DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`13. INCOME TAXES (Continued)
`
`made in accordance with the provisions of SFAS No. 109. Management determined that no state tax benefits associated with the temporary
`differences should be reflected for the remaining states in which it is operating, given the continued historical uncertainty related to realizing state
`tax benefits. Had the state tax benefits been reflected for the remaining states, the deferred tax assets as of September 30, 2008 would be
`approximately $919,000 higher.
`
`In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes." FIN No. 48 clarifies the accounting for income taxes by
`prescribing the minimum recognition threshold a tax position is required to meet before being recognized i11 the financial statements and also
`contains guidance on the measurement ofuncertain tax positions. FIN No. 48 applies to all tax positions related to income taxes subject to SFAS
`No. 109, "Accounting for Income Taxes." The Company adopted the provisions of FI.\l No. 48 effective as of October 1, 2007. In accordance with
`FIN No. 48, during the first quarter of fiscal 2008, the Company recorded a cumulative effect adjustment of $74,000, decreasing the liability for
`unrecognized tax benefits a11d increasing the September 30, 2007 balance of retained earnings.
`
`A rcco11ciliation of gross unrccognizcd tax bcncfits follows (in thousands):
`
`Balance—October 1, 2007
`Additions for current year tax positions
`Additions for prior ycar tax positions
`Reductions of prior year tax positions
`Settlements
`Balance—September 30, 2008
`
`zoos
`$2,315
`158
`126
`(98)
`(222)
`$2,279
`
`As of September 30, 2008, gross unrecognized tax benefits included accrued interest and penalties of $1,026,000. During fiscal 2008, interest and
`penalties of $145,000 related to unrecognized tax benefits were included in income tax provision (benefit). If recognized, the portion of the liability
`for unrccognizcd tax bcncfits that would impact thc Company's cffcctivc tax ratc was $1,605,000, net of federal tax bcncfit.
`
`During the twelve months subsequent to September 30, 2008, it is reasonably possible that the gross unrecognized tax benefits could potentially
`decrease by approximately $221,000 (of which approximately $152,000 would affect the effective tax rate, net of federal benefit) for federal a11d state
`tax positions related to the effect of expiring statutes of limitations and settlements.
`
`The Company's U.S. Federal income tax returns for the years ended September 30, 2006 and beyond remain subject to examination by the U.S.
`Internal Revenue Service. The Company also files returns in numerous state jurisdictions, which have varying statutes oflimitations. Generally,
`state tax returns for tl1e years ended September 30, 2004 a11d beyond, depending upon thejurisdiction, remain subject to examination. However, tl1e
`statutes of limitatio11s on certain of the Company's state returns remain open for years prior to fiscal 2004.
`
`F-25
`
`Source: DESTINATION MATERNITY CORR,
`
`‘lO~K, 12/'15/2008 | Powered by Intelligize
`
`DMC Exhibit 2039_O86
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`14 COMMITMENTS AND CONTINGENCIES
`
`The Company leases its retail facilities and certain equipment u11der various non—cancelable operating leases. Certain of these leases have renewal
`options. Total rent expense (including related occupancy costs, such as insurance, maintenance and taxes, paid to landlords) under operating
`leases amounted to $74,198,000, $73,012,000 and $74,682,000 in fiscal 2008, 2007 and 2006, respectively. Such amounts include contingent rentals
`based upon a percentage of sales totaling $1,232,000, $1,022,000 and $622,000 in fiscal 2008, 2007 and 2006, respectively.
`
`Store operating leases and warehouse leases generally provide for payment of direct operating costs in addition to rent. Future annual minimum
`operating lease payments. excluding such direct operating costs. as well as leases for equipment rental as of September 30, 2008 are as follows (in
`thousands):
`
`Fiscal Year
`
`2009
`2010
`2011
`2012
`2013
`2014 and thereafter
`
`$ 54,301
`46,374
`42,000
`35,108
`28,124
`45,917
`$251,824
`
`From time to time, the Company is named as a defendant in legal actions arising from normal business activities. Litigation is inherently
`unpredictable and although the amount of any liability that could arise with respect to currently pending actions cannot be accurately predicted,
`the Company does 11ot believe that the resolution of any pending action will have a material adverse effect on its financial position, results of
`operations or liquidity.
`
`15. EMPLOYMENT AGREEMENTS
`
`During fiscal 2008, 2007 and 2006, the Company had substantially identical employment agreements with Dan W. Matthias, the Company's
`Chairman of the Board and Chief Executive Officer (“CEO"), a11d Rebecca C. Matthias, the Company's President and Chief Creative Officer. Base
`compensation for each of Mr. and Ms. Matthias was $548,000, $532,000 and $506,000, for fiscal 2008. 2007 and 2006, respectively. Effective
`September 30, 2008, Mr. Matthias retired as CEO. Base compensation for Ms. Matthias will increase annually i11 an amount to be determined by the
`Compensation Committee of t11e Board ofDi1‘ecto1‘s, which amount will at least be equal to the ar11111a1 change i11 the consurrrer price index. Also,
`Ms. Matthias’ agreement provides for salary co11ti11uation and severance payments should her employment be terminated under specified
`conditions, as defined in the agreement. Additionally, Ms. Matthias is eligible for an annual cash bonus and restricted stock grant based 011
`performance, as specified by the Compensation Committee. Ms. Matthias‘ agreement continues i11 effect until terminated by either the Company or
`Ms. Matthias in accordance with the termination provisions of the agreement.
`
`I11 connection with M1‘. Matthias‘ retirement as CEO, the Company entered i11to a Transition Agreement (the "T1‘a11sitio11 Ag1‘ee1ne11t") with M1:
`Matthias. The Transition Agreement, which has a term of four years expiring September 30, 2012, provides that Mr. Matthias will make himself
`available
`
`17-26
`
`Source: DESTINATION MATERNITY CORR,
`
`‘10~K, 12/'15/2008 | Powered by Intelligize
`
`DMC Exhibit 2039_O87
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`15. EMPLOYMENT AGREEMENTS (Continued)
`
`to the Company for strategic planning, corporate development and other matters as requested by the Board or the Company's CEO. Mr. Matthias
`will continue to serve as the non-executive Chairman of the Board. In consideration of Mr. Matthias‘ advisory and board services (and in lieu of all
`other director compensation), the Company will pay Mr. Matthias an annual retainer of $200,000 and continue certain insurance and fringe benefits
`during the term of the Transition Agreement. Payment of the retainer and continuation of the benefits is subject to certain specified conditions, as
`defined in the Transition Agreement. The Transition Agreement also provides for the restrictive covenants set forth i11 Mr. Matthias‘ employment
`agreement to continue i11 effect until two years after Mr. Matthias ceases to serve the Company in any capacity (including service as a Board
`mcmbcr or advisor).
`
`The Company previously entered into an employment agreement dated April 26, 2005 with Edward M. Krell, who at the time was the Company's
`Executive Vice President—Chief Financial Officer. On May 15, 2007, the Company entered into a new employment agreement with Mr. Krell in
`connection with Mr. Krell‘s promotion to Chief Operating Officer & Chief Financial Officer, which new agreement replaced the April 26, 2005
`agreement. Base compensation for Mr. Krell was $531,000, $471,000 and $425,000 for fiscal 2008, 2007 and 2006, respectively. On September 26,
`2008, the Board of Directors appointed Mr. Krell to serve as CEO of the Company, effective as of October 1, 2008, replacing Mr. Matthias. In
`connection with Mr. K_rell's pronrotiorr to CEO, the Conrpany entered into an anrendnrent to his enrployrnent agreenrerrt. The anrendnrent provides
`for an increase in Mr. Krell‘s annual base salary from $531,000 to $650,000. Mr. Krell‘s base compensation is subject to potential increase in the
`future by the Company in an amount to be determined by the Compensation Committee of the Board of Directors at its discretion. The agreement
`also provides for salary continuation and severance payments should the employment of Mr. Krell be terminated under specified conditions, as
`defined therein. Additionally, Mr. Krell is eligible for an annual cash bonus based on performance, as specified by the Compensation Committee.
`The agreernent continues ir1 effect until terminated by either the Company or M1‘. Krell in accordance with the terminatiorr provisions of the
`agreement. In connection with Mr. Krell's appointment as CEO, the Company granted to Mr. Krell two stock options, each to purchase 100,000
`shares of common stock, under the Company's 2005 Equity Incentive Plan (see Note 12).
`
`Effective January 24, 2008, the Company entered into a letter agreement and an employment agreement with Lisa Hendrickson in connection with
`Ms. I-Iendrickson's promotion to ChiefMerchandising Officer. "he letter agreement provides that Ms. I-Iendrickson's annual base salary will be
`$425,000. Ms. Hendrickson's base conrpensatiorr is subject to potential increase i11 the future by the Conrpany i11 a11 ar11o11nt to be determined by
`the Compensation Committee of the Board of Directors at its discretion. Additionally, Ms. Hendrickson is eligible for an annual cash bonus based
`on performance, as specified by the Compensation Committee. "he agreements continue in effect until terminated by either the Company or Ms.
`Hendrickson.
`
`Effective July 23, 2008, the Company entered into an employment agreement with Judd P. Tirnauer, in connection with Mr. Timauer's promotion to
`Senior Vice President & Chief Financial Officer. The agreement
`rovides that Mr. Tirnauer's annual base salary will be $325,000. Mr. Tirr1auer's base
`compensation is subject to potential increase in the future by the Company in an amount to be determined by the Compensation Committee of the
`Board of Directors at its discretion. The agreement also provides for salary continuation and severance payments should employment of the
`executive be terminated under specified conditions, as defined tierein. Additionally, Mr. Tirnauer is eligible for an annual cash bonus based on
`performance, as specified by the Compensation Committee. The
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O88
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`15. EMPLOYMENT AGREEMENTS (Continued)
`
`agreement continues in effect until terminated by either the Company or the executive in accordance with the termination provisions of the
`agreement.
`
`16. RETIREMENT PLANS
`
`On March 2, 2007, the Company entered into Supplemental Executive Retirement Agreements with Mr. and Ms. Matthias (the “SERP Agreement
`(s)"). The purpose of the SERP Agreements is to provide the executives with supplemental pension benefits following their cessation of
`cmploymcnt.
`
`The Company's Transition Agreement with Mr. Matthias in connection with his retirement as CEO amended his SERP Agreement to provide for
`full vesting oflhe benefits payable to Mr. Matthias and to increase the total of the amounts payable under the SERP Agreement to approximately
`10% more than the amount that would have been payable on September 30, 2012 (the date the SERP Agreement had otherwise been expected to
`fully vest). The SERP Agreement benefits. totaling $3,960,000, will be paid to Mr. Matthias in installments over a period of four years commencing
`i11 April 2009.
`
`The amount of the benefit payable under Ms. Matthias‘ SERP Agreement is the actuarial present value of a single life annuity equal to 60% of Ms.
`Matthias‘ “deemed final pay," commencing upon cessation of employment. For this purpose, “deemed final pay" means Ms. Matthias‘ base salary
`or1 March 2, 2007, increased by 3% for each new fiscal year that begins before Ms. Matthias cessation of ernployrnerrt. This benefit vested 331/3%
`on March 2, 2007. Starting on September 30, 2007 and on each September 30 thereafter until fully vested, the benefit vests either (i) 15%, if during
`that entire fiscal year Ms. Matthias provided continuous full—time service to the Company, or (ii) 7.5%, if during that entire fiscal year Ms. Matthias
`provided at least continuous 50% part-time service to the Company. Notwithstanding the foregoing, the benefit is subject to full acceleration ifi
`following a change in control, Ms. Matthias‘ employment ceases due to a termination without cause or a resignation with good reason.
`
`The Company is accounting for the SERP Agreements i11 accordance with SFAS 158, “Employers” Accounting for Defined Benefit Pension and
`Other Postretirement P1ans—an amendment of FASB Statements No. 87, 88, 106, and 13Z(R).“
`
`Changes in the benefit obligation under the SERP Agreements as of September 30 were as follows (in thousands):
`
`Benefit obligation at beginning of year
`Service cost
`Interest cost
`Prior service cost
`Plan amendment and curtailment
`Benefit obligation at end of year
`Less: current portion included in accrued expenses and other current liabilities
`Non-current benefit obligation at end of year
`
`2008
`
`2007
`
`$ —
`$ 2,957
`918
`973
`68
`178
`— 1,971
`1,775
`—
`5,883
`2,957
`(1,560 ) —
`$ 4,323
`$2,957
`
`F-28
`
`Source: DESTINATION MATERNITY CORR,
`
`‘lO~K, 12/'15/2038 | Powered by Intelligize
`
`DMC Exhibit 2039_O89
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`16. RETIREMENT PLANS (Continued)
`
`The non—current benefit obligation at end of year was included in deferred rent and other non—current liabilities in the accompanying Consolidated
`Balancc Shccts. Estimated bcncfits cxpcctcd to bc paid duri11g thc ncxt fivc fiscal years, including paymcnts in fiscal 2009 through fiscal 2012 that
`are exclusively to Mr. Matthias under his amended SERP Agreement, are as follows (in thousands):
`
`Fiscal Year
`
`2009
`2010
`2011
`2012
`2013
`
`$1,560
`900
`750
`600
`4,702
`
`The components of net periodic pension cost on a pre-tax basis were as follows for the year ended September 30, 2008 (in thousands):
`
`Service cost
`Interest cost
`Amortization of prior service cost
`Plan amendment and curtailment
`Total net periodic benefit cost
`
`2007
`$ 918
`
`2008
`$ 973
`178
`353
`2,402
`$3,906
`
`The following weighted—average assumptions were used to determine net periodic benefit cost for the years ended September 30, 2008 and 2007:
`discount rate—6.0%; compensation increase rate—3.0%.
`
`An1o1111ts recorded i11 accunlulated other Comprellensive loss as of September‘ 30 were as follows (i11 thousands):
`
`Unrccognizcd prior scrvicc cost—bcginning of ycar
`Initial prior service cost
`Amortization of prior service cost
`Prior service cost recognized for plan amendment and curtailment
`Unrecognized prior service cost—enLl of year
`Deferred income tax benefit
`
`Unrecognized prior service cost, net of tax
`
`2008
`
`2007
`
`$(l,765 ) $ —
`— (1,971)
`353
`206
`627
`—
`(785 )
`(1,765)
`293
`689
`
`$ (492 ) $(l,076)
`
`The Company expects to amortize $196,000 of prior service cost on a pre—tax basis from accumulated other comprehensive loss into net periodic
`pcnsion cost in fiscal 2009.
`
`On April 30, 2007, the Company made an initial required contribution of $2,662,000 to a Grantor Trust, which was established for the purpose of
`accumulating assets in anticipation of the Company's payment obligations under the SERP Agreements. On November 27, 2007, the Company
`made an additional required contribution to tl1e Grantor Trust of $1,160,000. 111 order to impact positively the
`
`F-29
`
`Source: DESTINATION MATERNITY CORR, 10-K, 12‘./'15/2038 | Powered by Intelligize
`
`
`
`DMC Exhibit 2039_O90
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`16. RETIREMENT PLANS (Continued)
`
`Company's ability to comply with the Consolidated Leverage Ratio covenant of its Term Loan Agreement at March 31, 2008, with the consent of
`the SERP executives, the Company withdrew $l,000.000 from the Grantor Trust on March 28, 2008. The withdrawn funds were used to repay
`indebtedness under the Credit Facility.
`
`On May 20, 2008, the Company entered into (i) a Letter Agreement with the SERP executives and the trustee for the Grantor Trust (the “Trustee“),
`and (ii) an amendment to the Grantor Trust agreement with the Trustee (collectively the “Agreements"). The Agreements amended the SERP
`Agreements and the Grantor Trust agreement to provide for the Company to deliver an irrevocable standby letter of credit to the Trustee in an
`amount equal to the Company‘s then current funding obligation under the SERP Agreements, which was $3,885,000. As provided in the
`Agreements, in tlie third quarter of fiscal 2008 the Company received a distribution of the remaining assets held in the Grantor Trust, amounting to
`$2,844,000.
`
`The amendments affected by the Agreements also allow for, at the Company's option, the issuance from time to time of irrevocable standby letters
`of credit, or the i11crcase of size of an irrevocable standby letter of credit already held by the Trustee, in lieu of any deposit to the Grantor Trust
`otherwise required in the future. In addition, the Agreements permit the Company, from time to time at its sole discretion, to reduce the size of any
`irrevocable sta11dby letter of credit issued to the Trustee, so long as the Company simultaneously funds the Grantor Trust with an amount of cash
`equal to the amount of the reduction of the letter of credit. In October 2008, the Company increased the irrevocable standby letter of credit issued
`to the Trustee to a total of $6,779,000, in lieu of deposits to the Grantor Trust, i11 connection with the full vesting of Mr. Matthias‘ benefits under
`the Transition Agreement and the annual increase in vesting of Ms. Matthias‘ benefits.
`
`17. EMPLOYEE BENEFIT PI ANS
`
`The Company has a 401(k) savings plan for all employees who have at least six months of service and are at least 18 years of age. Employees can
`contribute up to 20% of their annual salary. Employees who meet certain criteria are eligible for a matching contribution from the Company based
`on a sliding scale. Company matches are made in the first quarter of the succeeding calendar year. Company matches vest over a period of
`approximately six years from each cmploycc's commencement of employment with the Company. Company matching contributions totaling
`$175,000, $158,000 and $130,000, were made in fiscal 2008, 2007 and 2006, respectively. In addition, the Company may make discretionary
`contributions to the plan, which vest over a period of approximately six years from each employee's commencement of employment with the
`Company. The Company has not made any discretionary contributions.
`
`F-30
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O91
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
`
`Quarterly financial results for the years ended September 30, 2008 and 2007 were as follows (in thousands, except per share amounts):
`
`Fiscal 2008
`
`Net sales
`Gross profit
`Net income (loss)
`Net income (loss) per share—Basic
`Net income (loss) per share—Diluted
`
`09/30/08
`$130,497
`63,191
`(4,784 )
`(0.80 )
`(0.80 )
`
`Quarter Ended
`06/30/03
`03/31/08
`$152,224
`$139,005
`78,202
`69,686
`4,137
`(390 )
`0.69
`(0.07 )
`0.68
`(0.07 )
`
`12/31/07
`$142,876
`71,962
`(352)
`(0.06)
`(0.06)
`
`Fiscal 2007
`
`Net sales
`Gross profit
`Net income (loss)
`Net income (loss) per share—Basic
`Net income (loss) per share—Di1uted
`
`09/30/07
`$135,803
`65.984
`(5,380 )
`(0.92 )
`(0.92 )
`
`Quarter Ended
`06/30/07
`03/31/07
`$153,227
`$143,857
`81.122
`76,060
`1,033
`2,565
`0.18
`0.44
`0.17
`0.41
`
`12/31/06
`$148,484
`77.050
`1.389
`0.24
`0.23
`
`The Company's business, like that of other retailers, is seasonal. The Company's quarterly net sales have historically been highest in its third fiscal
`quarter, corresponding to the Spring selling season. followed by its first fiscal quarter, corresponding to the Fall/holiday selling season. Given the
`typically higher gross margin experienced in the third fiscal quarter compared to other quarters, the relatively fixed nature of most of the Company‘s
`operating expenses and interest expense, and the historically higher sales level in the third quarter, the Company has typically generated a very
`significant percentage of its fi11l year operating income a11d net income during the third quarter.
`
`19. SEGMENT AND ENTERPRISE VVIDE DISCLOSURES
`
`Operating Segment. Under SFAS No. 131, "Disclosures about Segments of an Enterprise a11d Related Information," a company may be required to
`report segmented information about separately identifiable parts ofits business, which both (i) meet the deIinitio11 of an "operating segment"
`under SFAS No. 131, and (ii) exceed certain quantitative thresholds established in SFAS No. 131. The Company has determined that its business is
`comprised of one operating segment: the design, manufacture a11d sale of maternity apparel and related accessories. While the Company offers a
`wide range of products for sale, the substantial portion of its products are initially distributed through the same distribution facilities, many of the
`Company's products are manufactured at common contract manufacturer production facilities, the Com pany's products are marketed through a
`common marketing department, and these products are sold to a similar customer base, consisting of expectant mothers.
`
`F-31
`
`Source: DESTINATION MATERNITY CORR,
`
`lO~K, 12‘./'15/2008 | Powered by Intelligize
`
`DMC Exhibit 2039_O92
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`19. SEGMENT AND ENTERPRISE WIDE DISCLOSLRES (Continued)
`
`Geographic Information. Information concerning the Company's operations by geographic area is as follows (in thousands):
`
`Net Sales to Unaffiliated Customers
`United States
`Canada
`
`Year Ended September 30,
`2003
`2007
`2006
`
`$543,339
`21,263
`
`$562,519
`18,852
`
`$585,272
`17,472
`
`L0ng—Lived Assets
`U11itcd Statcs
`Canada
`Costa Rica
`
`September 30,
`2008
`
`September 30,
`2007
`
`$
`
`$
`
`64,699
`2,094
`207
`
`67,125
`2,102
`207
`
`Major Customers. For the periods presented, the Company did not have any one customer who represented n1ore than 10% of its net sales.
`
`20. INTEREST EXPENSE, NET
`
`Interest expense, net for the years ended September 30 is comprised of the following (in thousands):
`
`Intcrcst cxpcnsc
`Interest income
`Other investment loss, net
`Interest expense, net
`
`2008
`$6,971
`(27 )
`30
`$6,974
`
`2007
`$10,226
`(378 )
`—
`35 9,848
`
`2006
`$15,419
`(885)
`—
`$14,534
`
`21. RELATED PARTY TRANSACTIONS
`
`There is a husband and wife relationship between Mr. Matthias and Ms. Matthias. There are no family relationships among any of the Company's
`other executive officers.
`
`A director of tl1e Company currently provides consulting services to Pepper Hamilton LLP, which provides legal services to the Company. The
`Company paid legal fees to this law firm of $728,000, $1,061,000 and $278,000, in fiscal 2008, 2007 and 2006, respectively. As of September 30, 2008
`and 2007, the Company had accrued amounts outstanding to this law firm of $191,000 and $192,000, respectively.
`
`l4-32
`
`Source: DESTINATION MATERNITY CORR, 10-K, 12/'15/2008 | Powered by Intelligize
`
`DMC Exhibit 2039_O93
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES
`
`SCHEDULE H—VALUATION AND QUALIFYING ACCOUNTS
`
`(in thousands)
`
`Year Ended September 30, 2008
`Produetreturn reserve
`
`Year Ended September 30, 2007
`Product return reserve
`
`Year Ended September 30, 2006
`Product return reserve
`
`Balance at
`beginning
`of period
`
`Additions
`charged to
`costs and
`expenses
`
`Balance at
`end of
`Eeriod
`
`Deductions
`
`181
`
`$
`
`21
`
`$ — $
`
`202
`
`206
`
`55 i EB
`
`(25 ) $
`
`181
`
`177
`
`$
`
`29
`
`$
`
`$
`
`206
`
`$
`
`55
`
`$
`
`F-33
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O94
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`INDEX OF EXHIBITS
`
`Exhibit
`L
`3.1
`Amended and Restated Certificate of Incorporation of the Company (effective December 10, 2008).
`
`21
`
`B
`
`31.1
`
`31.2
`
`32.1
`
`Subsidiaries ofthe Company.
`
`Consent of KPMG LLP.
`
`Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes—Oxley Act of 2002.
`
`Certification of the Senior Vice President & Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
`
`Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarban es-
`Oxley Act of 2002.
`
`32.2 Certification ofthe Senior Vice President & Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
`906 of the Sarbanes—Oxley Act of 2002.
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O95
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`QuickLinks
`
`PART I.
`
`Iitem 1. Business
`
`Item 1A. Risk Factors
`
`Item 1B. Unresolved Staff Comments
`Item 2. Progerties
`Item 3. Leoail Proceed-inas
`Item 4. S:ubmi:ssiOn of Matters to -21 Vote of Seeuri Hoslders
`
`PART II.
`
`Item 5‘. Market for F’.=e2istrant‘s CornmoniE uitv, Related Stockholder Matters and Issuer Purchases of E u;iv Securities
`
`COMPARISON OF 5 YEAR -CUMULATIVE TOTAL RETURN* Amen Destination Materni Cor oration, The S&P 500 ‘Index And The S&P
`Aggarel Retail Index
`
`Item 6-. Selected Consolidated Financial and Operating Data
`
`Reconciliation ofNet Income nLoss= to Adfusted EBITDAI in thousands - unaudited
`
`Item 7. Mana emcnt‘s Discussion a11d Anal sis Of Financ:i'a'l Condition and Results :Of()l erations
`
`Item 8. Financial Statements and Sunglennentary Data
`Item 9. Changes «in and Disagreements with A.ccounta11ts on Accounting and Financial Disclosure
`Item 9A. Controls and Procedures
`Item 913. Other Information
`
`PART III.
`
`Item 10. Directors, Executive Ofiicers and Corporate Governance
`Item 11. Executive Compensation
`Item 12. Seeuritv Ownershi of Certain Benefivci-a'l Owners and Management and Related Stockholder Matters
`Item 13. ‘Certain Relationshigs and Related Transactions, and Director Indegendence
`Ftem 14. Pri«11CiEal Accounting Fees and Sewices
`
`M I
`
`tem 15. Exhibits. Financial Statement Schedules
`
`OF EX1. IIBITS
`SIGNA
`DESTINATION MATERNITY CORPORATION AND-SLESIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
`FINANCIAL STATEMENT SCHEDULE‘
`'
`REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
`DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES CONSOLIDATED EALANCE SHEETS -in thousands, exee t share a11d er
`share EIPIIOIIIIIS
`DESTINATION MATEERNITY CORPORATION AND SUBSIDIARIES3 CONSOLIDA ED STA EMENTS OF OPERATIONS (in th-ousands, except
`Eer share amounts}
`DESTIEI\'A"ION MATERNITY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS‘ E ’ UITY AND
`COMPREIIENSIVE INCOME LOSS in tiousands
`i11th.D.11saI1.d.S
`.
`.
`.
`DESTINA QN l_V.,IATElR.l\H.TY CQRPQRATIIIQIX AND SI SIDIARIES CQNSDLIDA ED STA, EMENTS -OF
`
`
`ON MATER\IITY CORPORATION AND-SI} SIDIARIES NOTES TO CONSOLIDATED FINANC.
`STATEMENTS
`DESTIN
`DESTINXIQNCMATERNJTYQQRPQRATIQN .SUBLSIDIARlES. §.CHEDULE.,I1—VAL.UAI;IQN_"AND QU.ALIFYfIN§3..ACQQL1§lTS (in
`thou8 and s 1
` <m3WS
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O96
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`Exhibit 3.1
`
`RESTATED CERTIFICATE OF INCORPORATION
`OF DESTINATION MATERNITY CORPORATION
`
`FIRST: The name ofthc Corporation is DESTINATION MATERNITY CORPORATION.
`
`SECOND: Tl1e address of its registered office i11 tl1e State of Delaware, County of New Castle is 27ll Centeiville Road, Suite 400,
`Wilmington, 19808. The name of its registered agent at such address is Corporation Service Company.
`
`1: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the
`General Corporation Law of Delaware.
`
`FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 20,000,000 shares of
`Common Stock, par value $.01 per share (the “Common Stock”), and 1,656,381 shares of Preferred Stock, par value $.01 per share (the “Preferred
`Stock”).
`
`The Board of Directors of the Corporation shall have full and complete authority, by resolution from time to time, to establish one or more
`series and to issue shares of Preferred Stock and to fix, determine and vary the voting rights, designations, preferences, qualifications, privileges,
`limitations, options, conversion rights and other special rights of each series of Preferred Stock, including but not limited to, dividend rates and
`manner of payment, preferential amounts payable upon voluntary or involuntary liquidation. voting rights, conversion rights, redemption prices,
`terms and conditions and sinking fund and stock purchase prices.
`
`A. Series B Junior Participatino Preferred Stock
`
`Section 1. Designation and Amount. The shares of such series shall be designated as “Series B Junior Participating Preferred Stock” and
`the numher of shares constituting each series shall be 300,000.
`
`Section 2. Dividends and Distributions.
`
`(A) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock or any other
`shares of preferred stock of the Corporation ranking prior and superior to the shares of series s Preferred Stock with respect to dividends, each
`holder of one one-thousandth (l/1000) of a share (a “EU of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the
`Board of Directors out of funds legally available for that purpose, (i) dividends payable in cash when and if declared by the Board of Directors of
`the Corporation in respect of the common stock (each such date being a “Dividend Payment Date”) commencing on the first Dividend Payment
`Date after the first issuance of such Unit of Series B Preferred Stock, in, an amount per unit (rounded to the nearest cent) equal to, subject to the
`provision for adjustment hereinafter set forth, the aggregate per share amount of all cash dividends declared on shares of the coninion stock since
`the immediately preceding Dividend Payment Date, or, with respect to the first Dividend Payment Date, since the first issuance ofa
`
`1
`
`Source: DESTINATION MATERNITY CORP., EX-3.1, 12/15/2008 I Powered by Intelligize
`
`DMC Exhibit 2039_O97
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`unit of Scrics B Prcfcrrcd Stock, and (ii) subjcct to the provision for adjustment hcrcinaficr sct forth, distributions (payable in kind) on cach
`Dividend Payment Date in an amount per Unit equal to the aggregate per share amount of all noncash dividends or other distributions (other than
`a dividend payable in shares of common stock or a subdivision of thy outstanding shares or common stock, by reclassilications or otherwise)
`declared on shares of common stock since the immediately preceding Dividend Payment Date, or with respect to the first Dividend Payment Date,
`since the first issuance of a Unit of Series B Preferred Stock. in the event that the Corporation shall at any time after October 5. 1995 (the “Rights
` , (i) declare any dividend on outstanding shares ofcommorr stock payable in shares of common stock, (ii) subdividc
`outstanding shares of. common stock or (iii) combine outstanding shares at common stock into a smaller number of shares, then in each such case
`the anrount to which the holder of a Unit of Series B Preferred Stock was entitled irrrrnediately prior to such event pursuant to the next preceding
`sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of common stock that
`are outstanding immediately after such event and the denominator of which shall be the number of shares of common stock that were outstanding
`immediately prior to such cvcnt.
`
`(B) The Corporation shall. declare a dividend or d