the term loan borrowings, which remain subj ect to a variable interest rate. As a result. an increase in interest rates could result in a substantial
`increase in interest expense, especially as the swapped amount ofthc term loan decreases over time.
`
`We are heavily dependent on our management information systems and our ability to maintain and upgrade these systemsfrom time to time.
`
`The effieient operation of our business is heavily dependent on our internally developed management infomration systems. In particular, we rely
`on point-of-sale terminals, which provide information to our custonrized 'l'rend'l'rack merchandise analysis and planning system used to track sales
`and inventory. The TrendTrack system helps integrate our design, manufacturing, distribution and financial functions, and also provides daily
`financial and rrrerclrandisirrg irrfornratiorr. Although our software programs and data are backed up and securely stored off-site, our servers and
`computer systems are located at our headquarters in Philadelphia, Pennsylvania. As a result, our business, financial condition and results of
`operations could be materially and adversely affected if our servers and systems were inoperable or inaccessible.
`
`From time to time, we improve and upgrade our management information systems. We have a proprietary, lntemet-based point-of-sale system. If
`we are unable to maintain and upgrade our systems or to integrate new and updated systems in an efficient and timely manner, our business,
`financial condition and results of operations could be materially and adversely affected.
`
`As an apparel retailer, we rely on numerous thirdparties in the supply chain to produce and deliver the products that we sell, and our business
`may be negatively impacted by disruptions in the supply chain.
`
`If we lose the services of one or more of our significant suppliers or one or more of them fail to meet our product needs, we may be unable to
`obtain replacement merchandise in a timely manner. If our existing suppliers cannot meet our increased needs and we cannot locate alternative
`supply sources. we may be unable to obtain sufficient quantities of the most popular items at attractive prices, which could negatively impact our
`sales, revenues and results of operations. We obtain apparel and other merchandise from foreign sources, both purchased directly in foreign
`markets and indirectly tlrrorrglr domestic vendors with foreign sources. To the extent that any of our vendors are located overseas or rely on
`overseas sources for a large portion of their products, any event causing a disruption of imports, including the imposition of import restrictions,
`could harm our ability to source product. This disruption could materially limit the merchandise that we would have available for sale and reduce
`our revenues and earnings. The flow of merchandise from our vendors could also be adversely affected by financial or political instability, or war,
`in or affecting any of the countries in which the goods we purchase are manufactured or through which they flow. Trade restrictions in the form of
`tariffs or quotas, ernbargos and customs restrictions that are applicable to the products that we sell also could affect the irrrport of those products
`and could increase the cost and reduce the supply of products available to us. Any material increase in tariff levels, or any material decrease in
`quota levels or available quota allocation, could negatively impact our business. Further, changes in tariffs or quotas for merchandise imported
`from individual foreign countries could lead us to shift our sources of supply among various countries. Any such shift we undertake in the future
`could result in a disruption of our sources of supply and lead to a reduction in our revenues and earnings. Supply chain security initiatives
`undertaken by the U.S. government that impede the rrornral flow of product could also negatively irrrpact our business. I11 addition, decreases in
`the value of the U.S. dollar against foreign currencies could increase the cost of products that we purchase from overseas vendors.
`
`22
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_023
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`We also face a variety of other risks generally associated with relying on vendors that do business in foreign markets and import merchandise from
`abroad, such as:
`
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`-
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`political instability or the threat of terrorism, in particular in countries where our vendors source merchandise;
`
`enhanced security measures at U.S. and foreign ports, which could delay delivery of imports;
`
`imposition of new or supplemental duties, taxes, and other charges on imports;
`
`delayed receipt or non—delivery of goods due to the failure of foreign—source suppliers to comply with applicable import regulations;
`
`delayed receipt or non-delivery ofgoods due to organized labor strikes or unexpected or significant port congestion at I LS. ports;
`and
`
`local business practice and political issues, including issues relating to compliance with domestic or international labor standards,
`which may result in adverse publicity.
`
`The U.S. may impose new initiatives that adversely affect the trading status of countries where apparel is manufactured. These initiatives may
`include retaliatory duties or other trade sanctions that, if enacted, would increase the cost of products imported from countries where our vendors
`acquire merchandise. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.
`
`We could be materially and adversely aflected if our distribution operations were disrupted
`
`To support our distribution of product throughout the U.S. and Canada, we operate our main distribution facility in Philadelphia, Pennsylvania and
`two significantly smaller distribution facilities, one in Philadelphia, Pennsylvania and the other, serving as our Canadian distribution facility, in
`Mississauga, Ontario. Finished garments from contractors and other manufacturers are inspected and stored for distribution to our stores. We do
`not have other distribution facilities to support our distribution 11eeds. If our main Philadelphia distribution facility were to shut down or otherwise
`become inoperable or inaccessible for any reason, we could incur significantly higher costs and longer lead times associated with the distribution
`of our products to our stores during the time it takes to reopen or replace this facility. In light of our strategic emphasis on rapid replenishment as a
`competitive strength, a distribution disruption might have a disproportionately adverse effect on our operations and profitability relative to other
`retailers. In addition, the loss or material disruption of service from any of our shippers for any reason, whether due to freight difficulties, strikes,
`natural disaster or other difficulties at our principal transport providers or otherwise, could have a material adverse impact on our business,
`financial condition and results of operations.
`
`We could be materially and adversely affected we are unable to ubtain sufficient raw materials or maintain satisfactory manufacturing
`arrangements.
`
`We do not own any rnanufacturing facilities and therefore depend on third parties to manufacture our products. We place our orders for
`prodL1etion of merchandise and raw materials by purchase order and do 11ot have any long-term contracts with any manufacturer or supplier. We
`compete with many other companies for production facilities and raw materials. Furthermore, we have received in the past, and may receive in the
`future, shipments of products from manufacturers that fail to conform to our quality control standards. In such event, unless we are able to obtain
`replacement products in a timely manner, we may lose sales. If we fail to maintain favorable relationships with these third parties, or if we cannot
`obtain an adequate supply of quality raw materials on Commercially reasonable ternrs, it could have a material adverse impact 011 our business,
`financial condition and results of operations.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O24
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Our stores are heavily dependent on the customer traflic generated by shopping malls.
`
`VVe depend heavily on locating our stores i11 prominent locations witl1i11 successful shopping 111alls in order to generate customer traffic. We
`cannot control the development of new shopping malls, the availability or cost of appropriate locations within existing or new shopping malls or
`the success ofexisting or new mall stores.
`
`The success of all of our mall stores will depend, in part, on the ability of each mall's anchor tenants, such as large department stores, other tenants
`and area attractions to generate con sumer traffic in the vicinity of our stores, and the continuing popularity ofmalls as shopping destinations.
`Many traditional enclosed malls are experiencing lower levels of customer traffic than iii the past. Sales volume and mall traffic may be adversely
`affected by economic downturns in a particular area, the closing of anchor tenants or competition from no11-n1all retailers and other malls where we
`do not have stores.
`
`Our success depends on our ability to identify and rapidly respond to fashion trends.
`
`Tl1e apparel industry is subject to rapidly changing fashion trends and shifting consumer demands. Accordingly, our success depends on the
`priority that our target customers place on fashion and our ability to anticipate, identify and capitalize upon emerging fashion trends. Our ability or
`our failure to anticipate, identify or react appropriately to changes in styles or trends could lead to, among other things, excess inventories and
`higher markdowns, as well as the decreased appeal of our brands. Particular fashion trends, or an inaccuracy of our forecasts regarding fashion
`trends could have a material adverse effect on our business, financial condition and results of operations. For example, in fiscal 2007 we were
`negatively impacted from the popularity of certain styles in the non-maternity women's apparel market, such as trapeze and baby-doll dresses and
`tops, which can more readily fit a pregnant woman early in her pregnancy than typical non—n1atemity fashions.
`
`Thefailure to retain our existing senior management team or to attract and retain highly skilled and qualifiedpersonnel could have a
`material adverse impact on our business, financial condition and results of operations.
`
`Our business requires disciplined execution at all levels of our organization in order to timely deliver and display fashionable merchandise in
`appropriate quantitics in our stores. This cxccution rcquircs experienced and talcntcd managcmcnt. \ 7 c currently have a management team with a
`great deal of experience with us and in apparel retailing. If we were to lose the benefit of this experience, our business, financial condition and
`results ofoperations could be materially and adversely affected.
`
`In addition, as our business expands, we believe that our success will depend greatly on our continued ability to attract and retain highly skilled
`and qualified personnel. There is a high level of competition for personnel iii the retail industry. Like most retailers, we experience significant
`cmploycc turnovcr ratcs, particularly among storc salcs associates and managcrs, and our continued growth will rcquirc us to hire and train cvcn
`more new personnel. V\7e therefore must continually attract, hire and train new personnel to meet our staffing needs. We constantly compete for
`qualified personnel with companies in our industry and in other industries. A significant increase in the turnover rate among our sales associates
`and managers would increase our recruiting and training costs and could decrease our operating efficiency and productivity. If we are unable to
`retain our employees or attract, train. assimilate or retain other skilled personnel in the future, we may not be able to service our customers as
`effectively, thus impairing our ability to incrcasc rcvcnuc and could otherwise harm our business.
`
`Our quarterly operating results and inventory levels may fluctuate significantly as a result ofseasonality in our business.
`
`Our business, like that of other retailers, is seasonal. Results for any quarter are not necessarily indicative of the results that may be achieved for a
`full fiscal year. Quarterly results may fluctuate
`
`24
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O25
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`materially depending upon. among other things, the timing of new store openings and new leased department openings. net sales and profitability
`contributed by new stores a11d leased departments, increases or decreases in comparable store sales, the timing ofthe fulfillment of purchase
`orders under o11r product and license arrangements, adverse weather conditions, shifts in the timing of certain holidays and promotions, changes
`in inventory and production levels and the timing ofdeliveries ofinventory, a11d changes in our merchandise mix. Our quarterly net sales have
`historically been highest in our third fiscal quarter, corresponding to the Spring selling season, followed by our first fiscal quarter, corresponding
`to the Fall/holiday selling season. Given the typically higher gross margin we experience in our third fiscal quarter compared to other quarters, the
`relatively fixed nature ofmost of" our operating expenses and interest expense, and the historically higher sales level in our third fiscal quarter, we
`have typically generated a very significant percentage of our full year operating income and net income during our third fiscal quarter. Thus, any
`factors which result in a material reduction of our sales for the third quarter could have a material adverse effect on our results of operations for our
`fiscal year as a whole. Seasonal fluctuations in sales also affect our inventory levels, as we usually order merchandise in advance of peak selling
`periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory,
`especially before the Fall/holiday and Spring selling seasons. lfwe are not successful in selling our inventory during this period, we may be forced
`to rely on markdowns or promotional sales to sell the excess inventory or we may not be able to sell the inventory at all, which could have a
`material adverse effect on our business, financial condition and results of operations.
`
`Our business depends on sustained demandfor maternity clothing and is sensitive to birth rates, women 'sfashion trends, economic conditions
`and consumer spending.
`
`Our business depends upon sustained demand for maternity clothing. Our future performance will be subject to a number of factors beyond our
`control, including demographic changes, fashion trends. economic conditions and consumer spending. If demand for maternity clothing were to
`decline for any reason, such as a decrease in the number of pregnancies, our operating results could be adversely affected. Additionally, our
`operating results could be adversely affected if certain non-maternity women's apparel fashions have a more pregnancy-friendly fit. For example, in
`fiscal 2007, we were negatively impacted by the popularity of certain styles in the non-maternity women's apparel market, such as trapeze and
`baby-doll dresses and tops, which can more readily fit a pregnant woman early in her pregnancy than typical 11on-maternity fashions. Downturns,
`or the expectation of a downturn. in general economic conditions could adversely affect consumer spending patterns, our business. financial
`condition a11d results of operations. ln addition. the specialty apparel retail business historically has been subject to cyclical variations. Consumer
`purchases of specialty apparel products, including maternity wear, may decline during recessionary periods and at other times when disposable
`income is lower. Declines in consumer spending patterns may have a 1I1ore negative effect o11 apparel retailers than some other retailers. Therefore,
`we may not be able to maintain our historical revenues and earnings, or remain as profitable, if there is a decline in consumer spending patterns. A
`prolonged economic downturn could have a material adverse impact on our business and results of operations.
`
`If an independent manufacturer violates labor or other laws, or is accused of violating any such laws, or if their labor practices diverge from
`those generally accepted as ethical, it could harm our business and brand image.
`
`While we maintain policies and guidelines with respect to labor practices that independent manufacturers that produce goods for us are
`contractually required to follow, and while we have an independent firm and Company employees inspect certain manufacturing sites to monitor
`compliance, we cannot control the actions of such manufacturers or the public's perceptions of them, nor can we assure that these manufacturers
`will conduct their businesses using ethical or legal labor practices. Apparel companies can be held jointly liable for the wrongdoings of the
`manufacturers of their
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_026
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`products. While many of our independent manufacturers are routinely monitored by buying representatives, who assist us in the areas of
`compliancc. garmcnt quality and delivery, wc do not control thc manufacturers‘ busincss practiccs or their employees‘ cmploymcnt conditions, and
`manufacturers act in their own interest which may he in a manner that results in negative public perceptions of us, and/or employee allegations
`against us or court determinations that we arejointly liable. Violations oflaw by our importers, buying agents, manufacturers or distributors could
`result in delays in shipments and receipt of goods and could subject us to fines or other penalties, any of which could restrict our business
`activities, increase our operating expenses or cause our revenues to decline.
`
`We may be unable to protect our trademarks and other intellectual property and may be subject to liability if we are alleged to have infringed
`on anoth er party ‘s intellectual property.
`
`We believe that our trademarks, scrvicc marks and othcr intcllcctual property are important to our continucd succcss and our competitive position
`due to their recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks, service marks
`and other intellectual property. Although we actively protect our intellectual property, there can be no assurance that the actions that we have
`taken to establish and protect our trademarks, service marks and other intellectual property, including our rights in our management information
`systems and our proprietary rights in products for which we have applied for patent protection (for example, our Secret Fit BellyTM innovation), will
`bc adequate to prcvcnt imitation of our marks, products or scrviccs by othcrs or to prcvcnt othcrs from sccking to block salcs of our products as a
`violation of their trademarks, service marks or other proprietary rights. Also, others may assert rights in, or ownership of, our trademarks and other
`proprietary rights or may allege that we have or are infringing 011 their intellectual property rights and we may not be able to successfully resolve
`these types of conflicts. In addition, the laws of certain foreign countries may not protect our trademarks and proprietary rights to the same extent
`as do the laws of the U.S. We cannot assure you that these registrations will prevent imitation of our name. merchandising concept, store design
`or private label mcrchandisc or thc infringement of our othcr intcllcctual property rights by othcrs. Imitation of our name. conccpt, store design or
`merchandise in a manner that projects lesser quality or carries a negative connotation of our brand image could have a material adverse effect on
`our business, financial condition and results of operations. Additionally, the high expense in both prosecuting and defending against, and
`potential liability related to, alleged infringements of intellectual property rights could be substantial and could have a material adverse effect on
`our business, financial condition and results of operations.
`
`War or acts ofterrorism or the threat ofeitlier may negatively impact availability of merchandise and otherwise adversely impact our
`business.
`
`In the event of war or acts of terrorism, or if either is threatened, our ability to obtain merchandise available for sale may be negatively affected. A
`substantial portion of our merchandise is imported from other countries. If goods become difficult or impossible to import into the U.S., and if we
`cannot obtain such merchandise from other sources at similar costs, o11r sales and profit margins may be adversely affected. In the event that
`commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping
`merchandise to our main distribution facility and retail locations. as well as fi.1lf1lling catalog and website orders.
`
`The terms of our debt instruments impose financial and operating restrictions.
`
`Our credit facility and term loa11 agreements each contain restrictive covenants that lin1it o11r ability to engage in activities that may be i11 0111‘ long
`term best interests. These covenants limit or restrict, among other things, our ability to:
`
`-
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`incur additional i11debted11ess:
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O27
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`-
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`pay dividends or make other distributions in respect of our equity securities, or purchase or redeem capital stock. or make certain
`investments;
`
`have our subsidiaries pay dividends, make loans or transfer assets to us;
`
`sell assets, including the capital stock of our subsidiaries:
`
`enter into any transactions with our affiliates;
`
`transfer any capital stock of any subsidiary or permit any subsidiary to issue capital stock;
`
`create liens;
`
`enter into certain sale/leaseback transactions; and
`
`effect a consolidation or merger or transfer of all or substantially all of our assets.
`
`These limitations and restrictions may adversely affect our ability to finance our future operations or capital needs or engage in other business
`activities that may be in our best interests. In addition, o11r ability to borrow under the credit facility is subject to borrowing base requirements. If
`we breach any of the covenants in our credit facility or term loan agreements, we may be in default under our credit facility or our term loan. If we
`default, the lenders under our term loan or the lender under our credit facility could declare all borrowings owed to them, including accrued interest
`and other fees, to be due and payable.
`
`Our share price may be volatile and could decline substantially.
`
`The market price of our common stock has been, and is expected to continue to be, volatile, both because of actual and perceived changes in our
`financial results and prospects and because of general volatility in the stock market. The factors that could cause fluctuations in our share price
`may include, among other factors discussed in this section, the following:
`
`actual or anticipated variations in the financial results and prospects of our business or other companies in the retail business;
`
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`changes in financial estimates by Wall Street research analysts;
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`actual or anticipated changes in the U.S. economy or the retailing environment‘.
`
`changes in the market valuations of other specialty apparel or retail companies;
`
`announcements by our competitors or us;
`
`additions and departures of key personnel;
`
`changes in accounting principles;
`
`the passage of legislation or other developments affecting us or our industry;
`
`the trading volume of our common stock in the public market;
`
`changes in economic conditions:
`
`financial market conditions;
`
`natural disasters, terrorist acts, acts of war or periods of civil unrest;
`
`the realization of some or all of the risks described in this section entitled "Risk Factors"; and
`
`any goodwill impairment would require a write down that would likely negatively alfect our stock price.
`
`27
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O28
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`In addition. the stock markets have experienced significant price and trading volume fluctuations from time to time, and the market prices of the
`equity sccuritics ofrctailcrs have been cxtrcmcly volatile and are sometimes subj cct to sharp price and trading volume changes. Thcsc broad
`market fluctuations may adversely affect the market price of our common stock.
`
`Our charter documents contain certain anti-takeover provisions, and we are entitled to certain otherprotective provisions under Delaware
`law.
`
`We are a Delaware Corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to
`acquire control of the Company, even if a change of control would be beneficial to our existing stockholders. We also have adopted a stockholder
`rights plan, commonly known as a “poison pill,“ that entitles our stockholders to acquire additional shares of us, or a potential acquirer of us._ at a
`substantial discount to their market value in thc cvcnt of an attempted takcovcr. In addition, our amended and restated ccrtificatc of incorporation
`and hy-laws contain provisions that may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider
`favorable by, among other things:
`
`authorizing the issuance of preferred stock, the terms of which may be determined at the discretion of our Board of Directors;
`
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`restricting the ability of stockholders to call special meetings of stockholders;
`
`providing for a classified Board of Directors, with staggered three-year terms; and
`
`establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can
`bc acted on by stockholdcrs at mcctings.
`
`These provisions may also reduce the market value of our common stock.
`
`We do not expect to pay cash dividends in theforeseeablefuture.
`
`We have 11ot paid any cash dividends on our common stock since our initial public offering and do not anticipate paying cash dividcnds 011 our
`common stock in the foreseeable future. In addition, the terms of each of our credit facility and term loan agreements significantly restrict our
`ability to declare or pay dividends on our common stock. Even if our ability to pay dividends were not restricted, any future payment of dividends
`would still be at the discretion of our Board of Directors and would be based upon any applicable restrictive financial covenants, earnings, capital
`requirements and our financial condition, among other factors, at the time any such dividend is considered.
`
`Any increase in our sales and marketing efforts that target markets outside the U.S. would expose as to additional risks associated with
`international operations.
`
`We believe that in the future, an opportunity for sales growth may come from the development of international sales. We may not be successful in
`these efforts. International operations and sales subject us to risks and challenges that we would otherwise not face if we conducted our business
`only in the U.S. For example, we may depend on third parties to market our products through foreign sales channels, and we may be challenged by
`laws and business practices favoring local competitors. In addition, our ability to succeed in foreign markets will depend on our ability to protect
`our intellectual property. We must also adapt our pricing structure to address different pricing environments and may face difficulty in enforcing
`revenue collection internationally. To the extent we achieve significant sales outside of the U.S. in the future, we may have significant exposure to
`fluctuating foreign currency exchange rates.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O29
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`We could havefailures in our system of internal controls.
`
`We maintain a documented system of i11ternal controls wl1icl1 is reviewed a11d monitored by management, wl1o meet regularly with our Audit
`Committee of the Board of Directors. We believe we have a well-designed system to maintain adequate internal controls on the business. We
`cannot assure you that there will not be any control deficiencies in the future. Should we become aware of any control deficiencies, we would
`report them to the Audit Committee and recommend prompt remediation. We have devoted significant resources to document, test, monitor and
`improve our internal controls and will continue to do so; however, we cannot be certain that these measures will ensure that our controls are
`adequate in the filture or that adequate controls will be effective i11 preventing fiaud. If we fail to maintain a11 effective system of intemal controls,
`we may not be able to accurately report our financial results or prevent fraud. Any failures in the effectiveness of our i11ternal controls could have
`a material adverse effect on our financial condition or operating results or cause us to fail to meet reporting obligations.
`
`Item 1B. Unresolved Staff Comments
`
`Not applicable.
`
`Item 2. Properties
`
`We own our principal executive offices and distribution facility. which is located at 456 North Fifth Street, Philadelphia, Pennsylvania, subject to a
`mortgage under tl1c terms of which we owe approximately $2.5 million as of September 30, 2008. This facility consists of approximately 318,000
`square feet, of which approximately 45,000 square feet is dedicated to office space and the remaining square footage is used for finished goods
`warehousing and distribution. On August 26, 2002, we entered into a te11-year lease for a facility located at 2001 Kitty Hawk Avenue, Philadelphia,
`Pennsylvania in the Philadelphia Naval Business Center. The area leased at this facility, which we use for raw material cutting, warehousing and
`distribution, consists of approximately 64,000 square feet of space. To facilitate our store growth in Canada, we entered into a three—year lease
`commencing November l, 2002 for approximately l2,U00 square feet of finished goods warehouse and distribution space in Mississauga, Ontario in
`Canada. Since this time, we have renewed this lease in Canada and it currently expires on November 30, 2009. From time to time we may also utilize
`third-party warehousing services in the Philadelphia, Pennsylvania area when we have increased storage requirements. These services essentially
`operate on a month-to-n1ontl1 basis. We believe that these facilities will be adequate to support our anticipated distribution needs for the near term
`and, potentially, longer. In the event we need additional space to meet our future distribution needs, we believe that such space would be readily
`available. Our facilities are subject to state and local regulations that range from building codes to health and safety regulations.
`
`We lease o11r store premises for terms averaging fror11 five to ten years. Certain leases allow us to terminate or reduce our obligations at specified
`points in time in the event that the applicable store does not achieve a specified sales volume. Some of our store leases also provide for contingent
`payments based on sales volume, escalations of the base rent, as well as increases in operating costs, marketing costs and real estate taxes.
`
`29
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_030
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`As of September 30, 2008, tl1e following numbers of store leases are set to expire as listed in the table below. We do not expect the expiration of
`any leases to have a material adverse impact on our business or operations.
`
`Fiscal Year Leases Expire
`
`2009
`2010
`2011
`2012
`2013
`2014 and later
`Total
`
`Number
`of Stores
`l3l
`109
`84
`76
`112
`242
`754
`
`In addition to the stores we operate, we have arrangements with department and specialty stores, including Macy's