issued upon the
exercise of options granted, and options to purchase 215,705 shares were vested and unexercised under the 2010 Plan. Pursuant to the April&nbsp;28, 2010 amendments to the 2007 Plan, no additional options may be issued under the 2007 Plan. In
conjunction with this offering, the 2010 Plan will be amended to provide that no additional options may be issued under the 2010 Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following is a summary of the material terms of the 2007 Plan and the 2010 Plan, which will each be in effect upon completion of this offering,
but does not include all of the provisions of the 2007 </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">93 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
Plan and the 2010 Plan. For further information about the 2007 Plan and the 2010 Plan, we refer you to the complete copies of the 2007 Plan and 2010 Plan, which we included as exhibits to our
registration statement of which this prospectus is a part. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Under the 2007 Plan and 2010 Plan, we are generally authorized to grant
options to purchase shares of our common stock, restricted stock awards and, in the case of the 2007 Plan, phantom stock awards to certain of our employees, consultants and directors. Options under the 2007 Plan and the 2010 Plan are either
incentive stock options, within the meaning of Section&nbsp;422 of the Internal Revenue Code, or nonqualified stock options. All options granted under the plan expire no later than ten years from their date of grant. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Compensation Committee administers the 2007 Plan and the 2010 Plan. As is customary in incentive plans of this nature, the number of shares
subject to outstanding awards under the 2007 Plan and the 2010 Plan and the exercise prices of those awards, are subject to adjustment in the event of changes in our capital structure, reorganizations and other extraordinary events. Currently, all
of the outstanding options granted pursuant to the 2007 Plan are fully vested and under the 2010 Plan, in the event of a change of control event (as defined in the 2010 Plan), our board of directors has discretion to provide for the accelerated
vesting of awards. For a discussion of the treatment of outstanding awards under the 2007 Plan in conjunction with the CCMP Acquisition, see &#147;&#151;CCMP Acquisition-Related Payments,&#148; below. Under the 2010 Plan, in such circumstances, the
options will terminate, subject to the plan administrator&#146;s authority to provide for the assumption or substitution of the options, provided that for awards that will not be otherwise assumed, substituted for or otherwise settled, option
holders are provided at least 10 days&#146; notice of the impending termination. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A portion of the stock options granted to Mr.&nbsp;De
Meritt on March&nbsp;26, 2010 may vest in connection with this offering based on the performance targets achieved by CCMP and certain of their affiliates (referred to herein as the Investors). Vesting of the options will be accelerated based upon
the achievement of performance targets upon a realization event (as such term is defined in Mr.&nbsp;De Meritt&#146;s option award agreement) (including this offering) as follows: (x)&nbsp;upon the Investors&#146; achievement of 2.0x of their
invested capital, 33.3% of the option will vest to the extent the option is then outstanding and unvested; (y)&nbsp;upon the Investors&#146; achievement of 2.5x of their invested capital, 66.6% of the option will vest to the extent the option is
then outstanding and unvested and (z)&nbsp;upon the Investors&#146; achievement of 3.0x of their invested capital, 100% of the option will vest to the extent the option is then outstanding and unvested. To the extent an option is vested at the time
of the realization event (based on the passage of time) by a percentage that equals or exceeds the percentage of the option that would be vested as a result of the achievement of the multiple of invested capital, the option&#146;s vesting will not
accelerate, but the option will remain outstanding and eligible for continued vesting contingent upon Mr.&nbsp;De Meritt&#146;s continued service. For more information regarding the compensation based expense related to stock options vesting on
account of this offering, please see &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#151;Critical Accounting Policies&#151;Stock-based Compensation.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>CCMP Acquisition-Related Payments </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The CCMP Acquisition was treated as a change in control for purposes of the 2007 Plan on February&nbsp;26, 2010, thereby causing an acceleration of vesting of all awards outstanding pursuant to the 2007 Plan. On
November&nbsp;17, 2010, we paid a cash dividend to our shareholders. Pursuant to the terms of the 2007 Plan and the 2010 Plan, our board of directors adjusted the exercise price of outstanding stock options to neutralize the dilutive effect of the
dividend payments. However, our board of directors determined that in the case of Mr.&nbsp;De Meritt and Ms.&nbsp;Backes, they should receive a cash payment in lieu of an adjustment, and accordingly, pursuant to the terms of letter agreements, dated
as of November&nbsp;16, 2010, Mr.&nbsp;De Meritt and Ms.&nbsp;Backes received a gross cash payment of $1,958,703 </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">94 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
and $957,801, respectively, which was calculated as the product of the proposed reduction in the exercise price of outstanding options of $2.39 multiplied by the number of fully-vested but
unexercised options granted to Ms.&nbsp;Backes under the 2007 Plan and the number of unexercised options (without regard to vesting) granted to Mr.&nbsp;De Meritt under the 2010 Plan at the time of the dividend payment. Our board of directors
determined to make these cash payments in lieu of an adjustment to their option exercise price in order to retain the original exercise price of their options, and thus retain the incentive to continue to generate shareholder value, while providing
compensation in recognition of the dilutive effect of the dividend payments. The stock options remain outstanding at their original exercise price in the case of Mr.&nbsp;De Meritt and Ms.&nbsp;Backes and are included in the &#147;Outstanding Equity
Awards at Fiscal Year-End&#148; table, below. The payments received by Mr.&nbsp;De Meritt and Ms.&nbsp;Backes in fiscal year 2010 are included in the &#147;All Other Compensation&#148; column of the &#147;Summary Compensation Table,&#148; below.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with the CCMP Acquisition, the company provided bonus payments to reward the past service of certain employees of the
company. Certain of our executives, including Ms.&nbsp;Backes and Ms.&nbsp;Thomassee, received a bonus payment following the completion of the CCMP Acquisition. Our Chief Executive Officer determined the bonus amounts in his discretion and
recommended them for the approval of our Compensation Committee. The bonuses paid to Ms.&nbsp;Backes and Ms.&nbsp;Thomassee in connection with the completion of the CCMP Acquisition during fiscal year 2010 were $5,000 and $30,000, respectively, and
are included in the &#147;All Other Compensation&#148; column of the &#147;Summary Compensation Table,&#148; below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Additional
Executive Benefits and Perquisites </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We provide our named executive officers with executive benefits and perquisites that the
Compensation Committee believes are reasonable and in the best interests of the company and our shareholders. Consistent with our compensation philosophy, and subject to any revisions discussed below, we intend to continue to maintain our current
benefits for our named executive officers, including retirement plans, housing relocation benefits, paid vacation and other perquisites described below. The Compensation Committee, in its discretion, may revise, amend or add to an officer&#146;s
executive benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Retirement Plan Benefits </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We do not sponsor a defined benefit retirement plan as we do not
believe that such a plan best serves the needs of our employees or the business at this time. However, we do sponsor a tax-qualified defined contribution retirement plan. The qualified plan is available to all eligible employees, including our named
executive officers, and allows them to elect to make contributions up to the maximum limits allowable under the Code. For fiscal years 2009 and 2010, in January of the following year we made a discretionary matching contribution to employees&#146;
accounts based upon their deferral elections for the previous fiscal year. We expect to continue making such matching contributions going forward. Employees&#146; contributions and company matching contributions vest immediately. Additional company
contributions and the related investment earnings are subject to vesting based on years of service. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Health and Welfare Benefits
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our named executive officers have the option to participate in various employee welfare benefit programs, including medical, dental
and life insurance benefits. These benefit programs are generally available to all employees. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">95 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Relocation Assistance </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The company&#146;s business needs require it on occasion to relocate certain employees. To meet this need, we may, on a case by case basis, cover certain expenses, including temporary housing, relocation, living
and travel expenses. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Perquisites </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Car Allowance. In fiscal year 2010, we provided our named executive officers with an automobile allowance and, in some instances, paid related maintenance and use costs. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Executive Life Insurance. Pursuant to the terms of their employment agreements, we have agreed to reimburse a portion of the premium for additional
term life insurance for Mr.&nbsp;De Meritt and Ms.&nbsp;Gill that offers a benefit equal to ten million dollars and three million dollars, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Going forward, and in conjunction with the amendment to their employment agreements, we will discontinue these perquisites, and in their place provide for an annual fixed dollar amount to be provided to certain
executives to purchase additional benefits of their choosing. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Employment Agreements; Severance and Change in Control Benefits
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Employment Agreements </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreements and letter agreements we have entered into with our named executive officers provide for severance and other benefits
which are designed to provide economic protection so that an executive can remain focused on our business without undue personal concern in the event that his or her position is eliminated or, in some cases, significantly altered by the company,
which is particularly important in light of the executives&#146; leadership roles at the company. The Compensation Committee believes that providing severance or similar benefits is common among similarly situated companies and remains essential to
recruiting and retaining key executives, which is a fundamental objective of our executive compensation program. For more information regarding the potential payments and benefits that would be provided to our named executive officers in connection
with a termination of employment or a change in control on January&nbsp;29, 2011, please see &#147;&#151;Potential Payments upon Termination or Change in Control,&#148; below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Change in Control Provisions </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The prospect of a change in control of the company can
cause significant distraction and uncertainty for executive officers and, accordingly, the Compensation Committee believes that appropriate change in control provisions in employment agreements and/or equity award agreements are important tools for
aligning executives&#146; interests in change in control transactions with those of our shareholders by allowing our executive officers to focus on strategic transactions that may be in the best interest of our shareholders without undue concern
regarding the effect of such transactions on their continued employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Accordingly, as described in &#147;&#151;Elements of
Compensation&#151;Equity Based Awards,&#148; above, upon a change in control (as defined in the applicable award agreement) stock options granted pursuant to the 2010 Plan may, at the discretion of the plan administrator, have their vesting
accelerated. In addition, in accordance with the Option Agreement relating to the 2010 option award made to Mr.&nbsp;De Meritt, the vesting of options is accelerated upon a change of control (as defined therein). For purposes of such provision this
offering does not constitute a change of control. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">96 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For more information regarding the potential payments and benefits that would be provided to our
continuing named executive officers in connection with a change in control on January&nbsp;29, 2011, please see &#147;&#151;Potential Payments upon Termination or Change in Control,&#148; below. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Actions Taken Subsequent to Fiscal Year 2010 </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Employment Arrangements </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In
conjunction with this offering, we intend to enter into amended and restated employment agreements with Mr.&nbsp;De Meritt and Ms.&nbsp;Gill and an employment letter with Ms.&nbsp;Backes setting forth the terms and conditions of their employment
with us, which we believe provide a total compensation package competitive with the package offered by companies with whom we compete for executive talent. Additionally, we intend to amend the current employment letters of Messrs. Morphis and Malik.
The anticipated terms and conditions of these new or amended employment arrangements are set forth below. For information regarding our named executive officers&#146; employment arrangements for fiscal year 2010, please see the narrative following
the &#147;Grants of Plan-Based Awards&#148; table, below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Amended and Restated Employment Agreements with Mr.&nbsp;De Meritt and
Ms.&nbsp;Gill: </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;De Meritt&#146;s and Ms.&nbsp;Gill&#146;s current employment agreements are being amended in conjunction
with this offering to remove the company&#146;s obligation to seek a shareholder vote to approve any &#147;excess parachute payments&#148; in connection with a change in control. Mr.&nbsp;De Meritt&#146;s term of employment will be three years,
subject to renewal for additional one-year terms, while Ms.&nbsp;Gill&#146;s term of employment will be two years. Under her amended agreement, Ms.&nbsp;Gill&#146;s base salary is also being increased to $295,000. Additionally, as described above
under &#147;&#151;Additional Executive Benefits and Perquisites&#151;Perquisites,&#148; we will discontinue providing a reimbursement for a portion of the premium for additional term life insurance, and in its place provide for an annual fixed
amount of $50,000 and $20,000 for Mr.&nbsp;De Meritt and Ms.&nbsp;Gill, respectively, to purchase additional benefits of the executive&#146;s choosing. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Amendment to Letter Agreement for Mr.&nbsp;Morphis: </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Morphis&#146; letter
agreement is being amended in conjunction with this offering to provide that the payment of any severance benefits he may become entitled to will be conditioned upon his execution of a general release of claims. In addition, Mr.&nbsp;Morphis will be
provided an annual fixed amount of $20,000 to purchase additional benefits of his choosing. For a description of Mr.&nbsp;Morphis&#146; current letter agreement, and any severance benefits, please see the narrative following the &#147;Grants of
Plan-Based Awards&#148; table, below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Employment Letter Agreements with Ms.&nbsp;Backes and Mr.&nbsp;Malik: </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to enter into employment letter agreements with Ms.&nbsp;Backes and Mr.&nbsp;Malik which, other than as noted below for Mr.&nbsp;Malik,
will replace each of their current letter agreements. The terms and conditions of Ms.&nbsp;Backes&#146; employment as our Executive Vice President, Chief Operating Officer and Mr.&nbsp;Malik&#146;s employment as our Executive Vice President, General
Counsel will be set forth in their respective employment letter agreements. Ms.&nbsp;Backes&#146; agreement does not provide for a fixed term while Mr.&nbsp;Malik&#146;s term of employment will be three years commencing on the effective date of the
agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment letter agreements provide that Ms.&nbsp;Backes and Mr.&nbsp;Malik will receive an annual base salary of
$250,000 and $225,000, respectively, and are each eligible to receive a discretionary annual cash incentive of up to 40% of their annual base salary, based upon the achievement of goals and objectives determined by our Compensation Committee. The
employment letter agreements </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">97 </FONT></P>


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provide that each executive will be eligible to participate in employee savings and welfare plans made available to our employees generally. In addition, each executive will be provided an annual
fixed amount of $20,000 to purchase additional benefits of their choosing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Each employment letter agreement provides for severance
benefits, subject to the execution of a general release of claims, payable in the event the executive&#146;s employment is terminated without &#147;cause&#148; (as defined in the employment letter agreement) in an amount equal to one times each
executive&#146;s respective annual base salary (as in effect on the date of termination). In addition, each executive will be entitled to receive accrued but unused vacation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Malik&#146;s employment letter agreement provides that certain covenants contained in his previous employment letter agreement will remain effective, whereby, subject to certain exceptions, during his
employment, and for a period of 12 months following termination, Mr.&nbsp;Malik will not solicit any company employees or consultants. The employment letter agreement for Ms.&nbsp;Backes provides, subject to certain exceptions, that, during her
employment, and for a period of 12 months following termination, Ms.&nbsp;Backes will not (i)&nbsp;compete with the company or its affiliates, (ii)&nbsp;solicit any company employees or consultants or (iii)&nbsp;solicit any customer of the company.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Promotion of Ms.&nbsp;Gill to Executive Vice Chairperson </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;8, 2011, Ms.&nbsp;Gill was promoted to the position of Executive Vice Chairperson of the Company. In connection with her promotion, Ms.&nbsp;Gill&#146;s base salary was increased to $295,000. Her
current compensation arrangements are described in the narrative following the &#147;Grants of Plan-Based Awards&#148; table, below. In her position of Executive Vice Chairperson, which we have newly created for her, Ms.&nbsp;Gill will be
responsible for general corporate oversight and, more specifically, oversee the company&#146;s merchandising functions and supervise the company&#146;s Chief Merchandising Officer. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Plans Adopted in Connection with Our Initial Public Offering </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>2011 Plan:
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect our board of directors to adopt the 2011 Plan prior to the consummation of this offering to provide an additional
means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. We also intend to obtain approval of this plan from our shareholders prior to the consummation of this offering. The below
summary of the 2011 Plan is what we expect the terms of the plan will be. Employees, officers, directors, and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2011 Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our Compensation Committee will administer the 2011 Plan. The administrator of the plan has broad authority to: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">select participants and determine the types of awards that they are to receive; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or
the award and establish the vesting conditions (if applicable) of such shares or awards; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">construe and interpret the terms of the 2011 Plan and any agreements relating to the 2011 Plan; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">98 </FONT></P>


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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">subject to the other provisions of the 2011 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or
succession of an award; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">allow the purchase price of an award or shares of our common stock to be paid in the form of cash, check or electronic funds transfer, by the delivery of
previously-owned shares of our common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the
administrator may authorize, or any other form permitted by law. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A total of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock will be authorized for issuance with respect to awards granted under the 2011 Plan. Any shares subject to awards that are not paid, delivered or
exercised before they expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2011
Plan. As of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, no awards have been granted under the 2011 Plan, and the full number of shares authorized under the 2011 Plan is available for award
purposes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Awards under the 2011 Plan may be in the form of nonqualified stock options, stock appreciation rights, stock bonuses,
restricted stock and other forms of awards including cash awards. Awards under the 2011 Plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain
transfers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock options may not be granted at prices below the fair market value of the common stock on the date of grant. These and
other awards may also be issued solely or in part for services. Awards are generally paid in cash or shares of our common stock. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to
deferrals. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As is customary in incentive plans of this nature, the number and type of shares available under the 2011 Plan and any
outstanding awards, as well as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that
change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders. In no case (except due to an adjustment referred to above or any repricing that may be approved by our shareholders) will
any adjustment be made to a stock option or stock appreciation right award under the 2011 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Generally, and subject to limited exceptions set forth in the 2011 Plan, if we dissolve or undergo certain corporate transactions such
as a merger, business combination, or other reorganization, or a sale of substantially all of its assets, all awards then-outstanding under the 2011 Plan may, at the administrator&#146;s discretion, become fully vested, and be paid, as applicable,
and will terminate or be terminated in such circumstances, unless the plan administrator provides for the assumption, substitution or other continuation of the award. The plan administrator also has the discretion to establish other change in
control provisions with respect to awards granted under the 2011 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide
that any such acceleration shall be automatic upon the occurrence of any such event. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors may amend or terminate the
2011 Plan at any time, but no such action will affect any outstanding award in any manner materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to shareholders for their approval as required by
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">99 </FONT></P>


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applicable law or any applicable listing agency. The 2011 Plan is not exclusive&#151;our board of directors and Compensation Committee may grant stock and performance incentives or other
compensation, in stock or cash, under other plans or authority. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The plan will terminate on
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2021. However, the plan administrator will retain its authority until all outstanding awards are exercised or terminated. The
maximum term of options, stock appreciation rights and other rights to acquire common stock under the plan is ten years after the initial date of the award. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Francesca&#146;s Holdings Corporation Executive Bonus Plan: </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In conjunction with this
offering, we intend to adopt the Francesca&#146;s Holdings Corporation Executive Bonus Plan (the &#147;Executive Bonus Plan&#148;), for eligible employees of the company and our subsidiaries. This plan is being adopted to take advantage of the
performance-based compensation exception to Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;). The purposes of the Executive Bonus Plan are to promote the interests of our company and its shareholders by
providing compensation opportunities that are competitive with other companies, and to provide performance-based cash awards to those individuals who contribute to the long-term performance and growth of our company. Generally, our Compensation
Committee will establish target bonuses for employees based on position and level of responsibility and grant awards based on the achievement of pre-established company and/or individual goals. Additionally, our Compensation Committee retains the
ability to reduce, but not increase, the amount of any bonus otherwise payable to our executive officers subject to Section&nbsp;162(m) of the Code. Participants shall receive distributions, if any, in cash following written certification by our
Compensation Committee of the extent to which the applicable performance targets have been achieved, and in no event more than two and one half months following the end of the performance period to which such certification relates. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock Option Grants in Conjunction with this Offering </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In conjunction with this offering, our board of directors intends to make a one-time grant to Mr.&nbsp;De Meritt and Ms.&nbsp;Backes of additional stock options under the 2011 Plan to purchase a number of shares of
our common stock equal to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, respectively. These options are being granted in order to continue to
provide these executives with continued incentive to build shareholder value over the long-term. The actual number of stock options to be granted and the exercise price of such options will be determined by our board of directors at, or shortly
following, the time of this offering. We intend that any stock options granted to Mr.&nbsp;De Meritt and Ms.&nbsp;Backes in conjunction with this offering will vest annually in equal 20% installments over five years, commencing on the first
anniversary of the date of grant. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Accounting and Tax Considerations </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In determining which elements of compensation are to be paid, and how they are weighted, on a going forward basis, we will take into account whether
a particular form of compensation will be deductible under Section&nbsp;162(m) of the Code. Section&nbsp;162(m) generally limits the deductibility of compensation paid to our named executive officers to $1&nbsp;million during any fiscal year unless
such compensation is &#147;performance-based&#148; under Section&nbsp;162(m). However, under a Section&nbsp;162(m) transition rule for compensation plans or agreements of corporations which are privately held and which become publicly held in an
initial public offering, compensation paid under a plan or agreement that existed prior to the initial public offering will not be subject to Section&nbsp;162(m) until the earliest of (1)&nbsp;the expiration of the plan or agreement, (2)&nbsp;a
material modification of the plan or agreement, (3)&nbsp;the issuance of all employer stock and other compensation that has been allocated under the plan, or (4)&nbsp;the first meeting of shareholders at which directors are to be elected that occurs
after the close of the third calendar year following the year of the initial public offering (the &#147;Transition Date&#148;). After the Transition Date, rights or awards granted under the plan, other than options and stock appreciation
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">100 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
rights, will not qualify as &#147;performance-based compensation&#148; for purposes of Section&nbsp;162(m) unless such rights or awards are granted or vest upon pre-established objective
performance goals, the material terms of which are disclosed to and approved by our shareholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our compensation program is intended
to maximize the deductibility of the compensation paid to our named executive officers to the extent that we determine it is in our best interests. Consequently, we may rely on the exemption from Section&nbsp;162(m) afforded to us by the transition
rule described above for compensation paid pursuant to our pre-existing plans. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Many other Code provisions, SEC regulations and
accounting rules affect the payment of executive compensation and are generally taken into consideration as programs are developed. Our goal is to create and maintain plans that are efficient, effective and in full compliance with these
requirements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Recoupment Policy </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We currently do not have a recoupment policy to adjust or recover bonuses or incentive compensation paid to executive officers where such bonuses or payments were based on financial statements that were
subsequently restated or otherwise amended in a manner that would have reduced the size of such bonuses or payments. Once we are publicly traded, we will become subject to the recoupment requirements under Sarbanes-Oxley, the Dodd-Frank Wall Street
Reform and Consumer Protection Act and other applicable laws. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock Ownership Guidelines </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Although as a private company we have not historically had formal stock ownership guidelines for our named executive officers, the company intends
to adopt formal stock ownership guidelines in conjunction with this offering. Under the stock ownership guidelines, the amount of common stock each executive will be targeted to own, which is stated as a multiple of the executive&#146;s base salary,
reflects each executive&#146;s role and level of responsibility at the company. The multiples to be applied to our executive officers are as follows: (i)&nbsp;five times for our Chief Executive Officer, (ii)&nbsp;three times for our other executive
officers with the title of Vice President and above (other than our Chief Executive Officer) and (iii)&nbsp;one times for any additional employees who hold stock option awards. The equity ownership of our named executive officers is set forth in the
beneficial ownership table in &#147;Principal and Selling Shareholders.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Risk Considerations in Our Compensation Program </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that the mix and design of the elements of our employee compensation policies and practices do not motivate imprudent risk taking.
Consequently, we are satisfied that any potential risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on the company. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">101 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Compensation Tables </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The purpose of the following tables is to provide information regarding the compensation earned during our most recently completed fiscal year by our named executive officers. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Summary Compensation Table </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
following table shows the compensation earned by our named executive officers during the fiscal year ended January&nbsp;29, 2011. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="39%"></TD>
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<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:107pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name and Principal Position</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Salary<BR>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Bonus<BR>($)(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Stock<BR>Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Awards</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>($)(4)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Non-Equity<BR>Incentive</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Plan<BR>Compen-<BR>sation</B></FONT>
<br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(5)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Change in<BR>Pension<BR>Value
and<BR>Nonquali-<BR>fied<BR>Deferred<BR>Compensa-<BR>tion<BR>Earnings</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All<BR>Other<BR>Compen-<BR>sation</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(6)</B></FONT></TD>

<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">375,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2,822,100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">450,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,964,140</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">5,611,240</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>President, Chief</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>Executive Officer</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">93,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,087,943</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">23,286</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,204,979</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Executive Vice President,</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>Chief Financial Officer(1)</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">160,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">30,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">276,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">55,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">10,017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">531,355</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Vice President of</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>Accounting</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">235,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">5,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">960,256</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,295,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Executive Vice President,</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>Chief Operating Officer</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">275,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">206,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3,740</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">485,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Chief Merchandising</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>Officer(2)</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2010</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">225,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">686,784</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">90,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,003,186</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Executive Vice President,</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em"><FONT
STYLE="font-family:ARIAL" SIZE="1"><I>General Counsel and</I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1"><I>Corporate Secretary</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Mr.&nbsp;Morphis&#146; employment as Chief Financial Officer commenced October&nbsp;18, 2010. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Ms.&nbsp;Gill was promoted to the position of Executive Vice Chairperson as of March&nbsp;8, 2011. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents special bonuses paid in conjunction with the CCMP Acquisition. See &#147;&#151;Compensation Discussion and Analysis&#151;Elements of Compensation&#151;CCMP
Acquisition-Related Payments&#148; for more details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board (&#147;FASB&#148;)
Accounting Standards Codification Topic 718 (&#147;FASB ASC Topic 718&#148;). The assumptions made in the valuation of the awards are set forth in note&nbsp;6 to the company&#146;s consolidated financial statements included elsewhere in this
prospectus. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents the amount paid under our performance-based cash award plan. See &#147;&#151;Compensation Discussion and Analysis&#151;Elements of Compensation&#151;Annual
Performance-Based Cash Awards,&#148; above, for more details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">For Mr.&nbsp;De Meritt and Ms.&nbsp;Backes, amounts reported include cash payments of $1,958,703 and $957,801, respectively, received in lieu of an adjustment to the exercise
price of their outstanding stock options at the time of CCMP Acquisition. See &#147;&#151;Compensation Discussion and Analysis&#151;Elements of Compensation&#151;CCMP Acquisition-Related Payments,&#148; above, for more details. For Mr.&nbsp;De
Meritt and Mmes. Thomassee and Backes, amounts reported include company matching contributions to the company&#146;s 401(k) savings plan of $1,154, $554 and $900, respectively. For Messrs. De Meritt and Malik and Mmes. Backes, Thomassee and Gill,
amounts reported include the incremental cost related to the executives&#146; personal use of a leased company vehicle. For Mr.&nbsp;De Meritt, the fiscal year 2010 cost was $4,283. In fiscal year 2010, in connection with his employment,
Mr.&nbsp;Morphis received relocation assistance in an amount of $23,286, based on actual cost to the company, which included housing assistance and moving expenses. See &#147;&#151;Compensation Discussion and Analysis&#151;Elements of
Compensation&#151;Additional Executive Benefits and Perquisites,&#148; above, for more details regarding executive benefits and perquisites. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">102 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Grants of Plan-Based Awards </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table sets forth information about the non-equity incentive awards and equity-based awards granted to each of our named executive officers in fiscal year 2010. </FONT></P>
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<TD VALIGN="bottom" ROWSPAN="2" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
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<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Grant<BR>Date</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Estimated Future<BR>Payouts Under<BR>Non-Equity Incentive<BR>Plan Awards(1)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Estimated Future<BR>Payouts Under<BR>Equity Incentive Plan<BR>Awards</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All
Other<BR>Stock<BR>Awards:<BR>Number&nbsp;of</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares of<BR>Stock or<BR>Units</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>All Other<BR>Option<BR>Awards:<BR>Number&nbsp;of<BR>Securities<BR>Underlying<BR>Options</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>(#)(2)</B></FONT></TD>
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of<BR>Option<BR>Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($/Sh)(3)</B></FONT></TD>
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STYLE="font-family:ARIAL" SIZE="1"><B>Fair<BR>Value of<BR>Stock<BR>and</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Awards</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(4)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Thresh-<BR>old</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Target<BR>($)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Maxi-<BR>mum</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Thresh-<BR>old</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Target<BR>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Maxi-<BR>mum</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
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<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3/26/10</FONT></TD>
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<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">818,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6.13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">2,822,100</FONT></TD>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">375,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">12/1/10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
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<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">202,030</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">10.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1,087,943</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">5/1/10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">80,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">276,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">40,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">94,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">206,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3/26/10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">204,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">686,784</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">90,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents the target award opportunities for performance-based cash awards payable for fiscal year 2010 under our annual performance-based cash award program. The actual amounts
earned are reported in the &#147;Non-Equity Incentive Plan Compensation&#148; column of the &#147;Summary Compensation Table,&#148; above. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents stock options granted in fiscal year 2010 under our 2010 Plan. The number of options granted in fiscal year 2010 has been adjusted for the 400-for-1 stock split that
occurred on April&nbsp;28, 2010. See the narrative following this &#147;Grants of Plan-Based Awards&#148; table, below, for more details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The exercise price of options granted in fiscal year 2010 has been adjusted for the 400-for-1 stock split that occurred on April&nbsp;28, 2010, in the case of Messrs. De Meritt
and Malik, and the payment of a special dividend of $2.39 on November&nbsp;12, 2010, in the case Ms.&nbsp;Thomassee and Mr.&nbsp;Malik,. See the narrative discussion following this &#147;Grants of Plan-Based Awards&#148; table, below, for more
details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board (&#147;FASB&#148;)
Accounting Standards Codification Topic 718 (&#147;FASB ASC Topic 718&#148;). The assumptions made in the valuation of the awards are set forth in note 6 to the company&#146;s consolidated financial statements included elsewhere in this prospectus.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Employment Agreements </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Amounts paid to our named executive officers in fiscal year 2010 were based, in part, on employment agreements in place with Mr.&nbsp;De Meritt and
Ms.&nbsp;Gill and letter agreements in place with Messrs. Morphis and Malik and Ms.&nbsp;Backes. Below is a description of these agreements. The company does not have an employment agreement or letter agreement in place for Ms.&nbsp;Thomassee. For a
discussion of the anticipated amendments to these arrangements in conjunction with this offering, see &#147;&#151;Compensation Discussion and Analysis&#151;Actions Taken Subsequent to Fiscal Year 2011&#151;Employment Arrangements,&#148; above.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Mr.&nbsp;De Meritt </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26, 2010, Mr.&nbsp;De Meritt entered into an employment agreement with the company providing for his employment as of such date as the company&#146;s President and Chief Executive Officer.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreement has an initial term of three years, which commenced on February&nbsp;26, 2010 and renews automatically for
successive one-year periods thereafter, unless either party provides ninety days&#146; written notice prior to the expiration of the initial term or each successive renewal term. The employment agreement provides for a minimum base salary of
$375,000 which will be reviewed </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">103 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
for increase no less frequently than annually, and a discretionary annual cash incentive based on the achievement of specified EBITDA hurdles, with a target annual cash incentive equal to 100% of
Mr.&nbsp;De Meritt&#146;s annual base salary. Additionally, in connection with his hiring, Mr.&nbsp;De Meritt received a sign-on equity grant of stock options to purchase shares of our common stock in an amount equal to 2% of the company&#146;s
issued and outstanding shares of common stock at the time of grant, or 818,000 shares. This option vests in equal monthly installments over a four-year period, and may be eligible for accelerated vesting upon the achievement of certain performance
objectives, as described under &#147;Compensation Discussion and Analysis&#151;Equity-Based Awards&#151;Plans in Existence Prior to our Initial Public Offering.&#148; Mr.&nbsp;De Meritt is eligible to participate in employee savings and welfare
plans made available to our employees generally. In addition, the company has agreed to provide, at its expense, term life insurance in an amount of $10 million and long-term disability coverage. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;De Meritt&#146;s employment agreement provides for severance benefits payable in the event of his termination under certain circumstances,
subject to the execution of a general release of claims. If Mr.&nbsp;De Meritt&#146;s employment is terminated without &#147;cause,&#148; or if he resigns for &#147;good reason&#148; (in either case as defined in his employment agreement),
Mr.&nbsp;De Meritt will be paid severance in an amount equal to two times his annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over
the 24-month period, with the first installment payable in the month following the month in which the termination date occurs. Additionally, the stock option Mr.&nbsp;De Meritt received in connection with his entering into the employment agreement
will immediately vest. Mr.&nbsp;De Meritt is eligible to receive, for up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of coverage he had as an active employee. In addition, Mr.&nbsp;De Meritt will be
entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued but unused vacation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The employment agreement also provides, subject to certain exceptions, that, during his employment, and (i)&nbsp;in the event he is terminated without &#147;cause,&#148; or if he resigns for &#147;good
reason,&#148; a period of 24 months following termination or (ii)&nbsp;if he terminates for any other reason, a period of 12 months following termination, Mr.&nbsp;De Meritt will not (x)&nbsp;compete with the company or its affiliates,
(y)&nbsp;solicit any company employees or consultants or (z)&nbsp;solicit any customer of the company. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Mr.&nbsp;Morphis
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The terms and conditions of Mr.&nbsp;Morphis&#146; employment as our Chief Financial Officer are set forth in a letter agreement
dated September&nbsp;9, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The letter agreement provides that Mr.&nbsp;Morphis will receive an annual base salary of $325,000 and is
eligible to receive a discretionary annual cash incentive of up to 60% of his annual base salary, based upon the achievement of goals and objectives determined by our Chief Executive Officer. Additionally, in connection with his hiring,
Mr.&nbsp;Morphis received a sign-on equity grant of stock options to purchase 202,030 shares of our common stock. This option vests in equal monthly installments over a five-year period. As part of this employment agreement, Mr.&nbsp;Morphis was
given the opportunity to purchase shares of our common stock in an amount up to a value of $100,000 and any shares purchased would be charged against the number of shares subject to the 202,030 option grant. In accordance with this opportunity,
Mr.&nbsp;Morphis purchased 9,813 shares of our common stock resulting in 192,217 shares remaining outstanding under this option grant. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Morphis&#146; letter agreement provides for severance benefits payable in the event his employment is terminated without &#147;cause&#148;
(as defined in his letter agreement) prior to October&nbsp;18, 2013, he will be paid severance in an amount equal to one times his annual base salary (as in effect on the date of termination). </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">104 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The letter agreement also provides, subject to certain exceptions, that, during his employment, and
for a period of 12 months following termination, Mr.&nbsp;Morphis will not solicit any company employees or consultants. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I></I></B><I>Ms.&nbsp;Backes</I><B><I> </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The terms and conditions of Ms.&nbsp;Backes&#146; employment as our Executive Vice President, Chief Operating Officer are set forth in an offer letter provided to Ms.&nbsp;Backes prior to her commencement of
employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The offer letter provides that Ms.&nbsp;Backes will receive an annual base salary of $195,000 (which was increased in
subsequent years to $250,000 as of January&nbsp;29, 2011), and is eligible to receive a discretionary annual cash incentive of 40% of her annual base salary, 50% based on the achievement of specified EBITDA hurdles and 50% based on the achievement
of individual goals established by our Chief Executive Officer. For fiscal year 2010 the discretionary annual cash incentive was 75% based on the achievement of specified EBITDA hurdles and 25% based on the achievement of individual goals.
Ms.&nbsp;Backes is eligible to participant in employee pension and welfare plans made available to our employees generally. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I></I></B><I>Ms.&nbsp;Gill</I><B><I> </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26, 2010, Ms.&nbsp;Gill entered into an employment agreement with the company providing for her employment as of such date as Chief Merchandising Officer. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreement has an initial term of three years, which commenced on February&nbsp;26, 2010 and renews automatically for successive
one-year periods thereafter, unless either party provides ninety days&#146; written notice prior to the expiration of the initial term or each successive renewal term. The employment agreement provides for a minimum base salary of $275,000 (which
was increased in 2011 to $295,000) which will be reviewed for increase no less frequently than annually, and a discretionary annual cash incentive, which may be based in part on the achievement of specified EBITDA hurdles, with a target annual cash
incentive equal to 75% of Ms.&nbsp;Gill&#146;s annual base salary. Ms.&nbsp;Gill is eligible to receive grants of equity awards, from time to time, as determined by our board of directors and to participate in employee savings and welfare plans made
available to our employees generally. In addition, the company has agreed to provide, at its expense, term life insurance in an amount of $3 million and long-term disability coverage. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Ms.&nbsp;Gill&#146;s employment agreement provides for severance benefits payable in the event of her termination under certain circumstances,
subject to the execution of a general release of claims. If Ms.&nbsp;Gill&#146;s employment is terminated without &#147;cause,&#148; or if she resigns for &#147;good reason&#148; (in either case as defined in her employment agreement), Ms.&nbsp;Gill
will be paid severance in an amount equal to two times her annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month period,
with the first installment payable in the month following the month in which the termination date occurs. Ms.&nbsp;Gill is eligible to receive, for up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of
coverage she had as an active employee. In addition, Ms.&nbsp;Gill will be entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued but unused vacation. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreement also provides, subject to certain exceptions, that, during her employment, and (i)&nbsp;in the event she is terminated
without &#147;cause,&#148; or if she resigns for &#147;good reason&#148;, a period of 24 months following termination or (ii)&nbsp;if she terminates for any other reason, a period of 12 months following termination, Ms.&nbsp;Gill will not
(x)&nbsp;compete with the company or its affiliates, (y)&nbsp;solicit any company employees or consultants or (z)&nbsp;solicit any customer of the company. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">105 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Mr.&nbsp;Malik </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The terms and conditions of Mr.&nbsp;Malik&#146;s employment as our Executive Vice President, General Counsel are set forth in a letter agreement dated September&nbsp;25, 2009, which was subsequently amended on
February&nbsp;26, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The amended letter agreement provides that Mr.&nbsp;Malik will receive an annual base salary of $225,000,
subject to annual review and upward adjustment, and is eligible to receive a discretionary annual cash incentive of up to 40% of his annual base salary, based upon the achievement of goals and objectives determined by our Chief Executive Officer.
Additionally, in connection with the amendment to his letter agreement, Mr.&nbsp;Malik received a stock option to purchase shares of our common stock in amount equal to 0.5% of the company&#146;s issued and outstanding shares of common stock at the
time of grant, or 204,400 shares. This option vests in equal monthly installments over a four-year period. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Malik&#146;s letter
agreement does not provide for severance benefits. However, Mr.&nbsp;Malik&#146;s employment may not be terminated by the company without &#147;cause&#148; (as defined in his letter agreement) prior to September&nbsp;25, 2013. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The letter agreement also provides, subject to certain exceptions, that during his employment, and for a period of 12 months following termination,
Mr.&nbsp;Malik will not solicit any company employees or consultants. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock Split and Payment of Special Dividend in 2010
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;28, 2010, following the CCMP Acquisition, our board of directors approved a 400-for-1 stock split of our common
equity. The number of shares of our common stock subject to outstanding stock options held by Messrs. De Meritt and Malik and Ms.&nbsp;Backes at the time of this stock split were adjusted accordingly to account for this stock split. Additionally, on
November&nbsp;12, 2010, our board of directors also approved the payment of a special dividend in the amount of $2.39 per share of our common equity. Holders of our stock options did not receive this dividend. The exercise price of outstanding
options held by Mr.&nbsp;Malik and Ms.&nbsp;Thomassee as of the ex-dividend date was adjusted accordingly. In lieu of an adjustment to the exercise price of their outstanding options, Mr.&nbsp;De Meritt and Ms.&nbsp;Backes received a cash payment,
as described in &#147;&#151;Compensation Discussion and Analysis&#151;CCMP Acquisition-Related Payments,&#148; above. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Outstanding
Equity Awards at Fiscal Year-End </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The table below sets forth certain information regarding the outstanding equity awards held by our
named executive officers as of January&nbsp;29, 2011. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Stock Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number
of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number
of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Options</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Unexercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Equity<BR>Incentive<BR>Plan<BR>Awards:<BR>Number
of<BR>Securities<BR>Underlying<BR>Unexercised<BR>Unearned<BR>Options</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Exercise<BR>Price</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option<BR>Expiration<BR>Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number<BR>of<BR>Shares<BR>or Units<BR>of<BR>Stock<BR>That<BR>Have<BR>Not<BR>Vested</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Market<BR>Value<BR>of<BR>Shares<BR>or<BR>Units<BR>of<BR>Stock<BR>That<BR>Have<BR>Not<BR>Vested</B></FONT><br><FONT
STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Equity<BR>Incentive<BR>Plan<BR>Awards:<BR>Number<BR>of<BR>Unearned<BR>Shares,<BR>Units
or<BR>Other<BR>Rights<BR>That<BR>Have Not<BR>Vested</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Equity<BR>Incentive<BR>Plan<BR>Awards:<BR>Market or<BR>Payout<BR>Value of<BR>Unearned<BR>Shares,<BR>Units
or<BR>Other<BR>Rights<BR>That<BR>Have Not<BR>Vested</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">170,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">647,583</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6.13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3/25/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">6,407</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">182,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">10.19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">11/30/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Cindy Thomassee(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">80,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">4/30/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">400,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">1.43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">12/1/2017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="1">Kal Malik(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">8,517</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">157,558</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">3/25/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="1">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="1">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">106 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The exercise price of outstanding options has been adjusted for the payment of a special dividend of $2.39 on November&nbsp;12, 2010. See the narrative discussion following the
&#147;Grants of Plan-Based Awards&#148; table, above, for more details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">These options were granted on 3/26/10 and will vest in equal installments on each monthly anniversary of the award date over a four-year period. Additionally, a portion of these
options may vest in connection with this offering, based upon the rate of return achieved by CCMP on its investment pursuant to the CCMP Acquisition. See &#147;&#151;Compensation Discussion and Analysis&#151;Elements of
Compensation&#151;Equity-Based Awards,&#148; above, for more details. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">These options were granted on 12/1/10 and will vest in equal monthly installments on the last day of each month following October&nbsp;18, 2010 over a five-year period.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">These options were granted on 5/1/10 and will vest in equal annual installments on each anniversary of the award date over a five-year period. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">These options were granted on 3/26/10 and will vest in equal monthly installments on the last day of each month following February&nbsp;26, 2010 over a four-year period.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Option Exercises and Stock Vested </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table provides information relating to the options exercised during fiscal year 2010. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="36%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Option Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Stock Awards</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares<BR>Acquired
on<BR>Exercise</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Value&nbsp;Realized&nbsp;
on<BR>Exercise</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares<BR>Acquired
on<BR>Vesting</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Value&nbsp;Realized&nbsp;on<BR>Vesting</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>(#)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">444,325</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,509,284</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The value realized upon the exercise of a stock option is calculated by multiplying the difference between the fair market value of our common shares on the date the stock option
was exercised and the exercise price paid by the executive by the number of shares acquired and does not necessarily reflect proceeds actually received by the executive. For Mr.&nbsp;Morphis, because there was no difference between the fair market
value of our common shares on the date the stock option was exercised and the exercise price paid by Mr.&nbsp;Morphis, no value is reported in this column. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Pension Benefits </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our named executive officers did not participate in or have account balances
in any qualified or nonqualified defined benefit plans sponsored by us. Our board of directors or Compensation Committee may elect to adopt qualified or nonqualified benefit plans in the future if it determines that doing so is in our best interest.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our named executive officers did not participate in or have account balances in any nonqualified deferred compensation plans sponsored by us. Our
board of directors or Compensation Committee may elect to adopt nonqualified deferred compensation plans in the future if it determines that doing so is in our best interest. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>Potential Payments Upon Termination or Change in Control </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The information below describes and
quantifies certain compensation that would become payable under employment agreements with the following named executive officers if, as of January&nbsp;29, 2011, his or her employment with us had been terminated. Due to the number of factors that
affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">107 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
distributed may be different. Factors that could affect these amounts include the timing during the year of any such event. Further, the information below does not incorporate the terms of any
agreement entered into or amended after January&nbsp;29, 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Employment Agreements </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreements and letter agreements we have entered into with our named executive officers provide for certain payments to be made in
connection with a termination of employment. Below is a description of the severance payments that would have become payable under employment agreements and letter agreements with the following named executive officers upon their termination as of
January&nbsp;29, 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Mr.&nbsp;De Meritt </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;De Meritt&#146;s employment agreement provides for severance benefits payable in the event of his termination under certain circumstances, subject to the execution of a general release of claims. If
Mr.&nbsp;De Meritt&#146;s employment is terminated without &#147;cause,&#148; or if he resigns for &#147;good reason&#148; (in either case as defined in his employment agreement), Mr.&nbsp;De Meritt will be paid severance in an amount equal to two
times his annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month period, with the first installment payable in the month
following the month in which the termination date occurs. In addition, the stock option Mr.&nbsp;De Meritt received in connection with his entering into the employment agreement will immediately vest. Mr.&nbsp;De Meritt is eligible to receive, for
up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of coverage he had as an active employee. In addition, Mr.&nbsp;De Meritt will be entitled to receive amounts accrued under the employment agreement,
including any accrued but unpaid salary and accrued but unused vacation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreement also provides, subject to certain
exceptions, that, during his employment, and (i)&nbsp;in the event he is terminated without &#147;cause,&#148; or if he resigns for &#147;good reason,&#148; a period of 24 months following termination or (ii)&nbsp;if he terminates for any other
reason, a period of 12 months following termination, Mr.&nbsp;De Meritt will not (x)&nbsp;compete with the company or its affiliates, (y)&nbsp;solicit any company employees or consultants or (z)&nbsp;solicit any customer of the company. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Mr.&nbsp;Morphis </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Morphis&#146; letter agreement provides that in the event his employment is terminated without &#147;cause&#148; (as defined in his letter
agreement) prior to October&nbsp;18, 2013, he will be paid severance in an amount equal to one times his annual base salary (as in effect on the date of termination). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The letter agreement also provides, subject to certain exceptions, that, during his employment, and for a period of 12 months following termination, Mr.&nbsp;Morphis will not solicit any company employees or
consultants. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Ms.&nbsp;Gill </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Ms.&nbsp;Gill&#146;s employment agreement provides for severance benefits payable in the event of her termination under certain circumstances,
subject to the execution of a general release of claims. If Ms.&nbsp;Gill&#146;s employment is terminated without &#147;cause,&#148; or if she resigns for &#147;good reason&#148; (in either case as defined in her employment agreement), Ms.&nbsp;Gill
will be paid severance in an amount equal to two times her annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">108 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
period, with the first installment payable in the month following the month in which the termination date occurs. Ms.&nbsp;Gill is eligible to receive, for up to 24 months, a monthly amount equal
to the applicable COBRA premium cost for the level of coverage she had as an active employee. In addition, Ms.&nbsp;Gill will be entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued
but unused vacation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The employment agreement also provides, subject to certain exceptions, that, during her employment, and
(i)&nbsp;in the event she is terminated without &#147;cause,&#148; or if she resigns for &#147;good reason&#148;, a period of 24 months following termination or (ii)&nbsp;if she terminates for any other reason, a period of 12 months following
termination, Ms.&nbsp;Gill will not (x)&nbsp;compete with the company or its affiliates, (y)&nbsp;solicit any company employees or consultants or (z)&nbsp;solicit any customer of the company. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Mr.&nbsp;Malik </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mr.&nbsp;Malik&#146;s letter agreement does not provide for severance
benefits. However, Mr.&nbsp;Malik&#146;s employment may not be terminated by the company without &#147;cause&#148; (as defined in his letter agreement) prior to September&nbsp;25, 2013. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The letter agreement also provides, subject to certain exceptions, that during his employment, and for a period of 12 months following termination,
Mr.&nbsp;Malik will not solicit any company employees or consultants. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Mmes. Backes and Thomassee </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Mmes. Backes and Thomassee had no arrangement in place as of January&nbsp;29, 2011 pursuant to which they would receive severance. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Estimated Potential Termination Payments and Benefits </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The following table details the estimated value of the payments and benefits that our named executive officers would have been provided under the employment agreements or letter agreements described above in
connection with certain terminations of their employment as if such termination had occurred on January&nbsp;29, 2011. The actual amounts that would be paid upon a named executive officer&#146;s termination of employment can be determined only at
the time of such event. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="49%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:37pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Executive</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Severance</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Continued&nbsp;Benefits</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Equity&nbsp;Vesting</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:ARIAL" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">750,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,629,187</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,404,872</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">325,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">325,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">550,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">575,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">412,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">22,261</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">434,761</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The severance amounts reported for Mr.&nbsp;De Meritt and Ms.&nbsp;Gill represent two times base salary. The severance amount reported for Mr.&nbsp;Morphis represents one times
base salary. Mr.&nbsp;Malik is not entitled to severance, but we have reported the estimated cost of continued salary through September&nbsp;25, 2013. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The amounts reported are merely estimates and are based on approximate benefit costs for 2010. The amounts reported for Mr.&nbsp;De Meritt and Ms.&nbsp;Gill represent the
approximate cost of 24 monthly payments in an amount equal to the applicable COBRA premium cost for the level of coverage each executive had as an active employee. The amount reported for continued benefits for Mr.&nbsp;Malik represents the
approximate employer portion of the cost for medical insurance through September&nbsp;25, 2013. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">The amount reported for Mr.&nbsp;De Meritt represents the value of the accelerated vesting of 647,583 stock options calculated based on the &#147;spread&#148; value between the
fair market value of our ordinary shares on January&nbsp;29, 2011 and the exercise price of such stock options. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">109 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_13"></A>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to the director and executive officer compensation arrangements discussed above under &#147;Executive Compensation&#148;, the following
is a description of transactions during our last three fiscal years to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5%
of our common stock, or persons or entities affiliated with them, had or will have a direct or indirect material interest. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stockholders&#146; Agreement </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26, 2010, we entered into a stockholders&#146; agreement with CCMP, the Founders and certain other stockholders that are the part
of our executive management team. The agreement provides, among other things, that five members of our board of directors were to be designated by CCMP and two members by the majority of the shares held by management stockholders so long as the
management stockholders held at least 7% of the total equity interest in the company. The stockholders&#146; agreement provides, among other things, certain demand and &#147;piggyback&#148; registration rights and other registration rights, subject
to lock-up arrangements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Demand and Piggyback Registration Rights </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the stockholders&#146; agreement, CCMP has the right at any time, but on not more than five occasions, to require us to use our best
efforts to register any or all of the shares held thereby on Form S-1 promulgated under the Securities Act at our expense. In addition, the Founders and certain other stockholders (which include members of our management) have the right on a single
occasion, upon the request of the holders representing a majority of the shares held by such Founders and other stockholders, to require us to use our best efforts to register any or all of the shares held thereby at any time following the 12-month
anniversary of a qualified initial public offering (as defined in the stockholders&#146; agreement) of our common stock. After the completion of this offering, the holders of approximately shares of our common stock will be entitled to these demand
registration rights. Following a demand, all other stockholders that are party to the stockholders&#146; agreement may request the inclusion of any or all of their shares in the registration statement. Under certain circumstances, we may delay the
filing or effectiveness of a registration statement one time, for up to 90 days, with respect to a demand made by CCMP, and one time in any 12-month period with respect to a demand made by the Founders and certain other stockholders. The
stockholders&#146; agreement also grants CCMP, the Founders and certain other stockholders (which include members of our management) &#147;piggyback&#148; registration rights. If we register any of our securities the holders of these shares are
entitled to include their shares in the registration. All demand and piggyback registration rights are subject to limitations that may be imposed by the managing underwriter on the number of shares to be included in any underwritten offering.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Short-Form Registration Rights </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">After the completion of this offering, the holders of approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock will be entitled to additional short-form
registration rights, commencing on the date that we become eligible to register securities on Form S-3. Each stockholder party to the stockholders&#146; agreement may request registration of their shares if the anticipated aggregate offering amount
of the shares is at least $10 million. There is no limit to the number of requests for registrations on Form S-3. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Indemnification
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with all registrations pursuant to the registration rights provisions of the stockholders&#146; agreement, we have
agreed to indemnify all holders of registrable securities against </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">110 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
specified liabilities, including liabilities under the Securities Act. All stockholders requesting or joining in a registration may be required to agree to indemnify us against certain
liabilities, but in no event will any single stockholder&#146;s liabilities exceed the net proceeds to that stockholder from the sale of the registrable securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Termination </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The registration rights provisions and certain other provisions of the
stockholders&#146; agreement will survive the completion of this offering and terminate upon the earlier of the date on which the stockholders party thereto no longer own any of our equity securities or the voluntary liquidation of the company, or
the sale of all or substantially all of our assets or outstanding common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stony Trading Relationship </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stony Leather, Inc. (&#147;Stony&#148;) is one of our inventory vendors. We purchase inventory from Stony on a purchase order basis. Stony sources,
wholesales and distributes jewelry, accessories, handbags and gift items. Stony&#146;s customers include retailers, wholesalers, individuals, television shopping networks, and internet-based merchants. Stony is based in Houston, Texas with a
showroom in New York City, New York. Stony does not own or operate conventional brick and mortar retail outlets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Chong Yi and Insuk Koo
(two of the four Founders) own and operate Stony. Mr.&nbsp;Yi and Ms.&nbsp;Koo are brother and sister. Mr.&nbsp;Yi and Ms.&nbsp;Koo along with their sister Ms.&nbsp;Kyong Gill (our Executive Vice Chairperson and one of the four Founders) are
stockholders of Francesca&#146;s. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Since the founding of our company, Stony has been a supplier of a variety of our inventory items.
Stony has accounted for 10%, 12% and 12% of our total inventory purchases on an annual basis in fiscal year 2010, fiscal year 2009 and fiscal year 2008, respectively. During fiscal year 2010, Stony accounted for approximately 10% of our total
inventory purchases. During fiscal year 2011, we expect to purchase approximately 10% of our total inventory from Stony. We negotiate and set the rates for the merchandise and services provided to us by Stony at market rates for such merchandise and
services at the time each such transaction is entered into. We often request and receive from Stony merchandise on special order, modify previously ordered merchandise, and acquire merchandise on consignment. Generally, Stony provides us a 3% damage
allowance to cover the costs of damaged merchandise. The Stony inventory purchases during fiscal years 2010, 2009 and 2008 were approximately $5.0 million, $3.1 million and $2.1 million, respectively. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>KJK Trading Relationship </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">KJK Trading Corporation (&#147;KJK Trading&#148;) is one of our inventory vendors. We purchase inventory from KJK Trading on a purchase order
basis. KJK Trading assists us in the design and sourcing of several items of apparel we sell in our boutiques. Beginning in May 2010, we subleased approximately 2,000 square feet of office space to KJK Trading within our headquarters in Houston,
Texas. We did not receive any rent payments from KJK Trading in fiscal year 2010. Beginning in January 2011, the rent payment is $1,000 per month. We are the sole customer of KJK Trading. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">KJK Trading is owned and operated by Ki Juing Gu. Mr. Gu is the brother-in-law of Ms.&nbsp;Insuk Koo (one of our Founders). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">KJK Trading has been one of our inventory vendors since 2008. KJK Trading has accounted for 13%, 11% and 6% of our total inventory purchases on an
annual basis in fiscal year 2010, fiscal year 2009 and fiscal year 2008, respectively. During fiscal year 2011, we expect to purchase no more than 18% of our total inventory from KJK Trading. We negotiate and set the rates for the merchandise and
services provided to us by KJK Trading at market rates for such merchandise and services at the time each such transaction is entered into. We often request and receive from KJK Trading merchandise on
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">111 </FONT></P>


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special order, modify previously ordered merchandise, and acquire merchandise on consignment. Generally, KJK Trading provides us a 1% damage allowance to cover the costs of damaged merchandise.
The KJK Trading inventory purchases during fiscal years 2010, 2009 and 2008 were approximately $6.6 million, $2.8 million and $1.0 million, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Indemnification of Officers and Directors </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, we intend to
enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, expense advancement and
reimbursement, to the fullest extent permitted under Delaware law. Additionally, we may enter into indemnification agreements with any new directors or executive officers that may be broader in scope than the specific indemnification provisions
contained in Delaware law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">There is no pending litigation or proceeding naming any of our directors or officers to which
indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Policies and Procedures for Related Person Transactions </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our board of directors will adopt
prior to completion of this offering a written policy for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $20,000 and one of our executive officers, directors, director nominees
or beneficial holders of more than 5% of our capital stock (or their immediate family members), each of whom we refer to as a &#147;related person,&#148; has a direct or indirect material interest. This policy was not in effect when we entered into
the transactions described above. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If a related person proposes to enter into such a transaction, arrangement or relationship, which we
refer to as a &#147;related person transaction,&#148; the related person must report the proposed related person transaction to the chairperson of our nominating and corporate governance committee. Additionally, in the case of beneficial holders of
more than 5% of our capital stock, we will solicit this information via an annual questionnaire. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the nominating and corporate
governance committee. Whenever practicable, the reporting, review and approval will occur prior to entering into the transaction. If advance review and approval is not practicable, the nominating and corporate governance committee will review and
may, in its discretion, ratify the related person transaction. Any related person transactions that are ongoing in nature will be reviewed annually and the nominating and corporate governance committee may establish guidelines for our management to
follow in the course of its ongoing dealings with the related person. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A related person transaction reviewed under the policy will be
considered approved or ratified if it is authorized by the nominating and corporate governance committee after full disclosure of the related person&#146;s interest in the transaction. The written policy also provides for the standing pre-approval
of certain related person transactions, such as the employment and compensation of executive officers, director compensation and certain charitable contributions, among other things. We expect that our board of directors will also adopt prior to
completion of this offering a written policy under which no immediate family member of a director or executive officer shall be hired until the employment arrangement is approved by the nominating and corporate governance committee or ratified by
the committee if it is not practicable for us to wait until the next nominating and corporate governance committee meeting. A copy of our related person transaction policy and nominating and corporate governance committee charter will be available
on our website at <I>www.francescascollections.com</I> upon completion of this offering. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">112 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_14"></A>PRINCIPAL AND SELLING STOCKHOLDERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth information as of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, regarding the beneficial ownership of our common stock (i)&nbsp;immediately prior to this offering and (ii)&nbsp;as
adjusted to give effect to this offering, by: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each person or group who we know to beneficially own more than 5% of our common stock; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each of our directors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each of our named executive officers; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">all of our executive officers and directors as a group; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">each of the selling stockholders. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT
STYLE="font-family:ARIAL" SIZE="2">We have determined beneficial ownership in the table in accordance with SEC rules and regulations. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the
power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, we have deemed shares of our common stock subject to options held by that person that are currently exercisable or will become exercisable within 60&nbsp;days of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011 to be outstanding, but we have not deemed these shares to be outstanding for computing the percentage ownership of any
other person. To our knowledge, except as set forth in the footnotes below, each stockholder identified in the table possesses sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by that
stockholder. Unless otherwise indicated, the address for each person named in the table below is c/o Francesca&#146;s Holdings Corporation, 3480 W. 12</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> Street, Houston, Texas 77008. For further information regarding material transactions between us and certain of our
stockholders, see &#147;Certain Relationships and Related Party Transactions&#148;. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="52%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares&nbsp;Beneficially&nbsp;Owned<BR>Prior to This Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of<BR>Shares<BR>Offered</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares&nbsp;Beneficially&nbsp;Owned<BR>After This Offering</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:21pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Percent&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Percent</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>5% Stockholders:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">CCMP Capital LLC and Related Funds(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,048,435</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">84.3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Executive Officers and Directors:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,438,583</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">32,238</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cindy Thomassee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Theresa Backes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">400,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,398,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Kal Malik</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">263,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Greg Brenneman(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Neill Davis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Richard Emmett</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Joseph Scharfenberger(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">110,025</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Richard Zannino(1)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">All directors and officers as a group (11&nbsp;persons)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,767,121</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Other Selling Stockholders:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">Less than 1% </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">In the case of CCMP Capital, LLC (&#147;CCMP Capital&#148;), includes 30,043,896 shares of common stock owned by CCMP Capital Investors II, L.P. (&#147;CCMP Capital
Investors&#148;) and 4,004,539 shares of common stock owned by CCMP Capital Investors (Cayman) II, L.P. (&#147;CCMP Cayman&#148; and, together with CCMP Capital Investors, the &#147;CCMP Capital Funds&#148;). Assuming no exercise of
underwriters&#146; option to purchase additional shares: (i) &nbsp;&nbsp;&nbsp;&nbsp; shares will be sold by CCMP Capital Investors and (ii) &nbsp;&nbsp;&nbsp;&nbsp; shares will be sold by CCMP Cayman. If the underwriters exercise their option to
purchase additional shares in full: (i) &nbsp;&nbsp;&nbsp;&nbsp; shares will be sold by CCMP Capital Investors and (ii) &nbsp;&nbsp;&nbsp;&nbsp;shares will be sold by CCMP Cayman. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">113 </FONT></P>


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 <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="1">The general partner of the CCMP Capital Funds is CCMP Capital Associates, L.P. (&#147;CCMP Capital
Associates&#148;). The general partner of CCMP Capital Associates is CCMP Capital Associates GP, LLC (&#147;CCMP Capital Associates GP&#148;). CCMP Capital Associates GP is wholly-owned by CCMP Capital. Each of CCMP Capital Associates, CCMP Capital
Associates GP and CCMP Capital may be deemed, pursuant to Rule 13d-3 under the Exchange Act, to beneficially own the shares held by the CCMP Capital Funds. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT
STYLE="font-family:ARIAL" SIZE="1">CCMP Capital ultimately exercises voting and dispositive power over the shares held by the CCMP Capital Funds. Voting and disposition decisions at CCMP Capital with respect to such shares are made by an investment
committee, the members of which are Stephen Murray (the President and Chief Executive Officer of CCMP Capital), Greg Brenneman and Rich Zannino. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT
STYLE="font-family:ARIAL" SIZE="1">Greg Brenneman is the Chairman of CCMP Capital Advisors, LLC. Each of Joseph Scharfenberger and Richard Zannino is a Managing Director of CCMP Capital Advisors, LLC. The address of each of Messrs. Brenneman,
Scharfenberger and Zannino and each of the CCMP entities (other than CCMP Cayman) is c/o CCMP Capital, LLC, 245 Park Avenue, New York, New York 10167. The address of CCMP Cayman is c/o Walkers Corporate Services Limited, Walker House, 87 Mary
Street, George Town KY1-9005, Grand Cayman, Cayman Islands. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="1">Each of Messrs. Murray, Brenneman, Scharfenberger and Zannino disclaims any
beneficial ownership of any shares beneficially owned by the CCMP Capital Funds. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">114 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_15"></A>DESCRIPTION OF CAPITAL STOCK </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated
bylaws, each of which will be in effect upon completion of this offering, are summaries only. These summaries do not purport to be complete and are subject to and qualified by reference to our amended and restated certificate of incorporation and
amended and restated bylaws, copies of which will be filed with the SEC as exhibits to our registration statement of which this prospectus forms&nbsp;a part and by the provisions of applicable law. This description of our capital stock reflects
changes to our capital structure that will become effective upon completion of this offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Authorized Capitalization
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, our authorized capital stock will consist of 80,000,000 shares of common stock, par value $0.01
per share, and 45,000 shares of preferred stock, par value $0.01 per share. Upon completion of this offering, there will be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock outstanding, or
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares if the underwriters exercise in full their option to purchase additional shares in full, and no shares of preferred stock outstanding. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, immediately
prior to completion of this offering, there were outstanding: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">40,457,343 shares of our common stock held by approximately 27 stockholders; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">2,416,446 shares issuable upon exercise of outstanding stock options. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Common Stock </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Voting Rights </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of stockholders, including the election or
removal of directors. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by the holders of common stock present in person or represented by proxy, subject to any voting rights
granted to holders of any preferred stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">An election of directors by our stockholders shall be determined by a plurality of the votes
cast by the stockholders entitled to vote on the election. There are no cumulative voting rights for the election of directors, which means that the holders of a majority of the shares of our common stock voted will be entitled to elect all of our
directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Dividends </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Subject to the rights of holders of any then outstanding shares of our preferred stock, holders of our common stock are entitled to receive ratably
any dividends that may be declared by our board of directors out of funds legally available therefor. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Liquidation </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In the event of our liquidation, dissolution or winding up, holders of our common stock would be entitled to share ratably in all assets available
for distribution to stockholders after the payment of or provision for all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">115 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Other Rights </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Holders of our common stock do not have preemptive rights to purchase shares of our stock. The shares of our common stock are not subject to any redemption provisions and are not convertible into any other shares
of our capital stock. The rights, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our preferred stock we may issue in the future. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Blank Check Preferred Stock </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Under the terms of our certificate of incorporation that will be in effect upon completion of this offering, our board of directors will have the
authority, without further action by our stockholders, to issue up to 45,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences. Upon completion of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could make it more difficult for a third
party to acquire, or could adversely affect the rights of our common stockholders by restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock or delaying or
preventing a change in control without further action by the stockholders. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Anti-Takeover Effects of Certain Provisions of Delaware Law, </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>the Certificate of Incorporation and the Bylaws </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and restated certificate of
incorporation and our amended and restated bylaws will contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and that could make it more difficult to acquire control
of our company by means of a tender offer, open market purchases, a proxy contest or otherwise. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they
also give our board of directors the power to discourage acquisitions that some stockholders may favor. A description of these provisions is set forth below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Classified Board </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our certificate of incorporation to be in effect upon completion of
this offering will provide for our board of directors to be divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for
the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. A third
party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">116 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>No Cumulative Voting </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation specifically authorizes cumulative voting. Our certificate of incorporation to be in effect upon completion
of this offering does not grant stockholders the right to vote cumulatively; therefore stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stockholder Action by Written Consent and Special Meetings of Stockholders </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Pursuant to Section&nbsp;228 of the Delaware General Corporation Law, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the company&#146;s certificate of incorporation provides otherwise. Our certificate of incorporation and bylaws to be effective upon completion of this
offering will provide that all stockholder action must be effected at a duly called meeting of stockholders and not by written consent, and that only our board of directors, chairman of our board of directors, chief executive officer or president
(in the absence of a chief executive officer) may call a special meeting of stockholders. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Requirements for Advance Notification of Stockholder
Meetings, Nominations and Proposals </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, our bylaws will establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders, including proposed nominations of candidates for election to our board of directors. Stockholders at an annual meeting will only be able to consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of our board of directors, or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely written notice in
proper form to our secretary of the stockholder&#146;s intention to bring such business before the meeting. These provisions could have the effect of delaying stockholder actions until the next stockholder meeting that are favored by the holders of
a majority of our outstanding voting securities or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain control of us. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stockholder Actions </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and
restated certificate of incorporation will include provisions requiring that all stockholder actions against us or any of its directors, officers, or employees in their capacity as such be brought in the courts of the State of Delaware.&nbsp;We
expect that these provisions will discourage venue shopping that may unduly increase the costs and expenses to us in connection with stockholder actions; however, these provisions could have the effect of discouraging the filing of certain
stockholder actions against us. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Blank Check Preferred Stock </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We believe that the availability of the preferred stock under our certificate of incorporation provides us with flexibility in addressing corporate issues that may arise. Having these authorized shares available
for issuance will allow us to issue shares of preferred stock without the expense and delay of a special stockholders&#146; meeting. The authorized shares of preferred stock, as well as shares of common stock, will be available for issuance without
further action by our stockholders, unless action is required by applicable law or the rules of any stock exchange on which our securities may be listed. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">117 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
The board of directors has the power, subject to applicable law, to issue series of preferred stock that could, depending on the terms of the series, impede the completion of a merger, tender
offer or other takeover attempt. For instance, subject to applicable law, a series of preferred stock might impede a business combination by including class voting rights which would enable the holder or holders of such series to block a proposed
transaction. Our board of directors will make any determination to issue shares of preferred stock based on its judgment as to our and our stockholders&#146; best interests. Our board of directors, in so acting, could issue preferred stock having
terms which could discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then
prevailing market price of the stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Super-Majority Voting </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Our certificate of incorporation will require a 66.7% stockholder vote for the amendment, repeal or modification of certain provisions of our certificate of incorporation and bylaws relating to the classification
of our board of directors, the requirement that stockholder actions be effected at a duly called meeting and the designated parties entitled to call a special meeting of the stockholders. The combination of the classification of our board of
directors, the lack of cumulative voting and the 66.7% stockholder voting requirements will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our
board of directors. Because our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the
authorization of blank check preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">These provisions may have the effect of deterring hostile takeovers, delaying, or preventing changes in control of our management or our company,
such as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may
involve an actual or threatened acquisition of us. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights.
However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored
takeover attempts. Such provisions may also have the effect of preventing changes in our management. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Limitation on Liability of
Directors and Officers </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and restated certificate of incorporation, which will be in effect upon completion of this
offering, limits the liability of directors to the fullest extent permitted by Delaware law. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders&#146; derivative suits on behalf of our company,
to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith,
knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition, our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be in effect upon completion of this offering, provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law. We also expect to continue to maintain directors&#146; and officers&#146; liability insurance. We believe that these indemnification provisions and insurance are useful to attract and retain
qualified directors and executive officers. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">118 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The limitation of liability and indemnification provisions in our amended and restated certificate of
incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition
to the indemnification required in our amended and restated certificate of incorporation and amended and restated bylaws, we expect to enter into indemnification agreements with each of our current directors and officers before the completion of
this offering. These agreements will provide for the indemnification of our directors and officers for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they
are or were our agents. We believe that these bylaw provisions and indemnification agreements, as well as our maintaining directors&#146; and officers&#146; liability insurance, help to attract and retain qualified persons as directors and officers.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Transfer Agent and Registrar </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The transfer agent and registrar for our common stock will be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">119 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_16"></A>DESCRIPTION OF CERTAIN INDEBTEDNESS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The key terms of our existing senior secured credit facility are described below. These descriptions are not complete and are qualified in their
entirety by reference to the complete texts of the related agreements, copies of which have been filed as exhibits to this registration statement, of which this prospectus forms a part. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We intend to use approximately $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a
new revolving credit facility (as described below), to repay our existing senior secured credit facility in full. See &#147;Use of Proceeds&#148;. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Existing Senior Secured Credit Facility </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On November&nbsp;17, 2010, Francesca&#146;s
Collections, our wholly owned indirect subsidiary, entered into a $100.0 million senior secured credit facility with a syndicate of financial institutions. The existing senior secured credit facility consists of a $95.0 million term loan facility
and a $5.0 million revolving credit facility, each with a scheduled maturity date of November&nbsp;17, 2013. The revolving credit facility includes borrowing capacity available for letters of credit. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of January&nbsp;29, 2011, we had $93.8 million outstanding under our term loan facility and $5.0 million available under our revolving credit
facility. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Interest Rates and Fees </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a)&nbsp;in the case of base rate borrowings, a rate equal to the
highest of (1)&nbsp;the higher of (i)&nbsp;the prime rate of Royal Bank of Canada and (ii)&nbsp;the federal funds rate plus 1/2 of 1%, (2)&nbsp;the LIBOR for an interest period of one month plus 1.00% and (3)&nbsp;2.75% or (b)&nbsp;in the case of
LIBOR borrowings, a rate equal to the higher of (1)&nbsp;1.75% and (2)&nbsp;the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings under both the revolving credit facility and the term loan
facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for base rate borrowings increases to 6.50%
and 9.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for LIBOR borrowings increases to 7.50% and 10.00% on June&nbsp;1, 2012 and
June&nbsp;1, 2013, respectively. As of January&nbsp;29, 2011, the loans under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In addition to paying interest on outstanding principal under our existing senior secured credit facility, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of
the unutilized commitments thereunder at a rate equal to 0.50%. We also pay customary letter of credit fees. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Prepayment </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We may voluntarily prepay loans or reduce commitments under our existing senior secured credit facility, in whole or in part, other than customary
redeployment costs with respect to LIBOR borrowings. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our existing senior secured credit facility requires us to prepay outstanding term
loans, subject to certain exceptions, with: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">50% of our excess cash flow (as defined in the credit agreement) if our consolidated leverage ratio (as defined in the credit agreement) is greater than a
certain threshold as of the last day of any fiscal year (such percentage may be reduced subject to our attaining certain leverage ratios); </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">120 </FONT></P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">100% of the net cash proceeds (as defined in the credit agreement) of any incurrence of debt other than debt permitted under our existing senior secured credit
facility; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">100% of the net cash proceeds (as defined in the credit agreement) of all non-ordinary course asset sales and casualty and condemnation events, subject to
certain exceptions and limitations; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">100% of the net cash proceeds (as defined in the credit agreement) of all equity issuances, subject to certain exceptions. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Amortization </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The term loan facility
amortizes each year in an amount equal to 1.25%&nbsp;per annum from closing until September&nbsp;30, 2011 (payable in four equal installments beginning on December&nbsp;30, 2010) and 2.50%&nbsp;per annum from October&nbsp;1, 2011 to
September&nbsp;30, 2012 (payable in four equal installments beginning on December&nbsp;31, 2011), with the remaining amount payable on November&nbsp;17, 2013. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Principal amounts outstanding under the revolving credit facility are due and payable in full at maturity. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Guarantee and Security </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">All
obligations under our existing senior secured credit facility are unconditionally guaranteed by, subject to certain exceptions, Parent and each of Francesca&#146;s Collections&#146; existing and future direct and indirect wholly owned domestic
subsidiaries. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">All obligations under our existing senior secured credit facility, and the guarantees of those obligations (as well as
cash management obligations and any interest hedging or other swap agreements), are secured by substantially all of Francesca&#146;s Collections&#146; assets as well as those of each subsidiary guarantor. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Covenants and Events of Default </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our
existing senior secured credit facility contains customary affirmative and negative covenants, including limitations on the ability of Francesca&#146;s Collections and its subsidiaries, to (i)&nbsp;incur additional debt; (ii)&nbsp;create liens;
(iii)&nbsp;make certain investments, loans and advances; (iv)&nbsp;sell assets; (v)&nbsp;pay dividends or make distributions or make other restricted payments; (vi)&nbsp;prepay other indebtedness; (vii)&nbsp;engage in mergers or consolidations;
(viii)&nbsp;change the business conducted by Francesca&#146;s Collections and its subsidiaries; (ix)&nbsp;engage in certain transactions with affiliates; (x)&nbsp;enter into agreements that restrict dividends from subsidiaries; and (xi)&nbsp;amend
certain charter documents and material agreements governing subordinated and junior indebtedness. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition, the existing senior
secured credit facility requires Francesca&#146;s Collections to maintain the following financial ratios: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending January&nbsp;29, 2011, a consolidated leverage ratio which shall not be more than the maximum consolidated leverage
ratio, which is based upon the ratio of (i)&nbsp;consolidated total debt (as defined in the credit agreement) to (ii)&nbsp;consolidated EBITDA (as defined in the credit agreement). The maximum consolidated leverage ratio, depending on the fiscal
quarter, ranges from (a)&nbsp;4.50 to 1.00, to (b)&nbsp;3.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending January&nbsp;29, 2011, a senior leverage ratio which shall not be greater than the maximum senior leverage ratio, which
is based upon the ratio of </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">121 </FONT></P>


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<TR>
<TD WIDTH="7%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P><FONT STYLE="font-family:ARIAL" SIZE="2">
(i)&nbsp;senior debt (as defined in the credit agreement) to (ii)&nbsp;consolidated EBITDA (as defined in the credit agreement). The maximum senior leverage ratio, depending on the fiscal
quarter, ranges from (a)&nbsp;3.50 to 1.00, to (b)&nbsp;2.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Beginning with the fiscal quarter ending October&nbsp;31, 2011, a consolidated fixed charge coverage ratio which shall not be less than the minimum consolidated
fixed charge coverage ratio, which is based upon the ratio of (i)&nbsp;consolidated EBITDA (as defined in the credit agreement) for the prior four fiscal quarters minus certain capital expenditures (as defined in the credit agreement) minus taxes
payable with respect to such period minus permitted tax distributions (as defined in the credit agreement) to (ii)&nbsp;consolidated fixed charges (as defined in the credit agreement). The minimum consolidated fixed charge coverage ratio, depending
on the fiscal quarter, ranges from (a)&nbsp;1.00 to 1.00, to (b)&nbsp;2.00 to 1.00. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our existing senior secured
credit facility also contains customary events of default, including: (i)&nbsp;failure to pay principal, interest, fees or other amounts under the existing senior secured credit facility when due taking into account any applicable grace period;
(ii)&nbsp;any representation or warranty proving to have been incorrect in any material respect when made; (iii)&nbsp;failure to perform or observe covenants or other terms of the existing senior secured credit facility subject to certain grace
periods; (iv)&nbsp;a cross default with respect to other indebtedness having an aggregate principal amount of at least $3.0 million; (v)&nbsp;bankruptcy and insolvency events; (vi)&nbsp;unsatisfied final judgments in excess of $3.0 million;
(vii)&nbsp;a &#147;change of control&#148; (as defined in the credit agreement); (viii)&nbsp;certain defaults under the Employee Retirement Income Security Act of 1974; (ix)&nbsp;the invalidity or impairment of any loan document or any security
interest; and (x)&nbsp;the subordination provisions of any subordinated debt or junior debt (each as defined in the credit agreement) having a principal amount of at least $3.0 million shall cease to be in full force. A &#147;change of control&#148;
does not include an initial public offering of our common stock as long certain CCMP managed funds continue to own and control, directly or indirectly, at least 50% of the capital ownership of Parent on a fully diluted basis following such offering.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are in compliance with our existing senior secured credit facility as of January&nbsp;29, 2011. Our ability for subsidiaries to
issue a dividend to the Parent was restricted at year-end under our existing senior credit facility. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>New Revolving Credit Facility.
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We are engaged in discussions with financing sources regarding the terms of a new $65.0 million revolving credit facility (of which
$50.0 million would be drawn concurrently with the consummation of this offering to effect the refinancing) and expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering. The
new revolving credit facility is expected to have a five-year maturity and include borrowing capacity available for letters of credit. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect that the new revolving credit facility will contain affirmative and negative covenants substantially similar to those in our existing
senior secured credit facility, and will subject us to financial maintenance covenants upon terms to be agreed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">To date we do not have
any binding commitments from any financing sources and there can be no assurance that we will be able to enter into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior
secured credit facility requires that the proceeds of this offering be used to repay all amounts outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the refinancing, we will be
required to apply more of the proceeds of this offering to repay our existing indebtedness and will have less available to use for general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business, sales
and marketing activities and other capital expenditures. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">122 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_17"></A>SHARES ELIGIBLE FOR FUTURE SALE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, there was no public market for our common stock. Future sales of our common stock in the public market, the perception that
such sales may occur or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after
this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market
price at such time and our ability to raise equity capital in the future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering,
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock will be outstanding, assuming no exercise of the underwriters&#146; option to purchase additional shares and no exercise of options. Of these shares, all
of the shares sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our &#147;affiliates&#148; as that term is defined under Rule 144 under the Securities Act. The remaining
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock outstanding after this offering will be &#147;restricted securities&#148; within the meaning of Rule 144. Restricted securities may be sold in the public
market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration, including the exemptions provided by Rule 144 and Rule 701 under the Securities Act, which rules are summarized below. The remaining
shares of common stock held by our existing stockholders upon completion of this offering will be available for sale in the public market after the expiration of the lock-up agreements described below and under &#147;Underwriting,&#148; taking into
account the provisions of Rules 144 and 701 under the Securities Act. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Rule&nbsp;144 </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In general, under Rule&nbsp;144 under the Securities Act, as in effect on the date of this prospectus, a person who is one of our affiliates, or
who is selling shares on behalf of one of our affiliates, and has beneficially owned shares of our common stock for at least six months would be entitled to sell, upon expiration of the lock-up agreements described below and under
&#147;Underwriting&#148;, within any three-month period a number of shares that does not exceed the greater of: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">one percent of the number of shares of our common stock then outstanding, which will equal
approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares immediately after the completion of this offering; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the average weekly trading volume of our common stock on The NASDAQ Global Select Market during the four calendar weeks preceding the filing of a notice on
Form&nbsp;144 with respect to the sale. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Sales under Rule&nbsp;144 by our affiliates and persons who are selling
shares on behalf of our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">A person (or persons whose shares are aggregated) who is not deemed to have been one of our affiliates at any time during the 90&nbsp;days preceding a sale, and who has beneficially owned restricted securities
within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than an affiliate, would be entitled to sell those shares, subject only to the availability of current public information about us. A
non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year, including the holding period of any prior owner other than an affiliate, would be entitled to sell those shares without
restriction. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">123 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Rule&nbsp;701 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Rule&nbsp;701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule&nbsp;144 but without compliance with certain restrictions of Rule&nbsp;144,
including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule&nbsp;701, but all holders of
Rule&nbsp;701 shares are required to wait until 90&nbsp;days after the date of this prospectus before selling their shares. However, substantially all Rule&nbsp;701 shares are subject to lock-up agreements as described below and under
&#147;Underwriting&#148; and will become eligible for sale upon the expiration of the restrictions set forth in those agreements. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Lock-up Agreements </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We and
each of our executive officers, directors, all of the selling stockholders and substantially all of our other existing stockholders will have agreed with the underwriters, that for a period of 180&nbsp;days after the date of this prospectus, we or
they will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock, or any options or warrants to purchase any shares of our common stock or any securities convertible into or
exchangeable for shares of common stock, subject to specified exceptions. The representatives of the underwriters may, in their discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such
agreement. See &#147;Underwriting&#148; for more information. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Registration Rights </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our stockholders agreement provides that CCMP, the Founders and certain members of our executive management team who hold our common stock will
have the right to require us to register any or all of their shares under the Securities Act at our expense, subject to certain limitations and conditions. Registration of shares held by these stockholders under the Securities Act would result in
these shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of the registration, subject to the expiration of the lock-up period. See &#147;Certain Relationships and Related Party
Transactions&#151;Stockholders&#146; Agreement&#148; for more information. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Equity Plans </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As soon as practicable after the completion of this offering, we intend to file&nbsp;a Form&nbsp;S-8 registration statement under the Securities
Act to register shares of our common stock subject to options outstanding or reserved for issuance under our 2007, 2010 and 2011 Stock Incentive Plans. Such registration statement will become effective immediately upon filing, and shares covered by
this registration statement will thereupon be eligible for sale in the public markets, subject to Rule&nbsp;144 limitations applicable to affiliates and any lock-up agreements. For a more complete discussion of our stock plans, see &#147;Executive
Compensation&#151;Elements of Compensation&#151;Equity-Based Compensation.&#148; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">124 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_18"></A>MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following is a general discussion of certain material U.S. federal income tax considerations with respect to the ownership and
disposition of our common stock applicable to non-U.S. holders. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), existing and proposed U.S. Treasury regulations promulgated
thereunder, and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change at any time, possibly with retroactive effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">For the purposes of this discussion, the term &#147;non-U.S. holder&#148; means a beneficial owner of our common stock other than: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a citizen or resident of the United States; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the
United States, any state thereof or the District of Columbia; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">a trust if (1)&nbsp;a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons
(as defined in the Code) have the authority to control all substantial decisions of the trust, or (2)&nbsp;it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">It is assumed for purposes of this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of
Section&nbsp;1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to a non-U.S. holder in light of that holder&#146;s particular circumstances
or that may be applicable to non-U.S. holders subject to special treatment under U.S. federal income tax law (including, for example, financial institutions, dealers in securities, traders in securities that elect mark-to-market treatment, insurance
companies, tax-exempt entities, holders who acquired our common stock pursuant to the exercise of employee stock options or otherwise as compensation, entities or arrangements treated as partnerships for U.S. federal income tax purposes, holders
liable for the alternative minimum tax, controlled foreign corporations, passive foreign investment companies, certain former citizens or former long-term residents of the United States, and holders who hold our common stock as part of a hedge,
straddle, constructive sale or conversion transaction). In addition, this discussion does not address U.S. federal tax laws other than those pertaining to the U.S. federal income tax, nor does it address any aspects of U.S. state, local or non-U.S.
taxes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of our common stock, the
tax treatment of a person treated as a partner generally will depend on the status of the partner and the activities of the partnership. Persons that for U.S. federal income tax purposes are treated as a partner in a partnership holding shares of
our common stock should consult their own tax advisors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX
CONSEQUENCES RELATING TO THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL,
NON-U.S. INCOME AND OTHER TAX LAWS) OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">125 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Dividends </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Although we do not anticipate that we will pay any dividends on our common stock for the foreseeable future, to the extent dividends are paid to non-U.S. holders, such distributions will be subject to U.S. federal
income tax withholding at a rate of 30% (or lower rate provided by an applicable income tax treaty). To obtain a reduced rate of withholding under an applicable income tax treaty, a non-U.S. holder generally will be required to provide us or our
paying agent with a properly completed Internal Revenue Service (&#147;IRS&#148;) Form W-8BEN certifying the non-U.S. holder&#146;s entitlement to benefits under that treaty. In certain cases, additional requirements may need to be satisfied to
avoid the imposition of U.S. withholding tax. See &#147;&#151;Recently Enacted Federal Tax Legislation&#148; below for further details. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If the dividends are effectively connected with the non-U.S. holder&#146;s conduct of a trade or business within the United States (and, if
required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by such non-U.S. holder), withholding should not apply, so long as the appropriate certifications are made by such non-U.S. holder. See
&#147;&#151;Effectively Connected Income&#148; below for additional information on the U.S. federal income tax considerations applicable with respect to such effectively connected dividends. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Gain on Disposition of our Common Stock </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Subject to the discussion below under &#147;&#151;Backup Withholding and Information Reporting&#148; and &#147;&#151;Recently Enacted Federal Tax Legislation,&#148; a non-U.S. holder generally will not be subject
to U.S. federal income tax or withholding tax on any gain realized upon the sale or other taxable disposition of our common stock unless: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the gain is effectively connected with the conduct, by such non-U.S. holder, of a trade or business in the United States (and, if required by an applicable
income tax treaty, is attributable to a non- U.S. holder&#146;s U.S. permanent establishment), in which case the gain will be subject to tax in the manner described below under &#147;&#151;Effectively Connected Income&#148;;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which
the sale or disposition occurs and certain other conditions are met (in which case the gain (reduced by any U.S.-source capital losses) will be subject to 30% tax); or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">we are, or have been, a &#147;United States real property holding corporation&#148; for U.S. federal income tax purposes, at any time during the shorter of the
five-year period preceding such disposition and the non-U.S. holder&#146;s holding period in our common stock; provided, that so long as our common stock is regularly traded on an established securities market, generally a non-U.S. holder would be
subject to taxation with respect to a taxable disposition of our common stock, only if at any time during that five-year or shorter period the non-U.S. holder owned more than 5% directly or by attribution, of that class of common stock.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We believe that we have not been, are not, and we do not anticipate becoming a U.S. real property holding corporation
during the relevant period described in the third bullet point above; however, no assurances can be provided in this regard. Under U.S. federal income tax laws, we will be a United States real property holding corporation if at least 50% of the fair
market value of our worldwide real property interests and other assets used in a trade or business has consisted of &#147;United States real property interests.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Effectively Connected Income </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If a dividend received on our common stock, or a sale or other
taxable disposition of our common stock, is treated as effectively connected with a non-U.S. holder&#146;s conduct of a trade or business in the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">126 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
United States, such non-U.S. holder will generally be exempt from withholding tax on any such dividend and any gain realized on such a disposition, provided such non-U.S. holder complies with
certain certification requirements (generally on IRS Form W-8ECI). Instead such non-U.S. holder will generally be subject to U.S. federal income tax on a net income basis on any such gains or dividends in the same manner as if such holder were a
U.S. person (as defined in the Code). In addition, a non-U.S. holder that is a foreign corporation may be subject to a branch profits tax at a rate of 30% (or lower rate provided by an applicable income tax treaty) on such holder&#146;s earnings and
profits for the taxable year that are effectively connected with such holder&#146;s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to such holder&#146;s U.S. permanent
establishment), subject to adjustments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Information Reporting and Backup Withholding </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Generally, we must report to our non-U.S.&nbsp;holders and the IRS the amount of dividends paid during each calendar year, if any, and the amount
of any tax withheld. These information reporting requirements apply even if no withholding is required (e.g., because the distributions are effectively connected with the non-U.S.&nbsp;holder&#146;s conduct of a United States trade or business, or
withholding is eliminated by an applicable income tax treaty). This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S.&nbsp;holder resides or is established.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Backup withholding, however, generally will not apply to distributions to a non-U.S.&nbsp;holder of shares of our common stock provided
the non-U.S.&nbsp;holder furnishes to us or our paying agent the required certification as to its non-U.S.&nbsp;status, such as by providing a valid IRS Form&nbsp;W-8BEN or IRS Form&nbsp;W-8ECI, or certain other requirements are met. Notwithstanding
the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the non-U.S.&nbsp;holder is a U.S.&nbsp;person (as defined in the Code) that is not an exempt recipient. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Information reporting and backup withholding generally will not apply to dispositions by a non-U.S. holder of shares of our common stock outside
the United States through a foreign office of a foreign broker that does not have certain specified connections to the United States. If the non-U.S. holder sells shares of our common stock through a U.S. broker or the U.S. office of a foreign
broker, however, the broker will be required to report to the IRS the amount of proceeds paid to the non-U.S. holder, and also backup withhold on that amount, unless the non-U.S. holder provides the required certification to the broker as to its
non-U.S. status, or an exemption is otherwise established. Information reporting will also apply if a non-U.S. holder sells shares of our common stock through a foreign broker deriving more than a specified percentage of its income from U.S. sources
or having certain other connections to the United States, unless such broker has documentary evidence in its records that the beneficial owner of the shares is a non-U.S. person and certain other conditions are met, or an exemption is otherwise
established. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results
in an overpayment of tax and the appropriate information is timely supplied by the non-U.S. holder to the IRS. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recently Enacted
Federal Tax Legislation </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;18, 2010, President Obama signed the &#147;Hiring Incentives to Restore Employment (HIRE)
Act&#148;, or the HIRE Act, which includes a revised version of a bill known as the &#147;Foreign Account Tax Compliance Act of 2009&#148; or &#147;FATCA.&#148; Under FATCA, foreign financial institutions (which include most hedge funds, private
equity funds, mutual funds, securitization vehicles and any other investment </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">127 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
vehicles regardless of their size) must comply with new information reporting rules with respect to their U.S. account holders and investors or confront a new withholding tax on U.S. source
payments made to them. More specifically, a foreign financial institution or other foreign entity that does not comply with the FATCA reporting requirements will generally be subject to a new 30% withholding tax with respect to any
&#147;withholdable payments&#148; made after December&nbsp;31, 2012. For this purpose, withholdable payments are U.S.-source payments otherwise subject to nonresident withholding tax and also include the entire gross proceeds from the sale of any
equity or debt instruments of U.S. issuers. The new FATCA withholding tax will apply even if the payment would otherwise not be subject to U.S. nonresident withholding tax (e.g., because it is capital gain treated as foreign source income under the
Code). Treasury is authorized to provide rules for implementing the FATCA withholding regime and coordinating the FATCA withholding regime with the existing nonresident withholding tax rules. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">FATCA withholding will not apply to withholdable payments made directly to foreign governments, international organizations, foreign central banks
of issue and individuals, and Treasury is authorized to provide additional exceptions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As noted above, the new FATCA withholding and
information reporting requirements generally will apply to withholdable payments made after December&nbsp;31, 2012. Non-U.S. holders are urged to consult with their own tax advisors regarding the effect, if any, of the FATCA provisions to them based
on their particular circumstances. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">128 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_19"></A>UNDERWRITING </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The company, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs&nbsp;&amp; Co. and J.P. Morgan Securities LLC are the representatives of the
underwriters. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="83%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:49pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Underwriters</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Number&nbsp;of&nbsp;Shares</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Goldman, Sachs&nbsp;&amp; Co.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">J.P. Morgan Securities LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Jefferies&nbsp;&amp; Company, Inc</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">RBC Capital Markets, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stifel, Nicolaus&nbsp;&amp; Company, Incorporated</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">KeyBanc Capital Markets Inc.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other
than the shares covered by the option described below unless and until this option is exercised. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">If the underwriters sell more shares
than the total number set forth in the table above, the underwriters have an option to buy up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares from the selling stockholders. They may exercise that option
for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above. We will not receive any proceeds from the sale of the shares
being sold by the selling stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following tables show the per share and total underwriting discounts and commissions to be
paid to the underwriters by the company and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters&#146; option to purchase
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:81pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Paid by the Company</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>No&nbsp;Exercise</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Full&nbsp;Exercise</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Per Share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:123pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Paid by the Selling Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>No&nbsp;Exercise</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Full&nbsp;Exercise</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Per Share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Shares sold by the underwriters to the
public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the
other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters&#146; right to reject any order in whole or in part. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The company and its officers, directors, and holders of substantially all of the company&#146;s common stock, including the selling stockholders,
have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except with the prior written </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">129 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
consent of the representatives. This agreement does not apply to any existing employee benefit plans. See &#147;Shares Eligible for Future Sale&#148; for a discussion of certain transfer
restrictions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1)&nbsp;during the
last 17 days of the 180-day restricted period the company issues an earnings release or announces material news or a material event; or (2)&nbsp;prior to the expiration of the 180-day restricted period, the company announces that it will release
earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of
the earnings release or the announcement of the material news or material event. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Prior to this offering, there has been no public
market for the shares. The initial public offering price has been negotiated among the company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing
market conditions, will be the company&#146;s historical performance, estimates of the business potential and earnings prospects of the company, an assessment of the company&#146;s management and the consideration of the above factors in relation to
market valuation of companies in related businesses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The company intends to list its common stock on The NASDAQ Global Select Market
under the symbol &#147;FRAN&#148;. In order to meet one of the requirements for listing the common stock on The NASDAQ Global Select Market, the underwriters will undertake to sell lots of 100 or more shares to a minimum of 400 beneficial holders.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with this offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions
may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering.
&#147;Covered&#148; short sales are sales made in an amount not greater than the underwriters&#146; option to purchase additional shares from the selling stockholders in this offering. The underwriters may close out any covered short position by
either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. &#147;Naked&#148; short sales are any sales in excess of such option. The underwriters
must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of this
offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a
portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have
the effect of preventing or retarding a decline in the market price of the company&#146;s stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the
price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on The NASDAQ Global Select Market, in
the over-the-counter market or otherwise. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">130 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters do not expect sales to discretionary accounts to exceed five percent of the total
number of shares offered. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The company and the selling stockholders estimate that their share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The company and the selling stockholders have agreed to indemnify the several underwriters and Stifel, Nicolaus&nbsp;&amp; Company, Incorporated in its capacity as qualified independent underwriter against certain
liabilities, including liabilities under the Securities Act. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Relationships and Conflicts of Interest </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">One or more affiliates of J.P. Morgan Securities LLC beneficially own more than 10% of CCMP Capital Investors II, L.P., which is a stockholder in
the company. Because J.P. Morgan Securities LLC is an underwriter and its affiliates beneficially, through CCMP Capital Investors II, L.P., own more than 10% of the company, J.P. Morgan Securities LLC is deemed to have a &#147;conflict of
interest&#148; under Rule 5121 (&#147;Rule 5121&#148;) of the Financial Industry Regulatory Authority. Furthermore, as described under &#147;Use of Proceeds&#148;, the company expects to use approximately $41.4 million of the net proceeds it
receives from this offering, together with $50.0 million of new indebtedness under a new revolving credit facility, to repay its existing senior secured credit facility in full. Affiliates of Goldman, Sachs&nbsp;&amp; Co., J.P. Morgan Securities
LLC, Jefferies&nbsp;&amp; Company, Inc., RBC Capital Markets, LLC, Stifel, Nicolaus&nbsp;&amp; Company, Incorporated and KeyBanc Capital Markets Inc. are lenders under the company&#146;s existing senior secured credit facility and will each receive
their pro rata share of such repayment. Because it is possible that each of Goldman, Sachs&nbsp;&amp; Co., J.P. Morgan Securities LLC and Jefferies&nbsp;&amp; Company, Inc. or their affiliates could receive more than 5% of the proceeds of this
offering in connection with the repayment of the company&#146;s existing senior secured credit facility, each of Goldman, Sachs&nbsp;&amp; Co., J.P. Morgan Securities LLC and Jefferies&nbsp;&amp; Company, Inc. is deemed to have a &#147;conflict of
interest&#148; under Rule 5121. Accordingly, this offering will be conducted in accordance with Rule 5121. Rule 5121 requires that a &#147;qualified independent underwriter&#148;, meeting certain standards, participate in the preparation of the
registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Stifel, Nicolaus&nbsp;&amp; Company, Incorporated has served as &#147;qualified independent underwriter&#148; within the meaning of Rule
5121 in connection with this offering. To comply with Rule 5121, Goldman, Sachs&nbsp;&amp; Co., J.P. Morgan Securities LLC and Jefferies&nbsp;&amp; Company, Inc. will not confirm any sales to any account over which it exercises discretionary
authority without the specific written approval of the transaction from the account holder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The underwriters and their respective
affiliates are full service financial institutions engaged in various activities,&nbsp;which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment,
hedging, financing and brokerage activities.&nbsp;Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the
company, for which they received or will receive customary fees and expenses.&nbsp;In particular, J.P. Morgan Securities LLC and affiliates of Goldman, Sachs&nbsp;&amp; Co. and Jefferies&nbsp;&amp; Company, Inc. are joint lead arrangers, joint
bookrunners and lenders under the company&#146;s existing senior secured credit facility. In addition, an affiliate of KeyBanc Capital Markets Inc. is syndication agent and a lender under the company&#146;s existing senior secured credit facility;
an affiliate of RBC Capital Markets, LLC is administrative agent, collateral agent and a lender under the company&#146;s existing senior secured credit facility; and an affiliate of Stifel, Nicolaus&nbsp;&amp; Company, Incorporated is a lender under
the company&#146;s existing senior secured credit facility. In addition, one or more affiliates of Goldman, Sachs &amp; Co. are limited partners in CCMP Capital Investors II, L.P., which is a stockholder in the company. In addition, a member of the
advisory board of CCMP Capital Investors II, L.P. is also an advisory director of Goldman, Sachs &amp; Co. In addition, an affiliate of RBC Capital Markets, LLC is expected to be a joint lead arranger, administrative agent and a lender under the
company&#146;s new revolving credit facility; and an affiliate of KeyBanc Capital Markets Inc. is expected to be a joint lead arranger and a lender under the company&#146;s new revolving credit facility. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">131 </FONT></P>


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 <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In the ordinary course of their various business activities, the underwriters and their respective
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers,
and such investment and securities activities may involve securities and/or instruments of the company. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in
respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>European Economic Area </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In relation to each Member State of the European Economic Area which
has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">(a) to
legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">(b) to any legal entity which has two or more of (1)&nbsp;an average of at least 250 employees during the last financial year; (2)&nbsp;a total
balance sheet of more than <FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:SANS-SERIF" SIZE="2" COLOR="#000000">&#128;</FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT
STYLE="font-family:ARIAL" SIZE="2"></FONT>43,000,000 and (3)&nbsp;an annual net turnover of more than <FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:SANS-SERIF" SIZE="2" COLOR="#000000">&#128;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT>50,000,000, as shown in its last annual or consolidated accounts; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">(d) in any other circumstances which do not require the publication by the company of a prospectus pursuant to Article 3 of the
Prospectus Directive. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For the purposes of this provision, the expression an &#147;offer of shares to the public&#148; in relation to
any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the
shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant
implementing measure in each Relevant Member State. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Each underwriter has represented and agreed that: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within
the meaning of Section&nbsp;21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section&nbsp;21(1) of the FSMA does not apply to the company; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(b)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the
United Kingdom. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">132 </FONT></P>


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 <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Hong Kong </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The shares may not be offered or sold by means of any document other than (i)&nbsp;in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong
Kong), (ii)&nbsp;to &#147;professional investors&#148; within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder or (iii)&nbsp;in other circumstances which do not result in the document
being a &#147;prospectus&#148; within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of
issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect
to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to &#147;professional investors&#148; within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Singapore </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation
for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore
other than (i)&nbsp;to an institutional investor under Section&nbsp;274 of the Securities and Futures Act, Chapter 289 of Singapore (the &#147;SFA&#148;), (ii)&nbsp;to a relevant person, or any person pursuant to Section&nbsp;275(1A), and in
accordance with the conditions, specified in Section&nbsp;275 of the SFA or (iii)&nbsp;otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Where the shares are subscribed or purchased under Section&nbsp;275 by a relevant person which is: (a)&nbsp;a corporation (which is not an
accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b)&nbsp;a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries&#146; rights and interest in that trust shall not be
transferable for 6 months after that corporation or that trust has acquired the shares under Section&nbsp;275 except: (1)&nbsp;to an institutional investor under Section&nbsp;274 of the SFA or to a relevant person, or any person pursuant to
Section&nbsp;275(1A), and in accordance with the conditions, specified in Section&nbsp;275 of the SFA; (2)&nbsp;where no consideration is given for the transfer; or (3)&nbsp;by operation of law. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Japan </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The securities have
not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in
Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly
or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and
ministerial guidelines of Japan. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">133 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_20"></A>LEGAL MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The validity of the common stock offered by this prospectus will be passed upon for us by O&#146;Melveny&nbsp;&amp; Myers LLP, New York, New York.
The underwriters have been represented by Cravath, Swaine&nbsp;&amp; Moore LLP, New York, New York. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_21"></A>EXPERTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The consolidated financial statements of Francesca&#146;s Holdings Corporation at January&nbsp;29, 2011, and for the year then ended, appearing in this Prospectus and Registration Statement have been audited by
Ernst &amp; Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and
auditing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The consolidated financial statements as of January&nbsp;30, 2010 and for each of the two years in the period ended January
30, 2010 included in this Prospectus and the Registration Statement have been so included in reliance on the report of BDO USA, LLP (formerly known as BDO Seidman, LLP), an independent registered public accounting firm, appearing elsewhere here in
and in the Registration Statement, given on the authorization of said firm as experts in auditing and accounting. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_22">
</A>CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On August&nbsp;10, 2010, the Audit Committee of the Board of Directors
of the company dismissed BDO USA, LLP (formerly known as BDO Seidman, LLP) (&#147;BDO&#148;) as the company&#146;s independent registered public accounting firm. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">With respect to BDO and its service as the company&#146;s independent registered public accounting firm, during the fiscal years ended January&nbsp;31, 2009 and January&nbsp;30, 2010 (&#147;Fiscal Years 2008 and
2009&#148;): </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">BDO&#146;s reports on the company&#146;s consolidated financial statements for Fiscal Years 2008 and 2009 did not contain an adverse opinion or a disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">There were no disagreements with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of BDO, would have caused BDO to make a reference to the subject matter of the disagreement(s) in connection with its reports on the financial statements of the company for such years and through
August 10, 2010, the date of BDO&#146;s dismissal as the company&#146;s independent registered public accounting firm. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">There were no &#147;reportable events&#148; as described in Item&nbsp;304(n)(1)(v) of Regulation S-K other than at January 31, 2009, the Company identified a
material weakness in internal controls over financial reporting related to the Company&#146;s accounting for its Convertible Redeemable Preferred Stock &#150; Series A. This material weakness resulted in a material error and correction of the
Company&#146;s annual financial statements for the fiscal year ended January 31, 2009 prior to their original issuance. The Company discussed this material weakness with BDO and has authorized BDO to respond fully to inquiries of Ernst &amp; Young,
successor auditors concerning this matter. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have provided BDO a copy of the disclosures we are making in this
prospectus and the registration statement of which this prospectus is a part prior to their initial filing with the SEC and requested that BDO furnish us with a letter addressed to the SEC stating whether or not BDO agrees with the above statements.
A copy of such letter, dated April 18, 2011 is filed as Exhibit 16.1 to the registration statement of which this prospectus forms a part. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Audit Committee of the Board of Directors of the company has conducted a competitive process to select a firm to serve as the company&#146;s
independent registered public accounting firm for the fiscal year ended January&nbsp;29, 2011. On August&nbsp;10, 2010, the Audit Committee of the Board of Directors of the company approved the engagement of Ernst&nbsp;&amp; Young&nbsp;LLP
(&#147;E&amp;Y&#148;) as its independent </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">134 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
registered public accounting firm for the fiscal year ending January&nbsp;29, 2011 subject to completion of normal client acceptance procedures. In deciding to engage E&amp;Y, the Audit Committee
of the Board of Directors of the company reviewed auditor independence and existing commercial relationships with E&amp;Y, and concluded that E&amp;Y has no commercial relationship with the company that would impair its independence. During Fiscal
Years 2008 and 2009, neither the company nor anyone acting on behalf of the company, consulted E&amp;Y regarding any of the matters or events set forth in Item&nbsp;304(a)(2)(i) or Item&nbsp;304(a)(2)(ii) of Regulation S-K. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="toc160201_23"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We have filed a registration statement on Form&nbsp;S-1 under the Securities Act with the SEC with respect to the shares of our common stock to be sold in this offering. This prospectus, which constitutes part of
the registration statement, does not include all of the information contained in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement and its exhibits and schedules for additional
information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of
the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly and special reports, proxy statements and other information with the SEC. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">You can read our SEC filings, including the registration statement and the exhibits and schedules thereto, at the SEC&#146;s website at
<I>www.sec.gov</I>. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon effectiveness of the registration statement, we will become subject to the informational requirements of the Exchange Act and will be required
to file reports and other information with the SEC. You will be able to inspect and copy these reports and other information at the public reference facilities maintained by the SEC at the address noted above. You also will be able to obtain copies
of this material from the Public Reference Room as described above, or inspect them without charge at the SEC&#146;s website. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our
independent registered public accounting firm. We maintain a website at <I>www.francescascollections.com</I>. <B>Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or
the registration statement of which this prospectus forms a part, and you should not rely on any such information in making your decision whether to purchase our securities.</B> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">135 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="index"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="94%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_1">Report of Independent Registered Public Accounting Firm</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_2">Report of Independent Registered Public Accounting Firm</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_3">Consolidated Balance Sheets as of January&nbsp;29, 2011 and January&nbsp;30, 2010</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_4">Consolidated Statements of Operations for the Fiscal Years Ended January&nbsp;29,&nbsp;2011, January&nbsp;
30, 2010 and January&nbsp;31, 2009</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_5">Consolidated Statements of Changes in Convertible Redeemable Preferred Stock and Shareholders&#146; Deficit for the Fiscal
 Years Ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_6">Consolidated Statements of Cash Flows for the Fiscal Years Ended January&nbsp;29,&nbsp;2011, January&nbsp;
30, 2010 and January&nbsp;31, 2009</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><A HREF="#fin160201_7">Notes to Consolidated Financial Statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">F-8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_1"></A>Report of Independent Registered Public Accounting Firm </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Board of Directors and Shareholders of </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We have audited the accompanying consolidated balance sheet of Francesca&#146;s Holdings Corporation (the &#147;Company&#148;) as of January&nbsp;29, 2011, and the related consolidated statements of operations,
changes in convertible redeemable preferred stock and shareholders&#146; deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion
on these financial statements based on our audit. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit
of the Company&#146;s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Francesca&#146;s Holdings Corporation at January&nbsp;29, 2011, and the consolidated results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">April&nbsp;15, 2011 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Dallas, Texas </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_2"></A>Report of Independent Registered Public Accounting Firm </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Board of Directors </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Houston, Texas </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We have audited the accompanying consolidated balance sheet of Francesca&#146;s Holdings Corporation (the &#147;Company&#148;) as of
January&nbsp;30, 2010, and the related consolidated statements of operations, changes in convertible redeemable preferred stock and shareholders&#146; deficit, and cash flows for each of the two years in the period ended January&nbsp;30, 2010. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Francesca&#146;s Holdings Corporation at January&nbsp;30, 2010, and the
results of its operations and its cash flows for each of the two years in the period ended January&nbsp;30, 2010, in conformity with accounting principles generally accepted in the United States of America. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ BDO USA, LLP </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT
STYLE="font-family:ARIAL" SIZE="2">(formerly known as </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">BDO Seidman, LLP) </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT STYLE="font-family:ARIAL" SIZE="2">Houston, Texas </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT
STYLE="font-family:ARIAL" SIZE="2">June&nbsp;22, 2010, except for </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2">footnotes 2 and 9, which </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:ARIAL" SIZE="2">are as of April&nbsp;15, 2011 </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_3"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>CONSOLIDATED BALANCE SHEETS </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>ASSETS</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current assets:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,767</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,054</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">497</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Inventories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,959</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,378</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,321</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Prepaid expenses and other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,871</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,103</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,721</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">22,318</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,495</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,704</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">766</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other assets, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,399</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">639</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>TOTAL ASSETS</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>LIABILITIES AND SHAREHOLDER'S DEFICIT</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,146</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,703</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,315</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current portion of long-term debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total current liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,494</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,018</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred and accrued rents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,223</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,224</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Long-term debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">87,875</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">114,592</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,242</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Commitments and contingencies</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock&#151;Series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Shareholders&#146; deficit:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Common stock&#151;$.01 par value, 80.0 million shares authorized, 40.5 million and 26.0 million shares issued and outstanding at January
29, 2011 and January 30, 2010, respectively</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">405</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Additional paid-in capital (distributions in excess of capital)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,232</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(63,138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accumulated deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(83,105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total shareholders&#146; deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(55,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(62,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>TOTAL LIABILITIES AND SHAREHOLDERS&#146; DEFICIT</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">59,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">31,218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:114px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>The accompanying notes are an integral part of these Consolidated Financial Statements. </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_4"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>CONSOLIDATED STATEMENTS OF OPERATIONS </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands, except per share data)</B> </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135,176</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cost of goods sold and occupancy costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">65,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">37,244</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,358</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,168</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">42,123</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Selling, general and administrative expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,962</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">29,643</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,482</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,970</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Interest income (expense)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,633</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income before income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">28,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,988</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,918</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,382</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in redemption value of convertible redeemable preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Convertible redeemable preferred stock accrued dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,965</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: Income attributable to participating securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to common shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic earnings (loss) per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted earnings (loss) per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends declared per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average shares outstanding:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted shares</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="font-size:120px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:114px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><I>The accompanying notes are an integral part of these Consolidated Financial Statements. </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_5"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>PREFERRED STOCK AND SHAREHOLDERS&#146; DEFICIT </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands) </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Convertible<BR>Redeemable Preferred<BR>Stock&#151;Series A</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Common Stock</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Additional<BR>Paid-in<BR>Capital<BR>(Distributions<BR>in Excess of<BR>Capital)</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Retained<BR>Earnings<BR>(Accumulated<BR>Deficit)</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Total<BR>Shareholders&#146;<BR>Deficit</B></FONT></TD>
<TD VALIGN="bottom" ROWSPAN="2"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares<BR>Outstanding</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Shares<BR>Outstanding</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Par<BR>Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balance, February&nbsp;2, 2008</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,920</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(13,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">128</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(12,736</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">S-Corporation distributions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued dividends for Preferred Stock&#151;Series&nbsp;A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balance, January&nbsp;31, 2009</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23,561</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(13,124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,576</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(11,288</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in redemption value of Preferred Stock&#151;Series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(50,014</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(10,257</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued dividends for Preferred Stock&#151;Series&nbsp;A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balance, January&nbsp;30, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(63,138</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(62,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Conversion of Preferred Stock&#151;Series A to common stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">140</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,714</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">85,854</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash dividends declared and related tax benefit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,220</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(98,780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock options exercised and related tax benefit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">457</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,036</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,041</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Balance, January&nbsp;29, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,457</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">405</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,232</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(83,105</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(55,468</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom" STYLE="BORDER-LEFT:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:2px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>The accompanying notes are an integral part of these Consolidated Financial Statements. </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_6"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>(In thousands) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>For the Fiscal Year Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash Flows Provided by Operating Activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Adjustments to reconcile net income to net cash provided by operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,377</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,215</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">700</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Excess tax benefit from stock-based compensation </FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,757</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Loss on sale of assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Amortization of debt issuance costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">158</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(54</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Changes in assets and liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivables</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,557</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(126</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Inventories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,581</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(794</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">310</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Prepaid expenses and other assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,549</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(407</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,443</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,434</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(298</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,874</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred and accrued rents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,999</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,440</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">315</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">978</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(196</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,462</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash provided by operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,277</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,708</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash Flows Used in Investing Activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Purchase of property and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(16,208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash used in investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(16,208</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,538</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash Flows Used in Financing Activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Excess tax benefit from stock-based compensation </FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,757</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">95,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Repayments on debt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,187</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Payment of debt issuance costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,137</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Proceeds from the exercise of stock options</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">504</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">S-Corporation distributions</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net cash used in financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(6,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,525</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net increase (decrease) in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,251</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,739</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">170</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash and cash equivalents, beginning of year</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,767</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,028</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,858</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Cash and cash equivalents, end of year</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,516</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,767</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,028</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Supplemental Disclosures of Cash Flow Information:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cash paid for income taxes</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,509</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,946</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,935</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Interest paid</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">163</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Supplemental Non-Cash Financing Activities:</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrual of dividends on Preferred Stock &#150; Series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Increase in redemption value of Preferred Stock Series A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>The accompanying notes are an integral
part of these Consolidated Financial Statements. </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><A NAME="fin160201_7"></A>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>1. Summary of Significant Accounting Policies </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Nature of
Business </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation (the &#147;Company&#148;) is a holding company incorporated in 2007 under the laws of
Delaware. The Company&#146;s business operations are conducted through its indirectly wholly-owned subsidiary Francesca&#146;s Collections, Inc., a corporation formed and existing under the laws of the State of Texas. Francesca&#146;s Collections,
Inc. is wholly-owned by Francesca&#146;s LLC (the &#147;Parent&#148;), a limited liability company formed and existing under the laws of Delaware. Parent is a wholly-owned subsidiary of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company operates a national chain of retail boutiques designed and merchandised to feel like independently owned, upscale boutiques and provide
its customers with an inviting, intimate and fun shopping experience. The Company offers a diverse and balanced mix of apparel, jewelry, accessories and gifts at attractive prices. At January&nbsp;29, 2011, the Company operated 207 boutiques, which
are located in 38 states throughout the United States, and its e-commerce website. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In February&nbsp;2010, two affiliates of CCMP
Capital Advisors, LLC (&#147;CCMP&#148;), acquired approximately 84% of the Company&#146;s outstanding shares (the &#147;CCMP Acquisition&#148;) from the founders of the Company and Bear Growth Capital Partners, LP (&#147;BGCP&#148;). The Company
considered the application of push-down accounting to the Company&#146;s financial statements and determined that, given the percentage of equity interest acquired in the acquisition, push-down accounting treatment was not required. The Company
elected not to apply push-down accounting treatment as a result of the acquisition. In connection with the CCMP Acquisition, the Convertible Redeemable Preferred Stock- Series A (&#147;Preferred Stock&#148;) was converted to common stock. In
addition, the outstanding stock options became fully vested and the management agreement with the holders of the Preferred Stock was terminated. See Notes 6 and 10 for more information. As described in Note 6, the Company recognized $1.0 million
compensation expense related to those options that became fully vested. The Company also incurred $0.2 million and $0.7 million of transaction costs which are included in selling, general and administrative expenses in the accompanying consolidated
statement of operations for the fiscal years ended January&nbsp;29, 2011 and January&nbsp;30, 2010, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;28,
2010, the Company authorized a split of its outstanding issued and outstanding stock in the ratio of four hundred to one (400-1). Accordingly, the accompanying consolidated financial statements have been retroactively adjusted to reflect the effects
of the stock split on common shares and per share amounts. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company maintains its accounts on a 52- to 53- week year ending on the Saturday closest to January&nbsp;31. All references herein to fiscal year &#147;2010&#148;, &#147;2009&#148; and &#147;2008&#148; represent
the 52-week periods ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Principles of Consolidation and
Presentation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The accompanying consolidated financial statements include the accounts of the Company and all its subsidiaries. All
significant inter-company balances and transactions have been eliminated in consolidation. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-8 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Reclassifications </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In certain instances,
amounts previously reported in the fiscal year 2009 and 2008 financial statements have been reclassified from selling, general and administrative expenses to cost of goods sold and occupancy costs (including rent, utilities, repairs and maintenance,
taxes and licenses and common area expenses) to conform with the presentation in the fiscal year 2010 financial statements. The reclassifications had no effect on net income or shareholders&#146; equity as previously reported. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Management Estimates and Assumptions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales return, and expenses during the reporting periods. Actual results could differ from those estimates.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fair Value of Financial Instruments </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities
measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level 1&#151;Quoted prices in active markets for identical assets or liabilities. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level 2&#151;Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">Level 3&#151;Unobservable inputs based on the Company&#146;s own assumptions. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. The carrying amount of the Company&#146;s debt approximates its fair value due to
proximity of the debt issue date and the latest balance sheet date and the variable component of the interest on the debt. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Cash and Cash Equivalents
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company considers all interest-bearing deposits and investments purchased with an original maturity of three months or less to
be cash equivalents. The Company maintains cash balances at financial institutions that may from time to time exceed the Federal Deposit Insurance Corporation&#146;s insurance limits. The Company mitigates this concentration of credit risk by
monitoring the credit worthiness of the financial institutions. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-9 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Accounts Receivable </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts receivable
consist of amounts due from credit card companies, tenant allowances due from landlords and income tax receivable. The Company&#146;s management has reviewed accounts receivable for collectibility and has determined an allowance for doubtful
accounts is not necessary at January&nbsp;29, 2011 and January&nbsp;30, 2010. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Inventory </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company values merchandise inventory at the lower of cost or market on a weighted-average cost basis. Inventory costs include freight-in. The
Company records merchandise receipts at the time they are delivered to the distribution center or to its boutiques from vendors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
Company reviews its inventory levels to identify slow-moving merchandise and generally uses promotional markdowns to clear slow-moving merchandise. Each period, the Company evaluates recent selling trends and the related promotional events or
pricing strategies in place to sell through the current inventory levels. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company also estimates a shrinkage reserve for the period
of time between the last physical count and the balance sheet date. The estimate for shrinkage reserve can be affected by changes in merchandise mix and changes in actual shrinkage trends. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Property and Equipment </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment is stated at cost. Depreciation of property and
equipment is provided on a straight-line basis for financial reporting purposes using the following useful lives: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="39%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:26pt"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Assets</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Estimated Useful Lives</B></FONT></P></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">3&nbsp;-&nbsp;5&nbsp;years</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Furniture and fixtures</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">5 years</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Software</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">3 years</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Signage and leasehold improvements</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">the&nbsp;lesser&nbsp;of 5 - 10 years or lease term</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Assets under construction are not depreciated until the asset is placed in service and ready for use. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Maintenance and repairs of property and equipment are expensed as incurred, and major improvements are capitalized. Upon retirement, sale or other
disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in current earnings. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Impairment of Long-lived Assets </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company periodically evaluates long-lived assets held for
use and held for sale whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash
flows, which is generally at a boutique level. Boutique assets are reviewed for impairment using factors including, but not limited to, the Company's future operating plans and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-10 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to that boutique, compared to the carrying
value of the assets. The Company recognizes impairment if the sum of the undiscounted future cash flows of a boutique does not exceed the carrying value of the assets. For impaired assets, the Company recognizes a loss equal to the difference
between the net book value of the asset and its estimated fair value. Fair value is based on discounted future cash flows of the asset using a discount rate commensurate with the risk. In addition, at the time a decision is made to close a boutique,
the Company records an impairment charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. Based on the analysis performed, there was no impairment for each of the fiscal years ended January&nbsp;29,
2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Operating Leases </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company leases boutiques and distribution center and office space under operating leases. The majority of the Company&#146;s lease agreements
provide for tenant improvement allowances, rent escalation clauses and/or contingent rent provisions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company records tenant
improvement allowances and other landlord incentives as a component of deferred rent which is amortized on a straight-line basis over the lease term as a reduction of rent expense. The unamortized portion of deferred rent totaled $5.9 million and
$1.6 million at January&nbsp;29, 2011 and January&nbsp;30, 2010, respectively, and is included in deferred and accrued rents in the consolidated balance sheets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company records straight-line rent expense beginning on the earlier of taking possession of the boutique (pre-opening or construction period) or the commencement date of the lease. In fiscal 2010, the Company
determined that its policy had historically been inconsistently applied. The Company corrected the deferred rent expense account, resulting in a non-cash $0.7 million cumulative adjustment to record additional rent expense during the first quarter
of fiscal 2010. That adjustment was included in the cost of goods sold and occupancy cost in the consolidated statements of operations. The adjustment did not impact historical cash flows and will not impact future net cash flows or the timing of
the payments under the related leases. Prior years&#146; financial statements were not restated as the impact of these issues was immaterial to previously reported results for any individual prior year. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Certain leases provide for contingent rents, in addition to a basic fixed rent, which are determined as a percentage of gross sales in excess of
specified levels. The Company records a contingent rent liability and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Revenue Recognition </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company
recognizes revenue upon purchase of merchandise by customers, net of estimated merchandise returns. Revenue is recognized for boutique sales at the point at which the customer receives and pays for the merchandise at the register. For on-line sales,
revenue is recognized upon delivery and includes shipping charges. Management estimates future returns on previously sold merchandise based on return history and current sales levels. The estimated sales returns are periodically compared to actual
sales returns and adjusted, if appropriate. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-11 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Gift Cards and Gift Card Breakage </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The
Company accounts for the sale of gift cards as a liability at the time a gift card is sold. The liability is relieved and revenue is recognized upon redemption of the gift card. The Company&#146;s gift cards do not have an expiration date. We will
recognize income from the breakage of gift cards when the likelihood of redemption of the gift card is remote based on historical redemption patterns. The Company has not accumulated adequate historical data to reasonably estimate the amount of gift
cards that will never be redeemed. Consequently, the Company has not recognized gift card breakage income in fiscal years 2010, 2009 or 2008. The Company does not anticipate recognizing gift card breakage until it accumulates additional data beyond
fiscal year 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Sales Taxes </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company excludes all taxes assessed by a government authority directly imposed on revenue producing transactions between a seller and a customer
from revenue. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Cost of Goods Sold and Occupancy Costs </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Cost of goods sold and occupancy costs include the direct cost of purchased merchandise, freight costs from the Company&#146;s suppliers to its distribution centers and freight costs for merchandise shipped
directly from its vendors to its boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation and boutique repair and maintenance costs, and
shipping costs related to e-commerce sales. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Selling, General and Administrative Expenses </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Selling, general and administrative expenses include boutique and headquarters payroll, employee benefits, freight from distribution centers to
boutiques, boutique pre-opening expense, credit card merchant fees, costs of maintaining and operating the Company&#146;s e-commerce business, travel and administration costs and other expenses related to operations at the corporate headquarters, as
well as share-based compensation. Pre-opening expenses (including boutique set-up and training expenses) incurred prior to the opening of new boutiques are expensed as incurred and are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Freight costs included in selling, general and administrative expenses amounted to
$0.8 million, $0.5 million and $0.3 million for the fiscal years ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Advertising </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Costs associated with advertising are charged to expense as incurred. For the
years ended January&nbsp;29, 2011, January&nbsp;30, 2010, and January 31, 2009 advertising costs were minimal. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Stock-Based Compensation
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In connection with the Company&#146;s stock based compensation plans, the Board of Directors considers the estimated fair value of
the Company&#146;s stock when setting stock option exercise price as of the date of each grant. Because the Company is privately held and there is no public market for its </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-12 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
common stock, the fair market value of its common stock is determined by its Board of Directors at the time the option grants are awarded. In determining the fair value of its common stock, the
Board of Directors considers such factors as the Company&#146;s actual and projected financial results, the principal amount of the Company&#146;s indebtedness, valuations of the Company performed by third parties and other factors it believes are
material to the valuation process. Stock options granted in the first and second quarters of fiscal 2010 were valued using the implied enterprise value paid by CCMP for its acquisition of the equity securities of the Company in February 2010, as
described in Note&nbsp;1. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a
straight-line basis over the employee&#146;s requisite service period (generally the vesting period of the equity grant). The Company estimates forfeitures for options granted that are not expected to vest. Changes in these inputs and assumptions
can materially affect the measurement of the estimated fair value of the stock-based compensation expense. The Company estimates the grant date fair value of stock option awards using the Black-Scholes option pricing model. See Note 6 for further
information. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Debt Issuance Costs </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Costs incurred in connection with the Company&#146;s borrowings are capitalized and included in other assets in the consolidated balance sheets.
These costs are amortized to interest expense using the effective interest method over the term of the loan. In 2010, the Company incurred $2.2 million of costs related to the credit facility obtained during the year. At January&nbsp;29, 2011, debt
issuance costs totaled $2.0 million, net of $0.2 million of accumulated amortization. Amortization expense amounted to $0.2 million for the fiscal year ended January&nbsp;29, 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Income Taxes </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company accounts for income taxes using the liability method. Under this
method, the amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences that currently exist between the tax basis and the
financial reporting basis of the Company&#146;s assets and liabilities. Valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected
to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and
liabilities in the future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the
position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. The
Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when the Company&#146;s judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-13 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
income tax expense and the effective tax rate in the period in which the new information becomes available. Interest and penalties related to unrecognized tax benefits are recognized in income
tax expense. The Company has no uncertain tax positions or related interest or penalties requiring accrual at January&nbsp;29, 2011 and January&nbsp;30, 2010. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>Subsequent Event Evaluation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company has reviewed and evaluated material subsequent events
from the balance sheet date of January&nbsp;29, 2011 through April&nbsp;15, 2011, the issuance of the financial statements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recent Accounting
Pronouncements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In January 2010, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Accounting Standards Update
(&#147;ASU&#148;) 2010-06, <I>Improving Disclosures About Fair Value Measurements </I>an update to Topic 820, Fair Value Measurements and Disclosures. ASU 2010-06 expands disclosure requirements related to fair value measurements including
(i)&nbsp;separately disclosing the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describing the reasons for the transfers and (ii)&nbsp;presenting separate information for Level 3 activity pertaining
to gross purchases, sales, issuances and settlements. The new disclosures are effective for interim and annual reporting periods beginning after December&nbsp;15, 2009, except for Level 3 activity disclosures, which are effective for fiscal years
beginning after December&nbsp;15, 2010. The adoption of ASU 2010-06 did not have a material impact on the Company&#146;s consolidated financial statements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>2. Earnings (Loss) per Share </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic earnings per common share amounts are calculated using the
weighted-average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of Preferred
Stock and stock options using the if-converted and treasury stock methods, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In the years the Preferred Stock was
outstanding, the two-class method was used to calculate basic and diluted earnings (loss) per common share since it is a participating security under ASC 260 <I>Earnings per Share</I>. The two-class method is an earnings allocation formula that
determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under the two-class method, basic earnings (loss) per common
share is computed by dividing net earnings (loss) attributable to common share after allocation of earnings to participating securities by the weighted-average number of common shares outstanding during the year. Diluted earnings (loss) per common
share is computed using the more dilutive of the two-class method or the if-converted method. In periods of net loss, no effect is given to participating securities since they do not contractually participate in the losses of the Company.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-14 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or converted into common
stock, and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted earnings per share: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>For the Fiscal Years Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In&nbsp;thousands,&nbsp;except&nbsp;per&nbsp;share&nbsp;data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Numerator:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net Income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,606</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: Increase in redemption value of Preferred Stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(60,271</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: Preferred Stock dividends</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,641</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,965</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less: Income attributable to participating securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1,038</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income (loss) available to common shareholders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,895</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(51,689</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,927</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Denominator:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted-average common shares outstanding&#151;basic</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,385</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options and other dilutive securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,522</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted-average common shares outstanding&#151;diluted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">40,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="5"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD>
<TD HEIGHT="5" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Per common share:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Basic earnings (loss) per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Diluted earnings (loss) per common share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(1.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.07</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As discussed above, the Company was
required to use the two-class method to compute basic and diluted earnings (loss) per common share during the period the Preferred Stock was outstanding. In fiscal year 2009, the adjustment to record the increase in redemption value of Preferred
Stock (see Note 10) reduced undistributed earnings, to be allocated between common shares and participating securities, to zero for purposes of calculating earnings per share using the two-class method. As such, net losses were solely attributable
to common shareholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock options to purchase 1.0&nbsp;million and 0.6&nbsp;million shares of common stock for the fiscal years
2009 and 2008, respectively, were outstanding but not included in the computation of diluted earnings per shares due to its anti-dilutive effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">For the fiscal years 2009 and 2008, Preferred Stock that could be converted to 14&nbsp;million shares of common stock were not included in the computation of diluted earnings per share, as the effect of doing so
would have been anti-dilutive. Accordingly, dividends paid and the increase in the redemption value of Preferred Stock was deducted to arrive at net income (loss) available to common shareholders. See Note 10 for more information regarding Preferred
Stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-15 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>3. Detail of Certain Balance Sheet Accounts </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounts and other receivables:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Credit card receivables</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">825</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">497</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Tenant allowances</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,574</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax receivable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">655</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,054</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">497</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment, net:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,798</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,374</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Furniture and fixtures</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,475</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,593</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Signage and leasehold improvements</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">14,829</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,604</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Construction in progress</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,799</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,314</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Software</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">191</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,092</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,885</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Less accumulated depreciation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(5,792</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3,390</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21,300</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,495</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gift cards and store credits outstanding</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,152</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued payroll, benefits and bonuses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,573</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,074</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued interest</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,308</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued sales tax</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">419</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">309</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">780</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,315</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred and accrued rents:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred rent</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,880</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,646</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued rent</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,343</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">578</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,223</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,224</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>4. Income Taxes </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The provision for income
tax expense for the years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;31, 2009 is as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="71%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>For Fiscal Years Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Current:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Federal</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,778</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,094</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,084</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">342</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,798</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,751</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,436</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Federal</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,275</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(724</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(56</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(410</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(109</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(2,685</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(833</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(54</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6,918</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,382</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">A reconciliation of the statutory federal income tax rate to the effective tax rate follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>For&nbsp;Fiscal&nbsp;Years&nbsp;Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income tax expense at statutory rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Nondeductible expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">State tax, net of federal benefit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(0.4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(3.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Effective tax rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39.7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39.5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34.1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For fiscal year 2008, the provision for income taxes was reduced by $0.2 million due to adjustments made to deferred
income taxes for differences between estimates used in recording the income tax provision in the prior year and the actual federal and state tax returns. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets and liabilities are recorded due to different carrying amounts for financial and income tax reporting purposes arising from
cumulative temporary differences as measured by enacted tax rates, which will be in effect when these temporary differences reverse. These differences consist of the following at January&nbsp;29, 2011 and January&nbsp;30, 2010: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax assets:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Inventories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">502</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">221</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accrued liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">819</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">352</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred and accrued rents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,618</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">890</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Equity based compensation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">358</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,297</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,463</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Deferred tax liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Property and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">272</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">106</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Other</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total deferred tax liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">272</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">124</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net deferred tax assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,025</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,339</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company&#146;s tax years are subject to examination by federal authorities from 2008 forward, and by state taxing
authorities from 2007 forward. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>5. Credit Facility </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On December&nbsp;11, 2008, the Company entered into a $3 million revolving credit agreement ("Credit Facility") with a bank. The Credit Facility provided a $3 million revolving line of credit that matured on
December&nbsp;11, 2011. On January&nbsp;25, 2010, the Company requested the Credit Facility be terminated, and on February&nbsp;16, 2010, the bank terminated the Credit Facility. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On November&nbsp;17, 2010, Francesca&#146;s Collections, Inc. (the &#147;Borrower&#148;) entered into a senior secured credit facility with a
syndicate of financial institutions, which provided financing of up to $100.0 million consisting of a $95.0 million term loan facility and a $5.0 million revolving credit facility each with a maturity date of November&nbsp;17, 2013.&nbsp;The
principal of the term loan component will be repaid in quarterly installments of $1.9 million in the first year, $2.4 million in the second and third year and the remainder on the maturity date. The revolving credit facility includes borrowing
capacity available for letters of credit.&nbsp;As of January&nbsp;29, 2011, the Company had $93.8 million outstanding under its term loan facility and $5.0 million available under its revolving credit facility. There were no letters of credit
outstanding at January&nbsp;29, 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">All obligations under the senior secured credit facility are unconditionally guaranteed by,
subject to certain exceptions, Parent and each of the Borrower&#146;s existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under the senior secured credit facility, and the guarantees of those obligations (as
well as cash management obligations and any interest hedging or other swap agreements), are secured by substantially all of the Borrower&#146;s assets as well as those of the subsidiary guarantor. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The borrowings under the senior secured credit facility bear interest at a rate equal to an applicable margin plus, at the Borrower&#146;s option,
either (a)&nbsp;in the case of base rate borrowings, a rate equal to the highest of (1)&nbsp;the higher of (i)&nbsp;the prime rate of Royal Bank of Canada and (ii)&nbsp;the federal funds rate plus 1/2 of 1%, (2)&nbsp;the LIBOR for an interest period
of one month plus 1.00% and (3)&nbsp;2.75% or (b)&nbsp;in the case of LIBOR borrowings, a rate equal to the higher of (1)&nbsp;1.75% and (2)&nbsp;the LIBOR for the interest period relevant to such borrowing. The current applicable margin for
borrowings under both the revolving credit facility and the term loan facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility
and the term loan facility for base rate borrowings increases to 6.50% and 9.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for
LIBOR borrowings increases to 7.50% and 10.00% on June&nbsp;1, 2012 and June&nbsp;1, 2013, respectively. As of January&nbsp;29, 2011, the loans under the senior secured credit facility were LIBOR-based and had an interest rate of 7.75%. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In addition to paying interest on the outstanding principal under the senior secured credit facility, the Borrower is required to pay a commitment
fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder at a rate equal to 0.5%. The Borrower also pays customary letter of credit fees. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The senior secured credit facility requires the Borrower to maintain a maximum consolidated leverage ratio and a maximum senior leverage ratio, in
each case, commencing with the fiscal quarter ending January&nbsp;29, 2011 and a minimum consolidated fixed charge coverage ratio commencing with the fiscal quarter ending October&nbsp;31, 2011.&nbsp;The Company&#146;s ability to declare dividends
from Francesca&#146;s Collections, Inc. to Holdings at January&nbsp;29, 2011, was subject to restrictions under the senior secured credit facility. Those restrictions include a maximum leverage ratio. If the Company&#146;s debt under its Credit
Facility exceeds that ratio, it is restricted from paying dividends. As of fiscal year-end 2010, this ratio exceeded that maximum, and, thereby was restricted from paying dividends. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Borrower is in compliance with the debt covenants of its senior secured credit facility as of January&nbsp;29, 2011. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Debt maturities </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The term loan, which
had aggregate principal balance of $93.8 million at January&nbsp;29, 2011, is due as follows: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="16%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:52pt"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in&nbsp;thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,938</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2012</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2013</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">78,375</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">93,813</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-19 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>6. Stock-Based Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>2007 Stock Incentive Plan
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In 2007, the Company adopted the Francesca&#146;s Holdings Corporation 2007 Stock Incentive Plan (the &#147;2007 Plan&#148;), to
be administered by Board of Directors or a committee designated by its Board of Directors (the &#147;Committee&#148;). Under the 2007 Plan, awards may be in the form of stock options, restricted stock or phantom shares and may be granted to any
employee, director or consultant of the Company. With respect to incentive stock options granted, the share exercise price shall not be less than the fair market price on the date of grant. For non-qualified stock options granted, the share exercise
price of each option is determined by the compensation committee of the Board of Directors, which considers the estimated fair value of the Company&#146;s stock when setting stock option price as of the date of each grant. The awards generally vest
evenly over four to five years and have a ten year contractual term. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The CCMP Acquisition triggered a &#147;Change of Control&#148;
that resulted in the acceleration of vesting, in accordance with the provisions of the 2007 Plan, of the 906,000 stock options issued and outstanding. Accordingly, the Company recognized compensation expense of $1.0 million included in selling,
general and administrative expenses in the consolidated statements of operations for the fiscal year ended January&nbsp;29, 2011 related to the accelerated vesting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;28, 2010, the plan was amended to adjust the number of shares available for issuance to account for a 400-for-1 stock split. Accordingly, the number of shares authorized to be issued under the 2007
Plan increased to 2,105,200 shares. As of January&nbsp;29, 2011, the Company can no longer grant awards under the 2007 Plan. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>2010 Stock Incentive
Plan </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;27, 2010, the Company adopted the Francesca&#146;s Holdings Corporation 2010 Stock Incentive Plan (the
&#147;2010 Plan&#148;) to be administered by the Board of Directors or a Committee. Under the 2010 Plan, awards may be in the form of stock options, stock or restricted stock and may be granted to any officers, directors, eligible employees and
consultants of the Company. Exercise prices shall not be less than the fair market value of the Company&#146;s common stock at the date of grant as determined by the Board of Directors. The awards generally vest over four to five years and have a
ten year contractual term. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;28, 2010, the plan was amended to adjust the number of shares available for issuance to
account for a 400-for-1 stock split. Accordingly, the number of shares authorized to be issued under the 2010 Plan increased to 2,020,400 shares. As of January&nbsp;29, 2011 there were 77,312 options remaining that can be granted under the 2010
Plan. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock Option Award Modification </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">In November 2010, the Board of Directors authorized and paid a cash dividend equal to $2.39 per share on its common stock following the issuance of a senior secured credit facility (see Note 5). In accordance with
applicable plan documents, stock option holders are entitled to an equitable adjustment to their stock option awards upon, among other events, a recapitalization of the Company. As a result, the Board of Directors approved the reduction of the
exercise price of certain outstanding options (724,000 total options) in an amount equal to the per share cash dividend effective on </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-20 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
December&nbsp;12, 2010 to reduce the dilution effect of the cash dividend. No incremental compensation expense was recognized because the fair value of the awards did not increase as a result of
the modification. Additionally, the Board of Directors allowed certain stock option holders (1,318,000 total options) to participate in the cash dividend in lieu of stock price adjustment. The Company recognized incremental compensation expense of
$0.3 million related to vested options for which the option holders received a cash dividend in lieu of the decrease in exercise price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Stock
Options </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table presents stock options granted, vested and expired and aggregate intrinsic value under the existing
share based compensation plans. The intrinsic value of the stock options was calculated based on a $10.19 estimated fair market value per share of the Company&#146;s common stock as of January 29, 2011. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="43%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Number<BR>of<BR>Options</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted<BR>Average<BR>Exercise Price</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted<BR>Average<BR>Remaining<BR>Contractual<BR>Life</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Aggregate<BR>Intrinsic Value</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(Per&nbsp;share&nbsp;data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in Years)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(In&nbsp;thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Outstanding as of January&nbsp;30, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">906,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.94</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options granted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,994,430</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">6.18</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options exercised</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">(457,342</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">0.91</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,506</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Options forfeited or expired</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Outstanding as of January&nbsp;29, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,443,088</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,126</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Exercisable at January&nbsp;29, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">685,340</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.71</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,127</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">During fiscal years 2010, 2009 and 2008, 1,994,430, 406,000 and 100,000 stock options, respectively, were granted at a
weighted-average grant date fair value of $3.99, $2.77 and $0.06, respectively. In fiscal year 2010, proceeds from stock option exercises amounted to $0.5 million. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The fair value of stock options was estimated on the date of grant using Black Scholes option pricing model using the following assumptions: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="20%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2010</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>2008</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected volatility</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">54.2&nbsp;%&nbsp;- 60.6%</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">85.4%</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">53.5%</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Risk-free interest rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">1.6% - 3.2%</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">0.9%</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">3.2%</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Weighted average term</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">6.27 - 6.5</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">2.00</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">6.42</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Expected dividend yield</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The risk-free interest rate was
determined based on the rate of Treasury instruments with maturities similar to those of the expected term of the award being valued. The expected dividend yield was based on the Company&#146;s expectations of not paying dividends on its common
stock for the foreseeable future. The expected volatility incorporates historical and implied volatility of similar entities whose share prices are publicly available. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Compensation expense for the fiscal years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;31, 2009 totaled approximately $2.4 million, $0.1 million and less than $0.1 million, respectively.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-21 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table summarizes information regarding non-vested outstanding stock options as of January&nbsp;29, 2011: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="69%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Options</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Weighted<BR>Average<BR>Fair&nbsp;Value&nbsp;at<BR>Grant Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-vested as of January 30, 2010</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">706,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.58</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Granted</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,994,430</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.99</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Vested</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">942,682</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2.09</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Cancelled</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">&#151;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Non-vested as of January 29, 2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,757,748</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.04</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">As of January&nbsp;29, 2011, there was approximately $7.3 million of total unrecognized compensation cost related to
non-vested stock option awards that is expected to be recognized over a weighted-average period of 3.7 years. The total fair value of options vested during the fiscal years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;30, 2009
was $2.0 million, less than $0.1 million and less than $0.1 million, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>7. Employee Benefits </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">In October&nbsp;2009, the Company adopted a Profit Sharing and 401(k) Plan (the &#147;Plan&#148;) under which full-time and part-time employees
become eligible to participate following twelve consecutive months of employment. Eligible employees may elect to contribute a percentage of their earnings to the 401(k) component of the Plan, and the Company makes a discretionary contribution to
the Plan based on the contribution of the employees. The Profit Sharing component of the Plan is entirely funded by the Company at its sole discretion. Effective January&nbsp;1, 2011, the 401(k) component of the Plan was amended whereby the Company
will make matching contributions equal to 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions. For the fiscal years ended January&nbsp;29, 2011 and January&nbsp;30, 2010, the Company&#146;s matching
contributions were $0.1 million and less than $0.1 million, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>8. Commitments and Contingencies </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B><I>Operating leases </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company leases
boutique space and office space under operating leases expiring in various years through the fiscal year ending 2021. Certain of the leases provide that the Company may cancel the lease, with penalties as defined in the lease, if the Company&#146;s
boutique sales at that location fall below an established level. Certain leases provide for additional rent payments to be made when sales exceed a base amount. Certain operating leases provide for renewal options for periods from three to five
years at their fair rental value at the time of renewal. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-22 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Minimum future rental payments under non-cancellable operating leases as of January&nbsp;29, 2011, are approximately as follows: </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="14%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:52pt"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in&nbsp;thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2011</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,285</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2012</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,656</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2013</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">13,636</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2014</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,302</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">2015</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">11,309</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Thereafter</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">50,529</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">118,717</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For the years ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009, rent expense totaled
$12.2 million, $7.2 million and $5.2 million, respectively. For the fiscal years ended January&nbsp;29, 2011,&nbsp;January&nbsp;30, 2010 and January&nbsp;31, 2009, common area maintenance charges totaled $2.6 million, $1.5 million and $0.9 million,
respectively, and other rental charges amounted to $1.3 million, $0.8 million and $0.7 million, respectively, consisting primarily of property taxes and advertising fees. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B><I>Legal Proceedings </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">From time to time, the Company is subject to various claims and legal
proceedings arising in the ordinary course of business. While the outcome of any such claim cannot be predicted with certainty, in the opinion of management, the outcome of these matters will not have a material adverse effect on the Company&#146;s
business, results of operations or financial conditions. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>9. Segment Reporting and Concentration of Risk </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Company determined its operating segments on the same basis used internally to evaluate performance. The Company&#146;s reporting segments are
the operation of boutiques and the e-commerce website, which have been aggregated into one reportable financial segment. The Company aggregates its operating segments because (i) the merchandise offered at retail locations and through the e-commerce
business is largely the same, (ii) management believes that the majority of its e-commerce customers are also customers of retail locations and (iii) the merchandise margin of both segments is similar. All of the Company&#146;s identifiable assets
are located in the United States. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following is net sales information regarding the Company&#146;s major product classes:
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="53%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>For Fiscal Years Ended</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;29,<BR>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;30,<BR>2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>January&nbsp;31,<BR>2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="10" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Apparel</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">70,326</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">45,540</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">26,829</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Jewelry</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">27,911</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16,764</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,281</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accessories</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,567</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,007</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,391</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gifts</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,367</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,949</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">7,789</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Merchandise sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">135,171</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">79,260</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">52,290</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The above table does not include shipping revenue and allowance for returns. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-23 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">For fiscal years 2010 and 2009, two of the Company&#146;s vendors accounted for approximately 23% of its purchases, with no single vendor accounting
for more than 15% of purchases. In fiscal year 2008, one vendor accounted for 12% of the Company&#146;s total purchases. Those vendors are related parties. See Note 11. Other than those mentioned, no vendor accounted for more than 10% of the
Company&#146;s purchases during the fiscal years 2010, 2009 and 2008. The Company believes that there are other vendors that could replace these vendors and therefore loss of one or all would not result in a material disruption to its business.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>10. Convertible Redeemable Preferred Stock&#151;Series A </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Under its Certificate of Incorporation, the Company is authorized to issue 45,000 shares of undesignated Preferred Stock. In April 2007, the Board of Directors designated 35,000 preferred shares as Convertible
Redeemable Preferred Stock&#151;Series A, par value $0.01 per share, all of which were outstanding through February&nbsp;25, 2010. The recipients of the Preferred Stock simultaneously purchased a portion of the Company&#146;s common stock directly
from the common shareholders and then exchanged such common stock for Preferred Stock. Accordingly, to properly record the redemption amount of the Preferred Stock (&#147;Face Amount&#148;) at that time, a distribution in excess of capital was
recorded. Distributions in excess of capital primarily represent deemed dividends recorded to properly reflect the redemption value of Preferred Stock. Distributions in excess of capital was charged with these deemed dividends as the Company did not
have sufficient retained earnings or additional paid in capital at the time of issuance. Upon conversion of the Preferred Stock to common stock, the redemption value of Preferred Stock was treated as contributed capital, which eliminated the
distributions in excess of capital and establish additional paid in capital. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The Convertible Redeemable Preferred Stock&#151;Series A
had the following rights and privileges: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Dividend</I>&#151;The Preferred Stock accrued cash dividends effective each January&nbsp;1, whether declared or not, at a rate of 12%&nbsp;per year of the
original issue price of the Preferred Stock. In the event that certain earnings before income tax, depreciation and amortization (&#147;EBITDA&#148;) thresholds were met in the calendar year 2007, the dividend rate was to be substituted by 15% or
10%, as appropriate in accordance with the Certificate of Designation governing the Preferred Stock. The Company accrued the required dividends, at the dividend rate of 10% having met the conditions under the Certificate of Designation to use such
rate, throughout the year and had considered it when estimating the redemption value of the Preferred Stock at each reporting period in the accompanying consolidated balance sheets. The Preferred Stock could also participate in dividends on common
stock, if declared. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Voting&#151;</I>The holders of the Preferred Stock voted on an as-converted basis together with the holders of the Company&#146;s common stock as a single
class, except with respect to any increase or decrease in the authorized shares of common stock, as to which the holders of the Preferred Stock had no right to vote. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Liquidation</I>&#151; Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or the consummation of any Change of
Control Transaction (as defined in the Certificate of Designations governing the Preferred Stock) each holder of outstanding shares of Preferred Stock was entitled to receive an amount equal to the greater of (i)&nbsp;$571.43 per share plus all
accumulated but unpaid dividends and (ii)&nbsp;the amount that would be distributed or payable in respect of the number of shares of common stock issuable upon conversion of the Preferred Stock if such conversion occurred immediately prior to such
liquidation event or change of control transaction. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-24 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:WINGDINGS" SIZE="2" COLOR="#000000">&#159;</FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"></FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><I>Conversion and redemption feature</I>&#151;The Preferred Stock is convertible into equal number of shares of common stock (adjusted for any stock split) or
was mandatorily convertible into common stock upon a Qualified IPO as defined in the Certificate of Designation governing the Preferred Stock. Given that the redemption feature was outside the Company&#146;s control, the Preferred Stock was
reflected in the consolidated balance sheets as temporary equity for the period it was outstanding. Upon voluntary or mandatory conversion of the Preferred Stock to common stock all accrued and unpaid dividends were to be deemed automatically
satisfied and extinguished without any adjustment to the conversion price or any increase in the number of shares of common stock into which the Preferred Stock was convertible in respect of such accrued but unpaid dividends. The redemption price
was the greater of the face amount of the Preferred Stock plus all accrued and unpaid dividends (&#147;Base Amount&#148;) or the fair market value of the Preferred Stock. The Company was required to record the Preferred Stock at its estimated fair
market value if determined that the fair market value exceeded the Base Amount. For accounting purposes, the Company has elected to adjust the carrying value of Preferred Stock to equal the redemption value at the end of each reporting period. The
increase in redemption value was recorded as a reduction to retained earnings or, in the absence of retained earnings, paid in capital. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The fair value of the Company&#146;s Preferred Stock was estimated using Level 3 inputs. At January&nbsp;30, 2010, the estimated fair value totaled $85.9 million, exceeding the Base Amount. The fair value was based
on the purchase price paid by CCMP upon purchase of approximately 84% of the underlying common shares (into which the shares of Preferred Stock were converted to in February 2010), as further supported by an independent valuation. Accordingly, the
Preferred Stock was recorded at its estimated redemption value of $85.9 million, which took into consideration the accrued dividends of $5.6 million. At January&nbsp;31, 2009, the estimated fair market value of the Preferred Stock, based on an
independent valuation, was determined to be less than the Base Amount. Accordingly, the face amount of the Preferred Stock of $20.0 million plus the accrued dividends of $3.6 million appropriately reflected the redemption value of the Preferred
Stock at January&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;26, 2010, the holders of Preferred Stock exercised their right to convert all of the
outstanding Preferred Stock into 14.0&nbsp;million shares of common stock in connection with the acquisition by CCMP of approximately 84% of the Company&#146;s outstanding shares. Thus, there were no outstanding shares of Preferred Stock at
January&nbsp;29, 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>11. Related Party Transactions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">Stony Leather, Inc. (&#147;Stony&#148;) and KJK Trading Corporation (&#147;KJK&#148;) are two of the Company&#146;s vendors that supply apparel, jewelry, accessories and gifts. Stony is owned and operated by
certain shareholders of the Company while KJK is owned by the brother-in-law of one of the Company&#146;s founders. During the fiscal years 2010, 2009 and 2008, purchases from KJK totaled $6.6 million, $2.8 million and $1 million, respectively,
while purchases from Stony totaled $5.0 million, $3.1 million and $2.1 million, respectively. Purchases from Stony and KJK accounted for 10%, 12% and 12%, respectively, and 13%, 11% and 6%, respectively, in each case, for the fiscal years ended
2010, 2009 and 2008, respectively. Accounts payable due to related parties for inventory purchases was not material at January&nbsp;29, 2011 and January&nbsp;30, 2010. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The Company entered into a management agreement with the holder of the Preferred Stock where such holder would provide consulting services in exchange for quarterly fees of $62,500. Upon
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-25 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
the conversion of the Preferred Stock, the management agreement was terminated. For each of the fiscal years ended January&nbsp;29, 2011, January&nbsp;30, 2010 and January&nbsp;31, 2009, the
Company incurred management fees totaling zero, $0.3 million and $0.3 million which are included in selling, general and administrative expenses in the consolidated statements of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>12. Quarterly Financial Data (Unaudited) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="75%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="56%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year 2010</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fourth<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Third<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Second<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>First<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">39,882</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">35,073</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">34,804</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">25,417</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,592</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,149</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">18,782</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,645</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,912</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,401</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">9,709</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,621</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,328</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,861</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,591</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="16"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fiscal Year 2009</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Fourth<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Third<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Second<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>First<BR>Quarter</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net sales</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24,607</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">19,501</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">20,008</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,251</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Gross profit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">12,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,204</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10,919</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">8,068</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Income from operations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,580</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4,053</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5,591</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,258</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,788</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">2,450</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3,390</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1,976</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">F-26 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:100px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="4">Shares </FONT></P> <P STYLE="font-size:36px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Francesca&#146;s Holdings Corporation </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="4">Common Stock </FONT></P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">

<IMG SRC="g160201g42h61.jpg" ALT="LOGO"> </P>
 <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Goldman, Sachs &amp; Co. </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>J.P. Morgan </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>Jefferies
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>RBC Capital Markets </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="5"><B>Stifel Nicolaus Weisel </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="5"><B>KeyBanc Capital Markets </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:150px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Through and including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer&#146;s obligation
to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>PART II </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2"><B>INFORMATION NOT REQUIRED IN PROSPECTUS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;13.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Other Expenses of Issuance and Distribution </B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with the registration
of the common stock hereunder. All amounts are estimates except the SEC registration fee, the FINRA filing fee and The NASDAQ Global Select Market listing fee. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="90%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">SEC registration fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">17,415</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">FINRA filing fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">15,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">The NASDAQ Global Select Market listing fee</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Accounting fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Legal fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Blue Sky fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Transfer Agent fees and expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Printing and engraving expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Miscellaneous Expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR></TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="1">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="1">To be provided by amendment. </FONT></TD></TR></TABLE> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;14.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Indemnification of Directors and Officers </B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;102(b)(7) of the Delaware General Corporation Law, or the DGCL, permits a corporation in its certificate of incorporation or an
amendment to eliminate or limit the personal liability of its directors or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of law or obtained an improper personal benefit. Our amended and restated certificate of
incorporation that will be in effect upon completion of this offering will provide for this limitation of liability. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;145
of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, to which he or she is a party by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section&nbsp;145 further provides that in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating
court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Court of Chancery or such other court shall deem
proper. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Section&nbsp;145(g) of the DGCL further authorizes a corporation to purchase and maintain insurance on behalf of any
indemnified person against any liability asserted against and incurred by such person </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
in any indemnified capacity, or arising out of such person&#146;s status as such, regardless of whether the corporation would otherwise have the power to indemnify under Delaware law. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Our amended and restated certificate of incorporation and our amended and restated bylaws that will be in effect upon completion of this offering
will provide that we must indemnify our directors and officers to the fullest extent authorized by Delaware law and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking,
by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this section or otherwise. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Upon completion of this offering, we expect to enter into indemnification agreements with our directors and executive officers. In general, these
agreements provide that we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as a director or officer or in connection with his or her service at our request for another
corporation or entity. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person
may have or hereafter acquire under any statute, provision of our amended and restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or disinterested directors or otherwise. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We expect to maintain standard policies of insurance that provide coverage (1)&nbsp;to our directors and officers against loss rising from claims
made by reason of breach of duty or other wrongful act and (2)&nbsp;to us with respect to indemnification payments that we may make to such directors and officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT
STYLE="font-family:ARIAL" SIZE="2">The underwriting agreement to be filed as an exhibit to this registration statement will provide for indemnification of us and our directors and certain of our officers by the underwriters for certain liabilities.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;15.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Recent Sales of Unregistered Securities </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Set
forth below is information regarding shares of common stock and preferred stock issued and options granted by us within the past three years that were not registered under the Securities Act. Also included is the consideration, if any, received by
us for such shares and options and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Issuances of Capital Stock </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Common Stock </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT STYLE="font-family:ARIAL" SIZE="2">On February&nbsp;25, 2010, the
Registrant issued 406,000 shares of common stock, as adjusted for the 400-for-1 stock split, to an employee in connection with the exercise of stock options granted pursuant to the Registrant&#146;s 2007 Stock Incentive Plan. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT STYLE="font-family:ARIAL" SIZE="2">On November&nbsp;11, 2010, the Registrant issued 38,325 shares of common stock to an employee in connection with the exercise of stock options
granted pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT STYLE="font-family:ARIAL" SIZE="2">On December&nbsp;16, 2010, the Registrant issued 13,017 shares of
common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT
STYLE="font-family:ARIAL" SIZE="2">On March&nbsp;29, 2011, the Registrant issued 12,775 shares of common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant&#146;s 2010 Stock Incentive Plan.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-2 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;1, 2011, the Registrant issued 9,609 shares of common stock to an employee in
connection with the exercise of stock options granted pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:15%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;5,
2011, the Registrant issued 4,258 shares of common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Preferred Stock </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">None. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(b)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Stock Option Grants </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On April&nbsp;1, 2008, the
Registrant granted a stock option to purchase 100,000 shares of common stock at an exercise price of $1.43 per share, as adjusted for the 400-for-1 stock split, to an employee pursuant to the Registrant&#146;s 2007 Stock Incentive Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On October&nbsp;5, 2009, the Registrant granted a stock option to purchase 406,000 shares of common stock at an exercise price of $0.34 per share,
as adjusted for the 400-for-1 stock split, to an employee pursuant to the Registrant&#146;s 2007 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On
March&nbsp;26, 2010, the Registrant granted stock options to purchase 1,062,400 shares of common stock at an exercise price of $6.13 per share, as adjusted for the 400-for-1 stock split, to certain employees pursuant to the Registrant&#146;s 2010
Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On May&nbsp;1, 2010, the Registrant granted stock options to purchase 400,000 shares of common stock at an
exercise price of $6.13 per share to certain employees pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On July&nbsp;1,
2010, the Registrant granted a stock option to purchase 80,000 shares of common stock at an exercise price of $6.13 per share to an employee pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">On December&nbsp;1, 2010, the Registrant granted stock options to purchase 452,030 shares of common stock at an exercise price of $10.19 per share
to certain employees pursuant to the Registrant&#146;s 2010 Stock Incentive Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">No underwriters were involved in the foregoing
issuances of securities. The offers, sales and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance upon Rule&nbsp;701 of the Securities Act or Section&nbsp;4(2) of the
Securities Act. The offers, sales and issuances of the securities that were deemed to be exempt in reliance on Rule&nbsp;701 were transactions under compensatory benefit plans and contracts relating to compensation as provided under Rule&nbsp;701.
The offers, sales and issuances of the securities that were deemed to be exempt in reliance upon Section&nbsp;4(2) were each transactions not involving any public offering, and all recipients of these securities were accredited investors within the
meaning of Rule&nbsp;501 of Regulation&nbsp;D of the Securities Act who were acquiring the applicable securities for investment and not distribution and had represented that they could bear the risks of the investment. Each of the recipients of
securities in these transactions had adequate access, through employment, business or other relationships, to information about us. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-3 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;16.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Exhibits and Financial Statement Schedules </B></FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(a)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Exhibits </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD WIDTH="83%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:59pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exhibit&nbsp;Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Underwriting Agreement.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Certificate of Incorporation of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Bylaws of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Certificate of Incorporation of Francesca&#146;s Holdings Corporation, to be effective upon completion of this offering.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.4</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Bylaws of Francesca&#146;s Holdings Corporation, to be effective upon completion of this offering.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Specimen Common Stock of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Opinion of O&#146;Melveny &amp; Myers LLP.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholders&#146; Agreement, dated as of February 26, 2010, among Francesca&#146;s Holdings Corporation, CCMP Capital Investors II, L.P., CCMP Capital Investors (Cayman) II, L.P.,
Francesca&#146;s Collections, Inc., the Management Stockholders signatory thereto and any other Persons signatory thereto from time to time.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Credit Agreement, dated as of November 17, 2010, among Francesca&#146;s Collections, Inc., as borrower, Francesca&#146;s LLC, as parent, the other guarantors party thereto, Royal Bank of
Canada, as administrative agent and collateral agent, and the lenders party thereto.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Guaranty and Security Agreement, dated as of November 17, 2010, among Francesca&#146;s Collections, Inc., the other guarantors party thereto, and Royal Bank of Canada, as administrative
agent and collateral agent.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.4</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Indemnification Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.5</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2007 Stock Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.6</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employee Stock Option Agreement for Theresa Backes, dated as of December 1, 2007</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.7</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2010 Stock Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.8</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for John De Meritt, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.9</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Khalid M. Malik, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.10</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Cindy Thomassee, dated as of May 1, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.11</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Gene Morphis, dated as of December 14, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.12</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Richard J. Emmett, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.13</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.14</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan - Form of Nonqualified Stock Option Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.15</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan - Form of Restricted Stock Award Agreement</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD WIDTH="83%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:59pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exhibit&nbsp;Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.16</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Executive Bonus Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.17</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Agreement between Francesca&#146;s Holdings Corporation and John De Meritt, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.18</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Gene Morphis, dated as of September 9, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.19</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Theresa Backes</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.20</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Agreement between Francesca&#146;s Holdings Corporation and Kyong Yi Gill, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.21</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Khalid M. Malik, dated as of November 12, 2009</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.22</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Agreement and First Amendment to Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Khalid M. Malik, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.23</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter Agreement between Francesca&#146;s Holdings Corporation and Richard J. Emmett, dated as of September 25, 2009</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.24</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amendment to Letter Agreement between Francesca&#146;s Holdings Corporation and Richard J. Emmett, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter from BDO USA, LLP (formerly known as BDO Seidman, LLP) to the Securities and Exchange Commission dated April&nbsp;18, 2011.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Subsidiaries of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of Ernst &amp; Young LLP.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of BDO USA, LLP (formerly known as BDO Seidman, LLP).</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of O&#146;Melveny &amp; Myers LLP (included as part of Exhibit 5.1).</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Powers of Attorney (included on signature pages to the Registration Statement filed on April 18, 2011).</FONT></TD></TR></TABLE>
<P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="0%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To be filed by amendment. </FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">(b)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">Financial Statement Schedules </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Schedules not listed
have been omitted because the information required to be set forth therein is not applicable, not material or is shown in the financial statements or notes thereto. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Item&nbsp;17.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>Undertakings. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The undersigned Registrant
hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denomination and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-5 </FONT></P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">
of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">The undersigned Registrant hereby undertakes that:
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule&nbsp;430A and contained in the form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-6 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>SIGNATURES </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%;padding-bottom:0px;"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement on
Form&nbsp;S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 18</FONT><FONT STYLE="font-family:ARIAL" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT STYLE="font-family:ARIAL" SIZE="2"> day of April, 2011. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="93%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>FRANCESCA&#146;S HOLDINGS CORPORATION</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:ARIAL" SIZE="2">By:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ John De Meritt</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:ARIAL" SIZE="2">Name: John De Meritt</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:ARIAL" SIZE="2">Title: President, Chief
Executive Officer</FONT></P></TD></TR></TABLE></DIV> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>POWER OF ATTORNEY </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">We, the undersigned officers and directors of Francesca&#146;s Holdings Corporation, hereby severally constitute and appoint John De Meritt and
Gene Morphis, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and
in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any other registration statement for the same offering pursuant to Rule&nbsp;462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:5%"><FONT STYLE="font-family:ARIAL" SIZE="2">Pursuant to the
requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="44%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="37%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="15%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:36pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Signature</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:16pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Title</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:17pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Date</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ John De Meritt</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">John De Meritt</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">President, Chief Executive Officer and Director</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">(Principal Executive Officer)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Gene Morphis</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Gene Morphis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Chief Financial Officer</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px; margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">(Principal Financial and<BR>Accounting Officer)</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Greg Brenneman</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Greg Brenneman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director, Non-Executive Chairman</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Kyong Gill</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Kyong Gill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director, Executive Vice Chairperson</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Neill Davis</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Neill Davis</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-7 </FONT></P>


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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="44%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="37%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="15%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:36pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Signature</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:16pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Title</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:17pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Date</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Richard Emmett</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Richard Emmett</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Joseph Scharfenberger</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Joseph Scharfenberger</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px;border-bottom:1px solid #000000" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">/s/ Richard Zannino</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:ARIAL" SIZE="2">Richard Zannino</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-left:1.00em; text-indent:-1.00em" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">Director</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">April 18, 2011</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">II-8 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD WIDTH="83%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:59pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exhibit&nbsp;Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">1.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Underwriting Agreement.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Certificate of Incorporation of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Bylaws of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Certificate of Incorporation of Francesca&#146;s Holdings Corporation, to be effective upon completion of this offering.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">3.4</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Amended and Restated Bylaws of Francesca&#146;s Holdings Corporation, to be effective upon completion of this offering.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">4.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Specimen Common Stock of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">5.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Opinion of O&#146;Melveny &amp; Myers LLP.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Stockholders&#146; Agreement, dated as of February 26, 2010, among Francesca&#146;s Holdings Corporation, CCMP Capital Investors II, L.P., CCMP Capital Investors (Cayman) II, L.P.,
Francesca&#146;s Collections, Inc., the Management Stockholders signatory thereto and any other Persons signatory thereto from time to time.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Credit Agreement, dated as of November 17, 2010, among Francesca&#146;s Collections, Inc., as borrower, Francesca&#146;s LLC, as parent, the other guarantors party thereto, Royal Bank of
Canada, as administrative agent and collateral agent, and the lenders party thereto.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Guaranty and Security Agreement, dated as of November 17, 2010, among Francesca&#146;s Collections, Inc., the other guarantors party thereto, and Royal Bank of Canada, as administrative
agent and collateral agent.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.4</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Form of Indemnification Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.5</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2007 Stock Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.6</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employee Stock Option Agreement for Theresa Backes, dated as of December 1, 2007</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.7</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2010 Stock Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.8</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for John De Meritt, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.9</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Khalid M. Malik, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.10</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Cindy Thomassee, dated as of May 1, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.11</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Gene Morphis, dated as of December 14, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.12</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Nonqualified Stock Option Agreement for Richard J. Emmett, dated as of March 31, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.13</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.14</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan&#151;Form of Nonqualified Stock Option Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.15</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Equity Incentive Plan&#151;Form of Restricted Stock Award Agreement</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.16</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Francesca&#146;s Holdings Corporation 2011 Executive Bonus Plan</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD WIDTH="83%"></TD></TR>

<TR>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:59pt" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Exhibit&nbsp;Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.17</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Agreement between Francesca&#146;s Holdings Corporation and John De Meritt, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.18</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Gene Morphis, dated as of September 9, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.19</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Theresa Backes</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.20</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Agreement between Francesca&#146;s Holdings Corporation and Kyong Yi Gill, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.21</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Khalid M. Malik, dated as of November 12, 2009</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.22</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Agreement and First Amendment to Employment Letter Agreement between Francesca&#146;s Holdings Corporation and Khalid M. Malik, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.23</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter Agreement between Francesca&#146;s Holdings Corporation and Richard J. Emmett, dated as of September 25, 2009</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">10.24</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Amendment to Letter Agreement between Francesca&#146;s Holdings Corporation and Richard J. Emmett, dated as of February 26, 2010</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">16.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Letter from BDO USA, LLP (formerly known as BDO Seidman, LLP) to the Securities and Exchange Commission dated April 18, 2011.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">21.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Subsidiaries of Francesca&#146;s Holdings Corporation.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of Ernst &amp; Young LLP.</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of BDO USA, LLP (formerly known as BDO Seidman, LLP).</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">23.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">*&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Consent of O&#146;Melveny &amp; Myers LLP (included as part of Exhibit 5.1).</FONT></TD></TR>
<TR>
<TD HEIGHT="5" COLSPAN="3"></TD>
<TD HEIGHT="5" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:ARIAL" SIZE="2">24.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:ARIAL" SIZE="2">Powers of Attorney (included on signature pages to the Registration Statement filed on April 18, 2011).</FONT></TD></TR></TABLE>
<P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:ARIAL" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:ARIAL" SIZE="2">To be filed by amendment. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:ARIAL" SIZE="2">2 </FONT></P>

</BODY></HTML>
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{"company-data": {"conformed-name": "Francesca's Holdings CORP", "cik": "0001399935", "irs-number": "208874704"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-173581", "film-number": "11766760"}, "business-address": {"street1": "3480 WEST 12TH STREET", "city": "Houston", "state": "TX", "zip": "77008", "phone": "713-864-1358"}, "mail-address": {"street1": "3480 WEST 12TH STREET", "city": "Houston", "state": "TX", "zip": "77008"}}
Form S-1
Table of Contents
As filed with the Securities and Exchange Commission on April 18, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FRANCESCA'S
HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
5632
20-8874704
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)
c/o Francesca's
Collections, Inc.
3480 W. 12
th
Street
Houston, Texas 77008
(713)
864-1358
(Address, including zip code, and telephone number, including area code, of registrant's principal executive
offices)
John De Meritt
President
and Chief Executive Officer
3480 W. 12
th
Street
Houston, Texas 77008
(713)
864-1358
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of Communications to:
Gregory Ezring, Esq.
Sung Pak, Esq.
O'Melveny & Myers LLP
7 Times Square
New York, New
York 10036
(212) 326-2000
LizabethAnn R. Eisen, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York,
New York 10019
(212) 474-1000
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box.
¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the
following box.
¨
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Proposed
Maximum
Aggregate
Offering Price(1)
Amount of
Registration Fee(2)
Common Stock, par value $0.01 per share
$150,000,000
$17,415
(1)
Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. The proposed maximum offering
price includes amounts attributable to shares that may be purchased by the underwriters to cover the underwriters' option to purchase additional shares of our common stock from the selling stockholders at the initial public offering price less
the underwriters' discount. See "Underwriting".
(2)
Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.
Subject to Completion. Dated April 18, 2011
Shares
Francesca's Holdings Corporation
Common Stock
This is an initial public
offering of shares of common stock of Francesca's Holdings Corporation.
We are offering
             of the shares to be sold in the offering. The selling stockholders, which includes certain of our officers and directors, identified in this prospectus are offering an
additional              shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders, including any shares sold by the selling
stockholders in connection with the exercise of the underwriters' option to purchase additional shares.
Prior to this offering,
there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $             and
$            . We intend to list our common stock on The NASDAQ Global Select Market under the symbol "FRAN."
See "
Risk Factors
" on page 11 to read about factors you should consider before buying shares of our common
stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to us
$
$
Proceeds, before expenses, to the selling stockholders
$
$
To the extent that the underwriters sell more than
             shares of common stock, the underwriters have the option to purchase up to an additional              shares from
the selling stockholders identified in this prospectus at the initial public offering price less the underwriting discount.
The underwriters expect
to deliver the shares against payment in New York, New York on                     , 2011
Goldman, Sachs & Co.
J.P. Morgan
Jefferies
RBC Capital Markets
Stifel Nicolaus Weisel
KeyBanc Capital Markets
Prospectus dated
                    , 2011.
Table of Contents
Table of Contents
Table of Contents
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
1
RISK FACTORS
11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
37
USE OF PROCEEDS
39
DIVIDEND POLICY
41
CAPITALIZATION
42
DILUTION
43
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
48
BUSINESS
68
MANAGEMENT
79
EXECUTIVE COMPENSATION
87
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
110
PRINCIPAL AND SELLING STOCKHOLDERS
113
DESCRIPTION OF CAPITAL STOCK
115
DESCRIPTION OF CERTAIN INDEBTEDNESS
120
SHARES ELIGIBLE FOR FUTURE SALE
123
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON–U.S. HOLDERS
125
UNDERWRITING (CONFLICTS OF INTEREST)
129
LEGAL MATTERS
134
EXPERTS
134
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
134
WHERE YOU CAN FIND MORE INFORMATION
135
Through and including
                    , 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any
free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but
only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
Basis of Presentation
We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January 31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January 29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January 30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January 31, 2009. For fiscal year 2007, which ended on December 31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December 31st.
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Industry and Market Data
We obtained the industry, market and competitive position data throughout this prospectus from our own internal estimates and research as well as
from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been prepared from sources believed to be reliable, although they do not
guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal
company research is reliable and the definitions of our market and industry are appropriate, neither this research nor these definitions have been verified by any independent source. Further, while we believe the market opportunity information
included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily
subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors". These and other factors could cause results to differ materially from those expressed in the estimates made by the
independent parties and by us.
Trademarks
We operate under our trademark "francesca's collections
®
" which is
registered under applicable intellectual property laws. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this
prospectus may appear without the
®
or
TM
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under
applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or
endorsement or sponsorship of us by, any other companies.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should
consider before investing in our common stock. You should read this entire prospectus carefully, especially the "Risk Factors" section of this prospectus and our consolidated financial statements and related notes appearing at the end of
this prospectus, before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" for more information.
We are a holding company and all of our business operations are conducted through our wholly owned indirect subsidiary, Francesca's
Collections, Inc. ("Francesca's Collections"), a corporation formed and existing under the laws of the State of Texas. Francesca's Collections is wholly owned by Francesca's LLC ("Parent"), a limited liability
company formed and existing under the laws of the State of Delaware. Parent is a wholly owned subsidiary of Francesca's Holdings Corporation ("Holdings"). Except where the context otherwise requires or where otherwise indicated, the
terms "Francesca's," "we," "us," "our," "the company," "our company" and "our business" refer to Holdings and its consolidated subsidiaries as a combined entity. Some
differences in the numbers in the tables and text throughout this prospectus may exist due to rounding.
Our Company
francesca's collections
®
is one of the fastest growing specialty retailers in the United States. Our retail locations are designed and merchandised to feel like independently owned, upscale
boutiques and provide our customers with an inviting, intimate and differentiated shopping experience. We believe we offer compelling value with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts
at attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious, female customer, although we find that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique
setting. We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty.
Our boutiques have been successful across a wide variety of geographic markets and shopping venues. We believe we have an opportunity
to continue to grow our boutique base from 236 locations in 38 states as of April 2, 2011 to approximately 900 boutiques in the United States over time. Our merchandise is also available through our e-commerce website,
www.francescascollections.com
.
We believe that through the strength of our business model and our disciplined operating
philosophy, we have achieved strong financial performance and growth that is among the best in the specialty retail sector:
Ÿ
Between fiscal year 2008 and 2010, our net sales increased from $52.3 million to $135.2 million, representing a compound annual growth rate of 60.8%.
Ÿ
Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in fiscal year 2009.
Ÿ
Between the end of fiscal year 2008 and 2010 our boutique count increased from 111 to 207, representing a compound annual growth rate of 36.6%.
Ÿ
Between fiscal year 2008 and 2010 our income from operations increased from $7.0 million to $29.6 million, representing a compound annual growth rate of 106.2%.
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Competitive Strengths
We believe the following strengths differentiate us from our competitors and are key drivers of our success:
Ÿ
Proven Trend-Right Merchandise Delivered at a Compelling Value
.    We believe our ability to quickly identify and respond to emerging
fashion and lifestyle trends positions us to consistently offer high-quality, trend-right apparel, jewelry, accessories and gifts at prices that 'surprise and delight' our customers. We offer a broad selection of merchandise, but
intentionally purchase small quantities of individual items for each boutique such that we frequently replenish our boutiques with new merchandise, keeping the shopping experience fresh and exciting for our customers. Our ability to make decisions
quickly on trend-right items combined with the short lead times of our vendors, maximizes our speed to market, as it generally takes only four to twelve weeks from the time an order is placed to the time merchandise is available on the boutique
floor. With these short lead times, we are able to make more informed buying decisions to meet customers' merchandise expectations, and to react quickly to changing fashion trends. This approach, combined with our uniquely balanced product mix
of approximately 50% apparel and 50% jewelry, accessories and gifts, is designed to encourage more frequent visits by our customers and reduce the seasonal fluctuations and margin erosion experienced by many other specialty retailers.
Ÿ
Differentiated Shopping Experience.
We believe our warm and inviting boutiques and eclectic merchandise create a unique
environment. Our passionate boutique managers and associates are encouraged to infuse each boutique with their personality, which increases their motivation and enhances the feel of an independent, upscale boutique shopping experience. We believe
these attributes, along with our strategy of carrying a broad selection but limited quantities of individual styles, create a unique 'treasure hunt' atmosphere that strongly appeals to our customers and differentiates us in the
marketplace.
Ÿ
Powerful Boutique Economics and Rigorous Real Estate Selection Process
.    We have a proven boutique format that works across a wide
variety of shopping venues, market sizes, climates and demographics. Our boutiques average approximately 1,400 square feet, which is meaningfully smaller than most specialty retailers. The performance of our boutiques and our flexible real estate
format enhance our ability to secure prominent, highly visible locations in regional malls, lifestyle centers, street locations and strip centers. We deploy a rigorous real estate selection process with all new boutique opportunities measured
against specific financial and geographic criteria. Over the previous two fiscal years our new boutiques have generated first year cash on cash returns in excess of 150% and payback periods of less than one year, allowing the company to fund growth
from internally generated cash flow.
Ÿ
Solid and Scalable Infrastructure.
We continually invest in systems, controls and human resources to support our growth. In recent
years we have made significant improvements to the infrastructure of our finance, buying and planning, real estate and IT departments. For instance, we believe that we have developed an integrated sourcing, distribution and merchandising process
that is scalable and will facilitate the continued growth in the number of boutiques we operate. As we focus almost exclusively on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image, we do not believe
that we will require significant investments in traditional marketing and advertising initiatives as we expand our boutique base.
Ÿ
Experienced Management Team with a Disciplined Operating Philosophy.
Our senior management has extensive experience across a broad
range of disciplines in the retail industry, including merchandising, real estate, supply chain and finance. Our highly skilled
2
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executive team includes two of our Founders (as defined below), John De Meritt, our President and Chief Executive Officer, and Kyong Gill, our Executive Vice Chairperson. Together they lead a
dynamic team with a strong background at companies such as David's Bridal, Chico's, CVS, Banana Republic, Nordstrom and J.C. Penney.
Growth Strategy
We believe we can continue to grow our revenues and earnings by executing on
the following strategies:
Ÿ
Grow Our Boutique Base
.    We believe we have the potential to grow our base from 236 boutiques in 38 states as of April 2, 2011
to approximately 900 boutiques in the U.S. over time. We opened 62 new boutiques in fiscal year 2010 and plan to open approximately 75 new boutiques in each of fiscal year 2011 and 2012. Going forward, we expect the economics of our new boutiques to
continue to be compelling.
Ÿ
Drive Comparable Boutique Sales
.    We intend to drive comparable boutique sales by maintaining our distinctive approach to
merchandising, refining our differentiated boutique experience and increasing the sophistication of our buying and planning infrastructure.
Ÿ
Expand the Penetration and Presence of our E-Commerce Business
.    Our e-commerce sales grew by 85% in fiscal year 2010 but only
represented 1.4% of our total net sales. We expect sales from this channel to continue to grow as consumers become more aware of our e-commerce capabilities and we open boutiques in new markets.
Ÿ
Enhance Operating Margins.
Our strong expected boutique growth should permit us to take advantage of economies of scale in
merchandising and sourcing and to also leverage our existing infrastructure, corporate overhead and other fixed costs.
Summary Risk Factors
We are
subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider these
risks, including all of the risks discussed in the section entitled "Risk Factors," beginning on page 11 of this prospectus, before investing in our common stock. Risks relating to our business include, among others:
Ÿ
we may not be able to effectively anticipate, identify and respond quickly to changing fashion trends and customer preferences;
Ÿ
we may not be able to execute our growth strategy if we are unable to identify suitable locations to open new boutiques, obtain favorable lease terms, attract
customers to our boutiques, hire and retain personnel and maintain sufficient levels of cash flow to support our expansion;
Ÿ
in connection with the audit of our consolidated financial statements as of and for the fiscal year ended January 31, 2009, the Company identified a material
weakness in our internal control over financial reporting for such period which related to accounting for convertible redeemable preferred stock. We have taken steps to remediate our internal control deficiencies, however, there are no assurances
that the measures we have taken were completely effective or that similar weaknesses will not recur;
Ÿ
we may face disruptions in our current or planned new information systems;
Ÿ
we may not be able to effectively manage our operations, which have grown rapidly, or our future growth;
3
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Ÿ
we may be adversely impacted by economic conditions and the lack of success of the malls and shopping centers where our boutiques are located;
Ÿ
we operate in the highly competitive specialty retail apparel and accessories industry and may face increased competition;
Ÿ
we may not be able to maintain or improve levels of comparable boutique sales; and
Ÿ
we may not be able to obtain merchandise quickly and at competitive prices if any deterioration or change occurs in our vendor relationships or their businesses.
Our Principal Stockholders
Upon the completion of this offering, affiliates of CCMP Capital Advisors, LLC (collectively referred to as "CCMP"), on the one hand, and Mr. Chong Yi, Ms. Kyong Gill, Ms. Insuk Koo and
Mr. John De Meritt (collectively referred to as the "Founders"), on the other hand, are expected to own approximately     %, and     %, respectively, of our outstanding common stock, or
    %, and     %, respectively, if the underwriters' option to purchase additional shares is fully exercised. As a result, CCMP and the Founders will be able to exert significant voting influence over
fundamental and significant corporate matters and transactions. See "Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—Concentration of ownership among our existing executive officers, directors and
principal stockholders may prevent new investors from influencing significant corporate decisions."
CCMP is a private equity firm
specializing in buyouts and growth equity investments in companies ranging from $500 million to more than $3 billion in size. With offices in New York, Houston and London, CCMP focuses on four primary industries: Consumer, Industrial, Energy and
Healthcare. Investments under management in its current fund, CCMP Capital Investors II, L.P. include, in addition to the investment in our company, ARAMARK Holdings Corporation, Chaparral Energy Inc., Edwards Group PLC, Generac Holdings Inc.,
Infogroup Inc. and LHP Hospital Group.
Corporate and Other Information
We opened our first boutique in Houston, Texas in 1999. John De Meritt, our President and Chief Executive Officer, and Kyong
Gill, our Executive Vice Chairperson, are two of the original four Founders of francesca's collections
®
. In February
2010, CCMP acquired a controlling interest in the company with the goal of supporting Mr. De Meritt and the management team in accelerating our growth.
Holdings was incorporated in Delaware in 2007. We are a holding company and all of our business operations are conducted through Francesca's Collections, our wholly owned operating subsidiary. Francesca's
Collections was formed in 2006 and is the successor-in-interest of PFD II, Inc., a corporation incorporated in 1999 under the laws of the State of Texas. In 2002, we incorporated Francesca's Collections of CA, Inc., under the laws of California
to own and operate our boutiques in California. In 2008, Francesca's Collections of CA, Inc., was merged into Francesca's Collections and as a result of such merger, Francesca's Collections of CA, Inc. ceased to exist.
Office Location
Our
principal executive office is located at 3480 W. 12th Street, Houston, Texas 77008, our telephone number is (713) 864-1358 and our fax number is (713) 426-2751. We maintain a website at
www.francescascollections.com
. We do not
incorporate the information contained on, or accessible through, our website into this prospectus, and you should not consider it part of this prospectus.
4
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THE OFFERING
Common stock offered by us
shares.
Common stock offered by the selling stockholders
shares.
shares if the underwriters exercise their option to purchase additional shares in full.
Common stock to be outstanding immediately after this offering
shares.
Use of proceeds
The net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us,
will be approximately $             million, assuming an initial public offering price of $             per share, the midpoint
of the price range set forth on the cover page of this prospectus.
We will not
receive any proceeds from the sale of shares by the selling stockholders. For a sensitivity analysis as to the offering price and other information, see "Use of Proceeds."
We expect to use approximately $41.4 million of the net proceeds we receive from this offering,
together with approximately $50.0 million of indebtedness under a new revolving credit facility, to repay our existing senior secured credit facility in full. This refinancing transaction is referred to in this prospectus as the
"refinancing". We intend to use the remaining proceeds from this offering, if any, to provide funds for working capital and other general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business,
sales and marketing activities and other capital expenditures. See "Use of Proceeds" and "Description of Certain Indebtedness".
Principal Stockholders
Upon completion of this offering, CCMP will own a controlling interest in us. We currently intend to avail ourselves of the controlled company exemption under the corporate governance rules
of The NASDAQ Stock Market.
Dividend Policy
We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the
foreseeable future. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition,
earnings, capital requirements, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. See "Dividend Policy".
Risk factors
Investing in our common stock involves a high degree of risk. You should carefully read the information set forth under "Risk Factors" beginning on page 11 of this prospectus,
together with all of the other information set forth in this prospectus, before deciding to invest in shares of our common stock.
5
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Proposed symbol for trading on The NASDAQ Global Select Market
"FRAN"
Conflicts of Interest
One or more affiliates of J.P. Morgan Securities LLC beneficially own more than 10% of CCMP Capital Investors II, L.P., which is a stockholder in the company. Because J.P. Morgan Securities
LLC is an underwriter and its affiliates beneficially, through CCMP Capital Investors II, L.P., own more than 10% of the company, J.P. Morgan Securities LLC is deemed to have a "conflict of interest" under Rule 5121 ("Rule 5121")
of the Financial Industry Regulatory Authority. Furthermore, as described under "Use of Proceeds", the company expects to use approximately $41.4 million of the net proceeds it receives from this offering, together with $50.0 million of
indebtedness under a new revolving credit facility, to repay its existing senior secured credit facility in full. Affiliates of Goldman, Sachs & Co., J.P. Morgan Securities LLC and Jefferies & Company, Inc. and the other underwriters are
lenders under the company's existing senior secured credit facility and will each receive their pro rata share of such repayment. Because it is possible that each of Goldman, Sachs & Co., J.P. Morgan Securities LLC and Jefferies &
Company, Inc. or their affiliates could receive more than 5% of the proceeds of this offering in connection with the repayment of the company's existing senior secured credit facility, each of Goldman, Sachs & Co., J.P. Morgan Securities
LLC and Jefferies & Company, Inc. is deemed to have a "conflict of interest" under Rule 5121. Accordingly, this offering will be conducted in accordance with Rule 5121. Rule 5121 requires that a "qualified independent
underwriter", meeting certain standards, to participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Stifel, Nicolaus & Company, Incorporated has
served as "qualified independent underwriter" within the meaning of Rule 5121 in connection with this offering. For more information, see "Underwriting."
6
Table of Contents
Unless otherwise indicated, all information in this prospectus relating to the number of shares
of our common stock to be outstanding immediately after this offering:
Ÿ
excludes 2,416,446 shares of common stock issuable upon the exercise of options outstanding as of
                    , 2011, at a weighted average exercise price of $             per
share; and
Ÿ
excludes              shares of our common stock reserved for future issuance under our 2011 Stock
Incentive Plan, which plan will be in effect upon completion of this offering.
Unless otherwise indicated, all
information in this prospectus assumes:
Ÿ
the repayment of all amounts outstanding under our existing senior secured credit facility immediately upon completion of this offering, with approximately $41.4
million of the net proceeds of this offering and $50.0 million of indebtedness under a new revolving credit facility;
Ÿ
no exercise of the underwriters' option to purchase additional shares; and
Ÿ
the adoption of our amended and restated certificate of incorporation, or certificate of incorporation, and our amended and restated bylaws, or bylaws, to be
effective upon completion of this offering.
7
Table of Contents
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth our summary consolidated financial information and operating data as of the dates and for the periods indicated. Our
summary consolidated financial data for each of the years ended January 29, 2011, January 30, 2010 and January 31, 2009 and the selected consolidated balance sheet data as of January 29, 2011 and January 30, 2010 has been
derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated balance sheet data as of January 31, 2009 has been derived from our audited consolidated balance sheet, which
is not included in this prospectus.
We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period
ending on the Saturday closest to January 31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January 29, 2011,
52 weeks of operations in fiscal year 2009, which ended January 30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January 31, 2009. For fiscal year 2007, which ended on December 31, 2007, and prior periods, the
company operated on a fiscal calendar year ending December 31st.
The historical results presented below are not necessarily
indicative of the results to be expected for any future period and the results for any interim period may not necessarily be indicative of the results that may be expected for a full year. The following summaries of our consolidated financial and
operating data for the periods presented should be read in conjunction with "Risk Factors", "Selected Consolidated Financial and Operating Data", "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial statements and the related notes, which are included elsewhere in this prospectus.
8
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Consolidated Statements of Operations
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands, except share and per
share amounts)
Net sales(1)
$
135,176
$
79,367
$
52,290
Cost of goods sold and occupancy costs(2)
65,008
37,244
25,358
Gross profit
70,168
42,123
26,932
Selling, general and administrative expenses
40,525
24,641
19,962
Income from operations
29,643
17,482
6,970
Other income (expense)
(2
)
38
14
Interest income (expense)
(1,633
)
2
4
Income before income tax expense
28,008
17,522
6,988
Income tax expense
11,113
6,918
2,382
Net income
16,895
10,604
4,606
Increase in redemption value of convertible redeemable preferred stock
—
(60,271
)
—
Convertible redeemable preferred stock accrued dividends
—
(2,022
)
(1,641
)
Net income (loss) available to shareholders
$
16,895
$
(51,689
)
$
2,965
Less: income attributable to participating securities
—
—
(1,038
)
Net income (loss) available to common shareholders
$
16,895
$
(51,689
)
$
1,927
Basic earnings (loss) per common share(3)
$
0.43
$
(1.99
)
$
0.07
Diluted earnings (loss) per common share(3)
$
0.41
$
(1.99
)
$
0.07
Dividends declared per common share
$
2.39
—
—
Weighted average shares outstanding:
(4)
Basic shares
39,385
26,000
26,000
Diluted shares
40,907
26,000
26,000
Consolidated Balance Sheet Data
As of Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands)
Total current assets
$
31,721
$
22,318
$
13,036
Total assets
59,124
31,218
16,830
Total liabilities
114,592
8,242
4,556
Convertible redeemable preferred stock—series A
—
85,854
23,561
Total shareholders' deficit
(55,468
)
(62,878
)
(11,287
)
Operating data:
Comparable boutique sales growth for period(5)
15.2
%
9.8
%
(6.3
)%
Number of boutiques open at end of period
207
147
111
Net sales per average square foot for period (not in thousands)
$
508
$
429
$
384
Average square feet (in thousands)(6)
266
185
136
Total gross square feet at end of period (in thousands)
296
210
158
(1)
Net sales plus shipping and handling fees.
(2)
Cost of goods sold and occupancy costs include the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for
merchandise shipped directly from our vendors to our boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation, and boutique repair and
maintenance costs, and shipping costs related to e-commerce sales.
(3)
Please see note 2 to our consolidated financial statements included elsewhere in this prospectus, for an explanation of per share calculations.
9
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(4)
On April 28, 2010, the company authorized a split of its outstanding and authorized common stock in the ratio of four hundred to one. Accordingly, our consolidated financial
data included elsewhere in this prospectus have been adjusted to reflect the effects of the stock split on common shares and per share amounts for all periods presented.
(5)
A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique's opening. When a boutique that is included in
comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no
longer consider sales from that boutique to be comparable boutique sales.
(6)
Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a) the sum of the total gross square feet at the end of each fiscal quarter, divided by (b) the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers.
10
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the
other information included in this prospectus, before making a decision to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition, results of operation, cash flow and prospects could be
materially and adversely affected. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock.
Risks Related to Our Business
Our success depends on our ability to anticipate, identify and respond
quickly to new and changing fashion trends, customer preferences and other factors, and our inability to anticipate, identify and respond to these changes and trends could have a material adverse effect on our business, financial condition and
results of operations.
Our core market, apparel, jewelry, accessories and gifts for women from 18 to 35-years old, is subject to
rapidly shifting fashion trends, customer tastes and demands. Accordingly, our success is dependent on our ability to anticipate, identify and respond to the latest fashion trends and customer demands, and to translate such trends and demands into
appropriate, saleable product offerings in a timely manner. A small number of our employees are primarily responsible for performing this analysis and making product purchase decisions. Our failure to anticipate, identify or react swiftly and
appropriately to new and changing styles, trends or desired image preferences or to accurately anticipate and forecast demand for certain product offerings is likely to lead to lower demand for our merchandise, which could cause, among other things,
sales declines, excess inventories and a greater number of markdowns. Further, if we are not able to anticipate, identify and respond to changing fashion trends and customer preferences, we may lose customers and market share to those of our
competitors who are able to better anticipate, identify and respond to such trends and preferences. In addition, because our success depends on our brand image, our business could be materially adversely affected if new product offerings are not
accepted by our customers. There can be no assurance that our new product offerings will be met with the same level of acceptance as our past product offerings or that we will be able to adequately respond to fashion trends in a timely manner or the
preferences of our customers. If we do not accurately forecast or analyze fashion trends and sales levels, our business, financial condition and results of operations will be adversely affected.
If we are not able to successfully maintain a broad and shallow merchandise assortment, we may be unable to attract a sufficient number of customers to our
boutiques or sell sufficient quantities of our merchandise through our e-commerce business, which could result in excess inventories and markdowns.
We use the term broad and shallow to refer to a diverse merchandise assortment with relatively small inventory of each product. We believe that our strategy to offer our customers a broad and shallow merchandise
assortment has contributed significantly to the success of our business. Among other things, we believe that this strategy creates a constant sense of newness and scarcity value, which drives repeat boutique visits and increased sales. In addition,
we believe that this strategy helps us reduce markdowns. There can be no assurance that we will be able to continue to adequately stock our boutiques with a sufficiently broad and shallow assortment of merchandise. As we increase order volumes in
connection with opening new boutiques and expanding our e-commerce business, it may become increasingly difficult for us to accurately forecast the optimal amount of merchandise to order from our vendors and continue to offer a broad and shallow
merchandise assortment at each boutique. If we are unable to offer a broad and shallow merchandise assortment, customers may choose to visit our boutiques less frequently, our brand could be impaired, our market share may decline and our
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results of operations could deteriorate. Further, any failure to maintain a broad and shallow merchandise assortment could lead to excess inventories which could lead to markdowns.
Our growth strategy depends in large part upon our ability to successfully open and operate new boutiques each year in a timely and cost-effective manner.
Our strategy to grow our business depends in large part on continuing to successfully open a substantial number of new boutiques
each year for the foreseeable future. The success of this strategy will depend largely upon our ability to find a sufficient number of suitable locations, our ability to recruit, hire and train qualified personnel to operate our new boutiques and
our ability to scale our infrastructure to successfully integrate our new boutiques.
Our ability to successfully open and operate new
boutiques depends on many factors that may be outside of our control including, among others, our ability to:
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identify desirable boutique locations, primarily in malls, lifestyle centers, street locations and strip centers, as well as other types of shopping venues and
outlet malls, which may be difficult and costly, particularly in an improving real estate environment;
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negotiate acceptable lease terms, including favorable levels of tenant allowances, which may be difficult, particularly in an improving real estate environment;
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maintain out-of-pocket, build-out costs in line with our boutique economic model, including by receiving expected levels of tenant allowances for a portion of
our construction expenses, and managing these construction expenses at reasonable levels, which may be difficult, particularly in an improving real estate environment;
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efficiently source and distribute additional merchandise;
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hire, train and retain a growing workforce of boutique managers, boutique associates and other personnel;
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successfully integrate new boutiques into our existing control structure and operations, including our information technology systems;
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efficiently expand the operations of our distribution facility to meet the needs of a growing boutique network;
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identify and satisfy the merchandise and other preferences of our customers in new geographic areas and markets; and
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address competitive, merchandising, marketing, distribution and other challenges encountered in connection with expansion into new geographic areas and markets.
Our near-term expansion plans have us opening new boutiques in or near the areas where we have existing boutiques. To
the extent that we open boutiques in markets where we already have existing boutiques, we may experience reduced net sales at those existing boutiques. Also, if we expand into new geographic areas, we will need to successfully identify and satisfy
the fashion preferences of customers in those areas. In addition, we will need to address competitive, merchandising, marketing, distribution and other challenges encountered in connection with any expansion and our limited brand recognition in new
markets may limit our expansion strategy and cause our business and growth to suffer.
Finally, we cannot assure you that any newly
opened boutiques will be received as well as, or achieve net sales or profitability levels comparable to those of, our existing boutiques in our estimated time periods, or at all. If our boutiques fail to achieve, or are unable to sustain,
acceptable net sales
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and profitability levels, our business may be materially harmed and we may incur significant costs associated with closing or relocating boutiques. In addition, our current expansion plans are
only estimates, and the actual number of boutiques we open each year and the actual number of suitable locations for our new boutiques could differ significantly from these estimates. If we fail to successfully open and operate new boutiques and
execute our growth plans, the price of our common stock could decline.
We may not be able to efficiently source and distribute the additional
merchandise quantities necessary to support our growth.
Our success depends on our ability to source and distribute merchandise
efficiently. The sourcing of our merchandise is dependent, in part, on our relationships with our vendors. If we are unable to maintain these relationships we may not be able to continue to source merchandise at competitive prices that appeal to our
customers. If we do not succeed in maintaining good relationships with our vendors or if our growth outpaces the ability of our vendors to scale up and the company cannot identify new vendors to meet the demand for additional merchandise production,
the company could see its costs go up or the delivery time on its new orders substantially increase.
Increases in the cost of the raw materials
or other inputs used in the production of our merchandise could result in the loss of suppliers, increase our cost of goods sold and occupancy costs and adversely affect our financial results.
The success of our business is in part driven by the compelling price-value proposition we offer our customers. If the costs of the raw materials,
particularly cotton, leather and synthetics, used in producing our merchandise increase, our vendors would look to pass these cost increases along to us. The price and availability of such raw materials may fluctuate significantly, depending on many
factors which are outside of our control, including commodity prices, crop yields and weather patterns. If our vendors attempt to pass any cost increases on to us and we refuse to pay the increases, we could lose certain vendors as suppliers,
resulting in the risk that we could not fill our orders in a timely manner or at all. If we pay the increases, we could either attempt to raise retail prices, which could adversely affect our sales and our brand image, or choose not to raise prices,
which could adversely affect the profitability of our merchandise sales.
We are planning to replace several core information technology systems,
which could disrupt our operations and adversely affect our financial results.
We recently completed the process of upgrading
our existing merchandising, warehousing and point-of-sale applications to the latest supported software releases for these applications. The purpose of the upgrade is to allow the company to scale for the boutique growth planned during calendar year
2011 and 2012. Additionally, this upgrade will allow us to continue to operate our business while we are preparing to launch our new enterprise technology platform.
Since the beginning of fiscal year 2011, we have begun the process of replacing our current merchandise management, merchandise planning and allocation and merchandise analytics systems with a new enterprise
technology platform. These replacements are expected to be completed in the third quarter of fiscal year 2011. In the near-term, delays and disruptions could arise, either of which might negatively impact our business, prospects, financial condition
and results of operations.
During the first quarter of fiscal year 2012, we plan to replace our boutiques' point-of-sale software
system which will complete the implementation of our new enterprise technology platform. Also, our accounting system may need to be upgraded and replaced over time depending on our growth.
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The risks associated with the above information technology systems changes, as well as any failure of
such systems to operate effectively, could disrupt and adversely impact the promptness and accuracy of our merchandise distribution, transaction processing, financial accounting and reporting, including the implementation of our internal controls
over financial reporting, the efficiency of our operations and our ability to properly forecast earnings and cash requirements. We could be required to make significant additional expenditures to remediate any such failures or problems.
We believe that other companies have experienced significant delays and cost overruns in implementing similar systems changes, and we may encounter
problems as well. We may not be able to successfully implement these new systems or, if implemented, we may still face unexpected disruptions in the future. Any resulting disruptions could harm our business, prospects, financial condition and
results of operations.
Our current growth plans will place a strain on our existing resources and could cause us to encounter challenges we have
not faced before.
As our number of boutiques and our e-commerce sales grow, our operations will become more complex. While we
have grown substantially as a company since inception, much of this growth occurred recently in fiscal year 2010. As we move forward, we expect our growth to bring new challenges that we have not faced before. Among other difficulties that we may
encounter, this growth will place a strain on our existing infrastructure, including our distribution facilities, information technology systems, financial controls, real estate and boutique operations staffs, may make it more difficult for us to
adequately forecast expenditures, such as real estate and construction expenses, budgeting will become more complex, and we may also place increased burdens on our vendors, as we will likely increase the size of our merchandise orders. The increased
demands that our growth plans will place on our infrastructure may cause us to operate our business less efficiently, which could cause a deterioration in the performance of our existing boutiques. New order delivery times could lengthen as a result
of the strains that growth will place on our existing resources and our growth may make it otherwise difficult for us to respond quickly to changing trends, consumer preferences and other factors. This could impair our ability to continue to offer
trend-right merchandise which could result in excess inventory, greater markdowns, loss of market share and decreased sales.
In
addition, our planned expansion is expected to place increased demands on our existing operational, managerial, administrative and other resources. Specifically, our inventory management systems and personnel processes may need to be further
upgraded to keep pace with our current growth strategy. We cannot anticipate all of the demands that our expanding operations will impose on our business, and our failure to appropriately address these demands could have an adverse effect on us.
Our business is sensitive to consumer spending and economic conditions.
Consumer purchases of discretionary retail items and specialty retail products, which include our apparel, jewelry, accessories and gifts, may be
adversely affected by economic conditions such as employment levels, salary and wage levels, the availability of consumer credit, inflation, high interest rates, high tax rates, high fuel prices and consumer confidence with respect to current and
future economic conditions. Consumer purchases may decline during recessionary periods or at other times when unemployment is higher or disposable income is lower. These risks may be exacerbated for retailers like us that focus significantly on
selling discretionary fashion merchandise. Consumer willingness to make discretionary purchases may decline, may stall or may be slow to increase due to national and regional economic conditions. Our financial performance is particularly susceptible
to economic and other conditions in regions or states where we have a significant number of boutiques. There remains considerable uncertainty and volatility in the national and global economy. Further or
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future slowdowns or disruptions in the economy could adversely affect mall traffic and new mall and shopping center development and could materially and adversely affect us and our growth plans.
We may not be able to maintain our recent rate of growth in net sales if there is a decline in consumer spending.
In addition, a
deterioration of economic conditions and future recessionary periods may exacerbate the other risks faced by our business, including those risks we encounter as we attempt to execute our growth plans. Such risks could be exacerbated individually or
collectively.
We operate in the highly competitive specialty retail apparel and accessories industry and the size and resources of some of our
competitors may allow them to compete more effectively than we can, which could adversely impact our growth and market share.
We
face intense competition in the specialty retail apparel and accessories industry. We compete on the basis of a combination of factors, including price, breadth, quality and style of merchandise, as well as our in-boutique experience and level of
customer service, our brand image and our ability to anticipate, identify and respond to new and changing fashion trends. While we believe that we compete primarily with specialty retailers and internet businesses that specialize in women's
apparel and accessories, we also face competition from department stores, mass merchandisers and value retailers. We believe our primary competitors include specialty apparel and accessories retailers that offer their own private labels, including,
among others, White House | Black Market, Ann Taylor Loft, Charlotte Russe and Anthropologie. In addition, our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our
markets could have an adverse effect on our business.
We also compete with a wide variety of large and small retailers for customers,
vendors, suitable boutique locations and personnel. The competitive landscape we face, particularly among specialty retailers, is subject to rapid change as new competitors emerge and existing competitors change their offerings. We cannot assure you
that we will be able to compete successfully and navigate the shifts in our market.
Many of our competitors are, and many of our
potential competitors may be, larger and have greater name recognition and access to greater financial, marketing and other resources. Therefore, these competitors may be able to adapt to changes in trends and customer desires more quickly, devote
greater resources to the marketing and sale of their products, generate greater brand recognition or adopt more aggressive pricing policies than we can. As a result, we may lose market share, which could reduce our sales and adversely affect our
results of operations. Many of our competitors also utilize advertising and marketing media which we do not, including advertising through the use of direct mail, newspapers, magazines, billboards, television and radio, which may provide them with
greater brand recognition than we have.
Our competitors may also sell certain products or substantially similar products through the
Internet or through outlet centers or discount stores, increasing the competitive pressure for those products. We cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Our expansion into
markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on us. Competitive forces and pressures may intensify as our presence in the retail marketplace
grows.
We do not possess exclusive rights to many of the elements that comprise our in-boutique experience and merchandise offerings.
Some specialty retailers offer a personalized shopping experience that in certain ways is similar to the one we strive to provide to our customers. Our competitors may seek to emulate facets of our business strategy and in-boutique experience, which
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could result in a reduction of any competitive advantage or special appeal that we might possess. In addition, some of our merchandise offerings are sold to us on a non-exclusive basis. As a
result, our current and future competitors, especially those with greater financial, marketing or other resources, may be able to duplicate or improve upon some or all of the elements of our in-boutique experience or merchandise offerings that we
believe are important in differentiating our boutiques and our customers' shopping experience. If our competitors were to duplicate or improve upon some or all of the elements of our in-boutique experience or product offerings, our competitive
position and our business could suffer.
Our inability to maintain or increase our comparable boutique sales could adversely impact our net sales,
profitability, cash flow and stock price.
We may not be able to sustain or increase the levels of comparable boutique sales that
we have experienced in the recent past. If our future comparable boutique sales decline or fail to meet market expectations, our profitability could be harmed and the price of our common stock could decline. In addition, the aggregate comparable
boutique sales levels of our boutiques have fluctuated in the past and can be expected to fluctuate in the future. A variety of factors affect comparable boutique sales, including fashion trends, competition, current national and regional economic
conditions, pricing, changes in our merchandise mix, prior period comparable boutique sales levels, inventory shrinkage, the timing and amount of markdowns, the success of our marketing programs, holiday timing and weather conditions. In addition,
it may be more challenging for us to sustain high levels of comparable boutique sales growth during and after our planned expansion. These factors may cause our comparable boutique sales results to be materially lower than in recent periods and
lower than market expectations, which could harm our business and our earnings and result in a decline in the price of our common stock.
Our
inability to maintain or increase our operating margins could adversely affect the price of our common stock.
We intend to
continue to increase our operating margins through scale efficiencies, improved systems, continued cost discipline and enhancements to our merchandise offerings. If we are unable to successfully manage the potential difficulties associated with our
growth plans, we may not be able to capture the scale efficiencies that we expect from expansion. If we are not able to continue to capture scale efficiencies, improve our systems, continue our cost discipline and enhance our merchandise offerings,
we may not be able to achieve our goals with respect to operating margins. In addition, if we do not adequately refine and improve our various ordering, tracking and allocation systems, we may not be able to increase sales and reduce inventory
shrinkage. As a result, our operating margins may stagnate or decline, which could adversely affect the price of our common stock.
Our ability to
attract customers to our boutiques that are located in regional malls and other shopping centers and venues depends heavily on the success of these venues, and any decrease in customer traffic to these venues could adversely affect our net sales.
Our boutiques are principally located in malls, lifestyle centers, street locations and strip centers, and we would expect this
to continue as we grow. Net sales at our boutiques are derived, to a significant degree, from the volume of traffic in these shopping venues and the surrounding areas. Our boutiques benefit from the ability of other tenants to generate consumer
traffic near our boutiques and the continuing popularity of these venues as shopping destinations. Our sales volume and traffic may be adversely affected by, among other things, economic downturns nationally or regionally, high fuel prices,
increased competition, unfavorable weather conditions, changes in consumer demographics and store closures and/or a decrease in popularity of shopping venues in which our boutiques are located. A reduction in customer traffic as a result of these or
any other factors, or our inability to obtain or maintain desirable boutique locations within desirable shopping venues, could have an adverse effect on our business. In addition, store closings in malls or other shopping venues, particularly stores
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that attract similar customers, or deteriorations in the financial condition of mall or other shopping venue operators could limit their ability to finance our tenant improvements, which could
have an adverse impact on our ability to open profitable boutiques.
Our business depends on a strong brand image, and if we are not able to
maintain and enhance our brand, particularly in new markets where we have limited brand recognition, we may be unable to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise.
We believe that our brand image and brand awareness has contributed significantly to the success of our business. We also believe that maintaining
and enhancing our brand image particularly in new markets where we have limited brand recognition is important to maintaining and expanding our customer base. Maintaining and enhancing our brand image may require us to make substantial investments
in areas such as merchandising, marketing, boutique operations, community relations, boutique promotions and employee training. These investments may be substantial and may not ultimately be successful.
We do not use traditional advertising channels and if we fail to adequately continue to connect with our customer base, our business could be adversely
affected.
We focus on organic, viral and in-boutique marketing to capture the interest of our customers and drive them to our
boutiques and website. We do not use traditional advertising channels, such as newspapers, magazines, billboards, television and radio, which are used by some of our competitors. We expect to increase our use of social media, such as Facebook and
Twitter, in the future. If our marketing efforts are not successful, there may be no immediately available or cost effective alternative marketing channel for us to use to build or maintain brand awareness. As we execute our growth strategy, our
ability to successfully integrate new boutiques into their surrounding communities or to expand into new markets will be adversely impacted if we fail to connect with our target customers. Failure to successfully connect with our target customers in
new and existing markets could harm our business, results of operations and financial condition.
We depend on our senior management personnel and
may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business.
Our
future success is substantially dependent on the continued service of our senior management, particularly Mr. De Meritt, one of our Founders and our Chief Executive Officer and a member of our board of directors, and Ms. Gill, another of
our Founders and the Executive Vice Chairperson of our board of directors. These employees have extensive experience both with our company and in our industry and are familiar with our business, systems and processes. The loss of services of one or
more of our key employees could impair our ability to manage our business effectively and could have an adverse effect on our business, as we may not be able to find suitable individuals to replace them on a timely basis or at all. In addition, any
departures of key personnel could be viewed in a negative light by investors and analysts, which could cause our common stock price to decline. We do not maintain key person insurance on any employee.
In addition to these key employees, we have other employees in positions, including those employees responsible for our merchandising and
operations departments, that, if vacant, could cause a temporary disruption in our business until such positions are filled.
If we are unable to
find, train and retain key personnel, including new boutique employees that reflect our brand image and embody our culture, we may not be able to grow or sustain our operations.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of boutique employees, including boutique managers,
who understand and appreciate our customers,
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brand and corporate culture, and are able to adequately and effectively represent our culture and establish credibility with our customers. Like most retailers, we experience significant employee
turnover rates, particularly among boutique employees. Our planned growth will require us to hire and train even more personnel to manage such growth. If we are unable to hire and retain boutique personnel capable of consistently providing a high
level of customer service, as demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the merchandise we offer, our ability to open new boutiques may be impaired, the performance of our existing and new
boutiques could be materially adversely affected and our brand image may be negatively impacted. There is a high level of competition for experienced, qualified personnel in the retail industry and we compete for personnel with a variety of
companies looking to hire for retail positions. Historically, we have prided ourselves on our commitment to employee growth and development and we focus on promoting from within our team. Our growth plans will strain our ability to staff our new
boutiques, particularly at the boutique manager level, which could have an adverse effect on our ability to maintain a cohesive and consistently strong team, which in turn could have an adverse impact on our business. If we are unable to attract,
train and retain employees in the future, we may not be able to serve our customers effectively, thus reducing our ability to continue our growth and to operate our existing boutiques as profitably as we have in the past.
Union attempts to organize our employees could negatively affect our business.
None of our employees are currently subject to a collective bargaining agreement. As we continue to grow and enter different regions, unions may
attempt to organize all or part of our employee base at certain boutiques or within certain regions. Responding to such organization attempts may distract management and employees and may have a negative financial impact on individual boutiques, or
on our business as a whole.
We have one corporate headquarters and distribution facility and have not yet implemented disaster recovery
procedures. Disruptions to the operations at that location could have an adverse effect on our business operations.
Our
corporate headquarters and our only distribution facility are co-located in Houston, Texas. Our distribution facility supports both our boutiques and our e-commerce business. A majority of our merchandise is shipped from our vendors to the
distribution facility and then packaged and shipped from our distribution facility to our boutiques and our e-commerce customers. The success of our boutiques depends on the timely receipt of merchandise because they must receive merchandise in a
timely manner in order to stay current with the fashion preferences of our customers. The efficient flow of our merchandise requires that we have adequate capacity and uninterrupted service in our distribution facility to support both our current
level of operations, and the anticipated increased levels that may follow from our growth plans. We believe that our current distribution facility is capable of supporting our growth through approximately 450 boutiques without significant additional
capital investment. In order to accommodate future growth beyond approximately 450 boutiques we will either need to expand and upgrade our existing distribution facility or move our distribution operations to a new facility with greater capacity.
Upgrading our existing facility or transferring our operations to a facility with greater capacity may require us to secure additional favorable real estate or may require us to obtain additional financing. Appropriate locations or financing for the
purchase or lease of such additional real estate may not be available at reasonable costs or at all. Our failure to provide adequate order fulfillment and secure additional distribution capacity when necessary could impede our growth plans, and the
further increase of this capacity would increase our costs.
In addition, if we encounter difficulties associated with our distribution
facility or if it were to shut down for any reason, including fire, hurricanes or other natural disaster, we could face inventory shortages resulting in "out-of-stock" conditions in our boutiques, and delays in shipments to our direct
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customers, resulting in significantly higher costs and longer lead times associated with distributing our merchandise. Also, most of our computer equipment and senior management, including
critical resources dedicated to merchandising, financial and administrative functions, are located at our corporate headquarters. Our management and our operations and distribution staff would need to find an alternative location, causing further
disruption and expense to our business and operations.
We recognize the need for, and are in the early stages of, developing disaster
recovery, business continuity and document retention plans that would allow us to be operational despite casualties or unforeseen events impacting our corporate headquarters or distribution center. Without disaster recovery, business continuity and
document retention plans, if we encounter difficulties or disasters with our distribution facility or at our corporate headquarters, our critical systems, operations and information may not be restored in a timely manner, or at all, and this could
have an adverse effect on our business.
Our business requires that we lease substantial amounts of space and there can be no assurance that we
will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
We do not own any real
estate. Instead, we lease all of our boutique locations, as well as our corporate headquarters and distribution facility in Houston, Texas. Our boutiques are leased from third parties, with lease terms of five to ten years. Many of our lease
agreements also have additional five-year renewal options. We believe that we have been able to negotiate favorable rental rates and tenant allowances over the last few years due in large part to the state of the economy and higher than usual
vacancy rates in a number of regional malls and shopping centers. These trends may not continue, and there is no guarantee that we will be able to continue to negotiate such favorable terms. Many of our leases have early cancellation clauses, which
permit the lease to be terminated by us or the landlord if certain sales levels are not met in specific periods or if the shopping venue does not meet specified occupancy standards. In addition to fixed minimum lease payments, most of our boutique
leases provide for additional rental payments based on a percentage of sales, or "percentage rent," if sales at the respective boutiques exceed specified levels, as well as the payment of common area maintenance charges, real property
insurance and real estate taxes. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our already substantial occupancy costs and difficulty in identifying economically suitable
new boutique locations could have significant negative consequences, which include:
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requiring that a greater portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes and reducing our
profitability;
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increasing our vulnerability to general adverse economic and industry conditions; and
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limiting our flexibility in planning for, or reacting to changes in, our business or in the industry in which we compete.
We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient
cash flow from operating activities to fund these expenses and needs and sufficient funds are not otherwise available to us, we may not be able to service our lease expenses, grow our business, respond to competitive challenges or fund our other
liquidity and capital needs, which could harm our business. Additional sites that we lease may be subject to long-term non-cancelable leases if we are unable to negotiate our current standard lease terms. If an existing or future boutique is not
profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an
early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have an
adverse effect on our results of operations.
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Our ability to obtain merchandise on a timely basis at competitive prices could suffer as a result of any
deterioration or change in our vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations.
We have many important vendor relationships that we believe provide us with a competitive advantage. We do not own or operate any manufacturing facilities. Instead, we purchase all of our merchandise from
third-party vendors. Two of our vendors accounted for approximately 23% of our purchases in fiscal year 2010, with no single vendor accounting for more than 15% of our purchases. One of these vendors is owned and operated by two of our Founders who
are the brother and sister of Ms. Kyong Gill, our Executive Vice Chairperson. The other vendor is owned and operated by the brother-in-law of one of our Founders. See "Certain Relationships and Related Party Transactions—Stony Trading
Relationship." Other than the two largest vendors, no vendor accounted for more than 5% of our purchases during fiscal year 2010. Our business and financial performance depend in large part on our ability to evaluate merchandise quickly for
style and then modify any undesirable designs or to improve the quality, look, and fit of the item. We do not have long-term contracts with any of these vendors and we generally operate without any contractual assurances of continued supply, pricing
or access to new products. Rather, we receive and review samples almost daily for fit and fashion evaluation. Any of our vendors could discontinue supplying us with desired products in sufficient quantities for a variety of reasons.
The benefits we currently experience from our vendor relationships could be adversely affected if our vendors:
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choose to stop providing merchandise samples to us or otherwise discontinue selling merchandise to us;
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raise the prices they charge us;
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change pricing terms to require us to pay on delivery or upfront, including as a result of changes in the credit relationships some of our vendors have with
their various lending institutions;
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reduce our access to styles, brands and merchandise by entering into broad exclusivity arrangements with our competitors or otherwise in the marketplace;
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sell similar merchandise to our competitors with similar or better pricing, many of whom already purchase merchandise in significantly greater volume and, in
some cases, at lower prices than we do;
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lengthen their lead times; or
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initiate or expand sales of apparel and accessories to retail customers directly through their own stores, catalogs or on the internet and compete with us
directly.
We historically have established good working relationships with many small- to mid-size vendors that often
have more limited resources, production capacities and operating histories. Market and economic events that adversely impact our vendors could impair our ability to obtain merchandise in sufficient quantities. Such events include difficulties or
problems associated with our vendors' business, finances, labor, ability to import merchandise, costs, production, insurance and reputation. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities
on acceptable terms or at all in the future, especially if we need significantly greater amounts of inventory in connection with the growth of our business. We may need to develop new relationships with larger vendors, as our current vendors may be
unable to supply us with needed quantities and we may not be able to find similar merchandise on the same terms from larger vendors. If we are unable to acquire suitable merchandise in sufficient quantities, at acceptable prices with adequate
delivery times due to the loss of or a deterioration or change in our relationship with one or more of our key vendors or events harmful to our vendors occur, it may adversely affect our business and results of operations.
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A failure in our e-commerce operations could significantly disrupt our business and lead to reduced sales,
growth prospects and reputational damage.
While accounting for only 1.4% of our net sales in fiscal year 2010, our e-commerce
business is rapidly growing and is an important element of our brand and relationship with our customers. Expanding our e-commerce business is an important part of our growth strategy. In addition to changing consumer preferences, shifting traffic
patterns and related customer acquisition costs and buying trends in e-commerce, we are vulnerable to certain additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other
technical failures, security breaches, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities. Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales,
increase our costs, diminish our growth prospects, and damage our brand, which could negatively impact our results of operations and stock price.
In addition, there is no guarantee that we will be able to expand our e-commerce business. Many of our competitors already have e-commerce businesses that are substantially larger and more developed than ours,
which places us at a competitive disadvantage. If we are unable to expand our e-commerce business, our growth plans will suffer and the price of our common stock could decline.
System security risk issues, including our failure to protect our customers' privacy and disruption of our internal operations or information technology systems, could harm our reputation and adversely
affect our financial results and stock price.
Experienced computer programmers and hackers, or even internal users, may be able
to penetrate or create systems disruptions or cause shutdowns of our network security or that of third-party companies with which we have contracted to provide services. We generally collect and store customer information for marketing purposes and
any compromise of customer information could subject us to customer or government litigation and harm our reputation, which could adversely affect our business and growth. Moreover, we could incur significant expenses or disruptions of our
operations in connection with system failures or data breaches. An increasing number of websites, including several large internet companies, have recently disclosed breaches of their security, some of which have involved sophisticated and highly
targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable
to anticipate these techniques or to implement adequate preventative measures. In addition, sophisticated hardware and operating system software and applications that we buy or license from third-parties may contain defects in design or manufacture,
including "bugs" and other problems that could unexpectedly interfere with the security and operation of the systems. The costs to us to eliminate or alleviate security problems, viruses and bugs, or any problems associated with the
outsourced services provided to us, could be significant, and efforts to address these problems could result in interruptions, delays or cessation of service that may impede our sales, distribution or other critical functions.
In addition, almost all states have adopted breach of data security statutes or regulations that require notification to consumers if the security
of their personal information is breached, and at least one state has adopted regulations requiring every company that maintains or stores personal information to adopt a comprehensive written information security program. Governmental focus on data
security may lead to additional legislative action, and the increased emphasis on information security may lead customers to request that we take additional measures to enhance security or restrict the manner in which we collect and use customer
information to gather insights into customer behavior and craft our marketing programs. As a result, we may have to modify our business systems and practices with the goal of further improving data security, which would result in reduced net sales,
increased expenditures and operating complexity. Any compromise of our security or accidental loss or
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theft of customer data in our possession could result in a violation of applicable privacy and other laws, significant legal and financial exposure and damage to our reputation, which could
adversely impact our business, results of operations and stock price.
The current geographic concentration of our boutiques creates an exposure
to local economies, regional downturns and severe weather or other catastrophic occurrences that may materially adversely affect our financial condition and results of operations.
We operated 28 boutiques in Texas as of April 2, 2011, making Texas our largest market, representing approximately 12% of our total boutiques. We
also have boutique concentration in California and Florida, operating 24 boutiques and 16 boutiques in those states, respectively, as of April 2, 2011. As a result, our business is currently more susceptible to regional conditions than the
operations of more geographically diversified competitors, and we are vulnerable to economic downturns in those regions. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect our sales and
profitability. These factors include, among other things, changes in demographics and population.
Further, our corporate headquarters
and only distribution center are located at a single facility in Houston, Texas. This single distribution center receives, stores and distributes merchandise to all of our boutiques and fulfills all sales for our e-commerce business. Most of our
computer equipment and senior management, including critical resources dedicated to merchandising and financial and administrative functions, are located at our corporate headquarters. As described elsewhere in the risk factors in this prospectus,
we do not have adequate disaster recovery systems and plans at our corporate headquarters and distribution facility. As a result, our business may be more susceptible to regional natural disasters and catastrophes than the operations of more
geographically diversified competitors.
In addition, a substantial number of our boutiques are located in the southeastern United
States The southeastern United States, Texas and other states along the Gulf Coast, in particular, are prone to severe weather conditions. For example, hurricanes have passed through Texas, Florida and other states along the Gulf Coast causing
extensive damage to the region. Adverse weather conditions impacting Texas and other states along the Gulf Coast, and the southeastern United States generally, could harm our business, results of operations and financial condition. All of our
boutique locations expose us to additional diverse risks, given that natural disasters or other unanticipated catastrophes, such as telecommunications failures, cyber-attacks, fires or terrorist attacks, can occur anywhere and could cause
disruptions in our operations. Extensive or multiple disruptions in our operations, whether at our boutiques or our corporate headquarters and distribution center, due to natural disasters or other catastrophes could have an adverse effect on our
business, results of operations and stock price.
Our results may be adversely affected by fluctuations in energy costs.
Energy costs have fluctuated dramatically in the past and may fluctuate in the future. These fluctuations may result in an increase in our
transportation costs for distribution, utility costs for our retail boutiques and costs to purchase product from our vendors. A continual rise in energy costs could adversely affect consumer spending and demand for our merchandise and increase our
operating costs and we may be unable to pass along to our customers such increased cost, all of which could have a material adverse effect on our business, results of operations and stock price.
Our net sales and merchandise fluctuate on a seasonal basis, leaving our operating results susceptible to adverse changes in seasonal shopping patterns,
weather and related risks.
Due to the seasonal nature of the retail industry, we have historically experienced and expect to
continue to experience some fluctuations in our net sales and net income. Our net sales and earnings
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are typically highest in the fourth fiscal quarter due to the year-end holiday season. Net sales during this period cannot be used as an accurate indicator of annual results. Likewise, as is the
case with many retailers of apparel, jewelry, accessories and gifts, we typically experience lower net sales in the first fiscal quarter relative to other quarters. If for any reason, including for example poor weather conditions, soft economic
environments and loss of consumer confidence, our net sales were below seasonal norms or expectations during typically higher-volume time periods, our net sales, inventory levels and results of operations could be adversely affected. In addition, in
order to prepare for these periods, we must order and keep in stock significantly more merchandise than we carry during other parts of the year. This inventory build-up may require us to expend cash faster than is generated by our operations during
these periods. Any unanticipated decrease in demand for our merchandise during peak shopping periods could result in excess inventory levels which could require us to sell excess inventory at a substantial markdown, which could have an adverse
effect on our business, profitability and brand image. In addition, we may experience variability in net sales as a result of a variety of other factors, including the timing of new boutique openings, boutique events, other marketing activities,
sales tax holidays and other holidays, which may cause our results of operations to fluctuate on a quarterly basis and relative to corresponding periods in prior years.
If our vendors fail to comply with applicable laws, including a failure to use acceptable labor practices, or if our vendors suffer disruptions in their businesses, we could suffer adverse business
consequences.
Our vendors source the merchandise sold in our boutiques from manufacturers both inside and outside of the United
States. Although each of our purchase orders is subject to our vendor manuals, which require compliance with labor, immigration, manufacturing safety and other laws, we do not supervise, control or audit our vendors or the manufacturers that produce
the merchandise we sell. The violation, or perception of any violation, of any labor, immigration, manufacturing safety or other laws by any of our vendors or their U.S. and non-U.S. manufacturers, such as use of child labor, or the divergence of
the labor practices followed by any of our vendors or these manufacturers from those generally accepted in the United States, could damage our brand image or subject us to boycotts by our customers or activist groups.
Any event causing a sudden disruption of manufacturing or imports, including the imposition of additional import restrictions, could interrupt, or
otherwise disrupt the shipment of finished products to us by our vendors and materially harm our operations. Political and financial instability outside the United States, strikes, adverse weather conditions or natural disasters that may occur or
acts of war or terrorism in the United States or worldwide, may affect the production, shipment or receipt of merchandise. These factors, which are beyond our control, could materially hurt our business, financial condition and results of operations
or may require us to modify our current business practices or incur increased costs.
Changes in laws, including employment laws and laws related
to our merchandise, could make conducting our business more expensive or otherwise cause us to change the way we do business.
We
are subject to numerous regulations, including labor and employment, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally or govern the promotion and sale of merchandise and the
operation of boutiques and warehouse facilities. If these regulations were to change or were violated by our management, employees or vendors, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be
subject to fines or penalties or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations.
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In addition to increased regulatory compliance requirements, changes in laws could make the ordinary
conduct of our business more expensive or require us to change the way we do business. Laws related to employee benefits and treatment of employees, including laws related to limitations on employee hours, immigration laws, child labor laws,
supervisory status, leaves of absence, mandated health benefits or overtime pay, could also negatively impact us, such as by increasing compensation and benefits costs for overtime and medical expenses. Moreover, changes in product safety or other
consumer protection laws could lead to increased costs to us for some merchandise, or additional labor costs associated with readying merchandise for sale. It is often difficult for us to plan and prepare for potential changes to applicable laws,
and future actions or payments related to these changes could be material to us.
We will require significant capital to fund our expanding
business, which may not be available to us on satisfactory terms or at all. We plan to use cash from operations to fund our operations and execute our growth strategy. If we are unable to maintain sufficient levels of cash flow, we may not meet our
growth expectations or we may require additional financing which could adversely affect our financial health and impose covenants that limit our business activities.
We plan to continue our growth and expansion, including opening a number of new boutiques, remodeling existing boutiques and upgrading our information technology systems and other infrastructure as opportunities
arise. Our plans to expand our boutique base may not be successful and the implementation of these plans may not result in expected increases in our net sales even though they increase our costs. To support our expanding business and execute on our
growth strategy, we will require significant capital.
We currently primarily depend on cash flow from operations and the revolving
credit facility under our existing senior secured credit facility to fund our business and growth plans. Upon completion of this offering and our refinancing we expect that we will primarily depend on cash flow from operations and our new revolving
credit facility to fund our business and growth plans. If our business does not generate sufficient cash flow from operations to fund these activities, and sufficient funds are not otherwise available to us from our new revolving credit facility, we
may need additional equity or debt financing. If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business or respond to competitive pressures would be curtailed and we may need
to delay, limit or eliminate planned boutique openings or operations or other elements of our growth strategy. If we raise additional capital by issuing equity securities or securities convertible into equity securities, your ownership would be
diluted.
The refinancing of our existing senior secured credit facility may not be completed on the terms that we expect or at all. The failure
to complete the refinancing as currently contemplated would require us to use more of the proceeds of this offering to repay our existing senior secured credit facility, leaving less of the proceeds for working capital and other general corporate
purposes.
While we are engaged in discussions with financing sources regarding the terms of a new revolving credit facility and
expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering, to date we do not have any binding commitments from any financing sources. There can be no assurance that we will be
able to enter into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior secured credit facility requires that the proceeds of this offering be used to repay all amounts
outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the refinancing, we will be required to apply more of the proceeds of this offering to repay our existing indebtedness and will
have less available to use for working capital
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and general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business, sales and marketing activities and other capital expenditures. As of April 2,
2011, approximately $92.6 million was outstanding under our existing senior secured credit facility. See "Use of Proceeds" and "Description of Certain Indebtedness".
We may incur additional indebtedness in the future, which may require us to use a substantial portion of our cash flow to service debt and limit our financial and operating flexibility in important ways.
We may incur additional indebtedness in the future. Any borrowings under any future debt financing (including our new revolving
credit facility) will require interest payments and need to be repaid or refinanced, could require us to divert funds identified for other purposes to debt service and would create additional cash demands and could impair our liquidity position and
add financial risk for us. Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. If we cannot generate sufficient cash flow from operations to service our debt, we may need to
refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.
Our level of indebtedness has important consequences to you and your investment in our common stock. For example, our level of indebtedness may:
Ÿ
require us to use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to us
for working capital, capital expenditures and other general corporate purposes;
Ÿ
limit our ability to pay future dividends;
Ÿ
limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans and other investments, which may limit our ability to
implement our business strategy;
Ÿ
heighten our vulnerability to downturns in our business, the specialty apparel and accessories retail industry or in the general economy and limit our
flexibility in planning for, or reacting to, changes in our business and the specialty apparel and accessories retail industry; or
Ÿ
prevent us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our boutique base and product
offerings.
We cannot assure you that our business will generate sufficient cash flow from operations or that future
borrowings will be available to us in amounts sufficient to enable us to make payments on our indebtedness or to fund our operations.
The terms
of our existing senior secured credit facility do, and the terms of any additional debt financing (including our new revolving credit facility) may, restrict our current and future operations, which could adversely affect our ability to manage our
operations and respond to changes in our business.
Our existing senior secured credit facility contains, and any additional debt
financing we may incur (including the new revolving credit facility) would likely contain, covenants that restrict our operations, including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock,
make certain investments and engage in certain merger, consolidation or asset sale transactions. A failure by us to comply with the covenants or financial ratios contained in our existing senior secured credit facility or any additional debt
financing we may incur (including the new revolving credit facility) could result in an event of default, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of
default, the lenders could elect to declare all amounts outstanding to be due and payable and exercise
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other remedies. If the indebtedness under our existing senior secured credit facility or any additional debt financing we may incur (including the new revolving credit facility) were to be
accelerated, our future financial condition could be materially adversely affected.
There are claims made against us from time to time that can
result in litigation that could distract management from our business activities and result in significant liability or damage to our brand.
As a growing company with expanding operations, we increasingly face the risk of litigation and other claims against us. Litigation and other claims may arise in the ordinary course of our business and include
employee claims, commercial disputes, landlord-tenant disputes, intellectual property issues, product-oriented allegations and slip and fall claims. These claims can raise complex factual and legal issues that are subject to risks and uncertainties
and could require significant management time. Litigation and other claims against us could result in unexpected expenses and liabilities, which could materially adversely affect our operations and our reputation.
We may be unable to protect our trademarks or other intellectual property rights.
We believe that our trademarks are integral to our boutique design, our e-commerce business and our success in building our brand image and customer
loyalty. We rely on trademark registrations and common law trademark rights to protect the distinctiveness of our brand and have registered those trademarks that we believe are important to our business with the United States Patent and Trademark
Office. We cannot assure you that these registrations will prevent imitation of our name, merchandising concept, boutique design or private label merchandise, or the infringement of our other intellectual property rights by others. In most cases,
the merchandise we sell is purchased on a non-exclusive basis from vendors that also sell to our competitors. While we use our brand name on these items, our competitors may seek to replicate aspects of our business strategy and in-boutique
experience, thereby diluting the experience we offer and adversely affecting our brand and competitive position. Imitation of our name, concept, boutique design or merchandise in a manner that projects lesser quality or carries a negative
connotation of our brand image could have an adverse effect on our business, financial condition and results of operations.
We are not
aware of any claims of infringement upon or challenges to our right to use any of our brand names or trademarks in the United States. Nevertheless, we cannot be certain that the actions we have taken to establish and protect our trademarks will be
adequate to prevent imitation of our merchandise by others or to prevent others from seeking to block sales of our merchandise as a violation of the trademarks or proprietary rights of others. Although we cannot currently estimate the likelihood of
success of any such lawsuit or ultimate resolution of such a conflict, such a controversy could have an adverse effect on our business, financial condition and results of operations. If disputes arise in the future, we may not be able to
successfully resolve these types of conflicts to our satisfaction.
We are currently in the process of registering our trademarks in
several foreign countries to seek protection outside the United States. However, international protection of our brand image and the use of these marks may be unavailable or could be limited. Also, other entities may have rights to trademarks that
contain portions of our marks or may have registered similar or competing marks for merchandise in foreign countries in which our vendors source our merchandise. There may also be other prior registrations of trademarks identical or similar to our
trademarks in other foreign countries of which we are not aware. Accordingly, it may be possible for others to prevent the manufacture of our branded goods in certain foreign countries or the sale or exportation of our branded goods from certain
foreign countries to the United States. If we were unable to reach a licensing arrangement with these parties, our vendors may be unable to manufacture our merchandise in those countries. Our inability to
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register our trademarks or purchase or license the right to use our trademarks or logos in these jurisdictions could limit our ability to obtain supplies from less costly markets or penetrate new
markets should our business plan change to include selling our merchandise in those foreign jurisdictions.
Litigation may be necessary
to protect our trademarks and other intellectual property rights or to enforce these rights. Any litigation or claims brought by us could result in substantial costs and diversion of our resources, which could have a material adverse effect on our
business, financial condition, results of operations or cash flows.
We may be subject to liability and other risks if we, our vendors or the
manufacturers of our merchandise infringe upon the trademarks or other intellectual property rights of third parties, including the risk that we could acquire merchandise from our vendors without the full right to sell it.
We purchase merchandise that may be subject to design copyrights, design patents or otherwise may incorporate protected intellectual property. While
we are not involved in the manufacture of any of the merchandise we purchase from our vendors for sale to our customers, we may be subject to liability if our vendors or the manufacturers of our merchandise infringe upon the trademarks or other
intellectual property rights of third parties. We do not independently investigate whether our vendors or the manufacturers with whom they do business legally hold intellectual property rights to the merchandise we purchase. Third parties may bring
legal claims, or threaten to bring legal claims, against us that their intellectual property rights are being infringed or violated by our use of intellectual property. Litigation or threatened litigation could be costly and distract our senior
management from operating our business. If we were to be found liable for any such infringement, we could be required to pay substantial damages and could be subject to injunctions preventing further infringement. In addition, any payments we are
required to make and any injunctions with which we are required to comply as a result of infringement claims could be costly and thereby adversely affect our financial results.
If a third party claims to have licensing rights with respect to merchandise we purchased from a vendor, or if we acquire unlicensed merchandise,
we may be obligated to remove this merchandise from our boutiques, incur costs associated with this removal if the distributor or vendor is unwilling or unable to reimburse us and be subject to liability under various civil and criminal causes of
action, including actions to recover unpaid royalties and other damages and injunctions. Additionally, we will be required to purchase new merchandise to replace any we remove.
We rely upon independent third-party transportation providers for substantially all of our merchandise shipments.
We currently rely upon independent third-party transportation providers for substantially all of our merchandise shipments, including shipments to all of our boutiques and our direct customers. Our use of outside
delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather, which may impact a shipper's ability to provide delivery services that
adequately meet our shipping needs. If we change shipping companies, we could face logistical difficulties that could adversely impact deliveries and we would incur costs and expend resources in connection with such change. Moreover, we may not be
able to obtain terms as favorable as those received from the independent third-party transportation providers we currently use, which would increase our costs.
Our ability to source our merchandise efficiently and profitably could be hurt if new trade restrictions are imposed or existing trade restrictions become more burdensome.
We currently purchase all our inventory from domestic vendors, who source our merchandise both domestically and internationally. In fiscal year
2010, we believe most of the merchandise sourced
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by our vendors was produced outside the United States. These vendors, to the extent they obtain merchandise from outside of the United States, are subject to trade restrictions, including
tariffs, safeguards or quotas, changes to which could increase the cost or reduce the supply of merchandise available to us. Under the World Trade Organization Agreement, effective January 1, 2005, the United States and other World Trade
Organization member countries removed quotas on goods from World Trade Organization members, which in certain instances we believe affords our vendors greater flexibility in importing textile and apparel products from World Trade Organization
countries from which they source our merchandise. However, as the removal of quotas resulted in an import surge from China, the United States imposed safeguard quotas on a number of categories of goods and apparel from China, and may impose
additional quotas in the future. These and other trade restrictions could have a significant impact on our vendors' sourcing patterns in the future. The extent of this impact, if any, and the possible effect on our purchasing patterns and
costs, cannot be determined at this time. We cannot predict whether any of the countries in which our vendors' merchandise is currently manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed
by the United States or foreign governments, nor can we predict the likelihood, type or effect of any restrictions. Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions against items we offer in
our boutiques, as well as United States or foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce the supply of merchandise to our vendors, and we would expect the costs to be passed along in increased prices to us,
which could hurt our profitability.
We may be subject to sales tax in states where we operate our e-commerce business, which could have an
adverse effect on our business, financial condition and results of operations.
Under current state and federal laws, we are not
required to collect and remit sales tax in some states where we sell through our e-commerce business . Legislation is pending in some states that may require us to collect and remit sales tax on e-commerce sales or institute use tax reporting. If
states pass sales or use tax laws, we may need to collect and remit current and past sales tax and could face greater exposure to income tax and franchise taxes in these states. Any increase in sales tax or use tax reporting on our internet sales
could discourage customers from purchasing through our e-commerce business, which could have an adverse effect on growth prospects.
Increases in
the minimum wage could have an adverse effect on our financial results.
From time to time, legislative proposals are made to
increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states. Base wage rates for many of our employees are at or slightly above the minimum wage. As federal or state minimum wage rates
increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well. Any increase in the cost of our labor could have an adverse effect on our operating costs,
financial condition and results of operations.
The additional financial, legal and regulatory requirements imposed on public companies may strain
our resources, divert management's attention and affect our ability to attract and retain qualified board members.
We have
historically operated our business as a private company. As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Sarbanes-Oxley Act and the rules of
The NASDAQ Stock Market. The requirements of these rules and regulations will significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, make some activities more difficult,
time-consuming or costly and may also place undue strain on our personnel, systems and resources.
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The Exchange Act will require, among other things, that we file annual, quarterly and current reports
with respect to our business and financial condition. Public disclosure of our business results and other company information could make us less competitive in the market place as our competition gains a better understanding of how we do business.
The Sarbanes-Oxley Act will require, among other things, that we maintain additional disclosure controls and procedures and internal
control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. Section 404 of the
Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm auditing the effectiveness of our internal control over
financial reporting beginning with fiscal year 2012. Both we and our independent registered public accounting firm will be testing our internal controls in connection with the Section 404 requirements and could, as part of that documentation
and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors,
officers and employees, require the hiring of additional finance, accounting and other personnel, involve substantial costs to modify our existing accounting systems and take a significant period of time to complete. These changes may not, however,
be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially
impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of
Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.
Various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors' and
officers' liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors' and officers' insurance, our ability to
recruit and retain qualified officers and directors, especially those directors who may be deemed independent for purposes of rules of The NASDAQ Stock Market, will be significantly curtailed.
In the past, a material weakness in our internal control over financial reporting had been identified. If material weaknesses or significant deficiencies
arise in the future or if we fail to maintain proper and effective internal controls going forward, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect our business, results of operations
and financial condition.
In connection with the audit of our consolidated financial statements as of and for the fiscal year
ended January 31, 2009, the Company identified a control deficiency that constituted a material weakness in our internal control over financial reporting for such period. This material weakness related to accounting for convertible redeemable
preferred stock.
A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or combination of
deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
We have taken steps to remediate our internal control deficiencies. However, there are no assurances that the measures we have taken to remediate
these internal control weaknesses were
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completely effective or that similar weaknesses will not recur. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to
address any other matters we identify.
No material weaknesses were identified for the fiscal year ended January 29, 2011, and,
accordingly, we believe that our remediation efforts were successful.
However, we did not perform an assessment of our internal control over financial reporting nor did our auditors perform an audit over our internal control over
financial reporting; we therefore cannot assure you that these or other similar issues will not arise in future periods. We anticipate that we will next evaluate our internal control over financial reporting in connection with management's
preparation of our financial statements for the fiscal year ending January 28, 2012.
In addition, if we are unable to conclude
that we have effective internal control over financial reporting, our independent auditors are unable to provide us with an unqualified report as required by Section 404 of this Sarbanes-Oxley Act or we are required by Section 404 of the
Sarbanes-Oxley Act to restate our financial statements, we may fail to meet our public reporting obligations and investors could lose confidence in our reported financial information, which could have a negative impact on the trading price of our
stock.
Certain historical financial information included in this prospectus has been derived from unaudited financial statements and, as such,
may contain errors that might have been detected in an audit. Accordingly, our reported financial results may not be reflective of our actual results for these prior periods.
Our consolidated financial statements as of and for the fiscal years ended December 31, 2007 and December 31, 2006, as well as our
consolidated financial statements as of and for the months ended January 31, 2007 and January 31, 2008, have not been audited. The financial data for those periods included in this prospectus is based on management accounts only and has
not been reviewed or audited by an independent registered public accounting firm. Although management believes that these unaudited consolidated financial statements have been prepared on a basis that is consistent with our audited consolidated
financial statements, there is a risk that this unaudited financial information may contain errors that might have been detected in an audit and such financial information may not be reflective of our true historical results for those periods. Any
differences between the financial information presented for these unaudited periods in this prospectus and our actual historical results may be material. Accordingly, you are cautioned not to place undue reliance on such information.
Our management has limited experience managing a public company and our current resources may not be sufficient to fulfill our public company obligations.
Following the completion of this offering, we will be subject to various regulatory requirements, including those of the SEC and
The NASDAQ Stock Market. These requirements include record keeping, financial reporting and corporate governance rules and regulations. Our management team has limited experience in managing a public company and, historically, has not had the
resources typically found in a public company. Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside
consultants or professionals to overcome our lack of experience or employees. Our business could be adversely affected if our internal infrastructure is inadequate, we are unable to engage outside consultants or are otherwise unable to fulfill our
public company obligations.
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Risks Related to this Offering and Ownership of Our Common Stock
No market currently exists for our common stock, and there can be no assurance that a viable public market for our common stock will develop.
Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common
stock will be determined through negotiations between us and the representatives of the underwriters and may not be indicative of the market price of our common stock after this offering. If you purchase shares of our common stock, you may not be
able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on The NASDAQ Global Select Market or otherwise or how
liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of
common stock at a price that is attractive to you, or at all.
Our stock price may be volatile or may decline regardless of our operating
performance, and you may not be able to resell your shares at or above the initial public offering price. Additionally, because we are a specialty retailer whose business is cyclical, the price of our common stock may fluctuate significantly.
After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been
traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:
Ÿ
fashion trends and changes in consumer preferences;
Ÿ
changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the retail sales environment;
Ÿ
the timing and level of expenses for new boutique openings, relocations and remodels and the relative proportion of our new boutiques to existing boutiques;
Ÿ
the performance and successful integration of any new boutiques that we open;
Ÿ
the success of our e-commerce business and sales levels;
Ÿ
changes in our merchandise mix and vendor base;
Ÿ
changes in key personnel;
Ÿ
entry into new markets;
Ÿ
our levels of comparable boutique sales;
Ÿ
announcements by us or our competitors of new product offerings or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital
commitments;
Ÿ
actions by competitors or other mall, lifestyle center, street locations and strip center tenants;
Ÿ
weather conditions, particularly during the holiday shopping period;
Ÿ
the level of pre-opening expenses associated with new boutiques;
Ÿ
inventory shrinkage beyond our historical average rates;
Ÿ
changes in operating performance and stock market valuations of other retail companies;
Ÿ
investors' perceptions of our prospects and the prospects of the retail industry;
Ÿ
fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;
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Ÿ
the public's response to press releases or other public announcements by us or third parties, including our filings with the SEC;
Ÿ
announcements relating to litigation;
Ÿ
guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
Ÿ
changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those
analysts to initiate or maintain coverage of our common stock;
Ÿ
the development and sustainability of an active trading market for our common stock;
Ÿ
investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;
Ÿ
future sales of our common stock by our officers, directors and significant stockholders;
Ÿ
other events or factors, including those resulting from system failures and disruptions, hurricanes, war, acts of terrorism, other natural disasters or responses
to these events; and
Ÿ
changes in accounting principles.
These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering
price.
In addition, the stock markets, including The NASDAQ Global Select Market, have experienced extreme price and volume
fluctuations that have affected and continue to affect the market prices of equity securities of many retail companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were
involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could
adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, we will have approximately
             shares of common stock outstanding. The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any
shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may
not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
After this offering, CCMP, the Founders and certain other stockholders that are the part of our executive management team will have rights to
require us to file registration statements registering additional sales of shares of common stock or to include sales of such shares of common stock in registration statements that we may file for ourselves or other stockholders. In order to
exercise these registration rights, these stockholders must satisfy the conditions discussed in "Certain Relationships and Related Party Transactions—Stockholders' Agreement". Subject to compliance with applicable lock-up
restrictions, shares of common stock sold under these registration statements can be freely sold in the public market. In the event such registration rights are exercised and a large number of
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shares of common stock are sold in the public market, such sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital.
Additionally, we will bear all expenses in connection with any such registrations (other than stock transfer taxes and underwriting discounts or commissions). See "Certain Relationships and Related Party Transactions—Stockholders'
Agreement" and "Shares Eligible for Future Sale—Registration Rights".
We and each of our executive officers,
directors, all of the selling stockholders and substantially all of our other existing stockholders will have agreed with the underwriters, that for a period of 180 days after the date of this prospectus, we or they will not offer, sell,
assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock, or any options or warrants to purchase any shares of our common stock or any securities convertible into or exchangeable for shares of common
stock, subject to specified exceptions. The representatives of the underwriters may, in their discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such agreement. See
"Underwriting" for more information. All of our shares of common stock outstanding as of the date of this prospectus may be sold in the public market by existing stockholders 180 days after the date of this prospectus, subject to
applicable volume and other limitations imposed under federal securities laws. See "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling shares of our common stock after this offering. Sales by
our existing stockholders of a substantial number of shares in the public market, or the perception that these sales might occur, could cause the market price of our common stock to decrease significantly.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in
connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional
dilution to you.
If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.
If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of
$             per share because the assumed initial public offering price of $            , which is the midpoint of the price
range set forth on the cover page of this prospectus, is substantially higher than the pro forma net tangible book value per share of our outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid
substantially less than the initial public offering price when they purchased their shares. In connection with this offering, we expect to issue stock options to directors, officers and key employees under the 2011 Stock Incentive Plan. We plan to
reserve              shares of common stock under the 2011 Stock Incentive Plan for future issuances. You may experience additional dilution upon future equity issuances or the exercise of
stock options to purchase common stock granted to our employees, consultants and directors under our stock incentive plans. See "Dilution" for a more detailed description.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our
business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively
impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our
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business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which
could cause our stock price and trading volume to decline.
We do not expect to pay any cash dividends for the foreseeable future.
We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our
business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any contractual
provisions, including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and
other factors that our board of directors deems relevant. Further, because we are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay
dividends as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants under future indebtedness we may incur. Accordingly, if you purchase shares in this offering, realization of a gain on your
investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant
corporate decisions.
Upon completion of this offering, and assuming no exercise of the underwriters' option to purchase
additional shares, our executive officers, directors and principal stockholders will own, in the aggregate, approximately     % of our outstanding common stock, or approximately     % assuming the exercise of
outstanding options owned by our executive officers and directors. As a result, these stockholders will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors, amendment of our
amended and restated certificate of incorporation and approval of significant corporate transactions and will have significant control over our management and policies. This concentration of influence could be disadvantageous to other stockholders
with interests different from those of our officers, directors and principal stockholders. We currently expect that, following this offering, three of the seven members of our board of directors will be principals of CCMP, one member will be
Mr. De Meritt, President and Chief Executive Officer of the company and one member will be Ms. Kyong Gill, the Executive Vice Chairperson of our board of directors.
Upon completion of this offering, and assuming no exercise of the underwriters' option to purchase additional shares, CCMP is expected to hold approximately     % of our outstanding common
stock and the Founders are expected to collectively hold approximately     % of our outstanding common stock. As a result of these ownership positions, these stockholders could take actions that have the effect of delaying or
preventing a change-in-control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. The
concentration of voting power held by CCMP may have an adverse effect on the price of our common stock. The interests of these stockholders may not be consistent with your interests as a stockholder.
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We will be a "controlled company" within the meaning of The NASDAQ Stock Market corporate governance
standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
Upon the completion of this offering, affiliates of CCMP will continue to control a majority of our outstanding common stock. As a result, we will
be a "controlled company" within the meaning of The NASDAQ Stock Market corporate governance standards. As a controlled company, certain exemptions under The NASDAQ Stock Market corporate governance standards will free us from the
obligation to comply with certain corporate governance requirements of The NASDAQ Stock Market corporate governance standards, including the requirements:
Ÿ
that a majority of the board of directors consist of "independent directors" as defined under The NASDAQ Stock Market corporate governance standards;
Ÿ
that our director nominees be selected, or recommended for our board of directors' selection, either (1) by a majority of independent directors in a
vote by independent directors, pursuant to a nominations process adopted by a board resolution, or (2) by a nominating and governance committee comprised solely of independent directors with a written charter addressing the nominations process;
and
Ÿ
that the compensation of our executive officers be determined, or recommended to the board for determination, by a majority of independent directors in a vote by
independent directors, or a compensation committee comprised solely of independent directors.
Following this
offering, we intend to utilize these exemptions. Accordingly, for so long as we are a "controlled company", you will not have the same protections afforded to stockholders of companies that are subject to all of The NASDAQ Stock Market
corporate governance standards.
Conflicts of interest may arise because some of our directors are principals of our principal stockholder.
Upon the completion of this offering, representatives of CCMP and its affiliates will occupy three seats on our board of
directors. CCMP or its affiliates could invest in entities that directly or indirectly compete with us or companies in which CCMP or its affiliates are currently invested may already compete with us. As a result of these relationships, when
conflicts arise between the interests of CCMP or its affiliates, on the one hand, and the interests of our stockholders, on the other hand, these directors may not be disinterested. The representatives of CCMP and its affiliates on our board of
directors, by the terms of our amended and restated certificate of incorporation, are not required to offer us any transaction opportunity of which they become aware and could take any such opportunity for themselves or offer it to other companies
in which they have an investment, unless such opportunity is expressly offered to them solely in their capacity as our directors.
Anti-takeover
provisions in our charter documents and provisions of Delaware law might discourage, delay or prevent change in control of our company and may result in an entrenchment of management and diminish the value of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be effective upon completion of this
offering, will contain provisions that make it difficult for our stockholders to change the composition of our board of directors, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or
prevent a merger or acquisition that our stockholders may consider favorable. See "Description of Capital Stock".
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These provisions, among other things:
Ÿ
establish a staggered, or classified, board of directors so that not all members of our board of directors are elected at one time;
Ÿ
prohibit cumulative voting in the election of directors;
Ÿ
authorize the issuance by our board of directors of "blank check" preferred stock, the terms of which may be established and the shares of which may be
issued without stockholder approval, and which may include super-majority voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock;
Ÿ
limit the persons who may call special meetings of stockholders;
Ÿ
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and
Ÿ
establish advance notice requirements for stockholder nominations for elections to our board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.
These anti-takeover provisions and other provisions under Delaware law,
together with the concentration of ownership of our common stock discussed above under "Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing
significant corporate decisions," could substantially impede the ability of our common stockholders to benefit from a change in control and, as a result, could materially adversely affect the market price of our common stock and your ability to
realize any potential change-in-control premium.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition as well as our
plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are
forward-looking statements. These statements may include words such as "aim", "anticipate", "assume", "believe", "can have", "could", "due", "estimate",
"expect", "goal", "intend", "likely", "may", "objective", "plan", "potential", "positioned", "predict", "should", "target",
"will", "would" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends. For example, all statements we make
relating to our estimated and projected earnings, sales, costs, expenditures, cash flows, growth rates, market share and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or
impact of pending or threatened litigation are forward-looking statements.
These forward-looking statements are based on current
expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management's beliefs and assumptions. These statements are not guarantees of future performance or development and involve known
and unknown risks, uncertainties and other factors that are in many cases beyond our control. All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations.
Factors that may cause such differences include, but are not limited to, the risks described under "Risk Factors," including:
Ÿ
our ability to identify and respond to new and changing fashion trends, customer preferences and other related factors;
Ÿ
our ability to maintain a broad and shallow merchandise assortment;
Ÿ
failure to execute successfully our growth strategy;
Ÿ
disruptions to our information systems in the ordinary course or as a result of systems upgrades;
Ÿ
changes in consumer spending and general economic conditions;
Ÿ
increasing cost of raw materials and other inputs used in the production of our merchandise;
Ÿ
changes in the competitive environment in our industry and the markets we serve, including increased competition from other retailers;
Ÿ
failure of our new boutiques or existing boutiques to achieve sales and operating levels consistent with our expectations;
Ÿ
the success of the malls and shopping centers in which our boutiques are located;
Ÿ
our dependence on a strong brand image;
Ÿ
failure of our e-commerce business to grow consistent with our growth strategy;
Ÿ
our dependence upon key senior management or our inability to hire or retain additional personnel;
Ÿ
disruptions in our supply chain and distribution facility;
Ÿ
our indebtedness and lease obligations;
Ÿ
our reliance upon independent third-party transportation providers for all of our merchandise shipments;
Ÿ
hurricanes, natural disasters, unusually adverse weather conditions, boycotts and unanticipated events;
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Ÿ
the seasonality of our business;
Ÿ
increases in costs of fuel, or other energy, transportation or utilities costs and in the costs of labor and employment;
Ÿ
the impact of governmental laws and regulations and the outcomes of legal proceedings;
Ÿ
restrictions imposed by our indebtedness on our current and future operations;
Ÿ
our failure to maintain effective internal controls;
Ÿ
our inability to protect our trademarks or other intellectual property rights; and
Ÿ
increased costs as a result of being a public company.
The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and it is not possible for us to predict all of them. We derive many of our forward-looking
statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is
impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly
qualified in their entirety by the cautionary statements contained in this prospectus as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking
statements made in this prospectus in the context of these risks and uncertainties.
Potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as
required by law, we undertake no obligation to update or revise any forward-looking statements publicly whether as a result of new information, future developments or otherwise.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately
$            million, assuming an initial public offering price of $            per share, the midpoint of the price range set
forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of our common stock by the selling
stockholders, which includes certain of our officers and directors, including any shares sold by the selling stockholders in connection with the exercise of the underwriters' option to purchase additional shares.
We intend to use approximately $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a
new revolving credit facility, to repay our existing senior secured credit facility in full. We intend to use the remaining proceeds from this offering, if any, to provide funds for working capital and other general corporate purposes, including the
growth of our boutique base, the growth of our e-commerce business, sales and marketing activities and other capital expenditures. We have not determined the specific portion of any net proceeds to be used for these purposes, and the net proceeds
from this offering have not been accounted for in our normal budgeting process. The amounts actually expended for these purposes may vary significantly and will depend on a number of factors, including the amount of cash we generate from future
operations, the actual expenses of operating our business, opportunities that may be or become available to us, the consummation of the refinancing and the other factors described under "Risk Factors." If the refinancing is not consummated
as expected, a greater amount of the proceeds from this offering would be required to be used to repay our existing senior secured credit facility. See "Risk Factors—Risks Related to our Business—The refinancing of our existing senior
secured credit facility may not be completed on the terms that we expect or at all. The failure to complete the refinancing as currently contemplated would require us to use more of the proceeds of this offering to repay our existing senior secured
credit facility, leaving less of the proceeds for working capital and other general corporate purposes." Notwithstanding the uses described above, we will retain broad discretion in the allocation of any remaining net proceeds from this
offering.
Affiliates of Goldman, Sachs & Co., J.P. Morgan Securities LLC, Jefferies & Company, Inc., RBC Capital
Markets, LLC, Stifel, Nicolaus & Company, Incorporated and KeyBanc Capital Markets Inc., underwriters for this offering, are lenders under our existing senior secured credit facility and will receive a portion of the net proceeds used to
repay amounts outstanding under our existing senior secured credit facility. See "Underwriting".
Our existing senior secured
credit facility consists of a $95.0 million term loan facility and a $5.0 million revolving credit facility, each with a scheduled maturity date of November 17, 2013. As of January 29, 2011, we had $93.8 million outstanding under our term
loan facility and $5.0 million available under our revolving credit facility. Immediately prior to the completion of this offering, we anticipate that there will be $            million of
term loans and no amounts of revolving loans outstanding under our existing senior secured credit facility. We used all of the term loan borrowings, along with cash on hand, to pay a dividend of $100.0 million on our common stock during November
2010. The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the higher
of (i) the prime rate of Royal Bank of Canada and (ii) the federal funds rate plus 1/2 of 1%, (2) the LIBOR for an interest period of one month plus 1.00% and (3) 2.75% or (b) in the case of LIBOR borrowings, a rate equal to
the higher of (1) 1.75% and (2) the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings under both the revolving credit facility and the term loan facility is 5.00% with respect to base
rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for base rate borrowings increases to 6.50% and 9.00% on June 1, 2012 and
June 1, 2013, respectively. The applicable margin for borrowings under both the revolving
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credit facility and the term loan facility for LIBOR borrowings increases to 7.50% and 10.00% on June 1, 2012 and June 1, 2013, respectively. As of January 29, 2011, the loans
under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%. See "Description of Certain Indebtedness—Existing Senior Secured Credit Facility" for more information on our existing senior
secured credit facility.
A $1.00 increase or decrease in the assumed initial public offering price of
$             per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds we receive from this offering by approximately
$            million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriter discounts and
commissions and estimated offering expenses payable by us.
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DIVIDEND POLICY
We did not declare or pay any dividends on our common stock during fiscal year 2009. We declared and paid a dividend of $2.39 per share on our
common stock (on a fully diluted basis) during November 2010. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the
foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any contractual provisions, including under agreements for indebtedness we may incur,
that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and other factors that our board of directors deems relevant. Because we
are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization,
agreements of our subsidiaries or covenants under future indebtedness we may incur.
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CAPITALIZATION
The following table sets forth our cash, cash equivalents and capitalization as of January 29, 2011 on:
Ÿ
an actual basis; and
Ÿ
a pro forma as adjusted basis to give effect to the following:
Ÿ
the sale by us of              shares of common stock in this offering at an assumed initial public
offering price of $             per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us; and
Ÿ
the use of $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a new revolving credit facility, to
repay our existing senior secured credit facility in full.
You should read the following table together with our
consolidated financial statements and the related notes appearing elsewhere in this prospectus and the sections of this prospectus titled "Management's Discussion and Analysis of Financial Condition and Results of Operations",
"Use of Proceeds" and "Selected Consolidated Financial and Operating Data".
As of January 29, 2011
Actual
Pro Forma
As Adjusted(1)
($ in thousands)
Cash and cash equivalents
$
12,516
$
Current portion of long-term debt
5,938
Long-term debt
87,875
Shareholders' deficit:
Common stock, $0.01 par value, 80,000,000 shares authorized; 40,457,343 shares issued and outstanding, actual;
             shares issued and outstanding, on a pro forma as adjusted basis
405
Additional paid-in capital
27,232
Accumulated deficit
(83,105
)
Total shareholders' deficit
$
(55,468
)
Total capitalization
$
38,345
(1)
Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the assumed initial public offering price of $            per share, the midpoint
of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds from this offering available to us to prepay our existing senior secured credit facility and would increase or decrease cash and cash
equivalents by $            million, additional paid-in capital by $            million, total shareholders' deficit by
$            million and total capitalization by $            million. See "Use of Proceeds." The pro forma as adjusted
information discussed above is illustrative only and following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.
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DILUTION
Dilution is the amount by which the offering price paid by the purchasers of our common stock in this offering will exceed the pro forma net
tangible book value per share of our common stock upon completion of this offering.
If you invest in shares of our common stock in this
offering, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share you pay in this offering and the pro forma net tangible book value per share of our common stock upon completion
of this offering. Our net tangible book value as of                     , 2011 was
$            million, or $            per share of common stock. Net tangible book value or deficiency per share of our common
stock is determined at any date by subtracting our total liabilities from our total assets, less our intangible assets, and dividing the difference by the number of shares of common stock outstanding at that date.
Our pro forma net tangible book value per share, after giving effect to this offering, set forth below represents our total tangible assets less
our total liabilities, divided by the number of shares of our common stock outstanding on                    , 2011, after giving effect to the
sale by us of shares of common stock in this offering.
After giving effect to our issuance and sale
of            shares of our common stock in this offering at an assumed initial public offering price of $            per share,
which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of
                    , 2011 would have been approximately $            million, or
$            per share of our common stock. This represents an immediate increase in pro forma net tangible book value to our existing stockholders of
$            per share, and an immediate dilution of $            per share to new investors who purchase shares of our common
stock in this offering.
The following table illustrates this per share dilution to new investors purchasing shares of our common stock
in this offering:
Assumed initial public offering price per share
$
Net tangible book value per share as of
                    , 2011
$
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares in this offering
Pro forma net tangible book value per share after this offering (without giving effect to the refinancing)
Dilution per share to new investors
$
Assuming the number of shares offered by
us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the
assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net tangible book
value attributable to new investors purchasing shares in this offering by $             per share and the dilution to new investors by
$            per share and increase or decrease the pro forma net tangible book value per share after this offering by
$            per share.
Sales by the selling stockholders in this offering
will cause the number of shares held by existing stockholders to be reduced to            shares or,    %, in the aggregate, of the total number of shares of our common
stock outstanding upon completion of this offering, and will increase the total number of shares held by new investors to            shares or,    %, in the aggregate,
of the total number of shares of our common stock outstanding upon completion of this offering.
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If the underwriters exercise their option to purchase additional shares in full, our existing
stockholders would own            shares or,    %, in the aggregate, and our new investors would
own            shares or,    %, in the aggregate, of the total number of shares of our common stock outstanding upon completion of this offering.
The following table summarizes, as of
                    , 2011, as adjusted to give effect to this offering, the difference between the number of shares of our common stock purchased
from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors, at an assumed initial public offering price of
$            per share, the midpoint of the range set forth on the cover page of this prospectus, before deducting the underwriting discounts and commissions and estimated offering expenses
payable by us in connection with this offering:
Shares Purchased
Total Consideration
Average
Price
Per Share
Number
Percent
Amount
Percent
Existing stockholders
%
$
%
$
New investors in the offering
Total
100
%
$
100
%
$
Assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same,
after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, a $1.00 increase or decrease in the assumed initial public offering price of
$            per share, the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease total consideration paid by new investors and total
consideration paid by all stockholders by approximately $            million.
The foregoing discussion and tables assume no exercise of stock options to purchase
             shares of our common stock issuable upon the exercise of stock options outstanding as of
                    , 2011, at a weighted average exercise price of $            per
share. To the extent that any options are exercised, new investors will experience further dilution.
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Table of Contents
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following selected consolidated financial data for each of the years ended January 29, 2011, January 30, 2010 and January 31,
2009 and the selected consolidated balance sheet data as of January 29, 2011 and January 30, 2010 have been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected
consolidated balance sheet data as of January 31, 2009 has been derived from our audited consolidated balance sheet, which is not included in this prospectus. The selected consolidated financial data for each of the years ended December 31,
2006 and December 31, 2007 and the selected consolidated balance sheet data as of December 31, 2006 and December 31, 2007 have been derived from our unaudited consolidated financial statements, which are not included in this
prospectus.
In February 2010, CCMP acquired a controlling interest in the company from the Founders and Bear Growth Capital Partners,
LP ("BGCP"). In connection with the acquisition, the company considered the application of push-down accounting to the company's financial statements. The company determined that given the percentage of the equity interest acquired in
the acquisition, the push-down accounting treatment was optional but not required. The company elected not to apply the push-down accounting treatment as a result of the acquisition.
We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January 31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January 29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January 30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January 31, 2009. For fiscal year 2007, which ended on December 31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December 31st.
The historical results presented below are not necessarily indicative of the results to be
expected for any future period and the results for any interim period may not necessarily be indicative of the results that may be expected for a full year. You should read the selected consolidated financial and operating data for the periods
presented in conjunction with "Risk Factors", "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related
notes, which are included elsewhere in this prospectus.
45
Table of Contents
Consolidated Statements of
Operations
(1)
Fiscal Year Ended
Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
December 31,
2007
December 31,
2006(2)
(in thousands, except share and per share amounts)
Net sales(3)
$
135,176
$
79,367
$
52,290
$
40,210
$
29,708
Cost of goods sold and occupancy costs(4)
65,008
37,244
25,358
19,312
14,225
Gross profit
70,168
42,123
26,932
20,898
15,483
Selling, general, and administrative expenses
40,525
24,641
19,962
14,671
9,833
Income from operations
29,643
17,482
6,970
6,227
5,650
Other income (expense)
(2
)
38
14
(159
)
—
Interest income (expense)
(1,633
)
2
4
2
4
Income before income tax expense
28,008
17,522
6,988
6,070
5,654
Income tax expense
11,113
6,918
2,382
2,379
47
Net income
16,895
10,604
4,606
3,691
5,607
Increase in redemption value of convertible redeemable preferred stock
—
(60,271
)
—
—
—
Convertible redeemable preferred stock accrued dividends
—
(2,022
)
(1,641
)
(1,703
)
—
Net income (loss) available to shareholders
$
16,895
$
(51,689
)
$
2,965
$
1,988
$
5,607
Less: Income attributable to participating securities
—
—
(1,038
)
(552
)
—
Net income (loss) available to common shareholders
$
16,895
$
(51,689
)
$
1,927
$
1,436
$
5,607
Basic earnings (loss) per common share(5)
$
0.43
$
(1.99
)
$
0.07
$
0.06
$
0.22
Diluted earnings (loss) per common share(5)
$
0.41
$
(1.99
)
$
0.07
$
0.06
$
0.22
Dividends declared per common share
$
2.39
—
—
—
—
Weighted average shares outstanding:
(6)
Basic shares
39,385
26,000
26,000
26,000
26,000
Diluted shares
40,907
26,000
26,000
26,000
26,000
Consolidated Balance Sheet Data
(1)
As of Fiscal Year Ended
As of Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
December 31,
2007
December 31,
2006(2)
Total current assets
$
31,721
$
22,318
$
13,036
$
12,860
$
7,396
Total assets
59,124
31,218
16,830
14,797
8,912
Total liabilities
114,592
8,242
4,556
5,107
2,335
Convertible redeemable preferred stock—series A
—
85,854
23,561
21,703
—
Total shareholders' (deficit) equity
(55,468
)
(62,878
)
(11,287
)
(12,013
)
6,577
Operating data:
Comparable boutique sales growth for period(7)
15.2
%
9.8
%
(6.3
)%
5.0
%
1.5
%
Number of boutiques open at end of period
207
147
111
78
64
Net sales per average square foot for period (not in thousands)
$
508
$
429
$
384
$
401
$
399
Average square feet (in thousands)(8)
266
185
136
100
74
Total gross square feet at end of period (in thousands)
296
210
158
110
89
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(1)
In January 2008, we changed our fiscal year end from December 31st to the Saturday closest to January 31st. The following table presents selected unaudited consolidated
financial and other selected data as of and for the months ended February 2, 2008 and January 31, 2007:
Month Ended
February 2,
2008
January 31,
2007
(in thousands)
Consolidated Statements of Operations Data:
Net revenues
$
2,794
$
1,593
Net loss
(506
)
(262
)
Consolidated Balance Sheet Data:
Total assets
$
14,913
$
8,478
Convertible Redeemable Preferred Stock
$
21,920
$
—
(2)
For the year ended December 31, 2006, we operated as a Subchapter "S" Corporation and therefore were not subject to Federal Income Tax. If we had been a
"C" Corporation as of January 1, 2006, assuming a combined federal, state and local effective tax rate of 39%, we would have incurred total income tax of $2,205.
(3)
Net sales plus shipping and handling fees.
(4)
Cost of goods sold and occupancy costs includes the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for
merchandise shipped directly from our vendors to our boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation, and boutique repair and
maintenance costs and shipping costs related to e-commerce sales.
(5)
Please see note 2 to our consolidated financial statements included elsewhere in this prospectus, for an explanation of per share calculations.
(6)
On April 28, 2010, the company authorized a split of its outstanding and authorized common stock in the ratio of four hundred to one. Accordingly, our consolidated financial
data included elsewhere in this prospectus have been adjusted to retroactively reflect the effects of the stock split on common shares and per share amounts for all periods presented.
(7)
A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique's opening. When a boutique that is included in
comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no
longer consider sales from that boutique to be comparable boutique sales.
(8)
Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a) the sum of the total gross square feet at the end of each fiscal quarter, divided by (b) the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with "Selected Consolidated Financial and Operating Data" and our consolidated
financial statements and the related notes and other financial information and operating data, which are included elsewhere in this prospectus. Some of the information contained in this discussion and analysis, including information with respect to
our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" and "Special Note Regarding Forward-Looking Statements" sections of this
prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to
January 31st. The reporting periods contained in our audited consolidated financial statements included in this prospectus contain 52 weeks of operations in fiscal year 2010, which ended January 29, 2011, 52 weeks of operations in fiscal
year 2009, which ended January 30, 2010, and 52 weeks of operations in fiscal year 2008, which ended January 31, 2009. For fiscal year 2007, which ended on December 31, 2007, and prior periods, the company operated on a fiscal
calendar year ending December 31st.
Overview
francesca's collections
®
is one of the fastest growing specialty retailers in the United States. Our retail locations are designed and merchandised to feel like independently owned, upscale
boutiques and provide our customers with an inviting, intimate and fun shopping experience. We believe we offer compelling value with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts at
attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious, female customer, although we find that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique setting.
We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week in order to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty.
By offering a differentiated shopping experience and high-quality merchandise at a compelling value, our boutiques have been successful
across a wide variety of geographic markets and shopping venues. We believe we have an opportunity to continue to grow our boutique base from 236 locations in 38 states as of April 2, 2011 to approximately 900 boutiques in the United States
over time. Our merchandise is also available through our e-commerce website,
www.francescascollections.com
.
Our company was
founded in 1999 by the Founders. We opened our first boutique that same year in Houston, Texas selling fashion jewelry and accessories. In April 2007, the Founders sold a minority ownership interest in the company to BGCP. Early that same year,
Mr. De Meritt was appointed the President and Chief Executive Officer of our company. Since 2007, Mr. De Meritt has augmented our strong founding management team with additional highly skilled and deeply experienced executives across key
areas of our business. In February 2010, CCMP acquired an approximately 84% controlling interest in the company from the Founders and BGCP (the "CCMP Acquisition") with the goals of providing liquidity to the Founders and BGCP and
supporting Mr. De Meritt and his management team in accelerating our company's growth.
Our strong growth and operating
results reflect the initiatives taken by our management team which include accelerating the rate of new boutique openings, and further investing in our distribution capability and in our internet site and e-commerce capability, as well as the
acceptance of our brand
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and merchandise as we have expanded into additional regions of the United States. Our net sales increased from $29.7 million in fiscal year 2006 to $135.2 million in fiscal year 2010, a
compound annual growth rate of 46.1%. Over the same period, we grew income from operations from $5.7 million to $29.6 million, a compound annual growth rate of 51.3%. While revenue increased at a compound annual growth rate of 46.1%, our total
retail square footage growth increased at a compound annual growth rate of 35.0% over that same period, as our boutique sales productivity improved.
Since the beginning of fiscal year 2011, we have increased our boutique base from 207 boutiques to 236 boutiques as of April 2, 2011. We expect to continue our strong growth in the future. We believe there is
a significant opportunity to grow our boutique base to approximately 900 boutiques over time. We plan to open approximately 75 boutiques in fiscal year 2011 (29 of which were opened as of April 2, 2011). We expect to continue to drive our
comparable boutique sales by featuring high-quality, trend-right merchandise at attractive prices and by maintaining our broad and shallow merchandising approach that we believe will result in increased units and dollars per transaction while also
protecting margins. We also expect to increase our e-commerce sales by more fully utilizing the functionality of our core e-commerce software that we licensed in 2010, improving our cross-selling and up-selling capability, emphasizing the purchase
of coordinated outfits to increase average dollars per sales transaction, and by increasing site traffic by utilizing better search engine optimization tools, email campaigns and social media marketing.
We believe that our broad and shallow merchandising strategy and the differentiated shopping experience we offer to our customers contributes to
the success of our boutiques, which generate attractive returns. Over the previous two fiscal years, we opened 98 boutiques which averaged approximately 1,400 square feet and, of the locations open 12 or more months, boutique sales averaged
approximately $750,000 in the first year. On average, these boutiques delivered first-year, pre-tax cash-on-cash returns in excess of 150% and payback periods of less than one year. Consistent with recent openings, our new boutique operating model
assumes a net investment of $155,000 consisting of $110,000 of build-out costs, including equipment and fixtures net of tenant allowances, and $45,000 of initial inventory. We expect new boutique economics to be consistent with our recent history
and, based on first-year boutique sales of $650,000 to $750,000, our boutiques achieve a payback period of less than a year and pre-tax cash-on-cash returns of approximately 150%.
We pursue various initiatives to build brand awareness and create relationships with customers. These initiatives include in-boutique visual
merchandising and presentation, periodic promotions including email marketing campaigns, the use of social networks and the building of a customer database. Our website was redesigned in October of 2010 to deliver improved functionality as well as a
stronger brand and fashion sensibility to our customers.
We continue to invest capital to build the corporate and distribution
infrastructure necessary to support our growth. We also continue to invest in our systems infrastructure, including implementation of technology for retail merchandise management, point-of-sale software and software applications to support our
e-commerce initiatives. We are currently implementing an integrated merchandise management, warehouse management and point-of-sale system. Our plan calls for the merchandise and warehouse components to be implemented during 2011 and the new
point-of-sale system to be deployed chain-wide by mid-2012.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our
business is performing are net sales, comparable boutique sales, gross profit, selling, general and administrative expenses and operating income.
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Table of Contents
Net Sales
Net sales constitute gross sales net of merchandise returns. Net sales consist of sales from comparable boutiques and non-comparable boutiques and sales and shipping revenue from our e-commerce business.
Comparable Boutique Sales
A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique's opening, which is
when we believe comparability is achieved. When a boutique that is included in comparable boutique sales is relocated, we continue to consider sales from that boutique to be comparable boutique sales. If a boutique is closed for thirty days or
longer for a remodel or as a result of weather damage, fire or the like, we no longer consider sales from that boutique to be comparable boutique sales. There may be variations in the way in which some of our competitors and other retailers
calculate comparable, "same store" or "same boutique" sales. As a result, data in this prospectus regarding our comparable boutique sales may not be comparable to similar data made available by other retailers. Non-comparable
boutique sales is comprised of new boutique sales, e-commerce sales, sales from closed boutiques and other sales not included in comparable boutique sales.
Measuring the change in year-over-year comparable boutique sales allows us to evaluate how our boutique base is performing. Various factors affect comparable boutique sales, including:
Ÿ
consumer preferences, buying trends and overall economic trends;
Ÿ
our ability to identify and respond effectively to fashion trends and customer preferences;
Ÿ
our ability to provide an assortment of distinctive, high-quality product offerings to generate new and repeat visits to our boutiques;
Ÿ
competition;
Ÿ
changes in our merchandise mix;
Ÿ
changes in pricing and average unit prices;
Ÿ
the number of items purchased per transaction or boutique visit;
Ÿ
the timing of promotional events and holidays;
Ÿ
the timing of introduction of new merchandise and customer acceptance of new merchandise;
Ÿ
the level of customer service that we provide in our boutiques;
Ÿ
our opening of new boutiques in the vicinity of our existing boutiques;
Ÿ
our ability to source and distribute merchandise efficiently; and
Ÿ
the number of boutiques we open, close, remodel or relocate in any period.
Opening new boutiques is an important part of our growth strategy. As we
continue to pursue our growth strategy we expect that a significant percentage of our net sales will continue to come from new boutiques not included in comparable boutique sales. Accordingly, comparable boutique sales is only one measure we use to
assess the success of our growth strategy. Our rapid pace of new boutique openings may affect the comparability of our results of operations, particularly our comparable boutique sales growth, to similar data made available by other retailers. We
also anticipate that sales from our e-commerce business will become a more significant contributor to net sales.
The specialty retail
apparel and accessories industry is cyclical, and consequently our net sales are affected by general economic conditions. Purchases of apparel, jewelry, accessories and gift items
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are sensitive to a number of factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and
consumer confidence.
Our business is mildly seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are
usually highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal quarter. While December generally experiences the highest level of net sales, January is typically the month with the least net sales.
Both months are included in our fourth fiscal quarter.
Gross Profit
Gross profit is equal to our net sales less our cost of goods sold and occupancy costs. Gross margin measures gross profit as a percentage of our
net sales. Cost of goods sold and occupancy costs includes the direct cost of purchased merchandise, freight costs from our suppliers to our distribution centers and freight costs for merchandise shipped directly from our vendors to our boutiques,
allowances for inventory shrinkage and obsolescence, boutique occupancy costs, including rent, utilities, common area maintenance, property taxes, depreciation and boutique repair and maintenance costs, and shipping costs related to e-commerce
sales. The components of our cost of goods sold and occupancy costs may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers. As a result, data in this prospectus regarding our gross
profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.
The variable
component of our cost of goods sold and occupancy costs is higher in higher volume quarters because the variable component of our cost of goods sold and occupancy costs generally increases as net sales increase. Changes in the mix of our merchandise
sold, such as changes in the percentage of apparel sold, may also impact our overall cost of goods sold and occupancy costs. We review our inventory levels on an ongoing basis to identify slow-moving merchandise, and generally use markdowns to clear
that merchandise. The timing and level of markdowns are not principally seasonal in nature but are driven by customer acceptance of our merchandise. If we misjudge the market for our merchandise, we may be faced with significant excess inventories
for some merchandise and be required to mark down such merchandise in order to sell them. These markdowns may result in selling merchandise below cost. Markdowns have reduced our gross profit in some prior periods and may have a material adverse
impact on our earnings for future periods depending on the extent of the markdown discount and the amount of merchandise affected.
Selling,
General and Administrative Expenses
Selling expense includes boutique payroll, employee benefits, freight from distribution
centers to boutiques, boutique pre-opening expense, credit card merchant fees, costs of maintaining our internet presence and operating our e-commerce business while general and administrative expenses includes payroll and benefits for our
headquarters and distribution operations, management incentives, professional fees, travel and administration costs and other expenses related to operations at our corporate headquarters, as well as share-based compensation. While selling expense
generally varies proportionally with net sales, general and administrative expenses does not generally vary proportionally with net sales. As a result, general and administrative expenses as a percentage of net sales is usually higher in lower
volume quarters and lower in higher volume quarters. The components of our selling, general and administrative expenses may not be comparable to those of our competitors and other retailers. We expect that our selling, general and administrative
expenses will increase in future periods due to our continuing growth and in part to additional legal, accounting, insurance and other expenses we expect to incur as a result of being a public company. Among other things, we expect that compliance
with the Sarbanes-Oxley Act and related rules and regulations will result in significant legal and accounting costs.
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Share-based compensation expense related to stock options was $2,400,000, $99,000 and $8,000 for
fiscal years 2010, 2009 and 2008, respectively. We granted options to purchase an aggregate of 1,994,430, 406,000 and 100,000 shares of common stock in fiscal years 2010, 2009 and 2008, respectively. These and any future stock option grants
will increase our share-based compensation expense in fiscal year 2011 and in future fiscal years compared to fiscal year 2010. See "—Critical Accounting Policies".
Income from Operations
Income from operations is gross profit less selling, general and
administrative expenses. We use operating income as an indicator of the productivity of our business and our ability to manage selling, general and administrative expenses. We believe that our operating income, expressed as a percentage of net
sales, compares favorably to other specialty retailers.
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of net
sales:
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands, except percentages and
number of boutiques)
Net sales
$
135,176
$
79,367
$
52,290
Cost of goods sold and occupancy costs
65,008
37,244
25,358
Gross profit
70,168
42,123
26,932
Selling, general and administrative expenses
40,525
24,641
19,962
Income from operations
29,643
17,482
6,970
Other income (expense)
(2
)
38
14
Interest income (expense)
(1,633
)
2
4
Income before income tax expense
28,008
17,522
6,988
Income tax expense
11,113
6,918
2,382
Net income
$
16,895
$
10,604
4,606
Percentage of sales:
Net sales
100.0
%
100.0
%
100.0
%
Cost of goods sold and occupancy costs
48.1
%
46.9
%
48.5
%
Gross profit
51.9
%
53.1
%
51.5
%
Selling, general and administrative expenses
30.0
%
31.0
%
38.2
%
Income from operations
21.9
%
22.1
%
13.3
%
Other income (expense)
0.0
%
0.0
%
0.0
%
Interest income (expense)
(1.2
)%
0.0
%
0.0
%
Income before income tax expense
20.7
%
22.1
%
13.3
%
Income tax expense
8.2
%
8.7
%
4.6
%
Net income
12.5
%
13.4
%
8.7
%
Operating data:
Comparable boutique sales growth for period(1)
15.2
%
9.8
%
(6.3
)%
Number of boutiques open at end of period
207
147
111
Net sales per average square foot for period (not in thousands)
$
508
$
429
$
384
Average square feet (in thousands)(2)
266
185
136
Total gross square feet at end of period (in thousands)
296
210
158
(1)
A boutique is included in comparable boutique sales on the first day of the fifteenth full month following the boutique's opening. When a boutique that is
included in comparable boutique sales is relocated, we continue to consider sales from
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that boutique to be comparable boutique sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no longer consider sales from
that boutique to be comparable boutique sales.
(2)
Because of our rapid growth, for purposes of providing a sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the
end of the period. Average square feet is calculated as (a) the sum of the total gross square feet at the end of each fiscal quarter, divided by (b) the number of quarters. There may be variations in the way in which some of our
competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, data in this prospectus regarding our average square feet and net sales per average square foot for period may not be comparable to similar
data made available by other retailers.
The following table summarizes the number of boutiques open at the beginning and
the end of the periods indicated:
Fiscal Year Ended
January 29,
January 30,
January 31,
2011
2010
2009
Number of boutiques open at beginning of period
147
111
80
Boutiques added
62
36
31
Boutiques closed
(2
)
—
—
Number of boutiques open at the end of period
207
147
111
We have determined our operating segments on the same basis that we use internally to evaluate performance. Our
reporting segments are our boutiques and e-commerce business, which have been aggregated into one reportable financial segment. We aggregate our operating segments because (i) the merchandise offered at our retail locations and through our
e-commerce business is largely the same, (ii) we believe that the majority of our e-commerce customers are also customers of our retail locations and (iii) the merchandise margin of both segments is similar.
Fiscal Year 2010 Compared to Fiscal Year 2009
Net Sales
Net sales increased 70.3%, or $55.8 million, to $135.2 million in fiscal
year 2010 from $79.4 million in fiscal year 2009. Comparable boutique sales increased 15.2% for fiscal year 2010 compared to fiscal year 2009. Comparable boutique sales increased $10.5 million and non-comparable boutique sales increased
$45.3 million, with $33.4 million from boutiques that opened in fiscal year 2010. There were 137 comparable boutiques and 70 non-comparable boutiques open at January 29, 2011 compared to 106 and 41, respectively, at January 30, 2010.
Our net e-commerce sales increased to $1.9 million in fiscal year 2010 from $1.0 million in fiscal year 2009.
E-commerce sales increased due to our use of a more robust e-commerce technology platform, expanded marketing efforts to a larger customer base and a growing awareness of francesca's collections
®
resulting from growth in our boutique base.
Fiscal Year Ended
January 29,
2011
January 30,
2010
Change
(in thousands)
Apparel
$
70,326
$
45,540
$
24,786
Jewelry
27,911
16,764
11,147
Accessories
19,567
8,007
11,560
Gifts
17,367
8,949
8,418
Merchandise sales
$
135,171
$
79,260
$
55,911
The preceding table was prepared from our internal merchandise system and presents sales by merchandise category
excluding shipping revenue and allowance for returns. In fiscal year 2010, shipping revenue and allowance for returns approximately offset each other while shipping revenue
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totaled $107,000 in fiscal year 2009. As shown in that table, sales increased in all of our merchandise categories, but growth was particularly high in the accessories and gift categories.
Gross Profit
Gross profit increased 66.6%, or $28.0 million, in fiscal year 2010 to $70.2 million from $42.1 million in fiscal year 2009. Gross margin decreased 116 basis points to 51.9% for fiscal year 2010 from
53.1% for fiscal year 2009. This decrease was primarily attributable to a decline in merchandise margin, which decline was primarily due to sales of markdown merchandise accounting for a larger proportion of net sales in fiscal year 2010 as well as
a correction to rent expense of $0.7 million, or 50 basis points of gross margin, for rent incurred from time of possession to boutique opening, for boutiques opened in prior fiscal years.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 64.5%, or $15.9 million in fiscal year 2010 to $40.5 million, from $24.6 million in fiscal year 2009. The increase in selling expense was primarily
attributable to an increase in the number of boutiques in operation during fiscal year 2010, compared to fiscal year 2009, which led to higher overall boutique-level labor expenses and other costs to operate our boutiques. We also experienced
increased costs associated with the expansion of our e-commerce initiative. General and administrative expenses increased due to the cost of adding headquarters and distribution employees to manage the larger boutique base and increased net sales.
Additionally, general and administrative expenses increased as we paid higher employee and management incentives. As a percentage of net sales, selling, general and administrative expenses decreased to 30.0% in fiscal year 2010 from 31.0% in fiscal
year 2009, primarily due to lower boutique-level labor expenses as a percentage of sales. The selling expense portion declined as a percentage of net sales to 17.8% in fiscal year 2010 from 19.0% in fiscal year 2009, while the general and
administrative portion increased to 12.2% from 12.0% in fiscal year 2010.
Income from Operations
As a result of the foregoing, income from operations increased $12.2 million, or 69.6%, to $29.6 million in fiscal year 2010 from $17.5 million in
fiscal year 2009. Income from operations was 21.9% of net sales in fiscal year 2010 compared to 22.1% in fiscal year 2009.
Interest Expense, Net
Interest expense, net increased by $1.6 million in fiscal year 2010 compared to fiscal year 2009 because the company made initial borrowings under
its senior secured credit facility during fiscal year 2010.
Provision for Income Taxes
The increase in provision for income taxes of $4.2 million in fiscal year 2010 from fiscal year 2009 was due primarily to a $10.5 million
increase in pre-tax income. The effective tax rate of 39.7% in fiscal year 2010 was comparable to the effective tax rate of 39.5% in fiscal year 2009.
Net Income
Net income increased 59.3%, or $6.3 million, to $16.9 million in
fiscal year 2010 from $10.6 million in fiscal year 2009. This increase was due primarily to a $28.0 million increase in gross profit, partially offset by increases in selling, general and administrative expenses of $15.9 million, and a
higher provision for income taxes of $4.2 million.
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Table of Contents
Fiscal Year 2009 Compared to Fiscal Year 2008
Net Sales
Net sales
increased 51.8%, or $27.1 million, to $79.4 million in fiscal year 2009 from $52.3 million in fiscal year 2008. Comparable boutique sales increased 9.8% for fiscal year 2009 compared to fiscal year 2008, as a result of particularly strong growth in
clothing and accessories categories, as presented in the following table. Comparable boutique sales increased by $4.5 million and non-comparable boutiques sales increased $21.7 million with $15.0 million from boutiques that opened in fiscal year
2009. There were 106 comparable boutiques and 41 non-comparable boutiques open at January 30, 2010 compared to 70 and 41, respectively, at January 31, 2009.
Our net e-commerce sales increased to $1.0 million from $0.7 million in the prior fiscal year. E-commerce sales increased as we expanded our assortment of merchandise available for online purchase and as our
customer database that we market to increased.
Fiscal Year Ended
January 30,
2010
January 31,
2009
Change
(in thousands)
Apparel
$
45,540
$
26,829
$
18,711
Jewelry
16,764
12,281
4,483
Accessories
8,007
5,391
2,616
Gifts
8,949
7,789
1,160
Merchandise sales
$
79,260
$
52,290
$
26,970
The preceding table was prepared from our internal merchandise system and presents sales by merchandise category
excluding shipping revenue which totaled $107,000 and zero in fiscal years 2009 and 2008, respectively. While percentage growth rates were highest for apparel and accessories, our jewelry category was also a key contributor to the total net sales
increase.
Gross Profit
Gross profit increased 56.4%, or $15.2 million, in fiscal year 2009 to $42.1 million from $26.9 million in fiscal year 2008. Gross margin increased 156 basis points to 53.1% for fiscal year 2009
from 51.5% for fiscal year 2008. This increase was primarily attributable to the absorption of fixed boutique occupancy costs over increased net sales as well as lower inventory shrinkage costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 23.4% or $4.7 million to $24.6 million in fiscal year 2009, from $20.0 million in fiscal year 2008. The increase in selling expense was primarily attributable
to an increase in the number of boutiques in operation during fiscal year 2009, compared to fiscal year 2008, which led to higher overall boutique-level labor expenses and other costs to operate our boutiques. General and administrative expenses
increased due to the cost of adding headquarters and distribution employees to manage the larger boutique base and increased net sales as well as professional fees relating to the CCMP Acquisition. As a percentage of net sales, selling, general and
administrative expenses declined to 31.0% in fiscal year 2009 from 38.2% in fiscal year 2008. The selling expense portion declined to 19.0% from 23.1% as a percentage of net sales, principally as a result of improved boutique labor scheduling. The
general and administrative portion declined to 12.0% in fiscal year 2009 from 15.1% in fiscal 2008 as headquarters payroll was absorbed over higher net sales, partially offset by increased professional fees.
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Table of Contents
Income from Operations
As a result of the foregoing, income from operations increased $10.5 million, or 150.8%, to $17.5 million in fiscal year 2009 from $7.0 million in
fiscal year 2008. Income from operations was 22.0% of net sales in fiscal year 2009 compared to 13.3% in fiscal year 2008.
Provision for Income Taxes
The increase in provision for income taxes of $4.5 million in fiscal year 2009 from fiscal year 2008 was due primarily to a $10.5 million increase in pre-tax income and an increase in the effective tax rate. For
fiscal year 2008, the provision for income taxes was reduced by $0.2 million due to adjustments made to deferred income taxes for differences between estimates used in recording the income tax provision in the prior year and the actual federal and
state tax returns.
Net Income
Net income increased 130.2%, or $6.0 million, to $10.6 million in fiscal year 2009 from $4.6 million in fiscal year 2008. This increase was due primarily to a $15.2 million increase in gross profit,
partially offset by increases in selling, general and administrative expenses of $4.7 million, and a higher provision for income taxes of $4.5 million.
Quarterly Results and Seasonality
The following table sets forth our historical quarterly
results of operation as well as certain operating data for each of our most recent eight fiscal quarters expressed as a percentage of our net sales. This unaudited quarterly information has been prepared on the same basis as our annual audited
financial statements appearing elsewhere in this prospectus, and includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary to present fairly the financial information for the fiscal quarters presented.
The quarterly data should be read in conjunction with our audited consolidated financial statements and the related notes appearing
elsewhere in this prospectus.
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Table of Contents
Quarterly Results of Operations
Fiscal Year 2010
Fiscal Year 2009
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(unaudited)
(in thousands, except percentages and number of boutiques)
Net sales
$
39,882
$
35,073
$
34,804
$
25,417
$
24,607
$
19,501
$
20,008
$
15,251
Gross profit
20,592
18,149
18,782
12,645
12,932
10,204
10,919
8,068
Income from operations
8,912
8,401
9,709
2,621
4,580
4,053
5,591
3,258
Net income
4,328
5,115
5,861
1,591
2,788
2,450
3,390
1,976
Year-Over-Year Increase
Net sales
62.1
%
79.9
%
74.0
%
66.7
%
69.0
%
49.9
%
50.9
%
33.0
%
Gross profit
59.2
%
77.9
%
72.0
%
56.7
%
99.7
%
52.3
%
43.6
%
31.9
%
Percent of Annual Results
Net sales
29.5
%
25.9
%
25.7
%
18.8
%
31.0
%
24.6
%
25.2
%
19.2
%
Gross profit
29.3
%
25.9
%
26.8
%
18.0
%
30.7
%
24.2
%
25.9
%
19.2
%
Income from operations
30.1
%
28.3
%
32.8
%
8.8
%
26.2
%
23.2
%
32.0
%
18.6
%
Net income
25.6
%
30.3
%
34.7
%
9.4
%
26.3
%
23.1
%
32.0
%
18.6
%
Operating Data
Comparable boutique sales change
14.5
%
21.1
%
11.2
%
14.5
%
20.6
%
8.5
%
11.2
%
(3.6
)%
Number of boutiques open at end of period
207
206
197
172
147
145
129
118
Percentage totals in the above table may not equal the sum of the components due to rounding.
Seasonality
Our business is mildly seasonal in nature and demand is generally the
highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal quarter. In addition, to prepare for these periods, we must order and keep in stock more merchandise than we carry during other parts of the year.
We expect inventory levels, along with an increase in accounts payable and accrued expenses, generally to reach their highest levels in anticipation of the increased net sales during these periods. As a result of this seasonality and generally
because of variation in consumer spending habits, we experience fluctuations in net sales and working capital requirements during the year.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from
operations and borrowings under our senior secured credit facility. Following completion of this offering, we expect that our primary sources of liquidity will be cash flows from operations and borrowings under a new revolving credit facility. Our
primary cash needs are for capital expenditures in connection with opening new boutiques and remodeling existing boutiques, investing in improved technology and working capital required for the increases in merchandise inventories associated with
our growth. We also occasionally use cash or our senior secured credit facility to issue letters of credit to support merchandise imports or for other corporate purposes. Cash is also required for investment in information technology and
distribution
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Table of Contents
facility enhancements and funding normal working capital requirements. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts
payable and other current liabilities. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within several days of the related
sale and we typically have up to 30 days to pay our vendors.
While we believe we have sufficient liquidity and capital resources to
meet our current operating requirements and expansion plans, we may elect to pursue additional expansion opportunities within the next year which could require additional debt or equity financing. If we are unable to secure additional financing at
favorable terms in order to pursue such additional expansion opportunities, our ability to pursue such opportunities could be materially adversely affected. Additionally, during the recent recession, we experienced negative comparable boutique sales
from the third quarter of fiscal year 2008 through the first quarter of fiscal year 2009, which reduced our cash flow from operations. We could experience a similar effect in a future recessionary period.
We were in compliance with all covenants under our existing senior credit facility as of January 29, 2011. At January 29, 2011, we had
$12.5 million of cash and cash equivalents and $5.0 million in borrowing availability under our revolving credit facility. There were no letters of credit outstanding at the end of fiscal year 2010.
Cash Flow
A summary of our
operating, investing and financing activities are shown in the following table:
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands)
Provided by operating activities
$
21,020
$
13,277
$
3,708
Used for investing activities
(16,208
)
(5,538
)
(2,013
)
Used for financing activities
(6,063
)
—
(1,525
)
Increase (decrease) in cash and cash equivalents
$
(1,251
)
$
7,739
$
170
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Table of Contents
Operating Activities
Operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization, deferred taxes, the
effect of working capital changes and tenant allowances received from landlords.
Fiscal Year Ended
January 29,
January 30,
January 31,
2011
2010
2009
(in thousands)
Net income
$
16,895
$
10,604
$
4,606
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
2,377
1,215
700
Stock-based compensation expense
2,400
99
8
Excess tax benefit from stock-based compensation
(1,757
)
—
—
Loss on sale of assets
25
—
—
Amortization of debt issuance costs
158
—
—
Deferred income taxes
(2,685
)
(833
)
(54
)
Changes in assets and liabilities:
Accounts receivable
(3,557
)
(126
)
(49
)
Inventories
(5,581
)
(794
)
310
Prepaid expenses and other current assets
(1,549
)
(573
)
(407
)
Accounts payable
3,443
1,434
(298
)
Accrued liabilities
3,874
1,007
39
Deferred and accrued rents
5,999
1,440
315
Income taxes payable
978
(196
)
(1,462
)
Net cash provided by operating activities
$
21,020
$
13,277
$
3,708
Net cash provided by operating activities was $21.0 million and $13.3 million for fiscal years 2010 and 2009,
respectively. The $7.7 million increase in fiscal year 2010 compared to fiscal year 2009 was primarily due to improved operating results given our significant revenue growth.
Net working capital decreased $3.1 million in fiscal year 2010 as merchandise inventory increased in connection with both new as well as existing
boutiques; accounts receivable, principally from credit card providers increased in connection with the increase in net sales as well as from higher tenant allowances and federal income tax refund receivable; and prepaid assets increased as a result
of higher prepaid rent and prepaid insurance. Those working capital decreases were partially offset by increases in accounts payable, accrued liabilities and deferred rent.
Merchandise inventory increased $5.6 million in fiscal year 2010 compared to an increase of $0.8 million in fiscal year 2009. Merchandise inventory increased during the year due to and in preparation for new
boutique openings, and in anticipation of sales increases in comparable boutiques. We estimate inventory levels and capital requirements based on historical boutique sales performance and new boutique opening plans as well as planned merchandise
assortment. To the extent that inventory levels substantially increase, we may rely upon various promotional events or pricing strategies to sell through the inventory levels. Management believes that at January 29, 2011, merchandise inventory
is at an appropriate level, from both a business and capital structure perspective, and properly planned for the prospective selling season. While management remains watchful in the current economic environment, we do not believe it will have a
negative effect on our present business strategy.
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Table of Contents
Investing Activities
Investing activities consist primarily of capital expenditures for new boutiques, improvements to existing boutiques, as well as investment in
information technology and our distribution facility.
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands)
Capital expenditures for:
New boutiques
$
13,176
$
4,872
$
1,676
Existing boutiques
850
153
138
Technology
1,708
94
—
Corporate and distribution
474
419
199
Net cash used in investing activities
$
16,208
$
5,538
$
2,013
Our total capital expenditures for fiscal year 2010 were $16.2 million with new boutiques accounting for the majority
of spending at $13.2 million. While capital expenditures for new boutiques were $13.2 million, we received tenant allowances of $5.0 million. Tenant allowances were $1.4 million and $0.3 million for fiscal years 2009 and 2008, respectively. Tenant
allowances are amortized as a reduction in rent expense over the term of the lease. The remaining capital expenditures of $3.0 million in fiscal year 2010, $0.7 million in fiscal year 2009 and $0.3 million in fiscal year 2008 were primarily for
investments in information technology, our corporate offices and for distribution facility enhancements.
Management anticipates that
capital expenditures in fiscal year 2011 will be approximately $16.5 million to $21.0 million, including approximately $12.0 million to $14.0 million in connection with the opening of approximately 75 new boutiques in 2011 and approximately
$3.0 million to $4.5 million in connection with boutiques we plan to open in early fiscal year 2012. In connection with these capital expenditures for new boutiques, we anticipate receiving similar amounts of tenant allowances as in fiscal year
2010. The remaining capital expenditures are expected to be used for investments in information technology and distribution center enhancements.
Financing Activities
Financing activities consist primarily of borrowings and payments
under our existing senior secured credit facility and distributions to our stockholders.
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands)
Dividends
$
(100,000
)
$
—
$
—
Excess tax benefit from stock-based compensation
1,757
—
—
Proceeds from debt
95,000
—
—
Repayments on debt
(1,187
)
—
—
Payment of debt issuance costs
(2,137
)
—
—
Proceeds from the exercise of stock options
504
—
—
S-Corporation distributions
—
—
(1,525
)
Net cash used for financing activities
$
(6,063
)
$
—
$
(1,525
)
Net cash used for financing activities was $6.1 million in fiscal year 2010. This included net proceeds of $95.0
million from borrowings under our existing senior secured credit facility, offset by the payment of a $100.0 million cash dividend and the repayment of $1.2 million of indebtedness outstanding
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Table of Contents
under our existing senior secured credit facility. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not
anticipate paying any cash dividends in the foreseeable future. See "Dividend Policy".
During fiscal year 2010, we made $1.2
million of scheduled principal payments on the term loans outstanding under our existing senior secured credit facility, reducing outstanding term loan to $93.8 million at fiscal year-end.
There were no revolving credit borrowings outstanding under our existing senior secured credit facility at January 29, 2011.
Preferred Stock
On February 26,
2010, CCMP acquired approximately 84% of our outstanding equity from various stockholders. As a part of the CCMP Acquisition, the Series A Preferred Stock of the company was converted into common shares on a one-for-one basis and all related rights
and preferences were terminated. Accordingly, no preferred stock was outstanding at year-end. See note 10 to our consolidated financial statements included elsewhere in this prospectus.
Existing Senior Secured Credit Facility
On November 17, 2010, Francesca's
Collections, our wholly owned indirect subsidiary, entered into a $100.0 million senior secured credit facility with a syndicate of financial institutions. The existing senior secured credit facility consists of a $95.0 million term loan facility
and a $5.0 million revolving credit facility, each with a scheduled maturity date of November 17, 2013. The revolving credit facility includes borrowing capacity available for letters of credit. As of January 29, 2011, we had $93.8 million
outstanding under our term loan facility and $5.0 million available under our revolving credit facility. There were no outstanding letters of credit at the end of fiscal year 2010.
All obligations under the existing senior secured credit facility are unconditionally guaranteed by, subject to certain exceptions, Parent and each
of Francesca's Collections' existing and future direct and indirect wholly owned domestic subsidiaries. All obligations under our existing senior secured credit facility, and the guarantees of those obligations (as well as cash management
obligations and any interest rate hedging or other swap agreements), are secured by substantially all of Francesca's Collections' assets as well as those of each subsidiary guarantor.
The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either
(a) in the case of base rate borrowings, a rate equal to the highest of (1) the higher of (i) the prime rate of Royal Bank of Canada and (ii) the federal funds rate plus 1/2 of 1%, (2) the LIBOR for an interest period of one
month plus 1.00% and (3) 2.75% or (b) in the case of LIBOR borrowings, a rate equal to the higher of (1) 1.75% and (2) the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings
under both the revolving credit facility and the term loan facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term
loan facility for base rate borrowings increases to 6.50% and 9.00% on June 1, 2012 and June 1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for LIBOR
borrowings increases to 7.50% and 10.00% on June 1, 2012 and June 1, 2013, respectively. As of January 29, 2011, the loans under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%.
Additionally, we are required to pay a fee to the lenders under the revolving credit facility on the un-borrowed amount at a rate equal
to 1/2 of 1%. We are also required to pay customary letter of credit fees.
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The term loan facility amortizes each year in an amount equal to 1.25% per annum from closing
until September 30, 2011 (payable in four equal installments beginning on December 30, 2010) and 2.50% per annum from October 1, 2011 to September 30, 2012 (payable in four equal installments beginning on December 31,
2011), with the remaining amount payable on November 17, 2013.
In addition, the existing senior secured credit facility requires
Francesca's Collections to maintain the following financial ratios:
Ÿ
Beginning with the fiscal quarter ending January 29, 2011, a consolidated leverage ratio which shall not be more than the maximum consolidated leverage
ratio, which is based upon the ratio of (i) consolidated total debt (as defined in the credit agreement) to (ii) consolidated EBITDA (as defined in the credit agreement). The maximum consolidated leverage ratio, depending on the fiscal
quarter, ranges from (a) 4.50 to 1.00, to (b) 3.00 to 1.00.
Ÿ
Beginning with the fiscal quarter ending January 29, 2011, a senior leverage ratio which shall not be greater than the maximum senior leverage ratio, which
is based upon the ratio of (i) senior debt (as defined in the credit agreement) to (ii) consolidated EBITDA (as defined in the credit agreement). The maximum senior leverage ratio, depending on the fiscal quarter, ranges from (a) 3.50
to 1.00, to (b) 2.00 to 1.00.
Ÿ
Beginning with the fiscal quarter ending October 31, 2011, a consolidated fixed charge coverage ratio which shall not be less than the minimum consolidated
fixed charge coverage ratio, which is based upon the ratio of (i) consolidated EBITDA (as defined in the credit agreement) for the prior four fiscal quarters minus certain capital expenditures (as defined in the credit agreement) minus taxes
payable with respect to such period minus permitted tax distributions (as defined in the credit agreement) to (ii) consolidated fixed charges (as defined in the credit agreement). The minimum consolidated fixed charge coverage ratio, depending
on the fiscal quarter, ranges from (a) 1.00 to 1.00, to (b) 2.00 to 1.00.
We were in compliance with all
covenants under our existing senior credit facility as of January 29, 2011. Our ability to declare dividends from Francesca's Collections to Holdings at January 29, 2011 was subject to restrictions under our senior credit facility.
See "Description of Certain Indebtedness—Existing Senior Secured Credit Facility" for additional details on our senior secured credit facility.
We believe that our cash position, net cash provided by operating activities and availability under our existing senior secured credit facility will be adequate to finance working capital needs and planned capital
expenditures for at least the next twelve months.
New Revolving Credit Facility
We are engaged in discussions with financing sources regarding the terms of a new $65.0 million revolving credit facility (of which $50.0 million
would be drawn concurrently with the consummation of this offering to effect the refinancing) and expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering. The new revolving
credit facility is expected to have a five-year maturity and include borrowing capacity available for letters of credit.
We expect that
the new revolving credit facility will contain affirmative and negative covenants substantially similar to those in our existing senior secured credit facility, and will subject us to financial maintenance covenants upon terms to be agreed.
To date we do not have any binding commitments from any financing sources and there can be no assurance that we will be able to enter
into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior secured credit facility requires
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that the proceeds of this offering be used to repay all amounts outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the
refinancing, we will be required to apply more of the proceeds of this offering to repay our existing indebtedness and will have less available to use for general corporate purposes, including the growth of our boutique base, the growth of our
e-commerce business, sales and marketing activities and other capital expenditures.
Critical Accounting Policies
Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities,
net sales and expenses, and disclosure of contingent assets and liabilities. Management bases estimates on historical experience and other assumptions it believes to be reasonable given the circumstances and evaluates these estimates on an ongoing
basis. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the following critical
accounting policies involve a higher degree of judgment and complexity. See note 1 to our consolidated financial statements, which are included elsewhere in this prospectus for a complete discussion of our significant accounting policies. The
following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenue upon purchase of merchandise by customers, net of estimated merchandise returns and discounts. Revenue is
recognized for boutique sales at the point at which the customer receives and pays for the merchandise at the register. For on-line sales, revenue is recognized upon delivery and includes shipping charges. Management estimates future returns on
previously sold merchandise based on return history and current sales levels. The estimated sales returns are periodically compared to actual sales returns and adjusted, if appropriate.
Gift Cards and Gift Card Breakage
We account for the sale of gift cards as a liability
at the time a gift card is sold. The liability is relieved and revenue is recognized upon redemption of the gift card. Our gift cards do not have an expiration date. We will recognize income from the breakage of gift cards when the likelihood of
redemption of the gift card is remote based on historical redemption patterns. We do not have accumulated adequate historical data to reasonably estimate the amount of gift cards that will never be redeemed. Consequently, we have not recognized gift
card breakage income in fiscal years 2010, 2009 or 2008. We do not anticipate recognizing gift card breakage until it accumulates additional data beyond fiscal year 2011.
Inventory Valuation
We value merchandise inventory at the lower of cost or market on a
weighted average cost basis. Inventory costs include freight-in. We record merchandise receipts at the time they are delivered to our distribution center or to our boutiques from vendors.
We review our inventory levels to identify slow-moving merchandise and generally use promotional markdowns to clear slow-moving merchandise. Each
period we evaluate recent selling trends and the related promotional events or pricing strategies in place to sell through the current inventory levels. Promotional markdowns or additions to the lower of cost or market reserve may occur
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when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition or if it is determined
that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have an adverse impact on earnings, depending on the extent and amount of inventory affected. The anticipated deployment of new merchandise is reflected
within the estimated future promotional markdown plan, as such new inventory in certain circumstances will displace merchandise currently on-hand. Additions to the lower of cost or market reserve are recorded as an increase to cost of goods sold and
occupancy costs in the accompanying consolidated statements of operations.
We also estimate a shrinkage reserve for the period of time
between the last physical inventory count and the balance sheet date. The estimate for shrinkage reserve can be affected by changes in merchandise mix and changes in actual shrinkage trends.
Impairment of Long-lived Assets
We periodically evaluate long-lived assets held for use
and held for sale whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows,
which is generally at a boutique level. Boutique assets are reviewed for impairment using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an
estimate of undiscounted future cash flows directly related to that boutique, compared to the carrying value of the assets. We recognize impairment if the sum of the undiscounted future cash flows of a boutique does not exceed the carrying value of
the assets. For impaired assets, we recognize a loss equal to the difference between the net book value of the asset and its estimated fair value. Fair value is based on discounted future cash flows of the asset using a discount rate commensurate
with the risk. In addition, at the time a decision is made to close a boutique, we record an impairment charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. Based on the analysis performed, there was no
impairment for each of the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009.
Income Taxes
We account for income taxes using the liability method. Under this method, the amount of taxes currently payable or refundable
is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of the company's assets and
liabilities. Valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur.
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate
is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
We recognize tax liabilities for uncertain tax positions and adjusts these liabilities when the company's judgment changes as a result of the
evaluation of new information not previously available.
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Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These
differences will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which the new information becomes available. Interest and penalties related to unrecognized tax benefits are recognized in
income tax expense.
Stock-based Compensation
In connection with our stock based compensation plans, the Board of Directors considers the estimated fair value of the Company's stock when setting stock option exercise price as of the date of each grant.
Because the company is privately held and there is no public market for its common stock, the fair market value of its common stock is determined by our board of directors at the time the option grants are awarded. In determining the fair value of
its common stock, the board of directors considered such factors as the company's actual and projected financial results, the principal amount of the company's indebtedness, valuations of the company performed by third parties and other
factors it believes are material to the valuation process. Stock options granted in the first and second quarters of fiscal 2010 were valued using the implied enterprise value paid by CCMP for its acquisition of the equity securities of the company
in February 2010.
Stock-based compensation expense related to stock options was $2,400,000, $99,000 and $8,000 for fiscal years 2010,
2009 and 2008, respectively. We granted options to purchase an aggregate of 1,994,430, 406,000 and 100,000 shares of common stock in fiscal years 2010, 2009 and 2008, respectively. These grants and any future stock option grants will likely increase
our stock-based compensation expense in fiscal year 2011 and in future fiscal years compared to fiscal year 2010.
We account for
stock-based compensation in accordance with FASB ASC 718,
"Compensation-Stock Compensation
", which establishes accounting for equity instruments exchanged for employee services. Under the provisions of this statement,
stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee's requisite service period (generally the vesting period of the equity grant). As required under
this guidance, we estimate forfeitures for options granted which are not expected to vest. Changes in these inputs and assumptions can materially affect the measurement of the estimated fair value of our stock-based compensation expense. We estimate
the grant date fair value of stock option awards using the Black-Scholes option pricing model. For fiscal years 2010, 2009 and 2008, the fair value of stock options was estimated at the grant date using the following assumptions:
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
Expected volatility
54.21% – 60.59%
85.43%
53.45%
Risk-free interest rate
1.63% – 3.24%
0.90%
3.21%
Weighted average term
6.27 – 6.50
2.00
6.42
Expected dividend yield
—
—
—
The risk-free interest rate was
determined based on the rate of Treasury instruments whose maturities are similar to those of the expected term of the award being valued. The expected dividend yield was based on our expectations of not paying dividends on our common stock for the
foreseeable future. The expected volatility incorporates historical volatility of similar entities whose shares prices are publicly available.
As of January 29, 2011, we had outstanding vested options to purchase approximately 685,340 shares of common stock, at a weighted average exercise price of $2.71 per share, and outstanding unvested options to
purchase 1,757,748 shares of common stock, at a weighted average exercise
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price of $6.21 per share. The per share value of each share of common stock underlying the vested and unvested options at the dates of the grant of the options range from $0.48 to $5.97 per
share. The average exercise prices per share for the vested and unvested options are less than the anticipated initial public offering price, adjusted for the anticipated shares to be offered.
For stock options granted from March 25, 2010 through July 1, 2010, the fair values of the shares at the dates of grant were based on the
price paid by CCMP in an arms-length transaction to acquire the controlling interest in our company. There were no options granted from January 31, 2010 through March 24, 2010.
For stock options granted after July 1, 2010, an analysis was performed to estimate the fair values of the shares at the dates of grant. The
objective of the analysis was to determine the fair market value of the company, its common stock and stock options, as of the valuation date, on a controlling interests basis. The probability-weighted expected return method was used to estimate the
fair value of our common stock which, in turn, represented the stock option exercise price on the date of grant. This method was selected based on management's current expectation for either an initial public offering or a sale or merger of the
company in the near future. There were three future scenarios incorporated into the valuation: (i) the company being sold to another company (the "M&A Scenario"), (ii) the company engaging in an initial public offering (the
"IPO Scenario"), and (iii) the company remaining an independent, privately-held company (the "Private Scenario"). The estimated fair value of our common stock in each scenario was affected by the use of certain assumptions
and valuation methodologies. The fair value of the stock was assessed based on the probability weighted potential for each scenario on the date of grant.
The estimated fair value under the M&A Scenario considered the projected value of the company upon sale or merger. To arrive at the fair value of common equity under the M&A Scenario, the discounted value
of the cash flow leading up to the date of an assumed merger or sale was added to values from comparable merger and acquisition transactions applying the observed paid-multiples to our financial performance to determine enterprise value.
To determine the estimated fair value of our common stock under the IPO Scenario, the public market valuations of other high-growth specialty
retailers were reviewed using a variety of methods. For such firms, a number of multiples and ratios such as revenue, earnings before interest, taxes, depreciation and amortization, or EBITDA, and net income to enterprise value were calculated. Then
those multiples were applied to both our historical and projected financial performance to determine our estimated enterprise value.
The estimated fair value under the Private Scenario was determined considering valuations based on three different fair value models: (i) an
income valuation model that incorporates the calculation of the present value of future cash flows discounted at an appropriate rate applicable given the risks associated with the company and related forecast, (ii) a market valuation model that
considers recent sales or offerings of comparable assets between third parties and (iii) the guideline public company method that focuses on comparing the company's economic performance to guideline publicly traded entities.
During first and second quarters of fiscal 2010 we granted stock options with an exercise price of $6.13 per share. During the fourth quarter of
fiscal 2010 we granted stock options with an exercise price of $10.19 per share. The difference between the estimated fair value of our underlying stock from the time of the first and second quarter grants to the fourth quarter grants was impacted
by significant increases in comparable boutique sales; including a 21.1% comparable boutique sales increase in the third quarter. Additionally, the new boutique openings during fiscal year 2010 exceeded the forecast by more than 10%. The accretive
factors were partially offset by the impact of the recapitalization of the company in November 2010, the issuance of our existing senior secured credit facility and the related $100 million cash dividend.
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Off Balance Sheet Arrangements
We are not party to any off balance sheet arrangements.
Contractual Obligations
The following table summarizes our contractual obligations as of
January 29, 2011 and the effect such obligations are expected to have on our liquidity and cash flows in future periods.
Payment Due by Period
Less than
1 year
1-3 years
3-5 years
More than
5 years
(in thousands)
Long-term debt obligations
$
5,938
$
87,875
$
—
$
—
Operating lease obligations(1)
15,285
29,292
23,611
50,529
Merchandise purchase commitments
8,066
—
—
—
Contract for software application implementation
549
888
664
—
(1)
Excludes common area maintenance charges, real estate taxes and certain other expenses which amounted to approximately 35.1% of minimum lease obligations in fiscal year 2010. We
expect this percentage to be relatively consistent for the next three years.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial. We cannot assure you, however, that our results of operations
and financial condition will not be materially impacted by inflation in the future.
Recent Accounting Pronouncements
For a description of a complete list of recent accounting pronouncements, see the notes to our consolidated financial statements included elsewhere
in this prospectus.
Quantitative and Qualitative Disclosures about Market Risk
Our principal exposure to market risk relates to changes in interest rates. Our existing senior secured credit facility carries floating interest
rates that are tied to LIBOR, the federal funds rate and the prime rate, and therefore, our statements of operations and our cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in
place. We historically have not used interest rate swap agreements to hedge the variable cash flows associated with the interest on our existing senior secured credit facility. At January 29, 2011, the weighted average interest rate on our
borrowings was 7.75%. Based on a sensitivity analysis at January 29, 2011, assuming the entire term loan would be outstanding for a full fiscal year, a 100 basis point increase in interest rates would increase our annual interest expense by
approximately $938,000. We do not use derivative financial instruments for speculative or trading purposes, however, this does not preclude our adoption of specific hedging strategies in the future.
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BUSINESS
Our Company
francesca's collections
®
is one of the fastest growing specialty retailers in the
United States. Our retail locations are designed and merchandised to feel like independently owned, upscale boutiques and provide our customers with an inviting, intimate and differentiated shopping experience. We believe we offer compelling value
with a diverse and uniquely balanced mix of high-quality, trend-right apparel, jewelry, accessories and gifts at attractive prices. We tailor our assortment to appeal to our core 18-35 year-old, fashion conscious female customer, although we find
that women of all ages are attracted to our eclectic and sophisticated merchandise selection and boutique setting. We carry a broad selection but limited quantities of individual styles and introduce new merchandise to our boutiques five days a week
in order to create a sense of scarcity and newness, which helps drive customer shopping frequency and loyalty.
By offering a
differentiated shopping experience and high-quality merchandise at a compelling value, our boutiques have been successful across a wide variety of geographic markets and shopping venues. We believe we have an opportunity to continue to grow our
boutique base from 236 locations in 38 states as of April 2, 2011 to approximately 900 boutiques in the United States over time. Our merchandise is also available through our e-commerce website,
www.francescascollections.com
.
We believe that through the strength of our business model and our disciplined operating philosophy, we have achieved strong financial performance
and growth that is among the best in the specialty retail sector:
Ÿ
Between fiscal year 2008 and 2010 our net sales increased from $52.3 million to $135.2 million, representing a compound annual growth rate of 60.8%.
Ÿ
Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in fiscal year 2009.
Ÿ
Between the end of fiscal year 2008 and 2010 our boutique count increased from 111 to 207, representing a compound annual growth rate of 36.6%.
Ÿ
Between fiscal year 2008 and 2010 our operating profit increased from $7.0 million to $29.6 million, representing a compound annual growth rate of 106.2%, driven
by increased net sales and an 860 basis points increase in our operating margin to 21.9% in fiscal year 2010.
Our
Competitive Strengths
We believe the following strengths differentiate us from our competitors and are key drivers of our success:
Ÿ
Proven Trend-Right Merchandise Delivered at a Compelling Value
.    Our boutiques carry a broad but shallow selection of high-quality,
trend-right apparel, jewelry, accessories and gifts at attractive prices. Our buyers closely monitor the marketplace to identify and source proven fashion trends that will appeal to our core customers. We primarily offer exclusive items under our
proprietary labels, but carry a small selection of third-party, nationally recognized brands that we use opportunistically in certain categories. We offer a broad selection of merchandise, but intentionally purchase small quantities of individual
items for each boutique such that we frequently replenish our boutiques with new merchandise, keeping the shopping experience fresh and exciting for our customers. The short lead times of our vendors, maximizes our speed to market, as it generally
takes only four to twelve weeks from the time an order is placed to the time merchandise is available on the boutique floor. With these short lead times,
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we are able to make more informed buying decisions to meet customers' merchandise expectations, and to react quickly to changing fashion trends. This approach, combined with our uniquely
balanced product mix of approximately 50% apparel and 50% jewelry, accessories and gifts, is designed to encourage more frequent visits by our customers and reduce the seasonal fluctuations and margin erosion experienced by many other specialty
retailers. We believe the expertise of our buyers and our broad base of vendors allows us to quickly identify and respond to emerging fashion trends in apparel, jewelry, accessories and gifts to offer quality merchandise at prices that
'surprise and delight' our customers.
Ÿ
Differentiated Shopping Experience.
Each of our retail locations are uniquely designed and merchandised to feel like an
independently owned, upscale boutique. Contemporary music, scented candles, small hand-made signs and vintage yet vibrant fixtures create a warm and inviting environment that showcases our eclectic assortment. Our open floor design enables customers
to easily view merchandise and we use a number of body forms to provide full outfit ideas to encourage customers to buy multiple items. Merchandise presentations, including display windows, tables and walls, are refreshed every two to three weeks to
keep our boutiques new and exciting. Our passionate boutique managers and associates, with the support of corporate guidelines, are encouraged to infuse each boutique with their personality, which increases their motivation and enhances the shopping
experience. We believe these attributes, along with our strategy of carrying a broad selection but limited quantities of individual styles, create a unique 'treasure hunt' atmosphere that strongly appeals to our customers and
differentiates us in the marketplace.
Ÿ
Powerful Boutique Economics and Rigorous Real Estate Selection Process
.    We have a proven boutique format that works across a wide
variety of shopping venues, market sizes, climates and demographics. Our boutiques average approximately 1,400 square feet, which is meaningfully smaller than most specialty retailers. The performance of our boutiques and our flexible real estate
format enhance our ability to secure prominent, highly visible locations in regional malls, lifestyle centers, street locations and strip centers. We deploy a rigorous real estate selection process with all new boutique opportunities measured
against specific financial and geographic criteria. Over the previous two fiscal years, our new boutiques have generated first year cash on cash returns in excess of 150% and payback periods of less than one year, due to our ability to consistently
obtain best-in-class locations combined with relatively low capital investment and operating cost requirements, allowing us to fund all of our growth from internally generated cashflow. We believe the financial characteristics of our new boutiques,
coupled with our proven ability to operate across different shopping venues and geographies, provide us with a wide scope of new boutique opportunities and enhance our ability to profitably expand our boutique base.
Ÿ
Solid and Scalable Infrastructure.
We continually invest in systems, controls and human resources to support our growth. In recent
years we have made significant improvements to the infrastructure of our finance, buying and planning, real estate and IT departments. For instance, we believe that we have developed an integrated sourcing, distribution and merchandising process
that is scalable and will facilitate the continued growth in the number of boutiques we operate. This process starts with our buyers who work closely with an established and diverse group of vendors to identify trend-right, high-quality merchandise
for our boutiques. From on-hand inventories or special orders and their international networks of manufacturers, our vendors make frequent deliveries of merchandise consisting of floor-ready, pre-tagged items to our warehouse. We then sort, allocate
and distribute the pre-packs to our boutiques five days a week based on current inventory levels and sales trends. Our boutique managers are able to readily merchandise the product and tailor the displays to differentiate their boutiques and reflect
local market tastes. As we focus on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image we do not believe that we will require significant investments in traditional marketing and advertising initiatives
as we expand our boutique base.
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Ÿ
Experienced Management Team with a Disciplined Operating Philosophy.
Our senior management has extensive experience across a broad
range of disciplines in the retail industry, including merchandising, real estate, supply chain and finance. Our highly skilled executive team includes two of our Founders, John De Meritt, our President and Chief Executive Officer, and Kyong Gill,
our Executive Vice Chairperson. Together they lead a dynamic team with a strong background at companies such as David's Bridal, Chico's, CVS, Banana Republic, Nordstrom and J.C. Penney. Our management team has built a solid operating
foundation based on sound retail principles that define our culture. Our disciplined operating philosophy is grounded in a relentless focus on providing great merchandise and a best-in class boutique experience supported by uncompromising site
selection and continual enhancements to our infrastructure.
Our Growth Strategy
We believe we can continue to grow our revenues and earnings by executing on the following strategies:
Ÿ
Grow Our Boutique Base
.    We believe there is an opportunity to significantly increase the number of boutiques we operate. Based on
our proven ability to open our flexible retail format in various shopping venues in new and existing markets, and supported by a third party research study, we believe we have the potential to grow our base from 236 to approximately 900 boutiques
over time. We opened 62 new boutiques in fiscal year 2010 and plan to open approximately 75 new boutiques in each of fiscal year 2011 and 2012. We expect to open boutiques in both new and existing markets and in regional malls, lifestyle centers,
street locations and strip centers. In the short term, we see a particular opportunity to open new boutiques with attractive lease terms in regional malls. As of April 2, 2011, 29 of the approximately 75 new boutiques planned for fiscal year
2011 had been opened with leases signed for another 39. We expect our new boutiques to generate first year cash-on-cash returns of approximately 150% and payback periods of less than one year. Below is a representation of our current boutique
coverage as of April 2, 2011.
Ÿ
Drive Comparable Boutique Sales
.    Our comparable boutique sales increased by 15.2% in fiscal year 2010 after a 9.8% increase in
fiscal year 2009. We intend to drive comparable boutique sales by featuring high-quality, trend-right merchandise at a compelling value and refining our distinctive boutique experience. We intend to maintain our broad but shallow merchandising
approach, which we believe will result in increased units and dollars per transaction and protect margins. In addition, we are increasing the sophistication of our buying
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and planning infrastructure, enhancing our buying team with additional category-specific buyers, and augmenting boutique-level management.
Ÿ
Expand the Penetration and Presence of Our E-Commerce Business
.    We complement our boutiques with a growing e-commerce business. We
use the same successful business principles deployed in our boutiques by offering limited assortment of individual styles to create a sense of scarcity and newness, which increases the frequency of customer visits to the site. Our e-commerce
business not only generates incremental sales and profits but also builds brand awareness and boutique traffic, and helps us access markets where we do not currently have a boutique. Our e-commerce sales grew by 85% in fiscal year 2010 and
represented 1.4% of our total net sales. We expect e-commerce sales growth to continue to outpace the growth of boutique sales as consumers discover the complementary nature of shopping with us online and through our boutiques.
Ÿ
Enhance Operating Margins.
Our strong expected boutique growth should permit us to take advantage of economies of scale in sourcing
and to also leverage our existing infrastructure, corporate overhead and other fixed costs. In addition, we expect to benefit from the implementation of a new enterprise software platform that we plan to introduce in stages between August 2011 and
the second half of 2012. This will enable us to more efficiently operate and manage our point-of-sale, management reporting, merchandise planning, ordering and allocation, and related inventory management functions.
Our History
We opened our first boutique in Houston, Texas in 1999. Initially, we focused on selling fashion jewelry, accessories and selected home décor but as our boutique base grew across the United States we
expanded our merchandise offering to include apparel, which has become our largest category and, we believe, a significant driver of growing customer loyalty and return visits. John De Meritt, our President and Chief Executive Officer, and Kyong
Gill, our Executive Vice Chairperson, are two of the original four Founders of francesca's collections
®
. In recent
years, we have augmented our strong management team with additional skilled and experienced executives who now lead our buying, merchandise planning, boutique operations, finance, real estate, information technology, e-commerce and corporate support
activities. In February 2010, CCMP acquired a controlling interest in the company with the goal of supporting Mr. De Meritt and the management team in accelerating our growth.
Our Market
Our distinct
boutique environment and carefully selected, trend-right merchandise attract a wide demographic. While our broad assortment appeals to women of varying ages and diverse backgrounds, from value-conscious to the more affluent, our primary customer is
a fashion conscious woman between the ages of 18 and 35. She is college educated and has moderate to high disposable income. She enjoys shopping for the latest fashions and is attracted to our upscale boutique shopping environment, compelling value
proposition and highly personalized customer service. Our core customer represents a growing segment of the U.S. population and we believe she spends a higher proportion of her income on fashion than the general population. According to the United
States Census Bureau's 2009 American Community Survey 1-Year Estimates, approximately 35.1 million women between the ages of 18 to 35 live in the United States.
Our unique merchandise combination of apparel, jewelry, accessories and gifts allows us to participate in a number of large market segments. The apparel and women's wear segment, which represents approximately
50% of our sales, had a market size of approximately $160 billion in 2010, according to Data Monitor, an international market research firm.
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Our Merchandise Offering and Merchandising Strategy
We offer a broad and shallow selection of fashion apparel, jewelry, accessories and gifts targeted to our core customer, who seeks trend-right,
high-quality merchandise at attractive prices. We have a well-balanced assortment of product categories with approximately 50% of our fiscal year 2010 sales generated by non-apparel items. Our diverse merchandise contributes to the 'treasure
hunt' atmosphere in our boutiques and is one which we aim to maintain as we grow. We carry a broad selection but limited quantities of each style and we deliver new merchandise to our boutiques five days a week. This contributes to a sense of
scarcity and newness within our boutiques, mitigates fashion risk, reduces the seasonality of the inventory and protects margins.
Our
wide range of apparel, jewelry, accessories and gifts fills the various casual and dressy fashion needs of our customers and our selection of gifts ranges from the elegant to the irreverent. Our 1,400 square foot boutiques carry approximately 3,000
SKUs at any one time and we stock about 15,000 different styles during the course of a year. The majority of our merchandise is sold under our proprietary labels (85% of apparel sales in fiscal year 2010) and we also sell a select assortment of
third-party, nationally recognized brands. Our e-commerce business features an edited selection of our boutique merchandise. The table below shows the breakdown of our fiscal year 2010 net sales by product category:
Apparel
52% of Net Sales
Jewelry
21% of Net Sales
Accessories
14% of Net Sales
Gifts
13% of Net Sales
Dresses, Tops, Denim, Skirts, Pants, Outerwear, Jackets & Coats, Layering Essentials, Intimates
Necklaces, Earrings, Bracelets, Rings
Handbags, Totes, Shoulder-Bags, Clutches, Wallets, Shoes, Belts, Hats, Scarves, Sunglasses, Umbrellas, Watches
Candles, Cards, Stationary, Coasters, Hand Crèmes, Soaps, Magnets, Wall Art, Miscellaneous Items
Our buying and planning team is responsible for selecting and sourcing our merchandise, managing inventory levels and
allocating items to boutiques. Each product category has a set of dedicated buyers with oversight provided by our Chief Merchandising Officer. The buying and planning team holds weekly meetings to review merchandise performance and identify new
fashion trends. Our buyers also make regular trips to important industry markets and trade shows and visit Asia several times per year. We have access to the expertise of hundreds of designers employed by our large vendor base who provide us with a
large selection of new styles for review each week. Our buyers collaborate with vendors to place special orders and to modify presented styles based on current fashion trends and their in-depth knowledge of our customers' preferences, which
means most of our merchandise is unique to francesca's collections
®
. Before placing an order, every item is evaluated
for style, quality, fit, value and profitability to ensure it meets standards consistent with our francesca's
collections
®
brand.
Our Sourcing Strategy
Our ability to quickly make decisions on trend-right items combined
with the short production lead times of our vendors maximizes our speed to market. We use vendors based in the United States that source from both domestic and overseas markets and it generally takes only four to twelve weeks from the time an order
is placed to the time merchandise is available on the boutique floor. With these short lead times, we are able to make more informed buying decisions in terms of customers' merchandise expectations, and to quickly react to changing fashion
trends. This also supports our merchandise strategy of offering a broad but limited assortment that is infused with new items five days a week. Due to the limited quantity of our buys in any one style, we avoid material inventory positions in
individual
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styles and this enhances our ability to quickly deliver trend-right merchandise and minimizes the risk of fashion misses, which can lead to increased inventory markdowns and diminished gross
margins.
We do not own or operate any manufacturing facilities. We have relationships with a diverse base of over 200 vendors and our
top 10 vendors sourced approximately 45% of our merchandise in fiscal year 2010, while no single vendor accounted for more than 15% of our purchases. We do not enter into exclusive contracts with our vendors and we continue to expand our vendor
network. This provides us with access to an even more extensive variety of merchandise from a greater number of vendors at competitive prices. We believe our vendors view us as an important retail partner given our growth and market position. Our
vendors utilize a network of domestic and overseas factories, providing them access to significant capacity.
Each of our vendors is
required to adhere to our vendor standards, which are designed to ensure that our vendors conduct their business in a legal, ethical and responsible manner. This also includes the requirement that all of our vendors comply with the applicable laws
and regulations of the United States, those of the respective country of manufacture or exportation and all state and local laws and regulations.
Our Sales Channels
We conduct our business through boutiques and our e-commerce website,
www.francescascollections.com
. We do not incorporate the information contained on, or accessible through, our website into this prospectus, and it should not be considered a part of this prospectus.
Boutiques
In fiscal year 2010, our boutiques generated net sales of $133.2 million, which represented 98.6% of total net sales. As of
April 2, 2011, we operated 236 boutiques under the name francesca's collections
®
in 38 states throughout the
United States. The following list shows the number of boutiques operated by state as of April 2, 2011, and demonstrates that we have been successful in opening boutiques in a wide range of geographies.
Number of
Boutiques
Number of
Boutiques
Alabama
7
Minnesota
5
Arizona
8
Mississippi
2
Arkansas
3
Missouri
5
California
24
Nebraska
3
Colorado
4
Nevada
4
Connecticut
5
New Jersey
10
Delaware
1
New Mexico
1
Florida
16
New York
5
Georgia
9
North Carolina
9
Illinois
14
Ohio
8
Indiana
3
Oklahoma
4
Iowa
2
Pennsylvania
3
Kansas
3
Rhode Island
2
Kentucky
3
South Carolina
6
Louisiana
5
Tennessee
9
Maine
1
Texas
28
Maryland
4
Virginia
3
Massachusetts
5
Washington
3
Michigan
4
Wisconsin
5
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Boutique Design and Environment
The differentiated shopping experience offered through our boutiques is central to the francesca's collections
®
brand. Our boutiques are designed and merchandised to deliver a warm and inviting atmosphere that creates the sense for our
customers that they are shopping in an independently owned, upscale boutique. Although we strive to maintain a relatively consistent look and feel in all of our boutiques, the intricacies of each boutique's physical properties, geographic
market and shopping venue, as well as the autonomy we provide to our boutique managers in visually merchandising the boutiques, make each feel different and in tune with its local clientele.
Our boutiques typically range in size from 1,000 to 1,800 square feet, with an average size of approximately 1,400 square feet. We seek locations
that have a boutique front at least 20 feet wide, which we adorn with visually appealing architectural lighting, signage and display window presentations. Inside, we use a warm earth tone color palette and soft lighting. We include rugs, lush
fabrics and table cloths to create a sense of depth and richness. Chandeliers and antique displays such as ottomans, dressing room chairs and wall mirrors reinforce the unique ambiance and add to the sense of sophistication and style. All of this
provides a dense canvas for our colorful displays of trend-right merchandise. Each boutique's merchandise presentation, including display windows, tables and walls, is refreshed every two to three weeks to keep our shopping experience new and
exciting. We believe by constantly changing our visual merchandising and floor sets, we give our customers a reason to shop our boutiques frequently, building customer loyalty. Our boutique managers also use our intranet website to share
best-practices with each other, such as ideas for displays. We believe these grass-root interactions improve the sense of community among our boutique managers and enhance the shopping experience for our customers.
Staffing in our boutiques consists of a salaried boutique manager, an assistant manager and a minimum of four part-time associates. Our
compensation structure for non-salaried employees consists of an hourly wage plus a monthly bonus based on performance, paid in cash or gift cards to all associates immediately upon achievement of the stated monthly sales goal. We endeavor to hire
boutique personnel that are friendly and customer-service driven individuals. In addition to a comprehensive training program for visual merchandising, customer service and operations, boutique managers benefit from ongoing field-level support and
training updates as well as guides and manuals.
Boutique Economics
We believe that our broad and shallow merchandising strategy and the differentiated shopping experience we offer to our customers contributes to the
success of our boutiques, which generate attractive returns. Over the previous two fiscal years, we opened 98 boutiques which averaged approximately 1,400 square feet and, of the locations open 12 or more months, boutique sales averaged
approximately $750,000 in the first year. On average, these boutiques delivered first-year, pre-tax cash-on-cash returns in excess of 150% and payback periods of less than one year. Consistent with recent openings, our new boutique operating model
assumes a net investment of $155,000 consisting of $110,000 of build-out costs, including equipment and fixtures net of tenant allowances, and $45,000 of initial inventory. We expect new boutique economics to be consistent with our recent history
and, based on first-year boutique sales of $650,000 to $750,000, our boutiques achieve a payback period of less than year and pre-tax cash-on-cash returns of approximately 150%.
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Boutique Growth and Site Selection
We have a proven track record of increasing our boutique base at a compound annual growth rate of approximately 34% over the previous four years.
The table below indicates certain historical information regarding our boutiques as of the end of each of the periods indicated below:
April 2,
2011
Fiscal
Year
2010
Fiscal
Year
2009
Fiscal
Year
2008
Calendar
Year
2007(2)
Calendar
Year
2006
Mall
90
69
25
4
1
1
Non-Malls
146
138
122
107
77
63
Total Boutiques
236
207
147
111
78
64
Boutiques Opened
29
62
36
31
16
19
Boutiques Closed
—
2
—
—
—
—
Total Gross Square Feet (in thousands)
336
296
210
158
110
89
Average Gross Square Feet Per Boutique
1,424
1,428
1,428
1,419
1,408
1,392
Net Sales Per Average Gross Square Foot(1)
N/A
$
508
$
429
$
384
$
401
$
399
(1)
Net sales per average gross square foot calculated as the sum of quarterly average sales per square foot (total quarterly revenue / avg. quarterly gross square feet).
(2)
Please see note 1 to the "Selected Consolidated Financial and Operating Data" section. In January 2008, we changed our fiscal year end from December 31st to the
Saturday closest to January 31st. We opened two boutiques in the month of January 2008, which is a time period not captured in Calendar Year 2007 nor Fiscal Year 2008. These two boutiques are included in Boutiques Opened in the calendar year
ended December 31, 2007 , but are not in included in Total Boutiques or calculations of Total Gross Square Feet, Average Gross Square Feet per Boutique or Net Sales Per Average Gross Square Foot in the calendar year ended December 31,
2007.
Our flexible boutique format has enabled us to successfully open boutiques across a variety of shopping venues,
market sizes, climates and demographics. We believe this provides us with a wide scope of real estate opportunities and enhances our ability to profitably expand our boutique base. Based on third party research we commissioned with a nationally
recognized retail real estate consulting firm, we believe we have the potential for approximately 900 boutiques in the United States. In fiscal year 2010, we opened 62 new boutiques and in each of fiscal year 2011 and 2012 we plan to open
approximately 75 new boutiques (so far in fiscal year 2011, we have already opened 29 new boutiques and have executed leases for another 39). We believe we can continue to successfully open new boutiques at an annual rate of at least 75 for the next
three to five years. We expect to open boutiques in both new and existing markets and across regional malls, lifestyle centers, street locations and strip centers. In the short term, we see a particular opportunity to open new boutiques with
attractive lease terms in regional malls.
Our real estate committee utilizes a disciplined approach to site selection, which analyzes
the prospective shopping venue for factors such as overall shopping venue productivity, competitive environment and specific sales of other retailers deemed most relevant as well as the configuration of available space for potential new boutique
locations. We seek prominent locations in high-traffic areas of the shopping venue and in close proximity to other retailers targeting similar customers. We also evaluate each new boutique location based on projected sales and determine whether the
capital investment and estimated boutique four-wall contribution satisfies our targeted return threshold, occupancy costs, and boutique contribution. As a result of our powerful boutique economics and our rigorous site selection process, we have
only closed two boutiques since we began business in 1999.
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E-Commerce
Our e-commerce business consists of our
www.francescascollections.com
website. Through our website, our customers are able to purchase individual items or recommended full outfits, shop the latest jewelry,
gift or fashion merchandise and special promotions, create a wish list, sign up for our mailing list, connect and follow us on social media sites such as Facebook and Twitter, as well as obtain current information on our boutique locations. This
channel enables us to reach customers in all states and further build our brand. We currently obtain and collect customer email information from our boutiques and website and use it to generate marketing programs, such as our weekly 'Pick of
the Week' email campaign. During fiscal year 2010 we made several improvements to our website to enhance our e-commerce business capabilities and its growth. These improvements have allowed us to support a more dynamic presentation of
merchandise, process more orders and enhance our marketing efforts. In fiscal year 2010, our e-commerce sales increased 85% relative to fiscal year 2009, but still only represented 1.4% of total net sales. We believe there is significant potential
to expand this channel over time.
Marketing and Advertising
We focus on organic, viral and in-boutique marketing to increase customer loyalty and build our brand image. By locating our
boutiques in prominent, high-traffic locations and refraining from traditional television, radio and print advertising, we encourage people to 'discover' francesca's collections
®
. We believe that many of our customers develop a personal connection with our boutiques and become our ambassadors in the local community by spreading the word about
francesca's collections
®
. We also use email communications, our website and, increasingly, social networking sites
Facebook and Twitter and fashion related blogs to achieve our marketing goals. Our boutique managers are passionate about francesca's collections
®
and contribute to our marketing effort by hosting in-boutique activities, such as fashion shows and private parties, and also independently promote their own boutique
via blogs, YouTube and social networking sites.
Distribution
We distribute all of our merchandise from our distribution center (located within our corporate headquarters) in Houston, Texas. Our combined
facility occupies approximately 100,000 square feet, consisting of approximately 70,000 square feet of warehouse and distribution space, which services our boutiques and e-commerce business, and approximately 30,000 square feet of office space for
our corporate headquarters. Our merchandise are received, inspected, managed, stored and distributed through our distribution warehouse, with the exception of approximately 20% of our merchandise which are drop-shipped by our vendors directly to our
boutiques. The majority of our merchandise are currently pre-ticketed and pre-sorted by our vendors, which allows us to efficiently ship from our distribution center directly to our boutiques, thereby reducing labor costs. We use third-party
providers to ship new items to our boutiques five days a week, which ensures a steady flow of new styles. Our distribution center can support at least 450 boutiques and is sufficient to support our expected growth plans for the foreseeable future.
Management Information Systems
Our management information technology systems provide support and timely information to our management team. We believe our current systems provide us with operational efficiencies, scalability, management control
and timely reporting that allows us to identify and respond to operating trends in our business. We use a combination of customized and industry-standard software systems to support boutique point-of-sale, merchandise planning and buying,
e-commerce, inventory management, financial reporting and administrative functions.
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We are in the process of upgrading several of our systems to provide improved support for our current
operations and position us for continued growth. This includes the implementation of a fully integrated enterprise software platform from JDA, which we plan to introduce in stages between August 2011 and the second half of 2012. Throughout the
installation and stabilization of JDA, we will continue to run our existing platform to ensure continuity during the conversion. We expect the new JDA system will enhance customer service, improve operational efficiency, enhance management reporting
and control and increase synergies between our e-commerce business and our boutiques.
Competition
The women's apparel, jewelry, accessories and gifts market is highly competitive, encompassing department stores, specialty retailers and mass
marketers, as well as local and regional players. We compete primarily with other specialty retailers and internet businesses that specialize in women's merchandise, such as White House | Black Market, Ann Taylor Loft, Charlotte
Russe, Brighton Collectibles and Anthropologie.
The principal basis upon which we compete is by offering a differentiated shopping
experience through high-quality, trend-right merchandise at attractive prices in a warm and inviting boutique environment with excellent customer service. In addition, our manageable boutique size and flexible but disciplined real estate strategy
provide us with a competitive advantage that is not easily replicated by our major competitors.
Intellectual Property
We have registered our trademark francesca's collections
®
with the United States Patent and Trademark Office. In addition, we own domain names, including
www.francescascollections.com
, and we own unregistered
copyright rights in our website content. We believe our trademarks have value, and we diligently protect them against infringement. For instance, we have recently filed applications to register our trademark internationally. We will also continue to
file new applications as appropriate to protect our intellectual property rights.
Regulation and Legislation
We are subject to labor and employment laws, laws governing advertising and promotions, privacy laws, safety regulations, consumer protection
regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and the operation of boutiques and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with
applicable laws.
Insurance
We use insurance for a number of risk management activities, including workers' compensation, general liability, automobile liability and employee-related health care benefits, a portion of which is paid by
the employees. We evaluate our insurance requirements on an ongoing basis to maintain adequate levels of coverage.
Properties
We do not own any real property, but rather lease our properties. Our corporate headquarters, warehouse and distribution center are
located in an approximately 100,000 square foot facility in Houston, Texas. The buildings in the facility are leased under agreements expiring in 2013, with
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options to extend for an additional 5 years. Approximately 70,000 square feet are dedicated to warehouse and distribution space, with the balance used as our corporate offices. We believe that
our Houston facility will be able to support our growth plans for the foreseeable future, although we may from time to time lease new facilities or vacate existing facilities as our operations require.
As of April 2, 2011, we had 236 boutiques in 38 states and had executed leases for 39 new boutiques we plan to open in 2011. In total we have
approximately 336,000 gross square feet across all of our boutiques. Our boutiques are leased from third parties with lease terms of five to ten years and many of our lease agreements have additional five-year renewal options. A majority of our
leases have early termination clauses, which permit the lease to be terminated by us if certain sales levels are not met in specific periods or if a shopping center does not meet specified occupancy standards. In addition to fixed minimum lease
payments, most of our boutique leases provide for additional rental payments based on a percentage of sales if sales at the respective boutiques exceed specified levels. In addition, a majority of our leases also provide for additional payments
associated with common area maintenance, real estate, taxes and insurance. In addition, many of our lease agreements have defined escalating rent provisions over the initial term and extensions.
Our Employees
As of
April 2, 2011, we had approximately 1,560 total employees. Of our total employees, approximately 102 were based at our corporate headquarters in Houston, Texas, and approximately 1,458 were boutique employees. We had approximately
462 full-time employees and approximately 1,098 part-time employees, who are primarily boutique employees. None of our employees are represented by a labor union, and we have had no labor-related work stoppages as of April 2, 2011. Our
relationship with our employees is one of the keys to our success, and we believe that relationship is satisfactory.
Seasonality
Our wide-range of merchandise and our strategy of carrying a broad selection but limited quantities of each item reduces our
overall seasonality relative to other specialty retailers. Nevertheless, our business is mildly seasonal in nature and demand is generally the highest in the fourth fiscal quarter due to the year-end holiday season and lowest in the first fiscal
quarter. As a result of this seasonality and generally because of variation in consumer spending habits, we experience fluctuations in net sales and working capital requirements during the year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations—Quarterly Results and Seasonality—Seasonality" for more information.
Legal Proceedings
We are
subject to various legal proceedings and claims, including employment claims, wage and hour claims, intellectual property claims, contractual and commercial disputes and other matters that arise in the ordinary course of our business. While the
outcome of these and other claims cannot be predicted with certainty, we do not believe that the outcome of these matters will have a material adverse effect on our business, results of operations or financial condition.
Privacy Policy
In the
course of our business, we collect information about our customers, including customer data submitted to us in connection with purchases of our merchandise at boutiques as well as from our e-commerce business. We respect the privacy of our customers
and take steps to safeguard the confidentiality of the information that they provide to us.
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MANAGEMENT
Executive Officers and Directors
Below is a list of our executive officers and directors and their respective ages and positions and a brief account of the business experience of each of them. Upon completion of this offering, our board of
directors will consist of seven members.
Name
Age
Position
John De Meritt
40
President, Chief Executive Officer and Director
Gene Morphis
62
Executive Vice President, Chief Financial Officer
Theresa Backes
53
Executive Vice President, Chief Operating Officer
Kal Malik
50
Executive Vice President, General Counsel
Kyong Gill
46
Director, Executive Vice Chairperson
Greg Brenneman
49
Director, Non-Executive Chairman
Neill Davis
54
Director
Richard Emmett
55
Director
Joseph Scharfenberger
39
Director
Richard Zannino
52
Director
Executive Officers
John De Meritt
is one of the Founders of the company and has served as our President and Chief Executive Officer since March 2007 and has
been a member of our board of directors since the inception of the company. Prior to becoming President and Chief Executive Officer of Francesca's, Mr. De Meritt worked for many years in the real estate investment industry, most recently
as Vice President, Director of Leasing in the Eastern United States for Weingarten Realty Investors. Mr. De Meritt holds a Bachelor of Arts degree in Political Science and a minor in Economics from the University of Houston and a Juris
Doctorate from the South Texas College of Law.
Gene Morphis
has served as our Chief Financial Offer since October 2010. Prior to
joining Francesca's, Mr. Morphis was the Chief Financial Officer of David's Bridal from March 2006 to September 2010. Prior to David's Bridal, from 2002 to March 2006, Mr. Morphis served as the Chief Financial Officer of The
Rowe Companies, a company that filed voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in September 2006. Mr. Morphis also served as Chief Financial Officer of ClientLogic from 1999 to 2001, as Chief Financial Officer
of Stream International, Inc. from 1995 to 1999, and as Executive Vice President and Chief Financial Officer of CVS Caremark Corporation from 1992 to 1995. He also held various executive positions at Zales Corporation, American Woodmark and Holiday
Inns. He currently serves on the advisory board of Serality. Mr. Morphis holds a Bachelor of Business Administration degree and a Master of Business Administration degree from the University of Memphis.
Theresa Backes
has served as our Chief Operating Officer since 2009. Prior to joining Francesca's, from 2004 to 2007, Ms. Backes
was the Vice President, Store Operations of David's Bridal. From 2002 to 2004, Ms. Backes was the Senior Director, Store Operations, at Banana Republic. Ms. Backes has also held positions with IBM Global Services from 2000 to 2002 and
she was the Senior Vice President, Stores, at Gymboree Corporation from 1996 to 2000. She held various management positions at Target Corp. and Mervyn's Stores from 1981 to 1996. Ms. Backes graduated from Arizona State University in 1981
and attended both the Graduate Studies in Retail Finance program at the University of Michigan and Leadership Studies program at the Aspen Institute.
Kal Malik
has served as our General Counsel since October 2009. Prior to joining Francesca's, Mr. Malik was an attorney in private practice from August 2007 through September 2009 as a partner
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(of counsel during 2009) at the law firm of Condon Thornton Harrell Malik LLP. Prior to that, he was a Senior Director at Kane Russell Coleman & Logan, P.C. from April 2001 to July 2007.
Mr. Malik holds a Bachelor of Science degree in Accounting from The University of Texas at Dallas, a Juris Doctorate from the South Texas College of Law and a Master of Laws in Taxation from Southern Methodist University Dedman School of Law.
Prior to entering the practice of law, Mr. Malik practiced as a Certified Public Accountant in Dallas, Texas.
Kyong Gill
is
one of the Founders of the company and has served as a member of our board of directors since the inception of the company and has served as the Executive Vice Chairperson of our board of directors since March 2010. Ms. Gill previously served
as our Chief Merchandising Officer from 2003 until March 2011 and continues to oversee our merchandising operations in her capacity as Executive Vice Chairperson. Prior to founding Francesca's, Ms. Gill worked in the finance departments of
Continental Airlines and Northwest Airlines. Ms. Gill holds a Bachelor of Arts degree from the University of Houston and a Master of Business Administration degree from the University of Georgia. Ms. Gill was previously licensed as a
Certified Public Accountant.
Directors
The following information pertains to the directors, principal occupations and other directorships for at least the last five years and information regarding their specific experience, qualifications, attributes or
skills. In selecting directors, we consider factors that are in our best interests and those of our stockholders, including diversity of backgrounds, experience and competencies that our board of directors desires to have represented. These
competencies include: independence (with respect to independent directors); adherence to ethical standards; the ability to exercise business judgment; substantial business or professional experience and the ability to offer our management meaningful
advice and guidance based on that experience; ability to devote sufficient time and effort to his or her duties as a director; and any other criteria established by our board of directors together with any core competencies or technical expertise
necessary for our committees. We believe that each director possesses these qualities and has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to us and to our board of directors.
Greg Brenneman
has served as a member of our board of directors since February 2010 and is the Chairman of our board of directors.
Mr. Brenneman is the Chairman of CCMP and a member of its investment committee. Mr. Brenneman served as Chief Executive Officer of Quiznos from January 2007 until September 2008 and as President of Quiznos from January 2007 until November
2007. He also served as Executive Chairman of Quiznos from 2008 to 2009. Prior to joining Quiznos, from 2004 to 2006, Mr. Brenneman was Chairman and Chief Executive Officer of Burger King Corporation. In 2002, Mr. Brenneman was named
President and Chief Executive Officer of PwC Consulting, where he restructured the business which led to a strategic sale to IBM. From 1995 to 2001, Mr. Brenneman was Continental Airlines as President, Chief Operating Officer and a member of
its board of directors. In 1994, Mr. Brenneman founded Turnworks, Inc., his personal investment firm that focuses on corporate turnarounds. Prior to founding Turnworks, Mr. Brenneman was a Vice President for Bain and Company.
Mr. Brenneman holds a Bachelors Administration of Business in Accounting and Finance from Washburn University of Topeka, Kansas and a Master of Business Administration degree with distinction from Harvard Business School. He was also awarded an
honorary Doctor of Commerce degree from Washburn University. Mr. Brenneman currently serves on the board of directors of Edwards Group PLC, The Home Depot, Inc., Automatic Data Processing, Inc. and Quiznos.
Neill Davis
has served as a member of our board of directors since May 2007. Mr. Davis joined Men's Warehouse in 1997 as Vice
President and Treasurer. In November 2000, he was named Senior Vice President, Chief Financial Officer and Treasurer, and in March 2001 he was named Principal
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Financial Officer. In March 2002, he was promoted to Executive Vice President and remained Chief Financial Officer, Treasurer and Principal Financial Officer. In March 2003, he was named
Executive Vice President, Chief Financial Officer and Principal Financial Officer. In April 2006, he was again named to the additional office of Treasurer. Mr. Davis holds a Bachelor of Business Administration degree from Southern Methodist
University and a Master of Business Administration degree from the University of Arkansas.
Rich Emmett
has served as a member of
our board of directors since November 2009. Mr. Emmett was named Senior Vice President, General Counsel and Secretary of Dunkin Brands in 2009. Prior to joining Dunkin Brands, Mr. Emmett served as Executive Vice President, Chief Legal
Officer and Secretary of Quiznos from May 2007 to April 2009. Mr. Emmett also served as a member of the Quiznos leadership team and worked a wide array of issues ranging from the development of the overall business strategy to managing U.S. and
international franchise relations. Prior to joining Quiznos, Mr. Emmett served as Senior Vice President, General Counsel and Secretary of Papa John's International, Inc. from 1992 to May 2007. Mr. Emmett holds a Bachelor of Arts
degree from Colgate University and a Juris Doctorate from The Marshall-Wythe School of Law, College of William & Mary. Mr. Emmett currently serves on the board of directors of Capital Pizza, Inc.
Joe Scharfenberger
has served as a member of our board of directors since April 2007. Mr. Scharfenberger is a managing director of
CCMP. Prior to joining CCMP in December 2008, Mr. Scharfenberger worked at Bear Stearns Merchant Banking. Prior to joining Bear Stearns Merchant Banking, Mr. Scharfenberger worked in the private equity department at Toronto Dominion
Securities. He holds a B.A. from The University of Vermont. Mr. Scharfenberger currently serves on the board of directors of Crestcom International, Harlem Furniture, JAG flocomponents and New Chapter.
Rich Zannino
has served as a member of our board of directors since February 2010. Mr. Zannino is a managing director of CCMP and a
member of its investment committee. Prior to joining CCMP in 2009, Mr. Zannino was Chief Executive Officer and a member of the board of directors of Dow Jones & Company. He joined Dow Jones as Executive Vice President and Chief
Financial Officer in February 2001 and was promoted to Chief Operating Officer in July 2002 and then to Chief Executive Officer and Director in February 2006. Prior to joining Dow Jones, Mr. Zannino was Executive Vice President in charge of
strategy, finance, M&A, technology, and a number of operating units at Liz Claiborne. He originally joined Liz Claiborne in 1998 as Chief Financial Officer. In 1998, he served as Executive Vice President and Chief Financial Officer of General
Signal, where he led the sale of that company. From 1993 until early 1998, he was at Saks Fifth Avenue, ultimately serving as Executive Vice President and Chief Financial Officer, where he oversaw the company's strategy, finance, business
development, merchandise planning and technology and helped lead its successful IPO. Mr. Zannino is currently a member of the board of directors of IAC, Estee Lauder, Hanley Wood and Infogroup and is a trustee of Pace University. He holds a
Bachelor of Science degree in finance and economics from Bentley College and a Masters of Business Administration in finance from Pace University.
Board Composition and Election of Directors
Board Composition
Our business and affairs are managed under the direction of our board of directors. Our board of directors currently consists of seven members. Upon
completion of this offering, our board of directors will consist of seven members. Our amended and restated bylaws which will be in effect upon completion of this offering will provide that, subject to any rights applicable to any then outstanding
preferred stock, our board of directors will consist of a number of directors to be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total directors then in office.
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As of the completion of this offering, our amended and restated certificate of incorporation and
amended and restated bylaws will provide for a staggered, or classified, board of directors consisting of three classes of directors, each serving a staggered three-year term and with one class being elected at each year's annual meeting of
stockholders as follows:
Ÿ
the Class I directors will be Mr. Scharfenberger and his term will expire at the annual meeting of stockholders to be held in 2012;
Ÿ
the Class II directors will be Ms. Gill and Messrs. Emmett and Zannino and their terms will expire at the annual meeting of stockholders to be held in 2013;
and
Ÿ
the Class III directors will be Messrs. Brenneman, Davis and De Meritt and their terms will expire at the annual meeting of stockholders to be held in 2014.
Upon the expiration of the term of a class of directors, directors for that class will be elected for a new
three-year term at the annual meeting of stockholders in the year in which the term expires. Each director's term is subject to the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Subject
to any rights applicable to any then outstanding preferred stock, any vacancies on our board of directors may be filled only by the affirmative vote of a majority of the directors then in office. Any increase or decrease in the number of directors
will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors will make it more difficult for a third party to acquire control of our
company.
Our stockholders' agreement has provided, among other things, that five members of our board of directors were to be
designated by CCMP, and two members were to be designated by the majority of the shares held by management so long as management held at least 7% of the total equity interest in the company. Currently, Messrs. Brenneman, Zannino,
Scharfenberger, Emmett and Davis have had the right to serve on our board of directors pursuant to the terms of this stockholders' agreement as appointees of CCMP and Mr. De Meritt and Ms. Gill have the right to serve on our board of
directors as appointees of the holders of a majority of the shares held by management. These related board representation rights will terminate upon completion of this offering and will no longer be in effect.
Director Independence and Controlled Company
We intend to avail ourselves of the "controlled company" exception under the corporate governance rules of The NASDAQ Stock Market. Accordingly, we will not have a majority of "independent
directors" on our board of directors nor will we have a compensation committee and a corporate governance and nominating committee composed entirely of "independent directors" as defined under the rules of The NASDAQ Stock Market.
Further, compensation for our executives and selection of our director nominees will not be determined by a majority of "independent directors" as defined under the rules of The NASDAQ Stock Market. The "controlled company"
exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of Sarbanes-Oxley and The NASDAQ Stock Market, which require that our audit committee be composed of at least three
members, one of whom will be independent upon the listing of our common stock on The NASDAQ Global Select Market, a majority of whom will be independent within 90 days of listing and each of whom will be independent within one year of listing.
If at any time we cease to be a "controlled company" under the rules of The NASDAQ Stock Market, our Board of Directors will
take all action necessary to comply with The NASDAQ Stock Market corporate governance rules, including appointing a majority of independent directors to the board and establishing certain committees composed entirely of independent directors,
subject to a permitted "phase-in" period. Our board of directors has determined that Messrs. Davis and Emmett each qualify as an "independent director" under the corporate governance rules of The NASDAQ Stock Market.
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Board Committees
Our board of directors has established an audit committee, a compensation committee and a corporate governance and nominating committee. The composition and responsibilities of each committee are described below.
Members will serve on these committees until their resignation or until otherwise determined by our board of directors. In the future, our board of directors may establish other committees, as it deems appropriate, to assist with its
responsibilities.
Audit Committee
Our audit committee currently consists of Messrs. Davis, Zannino, Emmett and Scharfenberger. Upon completion of this offering, our audit committee will consist of Messrs. Davis, Emmett and Scharfenberger.
Mr. Davis is the chairperson of our audit committee. Our audit committee will have responsibility for, among other things:
Ÿ
selecting and hiring our independent registered public accounting firm and approving the audit and non-audit services to be performed by our independent
registered public accounting firm;
Ÿ
evaluating the qualifications, performance and independence of our independent registered public accounting firm;
Ÿ
monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or
accounting matters;
Ÿ
reviewing the adequacy and effectiveness of our internal control policies and procedures;
Ÿ
discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered
public accounting firm our interim and year-end operating results; and
Ÿ
preparing the audit committee report required by the SEC to be included in our annual proxy statement.
The SEC and The NASDAQ Stock Market rules require us to have one independent audit committee member upon the listing of our common stock on The
NASDAQ Global Select Market, a majority of independent audit committee members within 90 days of the date of such listing and all independent audit committee members within one year of the date of such listing. We expect to have two independent
audit committee members upon the listing of our common stock on The NASDAQ Global Select Market, thereby constituting a majority of independent audit committee members, and we expect to have an entirely independent audit committee within one year
from the date of listing. Our board of directors has affirmatively determined that Messrs. Davis and Emmett meet the definition of "independent directors" under applicable SEC and The NASDAQ Stock Market rules. In addition, our board
of directors has determined that Mr. Davis qualifies as an "audit committee financial expert", as such term is defined in the rules and regulations of the SEC.
Our board of directors has adopted a written charter for our audit committee, which will be available on our website at
www.francescascollections.com
upon completion of this offering.
Compensation Committee
Our
compensation committee currently consists of Messrs. Brenneman, Emmett and Scharfenberger. Mr. Brenneman is the chairperson of our compensation committee. Upon completion of this offering, our compensation committee will remain unchanged.
The compensation committee will be responsible for, among other things:
Ÿ
reviewing and approving compensation of our executive officers, including annual base salary, annual incentive bonuses, specific goals, equity compensation,
employment agreements,
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severance and change-in-control arrangements and any other benefits, compensation or arrangements;
Ÿ
reviewing succession planning for our executive officers;
Ÿ
reviewing and recommending compensation goals, bonus and stock compensation criteria for our employees;
Ÿ
determining the compensation of our directors;
Ÿ
reviewing and discussing annually with management our "Compensation Discussion and Analysis" disclosure required by SEC rules;
Ÿ
preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and
Ÿ
administrating, reviewing and making recommendations with respect to our equity compensation plans.
We intend to avail ourselves of the "controlled company" exception under The NASDAQ Stock Market rules which exempts us from the
requirement that we have a compensation committee composed entirely of independent directors.
Our board of directors has adopted a
written charter for our compensation committee, which will be available on our website at
www.francescascollections.com
upon completion of this offering.
Corporate Governance and Nominating Committee
Our corporate governance and nominating
committee currently consists of Messrs. Brenneman, Zannino and Davis. Mr. Zannino is the chairperson of our corporate governance and nominating committee. Upon completion of this offering, our corporate governance and nominating committee
will remain unchanged.
The corporate governance and nominating committee is responsible for, among other things:
Ÿ
assisting our board of directors in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to our board of
directors;
Ÿ
reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors;
Ÿ
overseeing the evaluation of our board of directors and management;
Ÿ
recommending members for each board committee of our board of directors; and
Ÿ
approving related party transactions.
We intend to avail ourselves of the "controlled company" exception under The NASDAQ Stock Market rules which exempts us from the requirement that we have a corporate governance and nominating committee
composed entirely of independent directors.
Our board of directors will adopt prior to completion of this offering a written charter
for our corporate governance and nominating committee, which will be available on our website at
www.francescascollections.com
upon completion of this offering.
Compensation Committee Interlocks and Insider Participation
During the last fiscal year,
Messrs. Brenneman and Scharfenberger served on our compensation committee. Messrs. Brenneman and Scharfenberger both have relationships with us that require disclosure under Item 404 of Regulation S-K under the Exchange Act. See
"Certain Relationships and Related Party Transactions" for more information.
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During the past fiscal year, Mr. De Meritt and Ms. Gill, each an executive officer of the
company, served as members of our board of directors. However, none of the executive officers of the company, served on the compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive
officers who served as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor have they ever been an officer or employee of our company.
Code of Business Conduct and Ethics
Prior to the completion of this offering, we will revise our code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial
reporting. Our code of business conduct and ethics will address, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company funds and assets, confidentiality and corporate opportunity
requirements and the process for reporting violations of the code of business conduct and ethics, employee misconduct, conflicts of interest or other violations. Our code of business conduct and ethics will be available on our website at
www.francescascollections.com
upon completion of this offering. Any amendments to the code, or any waivers of its requirements, will be disclosed on our website.
Board Leadership Structure and Board's Role in Risk Oversight
Mr. Brenneman, a
non-employee, serves as Non-Executive Chairman of our board of directors. We support separating the position of Chief Executive Officer and Chairman to allow our Chief Executive Officer to focus on our day-to-day business, while allowing the
Chairman to lead our board of directors in its fundamental role of providing advice to, and oversight of, management. Our board of directors recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his
position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as our board of directors' oversight responsibilities continue to grow. Our board of directors also believes that this
structure ensures a greater role for the non-management directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our board of
directors.
While our amended and restated bylaws, which will be in effect upon the completion of this offering, will not require that
our Chairman and Chief Executive Officer positions be separate, our board of directors believes that having separate positions and having a non-employee director serve as Chairman is the appropriate leadership structure for us at this time and
demonstrates our commitment to good corporate governance.
Risk is inherent with every business and we face a number of risks as
outlined in the "Risk Factors" section of this prospectus. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its audit committee, is responsible for overseeing
our management and operations, including overseeing its risk assessment and risk management functions. Our board of directors has delegated responsibility for reviewing our policies with respect to risk assessment and risk management to our audit
committee through its charter. Our board of directors has determined that this oversight responsibility can be most efficiently performed by our audit committee as part of its overall responsibility for providing independent, objective oversight
with respect to our accounting and financial reporting functions, internal and external audit functions and systems of internal controls over financial reporting and legal, ethical and regulatory compliance. Our audit committee will regularly report
to our board of directors with respect to its oversight of these important areas.
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Director Compensation
Our independent directors, Messrs. Davis and Emmett, currently receive an annual retainer from us for their services as members of our board of directors. In addition, on March 26, 2010, we granted
Mr. Emmett a stock option under the Francesca's Holdings Corporation Stock Incentive Plan to purchase 40,000 shares of our common stock. Subject to his continued service through the applicable vesting date, the grant will vest in equal
annual installments on each anniversary of the award date over a five-year period. The terms and conditions of the stock option grant are similar to the terms and conditions of the stock options granted to employees generally. The CCMP Acquisition
was treated as a change in control for purposes of the 2007 Stock Incentive Plan (the "2007 Plan") on February 26, 2010, thereby causing an acceleration of vesting of all awards outstanding pursuant to the 2007 Plan, including
Mr. Davis' stock options granted on December 1, 2007. In addition, on November 17, 2010, we paid a cash divided to our shareholders. Pursuant to the terms of the 2007 Plan, our board of directors adjusted the exercise price of
outstanding stock options to neutralize the dilutive effect of the dividend payments. However, our board of directors determined that in the case of Mr. Davis, and certain of our named executive officers, they should receive a cash payment in
lieu of an adjustment. Accordingly, Mr. Davis received a gross cash payment of $239,450, which was calculated as the product of the proposed reduction in the exercise price of outstanding options of $2.39 multiplied by the number of
fully-vested but unexercised options granted to Mr. Davis under the 2007 Plan at the time of the dividend payment. The stock options remain outstanding at their original exercise price. For a discussion of the Francesca's Holdings
Corporation Stock Incentive Plan and the terms and conditions of stock options granted thereunder, please see "Executive Compensation—Compensation Discussion & Analysis—Elements of Compensation—Equity-Based Awards,"
below.
We expect to enter into indemnification agreements with all our directors effective upon completion of this offering. See
"Certain Relationships and Related Party Transactions—Indemnification of Officers and Directors" for more information. All members of our board of directors receive reimbursement of reasonable and documented costs and expenses
incurred by directors in connection with attending any meetings of our board of directors or any of our committees.
Our executives who
are members of our board of directors do not receive compensation from us in connection with their service on our board of directors. This arrangement will remain unchanged following the completion of this offering. Accordingly, Mr. De Meritt
and Ms. Gill will not receive compensation from us for their service on our board of directors. Only those directors who are non-executives are eligible to receive compensation from us for their service on our board of directors. Upon
completion of this offering, we expect that the non-executive directors will be paid:
The following table sets forth information
regarding the compensation of our non-executive directors for their service on our board of directors for the most recently completed fiscal year:
Name
Fees Earned or
Paid in Cash
($)
Option Awards
($)(1)
All Other
Compensation
($)(2)
Total
($)
Rich Emmett
40,000
137,600
—
177,600
Neill Davis
20,000
—
239,450
259,450
(1)
Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification Topic 718 ("FASB ASC Topic 718"). The assumptions made in the valuation of the awards are set forth in note 6 to the company's consolidated financial statements included elsewhere in this prospectus.
(2)
For Mr. Davis, amount reported represents a cash payment received in lieu of an adjustment to the exercise price of his outstanding stock options. See the narrative above
for more details.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation
Discussion and Analysis describes the compensation arrangements we have with our named executive officers as required under the rules of the SEC. The SEC rules require disclosure for the principal executive officer, or PEO (our Chief Executive
Officer) and principal financial officer, or PFO (our current and former Chief Financial Officer), regardless of compensation level, and the three most highly compensated executive officers in our last completed fiscal year, other than the PEO and
PFO. All of these executive officers are referred to in this Compensation Discussion and Analysis as our "named executive officers."
We operate on a fiscal calendar which in a given fiscal year consists of a 52- or 53-week period ending on the Saturday closest to January 31st. We refer to the period from January 31, 2010 to
January 29, 2011, our previous fiscal year, as "fiscal year 2010." For fiscal year 2010, our named executive officers were:
Name
Title
John De Meritt
President, Chief Executive Officer (PEO)
Gene Morphis
Executive Vice President, Chief Financial Officer (PFO, who joined the company effective October 18, 2010)
Cindy Thomassee
Vice President of Accounting (who served as PFO until October 18, 2010)
Theresa Backes
Executive Vice President, Chief Operating Officer
Kyong Gill
Chief Merchandising Officer (who, as of March 8, 2011, serves as our Executive Vice Chairperson)
Kal Malik
Executive Vice President, General Counsel and Corporate Secretary
Prior to this offering, we were a privately held company with a relatively small number of shareholders, including our principal shareholder, CCMP. As a result, we have not previously been subject to any stock
exchange listing or SEC rules requiring a majority of our board of directors to be independent or relating to the formation and functioning of board committees, including audit, compensation and nominating committees. Prior to the CCMP Acquisition,
compensation policies and determinations for our named executive officers, including our Chief Executive Officer, were made by our board of directors in consultation with our Chief Executive Officer. In connection with the CCMP Acquisition, our
board of directors established a compensation committee composed of Greg Brenneman (Committee Chair) and Joseph Scharfenberger (the "Compensation Committee"). During fiscal year 2010, the Compensation Committee was responsible for the
oversight, implementation and administration of all of our executive compensation plans and programs. The Compensation Committee determined all of the components of compensation of our Chief Executive Officer, and, in consultation with our Chief
Executive Officer, the compensation of our remaining named executive officers. Our board of directors reviewed the Compensation Committee's recommendations for the compensation of our Chief Executive Officer and approved his final compensation.
On March 8, 2011, Richard Emmett became a member of the Compensation Committee as well. The duties of the Compensation Committee and our board of directors will remain same as they were prior to this offering.
Compensation Philosophy and Objectives
The key objectives in designing our executive compensation program, both historically and following this offering, are to:
Ÿ
align the interests of our named executive officers with our shareholders' interests; and
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Ÿ
provide a total compensation package for each of our named executive officers that is commensurate with our peers in the specialty retail industry.
We seek to accomplish these objectives by providing a total compensation package which includes three main
components: base salary, annual performance-based cash awards and long-term equity-based awards. Of these components, base salary and annual performance-based cash awards have been historically, and will continue to be, at or below-market when
compared to our peers in the specialty retail industry. However, our long-term equity-based awards, which have been in the form of stock options, have been significantly above-market when compared to our peers in the specialty retail industry. As a
result, the total compensation package for each of our named executive officers is generally above the median of our peers in the specialty retail industry due to the outstanding performance of the company.
We believe that by providing a substantial portion of our named executive officers' total compensation package in the form of equity-based
awards through stock option grants which vest over a period of four or five years, we create an incentive to build shareholder value over the long-term and closely align the interests of our named executive officers to those of our shareholders by
incentivizing our named executive officers to produce value. Additionally, our annual performance-based cash awards, while a less significant portion of our total compensation package, are also contingent upon the achievement of financial
performance metrics and the amount of compensation ultimately received for these awards vary with our company's annual financial performance, thereby providing an additional incentive to maximize shareholder value.
We have adhered to this philosophy historically and intend to continue to do so going forward. We believe that this philosophy has been successful
by motivating, retaining and incentivizing our named executive officers and providing value to our shareholders.
Following this
offering, we intend to continue to follow the compensation objectives and philosophy we have maintained historically. We intend to continue to provide at- or below-market fixed compensation in the form of base salary and annual performance-based
cash awards, while providing the majority of our total compensation package in the form of long-term equity-based incentives. For example, in conjunction with this offering we intend to grant Mr. De Meritt and Ms. Backes a one-time grant
of additional stock options, each with a five-year vesting period, to provide a long-term incentive for them to continue to grow our company. We believe Mr. De Meritt's grant will serve to provide an additional incentive in the event
certain of his outstanding stock options vest upon completion of this offering. See "—Equity-Based Awards," below, for additional information regarding any potential vesting of Mr. De Meritt's outstanding awards upon
completion of this offering. Ms. Backes currently has no outstanding unvested equity awards, and therefore the grant in connection with this offering will provide her with a long-term incentive opportunity. Following these grants, all of our
named executive officers will have outstanding equity-based awards with multi-year vesting periods. (With the exception of Mr. De Meritt and Mmes. Gill and Backes, each of the option awards granted in 2010 will not fully vest until 2015, or
2014 in the case of Mr. Malik, provided that the executive remains employed through each applicable vesting period.) Additionally, none of these grants provide for accelerated vesting except in certain circumstances (such as the potential
accelerated vesting of a portion of Mr. De Meritt's options in connection with this offering, described under "—Elements of Compensation—Equity-Based Awards," below), thereby insuring that our executives have continued
incentive to drive shareholder value. This is in line with our compensation objective of aligning our executive officers' interests with the long-term interests of our shareholders. For additional information regarding stock option awards to be
made in conjunction with this offering, see "—Actions Taken Subsequent to Fiscal Year 2010—Stock Option Grants in Conjunction with this Offering," below.
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Historically, we have not used a third-party consultant to assist us with determining compensation
levels. Additionally, our Compensation Committee has not benchmarked our compensation levels and their decisions with regard to compensation levels have been subjective. However, in conjunction with this offering, we have engaged Pearl
Meyer & Partners, LLC to compile a report of benchmark data for executive positions for similar companies, including summaries of base salary, annual cash incentive plan opportunities and long-term incentive award values. The analysis
completed by Pearl Meyer & Partners, LLC has provided support that the current total compensation packages provided to our named executive officers are in line with our objective of providing below-market cash compensation but above-market
long-term equity compensation if, and only if, the company outperforms compared with our peers in the specialty retail industry. We expect that the Compensation Committee will compare our compensation practices and overall compensation levels and
components thereof with our peers in the specialty retail industry and, where appropriate, with non-retail organizations when establishing our compensation guidelines. We expect that the Compensation Committee will review compensation elements and
amounts for our named executive officers on an annual basis, at the time of a promotion or other change in level of responsibilities, as well as when competitive circumstances or business needs may require.
Role of the Compensation Committee and our Executive Officers
Historically, our compensation has been highly individualized, the result of arm's-length negotiations and based on a variety of informal factors including, in addition to the factors listed above, our
financial condition and available resources, our need for a particular position to be filled and the compensation levels of our other executive officers. In addition, we informally considered the competitive market for corresponding positions within
the specialty retail apparel industry based on the general knowledge possessed by members of our Compensation Committee and our Chief Executive Officer regarding the compensation given to some of the executive officers of other companies in our
industry through informal benchmarking.
Going forward, we expect that our Chief Executive Officer will continue to provide compensation
recommendations to the Compensation Committee for base salary, annual incentive targets and other compensation awards for executives other than himself based on this data and the other considerations mentioned in this Compensation Discussion and
Analysis. The Compensation Committee will likely give significant weight to our Chief Executive Officer's judgment when assessing each of the other named executive officers' performance and determining appropriate compensation levels and
incentive awards and will seek to base the compensation objectives on the achievement of our annual business plan. We expect that the Compensation Committee will recommend a total compensation package that is consistent with our described
compensation philosophy and competitive within the specialty retail industry. We expect that the Compensation Committee will then discuss these recommendations with the Chief Executive Officer and will make a recommendation to our board of
directors, which our board of directors will consider and approve, if appropriate. With regard to the compensation of our Chief Executive Officer, our Compensation Committee, without the input of our Chief Executive Officer, will determine the
compensation of our Chief Executive Officer, including the targets for his annual performance-based cash award. Our board of directors will review the Compensation Committee's recommendation and will be ultimately responsible for approving such
recommendation with or without modification.
Elements of Compensation
As discussed throughout this Compensation Discussion and Analysis, the compensation policies and programs applicable to our named executive officers
are reflective of our objective of aligning the interests of our executive officers with our shareholders' interests in enhancing shareholder value over the long term. Applying this philosophy, a significant portion of overall compensation
offered to our
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named executive officers is in the form of (i) equity-based compensation linked to enhanced shareholder value and (ii) annual performance-based cash awards contingent upon achievement
of measurable financial objectives.
The elements of our compensation program are:
Ÿ
base salaries;
Ÿ
annual performance-based cash awards;
Ÿ
equity-based incentive awards; and
Ÿ
certain additional executive benefits and perquisites.
In addition to these elements, in 2010 certain of our named executive officers received additional compensation as a reward for the successful completion of the CCMP Acquisition and to acknowledge their efforts in
creating the underlying enterprise value, as described below under "—CCMP Acquisition-Related Payments." We strive to achieve an appropriate mix between the various elements of our compensation program to meet our compensation
objectives and philosophy; however, we do not apply any rigid allocation formula in setting our named executive officers' compensation, and we may make adjustments to this approach for various positions after giving due consideration to
prevailing circumstances.
Base Salary
We provide a base salary to our named executive officers to induce talented executives to join or remain with our company, to compensate them for their services during the year and to provide them with a stable
source of income. For fiscal year 2010, each of our named executive officers, other than Ms. Thomassee, had an employment agreement or letter agreement which set his or her minimum base salary. While our base salary amounts are generally
below-market when compared to our peers in the specialty retail industry, the total compensation package provided to our named executive officers, including equity-based awards, is commensurate with our peers. For more information regarding the
current terms and conditions of our named executive officers' employment, please see the narrative following the "Grants of Plan-Based Awards" table, below.
The base salary levels of continuing named executive officers are reviewed annually by our Compensation Committee to determine whether an adjustment is warranted or necessary and this practice will be maintained by
our Compensation Committee following this offering. The Compensation Committee takes into account numerous factors in making its determination, none of which are dispositive or individually weighted, including our financial performance, the state of
our industry and local economies in which we operate, the executive officer's relative importance and responsibilities, the executive officer's track record in meeting his or her performance objectives and comparable salaries paid to other
executives of similar experience in our industry.
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In 2010, the base salaries of Mmes. Thomassee and Backes were increased by $10,000 and $15,000,
respectively, upon recommendation of our Chief Executive Officer, to be more reflective of market salaries for their respective positions. Our Compensation Committee also considered the base salaries of our other named executive officers, but
concluded that their base salaries were appropriate at their current levels. The base salaries paid to our named executive officers during fiscal year 2010 are reported in the "Summary Compensation Table," below. The annual base salaries
in effect for each of our continuing named executive officers as of January 29, 2011 are as follows:
Name
Annual Salary
John De Meritt
$
375,000
Gene Morphis
$
325,000
Theresa Backes
$
250,000
Kyong Gill
$
275,000
Kal Malik
$
225,000
Annual Performance-Based Cash
Awards
While a large portion of the total compensation package provided to our named executive officers is in the form of
long-term equity-based awards, we also provide our named executive officers with annual performance-based cash award opportunities linked to our annual financial performance and the achievement of individual goals and objectives. Annual
performance-based cash awards are tied specifically to the achievement of our annual financial objectives and individual performance. Our awards are designed to align each executive's annual goals for his or her respective area of
responsibility with the financial goals of the company.
The target annual performance-based cash award opportunity for each eligible
executive is set at a percentage of base salary. Pursuant to their employment agreements or letter agreements, as applicable, our named executive officers were eligible to receive a target annual performance-based cash award in fiscal 2010 equal to
100% of base salary for Mr. De Meritt, 25% for Ms. Thomassee, 40% for Ms. Backes and Mr. Malik, and 75% for Ms. Gill. The target annual performance-based cash award amounts were determined by our Compensation Committee with
recommendations by our Chief Executive Officer, and such target amounts generally reflect the executive's position and market conditions. Mr. Morphis was not eligible for an annual performance-based cash award for fiscal year 2010 because
he joined with us at the end of the 3rd fiscal quarter of 2010.
The award payable for fiscal year 2010 to Mr. De Meritt and
Ms. Gill were based on the achievement of the company's budgeted EBITDA goals. The award payable to Mmes. Thomassee and Backes and Mr. Malik were based 75% on the achievement of the company's budgeted EBITDA goal and 25% on the
achievement of individual goals. The weighting of individual goals versus the company's budgeted EBITDA goals, as well as the determination of the individual goals, were established by our Chief Executive Officer and approved by our board of
directors. The individual goals chosen for Mmes. Thomassee and Backes and Mr. Malik were intended to measure the performance of the tasks and activities each executive is asked to perform in their respective roles. The individual goals for
Ms. Thomassee included consistent timely preparation of financial reports, identification and implementation of internal controls and processes and cross-training individuals with related functions. The individual goals for Ms. Backes
included successful leadership of our boutique operations and e-commerce divisions and sales and merchandising teams, continued development of our business model and oversight of development of our regional management team. Finally, the individual
goals for Mr. Malik included management of our litigation exposure and associated risks, streamlining of our lease negotiation process, revisions to our capital structure and leadership of various team building initiatives. The target annual
performance-based cash award opportunities of our named executive officers for fiscal year 2010 are set forth in the "Grants of Plan-Based Awards" table, below.
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The pre-established objective financial incentive target goal for fiscal year 2010 was budgeted
EBITDA. The Compensation Committee chose EBITDA as the objective financial incentive target goal as this metric tracks both company earnings and cash flow and is indicative of our overall market value. For purposes of determining award amounts
payable to our named executive officers, budgeted EBITDA means the targeted consolidated earnings of the company and its subsidiaries before interest, taxes, depreciation and amortization, established at the beginning of each accounting period. For
fiscal year 2010, the target budgeted EBITDA was $24.8 million and we achieved EBITDA of $32.1 million, which was above our budgeted amount. Although budgeted EBITDA was used as the financial measure for fiscal year 2010, in the future the
Compensation Committee may use other objective financial performance indicators.
The table below indicates the total award payment for
fiscal year 2010 for our named executive officers (other than Mr. Morphis), as well as the weighted components used to determine award payments.
Name
Annual
Salary
($)
Target
Award As a
Percentage
of
Base
Salary
(%)
Weighting 
of
Budgeted
EBITDA
Goal
(%)(1)
Weighting 
of
Individual
Goals
(%)(2)
Actual Award
Payment
($)(3)
John De Meritt(4)
$
375,000
100
%
100
%
—
$
450,000
Cindy Thomassee(5)
$
160,000
25
%
75
%
25
%
$
55,000
Theresa Backes(5)
$
235,000
40
%
75
%
25
%
$
100,000
Kyong Gill
$
275,000
75
%
100
%
—
$
206,250
Kal Malik
$
225,000
40
%
75
%
25
%
$
90,000
(1)
As the company achieved the budgeted EBITDA goal for fiscal year 2010, each of our named executive officers received the full amount of this component.
(2)
Each of our named executive officers either met or exceeded their individual goals for fiscal year 2010 as determined by our Compensation Committee with recommendations by our
Chief Executive Officer.
(3)
The annual performance-based cash awards paid to our named executive officers during fiscal year 2010 are reported in the "Summary Compensation Table," below.
(4)
Mr. De Meritt received a payment which represents 120% of his base salary, or 20% more than the amount provided for in his employment agreement. This increased award payment
was determined by our Compensation Committee in its discretion, and approved by our board of directors, in recognition of the company exceeding the budgeted EBITDA goal, significant increases in boutique count, and successful implementation of
various corporate infrastructure expansion initiatives.
(5)
Mmes. Thomassee and Backes received payments which represent approximately 34% and 43% of their base salary amounts, respectively, or 9% and 3% more than their target award
amounts, respectively. The excess award payments were recommended by our Chief Executive Officer in his discretion, and approved by our Compensation Committee, in recognition of their outstanding performance and delivering above each and every
metric and special assignment.
For fiscal year 2011 and going forward, annual performance-based cash awards for our named
executive officers will be paid under the Francesca's Holdings Corporation Executive Bonus Plan, which will be adopted in conjunction with this offering. Performance goals and objectives for our named executive officers, other than our Chief
Executive Officer, will be determined by our Chief Executive Officer, approved by our Compensation Committee and reviewed by our board of directors. Performance goals and objectives for our Chief Executive Officer will be determined by our
Compensation Committee and approved by our board of directors. For more information on awards for fiscal year 2011 please see the section entitled "—Actions Taken Subsequent to Fiscal Year 2010— Plans Adopted in Connection with Our
Initial Public Offering— Francesca's Holdings Corporation Executive Bonus Plan," below.
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Equity-Based Awards
As discussed throughout this Compensation Discussion and Analysis, in order to align the interests of our named executive officers with those of the
company and its shareholders, the Compensation Committee has determined that a significant portion of each named executive officer's compensation should be in the form of equity-based awards. The option grants awarded over the last four years
had no public market and no certain opportunity for liquidity until the completion of this offering, making them inherently long-term compensation. Prior to the CCMP Acquisition, awards were granted under the Francesca's Holdings Corporation
2007 Stock Incentive Plan (the "2007 Plan") in the form of options to acquire our common stock. In conjunction with the CCMP Acquisition, the company adopted the Francesca's Holdings Corporation Stock Incentive Plan (the "2010
Plan"). Equity awards granted to our named executive officers for fiscal year 2010 under the 2010 Plan are set forth in the "Grants of Plan-Based Awards" table, below. In conjunction with this offering, we intend to adopt the 2011
Francesca's Holdings Equity Incentive Plan (the "2011 Plan"), and all future awards going forward will be granted under this plan. For a description of the 2007 Plan and the 2010 Plan, see "—Equity-Based Awards," below.
For a description of the 2011 Plan, see "—Actions Taken Subsequent to Fiscal Year 2010— Plans Adopted in Connection with Our Initial Public Offering—2011 Plan," below.
In general, all stock option grants under the 2010 Plan to our named executive officers are determined at the discretion of our Compensation
Committee. Our Compensation Committee has chosen to make equity-based awards in the form of stock options as opposed to other forms of equity-based awards because stock options provide a compensation opportunity only when we have created additional
shareholder value, which is consistent with our compensation philosophy. In addition, our Compensation Committee also considers a named executive officer's current position with our company, the size of his or her total compensation package and
the amount of existing vested and unvested stock options, if any, then held by the executive officer. Historically, based upon the Compensation Committee's knowledge of the company and the market, and the fact that the company was private and
therefore our shares were illiquid, no formal benchmarking efforts were made by our Compensation Committee with respect to the size of option grants made to executive officers. In conjunction with this offering, we intend to grant Mr. De Meritt
and Ms. Backes additional stock options, as discussed in "—Actions Taken Subsequent to Fiscal Year 2010—Stock Option Grants in Conjunction with this Offering," below. Because the grants made pursuant to 2010 are fairly
recent, we do not currently anticipate making any additional grants other than those to Mr. De Meritt and Ms. Backes described in the previous sentence.
Our board of directors adopted and our shareholders approved the 2007 Plan effective December 1, 2007. Our board of directors adopted and our shareholders approved the 2010 Plan effective February 27,
2010. The 2007 Plan and the 2010 Plan were amended effective April 28, 2010 to adjust the number of shares available for issuance to account for a 400-for-1 stock split.
As of                 , 2011, 406,000 shares of common stock had been issued upon the exercise of options granted under the 2007 Plan.
As of                 , 2011, 500,000 shares were vested and unexercised under the 2007 Plan. As of
                , 2011, 2,020,400 shares of common stock had been authorized and reserved for potential issuance, 77,984 shares of common stock had been issued upon the
exercise of options granted, and options to purchase 215,705 shares were vested and unexercised under the 2010 Plan. Pursuant to the April 28, 2010 amendments to the 2007 Plan, no additional options may be issued under the 2007 Plan. In
conjunction with this offering, the 2010 Plan will be amended to provide that no additional options may be issued under the 2010 Plan.
The following is a summary of the material terms of the 2007 Plan and the 2010 Plan, which will each be in effect upon completion of this offering,
but does not include all of the provisions of the 2007
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Plan and the 2010 Plan. For further information about the 2007 Plan and the 2010 Plan, we refer you to the complete copies of the 2007 Plan and 2010 Plan, which we included as exhibits to our
registration statement of which this prospectus is a part.
Under the 2007 Plan and 2010 Plan, we are generally authorized to grant
options to purchase shares of our common stock, restricted stock awards and, in the case of the 2007 Plan, phantom stock awards to certain of our employees, consultants and directors. Options under the 2007 Plan and the 2010 Plan are either
incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, or nonqualified stock options. All options granted under the plan expire no later than ten years from their date of grant.
Our Compensation Committee administers the 2007 Plan and the 2010 Plan. As is customary in incentive plans of this nature, the number of shares
subject to outstanding awards under the 2007 Plan and the 2010 Plan and the exercise prices of those awards, are subject to adjustment in the event of changes in our capital structure, reorganizations and other extraordinary events. Currently, all
of the outstanding options granted pursuant to the 2007 Plan are fully vested and under the 2010 Plan, in the event of a change of control event (as defined in the 2010 Plan), our board of directors has discretion to provide for the accelerated
vesting of awards. For a discussion of the treatment of outstanding awards under the 2007 Plan in conjunction with the CCMP Acquisition, see "—CCMP Acquisition-Related Payments," below. Under the 2010 Plan, in such circumstances, the
options will terminate, subject to the plan administrator's authority to provide for the assumption or substitution of the options, provided that for awards that will not be otherwise assumed, substituted for or otherwise settled, option
holders are provided at least 10 days' notice of the impending termination.
A portion of the stock options granted to Mr. De
Meritt on March 26, 2010 may vest in connection with this offering based on the performance targets achieved by CCMP and certain of their affiliates (referred to herein as the Investors). Vesting of the options will be accelerated based upon
the achievement of performance targets upon a realization event (as such term is defined in Mr. De Meritt's option award agreement) (including this offering) as follows: (x) upon the Investors' achievement of 2.0x of their
invested capital, 33.3% of the option will vest to the extent the option is then outstanding and unvested; (y) upon the Investors' achievement of 2.5x of their invested capital, 66.6% of the option will vest to the extent the option is
then outstanding and unvested and (z) upon the Investors' achievement of 3.0x of their invested capital, 100% of the option will vest to the extent the option is then outstanding and unvested. To the extent an option is vested at the time
of the realization event (based on the passage of time) by a percentage that equals or exceeds the percentage of the option that would be vested as a result of the achievement of the multiple of invested capital, the option's vesting will not
accelerate, but the option will remain outstanding and eligible for continued vesting contingent upon Mr. De Meritt's continued service. For more information regarding the compensation based expense related to stock options vesting on
account of this offering, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock-based Compensation."
CCMP Acquisition-Related Payments
The CCMP Acquisition was treated as a change in control for purposes of the 2007 Plan on February 26, 2010, thereby causing an acceleration of vesting of all awards outstanding pursuant to the 2007 Plan. On
November 17, 2010, we paid a cash dividend to our shareholders. Pursuant to the terms of the 2007 Plan and the 2010 Plan, our board of directors adjusted the exercise price of outstanding stock options to neutralize the dilutive effect of the
dividend payments. However, our board of directors determined that in the case of Mr. De Meritt and Ms. Backes, they should receive a cash payment in lieu of an adjustment, and accordingly, pursuant to the terms of letter agreements, dated
as of November 16, 2010, Mr. De Meritt and Ms. Backes received a gross cash payment of $1,958,703
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and $957,801, respectively, which was calculated as the product of the proposed reduction in the exercise price of outstanding options of $2.39 multiplied by the number of fully-vested but
unexercised options granted to Ms. Backes under the 2007 Plan and the number of unexercised options (without regard to vesting) granted to Mr. De Meritt under the 2010 Plan at the time of the dividend payment. Our board of directors
determined to make these cash payments in lieu of an adjustment to their option exercise price in order to retain the original exercise price of their options, and thus retain the incentive to continue to generate shareholder value, while providing
compensation in recognition of the dilutive effect of the dividend payments. The stock options remain outstanding at their original exercise price in the case of Mr. De Meritt and Ms. Backes and are included in the "Outstanding Equity
Awards at Fiscal Year-End" table, below. The payments received by Mr. De Meritt and Ms. Backes in fiscal year 2010 are included in the "All Other Compensation" column of the "Summary Compensation Table," below.
In connection with the CCMP Acquisition, the company provided bonus payments to reward the past service of certain employees of the
company. Certain of our executives, including Ms. Backes and Ms. Thomassee, received a bonus payment following the completion of the CCMP Acquisition. Our Chief Executive Officer determined the bonus amounts in his discretion and
recommended them for the approval of our Compensation Committee. The bonuses paid to Ms. Backes and Ms. Thomassee in connection with the completion of the CCMP Acquisition during fiscal year 2010 were $5,000 and $30,000, respectively, and
are included in the "All Other Compensation" column of the "Summary Compensation Table," below.
Additional
Executive Benefits and Perquisites
We provide our named executive officers with executive benefits and perquisites that the
Compensation Committee believes are reasonable and in the best interests of the company and our shareholders. Consistent with our compensation philosophy, and subject to any revisions discussed below, we intend to continue to maintain our current
benefits for our named executive officers, including retirement plans, housing relocation benefits, paid vacation and other perquisites described below. The Compensation Committee, in its discretion, may revise, amend or add to an officer's
executive benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies.
Retirement Plan Benefits
We do not sponsor a defined benefit retirement plan as we do not
believe that such a plan best serves the needs of our employees or the business at this time. However, we do sponsor a tax-qualified defined contribution retirement plan. The qualified plan is available to all eligible employees, including our named
executive officers, and allows them to elect to make contributions up to the maximum limits allowable under the Code. For fiscal years 2009 and 2010, in January of the following year we made a discretionary matching contribution to employees'
accounts based upon their deferral elections for the previous fiscal year. We expect to continue making such matching contributions going forward. Employees' contributions and company matching contributions vest immediately. Additional company
contributions and the related investment earnings are subject to vesting based on years of service.
Health and Welfare Benefits
Our named executive officers have the option to participate in various employee welfare benefit programs, including medical, dental
and life insurance benefits. These benefit programs are generally available to all employees.
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Relocation Assistance
The company's business needs require it on occasion to relocate certain employees. To meet this need, we may, on a case by case basis, cover certain expenses, including temporary housing, relocation, living
and travel expenses.
Perquisites
Car Allowance. In fiscal year 2010, we provided our named executive officers with an automobile allowance and, in some instances, paid related maintenance and use costs.
Executive Life Insurance. Pursuant to the terms of their employment agreements, we have agreed to reimburse a portion of the premium for additional
term life insurance for Mr. De Meritt and Ms. Gill that offers a benefit equal to ten million dollars and three million dollars, respectively.
Going forward, and in conjunction with the amendment to their employment agreements, we will discontinue these perquisites, and in their place provide for an annual fixed dollar amount to be provided to certain
executives to purchase additional benefits of their choosing.
Employment Agreements; Severance and Change in Control Benefits
Employment Agreements
The employment agreements and letter agreements we have entered into with our named executive officers provide for severance and other benefits
which are designed to provide economic protection so that an executive can remain focused on our business without undue personal concern in the event that his or her position is eliminated or, in some cases, significantly altered by the company,
which is particularly important in light of the executives' leadership roles at the company. The Compensation Committee believes that providing severance or similar benefits is common among similarly situated companies and remains essential to
recruiting and retaining key executives, which is a fundamental objective of our executive compensation program. For more information regarding the potential payments and benefits that would be provided to our named executive officers in connection
with a termination of employment or a change in control on January 29, 2011, please see "—Potential Payments upon Termination or Change in Control," below.
Change in Control Provisions
The prospect of a change in control of the company can
cause significant distraction and uncertainty for executive officers and, accordingly, the Compensation Committee believes that appropriate change in control provisions in employment agreements and/or equity award agreements are important tools for
aligning executives' interests in change in control transactions with those of our shareholders by allowing our executive officers to focus on strategic transactions that may be in the best interest of our shareholders without undue concern
regarding the effect of such transactions on their continued employment.
Accordingly, as described in "—Elements of
Compensation—Equity Based Awards," above, upon a change in control (as defined in the applicable award agreement) stock options granted pursuant to the 2010 Plan may, at the discretion of the plan administrator, have their vesting
accelerated. In addition, in accordance with the Option Agreement relating to the 2010 option award made to Mr. De Meritt, the vesting of options is accelerated upon a change of control (as defined therein). For purposes of such provision this
offering does not constitute a change of control.
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For more information regarding the potential payments and benefits that would be provided to our
continuing named executive officers in connection with a change in control on January 29, 2011, please see "—Potential Payments upon Termination or Change in Control," below.
Actions Taken Subsequent to Fiscal Year 2010
Employment Arrangements
In
conjunction with this offering, we intend to enter into amended and restated employment agreements with Mr. De Meritt and Ms. Gill and an employment letter with Ms. Backes setting forth the terms and conditions of their employment
with us, which we believe provide a total compensation package competitive with the package offered by companies with whom we compete for executive talent. Additionally, we intend to amend the current employment letters of Messrs. Morphis and Malik.
The anticipated terms and conditions of these new or amended employment arrangements are set forth below. For information regarding our named executive officers' employment arrangements for fiscal year 2010, please see the narrative following
the "Grants of Plan-Based Awards" table, below.
Amended and Restated Employment Agreements with Mr. De Meritt and
Ms. Gill:
Mr. De Meritt's and Ms. Gill's current employment agreements are being amended in conjunction
with this offering to remove the company's obligation to seek a shareholder vote to approve any "excess parachute payments" in connection with a change in control. Mr. De Meritt's term of employment will be three years,
subject to renewal for additional one-year terms, while Ms. Gill's term of employment will be two years. Under her amended agreement, Ms. Gill's base salary is also being increased to $295,000. Additionally, as described above
under "—Additional Executive Benefits and Perquisites—Perquisites," we will discontinue providing a reimbursement for a portion of the premium for additional term life insurance, and in its place provide for an annual fixed
amount of $50,000 and $20,000 for Mr. De Meritt and Ms. Gill, respectively, to purchase additional benefits of the executive's choosing.
Amendment to Letter Agreement for Mr. Morphis:
Mr. Morphis' letter
agreement is being amended in conjunction with this offering to provide that the payment of any severance benefits he may become entitled to will be conditioned upon his execution of a general release of claims. In addition, Mr. Morphis will be
provided an annual fixed amount of $20,000 to purchase additional benefits of his choosing. For a description of Mr. Morphis' current letter agreement, and any severance benefits, please see the narrative following the "Grants of
Plan-Based Awards" table, below.
Employment Letter Agreements with Ms. Backes and Mr. Malik:
We intend to enter into employment letter agreements with Ms. Backes and Mr. Malik which, other than as noted below for Mr. Malik,
will replace each of their current letter agreements. The terms and conditions of Ms. Backes' employment as our Executive Vice President, Chief Operating Officer and Mr. Malik's employment as our Executive Vice President, General
Counsel will be set forth in their respective employment letter agreements. Ms. Backes' agreement does not provide for a fixed term while Mr. Malik's term of employment will be three years commencing on the effective date of the
agreement.
The employment letter agreements provide that Ms. Backes and Mr. Malik will receive an annual base salary of
$250,000 and $225,000, respectively, and are each eligible to receive a discretionary annual cash incentive of up to 40% of their annual base salary, based upon the achievement of goals and objectives determined by our Compensation Committee. The
employment letter agreements
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provide that each executive will be eligible to participate in employee savings and welfare plans made available to our employees generally. In addition, each executive will be provided an annual
fixed amount of $20,000 to purchase additional benefits of their choosing.
Each employment letter agreement provides for severance
benefits, subject to the execution of a general release of claims, payable in the event the executive's employment is terminated without "cause" (as defined in the employment letter agreement) in an amount equal to one times each
executive's respective annual base salary (as in effect on the date of termination). In addition, each executive will be entitled to receive accrued but unused vacation.
Mr. Malik's employment letter agreement provides that certain covenants contained in his previous employment letter agreement will remain effective, whereby, subject to certain exceptions, during his
employment, and for a period of 12 months following termination, Mr. Malik will not solicit any company employees or consultants. The employment letter agreement for Ms. Backes provides, subject to certain exceptions, that, during her
employment, and for a period of 12 months following termination, Ms. Backes will not (i) compete with the company or its affiliates, (ii) solicit any company employees or consultants or (iii) solicit any customer of the company.
Promotion of Ms. Gill to Executive Vice Chairperson
On March 8, 2011, Ms. Gill was promoted to the position of Executive Vice Chairperson of the Company. In connection with her promotion, Ms. Gill's base salary was increased to $295,000. Her
current compensation arrangements are described in the narrative following the "Grants of Plan-Based Awards" table, below. In her position of Executive Vice Chairperson, which we have newly created for her, Ms. Gill will be
responsible for general corporate oversight and, more specifically, oversee the company's merchandising functions and supervise the company's Chief Merchandising Officer.
Plans Adopted in Connection with Our Initial Public Offering
2011 Plan:
We expect our board of directors to adopt the 2011 Plan prior to the consummation of this offering to provide an additional
means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. We also intend to obtain approval of this plan from our shareholders prior to the consummation of this offering. The below
summary of the 2011 Plan is what we expect the terms of the plan will be. Employees, officers, directors, and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2011 Plan.
Our Compensation Committee will administer the 2011 Plan. The administrator of the plan has broad authority to:
Ÿ
select participants and determine the types of awards that they are to receive;
Ÿ
determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or
the award and establish the vesting conditions (if applicable) of such shares or awards;
Ÿ
cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
Ÿ
construe and interpret the terms of the 2011 Plan and any agreements relating to the 2011 Plan;
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Ÿ
accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;
Ÿ
subject to the other provisions of the 2011 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or
succession of an award; and
Ÿ
allow the purchase price of an award or shares of our common stock to be paid in the form of cash, check or electronic funds transfer, by the delivery of
previously-owned shares of our common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the
administrator may authorize, or any other form permitted by law.
A total of
             shares of our common stock will be authorized for issuance with respect to awards granted under the 2011 Plan. Any shares subject to awards that are not paid, delivered or
exercised before they expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2011
Plan. As of                 , 2011, no awards have been granted under the 2011 Plan, and the full number of shares authorized under the 2011 Plan is available for award
purposes.
Awards under the 2011 Plan may be in the form of nonqualified stock options, stock appreciation rights, stock bonuses,
restricted stock and other forms of awards including cash awards. Awards under the 2011 Plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain
transfers.
Stock options may not be granted at prices below the fair market value of the common stock on the date of grant. These and
other awards may also be issued solely or in part for services. Awards are generally paid in cash or shares of our common stock. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to
deferrals.
As is customary in incentive plans of this nature, the number and type of shares available under the 2011 Plan and any
outstanding awards, as well as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that
change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders. In no case (except due to an adjustment referred to above or any repricing that may be approved by our shareholders) will
any adjustment be made to a stock option or stock appreciation right award under the 2011 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award.
Generally, and subject to limited exceptions set forth in the 2011 Plan, if we dissolve or undergo certain corporate transactions such
as a merger, business combination, or other reorganization, or a sale of substantially all of its assets, all awards then-outstanding under the 2011 Plan may, at the administrator's discretion, become fully vested, and be paid, as applicable,
and will terminate or be terminated in such circumstances, unless the plan administrator provides for the assumption, substitution or other continuation of the award. The plan administrator also has the discretion to establish other change in
control provisions with respect to awards granted under the 2011 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide
that any such acceleration shall be automatic upon the occurrence of any such event.
Our board of directors may amend or terminate the
2011 Plan at any time, but no such action will affect any outstanding award in any manner materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to shareholders for their approval as required by
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applicable law or any applicable listing agency. The 2011 Plan is not exclusive—our board of directors and Compensation Committee may grant stock and performance incentives or other
compensation, in stock or cash, under other plans or authority.
The plan will terminate on
                    , 2021. However, the plan administrator will retain its authority until all outstanding awards are exercised or terminated. The
maximum term of options, stock appreciation rights and other rights to acquire common stock under the plan is ten years after the initial date of the award.
Francesca's Holdings Corporation Executive Bonus Plan:
In conjunction with this
offering, we intend to adopt the Francesca's Holdings Corporation Executive Bonus Plan (the "Executive Bonus Plan"), for eligible employees of the company and our subsidiaries. This plan is being adopted to take advantage of the
performance-based compensation exception to Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The purposes of the Executive Bonus Plan are to promote the interests of our company and its shareholders by
providing compensation opportunities that are competitive with other companies, and to provide performance-based cash awards to those individuals who contribute to the long-term performance and growth of our company. Generally, our Compensation
Committee will establish target bonuses for employees based on position and level of responsibility and grant awards based on the achievement of pre-established company and/or individual goals. Additionally, our Compensation Committee retains the
ability to reduce, but not increase, the amount of any bonus otherwise payable to our executive officers subject to Section 162(m) of the Code. Participants shall receive distributions, if any, in cash following written certification by our
Compensation Committee of the extent to which the applicable performance targets have been achieved, and in no event more than two and one half months following the end of the performance period to which such certification relates.
Stock Option Grants in Conjunction with this Offering
In conjunction with this offering, our board of directors intends to make a one-time grant to Mr. De Meritt and Ms. Backes of additional stock options under the 2011 Plan to purchase a number of shares of
our common stock equal to              and             , respectively. These options are being granted in order to continue to
provide these executives with continued incentive to build shareholder value over the long-term. The actual number of stock options to be granted and the exercise price of such options will be determined by our board of directors at, or shortly
following, the time of this offering. We intend that any stock options granted to Mr. De Meritt and Ms. Backes in conjunction with this offering will vest annually in equal 20% installments over five years, commencing on the first
anniversary of the date of grant.
Accounting and Tax Considerations
In determining which elements of compensation are to be paid, and how they are weighted, on a going forward basis, we will take into account whether
a particular form of compensation will be deductible under Section 162(m) of the Code. Section 162(m) generally limits the deductibility of compensation paid to our named executive officers to $1 million during any fiscal year unless
such compensation is "performance-based" under Section 162(m). However, under a Section 162(m) transition rule for compensation plans or agreements of corporations which are privately held and which become publicly held in an
initial public offering, compensation paid under a plan or agreement that existed prior to the initial public offering will not be subject to Section 162(m) until the earliest of (1) the expiration of the plan or agreement, (2) a
material modification of the plan or agreement, (3) the issuance of all employer stock and other compensation that has been allocated under the plan, or (4) the first meeting of shareholders at which directors are to be elected that occurs
after the close of the third calendar year following the year of the initial public offering (the "Transition Date"). After the Transition Date, rights or awards granted under the plan, other than options and stock appreciation
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rights, will not qualify as "performance-based compensation" for purposes of Section 162(m) unless such rights or awards are granted or vest upon pre-established objective
performance goals, the material terms of which are disclosed to and approved by our shareholders.
Our compensation program is intended
to maximize the deductibility of the compensation paid to our named executive officers to the extent that we determine it is in our best interests. Consequently, we may rely on the exemption from Section 162(m) afforded to us by the transition
rule described above for compensation paid pursuant to our pre-existing plans.
Many other Code provisions, SEC regulations and
accounting rules affect the payment of executive compensation and are generally taken into consideration as programs are developed. Our goal is to create and maintain plans that are efficient, effective and in full compliance with these
requirements.
Recoupment Policy
We currently do not have a recoupment policy to adjust or recover bonuses or incentive compensation paid to executive officers where such bonuses or payments were based on financial statements that were
subsequently restated or otherwise amended in a manner that would have reduced the size of such bonuses or payments. Once we are publicly traded, we will become subject to the recoupment requirements under Sarbanes-Oxley, the Dodd-Frank Wall Street
Reform and Consumer Protection Act and other applicable laws.
Stock Ownership Guidelines
Although as a private company we have not historically had formal stock ownership guidelines for our named executive officers, the company intends
to adopt formal stock ownership guidelines in conjunction with this offering. Under the stock ownership guidelines, the amount of common stock each executive will be targeted to own, which is stated as a multiple of the executive's base salary,
reflects each executive's role and level of responsibility at the company. The multiples to be applied to our executive officers are as follows: (i) five times for our Chief Executive Officer, (ii) three times for our other executive
officers with the title of Vice President and above (other than our Chief Executive Officer) and (iii) one times for any additional employees who hold stock option awards. The equity ownership of our named executive officers is set forth in the
beneficial ownership table in "Principal and Selling Shareholders."
Risk Considerations in Our Compensation Program
We believe that the mix and design of the elements of our employee compensation policies and practices do not motivate imprudent risk taking.
Consequently, we are satisfied that any potential risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on the company.
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Compensation Tables
The purpose of the following tables is to provide information regarding the compensation earned during our most recently completed fiscal year by our named executive officers.
Summary Compensation Table
The
following table shows the compensation earned by our named executive officers during the fiscal year ended January 29, 2011.
Name and Principal Position
Year
Salary
($)
Bonus
($)(3)
Stock
Awards
($)
Option
Awards
($)(4)
Non-Equity
Incentive
Plan
Compen-
sation
($)(5)
Change in
Pension
Value
and
Nonquali-
fied
Deferred
Compensa-
tion
Earnings
($)
All
Other
Compen-
sation
($)(6)
Total
($)
John De Meritt
2010
375,000
—
—
2,822,100
450,000
—
1,964,140
5,611,240
President, Chief
Executive Officer
Gene Morphis
2010
93,750
—
—
1,087,943
—
—
23,286
1,204,979
Executive Vice President,
Chief Financial Officer(1)
Cindy Thomassee
2010
160,000
30,000
—
276,000
55,000
—
10,017
531,355
Vice President of
Accounting
Theresa Backes
2010
235,000
5,000
—
—
100,000
—
960,256
1,295,641
Executive Vice President,
Chief Operating Officer
Kyong Gill
2010
275,000
—
—
—
206,250
—
3,740
485,124
Chief Merchandising
Officer(2)
Kal Malik
2010
225,000
—
—
686,784
90,000
—
1,168
1,003,186
Executive Vice President,
General Counsel and
Corporate Secretary
(1)
Mr. Morphis' employment as Chief Financial Officer commenced October 18, 2010.
(2)
Ms. Gill was promoted to the position of Executive Vice Chairperson as of March 8, 2011.
(3)
Represents special bonuses paid in conjunction with the CCMP Acquisition. See "—Compensation Discussion and Analysis—Elements of Compensation—CCMP
Acquisition-Related Payments" for more details.
(4)
Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification Topic 718 ("FASB ASC Topic 718"). The assumptions made in the valuation of the awards are set forth in note 6 to the company's consolidated financial statements included elsewhere in this
prospectus.
(5)
Represents the amount paid under our performance-based cash award plan. See "—Compensation Discussion and Analysis—Elements of Compensation—Annual
Performance-Based Cash Awards," above, for more details.
(6)
For Mr. De Meritt and Ms. Backes, amounts reported include cash payments of $1,958,703 and $957,801, respectively, received in lieu of an adjustment to the exercise
price of their outstanding stock options at the time of CCMP Acquisition. See "—Compensation Discussion and Analysis—Elements of Compensation—CCMP Acquisition-Related Payments," above, for more details. For Mr. De
Meritt and Mmes. Thomassee and Backes, amounts reported include company matching contributions to the company's 401(k) savings plan of $1,154, $554 and $900, respectively. For Messrs. De Meritt and Malik and Mmes. Backes, Thomassee and Gill,
amounts reported include the incremental cost related to the executives' personal use of a leased company vehicle. For Mr. De Meritt, the fiscal year 2010 cost was $4,283. In fiscal year 2010, in connection with his employment,
Mr. Morphis received relocation assistance in an amount of $23,286, based on actual cost to the company, which included housing assistance and moving expenses. See "—Compensation Discussion and Analysis—Elements of
Compensation—Additional Executive Benefits and Perquisites," above, for more details regarding executive benefits and perquisites.
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Grants of Plan-Based Awards
The following table sets forth information about the non-equity incentive awards and equity-based awards granted to each of our named executive officers in fiscal year 2010.
Name
Grant
Date
Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards(1)
Estimated Future
Payouts Under
Equity Incentive Plan
Awards
All
Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
Exercise
or Base
Price
of
Option
Awards
($/Sh)(3)
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)(4)
Thresh-
old
($)
Target
($)
Maxi-
mum
($)
Thresh-
old
($)
Target
($)
Maxi-
mum
($)
John De Meritt
3/26/10
—
—
—
—
—
—
—
818,000
6.13
2,822,100
—
—
375,000
—
—
—
—
—
—
—
—
Gene Morphis
12/1/10
—
—
—
—
—
—
—
202,030
10.19
1,087,943
Cindy Thomassee
5/1/10
—
—
—
—
—
—
—
80,000
3.74
276,000
—
—
40,000
—
—
—
—
—
—
—
—
Theresa Backes
—
—
94,000
—
—
—
—
—
—
—
—
Kyong Gill
—
—
206,250
—
—
—
—
—
—
—
—
Kal Malik
3/26/10
—
—
—
—
—
—
—
204,400
3.74
686,784
—
—
90,000
—
—
—
—
—
—
—
—
(1)
Represents the target award opportunities for performance-based cash awards payable for fiscal year 2010 under our annual performance-based cash award program. The actual amounts
earned are reported in the "Non-Equity Incentive Plan Compensation" column of the "Summary Compensation Table," above.
(2)
Represents stock options granted in fiscal year 2010 under our 2010 Plan. The number of options granted in fiscal year 2010 has been adjusted for the 400-for-1 stock split that
occurred on April 28, 2010. See the narrative following this "Grants of Plan-Based Awards" table, below, for more details.
(3)
The exercise price of options granted in fiscal year 2010 has been adjusted for the 400-for-1 stock split that occurred on April 28, 2010, in the case of Messrs. De Meritt
and Malik, and the payment of a special dividend of $2.39 on November 12, 2010, in the case Ms. Thomassee and Mr. Malik,. See the narrative discussion following this "Grants of Plan-Based Awards" table, below, for more
details.
(4)
Represents the aggregate grant date fair value of awards granted in fiscal year 2010 computed in accordance with the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification Topic 718 ("FASB ASC Topic 718"). The assumptions made in the valuation of the awards are set forth in note 6 to the company's consolidated financial statements included elsewhere in this prospectus.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
Amounts paid to our named executive officers in fiscal year 2010 were based, in part, on employment agreements in place with Mr. De Meritt and
Ms. Gill and letter agreements in place with Messrs. Morphis and Malik and Ms. Backes. Below is a description of these agreements. The company does not have an employment agreement or letter agreement in place for Ms. Thomassee. For a
discussion of the anticipated amendments to these arrangements in conjunction with this offering, see "—Compensation Discussion and Analysis—Actions Taken Subsequent to Fiscal Year 2011—Employment Arrangements," above.
Mr. De Meritt
On February 26, 2010, Mr. De Meritt entered into an employment agreement with the company providing for his employment as of such date as the company's President and Chief Executive Officer.
The employment agreement has an initial term of three years, which commenced on February 26, 2010 and renews automatically for
successive one-year periods thereafter, unless either party provides ninety days' written notice prior to the expiration of the initial term or each successive renewal term. The employment agreement provides for a minimum base salary of
$375,000 which will be reviewed
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for increase no less frequently than annually, and a discretionary annual cash incentive based on the achievement of specified EBITDA hurdles, with a target annual cash incentive equal to 100% of
Mr. De Meritt's annual base salary. Additionally, in connection with his hiring, Mr. De Meritt received a sign-on equity grant of stock options to purchase shares of our common stock in an amount equal to 2% of the company's
issued and outstanding shares of common stock at the time of grant, or 818,000 shares. This option vests in equal monthly installments over a four-year period, and may be eligible for accelerated vesting upon the achievement of certain performance
objectives, as described under "Compensation Discussion and Analysis—Equity-Based Awards—Plans in Existence Prior to our Initial Public Offering." Mr. De Meritt is eligible to participate in employee savings and welfare
plans made available to our employees generally. In addition, the company has agreed to provide, at its expense, term life insurance in an amount of $10 million and long-term disability coverage.
Mr. De Meritt's employment agreement provides for severance benefits payable in the event of his termination under certain circumstances,
subject to the execution of a general release of claims. If Mr. De Meritt's employment is terminated without "cause," or if he resigns for "good reason" (in either case as defined in his employment agreement),
Mr. De Meritt will be paid severance in an amount equal to two times his annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over
the 24-month period, with the first installment payable in the month following the month in which the termination date occurs. Additionally, the stock option Mr. De Meritt received in connection with his entering into the employment agreement
will immediately vest. Mr. De Meritt is eligible to receive, for up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of coverage he had as an active employee. In addition, Mr. De Meritt will be
entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued but unused vacation.
The employment agreement also provides, subject to certain exceptions, that, during his employment, and (i) in the event he is terminated without "cause," or if he resigns for "good
reason," a period of 24 months following termination or (ii) if he terminates for any other reason, a period of 12 months following termination, Mr. De Meritt will not (x) compete with the company or its affiliates,
(y) solicit any company employees or consultants or (z) solicit any customer of the company.
Mr. Morphis
The terms and conditions of Mr. Morphis' employment as our Chief Financial Officer are set forth in a letter agreement
dated September 9, 2010.
The letter agreement provides that Mr. Morphis will receive an annual base salary of $325,000 and is
eligible to receive a discretionary annual cash incentive of up to 60% of his annual base salary, based upon the achievement of goals and objectives determined by our Chief Executive Officer. Additionally, in connection with his hiring,
Mr. Morphis received a sign-on equity grant of stock options to purchase 202,030 shares of our common stock. This option vests in equal monthly installments over a five-year period. As part of this employment agreement, Mr. Morphis was
given the opportunity to purchase shares of our common stock in an amount up to a value of $100,000 and any shares purchased would be charged against the number of shares subject to the 202,030 option grant. In accordance with this opportunity,
Mr. Morphis purchased 9,813 shares of our common stock resulting in 192,217 shares remaining outstanding under this option grant.
Mr. Morphis' letter agreement provides for severance benefits payable in the event his employment is terminated without "cause"
(as defined in his letter agreement) prior to October 18, 2013, he will be paid severance in an amount equal to one times his annual base salary (as in effect on the date of termination).
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The letter agreement also provides, subject to certain exceptions, that, during his employment, and
for a period of 12 months following termination, Mr. Morphis will not solicit any company employees or consultants.
Ms. Backes
The terms and conditions of Ms. Backes' employment as our Executive Vice President, Chief Operating Officer are set forth in an offer letter provided to Ms. Backes prior to her commencement of
employment.
The offer letter provides that Ms. Backes will receive an annual base salary of $195,000 (which was increased in
subsequent years to $250,000 as of January 29, 2011), and is eligible to receive a discretionary annual cash incentive of 40% of her annual base salary, 50% based on the achievement of specified EBITDA hurdles and 50% based on the achievement
of individual goals established by our Chief Executive Officer. For fiscal year 2010 the discretionary annual cash incentive was 75% based on the achievement of specified EBITDA hurdles and 25% based on the achievement of individual goals.
Ms. Backes is eligible to participant in employee pension and welfare plans made available to our employees generally.
Ms. Gill
On February 26, 2010, Ms. Gill entered into an employment agreement with the company providing for her employment as of such date as Chief Merchandising Officer.
The employment agreement has an initial term of three years, which commenced on February 26, 2010 and renews automatically for successive
one-year periods thereafter, unless either party provides ninety days' written notice prior to the expiration of the initial term or each successive renewal term. The employment agreement provides for a minimum base salary of $275,000 (which
was increased in 2011 to $295,000) which will be reviewed for increase no less frequently than annually, and a discretionary annual cash incentive, which may be based in part on the achievement of specified EBITDA hurdles, with a target annual cash
incentive equal to 75% of Ms. Gill's annual base salary. Ms. Gill is eligible to receive grants of equity awards, from time to time, as determined by our board of directors and to participate in employee savings and welfare plans made
available to our employees generally. In addition, the company has agreed to provide, at its expense, term life insurance in an amount of $3 million and long-term disability coverage.
Ms. Gill's employment agreement provides for severance benefits payable in the event of her termination under certain circumstances,
subject to the execution of a general release of claims. If Ms. Gill's employment is terminated without "cause," or if she resigns for "good reason" (in either case as defined in her employment agreement), Ms. Gill
will be paid severance in an amount equal to two times her annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month period,
with the first installment payable in the month following the month in which the termination date occurs. Ms. Gill is eligible to receive, for up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of
coverage she had as an active employee. In addition, Ms. Gill will be entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued but unused vacation.
The employment agreement also provides, subject to certain exceptions, that, during her employment, and (i) in the event she is terminated
without "cause," or if she resigns for "good reason", a period of 24 months following termination or (ii) if she terminates for any other reason, a period of 12 months following termination, Ms. Gill will not
(x) compete with the company or its affiliates, (y) solicit any company employees or consultants or (z) solicit any customer of the company.
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Mr. Malik
The terms and conditions of Mr. Malik's employment as our Executive Vice President, General Counsel are set forth in a letter agreement dated September 25, 2009, which was subsequently amended on
February 26, 2010.
The amended letter agreement provides that Mr. Malik will receive an annual base salary of $225,000,
subject to annual review and upward adjustment, and is eligible to receive a discretionary annual cash incentive of up to 40% of his annual base salary, based upon the achievement of goals and objectives determined by our Chief Executive Officer.
Additionally, in connection with the amendment to his letter agreement, Mr. Malik received a stock option to purchase shares of our common stock in amount equal to 0.5% of the company's issued and outstanding shares of common stock at the
time of grant, or 204,400 shares. This option vests in equal monthly installments over a four-year period.
Mr. Malik's letter
agreement does not provide for severance benefits. However, Mr. Malik's employment may not be terminated by the company without "cause" (as defined in his letter agreement) prior to September 25, 2013.
The letter agreement also provides, subject to certain exceptions, that during his employment, and for a period of 12 months following termination,
Mr. Malik will not solicit any company employees or consultants.
Stock Split and Payment of Special Dividend in 2010
On April 28, 2010, following the CCMP Acquisition, our board of directors approved a 400-for-1 stock split of our common
equity. The number of shares of our common stock subject to outstanding stock options held by Messrs. De Meritt and Malik and Ms. Backes at the time of this stock split were adjusted accordingly to account for this stock split. Additionally, on
November 12, 2010, our board of directors also approved the payment of a special dividend in the amount of $2.39 per share of our common equity. Holders of our stock options did not receive this dividend. The exercise price of outstanding
options held by Mr. Malik and Ms. Thomassee as of the ex-dividend date was adjusted accordingly. In lieu of an adjustment to the exercise price of their outstanding options, Mr. De Meritt and Ms. Backes received a cash payment,
as described in "—Compensation Discussion and Analysis—CCMP Acquisition-Related Payments," above.
Outstanding
Equity Awards at Fiscal Year-End
The table below sets forth certain information regarding the outstanding equity awards held by our
named executive officers as of January 29, 2011.
Option Awards
Stock Awards
Name
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
(#)
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested
($)
John De Meritt
170,417
647,583
(2)
—
6.13
3/25/2020
—
—
—
—
Gene Morphis
6,407
182,606
(3)
—
10.19
11/30/2020
—
—
—
—
Cindy Thomassee(1)
—
80,000
(4)
—
3.74
4/30/2020
—
—
—
—
Theresa Backes
400,000
—
—
1.43
12/1/2017
—
—
—
—
Kal Malik(1)
8,517
157,558
(5)
—
3.74
3/25/2020
—
—
—
—
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(1)
The exercise price of outstanding options has been adjusted for the payment of a special dividend of $2.39 on November 12, 2010. See the narrative discussion following the
"Grants of Plan-Based Awards" table, above, for more details.
(2)
These options were granted on 3/26/10 and will vest in equal installments on each monthly anniversary of the award date over a four-year period. Additionally, a portion of these
options may vest in connection with this offering, based upon the rate of return achieved by CCMP on its investment pursuant to the CCMP Acquisition. See "—Compensation Discussion and Analysis—Elements of
Compensation—Equity-Based Awards," above, for more details.
(3)
These options were granted on 12/1/10 and will vest in equal monthly installments on the last day of each month following October 18, 2010 over a five-year period.
(4)
These options were granted on 5/1/10 and will vest in equal annual installments on each anniversary of the award date over a five-year period.
(5)
These options were granted on 3/26/10 and will vest in equal monthly installments on the last day of each month following February 26, 2010 over a four-year period.
Option Exercises and Stock Vested
The following table provides information relating to the options exercised during fiscal year 2010.
Option Awards
Stock Awards
Name
Number of Shares
Acquired
on
Exercise
(#)
Value Realized 
on
Exercise
($)(1)
Number of Shares
Acquired
on
Vesting
(#)
Value Realized on
Vesting
(#)
John De Meritt
—
—
—
—
Gene Morphis
13,017
0
—
—
Cindy Thomassee
—
—
—
—
Theresa Backes
—
—
—
—
Kyong Gill
—
—
—
—
Kal Malik
444,325
2,509,284
—
—
(1)
The value realized upon the exercise of a stock option is calculated by multiplying the difference between the fair market value of our common shares on the date the stock option
was exercised and the exercise price paid by the executive by the number of shares acquired and does not necessarily reflect proceeds actually received by the executive. For Mr. Morphis, because there was no difference between the fair market
value of our common shares on the date the stock option was exercised and the exercise price paid by Mr. Morphis, no value is reported in this column.
Pension Benefits
Our named executive officers did not participate in or have account balances
in any qualified or nonqualified defined benefit plans sponsored by us. Our board of directors or Compensation Committee may elect to adopt qualified or nonqualified benefit plans in the future if it determines that doing so is in our best interest.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
Our named executive officers did not participate in or have account balances in any nonqualified deferred compensation plans sponsored by us. Our
board of directors or Compensation Committee may elect to adopt nonqualified deferred compensation plans in the future if it determines that doing so is in our best interest.
Potential Payments Upon Termination or Change in Control
The information below describes and
quantifies certain compensation that would become payable under employment agreements with the following named executive officers if, as of January 29, 2011, his or her employment with us had been terminated. Due to the number of factors that
affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or
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distributed may be different. Factors that could affect these amounts include the timing during the year of any such event. Further, the information below does not incorporate the terms of any
agreement entered into or amended after January 29, 2011.
Employment Agreements
The employment agreements and letter agreements we have entered into with our named executive officers provide for certain payments to be made in
connection with a termination of employment. Below is a description of the severance payments that would have become payable under employment agreements and letter agreements with the following named executive officers upon their termination as of
January 29, 2011.
Mr. De Meritt
Mr. De Meritt's employment agreement provides for severance benefits payable in the event of his termination under certain circumstances, subject to the execution of a general release of claims. If
Mr. De Meritt's employment is terminated without "cause," or if he resigns for "good reason" (in either case as defined in his employment agreement), Mr. De Meritt will be paid severance in an amount equal to two
times his annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month period, with the first installment payable in the month
following the month in which the termination date occurs. In addition, the stock option Mr. De Meritt received in connection with his entering into the employment agreement will immediately vest. Mr. De Meritt is eligible to receive, for
up to 24 months, a monthly amount equal to the applicable COBRA premium cost for the level of coverage he had as an active employee. In addition, Mr. De Meritt will be entitled to receive amounts accrued under the employment agreement,
including any accrued but unpaid salary and accrued but unused vacation.
The employment agreement also provides, subject to certain
exceptions, that, during his employment, and (i) in the event he is terminated without "cause," or if he resigns for "good reason," a period of 24 months following termination or (ii) if he terminates for any other
reason, a period of 12 months following termination, Mr. De Meritt will not (x) compete with the company or its affiliates, (y) solicit any company employees or consultants or (z) solicit any customer of the company.
Mr. Morphis
Mr. Morphis' letter agreement provides that in the event his employment is terminated without "cause" (as defined in his letter
agreement) prior to October 18, 2013, he will be paid severance in an amount equal to one times his annual base salary (as in effect on the date of termination).
The letter agreement also provides, subject to certain exceptions, that, during his employment, and for a period of 12 months following termination, Mr. Morphis will not solicit any company employees or
consultants.
Ms. Gill
Ms. Gill's employment agreement provides for severance benefits payable in the event of her termination under certain circumstances,
subject to the execution of a general release of claims. If Ms. Gill's employment is terminated without "cause," or if she resigns for "good reason" (in either case as defined in her employment agreement), Ms. Gill
will be paid severance in an amount equal to two times her annual base salary (as in effect on the date of termination). The severance amount is payable in equal installments in accordance with our regular payroll practices over the 24-month
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period, with the first installment payable in the month following the month in which the termination date occurs. Ms. Gill is eligible to receive, for up to 24 months, a monthly amount equal
to the applicable COBRA premium cost for the level of coverage she had as an active employee. In addition, Ms. Gill will be entitled to receive amounts accrued under the employment agreement, including any accrued but unpaid salary and accrued
but unused vacation.
The employment agreement also provides, subject to certain exceptions, that, during her employment, and
(i) in the event she is terminated without "cause," or if she resigns for "good reason", a period of 24 months following termination or (ii) if she terminates for any other reason, a period of 12 months following
termination, Ms. Gill will not (x) compete with the company or its affiliates, (y) solicit any company employees or consultants or (z) solicit any customer of the company.
Mr. Malik
Mr. Malik's letter agreement does not provide for severance
benefits. However, Mr. Malik's employment may not be terminated by the company without "cause" (as defined in his letter agreement) prior to September 25, 2013.
The letter agreement also provides, subject to certain exceptions, that during his employment, and for a period of 12 months following termination,
Mr. Malik will not solicit any company employees or consultants.
Mmes. Backes and Thomassee
Mmes. Backes and Thomassee had no arrangement in place as of January 29, 2011 pursuant to which they would receive severance.
Estimated Potential Termination Payments and Benefits
The following table details the estimated value of the payments and benefits that our named executive officers would have been provided under the employment agreements or letter agreements described above in
connection with certain terminations of their employment as if such termination had occurred on January 29, 2011. The actual amounts that would be paid upon a named executive officer's termination of employment can be determined only at
the time of such event.
Executive
Severance
($)(1)
Continued Benefits
($)(2)
Equity Vesting
($)(3)
Total
($)
John De Meritt
750,000
25,685
2,629,187
3,404,872
Gene Morphis
325,000
—
—
325,000
Cindy Thomassee
—
—
—
—
Theresa Backes
—
—
—
—
Kyong Gill
550,000
25,685
—
575,685
Kal Malik
412,500
22,261
—
434,761
(1)
The severance amounts reported for Mr. De Meritt and Ms. Gill represent two times base salary. The severance amount reported for Mr. Morphis represents one times
base salary. Mr. Malik is not entitled to severance, but we have reported the estimated cost of continued salary through September 25, 2013.
(2)
The amounts reported are merely estimates and are based on approximate benefit costs for 2010. The amounts reported for Mr. De Meritt and Ms. Gill represent the
approximate cost of 24 monthly payments in an amount equal to the applicable COBRA premium cost for the level of coverage each executive had as an active employee. The amount reported for continued benefits for Mr. Malik represents the
approximate employer portion of the cost for medical insurance through September 25, 2013.
(3)
The amount reported for Mr. De Meritt represents the value of the accelerated vesting of 647,583 stock options calculated based on the "spread" value between the
fair market value of our ordinary shares on January 29, 2011 and the exercise price of such stock options.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the director and executive officer compensation arrangements discussed above under "Executive Compensation", the following
is a description of transactions during our last three fiscal years to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5%
of our common stock, or persons or entities affiliated with them, had or will have a direct or indirect material interest.
Stockholders' Agreement
On February 26, 2010, we entered into a stockholders' agreement with CCMP, the Founders and certain other stockholders that are the part
of our executive management team. The agreement provides, among other things, that five members of our board of directors were to be designated by CCMP and two members by the majority of the shares held by management stockholders so long as the
management stockholders held at least 7% of the total equity interest in the company. The stockholders' agreement provides, among other things, certain demand and "piggyback" registration rights and other registration rights, subject
to lock-up arrangements.
Demand and Piggyback Registration Rights
Pursuant to the stockholders' agreement, CCMP has the right at any time, but on not more than five occasions, to require us to use our best
efforts to register any or all of the shares held thereby on Form S-1 promulgated under the Securities Act at our expense. In addition, the Founders and certain other stockholders (which include members of our management) have the right on a single
occasion, upon the request of the holders representing a majority of the shares held by such Founders and other stockholders, to require us to use our best efforts to register any or all of the shares held thereby at any time following the 12-month
anniversary of a qualified initial public offering (as defined in the stockholders' agreement) of our common stock. After the completion of this offering, the holders of approximately shares of our common stock will be entitled to these demand
registration rights. Following a demand, all other stockholders that are party to the stockholders' agreement may request the inclusion of any or all of their shares in the registration statement. Under certain circumstances, we may delay the
filing or effectiveness of a registration statement one time, for up to 90 days, with respect to a demand made by CCMP, and one time in any 12-month period with respect to a demand made by the Founders and certain other stockholders. The
stockholders' agreement also grants CCMP, the Founders and certain other stockholders (which include members of our management) "piggyback" registration rights. If we register any of our securities the holders of these shares are
entitled to include their shares in the registration. All demand and piggyback registration rights are subject to limitations that may be imposed by the managing underwriter on the number of shares to be included in any underwritten offering.
Short-Form Registration Rights
After the completion of this offering, the holders of approximately            shares of our common stock will be entitled to additional short-form
registration rights, commencing on the date that we become eligible to register securities on Form S-3. Each stockholder party to the stockholders' agreement may request registration of their shares if the anticipated aggregate offering amount
of the shares is at least $10 million. There is no limit to the number of requests for registrations on Form S-3.
Indemnification
In connection with all registrations pursuant to the registration rights provisions of the stockholders' agreement, we have
agreed to indemnify all holders of registrable securities against
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specified liabilities, including liabilities under the Securities Act. All stockholders requesting or joining in a registration may be required to agree to indemnify us against certain
liabilities, but in no event will any single stockholder's liabilities exceed the net proceeds to that stockholder from the sale of the registrable securities.
Termination
The registration rights provisions and certain other provisions of the
stockholders' agreement will survive the completion of this offering and terminate upon the earlier of the date on which the stockholders party thereto no longer own any of our equity securities or the voluntary liquidation of the company, or
the sale of all or substantially all of our assets or outstanding common stock.
Stony Trading Relationship
Stony Leather, Inc. ("Stony") is one of our inventory vendors. We purchase inventory from Stony on a purchase order basis. Stony sources,
wholesales and distributes jewelry, accessories, handbags and gift items. Stony's customers include retailers, wholesalers, individuals, television shopping networks, and internet-based merchants. Stony is based in Houston, Texas with a
showroom in New York City, New York. Stony does not own or operate conventional brick and mortar retail outlets.
Chong Yi and Insuk Koo
(two of the four Founders) own and operate Stony. Mr. Yi and Ms. Koo are brother and sister. Mr. Yi and Ms. Koo along with their sister Ms. Kyong Gill (our Executive Vice Chairperson and one of the four Founders) are
stockholders of Francesca's.
Since the founding of our company, Stony has been a supplier of a variety of our inventory items.
Stony has accounted for 10%, 12% and 12% of our total inventory purchases on an annual basis in fiscal year 2010, fiscal year 2009 and fiscal year 2008, respectively. During fiscal year 2010, Stony accounted for approximately 10% of our total
inventory purchases. During fiscal year 2011, we expect to purchase approximately 10% of our total inventory from Stony. We negotiate and set the rates for the merchandise and services provided to us by Stony at market rates for such merchandise and
services at the time each such transaction is entered into. We often request and receive from Stony merchandise on special order, modify previously ordered merchandise, and acquire merchandise on consignment. Generally, Stony provides us a 3% damage
allowance to cover the costs of damaged merchandise. The Stony inventory purchases during fiscal years 2010, 2009 and 2008 were approximately $5.0 million, $3.1 million and $2.1 million, respectively.
KJK Trading Relationship
KJK Trading Corporation ("KJK Trading") is one of our inventory vendors. We purchase inventory from KJK Trading on a purchase order
basis. KJK Trading assists us in the design and sourcing of several items of apparel we sell in our boutiques. Beginning in May 2010, we subleased approximately 2,000 square feet of office space to KJK Trading within our headquarters in Houston,
Texas. We did not receive any rent payments from KJK Trading in fiscal year 2010. Beginning in January 2011, the rent payment is $1,000 per month. We are the sole customer of KJK Trading.
KJK Trading is owned and operated by Ki Juing Gu. Mr. Gu is the brother-in-law of Ms. Insuk Koo (one of our Founders).
KJK Trading has been one of our inventory vendors since 2008. KJK Trading has accounted for 13%, 11% and 6% of our total inventory purchases on an
annual basis in fiscal year 2010, fiscal year 2009 and fiscal year 2008, respectively. During fiscal year 2011, we expect to purchase no more than 18% of our total inventory from KJK Trading. We negotiate and set the rates for the merchandise and
services provided to us by KJK Trading at market rates for such merchandise and services at the time each such transaction is entered into. We often request and receive from KJK Trading merchandise on
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special order, modify previously ordered merchandise, and acquire merchandise on consignment. Generally, KJK Trading provides us a 1% damage allowance to cover the costs of damaged merchandise.
The KJK Trading inventory purchases during fiscal years 2010, 2009 and 2008 were approximately $6.6 million, $2.8 million and $1.0 million, respectively.
Indemnification of Officers and Directors
Upon completion of this offering, we intend to
enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, expense advancement and
reimbursement, to the fullest extent permitted under Delaware law. Additionally, we may enter into indemnification agreements with any new directors or executive officers that may be broader in scope than the specific indemnification provisions
contained in Delaware law.
There is no pending litigation or proceeding naming any of our directors or officers to which
indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Policies and Procedures for Related Person Transactions
Our board of directors will adopt
prior to completion of this offering a written policy for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $20,000 and one of our executive officers, directors, director nominees
or beneficial holders of more than 5% of our capital stock (or their immediate family members), each of whom we refer to as a "related person," has a direct or indirect material interest. This policy was not in effect when we entered into
the transactions described above.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we
refer to as a "related person transaction," the related person must report the proposed related person transaction to the chairperson of our nominating and corporate governance committee. Additionally, in the case of beneficial holders of
more than 5% of our capital stock, we will solicit this information via an annual questionnaire. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the nominating and corporate
governance committee. Whenever practicable, the reporting, review and approval will occur prior to entering into the transaction. If advance review and approval is not practicable, the nominating and corporate governance committee will review and
may, in its discretion, ratify the related person transaction. Any related person transactions that are ongoing in nature will be reviewed annually and the nominating and corporate governance committee may establish guidelines for our management to
follow in the course of its ongoing dealings with the related person.
A related person transaction reviewed under the policy will be
considered approved or ratified if it is authorized by the nominating and corporate governance committee after full disclosure of the related person's interest in the transaction. The written policy also provides for the standing pre-approval
of certain related person transactions, such as the employment and compensation of executive officers, director compensation and certain charitable contributions, among other things. We expect that our board of directors will also adopt prior to
completion of this offering a written policy under which no immediate family member of a director or executive officer shall be hired until the employment arrangement is approved by the nominating and corporate governance committee or ratified by
the committee if it is not practicable for us to wait until the next nominating and corporate governance committee meeting. A copy of our related person transaction policy and nominating and corporate governance committee charter will be available
on our website at
www.francescascollections.com
upon completion of this offering.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information as of
                    , 2011, regarding the beneficial ownership of our common stock (i) immediately prior to this offering and (ii) as
adjusted to give effect to this offering, by:
Ÿ
each person or group who we know to beneficially own more than 5% of our common stock;
Ÿ
each of our directors;
Ÿ
each of our named executive officers;
Ÿ
all of our executive officers and directors as a group; and
Ÿ
each of the selling stockholders.
We have determined beneficial ownership in the table in accordance with SEC rules and regulations. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the
power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, we have deemed shares of our common stock subject to options held by that person that are currently exercisable or will become exercisable within 60 days of
                    , 2011 to be outstanding, but we have not deemed these shares to be outstanding for computing the percentage ownership of any
other person. To our knowledge, except as set forth in the footnotes below, each stockholder identified in the table possesses sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by that
stockholder. Unless otherwise indicated, the address for each person named in the table below is c/o Francesca's Holdings Corporation, 3480 W. 12
th
Street, Houston, Texas 77008. For further information regarding material transactions between us and certain of our
stockholders, see "Certain Relationships and Related Party Transactions".
Shares Beneficially Owned
Prior to This Offering
Number of
Shares
Offered
Shares Beneficially Owned
After This Offering
Name
Number
Percent
Number
Percent
5% Stockholders:
CCMP Capital LLC and Related Funds(1)
34,048,435
84.3
%
%
Executive Officers and Directors:
John De Meritt
1,438,583
3.5
Gene Morphis
32,238
*
Cindy Thomassee
16,000
*
Theresa Backes
400,000
1.0
Kyong Gill
1,398,400
3.5
Kal Malik
263,875
*
Greg Brenneman(1)
—
—
Neill Davis
100,000
*
Richard Emmett
8,000
*
Joseph Scharfenberger(1)
110,025
*
Richard Zannino(1)
—
—
All directors and officers as a group (11 persons)
3,767,121
9.2
Other Selling Stockholders:
*
Less than 1%
(1)
In the case of CCMP Capital, LLC ("CCMP Capital"), includes 30,043,896 shares of common stock owned by CCMP Capital Investors II, L.P. ("CCMP Capital
Investors") and 4,004,539 shares of common stock owned by CCMP Capital Investors (Cayman) II, L.P. ("CCMP Cayman" and, together with CCMP Capital Investors, the "CCMP Capital Funds"). Assuming no exercise of
underwriters' option to purchase additional shares: (i)      shares will be sold by CCMP Capital Investors and (ii)      shares will be sold by CCMP Cayman. If the underwriters exercise their option to
purchase additional shares in full: (i)      shares will be sold by CCMP Capital Investors and (ii)     shares will be sold by CCMP Cayman.
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The general partner of the CCMP Capital Funds is CCMP Capital Associates, L.P. ("CCMP Capital
Associates"). The general partner of CCMP Capital Associates is CCMP Capital Associates GP, LLC ("CCMP Capital Associates GP"). CCMP Capital Associates GP is wholly-owned by CCMP Capital. Each of CCMP Capital Associates, CCMP Capital
Associates GP and CCMP Capital may be deemed, pursuant to Rule 13d-3 under the Exchange Act, to beneficially own the shares held by the CCMP Capital Funds.
CCMP Capital ultimately exercises voting and dispositive power over the shares held by the CCMP Capital Funds. Voting and disposition decisions at CCMP Capital with respect to such shares are made by an investment
committee, the members of which are Stephen Murray (the President and Chief Executive Officer of CCMP Capital), Greg Brenneman and Rich Zannino.
Greg Brenneman is the Chairman of CCMP Capital Advisors, LLC. Each of Joseph Scharfenberger and Richard Zannino is a Managing Director of CCMP Capital Advisors, LLC. The address of each of Messrs. Brenneman,
Scharfenberger and Zannino and each of the CCMP entities (other than CCMP Cayman) is c/o CCMP Capital, LLC, 245 Park Avenue, New York, New York 10167. The address of CCMP Cayman is c/o Walkers Corporate Services Limited, Walker House, 87 Mary
Street, George Town KY1-9005, Grand Cayman, Cayman Islands.
Each of Messrs. Murray, Brenneman, Scharfenberger and Zannino disclaims any
beneficial ownership of any shares beneficially owned by the CCMP Capital Funds.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated
bylaws, each of which will be in effect upon completion of this offering, are summaries only. These summaries do not purport to be complete and are subject to and qualified by reference to our amended and restated certificate of incorporation and
amended and restated bylaws, copies of which will be filed with the SEC as exhibits to our registration statement of which this prospectus forms a part and by the provisions of applicable law. This description of our capital stock reflects
changes to our capital structure that will become effective upon completion of this offering.
Authorized Capitalization
Upon completion of this offering, our authorized capital stock will consist of 80,000,000 shares of common stock, par value $0.01
per share, and 45,000 shares of preferred stock, par value $0.01 per share. Upon completion of this offering, there will be              shares of common stock outstanding, or
             shares if the underwriters exercise in full their option to purchase additional shares in full, and no shares of preferred stock outstanding.
As of                     , 2011, immediately
prior to completion of this offering, there were outstanding:
Ÿ
40,457,343 shares of our common stock held by approximately 27 stockholders; and
Ÿ
2,416,446 shares issuable upon exercise of outstanding stock options.
Common Stock
Voting Rights
Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of stockholders, including the election or
removal of directors. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by the holders of common stock present in person or represented by proxy, subject to any voting rights
granted to holders of any preferred stock.
An election of directors by our stockholders shall be determined by a plurality of the votes
cast by the stockholders entitled to vote on the election. There are no cumulative voting rights for the election of directors, which means that the holders of a majority of the shares of our common stock voted will be entitled to elect all of our
directors.
Dividends
Subject to the rights of holders of any then outstanding shares of our preferred stock, holders of our common stock are entitled to receive ratably
any dividends that may be declared by our board of directors out of funds legally available therefor.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our common stock would be entitled to share ratably in all assets available
for distribution to stockholders after the payment of or provision for all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.
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Other Rights
Holders of our common stock do not have preemptive rights to purchase shares of our stock. The shares of our common stock are not subject to any redemption provisions and are not convertible into any other shares
of our capital stock. The rights, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our preferred stock we may issue in the future.
Blank Check Preferred Stock
Under the terms of our certificate of incorporation that will be in effect upon completion of this offering, our board of directors will have the
authority, without further action by our stockholders, to issue up to 45,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences. Upon completion of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could make it more difficult for a third
party to acquire, or could adversely affect the rights of our common stockholders by restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock or delaying or
preventing a change in control without further action by the stockholders. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock.
Anti-Takeover Effects of Certain Provisions of Delaware Law,
the Certificate of Incorporation and the Bylaws
Our amended and restated certificate of
incorporation and our amended and restated bylaws will contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and that could make it more difficult to acquire control
of our company by means of a tender offer, open market purchases, a proxy contest or otherwise. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they
also give our board of directors the power to discourage acquisitions that some stockholders may favor. A description of these provisions is set forth below.
Classified Board
Our certificate of incorporation to be in effect upon completion of
this offering will provide for our board of directors to be divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for
the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. A third
party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board.
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No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation specifically authorizes cumulative voting. Our certificate of incorporation to be in effect upon completion
of this offering does not grant stockholders the right to vote cumulatively; therefore stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors.
Stockholder Action by Written Consent and Special Meetings of Stockholders
Pursuant to Section 228 of the Delaware General Corporation Law, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the company's certificate of incorporation provides otherwise. Our certificate of incorporation and bylaws to be effective upon completion of this
offering will provide that all stockholder action must be effected at a duly called meeting of stockholders and not by written consent, and that only our board of directors, chairman of our board of directors, chief executive officer or president
(in the absence of a chief executive officer) may call a special meeting of stockholders.
Requirements for Advance Notification of Stockholder
Meetings, Nominations and Proposals
In addition, our bylaws will establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders, including proposed nominations of candidates for election to our board of directors. Stockholders at an annual meeting will only be able to consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of our board of directors, or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely written notice in
proper form to our secretary of the stockholder's intention to bring such business before the meeting. These provisions could have the effect of delaying stockholder actions until the next stockholder meeting that are favored by the holders of
a majority of our outstanding voting securities or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain control of us.
Stockholder Actions
Our amended and
restated certificate of incorporation will include provisions requiring that all stockholder actions against us or any of its directors, officers, or employees in their capacity as such be brought in the courts of the State of Delaware. We
expect that these provisions will discourage venue shopping that may unduly increase the costs and expenses to us in connection with stockholder actions; however, these provisions could have the effect of discouraging the filing of certain
stockholder actions against us.
Blank Check Preferred Stock
We believe that the availability of the preferred stock under our certificate of incorporation provides us with flexibility in addressing corporate issues that may arise. Having these authorized shares available
for issuance will allow us to issue shares of preferred stock without the expense and delay of a special stockholders' meeting. The authorized shares of preferred stock, as well as shares of common stock, will be available for issuance without
further action by our stockholders, unless action is required by applicable law or the rules of any stock exchange on which our securities may be listed.
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The board of directors has the power, subject to applicable law, to issue series of preferred stock that could, depending on the terms of the series, impede the completion of a merger, tender
offer or other takeover attempt. For instance, subject to applicable law, a series of preferred stock might impede a business combination by including class voting rights which would enable the holder or holders of such series to block a proposed
transaction. Our board of directors will make any determination to issue shares of preferred stock based on its judgment as to our and our stockholders' best interests. Our board of directors, in so acting, could issue preferred stock having
terms which could discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then
prevailing market price of the stock.
Super-Majority Voting
Our certificate of incorporation will require a 66.7% stockholder vote for the amendment, repeal or modification of certain provisions of our certificate of incorporation and bylaws relating to the classification
of our board of directors, the requirement that stockholder actions be effected at a duly called meeting and the designated parties entitled to call a special meeting of the stockholders. The combination of the classification of our board of
directors, the lack of cumulative voting and the 66.7% stockholder voting requirements will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our
board of directors. Because our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the
authorization of blank check preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company.
These provisions may have the effect of deterring hostile takeovers, delaying, or preventing changes in control of our management or our company,
such as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may
involve an actual or threatened acquisition of us. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights.
However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored
takeover attempts. Such provisions may also have the effect of preventing changes in our management.
Limitation on Liability of
Directors and Officers
Our amended and restated certificate of incorporation, which will be in effect upon completion of this
offering, limits the liability of directors to the fullest extent permitted by Delaware law. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders' derivative suits on behalf of our company,
to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith,
knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be in effect upon completion of this offering, provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law. We also expect to continue to maintain directors' and officers' liability insurance. We believe that these indemnification provisions and insurance are useful to attract and retain
qualified directors and executive officers.
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The limitation of liability and indemnification provisions in our amended and restated certificate of
incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders.
In addition
to the indemnification required in our amended and restated certificate of incorporation and amended and restated bylaws, we expect to enter into indemnification agreements with each of our current directors and officers before the completion of
this offering. These agreements will provide for the indemnification of our directors and officers for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they
are or were our agents. We believe that these bylaw provisions and indemnification agreements, as well as our maintaining directors' and officers' liability insurance, help to attract and retain qualified persons as directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be             .
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The key terms of our existing senior secured credit facility are described below. These descriptions are not complete and are qualified in their
entirety by reference to the complete texts of the related agreements, copies of which have been filed as exhibits to this registration statement, of which this prospectus forms a part.
We intend to use approximately $41.4 million of the net proceeds we receive from this offering, together with $50.0 million of indebtedness under a
new revolving credit facility (as described below), to repay our existing senior secured credit facility in full. See "Use of Proceeds".
Existing Senior Secured Credit Facility
On November 17, 2010, Francesca's
Collections, our wholly owned indirect subsidiary, entered into a $100.0 million senior secured credit facility with a syndicate of financial institutions. The existing senior secured credit facility consists of a $95.0 million term loan facility
and a $5.0 million revolving credit facility, each with a scheduled maturity date of November 17, 2013. The revolving credit facility includes borrowing capacity available for letters of credit.
As of January 29, 2011, we had $93.8 million outstanding under our term loan facility and $5.0 million available under our revolving credit
facility.
Interest Rates and Fees
The borrowings under our existing senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a) in the case of base rate borrowings, a rate equal to the
highest of (1) the higher of (i) the prime rate of Royal Bank of Canada and (ii) the federal funds rate plus 1/2 of 1%, (2) the LIBOR for an interest period of one month plus 1.00% and (3) 2.75% or (b) in the case of
LIBOR borrowings, a rate equal to the higher of (1) 1.75% and (2) the LIBOR for the interest period relevant to such borrowing. The current applicable margin for borrowings under both the revolving credit facility and the term loan
facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for base rate borrowings increases to 6.50%
and 9.00% on June 1, 2012 and June 1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for LIBOR borrowings increases to 7.50% and 10.00% on June 1, 2012 and
June 1, 2013, respectively. As of January 29, 2011, the loans under our existing senior secured credit facility were LIBOR-based and had an interest rate of 7.75%.
In addition to paying interest on outstanding principal under our existing senior secured credit facility, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of
the unutilized commitments thereunder at a rate equal to 0.50%. We also pay customary letter of credit fees.
Prepayment
We may voluntarily prepay loans or reduce commitments under our existing senior secured credit facility, in whole or in part, other than customary
redeployment costs with respect to LIBOR borrowings.
Our existing senior secured credit facility requires us to prepay outstanding term
loans, subject to certain exceptions, with:
Ÿ
50% of our excess cash flow (as defined in the credit agreement) if our consolidated leverage ratio (as defined in the credit agreement) is greater than a
certain threshold as of the last day of any fiscal year (such percentage may be reduced subject to our attaining certain leverage ratios);
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Ÿ
100% of the net cash proceeds (as defined in the credit agreement) of any incurrence of debt other than debt permitted under our existing senior secured credit
facility;
Ÿ
100% of the net cash proceeds (as defined in the credit agreement) of all non-ordinary course asset sales and casualty and condemnation events, subject to
certain exceptions and limitations; and
Ÿ
100% of the net cash proceeds (as defined in the credit agreement) of all equity issuances, subject to certain exceptions.
Amortization
The term loan facility
amortizes each year in an amount equal to 1.25% per annum from closing until September 30, 2011 (payable in four equal installments beginning on December 30, 2010) and 2.50% per annum from October 1, 2011 to
September 30, 2012 (payable in four equal installments beginning on December 31, 2011), with the remaining amount payable on November 17, 2013.
Principal amounts outstanding under the revolving credit facility are due and payable in full at maturity.
Guarantee and Security
All
obligations under our existing senior secured credit facility are unconditionally guaranteed by, subject to certain exceptions, Parent and each of Francesca's Collections' existing and future direct and indirect wholly owned domestic
subsidiaries.
All obligations under our existing senior secured credit facility, and the guarantees of those obligations (as well as
cash management obligations and any interest hedging or other swap agreements), are secured by substantially all of Francesca's Collections' assets as well as those of each subsidiary guarantor.
Covenants and Events of Default
Our
existing senior secured credit facility contains customary affirmative and negative covenants, including limitations on the ability of Francesca's Collections and its subsidiaries, to (i) incur additional debt; (ii) create liens;
(iii) make certain investments, loans and advances; (iv) sell assets; (v) pay dividends or make distributions or make other restricted payments; (vi) prepay other indebtedness; (vii) engage in mergers or consolidations;
(viii) change the business conducted by Francesca's Collections and its subsidiaries; (ix) engage in certain transactions with affiliates; (x) enter into agreements that restrict dividends from subsidiaries; and (xi) amend
certain charter documents and material agreements governing subordinated and junior indebtedness.
In addition, the existing senior
secured credit facility requires Francesca's Collections to maintain the following financial ratios:
Ÿ
Beginning with the fiscal quarter ending January 29, 2011, a consolidated leverage ratio which shall not be more than the maximum consolidated leverage
ratio, which is based upon the ratio of (i) consolidated total debt (as defined in the credit agreement) to (ii) consolidated EBITDA (as defined in the credit agreement). The maximum consolidated leverage ratio, depending on the fiscal
quarter, ranges from (a) 4.50 to 1.00, to (b) 3.00 to 1.00.
Ÿ
Beginning with the fiscal quarter ending January 29, 2011, a senior leverage ratio which shall not be greater than the maximum senior leverage ratio, which
is based upon the ratio of
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(i) senior debt (as defined in the credit agreement) to (ii) consolidated EBITDA (as defined in the credit agreement). The maximum senior leverage ratio, depending on the fiscal
quarter, ranges from (a) 3.50 to 1.00, to (b) 2.00 to 1.00.
Ÿ
Beginning with the fiscal quarter ending October 31, 2011, a consolidated fixed charge coverage ratio which shall not be less than the minimum consolidated
fixed charge coverage ratio, which is based upon the ratio of (i) consolidated EBITDA (as defined in the credit agreement) for the prior four fiscal quarters minus certain capital expenditures (as defined in the credit agreement) minus taxes
payable with respect to such period minus permitted tax distributions (as defined in the credit agreement) to (ii) consolidated fixed charges (as defined in the credit agreement). The minimum consolidated fixed charge coverage ratio, depending
on the fiscal quarter, ranges from (a) 1.00 to 1.00, to (b) 2.00 to 1.00.
Our existing senior secured
credit facility also contains customary events of default, including: (i) failure to pay principal, interest, fees or other amounts under the existing senior secured credit facility when due taking into account any applicable grace period;
(ii) any representation or warranty proving to have been incorrect in any material respect when made; (iii) failure to perform or observe covenants or other terms of the existing senior secured credit facility subject to certain grace
periods; (iv) a cross default with respect to other indebtedness having an aggregate principal amount of at least $3.0 million; (v) bankruptcy and insolvency events; (vi) unsatisfied final judgments in excess of $3.0 million;
(vii) a "change of control" (as defined in the credit agreement); (viii) certain defaults under the Employee Retirement Income Security Act of 1974; (ix) the invalidity or impairment of any loan document or any security
interest; and (x) the subordination provisions of any subordinated debt or junior debt (each as defined in the credit agreement) having a principal amount of at least $3.0 million shall cease to be in full force. A "change of control"
does not include an initial public offering of our common stock as long certain CCMP managed funds continue to own and control, directly or indirectly, at least 50% of the capital ownership of Parent on a fully diluted basis following such offering.
We are in compliance with our existing senior secured credit facility as of January 29, 2011. Our ability for subsidiaries to
issue a dividend to the Parent was restricted at year-end under our existing senior credit facility.
New Revolving Credit Facility.
We are engaged in discussions with financing sources regarding the terms of a new $65.0 million revolving credit facility (of which
$50.0 million would be drawn concurrently with the consummation of this offering to effect the refinancing) and expect to receive commitments from financing sources for the new revolving credit facility prior to the completion of this offering. The
new revolving credit facility is expected to have a five-year maturity and include borrowing capacity available for letters of credit.
We expect that the new revolving credit facility will contain affirmative and negative covenants substantially similar to those in our existing
senior secured credit facility, and will subject us to financial maintenance covenants upon terms to be agreed.
To date we do not have
any binding commitments from any financing sources and there can be no assurance that we will be able to enter into a new revolving credit facility, or that the refinancing will be completed on the terms that we currently expect. Our existing senior
secured credit facility requires that the proceeds of this offering be used to repay all amounts outstanding under such credit facility. Therefore, in the event that we are unable to incur new indebtedness as part of the refinancing, we will be
required to apply more of the proceeds of this offering to repay our existing indebtedness and will have less available to use for general corporate purposes, including the growth of our boutique base, the growth of our e-commerce business, sales
and marketing activities and other capital expenditures.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no public market for our common stock. Future sales of our common stock in the public market, the perception that
such sales may occur or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after
this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market
price at such time and our ability to raise equity capital in the future.
Upon completion of this offering,
             shares of common stock will be outstanding, assuming no exercise of the underwriters' option to purchase additional shares and no exercise of options. Of these shares, all
of the shares sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates" as that term is defined under Rule 144 under the Securities Act. The remaining
             shares of common stock outstanding after this offering will be "restricted securities" within the meaning of Rule 144. Restricted securities may be sold in the public
market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration, including the exemptions provided by Rule 144 and Rule 701 under the Securities Act, which rules are summarized below. The remaining
shares of common stock held by our existing stockholders upon completion of this offering will be available for sale in the public market after the expiration of the lock-up agreements described below and under "Underwriting," taking into
account the provisions of Rules 144 and 701 under the Securities Act.
Rule 144
In general, under Rule 144 under the Securities Act, as in effect on the date of this prospectus, a person who is one of our affiliates, or
who is selling shares on behalf of one of our affiliates, and has beneficially owned shares of our common stock for at least six months would be entitled to sell, upon expiration of the lock-up agreements described below and under
"Underwriting", within any three-month period a number of shares that does not exceed the greater of:
Ÿ
one percent of the number of shares of our common stock then outstanding, which will equal
approximately            shares immediately after the completion of this offering; and
Ÿ
the average weekly trading volume of our common stock on The NASDAQ Global Select Market during the four calendar weeks preceding the filing of a notice on
Form 144 with respect to the sale.
Sales under Rule 144 by our affiliates and persons who are selling
shares on behalf of our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
A person (or persons whose shares are aggregated) who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned restricted securities
within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than an affiliate, would be entitled to sell those shares, subject only to the availability of current public information about us. A
non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year, including the holding period of any prior owner other than an affiliate, would be entitled to sell those shares without
restriction.
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Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144,
including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of
Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under
"Underwriting" and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
Lock-up Agreements
We and
each of our executive officers, directors, all of the selling stockholders and substantially all of our other existing stockholders will have agreed with the underwriters, that for a period of 180 days after the date of this prospectus, we or
they will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock, or any options or warrants to purchase any shares of our common stock or any securities convertible into or
exchangeable for shares of common stock, subject to specified exceptions. The representatives of the underwriters may, in their discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such
agreement. See "Underwriting" for more information.
Registration Rights
Our stockholders agreement provides that CCMP, the Founders and certain members of our executive management team who hold our common stock will
have the right to require us to register any or all of their shares under the Securities Act at our expense, subject to certain limitations and conditions. Registration of shares held by these stockholders under the Securities Act would result in
these shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of the registration, subject to the expiration of the lock-up period. See "Certain Relationships and Related Party
Transactions—Stockholders' Agreement" for more information.
Equity Plans
As soon as practicable after the completion of this offering, we intend to file a Form S-8 registration statement under the Securities
Act to register shares of our common stock subject to options outstanding or reserved for issuance under our 2007, 2010 and 2011 Stock Incentive Plans. Such registration statement will become effective immediately upon filing, and shares covered by
this registration statement will thereupon be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates and any lock-up agreements. For a more complete discussion of our stock plans, see "Executive
Compensation—Elements of Compensation—Equity-Based Compensation."
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS
The following is a general discussion of certain material U.S. federal income tax considerations with respect to the ownership and
disposition of our common stock applicable to non-U.S. holders. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed U.S. Treasury regulations promulgated
thereunder, and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change at any time, possibly with retroactive effect.
For the purposes of this discussion, the term "non-U.S. holder" means a beneficial owner of our common stock other than:
Ÿ
a citizen or resident of the United States;
Ÿ
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the
United States, any state thereof or the District of Columbia;
Ÿ
an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
Ÿ
a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons
(as defined in the Code) have the authority to control all substantial decisions of the trust, or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust.
It is assumed for purposes of this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of
Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to a non-U.S. holder in light of that holder's particular circumstances
or that may be applicable to non-U.S. holders subject to special treatment under U.S. federal income tax law (including, for example, financial institutions, dealers in securities, traders in securities that elect mark-to-market treatment, insurance
companies, tax-exempt entities, holders who acquired our common stock pursuant to the exercise of employee stock options or otherwise as compensation, entities or arrangements treated as partnerships for U.S. federal income tax purposes, holders
liable for the alternative minimum tax, controlled foreign corporations, passive foreign investment companies, certain former citizens or former long-term residents of the United States, and holders who hold our common stock as part of a hedge,
straddle, constructive sale or conversion transaction). In addition, this discussion does not address U.S. federal tax laws other than those pertaining to the U.S. federal income tax, nor does it address any aspects of U.S. state, local or non-U.S.
taxes.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of our common stock, the
tax treatment of a person treated as a partner generally will depend on the status of the partner and the activities of the partnership. Persons that for U.S. federal income tax purposes are treated as a partner in a partnership holding shares of
our common stock should consult their own tax advisors.
THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX
CONSEQUENCES RELATING TO THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL,
NON-U.S. INCOME AND OTHER TAX LAWS) OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
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Dividends
Although we do not anticipate that we will pay any dividends on our common stock for the foreseeable future, to the extent dividends are paid to non-U.S. holders, such distributions will be subject to U.S. federal
income tax withholding at a rate of 30% (or lower rate provided by an applicable income tax treaty). To obtain a reduced rate of withholding under an applicable income tax treaty, a non-U.S. holder generally will be required to provide us or our
paying agent with a properly completed Internal Revenue Service ("IRS") Form W-8BEN certifying the non-U.S. holder's entitlement to benefits under that treaty. In certain cases, additional requirements may need to be satisfied to
avoid the imposition of U.S. withholding tax. See "—Recently Enacted Federal Tax Legislation" below for further details.
If the dividends are effectively connected with the non-U.S. holder's conduct of a trade or business within the United States (and, if
required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by such non-U.S. holder), withholding should not apply, so long as the appropriate certifications are made by such non-U.S. holder. See
"—Effectively Connected Income" below for additional information on the U.S. federal income tax considerations applicable with respect to such effectively connected dividends.
Gain on Disposition of our Common Stock
Subject to the discussion below under "—Backup Withholding and Information Reporting" and "—Recently Enacted Federal Tax Legislation," a non-U.S. holder generally will not be subject
to U.S. federal income tax or withholding tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
Ÿ
the gain is effectively connected with the conduct, by such non-U.S. holder, of a trade or business in the United States (and, if required by an applicable
income tax treaty, is attributable to a non- U.S. holder's U.S. permanent establishment), in which case the gain will be subject to tax in the manner described below under "—Effectively Connected Income";
Ÿ
the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which
the sale or disposition occurs and certain other conditions are met (in which case the gain (reduced by any U.S.-source capital losses) will be subject to 30% tax); or
Ÿ
we are, or have been, a "United States real property holding corporation" for U.S. federal income tax purposes, at any time during the shorter of the
five-year period preceding such disposition and the non-U.S. holder's holding period in our common stock; provided, that so long as our common stock is regularly traded on an established securities market, generally a non-U.S. holder would be
subject to taxation with respect to a taxable disposition of our common stock, only if at any time during that five-year or shorter period the non-U.S. holder owned more than 5% directly or by attribution, of that class of common stock.
We believe that we have not been, are not, and we do not anticipate becoming a U.S. real property holding corporation
during the relevant period described in the third bullet point above; however, no assurances can be provided in this regard. Under U.S. federal income tax laws, we will be a United States real property holding corporation if at least 50% of the fair
market value of our worldwide real property interests and other assets used in a trade or business has consisted of "United States real property interests."
Effectively Connected Income
If a dividend received on our common stock, or a sale or other
taxable disposition of our common stock, is treated as effectively connected with a non-U.S. holder's conduct of a trade or business in the
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United States, such non-U.S. holder will generally be exempt from withholding tax on any such dividend and any gain realized on such a disposition, provided such non-U.S. holder complies with
certain certification requirements (generally on IRS Form W-8ECI). Instead such non-U.S. holder will generally be subject to U.S. federal income tax on a net income basis on any such gains or dividends in the same manner as if such holder were a
U.S. person (as defined in the Code). In addition, a non-U.S. holder that is a foreign corporation may be subject to a branch profits tax at a rate of 30% (or lower rate provided by an applicable income tax treaty) on such holder's earnings and
profits for the taxable year that are effectively connected with such holder's conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to such holder's U.S. permanent
establishment), subject to adjustments.
Information Reporting and Backup Withholding
Generally, we must report to our non-U.S. holders and the IRS the amount of dividends paid during each calendar year, if any, and the amount
of any tax withheld. These information reporting requirements apply even if no withholding is required (e.g., because the distributions are effectively connected with the non-U.S. holder's conduct of a United States trade or business, or
withholding is eliminated by an applicable income tax treaty). This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established.
Backup withholding, however, generally will not apply to distributions to a non-U.S. holder of shares of our common stock provided
the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN or IRS Form W-8ECI, or certain other requirements are met. Notwithstanding
the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the non-U.S. holder is a U.S. person (as defined in the Code) that is not an exempt recipient.
Information reporting and backup withholding generally will not apply to dispositions by a non-U.S. holder of shares of our common stock outside
the United States through a foreign office of a foreign broker that does not have certain specified connections to the United States. If the non-U.S. holder sells shares of our common stock through a U.S. broker or the U.S. office of a foreign
broker, however, the broker will be required to report to the IRS the amount of proceeds paid to the non-U.S. holder, and also backup withhold on that amount, unless the non-U.S. holder provides the required certification to the broker as to its
non-U.S. status, or an exemption is otherwise established. Information reporting will also apply if a non-U.S. holder sells shares of our common stock through a foreign broker deriving more than a specified percentage of its income from U.S. sources
or having certain other connections to the United States, unless such broker has documentary evidence in its records that the beneficial owner of the shares is a non-U.S. person and certain other conditions are met, or an exemption is otherwise
established.
Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results
in an overpayment of tax and the appropriate information is timely supplied by the non-U.S. holder to the IRS.
Recently Enacted
Federal Tax Legislation
On March 18, 2010, President Obama signed the "Hiring Incentives to Restore Employment (HIRE)
Act", or the HIRE Act, which includes a revised version of a bill known as the "Foreign Account Tax Compliance Act of 2009" or "FATCA." Under FATCA, foreign financial institutions (which include most hedge funds, private
equity funds, mutual funds, securitization vehicles and any other investment
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vehicles regardless of their size) must comply with new information reporting rules with respect to their U.S. account holders and investors or confront a new withholding tax on U.S. source
payments made to them. More specifically, a foreign financial institution or other foreign entity that does not comply with the FATCA reporting requirements will generally be subject to a new 30% withholding tax with respect to any
"withholdable payments" made after December 31, 2012. For this purpose, withholdable payments are U.S.-source payments otherwise subject to nonresident withholding tax and also include the entire gross proceeds from the sale of any
equity or debt instruments of U.S. issuers. The new FATCA withholding tax will apply even if the payment would otherwise not be subject to U.S. nonresident withholding tax (e.g., because it is capital gain treated as foreign source income under the
Code). Treasury is authorized to provide rules for implementing the FATCA withholding regime and coordinating the FATCA withholding regime with the existing nonresident withholding tax rules.
FATCA withholding will not apply to withholdable payments made directly to foreign governments, international organizations, foreign central banks
of issue and individuals, and Treasury is authorized to provide additional exceptions.
As noted above, the new FATCA withholding and
information reporting requirements generally will apply to withholdable payments made after December 31, 2012. Non-U.S. holders are urged to consult with their own tax advisors regarding the effect, if any, of the FATCA provisions to them based
on their particular circumstances.
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UNDERWRITING
The company, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and J.P. Morgan Securities LLC are the representatives of the
underwriters.
Underwriters
Number of Shares
Goldman, Sachs & Co.
J.P. Morgan Securities LLC
Jefferies & Company, Inc
RBC Capital Markets, LLC
Stifel, Nicolaus & Company, Incorporated
KeyBanc Capital Markets Inc.
Total
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other
than the shares covered by the option described below unless and until this option is exercised.
If the underwriters sell more shares
than the total number set forth in the table above, the underwriters have an option to buy up to              additional shares from the selling stockholders. They may exercise that option
for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above. We will not receive any proceeds from the sale of the shares
being sold by the selling stockholders.
The following tables show the per share and total underwriting discounts and commissions to be
paid to the underwriters by the company and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase
             additional shares.
Paid by the Company
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Paid by the Selling Stockholders
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Shares sold by the underwriters to the
public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to
$            per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the
other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part.
The company and its officers, directors, and holders of substantially all of the company's common stock, including the selling stockholders,
have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except with the prior written
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consent of the representatives. This agreement does not apply to any existing employee benefit plans. See "Shares Eligible for Future Sale" for a discussion of certain transfer
restrictions.
The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the
last 17 days of the 180-day restricted period the company issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, the company announces that it will release
earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of
the earnings release or the announcement of the material news or material event.
Prior to this offering, there has been no public
market for the shares. The initial public offering price has been negotiated among the company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing
market conditions, will be the company's historical performance, estimates of the business potential and earnings prospects of the company, an assessment of the company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
The company intends to list its common stock on The NASDAQ Global Select Market
under the symbol "FRAN". In order to meet one of the requirements for listing the common stock on The NASDAQ Global Select Market, the underwriters will undertake to sell lots of 100 or more shares to a minimum of 400 beneficial holders.
In connection with this offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions
may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering.
"Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares from the selling stockholders in this offering. The underwriters may close out any covered short position by
either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. "Naked" short sales are any sales in excess of such option. The underwriters
must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of this
offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a
portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have
the effect of preventing or retarding a decline in the market price of the company's stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the
price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on The NASDAQ Global Select Market, in
the over-the-counter market or otherwise.
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The underwriters do not expect sales to discretionary accounts to exceed five percent of the total
number of shares offered.
The company and the selling stockholders estimate that their share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately $            .
The company and the selling stockholders have agreed to indemnify the several underwriters and Stifel, Nicolaus & Company, Incorporated in its capacity as qualified independent underwriter against certain
liabilities, including liabilities under the Securities Act.
Relationships and Conflicts of Interest
One or more affiliates of J.P. Morgan Securities LLC beneficially own more than 10% of CCMP Capital Investors II, L.P., which is a stockholder in
the company. Because J.P. Morgan Securities LLC is an underwriter and its affiliates beneficially, through CCMP Capital Investors II, L.P., own more than 10% of the company, J.P. Morgan Securities LLC is deemed to have a "conflict of
interest" under Rule 5121 ("Rule 5121") of the Financial Industry Regulatory Authority. Furthermore, as described under "Use of Proceeds", the company expects to use approximately $41.4 million of the net proceeds it
receives from this offering, together with $50.0 million of new indebtedness under a new revolving credit facility, to repay its existing senior secured credit facility in full. Affiliates of Goldman, Sachs & Co., J.P. Morgan Securities
LLC, Jefferies & Company, Inc., RBC Capital Markets, LLC, Stifel, Nicolaus & Company, Incorporated and KeyBanc Capital Markets Inc. are lenders under the company's existing senior secured credit facility and will each receive
their pro rata share of such repayment. Because it is possible that each of Goldman, Sachs & Co., J.P. Morgan Securities LLC and Jefferies & Company, Inc. or their affiliates could receive more than 5% of the proceeds of this
offering in connection with the repayment of the company's existing senior secured credit facility, each of Goldman, Sachs & Co., J.P. Morgan Securities LLC and Jefferies & Company, Inc. is deemed to have a "conflict of
interest" under Rule 5121. Accordingly, this offering will be conducted in accordance with Rule 5121. Rule 5121 requires that a "qualified independent underwriter", meeting certain standards, participate in the preparation of the
registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Stifel, Nicolaus & Company, Incorporated has served as "qualified independent underwriter" within the meaning of Rule
5121 in connection with this offering. To comply with Rule 5121, Goldman, Sachs & Co., J.P. Morgan Securities LLC and Jefferies & Company, Inc. will not confirm any sales to any account over which it exercises discretionary
authority without the specific written approval of the transaction from the account holder.
The underwriters and their respective
affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment,
hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the
company, for which they received or will receive customary fees and expenses. In particular, J.P. Morgan Securities LLC and affiliates of Goldman, Sachs & Co. and Jefferies & Company, Inc. are joint lead arrangers, joint
bookrunners and lenders under the company's existing senior secured credit facility. In addition, an affiliate of KeyBanc Capital Markets Inc. is syndication agent and a lender under the company's existing senior secured credit facility;
an affiliate of RBC Capital Markets, LLC is administrative agent, collateral agent and a lender under the company's existing senior secured credit facility; and an affiliate of Stifel, Nicolaus & Company, Incorporated is a lender under
the company's existing senior secured credit facility. In addition, one or more affiliates of Goldman, Sachs & Co. are limited partners in CCMP Capital Investors II, L.P., which is a stockholder in the company. In addition, a member of the
advisory board of CCMP Capital Investors II, L.P. is also an advisory director of Goldman, Sachs & Co. In addition, an affiliate of RBC Capital Markets, LLC is expected to be a joint lead arranger, administrative agent and a lender under the
company's new revolving credit facility; and an affiliate of KeyBanc Capital Markets Inc. is expected to be a joint lead arranger and a lender under the company's new revolving credit facility.
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In the ordinary course of their various business activities, the underwriters and their respective
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers,
and such investment and securities activities may involve securities and/or instruments of the company. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in
respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
European Economic Area
In relation to each Member State of the European Economic Area which
has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:
(a) to
legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total
balance sheet of more than
€
43,000,000 and (3) an annual net turnover of more than
€
50,000,000, as shown in its last annual or consolidated accounts;
(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or
(d) in any other circumstances which do not require the publication by the company of a prospectus pursuant to Article 3 of the
Prospectus Directive.
For the purposes of this provision, the expression an "offer of shares to the public" in relation to
any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the
shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant
implementing measure in each Relevant Member State.
Each underwriter has represented and agreed that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within
the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the company; and
(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the
United Kingdom.
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Hong Kong
The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong
Kong), (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder or (iii) in other circumstances which do not result in the document
being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of
issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect
to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation
for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore
other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in
accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an
accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be
transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.
Japan
The securities have
not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in
Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly
or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and
ministerial guidelines of Japan.
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LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed upon for us by O'Melveny & Myers LLP, New York, New York.
The underwriters have been represented by Cravath, Swaine & Moore LLP, New York, New York.
EXPERTS
The consolidated financial statements of Francesca's Holdings Corporation at January 29, 2011, and for the year then ended, appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements as of January 30, 2010 and for each of the two years in the period ended January
30, 2010 included in this Prospectus and the Registration Statement have been so included in reliance on the report of BDO USA, LLP (formerly known as BDO Seidman, LLP), an independent registered public accounting firm, appearing elsewhere here in
and in the Registration Statement, given on the authorization of said firm as experts in auditing and accounting.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On August 10, 2010, the Audit Committee of the Board of Directors
of the company dismissed BDO USA, LLP (formerly known as BDO Seidman, LLP) ("BDO") as the company's independent registered public accounting firm.
With respect to BDO and its service as the company's independent registered public accounting firm, during the fiscal years ended January 31, 2009 and January 30, 2010 ("Fiscal Years 2008 and
2009"):
Ÿ
BDO's reports on the company's consolidated financial statements for Fiscal Years 2008 and 2009 did not contain an adverse opinion or a disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles.
Ÿ
There were no disagreements with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of BDO, would have caused BDO to make a reference to the subject matter of the disagreement(s) in connection with its reports on the financial statements of the company for such years and through
August 10, 2010, the date of BDO's dismissal as the company's independent registered public accounting firm.
Ÿ
There were no "reportable events" as described in Item 304(n)(1)(v) of Regulation S-K other than at January 31, 2009, the Company identified a
material weakness in internal controls over financial reporting related to the Company's accounting for its Convertible Redeemable Preferred Stock – Series A. This material weakness resulted in a material error and correction of the
Company's annual financial statements for the fiscal year ended January 31, 2009 prior to their original issuance. The Company discussed this material weakness with BDO and has authorized BDO to respond fully to inquiries of Ernst & Young,
successor auditors concerning this matter.
We have provided BDO a copy of the disclosures we are making in this
prospectus and the registration statement of which this prospectus is a part prior to their initial filing with the SEC and requested that BDO furnish us with a letter addressed to the SEC stating whether or not BDO agrees with the above statements.
A copy of such letter, dated April 18, 2011 is filed as Exhibit 16.1 to the registration statement of which this prospectus forms a part.
The Audit Committee of the Board of Directors of the company has conducted a competitive process to select a firm to serve as the company's
independent registered public accounting firm for the fiscal year ended January 29, 2011. On August 10, 2010, the Audit Committee of the Board of Directors of the company approved the engagement of Ernst & Young LLP
("E&Y") as its independent
134
Table of Contents
registered public accounting firm for the fiscal year ending January 29, 2011 subject to completion of normal client acceptance procedures. In deciding to engage E&Y, the Audit Committee
of the Board of Directors of the company reviewed auditor independence and existing commercial relationships with E&Y, and concluded that E&Y has no commercial relationship with the company that would impair its independence. During Fiscal
Years 2008 and 2009, neither the company nor anyone acting on behalf of the company, consulted E&Y regarding any of the matters or events set forth in Item 304(a)(2)(i) or Item 304(a)(2)(ii) of Regulation S-K.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act with the SEC with respect to the shares of our common stock to be sold in this offering. This prospectus, which constitutes part of
the registration statement, does not include all of the information contained in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement and its exhibits and schedules for additional
information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of
the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly and special reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement and the exhibits and schedules thereto, at the SEC's website at
www.sec.gov
. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
Upon effectiveness of the registration statement, we will become subject to the informational requirements of the Exchange Act and will be required
to file reports and other information with the SEC. You will be able to inspect and copy these reports and other information at the public reference facilities maintained by the SEC at the address noted above. You also will be able to obtain copies
of this material from the Public Reference Room as described above, or inspect them without charge at the SEC's website. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our
independent registered public accounting firm. We maintain a website at
www.francescascollections.com
.
Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or
the registration statement of which this prospectus forms a part, and you should not rely on any such information in making your decision whether to purchase our securities.
135
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FRANCESCA'S HOLDINGS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Balance Sheets as of January 29, 2011 and January 30, 2010
F-4
Consolidated Statements of Operations for the Fiscal Years Ended January 29, 2011, January 
30, 2010 and January 31, 2009
F-5
Consolidated Statements of Changes in Convertible Redeemable Preferred Stock and Shareholders' Deficit for the Fiscal
 Years Ended January 29, 2011, January 30, 2010 and January 31, 2009
F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended January 29, 2011, January 
30, 2010 and January 31, 2009
F-7
Notes to Consolidated Financial Statements
F-8
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Francesca's Holdings Corporation:
We have audited the accompanying consolidated balance sheet of Francesca's Holdings Corporation (the "Company") as of January 29, 2011, and the related consolidated statements of operations,
changes in convertible redeemable preferred stock and shareholders' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit
of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Francesca's Holdings Corporation at January 29, 2011, and the consolidated results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
April 15, 2011
Dallas, Texas
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors
Francesca's Holdings Corporation
Houston, Texas
We have audited the accompanying consolidated balance sheet of Francesca's Holdings Corporation (the "Company") as of
January 30, 2010, and the related consolidated statements of operations, changes in convertible redeemable preferred stock and shareholders' deficit, and cash flows for each of the two years in the period ended January 30, 2010. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Francesca's Holdings Corporation at January 30, 2010, and the
results of its operations and its cash flows for each of the two years in the period ended January 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
(formerly known as
BDO Seidman, LLP)
Houston, Texas
June 22, 2010, except for
footnotes 2 and 9, which
are as of April 15, 2011
F-3
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
January 29,
2011
January 30,
2010
ASSETS
Current assets:
Cash and cash equivalents
$
12,516
$
13,767
Accounts receivable
4,054
497
Inventories
11,959
6,378
Deferred income taxes
1,321
573
Prepaid expenses and other current assets
1,871
1,103
Total current assets
31,721
22,318
Property and equipment, net
21,300
7,495
Deferred income taxes
2,704
766
Other assets, net
3,399
639
TOTAL ASSETS
$
59,124
$
31,218
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable
$
6,146
$
2,703
Accrued liabilities
6,410
3,315
Current portion of long-term debt
5,938
—
Total current liabilities
18,494
6,018
Deferred and accrued rents
8,223
2,224
Long-term debt
87,875
—
Total liabilities
114,592
8,242
Commitments and contingencies
—
—
Convertible redeemable preferred stock—Series A
—
85,854
Shareholders' deficit:
Common stock—$.01 par value, 80.0 million shares authorized, 40.5 million and 26.0 million shares issued and outstanding at January
29, 2011 and January 30, 2010, respectively
405
260
Additional paid-in capital (distributions in excess of capital)
27,232
(63,138
)
Accumulated deficit
(83,105
)
—
Total shareholders' deficit
(55,468
)
(62,878
)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
$
59,124
$
31,218
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-4
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
Net sales
$
135,176
$
79,367
$
52,290
Cost of goods sold and occupancy costs
65,008
37,244
25,358
Gross profit
70,168
42,123
26,932
Selling, general and administrative expenses
40,525
24,641
19,962
Income from operations
29,643
17,482
6,970
Other income (expense)
(2
)
38
14
Interest income (expense)
(1,633
)
2
4
Income before income tax expense
28,008
17,522
6,988
Income tax expense
11,113
6,918
2,382
Net income
16,895
10,604
4,606
Increase in redemption value of convertible redeemable preferred stock
—
(60,271
)
—
Convertible redeemable preferred stock accrued dividends
—
(2,022
)
(1,641
)
Net income (loss) available to shareholders
$
16,895
$
(51,689
)
$
2,965
Less: Income attributable to participating securities
—
—
(1,038
)
Net income (loss) available to common shareholders
$
16,895
$
(51,689
)
$
1,927
Basic earnings (loss) per common share
$
0.43
$
(1.99
)
$
0.07
Diluted earnings (loss) per common share
$
0.41
$
(1.99
)
$
0.07
Dividends declared per common share
$
2.39
—
—
Weighted average shares outstanding:
Basic shares
39,385
26,000
26,000
Diluted shares
40,907
26,000
26,000
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE
PREFERRED STOCK AND SHAREHOLDERS' DEFICIT
(In thousands)
Convertible
Redeemable Preferred
Stock—Series A
Common Stock
Additional
Paid-in
Capital
(Distributions
in Excess of
Capital)
Retained
Earnings
(Accumulated
Deficit)
Total
Shareholders'
Deficit
Shares
Outstanding
Amount
Shares
Outstanding
Par
Value
Balance, February 2, 2008
35
$
21,920
26,000
$
260
$
(13,124
)
$
128
$
(12,736
)
Net income
—
—
—
—
—
4,606
4,606
S-Corporation distributions
—
—
—
—
—
(1,525
)
(1,525
)
Stock-based compensation
—
—
—
—
—
8
8
Accrued dividends for Preferred Stock—Series A
—
1,641
—
—
—
(1,641
)
(1,641
)
Balance, January 31, 2009
35
23,561
26,000
260
(13,124
)
1,576
(11,288
)
Net income
—
—
10,604
10,604
Stock-based compensation
—
—
—
—
—
99
99
Increase in redemption value of Preferred Stock—Series A
—
60,271
—
—
(50,014
)
(10,257
)
(60,271
)
Accrued dividends for Preferred Stock—Series A
—
2,022
—
—
—
(2,022
)
(2,022
)
Balance, January 30, 2010
35
85,854
26,000
260
(63,138
)
—
(62,878
)
Net income
—
—
—
16,895
16,895
Conversion of Preferred Stock—Series A to common stock
(35
)
(85,854
)
14,000
140
85,714
—
85,854
Stock-based compensation
—
—
—
—
2,400
—
2,400
Cash dividends declared and related tax benefit
—
—
—
—
1,220
(100,000
)
(98,780
)
Stock options exercised and related tax benefit
—
—
457
5
1,036
—
1,041
Balance, January 29, 2011
—
$
—
40,457
$
405
$
27,232
$
(83,105
)
$
(55,468
)
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Fiscal Year Ended
January 29,
2011
January 30,
2010
January 31,
2009
Cash Flows Provided by Operating Activities:
Net income
$
16,895
$
10,604
$
4,606
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
2,377
1,215
700
Stock-based compensation expense
2,400
99
8
Excess tax benefit from stock-based compensation
(1,757
)
—
—
Loss on sale of assets
25
—
—
Amortization of debt issuance costs
158
—
—
Deferred income taxes
(2,685
)
(833
)
(54
)
Changes in assets and liabilities:
Accounts receivables
(3,557
)
(126
)
(49
)
Inventories
(5,581
)
(794
)
310
Prepaid expenses and other assets
(1,549
)
(573
)
(407
)
Accounts payable
3,443
1,434
(298
)
Accrued liabilities
3,874
1,007
39
Deferred and accrued rents
5,999
1,440
315
Income tax payable
978
(196
)
(1,462
)
Net cash provided by operating activities
21,020
13,277
3,708
Cash Flows Used in Investing Activities:
Purchase of property and equipment
(16,208
)
(5,538
)
(2,013
)
Net cash used in investing activities
(16,208
)
(5,538
)
(2,013
)
Cash Flows Used in Financing Activities:
Dividends
(100,000
)
—
—
Excess tax benefit from stock-based compensation
1,757
—
—
Proceeds from debt
95,000
—
—
Repayments on debt
(1,187
)
—
—
Payment of debt issuance costs
(2,137
)
—
—
Proceeds from the exercise of stock options
504
—
—
S-Corporation distributions
—
—
(1,525
)
Net cash used in financing activities
(6,063
)
—
(1,525
)
Net increase (decrease) in cash and cash equivalents
(1,251
)
7,739
170
Cash and cash equivalents, beginning of year
13,767
6,028
5,858
Cash and cash equivalents, end of year
$
12,516
$
13,767
$
6,028
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes
13,509
7,946
3,935
Interest paid
163
—
—
Supplemental Non-Cash Financing Activities:
Accrual of dividends on Preferred Stock – Series A
—
2,022
1,641
Increase in redemption value of Preferred Stock Series A
—
60,271
—
The accompanying notes are an integral
part of these Consolidated Financial Statements.
F-7
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of
Business
Francesca's Holdings Corporation (the "Company") is a holding company incorporated in 2007 under the laws of
Delaware. The Company's business operations are conducted through its indirectly wholly-owned subsidiary Francesca's Collections, Inc., a corporation formed and existing under the laws of the State of Texas. Francesca's Collections,
Inc. is wholly-owned by Francesca's LLC (the "Parent"), a limited liability company formed and existing under the laws of Delaware. Parent is a wholly-owned subsidiary of the Company.
The Company operates a national chain of retail boutiques designed and merchandised to feel like independently owned, upscale boutiques and provide
its customers with an inviting, intimate and fun shopping experience. The Company offers a diverse and balanced mix of apparel, jewelry, accessories and gifts at attractive prices. At January 29, 2011, the Company operated 207 boutiques, which
are located in 38 states throughout the United States, and its e-commerce website.
In February 2010, two affiliates of CCMP
Capital Advisors, LLC ("CCMP"), acquired approximately 84% of the Company's outstanding shares (the "CCMP Acquisition") from the founders of the Company and Bear Growth Capital Partners, LP ("BGCP"). The Company
considered the application of push-down accounting to the Company's financial statements and determined that, given the percentage of equity interest acquired in the acquisition, push-down accounting treatment was not required. The Company
elected not to apply push-down accounting treatment as a result of the acquisition. In connection with the CCMP Acquisition, the Convertible Redeemable Preferred Stock- Series A ("Preferred Stock") was converted to common stock. In
addition, the outstanding stock options became fully vested and the management agreement with the holders of the Preferred Stock was terminated. See Notes 6 and 10 for more information. As described in Note 6, the Company recognized $1.0 million
compensation expense related to those options that became fully vested. The Company also incurred $0.2 million and $0.7 million of transaction costs which are included in selling, general and administrative expenses in the accompanying consolidated
statement of operations for the fiscal years ended January 29, 2011 and January 30, 2010, respectively.
On April 28,
2010, the Company authorized a split of its outstanding issued and outstanding stock in the ratio of four hundred to one (400-1). Accordingly, the accompanying consolidated financial statements have been retroactively adjusted to reflect the effects
of the stock split on common shares and per share amounts.
Fiscal Year
The Company maintains its accounts on a 52- to 53- week year ending on the Saturday closest to January 31. All references herein to fiscal year "2010", "2009" and "2008" represent
the 52-week periods ended January 29, 2011, January 30, 2010 and January 31, 2009, respectively.
Principles of Consolidation and
Presentation
The accompanying consolidated financial statements include the accounts of the Company and all its subsidiaries. All
significant inter-company balances and transactions have been eliminated in consolidation.
F-8
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reclassifications
In certain instances,
amounts previously reported in the fiscal year 2009 and 2008 financial statements have been reclassified from selling, general and administrative expenses to cost of goods sold and occupancy costs (including rent, utilities, repairs and maintenance,
taxes and licenses and common area expenses) to conform with the presentation in the fiscal year 2010 financial statements. The reclassifications had no effect on net income or shareholders' equity as previously reported.
Management Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales return, and expenses during the reporting periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities
measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:
Ÿ
Level 1—Quoted prices in active markets for identical assets or liabilities.
Ÿ
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Ÿ
Level 3—Unobservable inputs based on the Company's own assumptions.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. The carrying amount of the Company's debt approximates its fair value due to
proximity of the debt issue date and the latest balance sheet date and the variable component of the interest on the debt.
Cash and Cash Equivalents
The Company considers all interest-bearing deposits and investments purchased with an original maturity of three months or less to
be cash equivalents. The Company maintains cash balances at financial institutions that may from time to time exceed the Federal Deposit Insurance Corporation's insurance limits. The Company mitigates this concentration of credit risk by
monitoring the credit worthiness of the financial institutions.
F-9
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts Receivable
Accounts receivable
consist of amounts due from credit card companies, tenant allowances due from landlords and income tax receivable. The Company's management has reviewed accounts receivable for collectibility and has determined an allowance for doubtful
accounts is not necessary at January 29, 2011 and January 30, 2010.
Inventory
The Company values merchandise inventory at the lower of cost or market on a weighted-average cost basis. Inventory costs include freight-in. The
Company records merchandise receipts at the time they are delivered to the distribution center or to its boutiques from vendors.
The
Company reviews its inventory levels to identify slow-moving merchandise and generally uses promotional markdowns to clear slow-moving merchandise. Each period, the Company evaluates recent selling trends and the related promotional events or
pricing strategies in place to sell through the current inventory levels.
The Company also estimates a shrinkage reserve for the period
of time between the last physical count and the balance sheet date. The estimate for shrinkage reserve can be affected by changes in merchandise mix and changes in actual shrinkage trends.
Property and Equipment
Property and equipment is stated at cost. Depreciation of property and
equipment is provided on a straight-line basis for financial reporting purposes using the following useful lives:
Assets
Estimated Useful Lives
Equipment
3 - 5 years
Furniture and fixtures
5 years
Software
3 years
Signage and leasehold improvements
the lesser of 5 - 10 years or lease term
Assets under construction are not depreciated until the asset is placed in service and ready for use.
Maintenance and repairs of property and equipment are expensed as incurred, and major improvements are capitalized. Upon retirement, sale or other
disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in current earnings.
Impairment of Long-lived Assets
The Company periodically evaluates long-lived assets held for
use and held for sale whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash
flows, which is generally at a boutique level. Boutique assets are reviewed for impairment using factors including, but not limited to, the Company's future operating plans and
F-10
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to that boutique, compared to the carrying
value of the assets. The Company recognizes impairment if the sum of the undiscounted future cash flows of a boutique does not exceed the carrying value of the assets. For impaired assets, the Company recognizes a loss equal to the difference
between the net book value of the asset and its estimated fair value. Fair value is based on discounted future cash flows of the asset using a discount rate commensurate with the risk. In addition, at the time a decision is made to close a boutique,
the Company records an impairment charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. Based on the analysis performed, there was no impairment for each of the fiscal years ended January 29,
2011, January 30, 2010 and January 31, 2009.
Operating Leases
The Company leases boutiques and distribution center and office space under operating leases. The majority of the Company's lease agreements
provide for tenant improvement allowances, rent escalation clauses and/or contingent rent provisions.
The Company records tenant
improvement allowances and other landlord incentives as a component of deferred rent which is amortized on a straight-line basis over the lease term as a reduction of rent expense. The unamortized portion of deferred rent totaled $5.9 million and
$1.6 million at January 29, 2011 and January 30, 2010, respectively, and is included in deferred and accrued rents in the consolidated balance sheets.
The Company records straight-line rent expense beginning on the earlier of taking possession of the boutique (pre-opening or construction period) or the commencement date of the lease. In fiscal 2010, the Company
determined that its policy had historically been inconsistently applied. The Company corrected the deferred rent expense account, resulting in a non-cash $0.7 million cumulative adjustment to record additional rent expense during the first quarter
of fiscal 2010. That adjustment was included in the cost of goods sold and occupancy cost in the consolidated statements of operations. The adjustment did not impact historical cash flows and will not impact future net cash flows or the timing of
the payments under the related leases. Prior years' financial statements were not restated as the impact of these issues was immaterial to previously reported results for any individual prior year.
Certain leases provide for contingent rents, in addition to a basic fixed rent, which are determined as a percentage of gross sales in excess of
specified levels. The Company records a contingent rent liability and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.
Revenue Recognition
The Company
recognizes revenue upon purchase of merchandise by customers, net of estimated merchandise returns. Revenue is recognized for boutique sales at the point at which the customer receives and pays for the merchandise at the register. For on-line sales,
revenue is recognized upon delivery and includes shipping charges. Management estimates future returns on previously sold merchandise based on return history and current sales levels. The estimated sales returns are periodically compared to actual
sales returns and adjusted, if appropriate.
F-11
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gift Cards and Gift Card Breakage
The
Company accounts for the sale of gift cards as a liability at the time a gift card is sold. The liability is relieved and revenue is recognized upon redemption of the gift card. The Company's gift cards do not have an expiration date. We will
recognize income from the breakage of gift cards when the likelihood of redemption of the gift card is remote based on historical redemption patterns. The Company has not accumulated adequate historical data to reasonably estimate the amount of gift
cards that will never be redeemed. Consequently, the Company has not recognized gift card breakage income in fiscal years 2010, 2009 or 2008. The Company does not anticipate recognizing gift card breakage until it accumulates additional data beyond
fiscal year 2011.
Sales Taxes
The Company excludes all taxes assessed by a government authority directly imposed on revenue producing transactions between a seller and a customer
from revenue.
Cost of Goods Sold and Occupancy Costs
Cost of goods sold and occupancy costs include the direct cost of purchased merchandise, freight costs from the Company's suppliers to its distribution centers and freight costs for merchandise shipped
directly from its vendors to its boutiques, allowances for inventory shrinkage and obsolescence, boutique occupancy costs including rent, utilities, common area maintenance, property taxes, depreciation and boutique repair and maintenance costs, and
shipping costs related to e-commerce sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include boutique and headquarters payroll, employee benefits, freight from distribution centers to
boutiques, boutique pre-opening expense, credit card merchant fees, costs of maintaining and operating the Company's e-commerce business, travel and administration costs and other expenses related to operations at the corporate headquarters, as
well as share-based compensation. Pre-opening expenses (including boutique set-up and training expenses) incurred prior to the opening of new boutiques are expensed as incurred and are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.
Freight costs included in selling, general and administrative expenses amounted to
$0.8 million, $0.5 million and $0.3 million for the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009, respectively.
Advertising
Costs associated with advertising are charged to expense as incurred. For the
years ended January 29, 2011, January 30, 2010, and January 31, 2009 advertising costs were minimal.
Stock-Based Compensation
In connection with the Company's stock based compensation plans, the Board of Directors considers the estimated fair value of
the Company's stock when setting stock option exercise price as of the date of each grant. Because the Company is privately held and there is no public market for its
F-12
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
common stock, the fair market value of its common stock is determined by its Board of Directors at the time the option grants are awarded. In determining the fair value of its common stock, the
Board of Directors considers such factors as the Company's actual and projected financial results, the principal amount of the Company's indebtedness, valuations of the Company performed by third parties and other factors it believes are
material to the valuation process. Stock options granted in the first and second quarters of fiscal 2010 were valued using the implied enterprise value paid by CCMP for its acquisition of the equity securities of the Company in February 2010, as
described in Note 1.
Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a
straight-line basis over the employee's requisite service period (generally the vesting period of the equity grant). The Company estimates forfeitures for options granted that are not expected to vest. Changes in these inputs and assumptions
can materially affect the measurement of the estimated fair value of the stock-based compensation expense. The Company estimates the grant date fair value of stock option awards using the Black-Scholes option pricing model. See Note 6 for further
information.
Debt Issuance Costs
Costs incurred in connection with the Company's borrowings are capitalized and included in other assets in the consolidated balance sheets.
These costs are amortized to interest expense using the effective interest method over the term of the loan. In 2010, the Company incurred $2.2 million of costs related to the credit facility obtained during the year. At January 29, 2011, debt
issuance costs totaled $2.0 million, net of $0.2 million of accumulated amortization. Amortization expense amounted to $0.2 million for the fiscal year ended January 29, 2011.
Income Taxes
The Company accounts for income taxes using the liability method. Under this
method, the amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences that currently exist between the tax basis and the
financial reporting basis of the Company's assets and liabilities. Valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur.
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected
to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and
liabilities in the future.
A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the
position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. The
Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when the Company's judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
income tax expense and the effective tax rate in the period in which the new information becomes available. Interest and penalties related to unrecognized tax benefits are recognized in income
tax expense. The Company has no uncertain tax positions or related interest or penalties requiring accrual at January 29, 2011 and January 30, 2010.
Subsequent Event Evaluation
The Company has reviewed and evaluated material subsequent events
from the balance sheet date of January 29, 2011 through April 15, 2011, the issuance of the financial statements.
Recent Accounting
Pronouncements
In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("ASU") 2010-06,
Improving Disclosures About Fair Value Measurements
an update to Topic 820, Fair Value Measurements and Disclosures. ASU 2010-06 expands disclosure requirements related to fair value measurements including
(i) separately disclosing the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describing the reasons for the transfers and (ii) presenting separate information for Level 3 activity pertaining
to gross purchases, sales, issuances and settlements. The new disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for Level 3 activity disclosures, which are effective for fiscal years
beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a material impact on the Company's consolidated financial statements.
2. Earnings (Loss) per Share
Basic earnings per common share amounts are calculated using the
weighted-average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of Preferred
Stock and stock options using the if-converted and treasury stock methods, respectively.
In the years the Preferred Stock was
outstanding, the two-class method was used to calculate basic and diluted earnings (loss) per common share since it is a participating security under ASC 260
Earnings per Share
. The two-class method is an earnings allocation formula that
determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under the two-class method, basic earnings (loss) per common
share is computed by dividing net earnings (loss) attributable to common share after allocation of earnings to participating securities by the weighted-average number of common shares outstanding during the year. Diluted earnings (loss) per common
share is computed using the more dilutive of the two-class method or the if-converted method. In periods of net loss, no effect is given to participating securities since they do not contractually participate in the losses of the Company.
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or converted into common
stock, and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted earnings per share:
For the Fiscal Years Ended
January 29,
2011
January 30,
2010
January 31,
2009
(In thousands, except per share data)
Numerator:
Net Income
$
16,895
$
10,604
$
4,606
Less: Increase in redemption value of Preferred Stock
—
(60,271
)
—
Less: Preferred Stock dividends
—
(2,022
)
(1,641
)
Net income (loss) available to shareholders
16,895
(51,689
)
2,965
Less: Income attributable to participating securities
—
—
(1,038
)
Net income (loss) available to common shareholders
$
16,895
$
(51,689
)
$
1,927
Denominator:
Weighted-average common shares outstanding—basic
39,385
26,000
26,000
Options and other dilutive securities
1,522
—
—
Weighted-average common shares outstanding—diluted
40,907
26,000
26,000
Per common share:
Basic earnings (loss) per common share
$
0.43
$
(1.99
)
$
0.07
Diluted earnings (loss) per common share
$
0.41
$
(1.99
)
$
0.07
As discussed above, the Company was
required to use the two-class method to compute basic and diluted earnings (loss) per common share during the period the Preferred Stock was outstanding. In fiscal year 2009, the adjustment to record the increase in redemption value of Preferred
Stock (see Note 10) reduced undistributed earnings, to be allocated between common shares and participating securities, to zero for purposes of calculating earnings per share using the two-class method. As such, net losses were solely attributable
to common shareholders.
Stock options to purchase 1.0 million and 0.6 million shares of common stock for the fiscal years
2009 and 2008, respectively, were outstanding but not included in the computation of diluted earnings per shares due to its anti-dilutive effect.
For the fiscal years 2009 and 2008, Preferred Stock that could be converted to 14 million shares of common stock were not included in the computation of diluted earnings per share, as the effect of doing so
would have been anti-dilutive. Accordingly, dividends paid and the increase in the redemption value of Preferred Stock was deducted to arrive at net income (loss) available to common shareholders. See Note 10 for more information regarding Preferred
Stock.
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Detail of Certain Balance Sheet Accounts
January 29,
2011
January 30,
2010
(in thousands)
Accounts and other receivables:
Credit card receivables
$
825
$
497
Tenant allowances
2,574
—
Income tax receivable
655
—
$
4,054
$
497
Property and equipment, net:
Equipment
$
1,798
$
1,374
Furniture and fixtures
4,475
2,593
Signage and leasehold improvements
14,829
5,604
Construction in progress
5,799
1,314
Software
191
—
27,092
10,885
Less accumulated depreciation
(5,792
)
(3,390
)
$
21,300
$
7,495
Accrued liabilities:
Gift cards and store credits outstanding
$
2,110
$
1,152
Accrued payroll, benefits and bonuses
2,573
1,074
Accrued interest
1,308
—
Accrued sales tax
419
309
Income tax payable
—
780
$
6,410
$
3,315
Deferred and accrued rents:
Deferred rent
$
5,880
$
1,646
Accrued rent
2,343
578
$
8,223
$
2,224
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Income Taxes
The provision for income
tax expense for the years ended January 29, 2011, January 30, 2010 and January 31, 2009 is as follows:
For Fiscal Years Ended
2011
2010
2009
(in thousands)
Current:
Federal
$
11,778
$
6,667
$
2,094
State
2,020
1,084
342
Total
13,798
7,751
2,436
Deferred:
Federal
(2,275
)
(724
)
(56
)
State
(410
)
(109
)
2
Total
(2,685
)
(833
)
(54
)
Income tax expense
$
11,113
$
6,918
$
2,382
A reconciliation of the statutory federal income tax rate to the effective tax rate follows:
For Fiscal Years Ended
2011
2010
2009
Income tax expense at statutory rate
35.0
%
35.0
%
34.0
%
Nondeductible expenses
0.5
0.9
0.4
State tax, net of federal benefit
3.7
4.0
3.2
Other
0.5
(0.4
)
(3.5
)
Effective tax rate
39.7
%
39.5
%
34.1
%
For fiscal year 2008, the provision for income taxes was reduced by $0.2 million due to adjustments made to deferred
income taxes for differences between estimates used in recording the income tax provision in the prior year and the actual federal and state tax returns.
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities are recorded due to different carrying amounts for financial and income tax reporting purposes arising from
cumulative temporary differences as measured by enacted tax rates, which will be in effect when these temporary differences reverse. These differences consist of the following at January 29, 2011 and January 30, 2010:
January 29,
2011
January 30,
2010
(in thousands)
Deferred tax assets:
Inventories
$
502
$
221
Accrued liabilities
819
352
Deferred and accrued rents
2,618
890
Equity based compensation
358
—
Total deferred tax assets
4,297
1,463
Deferred tax liabilities
Property and equipment
272
106
Other
—
18
Total deferred tax liabilities
272
124
Net deferred tax assets
$
4,025
$
1,339
The Company's tax years are subject to examination by federal authorities from 2008 forward, and by state taxing
authorities from 2007 forward.
5. Credit Facility
On December 11, 2008, the Company entered into a $3 million revolving credit agreement ("Credit Facility") with a bank. The Credit Facility provided a $3 million revolving line of credit that matured on
December 11, 2011. On January 25, 2010, the Company requested the Credit Facility be terminated, and on February 16, 2010, the bank terminated the Credit Facility.
On November 17, 2010, Francesca's Collections, Inc. (the "Borrower") entered into a senior secured credit facility with a
syndicate of financial institutions, which provided financing of up to $100.0 million consisting of a $95.0 million term loan facility and a $5.0 million revolving credit facility each with a maturity date of November 17, 2013. The
principal of the term loan component will be repaid in quarterly installments of $1.9 million in the first year, $2.4 million in the second and third year and the remainder on the maturity date. The revolving credit facility includes borrowing
capacity available for letters of credit. As of January 29, 2011, the Company had $93.8 million outstanding under its term loan facility and $5.0 million available under its revolving credit facility. There were no letters of credit
outstanding at January 29, 2011.
All obligations under the senior secured credit facility are unconditionally guaranteed by,
subject to certain exceptions, Parent and each of the Borrower's existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under the senior secured credit facility, and the guarantees of those obligations (as
well as cash management obligations and any interest hedging or other swap agreements), are secured by substantially all of the Borrower's assets as well as those of the subsidiary guarantor.
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The borrowings under the senior secured credit facility bear interest at a rate equal to an applicable margin plus, at the Borrower's option,
either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the higher of (i) the prime rate of Royal Bank of Canada and (ii) the federal funds rate plus 1/2 of 1%, (2) the LIBOR for an interest period
of one month plus 1.00% and (3) 2.75% or (b) in the case of LIBOR borrowings, a rate equal to the higher of (1) 1.75% and (2) the LIBOR for the interest period relevant to such borrowing. The current applicable margin for
borrowings under both the revolving credit facility and the term loan facility is 5.00% with respect to base rate borrowings and 6.00% with respect to LIBOR borrowings. The applicable margin for borrowings under both the revolving credit facility
and the term loan facility for base rate borrowings increases to 6.50% and 9.00% on June 1, 2012 and June 1, 2013, respectively. The applicable margin for borrowings under both the revolving credit facility and the term loan facility for
LIBOR borrowings increases to 7.50% and 10.00% on June 1, 2012 and June 1, 2013, respectively. As of January 29, 2011, the loans under the senior secured credit facility were LIBOR-based and had an interest rate of 7.75%.
In addition to paying interest on the outstanding principal under the senior secured credit facility, the Borrower is required to pay a commitment
fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder at a rate equal to 0.5%. The Borrower also pays customary letter of credit fees.
The senior secured credit facility requires the Borrower to maintain a maximum consolidated leverage ratio and a maximum senior leverage ratio, in
each case, commencing with the fiscal quarter ending January 29, 2011 and a minimum consolidated fixed charge coverage ratio commencing with the fiscal quarter ending October 31, 2011. The Company's ability to declare dividends
from Francesca's Collections, Inc. to Holdings at January 29, 2011, was subject to restrictions under the senior secured credit facility. Those restrictions include a maximum leverage ratio. If the Company's debt under its Credit
Facility exceeds that ratio, it is restricted from paying dividends. As of fiscal year-end 2010, this ratio exceeded that maximum, and, thereby was restricted from paying dividends.
The Borrower is in compliance with the debt covenants of its senior secured credit facility as of January 29, 2011.
Debt maturities
The term loan, which
had aggregate principal balance of $93.8 million at January 29, 2011, is due as follows:
Fiscal Year
Amount
(in thousands)
2011
$
5,938
2012
9,500
2013
78,375
$
93,813
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Stock-Based Compensation
2007 Stock Incentive Plan
In 2007, the Company adopted the Francesca's Holdings Corporation 2007 Stock Incentive Plan (the "2007 Plan"), to
be administered by Board of Directors or a committee designated by its Board of Directors (the "Committee"). Under the 2007 Plan, awards may be in the form of stock options, restricted stock or phantom shares and may be granted to any
employee, director or consultant of the Company. With respect to incentive stock options granted, the share exercise price shall not be less than the fair market price on the date of grant. For non-qualified stock options granted, the share exercise
price of each option is determined by the compensation committee of the Board of Directors, which considers the estimated fair value of the Company's stock when setting stock option price as of the date of each grant. The awards generally vest
evenly over four to five years and have a ten year contractual term.
The CCMP Acquisition triggered a "Change of Control"
that resulted in the acceleration of vesting, in accordance with the provisions of the 2007 Plan, of the 906,000 stock options issued and outstanding. Accordingly, the Company recognized compensation expense of $1.0 million included in selling,
general and administrative expenses in the consolidated statements of operations for the fiscal year ended January 29, 2011 related to the accelerated vesting.
On April 28, 2010, the plan was amended to adjust the number of shares available for issuance to account for a 400-for-1 stock split. Accordingly, the number of shares authorized to be issued under the 2007
Plan increased to 2,105,200 shares. As of January 29, 2011, the Company can no longer grant awards under the 2007 Plan.
2010 Stock Incentive
Plan
On February 27, 2010, the Company adopted the Francesca's Holdings Corporation 2010 Stock Incentive Plan (the
"2010 Plan") to be administered by the Board of Directors or a Committee. Under the 2010 Plan, awards may be in the form of stock options, stock or restricted stock and may be granted to any officers, directors, eligible employees and
consultants of the Company. Exercise prices shall not be less than the fair market value of the Company's common stock at the date of grant as determined by the Board of Directors. The awards generally vest over four to five years and have a
ten year contractual term.
On April 28, 2010, the plan was amended to adjust the number of shares available for issuance to
account for a 400-for-1 stock split. Accordingly, the number of shares authorized to be issued under the 2010 Plan increased to 2,020,400 shares. As of January 29, 2011 there were 77,312 options remaining that can be granted under the 2010
Plan.
Stock Option Award Modification
In November 2010, the Board of Directors authorized and paid a cash dividend equal to $2.39 per share on its common stock following the issuance of a senior secured credit facility (see Note 5). In accordance with
applicable plan documents, stock option holders are entitled to an equitable adjustment to their stock option awards upon, among other events, a recapitalization of the Company. As a result, the Board of Directors approved the reduction of the
exercise price of certain outstanding options (724,000 total options) in an amount equal to the per share cash dividend effective on
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 12, 2010 to reduce the dilution effect of the cash dividend. No incremental compensation expense was recognized because the fair value of the awards did not increase as a result of
the modification. Additionally, the Board of Directors allowed certain stock option holders (1,318,000 total options) to participate in the cash dividend in lieu of stock price adjustment. The Company recognized incremental compensation expense of
$0.3 million related to vested options for which the option holders received a cash dividend in lieu of the decrease in exercise price.
Stock
Options
The following table presents stock options granted, vested and expired and aggregate intrinsic value under the existing
share based compensation plans. The intrinsic value of the stock options was calculated based on a $10.19 estimated fair market value per share of the Company's common stock as of January 29, 2011.
Number
of
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic Value
(Per share data)
(in Years)
(In thousands)
Outstanding as of January 30, 2010
906,000
$
0.94
8
Options granted
1,994,430
$
6.18
9
Options exercised
(457,342
)
$
0.91
9
$
2,506
Options forfeited or expired
—
$
—
—
$
—
Outstanding as of January 29, 2011
2,443,088
$
5.23
9
$
12,126
Exercisable at January 29, 2011
685,340
$
2.71
7
$
5,127
During fiscal years 2010, 2009 and 2008, 1,994,430, 406,000 and 100,000 stock options, respectively, were granted at a
weighted-average grant date fair value of $3.99, $2.77 and $0.06, respectively. In fiscal year 2010, proceeds from stock option exercises amounted to $0.5 million.
The fair value of stock options was estimated on the date of grant using Black Scholes option pricing model using the following assumptions:
2010
2009
2008
Expected volatility
54.2 % - 60.6%
85.4%
53.5%
Risk-free interest rate
1.6% - 3.2%
0.9%
3.2%
Weighted average term
6.27 - 6.5
2.00
6.42
Expected dividend yield
—
—
—
The risk-free interest rate was
determined based on the rate of Treasury instruments with maturities similar to those of the expected term of the award being valued. The expected dividend yield was based on the Company's expectations of not paying dividends on its common
stock for the foreseeable future. The expected volatility incorporates historical and implied volatility of similar entities whose share prices are publicly available.
Compensation expense for the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009 totaled approximately $2.4 million, $0.1 million and less than $0.1 million, respectively.
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Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information regarding non-vested outstanding stock options as of January 29, 2011:
Options
Weighted
Average
Fair Value at
Grant Date
Non-vested as of January 30, 2010
706,000
$
1.58
Granted
1,994,430
$
3.99
Vested
942,682
$
2.09
Cancelled
—
—
Non-vested as of January 29, 2011
1,757,748
$
4.04
As of January 29, 2011, there was approximately $7.3 million of total unrecognized compensation cost related to
non-vested stock option awards that is expected to be recognized over a weighted-average period of 3.7 years. The total fair value of options vested during the fiscal years ended January 29, 2011, January 30, 2010 and January 30, 2009
was $2.0 million, less than $0.1 million and less than $0.1 million, respectively.
7. Employee Benefits
In October 2009, the Company adopted a Profit Sharing and 401(k) Plan (the "Plan") under which full-time and part-time employees
become eligible to participate following twelve consecutive months of employment. Eligible employees may elect to contribute a percentage of their earnings to the 401(k) component of the Plan, and the Company makes a discretionary contribution to
the Plan based on the contribution of the employees. The Profit Sharing component of the Plan is entirely funded by the Company at its sole discretion. Effective January 1, 2011, the 401(k) component of the Plan was amended whereby the Company
will make matching contributions equal to 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions. For the fiscal years ended January 29, 2011 and January 30, 2010, the Company's matching
contributions were $0.1 million and less than $0.1 million, respectively.
8. Commitments and Contingencies
Operating leases
The Company leases
boutique space and office space under operating leases expiring in various years through the fiscal year ending 2021. Certain of the leases provide that the Company may cancel the lease, with penalties as defined in the lease, if the Company's
boutique sales at that location fall below an established level. Certain leases provide for additional rent payments to be made when sales exceed a base amount. Certain operating leases provide for renewal options for periods from three to five
years at their fair rental value at the time of renewal.
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Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Minimum future rental payments under non-cancellable operating leases as of January 29, 2011, are approximately as follows:
Fiscal Year
Amount
(in thousands)
2011
$
15,285
2012
15,656
2013
13,636
2014
12,302
2015
11,309
Thereafter
50,529
$
118,717
For the years ended January 29, 2011, January 30, 2010 and January 31, 2009, rent expense totaled
$12.2 million, $7.2 million and $5.2 million, respectively. For the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009, common area maintenance charges totaled $2.6 million, $1.5 million and $0.9 million,
respectively, and other rental charges amounted to $1.3 million, $0.8 million and $0.7 million, respectively, consisting primarily of property taxes and advertising fees.
Legal Proceedings
From time to time, the Company is subject to various claims and legal
proceedings arising in the ordinary course of business. While the outcome of any such claim cannot be predicted with certainty, in the opinion of management, the outcome of these matters will not have a material adverse effect on the Company's
business, results of operations or financial conditions.
9. Segment Reporting and Concentration of Risk
The Company determined its operating segments on the same basis used internally to evaluate performance. The Company's reporting segments are
the operation of boutiques and the e-commerce website, which have been aggregated into one reportable financial segment. The Company aggregates its operating segments because (i) the merchandise offered at retail locations and through the e-commerce
business is largely the same, (ii) management believes that the majority of its e-commerce customers are also customers of retail locations and (iii) the merchandise margin of both segments is similar. All of the Company's identifiable assets
are located in the United States.
The following is net sales information regarding the Company's major product classes:
For Fiscal Years Ended
January 29,
2011
January 30,
2010
January 31,
2009
(in thousands)
Apparel
$
70,326
$
45,540
$
26,829
Jewelry
27,911
16,764
12,281
Accessories
19,567
8,007
5,391
Gifts
17,367
8,949
7,789
Merchandise sales
$
135,171
$
79,260
$
52,290
The above table does not include shipping revenue and allowance for returns.
F-23
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For fiscal years 2010 and 2009, two of the Company's vendors accounted for approximately 23% of its purchases, with no single vendor accounting
for more than 15% of purchases. In fiscal year 2008, one vendor accounted for 12% of the Company's total purchases. Those vendors are related parties. See Note 11. Other than those mentioned, no vendor accounted for more than 10% of the
Company's purchases during the fiscal years 2010, 2009 and 2008. The Company believes that there are other vendors that could replace these vendors and therefore loss of one or all would not result in a material disruption to its business.
10. Convertible Redeemable Preferred Stock—Series A
Under its Certificate of Incorporation, the Company is authorized to issue 45,000 shares of undesignated Preferred Stock. In April 2007, the Board of Directors designated 35,000 preferred shares as Convertible
Redeemable Preferred Stock—Series A, par value $0.01 per share, all of which were outstanding through February 25, 2010. The recipients of the Preferred Stock simultaneously purchased a portion of the Company's common stock directly
from the common shareholders and then exchanged such common stock for Preferred Stock. Accordingly, to properly record the redemption amount of the Preferred Stock ("Face Amount") at that time, a distribution in excess of capital was
recorded. Distributions in excess of capital primarily represent deemed dividends recorded to properly reflect the redemption value of Preferred Stock. Distributions in excess of capital was charged with these deemed dividends as the Company did not
have sufficient retained earnings or additional paid in capital at the time of issuance. Upon conversion of the Preferred Stock to common stock, the redemption value of Preferred Stock was treated as contributed capital, which eliminated the
distributions in excess of capital and establish additional paid in capital.
The Convertible Redeemable Preferred Stock—Series A
had the following rights and privileges:
Ÿ
Dividend
—The Preferred Stock accrued cash dividends effective each January 1, whether declared or not, at a rate of 12% per year of the
original issue price of the Preferred Stock. In the event that certain earnings before income tax, depreciation and amortization ("EBITDA") thresholds were met in the calendar year 2007, the dividend rate was to be substituted by 15% or
10%, as appropriate in accordance with the Certificate of Designation governing the Preferred Stock. The Company accrued the required dividends, at the dividend rate of 10% having met the conditions under the Certificate of Designation to use such
rate, throughout the year and had considered it when estimating the redemption value of the Preferred Stock at each reporting period in the accompanying consolidated balance sheets. The Preferred Stock could also participate in dividends on common
stock, if declared.
Ÿ
Voting—
The holders of the Preferred Stock voted on an as-converted basis together with the holders of the Company's common stock as a single
class, except with respect to any increase or decrease in the authorized shares of common stock, as to which the holders of the Preferred Stock had no right to vote.
Ÿ
Liquidation
— Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or the consummation of any Change of
Control Transaction (as defined in the Certificate of Designations governing the Preferred Stock) each holder of outstanding shares of Preferred Stock was entitled to receive an amount equal to the greater of (i) $571.43 per share plus all
accumulated but unpaid dividends and (ii) the amount that would be distributed or payable in respect of the number of shares of common stock issuable upon conversion of the Preferred Stock if such conversion occurred immediately prior to such
liquidation event or change of control transaction.
F-24
Table of Contents
FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ÿ
Conversion and redemption feature
—The Preferred Stock is convertible into equal number of shares of common stock (adjusted for any stock split) or
was mandatorily convertible into common stock upon a Qualified IPO as defined in the Certificate of Designation governing the Preferred Stock. Given that the redemption feature was outside the Company's control, the Preferred Stock was
reflected in the consolidated balance sheets as temporary equity for the period it was outstanding. Upon voluntary or mandatory conversion of the Preferred Stock to common stock all accrued and unpaid dividends were to be deemed automatically
satisfied and extinguished without any adjustment to the conversion price or any increase in the number of shares of common stock into which the Preferred Stock was convertible in respect of such accrued but unpaid dividends. The redemption price
was the greater of the face amount of the Preferred Stock plus all accrued and unpaid dividends ("Base Amount") or the fair market value of the Preferred Stock. The Company was required to record the Preferred Stock at its estimated fair
market value if determined that the fair market value exceeded the Base Amount. For accounting purposes, the Company has elected to adjust the carrying value of Preferred Stock to equal the redemption value at the end of each reporting period. The
increase in redemption value was recorded as a reduction to retained earnings or, in the absence of retained earnings, paid in capital.
The fair value of the Company's Preferred Stock was estimated using Level 3 inputs. At January 30, 2010, the estimated fair value totaled $85.9 million, exceeding the Base Amount. The fair value was based
on the purchase price paid by CCMP upon purchase of approximately 84% of the underlying common shares (into which the shares of Preferred Stock were converted to in February 2010), as further supported by an independent valuation. Accordingly, the
Preferred Stock was recorded at its estimated redemption value of $85.9 million, which took into consideration the accrued dividends of $5.6 million. At January 31, 2009, the estimated fair market value of the Preferred Stock, based on an
independent valuation, was determined to be less than the Base Amount. Accordingly, the face amount of the Preferred Stock of $20.0 million plus the accrued dividends of $3.6 million appropriately reflected the redemption value of the Preferred
Stock at January 31, 2009.
On February 26, 2010, the holders of Preferred Stock exercised their right to convert all of the
outstanding Preferred Stock into 14.0 million shares of common stock in connection with the acquisition by CCMP of approximately 84% of the Company's outstanding shares. Thus, there were no outstanding shares of Preferred Stock at
January 29, 2011.
11. Related Party Transactions
Stony Leather, Inc. ("Stony") and KJK Trading Corporation ("KJK") are two of the Company's vendors that supply apparel, jewelry, accessories and gifts. Stony is owned and operated by
certain shareholders of the Company while KJK is owned by the brother-in-law of one of the Company's founders. During the fiscal years 2010, 2009 and 2008, purchases from KJK totaled $6.6 million, $2.8 million and $1 million, respectively,
while purchases from Stony totaled $5.0 million, $3.1 million and $2.1 million, respectively. Purchases from Stony and KJK accounted for 10%, 12% and 12%, respectively, and 13%, 11% and 6%, respectively, in each case, for the fiscal years ended
2010, 2009 and 2008, respectively. Accounts payable due to related parties for inventory purchases was not material at January 29, 2011 and January 30, 2010.
The Company entered into a management agreement with the holder of the Preferred Stock where such holder would provide consulting services in exchange for quarterly fees of $62,500. Upon
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FRANCESCA'S HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the conversion of the Preferred Stock, the management agreement was terminated. For each of the fiscal years ended January 29, 2011, January 30, 2010 and January 31, 2009, the
Company incurred management fees totaling zero, $0.3 million and $0.3 million which are included in selling, general and administrative expenses in the consolidated statements of operations.
12. Quarterly Financial Data (Unaudited)
Fiscal Year 2010
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(in thousands)
Net sales
$
39,882
$
35,073
$
34,804
$
25,417
Gross profit
$
20,592
$
18,149
$
18,782
$
12,645
Income from operations.
$
8,912
$
8,401
$
9,709
$
2,621
Net income
$
4,328
$
5,115
$
5,861
$
1,591
Fiscal Year 2009
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(in thousands)
Net sales
$
24,607
$
19,501
$
20,008
$
15,251
Gross profit
$
12,932
$
10,204
$
10,919
$
8,068
Income from operations
$
4,580
$
4,053
$
5,591
$
3,258
Net income
$
2,788
$
2,450
$
3,390
$
1,976
F-26
Table of Contents
Shares
Francesca's Holdings Corporation
Common Stock
Goldman, Sachs & Co.
J.P. Morgan
Jefferies
RBC Capital Markets
Stifel Nicolaus Weisel
KeyBanc Capital Markets
Through and including                     ,
2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation
to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with the registration
of the common stock hereunder. All amounts are estimates except the SEC registration fee, the FINRA filing fee and The NASDAQ Global Select Market listing fee.
SEC registration fee
$
17,415
FINRA filing fee
15,500
The NASDAQ Global Select Market listing fee
*
Accounting fees and expenses
*
Legal fees and expenses
*
Blue Sky fees and expenses
*
Transfer Agent fees and expenses
*
Printing and engraving expenses
*
Miscellaneous Expenses
*
Total
*
*
To be provided by amendment.
Item 14.
Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law, or the DGCL, permits a corporation in its certificate of incorporation or an
amendment to eliminate or limit the personal liability of its directors or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of law or obtained an improper personal benefit. Our amended and restated certificate of
incorporation that will be in effect upon completion of this offering will provide for this limitation of liability.
Section 145
of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, to which he or she is a party by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section 145 further provides that in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating
court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Court of Chancery or such other court shall deem
proper.
Section 145(g) of the DGCL further authorizes a corporation to purchase and maintain insurance on behalf of any
indemnified person against any liability asserted against and incurred by such person
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in any indemnified capacity, or arising out of such person's status as such, regardless of whether the corporation would otherwise have the power to indemnify under Delaware law.
Our amended and restated certificate of incorporation and our amended and restated bylaws that will be in effect upon completion of this offering
will provide that we must indemnify our directors and officers to the fullest extent authorized by Delaware law and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking,
by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this section or otherwise.
Upon completion of this offering, we expect to enter into indemnification agreements with our directors and executive officers. In general, these
agreements provide that we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as a director or officer or in connection with his or her service at our request for another
corporation or entity.
The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person
may have or hereafter acquire under any statute, provision of our amended and restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from claims
made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.
The underwriting agreement to be filed as an exhibit to this registration statement will provide for indemnification of us and our directors and certain of our officers by the underwriters for certain liabilities.
Item 15.
Recent Sales of Unregistered Securities
Set
forth below is information regarding shares of common stock and preferred stock issued and options granted by us within the past three years that were not registered under the Securities Act. Also included is the consideration, if any, received by
us for such shares and options and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
(a)
Issuances of Capital Stock
(1)
Common Stock
On February 25, 2010, the
Registrant issued 406,000 shares of common stock, as adjusted for the 400-for-1 stock split, to an employee in connection with the exercise of stock options granted pursuant to the Registrant's 2007 Stock Incentive Plan.
On November 11, 2010, the Registrant issued 38,325 shares of common stock to an employee in connection with the exercise of stock options
granted pursuant to the Registrant's 2010 Stock Incentive Plan.
On December 16, 2010, the Registrant issued 13,017 shares of
common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant's 2010 Stock Incentive Plan.
On March 29, 2011, the Registrant issued 12,775 shares of common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant's 2010 Stock Incentive Plan.
II-2
Table of Contents
On April 1, 2011, the Registrant issued 9,609 shares of common stock to an employee in
connection with the exercise of stock options granted pursuant to the Registrant's 2010 Stock Incentive Plan.
On April 5,
2011, the Registrant issued 4,258 shares of common stock to an employee in connection with the exercise of stock options granted pursuant to the Registrant's 2010 Stock Incentive Plan.
(2)
Preferred Stock
None.
(b)
Stock Option Grants
On April 1, 2008, the
Registrant granted a stock option to purchase 100,000 shares of common stock at an exercise price of $1.43 per share, as adjusted for the 400-for-1 stock split, to an employee pursuant to the Registrant's 2007 Stock Incentive Plan.
On October 5, 2009, the Registrant granted a stock option to purchase 406,000 shares of common stock at an exercise price of $0.34 per share,
as adjusted for the 400-for-1 stock split, to an employee pursuant to the Registrant's 2007 Stock Incentive Plan.
On
March 26, 2010, the Registrant granted stock options to purchase 1,062,400 shares of common stock at an exercise price of $6.13 per share, as adjusted for the 400-for-1 stock split, to certain employees pursuant to the Registrant's 2010
Stock Incentive Plan.
On May 1, 2010, the Registrant granted stock options to purchase 400,000 shares of common stock at an
exercise price of $6.13 per share to certain employees pursuant to the Registrant's 2010 Stock Incentive Plan.
On July 1,
2010, the Registrant granted a stock option to purchase 80,000 shares of common stock at an exercise price of $6.13 per share to an employee pursuant to the Registrant's 2010 Stock Incentive Plan.
On December 1, 2010, the Registrant granted stock options to purchase 452,030 shares of common stock at an exercise price of $10.19 per share
to certain employees pursuant to the Registrant's 2010 Stock Incentive Plan.
No underwriters were involved in the foregoing
issuances of securities. The offers, sales and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance upon Rule 701 of the Securities Act or Section 4(2) of the
Securities Act. The offers, sales and issuances of the securities that were deemed to be exempt in reliance on Rule 701 were transactions under compensatory benefit plans and contracts relating to compensation as provided under Rule 701.
The offers, sales and issuances of the securities that were deemed to be exempt in reliance upon Section 4(2) were each transactions not involving any public offering, and all recipients of these securities were accredited investors within the
meaning of Rule 501 of Regulation D of the Securities Act who were acquiring the applicable securities for investment and not distribution and had represented that they could bear the risks of the investment. Each of the recipients of
securities in these transactions had adequate access, through employment, business or other relationships, to information about us.
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Table of Contents
Item 16.
Exhibits and Financial Statement Schedules
(a)
Exhibits
Exhibit Number
Description
1.1
*
Form of Underwriting Agreement.
3.1
Certificate of Incorporation of Francesca's Holdings Corporation.
3.2
Bylaws of Francesca's Holdings Corporation.
3.3
*
Form of Amended and Restated Certificate of Incorporation of Francesca's Holdings Corporation, to be effective upon completion of this offering.
3.4
*
Form of Amended and Restated Bylaws of Francesca's Holdings Corporation, to be effective upon completion of this offering.
4.1
*
Form of Specimen Common Stock of Francesca's Holdings Corporation.
5.1
*
Opinion of O'Melveny & Myers LLP.
10.1
Stockholders' Agreement, dated as of February 26, 2010, among Francesca's Holdings Corporation, CCMP Capital Investors II, L.P., CCMP Capital Investors (Cayman) II, L.P.,
Francesca's Collections, Inc., the Management Stockholders signatory thereto and any other Persons signatory thereto from time to time.
10.2
Credit Agreement, dated as of November 17, 2010, among Francesca's Collections, Inc., as borrower, Francesca's LLC, as parent, the other guarantors party thereto, Royal Bank of
Canada, as administrative agent and collateral agent, and the lenders party thereto.
10.3
Guaranty and Security Agreement, dated as of November 17, 2010, among Francesca's Collections, Inc., the other guarantors party thereto, and Royal Bank of Canada, as administrative
agent and collateral agent.
10.4
*
Form of Indemnification Agreement
10.5
*
Francesca's Holdings Corporation 2007 Stock Incentive Plan
10.6
*
Employee Stock Option Agreement for Theresa Backes, dated as of December 1, 2007
10.7
*
Francesca's Holdings Corporation 2010 Stock Incentive Plan
10.8
*
Nonqualified Stock Option Agreement for John De Meritt, dated as of March 31, 2010
10.9
*
Nonqualified Stock Option Agreement for Khalid M. Malik, dated as of March 31, 2010
10.10
*
Nonqualified Stock Option Agreement for Cindy Thomassee, dated as of May 1, 2010
10.11
*
Nonqualified Stock Option Agreement for Gene Morphis, dated as of December 14, 2010
10.12
*
Nonqualified Stock Option Agreement for Richard J. Emmett, dated as of March 31, 2010
10.13
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan
10.14
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan - Form of Nonqualified Stock Option Agreement
10.15
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan - Form of Restricted Stock Award Agreement
II-4
Table of Contents
Exhibit Number
Description
10.16
*
Francesca's Holdings Corporation 2011 Executive Bonus Plan
10.17
*
Employment Agreement between Francesca's Holdings Corporation and John De Meritt, dated as of February 26, 2010
10.18
*
Employment Letter Agreement between Francesca's Holdings Corporation and Gene Morphis, dated as of September 9, 2010
10.19
*
Employment Letter Agreement between Francesca's Holdings Corporation and Theresa Backes
10.20
*
Employment Agreement between Francesca's Holdings Corporation and Kyong Yi Gill, dated as of February 26, 2010
10.21
*
Employment Letter Agreement between Francesca's Holdings Corporation and Khalid M. Malik, dated as of November 12, 2009
10.22
*
Agreement and First Amendment to Employment Letter Agreement between Francesca's Holdings Corporation and Khalid M. Malik, dated as of February 26, 2010
10.23
*
Letter Agreement between Francesca's Holdings Corporation and Richard J. Emmett, dated as of September 25, 2009
10.24
*
Amendment to Letter Agreement between Francesca's Holdings Corporation and Richard J. Emmett, dated as of February 26, 2010
16.1
Letter from BDO USA, LLP (formerly known as BDO Seidman, LLP) to the Securities and Exchange Commission dated April 18, 2011.
21.1
Subsidiaries of Francesca's Holdings Corporation.
23.1
Consent of Ernst & Young LLP.
23.2
Consent of BDO USA, LLP (formerly known as BDO Seidman, LLP).
23.3
*
Consent of O'Melveny & Myers LLP (included as part of Exhibit 5.1).
24.1
Powers of Attorney (included on signature pages to the Registration Statement filed on April 18, 2011).
*
To be filed by amendment.
(b)
Financial Statement Schedules
Schedules not listed
have been omitted because the information required to be set forth therein is not applicable, not material or is shown in the financial statements or notes thereto.
Item 17.
Undertakings.
The undersigned Registrant
hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denomination and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person
II-5
Table of Contents
of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-6
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 18
th
day of April, 2011.
FRANCESCA'S HOLDINGS CORPORATION
By:
/s/ John De Meritt
Name: John De Meritt
Title: President, Chief
Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Francesca's Holdings Corporation, hereby severally constitute and appoint John De Meritt and
Gene Morphis, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and
in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any other registration statement for the same offering pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the
requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated.
Signature
Title
Date
/s/ John De Meritt
John De Meritt
President, Chief Executive Officer and Director
(Principal Executive Officer)
April 18, 2011
/s/ Gene Morphis
Gene Morphis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
April 18, 2011
/s/ Greg Brenneman
Greg Brenneman
Director, Non-Executive Chairman
April 18, 2011
/s/ Kyong Gill
Kyong Gill
Director, Executive Vice Chairperson
April 18, 2011
/s/ Neill Davis
Neill Davis
Director
April 18, 2011
II-7
Table of Contents
Signature
Title
Date
/s/ Richard Emmett
Richard Emmett
Director
April 18, 2011
/s/ Joseph Scharfenberger
Joseph Scharfenberger
Director
April 18, 2011
/s/ Richard Zannino
Richard Zannino
Director
April 18, 2011
II-8
Table of Contents
EXHIBIT INDEX
Exhibit Number
Description
1.1
*
Form of Underwriting Agreement.
3.1
Certificate of Incorporation of Francesca's Holdings Corporation.
3.2
Bylaws of Francesca's Holdings Corporation.
3.3
*
Form of Amended and Restated Certificate of Incorporation of Francesca's Holdings Corporation, to be effective upon completion of this offering.
3.4
*
Form of Amended and Restated Bylaws of Francesca's Holdings Corporation, to be effective upon completion of this offering.
4.1
*
Form of Specimen Common Stock of Francesca's Holdings Corporation.
5.1
*
Opinion of O'Melveny & Myers LLP.
10.1
Stockholders' Agreement, dated as of February 26, 2010, among Francesca's Holdings Corporation, CCMP Capital Investors II, L.P., CCMP Capital Investors (Cayman) II, L.P.,
Francesca's Collections, Inc., the Management Stockholders signatory thereto and any other Persons signatory thereto from time to time.
10.2
Credit Agreement, dated as of November 17, 2010, among Francesca's Collections, Inc., as borrower, Francesca's LLC, as parent, the other guarantors party thereto, Royal Bank of
Canada, as administrative agent and collateral agent, and the lenders party thereto.
10.3
Guaranty and Security Agreement, dated as of November 17, 2010, among Francesca's Collections, Inc., the other guarantors party thereto, and Royal Bank of Canada, as administrative
agent and collateral agent.
10.4
*
Form of Indemnification Agreement
10.5
*
Francesca's Holdings Corporation 2007 Stock Incentive Plan
10.6
*
Employee Stock Option Agreement for Theresa Backes, dated as of December 1, 2007
10.7
*
Francesca's Holdings Corporation 2010 Stock Incentive Plan
10.8
*
Nonqualified Stock Option Agreement for John De Meritt, dated as of March 31, 2010
10.9
*
Nonqualified Stock Option Agreement for Khalid M. Malik, dated as of March 31, 2010
10.10
*
Nonqualified Stock Option Agreement for Cindy Thomassee, dated as of May 1, 2010
10.11
*
Nonqualified Stock Option Agreement for Gene Morphis, dated as of December 14, 2010
10.12
*
Nonqualified Stock Option Agreement for Richard J. Emmett, dated as of March 31, 2010
10.13
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan
10.14
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan—Form of Nonqualified Stock Option Agreement
10.15
*
Francesca's Holdings Corporation 2011 Equity Incentive Plan—Form of Restricted Stock Award Agreement
10.16
*
Francesca's Holdings Corporation 2011 Executive Bonus Plan
1
Table of Contents
Exhibit Number
Description
10.17
*
Employment Agreement between Francesca's Holdings Corporation and John De Meritt, dated as of February 26, 2010
10.18
*
Employment Letter Agreement between Francesca's Holdings Corporation and Gene Morphis, dated as of September 9, 2010
10.19
*
Employment Letter Agreement between Francesca's Holdings Corporation and Theresa Backes
10.20
*
Employment Agreement between Francesca's Holdings Corporation and Kyong Yi Gill, dated as of February 26, 2010
10.21
*
Employment Letter Agreement between Francesca's Holdings Corporation and Khalid M. Malik, dated as of November 12, 2009
10.22
*
Agreement and First Amendment to Employment Letter Agreement between Francesca's Holdings Corporation and Khalid M. Malik, dated as of February 26, 2010
10.23
*
Letter Agreement between Francesca's Holdings Corporation and Richard J. Emmett, dated as of September 25, 2009
10.24
*
Amendment to Letter Agreement between Francesca's Holdings Corporation and Richard J. Emmett, dated as of February 26, 2010
16.1
Letter from BDO USA, LLP (formerly known as BDO Seidman, LLP) to the Securities and Exchange Commission dated April 18, 2011.
21.1
Subsidiaries of Francesca's Holdings Corporation.
23.1
Consent of Ernst & Young LLP.
23.2
Consent of BDO USA, LLP (formerly known as BDO Seidman, LLP).
23.3
*
Consent of O'Melveny & Myers LLP (included as part of Exhibit 5.1).
24.1
Powers of Attorney (included on signature pages to the Registration Statement filed on April 18, 2011).
*
To be filed by amendment.
2