TRLG True Religion Apparel, Inc. (MM)

PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To Be Held    •    , 2013

        These proxy materials are delivered in connection with the solicitation by the Board of proxies to be voted at our Special Meeting and at any adjournments or postponements thereof.

        You are invited to attend the Special Meeting on    •    , 2013 at our corporate headquarters located at 2263 E. Vernon Avenue, Vernon, California 90058, beginning at 10:00 a.m. local time.

        This Proxy Statement and form of proxy are being mailed to stockholders commencing on or about    •    , 2013.

SUMMARY

         The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under "Where You Can Find More Information" beginning on page     •    .

Parties to the Merger (Page     •    )

         True Religion Apparel, Inc. , which we refer to as the Company, we or us, is a Delaware corporation that designs, markets, sells and distributes premium fashion apparel, centered on our core denim products using the brand name "True Religion Brand Jeans." Our products include jeans, pants, woven and knit tops and outerwear made from denim, fleece, jersey and other fabrics. We are known for our unique fits, washes and styling details. Our products are distributed through multiple wholesale and retail segments on six continents, including North America, Europe, Asia, Australia, Africa and South America.

         TRLG Holdings, LLC , which we refer to as Parent, is a Delaware limited liability company that was formed by TowerBrook Capital Partners L.P. solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Parent is controlled by investment funds advised by TowerBrook Capital Partners L.P., which we refer to as TowerBrook Capital Partners and, together with such investment funds, as TowerBrook. TowerBrook Capital Partners is an investment management company with more than $8 billion under management. The firm is based in Europe and the United States and focuses its investments in European and North American companies. Upon completion of the merger, TRLG Holdings, LLC will be the parent of the Company.

         TRLG Merger Sub, Inc. , which we refer to as Merger Sub, is a Delaware corporation that was formed by Parent solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Upon completion of the merger, Merger Sub will cease to exist as a separate entity and the Company will continue as the surviving corporation.

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        In this proxy statement, we refer to the Agreement and Plan of Merger, dated as of May 10, 2013, as it may be amended from time to time, among the Company, Parent, and Merger Sub, as the merger agreement, and the merger of Merger Sub with and into the Company as the merger.

The Special Meeting (Page     •    )

Time, Place and Purpose of the Special Meeting (Page     •    )

        The Special Meeting will be held on    •    , 2013, at 10:00 a.m., local time, at 2263 E. Vernon Avenue, Vernon, California 90058.

        At the Special Meeting, holders of our common stock will be asked to approve the proposal to adopt the merger agreement, to approve the proposal to approve, on an advisory (non-binding) basis, certain compensation arrangements for the Company's named executive officers in connection with the merger, and to approve the proposal to adjourn the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the merger agreement.

Record Date and Quorum (Page     •    )

        You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of our common stock at the close of business on    •    , 2013, which the Company has set as the record date for the Special Meeting and which we refer to as the record date. You will have one vote for each share of our common stock that you owned on the record date. As of the record date, there were    •    shares of our common stock outstanding and entitled to vote at the Special Meeting, held by    •    holders of record. A majority of the shares of our common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the Special Meeting constitutes a quorum for the purposes of the Special Meeting. Abstentions and broker non-votes (as described below) are counted as present for the purpose of determining whether a quorum is present.

Vote Required (Page     •    )

        Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions and broker non-votes will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement.

        The proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote "AGAINST" approval of this proposal. Broker non-votes are not counted for purposes of this proposal.

        The proposal to approve, on an advisory (non-binding) basis, certain compensation arrangements for the Company's named executive officers in connection with the merger, as described under "Advisory Vote on Merger-Related Compensation for the Company's Named Executive Officers" beginning on page     •    , requires the affirmative vote of holders of a majority of the shares of our common stock present, in person or represented by proxy, at the Special Meeting and entitled to vote on this proposal. The Company is providing stockholders with the opportunity to approve, on a non-binding, advisory basis, such merger-related executive compensation in accordance with Section 14A of the Securities Exchange Act of 1934 (as amended), which we refer to as the Exchange Act. Abstentions will have the same effect as a vote "AGAINST" approval of this proposal. Broker non-votes are not counted for purposes of this proposal.

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        As of    •    , 2013, the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate,    •    shares of our common stock, representing approximately    •     percent of the outstanding shares of our common stock. The directors and executive officers have informed the Company that they currently intend to vote all such shares of our common stock "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger, and "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies.

Adjournments (Page     •    )

        Although it is not currently expected, the Special Meeting may be adjourned for the purpose of soliciting additional proxies if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the Special Meeting. An adjournment generally may be made with the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting.

Proxies and Revocation (Page     •    )

        Any stockholder of record entitled to vote at the Special Meeting may submit a proxy over the telephone, over the Internet, or by returning the enclosed proxy card in the accompanying prepaid reply envelope or may vote in person by appearing at the Special Meeting. If your shares of our common stock are held in "street name" through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of our common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the Special Meeting, or do not provide your bank, brokerage firm or other nominee with instructions, as applicable, your shares of our common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement, and your shares of our common stock will not have an effect on the proposal to adjourn the Special Meeting or on the proposal to approve the merger-related executive compensation.

        You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by voting again at a later date through any of the methods available to you, by giving written notice of revocation to our Secretary, which must be filed with the Secretary by the time the Special Meeting begins, or by attending the Special Meeting and voting in person.

The Merger (Page     •    )

        The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger, which we refer to as the surviving corporation, and will continue to do business following the consummation of the merger. As a result of the merger, the Company will cease to be a publicly traded company. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation.

Merger Consideration (Page     •    )

        In the merger, each outstanding share of our common stock (other than shares owned by the Company as treasury stock, by any subsidiary of the Company or by Parent or any of its subsidiaries, which we refer to collectively as excluded shares) will be converted into the right to receive an amount in cash equal to $32.00, which we refer to as the merger consideration, less any applicable withholding taxes.

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Reasons for the Merger; Recommendation of the Board (Page     •    )

        After careful consideration of various factors described in the section entitled "The Merger—Reasons for the Merger; Recommendation of the Board" beginning on page     •    , and acting upon the unanimous recommendation of the Special Committee, the Board unanimously (i) determined that the merger is advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) approved the merger and the other transactions contemplated by the merger agreement and the other transaction documents, (iii) resolved that the merger agreement be submitted for consideration by the stockholders of the Company at a Special Meeting of stockholders and (iv) recommended that the stockholders of the Company vote to adopt the merger agreement.

        For a description of the reasons considered by the Special Committee and the Board in deciding to recommend approval of the proposal to adopt the merger agreement, see the information included under "The Merger—Reasons for the Merger; Recommendations of the Board".

Opinion of Guggenheim Securities (Page     •    )

        Guggenheim Securities, LLC, which we refer to as Guggenheim Securities, delivered its opinion to the Special Committee and the Board to the effect that, as of May 9, 2013 and based on the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the merger consideration was fair, from a financial point of view, to holders of shares of common stock, par value $0.0001 per share, of the Company. The full text of Guggenheim Securities' written opinion, which is attached as Annex C to this proxy statement and which you should read in its entirety, is subject to the assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim Securities, as of the date of such opinion.

        Guggenheim Securities' opinion was provided to the Special Committee and the Board (solely in that capacity) for their information and assistance in connection with its consideration of the merger, did not constitute a recommendation to the Special Committee or the Board with respect to the merger and does not constitute advice or a recommendation to any holder of our common stock as to how to vote in connection with the merger or otherwise.

        More specifically, Guggenheim Securities' opinion (i) did not address the Company's underlying business or financial decision to pursue the merger, the relative merits of the merger as compared to any alternative business or financial strategies that might exist for the Company, the financing of the merger or the effects of any other transaction in which the Company might engage; (ii) addressed only the fairness, from a financial point of view, of the merger consideration pursuant to the merger agreement; (iii) expressed no view or opinion as to (a) any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or to be entered into or amended in connection with the merger or (b) the fairness, financial or otherwise, of the merger to, or of any consideration to be paid to or received by, the holders of any other class of securities, creditors or other constituencies of the Company; and (iv) expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of the Company's officers, directors or employees, or any class of such persons, in connection with the merger relative to the merger consideration. Furthermore, Guggenheim Securities expressed no view or opinion as to the price or range of prices at which the shares of our common stock or other securities of the Company may trade at any time, including, without limitation, subsequent to the announcement or consummation of the merger.

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Financing of the Merger (Page     •    )

        We anticipate that the total funds needed by Parent and Merger Sub to pay our stockholders the amounts due to them under the merger agreement and to pay related fees and expenses in connection with the merger will be approximately $858.9 million.

        We anticipate that the funds needed to pay the amounts described above will be obtained as follows:

•

equity financing to be provided by the TowerBrook Funds (as described below under "The Merger—Financing of the Merger") in an aggregate amount of up to $175 million, or other permitted assignees to whom they assign a portion of their respective commitments, which is described under "The Merger—Financing of the Merger—Equity Commitments";



•

debt financing to be provided to Parent and Merger Sub through $535 million in senior secured credit facilities provided by Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., Jefferies Finance LLC, UBS Securities LLC, UBS Loan Finance LLC, Macquarie Capital (USA) Inc., and MIHI LLC; provided that no more than $495 million plus an amount equal to any original issue discount and certain lending fees and expense will be available on the closing date of the merger; and



•

cash on hand of the Company and its subsidiaries.

        We believe these amounts will be sufficient to complete the merger and pay related fees and expenses in connection with the merger, but we cannot assure you that there will be adequate funds to complete the merger. Among other things, the conditions to the debt and equity financing could fail to be satisfied, the TowerBrook Funds could fail to fund the committed amounts in breach of the equity commitment letter, the lenders under the debt commitment letter could fail to fund the committed amounts in breach of such debt commitment letter, cash on hand of the Company could be less than expected, or the fees, expenses or other amounts required to be paid in connection with the merger could be greater than anticipated.

        In addition, Parent's and Merger Sub's obligation to consummate the merger is conditioned upon, among other things, the Company having cash in U.S. dollars deposited in a U.S. bank that will be freely available to be used to pay the aggregate merger consideration immediately prior to the effective time of the merger of at least $190 million (subject to certain adjustments) as described under "The Merger Agreement—Conditions to the Merger" beginning on page     •    .

Limited Guarantee (Page     •    )

        TowerBrook has agreed, pursuant to the terms of limited guarantee, to pay the due and punctual payment when due of the obligations of Parent to pay the reverse termination fee of $58.439 million, which we refer to as the Reverse Termination Fee, and certain expense reimbursement to the Company under the terms of the merger agreement and, subject to certain limitations including a liability cap, any obligations of Parent and Merger Sub in respect of any breach of the merger agreement.

Interests of Certain Persons in the Merger (Page     •    )

        In considering the recommendation of the Board with respect to the Company merger proposal, you should be aware that executive officers and directors of the Company may have certain interests in the merger that may be different from, or in addition to, the interests of the Company's stockholders generally. The Special Committee and the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of the Company. These

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interests include the possible receipt of the following types of payments and benefits that may be triggered or otherwise relate to the merger:

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accelerated vesting of outstanding Company equity awards (including all restricted stock);



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cash payments and related benefits under executive officer employment agreements; and



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the provision of indemnification and insurance arrangements pursuant to the merger agreement.

        For further information with respect to the arrangements between the Company and its directors and executive officers, see the information included under "The Merger—Interests of Certain Persons in the Merger" beginning on page     •    and "Advisory Vote on Merger-Related Compensation for the Company's Named Executive Officers—Golden Parachute Compensation" beginning on page     •    .

Material U.S. Federal Income Tax Consequences of the Merger (Page     •    )

        The exchange of shares of our common stock for cash pursuant to the merger generally will be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (i) the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and (ii) the U.S. holder's adjusted tax basis in such shares. A U.S. holder's adjusted tax basis will generally equal the price the U.S. holder paid for such shares. Such capital gain or loss will be long-term capital gain or loss; provided that the U.S. holder's holding period for such shares of common stock is more than 12 months at the effective time of the merger. Backup withholding may also apply to the cash payments made pursuant to the merger unless the U.S. holder or other payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules. You should read "The Merger—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page     •    for a definition of "U.S. holder" and a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

Regulatory Approvals (Page     •    )

        Under the terms of the merger agreement, the merger cannot be completed until any waiting periods applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and Germany merger control provisions under Chapter VII of the Act against Restraint of Competition of 1958, as amended, which we refer to as the German Competition Merger Control Provisions, have expired or been terminated.

        On May 16, 2013, TowerBrook filed a merger notification with the German Federal Cartel Office pursuant to Sec. 39 Para. 1 GWB in respect of the German Competition Merger Control Provisions.

        On May 22, 2013, the Company and TowerBrook Investors III, L.P. each filed notification of the proposed merger with the Federal Trade Commission and the Department of Justice under the HSR Act.

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Litigation Relating to the Merger (Page     •    )

        Between May 14, 2013 and May 16, 2013, three putative class action complaints were filed in the Superior Court of California, Los Angeles County (Ford v. True Religion Apparel, Inc., et al., Case No. BC508950; Palkon v. True Religion Apparel, Inc., et al., Case No. BC509137; and Cupersmith v. True Religion Apparel, Inc., et al., Case No. BC509278) in connection with the proposed transaction (collectively, the "California Actions"). Between May 21, 2013 and May 28, 2013, two putative class action complaints were filed in Delaware Chancery Court (Hansen v. True Religion Apparel, Inc. et al., Case No. 8581 and Phillips v. Mark Maron et al., Case No. 8598) (collectively, the "Delaware Actions") in connection with the proposed transaction. Each lawsuit names as defendants the Company, the Board, TowerBrook Capital Partners, Parent, and Merger Sub. The lawsuits generally allege that the Company's directors breached their fiduciary duties by engaging in a flawed sales process, by approving an inadequate price, and by agreeing to provisions that would allegedly preclude another interested buyer from making a financially superior proposal to acquire the Company. The complaints also allege that one or more of the Company, TowerBrook Capital Partners, Parent, and Merger Sub aided and abetted the alleged breaches of fiduciary duties by the directors. Among other things, plaintiffs seek an injunction (to prevent consummation of the merger), damages, declaratory relief, and attorneys' fees. The Company believes these lawsuits are without merit.

        On May 23, 2013, plaintiffs in the California Actions filed a Motion to Consolidate the California Actions and Appoint Interim Co-Lead Class Counsel in the consolidated action.

The Merger Agreement (Page     •    )

Effects of the Merger (Page     •    )

        If the conditions to the closing of the merger are either satisfied or, to the extent permitted, waived, Merger Sub will be merged with and into the Company with the Company surviving the merger as a wholly-owned subsidiary of Parent. Following the completion of the merger, our common stock will no longer be publicly traded, and stockholders (other than those executive officers of the Company, if any, who enter into rollover, contribution or certain other arrangements with Parent prior to the consummation of the merger) will cease to have any ownership interest in the Company.

Treatment of Common Stock, Restricted Stock and Restricted Stock Units (Page     •    )

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Common Stock.   At the effective time of the merger, each share of our common stock issued and outstanding immediately prior thereto (other than excluded shares) will be converted into the right to receive the per share merger consideration, without interest and less any applicable withholding taxes.



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Restricted Stock.   Each outstanding share of Company restricted stock (which would include any restricted stock unit granted in respect of a share of our common stock) shall become fully vested immediately prior to the effective time of the merger. At the effective time of the merger, each such share will be cancelled and will only entitle the holder thereof to receive from the Company, in full settlement of such share of Company restricted stock, an amount in cash equal to the merger consideration, less any applicable withholding taxes.

Solicitation of Acquisition Proposals (Page     •    )

        The merger agreement provides that from and after the date of the merger agreement until the effective time of the merger or the termination of the merger agreement, we, our subsidiaries and our representatives may not, directly or indirectly (i) solicit, initiate or knowingly facilitate or knowingly encourage any inquiries regarding, or the submission or announcement of any proposals or offers that constitute or would reasonably be expected to lead to, a takeover proposal, (ii) provide any non-public

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information concerning the Company or any of its subsidiaries to any person or group who would reasonably be expected to make any takeover proposal or otherwise in connection with, or for the purpose of encouraging or facilitating, any takeover proposal, (iii) engage in any discussions or negotiations regarding any takeover proposal, (iv) approve, support, enter into or adopt any contract providing for, recommend to any holders of our common stock, or propose to approve, support, enter into or adopt any contract providing for, or recommend to any holders of our common stock, any letter of intent or similar document, agreement, commitment, or agreement in principle with respect to any takeover proposal or (v) otherwise cooperate with or assist or participate in, or knowingly facilitate or knowingly encourage any such inquiries, proposals, offers, discussions or negotiations.

        However, at any time prior to the time our stockholders adopt the merger agreement, if (i) the Company receives an unsolicited, bona fide, written takeover proposal from any person that did not result from a breach of the restrictions on solicitation of takeover proposals and (ii) the Board determines in good faith, after consultation with the Company's financial advisor and outside counsel, that such takeover proposal constitutes or would reasonably be expected to lead to a superior proposal, then the Company is permitted to:

•

furnish information (including non-public information) with respect to the Company and its subsidiaries to the person making such takeover proposal pursuant to a confidentiality agreement containing certain terms and provided the Company withhold such portions of documents or information to the extent relating to any pricing or other matters that are highly sensitive or competitive in nature if the exchange of such information (or portions thereof) could reasonably be likely to be harmful to the operation of the Company in any material respect; and



•

engage in discussions and negotiations with the person making such takeover proposal regarding such takeover proposal.

See "The Merger Agreement—Solicitation of Acquisition Proposals" beginning on page     •    .

Conditions to the Merger (Page     •    )

        The respective obligations of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our stockholders, receipt of certain regulatory approvals, and the absence of any legal prohibitions. The respective obligations of Parent and Merger Sub to consummate the merger are also subject to the satisfaction or waiver of the following conditions: the Company having cash in U.S. dollars deposited in a U.S. bank that will be freely available to be used to pay the aggregate merger consideration immediately prior to the effective time of the merger of at least $190 million (net of unpaid Company transaction costs, certain of which Company transaction costs, may not exceed, in the aggregate, estimates provided to Parent by the Company); and certain customary conditions, including the accuracy of the representations and warranties in the merger agreement, the compliance of the Company with the covenants set forth in the merger agreement and no material adverse effect shall have occurred. See "The Merger Agreement—Conditions to the Merger" beginning on page     •    .

Termination (Page     •    )

        We and Parent may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by our stockholders.

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        The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger as follows:

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by either Parent or the Company, if:



•

any law or order by any governmental authority enjoining, restraining, preventing or prohibiting consummation of the merger or making the consummation of the merger illegal; provided that this termination right will not be available to any party if the failure to consummate the merger prior to the termination date was primarily due to the failure of such party to perform any of its obligations under the merger agreement;



•

the merger has not been consummated on or before November 10, 2013 (or, in certain circumstances, a subsequent date no later than November 22, 2013), which we refer to as the Walk-Away Date; provided that this termination right will not be available to (i) any party if the failure of the merger to be so consummated on or before the Walk-Away Date was primarily due to the failure of such party to perform any of its obligations under the merger agreement, other than the obligation to consummate the merger, and (ii) Parent if, at the such time, the Company is entitled to seek or obtain an injunction, specific performance or other equitable remedies enforcing Parent's obligation to cause the equity financing to be funded in accordance with the remedies provided for pursuant to of the merger agreement as described under "The Merger Agreement—Remedies" unless Parent has delivered the Company at least ten days' prior written notice that it may seek to terminate the merger agreement as a result of the failure to consummate by the Walk-Away Date, which we refer to as a Walk-Away Date termination event; or



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the Special Meeting has been held and completed and our stockholders have not adopted the merger agreement at such meeting or any adjournment or postponement of such meeting, which we refer to as a stockholder non-approval termination event.



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by the Company, if:



•

at any time prior to the adoption of the merger agreement by our stockholders, the Company enters into a definitive Company acquisition agreement providing for a superior proposal in accordance with the restrictions on solicitation of acquisitions proposals in the merger agreement as discussed under "The Merger Agreement—Solicitation of Acquisition Proposals" beginning on page     •    , immediately following or simultaneously with termination pursuant to this termination right; provided that (x) simultaneously therewith the Company shall have paid or caused to be paid to Parent the termination fee of $29.219 million, which we refer to as the Termination Fee, discussed under "The Merger Agreement—Termination Fees" beginning on page     •    (and such termination of this Agreement by the Company shall not take effect unless and until the Termination Fee shall have been paid to Parent) and (y) the Company shall have complied with all of the other restrictions on solicitation of acquisitions proposals, which we refer to as an alternative takeover proposal termination event;



•

there has been a breach of a representation, warranty, covenant or agreement made by Parent or Merger Sub in the merger agreement or any such representation and warranty becomes untrue after the date of the merger agreement, which breach or failure to be true would give rise to the failure of the condition to the closing of the merger relating to the accuracy of the representations and warranties of Parent and Merger Sub or compliance by Parent and Merger Sub with their obligations under the merger agreement, and such breach or failure to be true cannot be cured by the Walk-Away Date, or if curable, is not cured within 30 calendar days after written notice is given by us to Parent; provided that this termination right will not be available to us if (x) the Company is then in breach of any of

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its representations, warranties, covenants or agreements hereunder such that the conditions to the closing of the merger relating to the accuracy of our representations and warranties or our compliance with our obligations under the merger agreement would not be satisfied or (y) the conditions to the closing of the merger relating to the absence of a Company material adverse effect would not be satisfied, which we refer to as a Parent breach termination event; or

•

the conditions to the obligations of Parent and Merger Sub to consummate the merger (other than those conditions that by their nature cannot be satisfied until the closing date of the merger but that are expected to be satisfied at the closing of the merger) have been satisfied (and remain satisfied) or waived or (ii) the Company has irrevocably confirmed by written notice to Parent following the end of the marketing period that the conditions to the Company's obligation to consummate the merger (other than those conditions that by their nature cannot be satisfied until the closing date of the merger but that are expected to be satisfied at the closing of the merger) have been satisfied (and remain satisfied), or the Company has confirmed by written notice to Parent following the end of the marketing period that Parent and Merger Sub may use to complete their financing of the merger that it is willing to waive any such unsatisfied conditions and that the Company stands, and will stand, ready, willing and able to consummate the merger, and Parent and Merger Sub fail to consummate the transactions contemplated by the merger agreement within five business days following the date on which the closing of the merger should have occurred under the merger agreement and we stood ready, willing and able to consummate the merger through the end of such period, which we refer to as a failure to close termination event.



•

by Parent, if:



•

at any time prior to the adoption of the merger agreement by our stockholders, (i) the Board makes a Change in Recommendation (as described under "The Merger Agreement—Solicitation of Acquisition Proposals" beginning on page     •    ), (ii) the Company shall have breached in any material respect its obligations described under "The Merger Agreement—Solicitation of Acquisition Proposals" beginning on page     •    or (iii) following the public disclosure or announcement of a takeover proposal (A) except in the case of a tender offer or exchange offer, the Board fails to reconfirm publicly its recommendation to our stockholders to adopt the merger agreement, which we refer to as the Company Recommendation, within five business days after receiving a written request from Parent therefor or (B) if a tender offer or exchange offer for our common stock is commenced and no later than the tenth day following commencement of such tender offer the Company shall not have publicly announced its recommendation that stockholders reject such tender offer or exchange offer; provided that this termination right will not be available to Parent if Parent or Merger Sub is then in breach of any of its respective representations, warranties, covenants or agreements under the merger agreement such that the conditions to the closing of the merger relating to the accuracy of Parent's and Merger Sub's representations and warranties or Parent's and Merger Sub's compliance with Parent's and Merger Sub's obligations under the merger agreement, which we refer to as a Change in Recommendation termination event; or



•

there has been a breach of a representation, warranty, covenant or agreement made by the Company in the merger agreement or any such representation and warranty becomes untrue after the date of the merger agreement, which breach or failure to be true would give rise to the failure of the condition to the closing of the merger relating to the accuracy of the representations and warranties of the Company or compliance by the Company with its obligations under the merger agreement, and such breach or failure to be true cannot be

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cured prior to the Walk-Away Date, or if curable, is not cured within 30 calendar days after written notice is given by Parent to us provided that this termination right will not be available to Parent if (x) Parent or Merger Sub is then in breach of any of its representations, warranties, covenants or agreements hereunder such that the conditions to the closing of the merger relating to the accuracy of Parent's and Merger Sub's representations and warranties or Parent's and Merger Sub's compliance with Parent's and Merger Sub's obligations under the merger agreement would not be satisfied, which we refer to as a Company breach termination event.

Termination Fees (Page     •    )

        We are required to pay Parent the Termination Fee of $29.219 million if:

•

each of the following three events occurs:



•

a takeover proposal shall have been made known to the Company, publicly disclosed or made publicly known or made directly to the Company's stockholders or the intention (whether or not conditional) of any person to make a takeover proposal shall have been made known to the Company, publicly disclosed or made publicly known or made directly to the Company stockholders;



•

thereafter, the merger agreement is terminated pursuant to a Walk-Away Date termination event, a stockholder non-approval termination event or a Company breach termination event; and



•

within 12 months after such termination, we consummate a takeover proposal or we enter into a definitive agreement with respect to a takeover proposal and such takeover proposal is subsequently consummated, provided that for purposes of the foregoing, the references to "20%" in the definition of takeover proposal, as described under "The Merger Agreement—Solicitation of Acquisition Proposals" beginning on page     •    , shall be deemed to be references to "50.1%";



•

the merger agreement is terminated by Parent pursuant to a Change in Recommendation termination event, or is terminated by Parent or the Company for any reason other than a failure to close termination event at a time when Parent has the right to terminate the merger agreement pursuant to a Change in Recommendation termination event; or



•

the merger agreement is terminated by the Company due to an alternative takeover proposal termination event.

        We must reimburse Parent for its and its affiliates' out of pocket expenses in connection with the merger agreement and the transactions contemplated thereby up to an amount equal to $5 million if:

•

the merger agreement is terminated by either Parent or the Company due to our stockholders not having adopted the merger agreement; or



•

the merger agreement is terminated by Parent due to a Company breach termination event.

        Any out of pocket expenses so reimbursed to Parent by the Company will be netted against the amount of the Termination Fee payable by the Company in the event of a subsequent payment of a Termination Fee to Parent.

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        Parent must pay us the Reverse Termination Fee of $58,439,000, if the merger agreement is terminated by the Company pursuant to a failure to close termination event or if Parent terminates the merger agreement pursuant to a Walk-Away Date termination event and at the time of termination the Company has the right to terminate the merger agreement pursuant to a failure to close termination event.

        TowerBrook has guaranteed the obligation of Parent to pay the Reverse Termination Fee, among other things, pursuant to the limited guarantee.

Remedies (Page     •    )

        Our receipt of the Reverse Termination Fee and certain indemnification and expense reimbursement from Parent will, subject to certain specific performance rights described below, be our sole and exclusive remedy against Parent, Merger Sub, the debt financing parties or any of their respective affiliates and any of their respective representatives, members, controlling persons or holders of any of their equity interests or securities for any loss suffered as a result of any breach of any covenant or agreement in the merger agreement or the failure of the merger to be consummated.

        The maximum aggregate liability of Parent and Merger Sub for monetary damages or otherwise in connection with the merger agreement, the equity commitment letter and the transactions contemplated by the merger agreement shall be limited to $58,439,000 plus the amount of any reimbursement of the Company's expenses, in connection with cooperation provided with respect to the arrangement or consummation of the financing, up to $2,500,000 as described under "The Merger Agreement—Company Cooperation with the Financing" beginning on page     •    .

        The parties are entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement in addition to any other remedy to which they are entitled at law or in equity. However, the Company is only entitled to seek specific performance of Parent's obligation to cause the equity financing to be funded to fund the merger under the circumstances described in "The Merger—Financing of the Merger—Equity Commitments" beginning on page     •    . Under no circumstances will the Company be entitled to receive both a grant of specific performance to cause the funding of the equity financing or the merger to be consummated and to receive payment of the Reverse Termination Fee.

Market Price of Common Stock and Dividend Information (Page     •    )

        The closing price of our common stock on the Nasdaq Stock Market, Inc., or NASDAQ, on May 9, 2013, the last trading day prior to the public announcement of the execution of the merger agreement, was $29.44 per share of common stock. On    •    , 2013, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on the Nasdaq was $    •    per share of common stock. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock.

        We declared a cash dividend of $0.20 per share of our common stock in May, August, November and December 2012. The terms of the merger agreement provide that, from the date of the merger agreement until the effective time of the merger, we may not declare, authorize, set aside for payment or pay any dividend on shares of our common stock without the consent of Parent. Accordingly, the Board did not declare a regular dividend for the first quarter 2013 and does not intend to declare any dividends during the pendency of the merger agreement.

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Appraisal Rights (Page     •    )

        Stockholders are entitled to appraisal rights under the General Corporation Law of the State of Delaware, which we refer to as the DGCL, in connection with the merger. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures specified under the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

        To exercise your appraisal rights, you must submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not vote (either in person or by proxy) in favor of the proposal to adopt the merger agreement. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. See "Appraisal Rights" beginning on page     •    and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex B to this proxy statement. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage firm or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Delisting and Deregistration of Common Stock (Page     •    )

        If the merger is completed, our common stock will be delisted from the NASDAQ and deregistered under the Exchange Act and we will no longer file periodic reports with the Securities and Exchange Commission, or the SEC, on account of our common stock.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

         The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement, and the Special Meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder . Please refer to the "Summary" beginning on page     •     and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety . You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under "Where You Can Find More Information" beginning on page     •    .

Q.

Why am I receiving this proxy statement and proxy card or voting instruction form?

A.

On May 10, 2013, we entered into the merger agreement providing for the merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent. You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the proposal to adopt the merger agreement and the other matters to be voted on at the special meeting.

Q.

When and where is the Special Meeting?

A.

The Special Meeting of stockholders of the Company will be held at 2263 E. Vernon Avenue, Vernon, California 90058, at 10:00 a.m., local time, on     •    , 2013.

Q.

What am I being asked to vote on at the Special Meeting?

A.

You are being asked to consider and vote on a proposal to adopt the merger agreement that provides for the acquisition of the Company by Parent, to approve the proposal to adopt the merger agreement, to approve a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger and to approve a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting.

Q.

Who can attend and vote at the special meeting?

A.

All stockholders of record as of the close of business on    •    , 2013, the record date for the Special Meeting, are entitled to receive notice of and to attend and vote at the Special Meeting, or any adjournment or postponement thereof. If you are a stockholder of record, please be prepared to provide proper identification, such as a driver's license or passport. If you wish to attend the Special Meeting and your shares of our common stock are held in "street name" by your bank, broker, or other nominee, you will need to provide proof of ownership, such as a recent account statement or letter from your bank, broker or other nominee, along with proper identification.

Q.

What is a quorum?

A.

In order for any matter to be considered at the Special Meeting, there must be a quorum present. The presence, in person or represented by proxy, of the holders of a majority of the shares of our common stock outstanding and entitled to vote on such matters as of the record date for the meeting will constitute a quorum. Shares of our common stock represented by proxies reflecting abstentions and properly executed broker non-votes (if any) will be counted as present and entitled to vote for purposes of determining a quorum. If a quorum is not present, the stockholders entitled to vote at the meeting who are present or represented by proxy may adjourn the meeting until a quorum is present.

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Q.

What is the proposed merger transaction and what effects will it have on the Company?

A.

The proposed transaction is the acquisition of the Company by Parent pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by our stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into the Company, with the Company being the surviving corporation. As a result of the merger, the Company will become a subsidiary of Parent and will no longer be a publicly held corporation, and you, as a holder of our common stock, will no longer have any interest in our future earnings or growth. In addition, following the merger, our common stock will be delisted from the NASDAQ and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.

Q.

What will I receive if the merger is completed?

A.

Upon completion of the merger, you will be entitled to receive the merger consideration of $32.00 per share in cash, without interest, less any applicable withholding taxes, for each share of our common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL with respect to such shares. For example, if you own 100 shares of our common stock, you will receive $3,200.00 in cash in exchange for your shares of our common stock, less any applicable withholding taxes. You will not own any shares of the capital stock in the surviving corporation. Please do NOT return your stock certificate(s) with your proxy.

Q.

How does the merger consideration compare to the market price of our common stock prior to announcement of the merger?

A.

The merger consideration represents a premium of approximately 52.3% to the closing price of our common stock on October 9, 2012, the date prior to the announcement that our Board had formed the Special Committee conduct a review of strategic alternatives, a premium of approximately 16.4% to the one month volume weighted average trading price of our common stock prior to May 10, 2013, the date of the public announcement of the execution of the merger agreement, and a premium of approximately 8.7% to the closing price of our common stock on May 9, 2013, the last trading day prior to the public announcement of the execution of the merger agreement.

Q.

How does the Board recommend that I vote?

A.

The Board recommends that you vote "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger and "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies.

Q.

When do you expect the merger to be completed?

A.

We are working towards completing the merger as soon as possible. In order to complete the merger, the Company must obtain the stockholder approval described in this proxy statement and the other closing conditions under the merger agreement must be satisfied or waived. In addition, Parent and Merger Sub are not obligated to complete the merger until the expiration of a twenty, or in certain circumstances fifteen, consecutive business day "marketing period" that they may use to complete their financing for the merger. The marketing period will begin after we have obtained the Company's stockholders' approval and satisfied other specified conditions under the merger agreement. If the marketing period would not end on or before August 16, 2013, however, then the marketing period will commence no earlier than September 3, 2013. See "The Merger Agreement—Marketing Period" beginning on page     •    . The Company currently expects to complete the merger during the third quarter of the Company's current fiscal year. The Company,

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however, cannot assure completion of the merger by any particular date, if at all. Because consummation of the merger is subject to a number of conditions and the marketing period, the exact timing of the merger cannot be determined at this time.

Q.

What happens if the merger is not completed?

A.

If the merger agreement is not adopted by the stockholders of the Company or if the merger is not completed for any other reason, the stockholders of the Company will not receive any payment for their shares of our common stock in connection with the merger. Instead, the Company will remain an independent public company and our common stock will continue to be listed and traded on the NASDAQ. Under specified circumstances, the Company may be required to pay to Parent a fee with respect to the termination of the merger agreement, or to reimburse Parent and its affiliates for certain reasonable and documented out-of-pocket fees and expenses, or be entitled to receive from Parent a fee with respect to the termination of the merger agreement or receive reimbursement from Parent for all reasonable and documented out-of-pocket fees and expenses incurred by the Company and its subsidiaries in connection with the Company's compliance with certain covenants set forth in the merger agreement in furtherance of the merger, as described under "The Merger Agreement—Company Cooperation with Financing" beginning on page     •    and "The Merger Agreement—Termination Fees" beginning on page     •    .

Q.

Is the merger expected to be taxable to me?

A.

If you are a U.S. holder, the receipt of cash for your shares of our common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. See "The Merger—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page     •    . You should consult your own tax advisors regarding the particular tax consequences to you of the exchange of shares of our common stock for cash pursuant to the merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).

Q.

What vote is required for the Company's stockholders to approve the proposal to adopt the merger agreement?

A.

The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Because the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding shares of our common stock present in person or represented by proxy, if you fail to submit a proxy or vote in person at the Special Meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement.

Q.

What vote of our stockholders is required to approve the other proposals submitted to the stockholders at the Special Meeting?

A.

Approval of the other proposals to be submitted to the stockholders at the Special Meeting requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting. Abstaining will have the same effect as a vote "AGAINST" approval of a proposal. If you fail to submit a proxy or to vote in person at the Special Meeting or if your shares of our common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted, but this will not have an effect on the proposal to adjourn the Special Meeting.

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Q.

Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger?

A.

Under SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger. This compensation is referred to as "golden parachute" compensation.

Q.

What will happen if the Company's stockholders do not approve the golden parachute compensation?

A.

Approval of the compensation that may be paid or become payable to the Company's named executive officers that is based on or otherwise relates to the merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on the Company or the surviving corporation in the merger. Therefore, if the merger agreement is adopted by the Company's stockholders and the merger is completed, this compensation, including amounts that the Company is contractually obligated to pay, could still be payable regardless of the outcome of the advisory vote.

Q.

If my shares of common stock are held in "street name" by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares of common stock for me?

A.

Your bank, brokerage firm or other nominee will only be permitted to vote your shares of our common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of our common stock. Under the rules of the NASDAQ, banks, brokerage firms or other nominees who hold shares in street name for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposal to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of our common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of our common stock on non-routine matters. If you do not instruct your bank, brokerage firm or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted, which we refer to as broker non-votes, and the effect will be the same as a vote "AGAINST" approval of the proposal to adopt the merger agreement, and your shares of our common stock will not have an effect on the proposal to adjourn the Special Meeting or on the proposal to approve the merger-related executive compensation.

Q.

How do I vote?

A.

Stockholder of Record . If you are a stockholder of record, you may have your shares of our common stock voted on matters presented at the Special Meeting in any of the following ways:

•

by proxy by telephone;

•

by proxy by Internet;

•

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

•

in person—you may attend the Special Meeting and cast your vote there.

Beneficial Owner.     If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting,

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you must provide a legal proxy from your bank, brokerage firm or other nominee at the Special Meeting.

Q.

How can I change or revoke my vote?

A.

You have the right to revoke a proxy before it is voted by submitting a new proxy card with a later date. Record holders may also revoke their proxy by voting in person at the Special Meeting or by notifying the Company's Secretary in writing at: True Religion Apparel, Inc., Attention: Secretary, 2263 E. Vernon Avenue, Vernon, California 90058.

Q.

What happens when a proxy card is not returned by a stockholder and such stockholder does not attend or vote in person at the Special Meeting?

A.

If a stockholder of record fails to submit a proxy card by mail, phone or Internet return and such stockholder does not attend or vote in person at the Special Meeting, such shares of our common stock held by such person will not be counted for purposes of determining whether a quorum is present and will have the same effect as a vote "AGAINST" the proposal to adopt the Merger.

Q.

What do I do if I receive more than one proxy or set of voting instructions?

A.

If you hold shares of our common stock in "street name" and also directly as a record holder or otherwise, you may receive more than one proxy and/or set of voting instructions relating to the Special Meeting. Please vote each proxy or voting instruction card in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of our common stock are voted.

Q.

What happens if I sell my shares of common stock before the Special Meeting?

A.

The record date for stockholders entitled to vote at the Special Meeting is earlier than both the date of the Special Meeting and the consummation of the merger. If you transfer your shares of our common stock after the record date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares at the Special Meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares.

Q.

What happens if I sell my shares of common stock after the Special Meeting but before the effective time of the merger?

A.

If you transfer your shares after the Special Meeting but before the effective time of the merger, you will have transferred the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares of our common stock through completion of the merger.

Q.

Who will solicit and pay the cost of soliciting proxies?

A.

The Company has engaged MacKenzie Partners, Inc., which we refer to as MacKenzie Partners, to assist in the solicitation of proxies for the Special Meeting. The Company estimates that it will pay MacKenzie Partners a fee of $75,000 and telephone charges. The Company has agreed to reimburse MacKenzie Partners for, pay directly, or, where requested in special situations, advance sufficient funds to MacKenzie Partners for the payment of, certain fees and expenses and will also indemnify MacKenzie Partners, its subsidiaries and their respective directors, officers, employees and agents against certain claims, liabilities, losses, damages and expenses. The Company may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

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Q.

What do I need to do now?

A.

Even if you plan to attend the Special Meeting, after carefully reading and considering the information contained in this proxy statement, please vote promptly to ensure that your shares are represented at the Special Meeting. If you hold your shares of our common stock in your own name as the stockholder of record, you may submit a proxy to have your shares of our common stock voted at the Special Meeting by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

Q.

Should I send in my stock certificates now?

A.

No. If the proposal to adopt the merger agreement is approved, you will be sent a letter of transmittal promptly, and in any event within three days, after the completion of the merger, describing how you may exchange your shares of our common stock for the merger consideration. If your shares of our common stock are held in "street name" through a bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your "street name" shares of our common stock in exchange for the merger consideration. Please do NOT return your stock certificate(s) with your proxy.

Q.

Who can help answer any other questions I might have?

A.

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact    •    , our proxy solicitor, by calling toll-free at     •    . Brokers, banks and other nominees may call collect at    •    .

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This proxy statement, and the documents to which we refer you in this proxy statement, as well as oral statements made or to be made by us, contain assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks, uncertainties and assumptions include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (2) the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; (3) the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement; (4) risks related to disruption of management's attention from the Company's ongoing business operations due to the transaction; and (5) the effect of the announcement of the proposed merger on the Company's relationships with its customers, suppliers, operating results and business generally.

        Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent the Company's views as of the date on which such statements were made. The Company anticipates that subsequent events and developments will cause its views to change. However, although the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date hereof. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 under the heading "Item 1A—Risk Factors," and in subsequent reports on Forms 10-Q and 8-K filed with the SEC by the Company.

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PARTIES TO THE MERGER

The Company

True Religion Apparel, Inc.
2263 E. Vernon Avenue
Vernon, California 90058
(323) 266-3072

        The Company designs, markets, sells and distributes premium fashion apparel, centered on our core denim products using the brand name "True Religion Brand Jeans." Our products include jeans, pants, woven and knit tops and outerwear made from denim, fleece, jersey and other fabrics. We are known for our unique fits, washes and styling details. Our products are distributed through multiple wholesale and retail segments on six continents, including North America, Europe, Asia, Australia, Africa and South America.

        For more information about the Company, please visit the Investor Relations page on our website at www.truereligionbrandjeans.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC. See also "Where You Can Find More Information" beginning on page     •    .

        The Company's common stock is listed on NASDAQ under the symbol "TRLG".

Parent

TRLG Holdings, LLC
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 699-2200

        Parent is a Delaware limited liability company that was formed by TowerBrook Capital Partners solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Parent is controlled by investment funds advised by TowerBrook Capital Partners. TowerBrook Capital Partners is an investment management company with more than $8 billion under management. The firm is based in Europe and the United States and focuses its investments in European and North American companies.

Merger Sub

TRLG Merger Sub, Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 699-2200

        Merger Sub is a Delaware corporation that was formed by Parent solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Merger Sub is an indirect wholly owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation.

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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

        This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting to be held on    •    , 2013, at 2263 E. Vernon Avenue, Vernon, California 90058, beginning at 10:00 a.m. local time, or at any postponement or adjournment thereof. At the Special Meeting, holders of our common stock will be asked (i) to approve the proposal to adopt the merger agreement, (ii) to approve the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger, and (iii) to approve the proposal to adjourn the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the merger agreement.

        Our stockholders must approve the proposal to adopt the merger agreement in order for the merger to occur. If our stockholders fail to approve the proposal to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully and in its entirety.

Record Date and Quorum

        We have fixed the close of business on    •    , 2013 as the record date for the Special Meeting, and only holders of record of our common stock on the record date are entitled to vote at the Special Meeting. You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of our common stock at the close of business on the record date. On the record date, there were    •    shares of our common stock outstanding and entitled to vote held by    •    holders of record. You will have one vote on all matters properly coming before the Special Meeting for each share of our common stock that you owned on the record date.

        A majority of the shares of our common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the Special Meeting constitutes a quorum for the purposes of the Special Meeting. Shares of our common stock represented at the Special Meeting but not voted, including shares of our common stock for which a stockholder directs an "abstention" from voting, will be counted for purposes of establishing a quorum. Broker non-votes will also be counted for purposes of establishing a quorum. A quorum is necessary to transact business at the Special Meeting. Once a share of our common stock is represented at the Special Meeting, it will be counted for the purpose of determining a quorum at the Special Meeting and any adjournment of the Special Meeting. However, if a new record date is set for the adjourned Special Meeting, then a new quorum will have to be established. In the event that a quorum is not present at the Special Meeting, it is expected that the Special Meeting will be adjourned.

Attendance

        Only stockholders of record, their duly authorized proxy holders, beneficial stockholders with proof of ownership and our guests may attend the Special Meeting. To gain admittance, please bring to the Special Meeting proof of your beneficial ownership of our common stock. Acceptable proof could include an account statement showing that you owned shares of our common stock on the record date,    •    , 2013. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are the representative of such stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the Special Meeting.

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Vote Required

        Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. For the proposal to adopt the merger agreement, you may vote "FOR", "AGAINST" or "ABSTAIN". Abstentions will not be counted as votes cast in favor of the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote in person at the Special Meeting, or abstain, it will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement.

        If your shares of our common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares of our common stock, the "stockholder of record". This proxy statement and proxy card have been sent directly to you by the Company.

        If your shares of our common stock are held through a bank, brokerage firm or other nominee, you are considered the "beneficial owner" of shares of our common stock held in street name. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of our common stock, the stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.

        Under the rules of NASDAQ, banks, brokerage firms or other nominees who hold shares in street name for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters such as the proposal to adopt the merger agreement and, as a result, absent specific instructions from the beneficial owner of such shares of our common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of our common stock on non-routine matters. These broker non-votes will be counted for purposes of determining a quorum, and will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement.

        The proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting, whether or not a quorum is present. For the proposal to adjourn the Special Meeting, if necessary or appropriate, you may vote "FOR", "AGAINST" or "ABSTAIN". For purposes of this proposal, if your shares of our common stock are present at the Special Meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have the same effect as if you voted "AGAINST" approval of the proposal. If you fail to submit a proxy, attend in person the Special Meeting, or there are broker non-votes on the issue, as applicable, the shares of our common stock held by you or your broker will not be counted in respect of, and will not have an effect on, the proposal to adjourn the Special Meeting.

        The proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting, whether or not a quorum is present. For the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger, you may vote "FOR", "AGAINST" or "ABSTAIN". For purposes of this proposal, if your shares of our common stock are present at the Special Meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have the same effect as if you voted "AGAINST" approval of the proposal. If you fail to submit a proxy, attend in person the Special Meeting, or there are broker non-votes on the issue,

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as applicable, the shares of our common stock held by you or your broker will not be counted in respect of, and will not have an effect on, the proposal to approve the merger-related executive compensation.

        If you are a stockholder of record, you may have your shares of our common stock voted on matters presented at the Special Meeting in any of the following ways:

•

by proxy—stockholders of record have a choice of voting by proxy;



•

by telephone or over the Internet, by accessing the telephone number or website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when voting by telephone or by Internet. Please be aware that if you vote over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;



•

by signing, dating, and returning the enclosed proxy card in the accompanying prepaid reply envelope; or



•

in person—you may attend the Special Meeting and cast your vote there.

        If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of our common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the Special Meeting.

        Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you choose to submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be filed with our Secretary by the time the Special Meeting begins. Please do not send in your stock certificates with your proxy card. When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the merger consideration in exchange for your stock certificates.

        If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of our common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of our common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

        If you properly sign your proxy card but do not mark the boxes showing how your shares of our common stock should be voted on a matter, the shares of our common stock represented by your properly signed proxy will be voted "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies and "FOR" approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger.

        If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, our proxy solicitor, by calling toll-free at     •    . Brokers, banks and other nominees may call collect at    •    .

        IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF OUR COMMON STOCK AT THE MEETING PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL

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MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

        As of    •    , 2013, the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate,    •    shares of our common stock, representing approximately    •     percent of the outstanding shares of our common stock. The directors and officers have informed the Company that they currently intend to vote all such shares of our common stock "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies and "FOR" approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger. The Board recommends that you vote "FOR" approval of the proposal to adopt the merger agreement, "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies and "FOR" approval of the proposal to approve, by a non-binding advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger.

Adjournments

        Although it is not currently expected, the Special Meeting may be adjourned for the purpose of soliciting additional proxies if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the Special Meeting. An adjournment generally may be made with the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the matter at the Special Meeting. Any adjournment of the Special Meeting for the purpose of soliciting additional proxies will allow the Company's stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned.

Proxies and Revocation

        Any stockholder of record entitled to vote at the Special Meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the Special Meeting. If your shares of our common stock are held in "street name" through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of our common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the Special Meeting, or do not provide your bank, brokerage firm or other nominee with instructions, as applicable, your shares of our common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote "AGAINST" approval of the proposal to adopt the merger agreement, and your shares of our common stock will not have an effect on the proposal to adjourn the Special Meeting or on the proposal to approve by non-binding, advisory vote, certain compensation arrangements for the Company's named executive officers in connection with the merger.

        You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by voting again at a later date through any of the methods available to you, by giving written notice of revocation to our Secretary, which must be filed with the Secretary by the time the Special Meeting begins, or by attending the Special Meeting and voting in person. Written notice of revocation should be mailed to: True Religion Apparel, Inc., Attention: Secretary, 2263 E. Vernon Avenue, Vernon, California 90058.

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Anticipated Date of Completion of the Merger

        We are working towards completing the merger as soon as possible. In order to complete the merger, the Company must obtain the stockholder approval described in this proxy statement and the other closing conditions under the merger agreement must be satisfied or waived. In addition, Parent and Merger Sub are not obligated to complete the merger until the expiration of a twenty (or, in certain circumstances, fifteen) consecutive business day "marketing period" that they may use to complete their financing for the merger. The marketing period will begin after we have obtained the Company's stockholders' approval and satisfied other specified conditions under the merger agreement. If the marketing period would not end on or before August 16, 2013, however, then the marketing period will commence no earlier than September 3, 2013. See "The Merger Agreement—Marketing Period" beginning on page     •    . The Company currently expects to complete the merger during the third quarter of the Company's current fiscal year. The Company, however, cannot assure completion of the merger by any particular date, if at all. Because consummation of the merger is subject to a number of conditions and the marketing period, the exact timing of the merger cannot be determined at this time.

Rights of Stockholders Who Seek Appraisal

        Stockholders are entitled to appraisal rights under the DGCL in connection with the merger. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures specified under the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

        To exercise your appraisal rights, you must submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not vote (either in person or by proxy) in favor of the proposal to adopt the merger agreement. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. See "Appraisal Rights" beginning on page     •    and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex B to this proxy statement. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage firm or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Solicitation of Proxies; Payment of Solicitation Expenses

        The Company has engaged MacKenzie Partners to assist in the solicitation of proxies for the Special Meeting. The Company estimates that it will pay MacKenzie Partners a fee of $75,000 and its reasonable out of pocket expenses. The Company has agreed to indemnify MacKenzie Partners and its employees against certain losses, claims, damages, liabilities and expenses. The Company may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Questions and Additional Information

        If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact MacKenzie Partners, our proxy solicitor, by calling toll-free at    •    . Brokers, banks and other nominees may call collect at    •    .

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THE MERGER

         This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A . You should read the entire merger agreement carefully as it is the legal document that governs the merger.

        The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to exist following the merger. As a result of the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation.

Merger Consideration

        In the merger, each outstanding share of our common stock (other than excluded shares) will be converted into the right to receive an amount in cash equal to $32.00, less any applicable withholding taxes.

Background of the Merger

        From time to time, the Board has reviewed and evaluated strategic alternatives relating to the Company's business, including potential business combination transactions, special dividends, stock repurchases, levered recapitalizations and other potential strategic transactions, each with a view towards maximizing stockholder value.

        On May 2, 2012, Peter Collins, the Company's Chief Financial Officer, received an unsolicited inquiry from a representative of J.P. Morgan Securities, Inc., which we refer to as J.P. Morgan, the financial advisor to a publicly listed, global branded apparel company, which we refer to as Party A, requesting an introductory meeting between representatives of Party A and representatives of the Company. This inquiry expressed Party A's interest in "getting to know" the Company and its management team and referenced Party A's interest in pursuing an acquisition growth strategy.

        Later that day, Mr. Collins reported the J.P. Morgan inquiry to the Company's then Chairman and Chief Executive Officer, Jeffrey Lubell.

        On May 3, 2012, Mr. Lubell instructed Mr. Collins to contact Peter Comisar, Vice Chairman of Guggenheim Securities, who had a long-standing investment banking advisory relationship with the Company, to discuss the J.P. Morgan inquiry.

        On May 4, 2012, Mr. Collins contacted Mr. Comisar to discuss the J.P. Morgan inquiry. Because of Mr. Comisar's familiarity with Party A and the principals within Party A's organization, Mr. Collins, pursuant to Mr. Lubell's instructions, asked Mr. Comisar to confirm directly the nature of the meeting request and, as appropriate, host and facilitate such an introductory meeting with Party A.

        On May 8, 2012, Mr. Comisar had a telephonic conversation with Party A's Executive Vice President of International Strategy and Business Development during which they agreed to meet to discuss Party A's interest in the Company.

        On May 22, 2012, representatives of Guggenheim Securities and representatives of Party A met at Party A's corporate headquarters. Party A described its Chief Executive Officer's respect and admiration for the Company's brand and stated that she wished to meet Mr. Lubell and to discuss each company's respective goals and strategies.

        On June 13, 2012, Mr. Lubell attended a meeting with Mr. Comisar and Party A's Chief Executive Officer and its Executive Vice President of International Strategy and Business Development. At the meeting, these individuals discussed current trends and developments in the Company's and Party A's respective businesses, operations and capabilities, as well as the apparel industry in general.

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        Immediately following this introductory meeting with Party A, Mr. Lubell debriefed Seth R. Johnson, Lead Independent Director, and Mark S. Maron, one of the Company's directors, on the discussions with Party A. On June 15 and June 16, 2012, representatives of Guggenheim Securities had follow up conversations with Mr. Johnson and Mr. Maron regarding such discussions with Party A, during which it was agreed that Guggenheim Securities would provide an overview of Party A's operations, financial performance and strategy to the other members of the Board at the next opportunity to do so.

        On June 21, 2012, the non-management members of the Board met in an executive session, during which Mr. Johnson informed the other non-management members of the Board of the meeting held on June 13, 2012 between Mr. Lubell, Mr. Comisar and representatives of Party A.

        On July 5, 2012, the Chief Executive Officer of Party A contacted Mr. Lubell indicating that she enjoyed their meeting and expressed continued interest in a dialogue and information exchange.

        On August 6, 2012, at the request of Party A, representatives of Guggenheim Securities met with representatives of J.P. Morgan and Party A. At this meeting, a representative of Party A and a representative of J.P. Morgan discussed Party A's interest in a potential acquisition of the Company and indicated a desire to submit a proposal regarding such an acquisition to the Board, but no proposal regarding the price or structure of a transaction was made. Shortly thereafter, Guggenheim Securities had separate telephonic conversations with each of Mr. Johnson, Mr. Maron and Mr. Lubell during which Guggenheim Securities provided a summary of its discussion with representatives of Party A and J.P. Morgan.

        On August 15, 2012, Party A submitted to the Company a non-binding written preliminary indication of interest to acquire 100% of the outstanding shares of common stock of the Company at a price of $33.00 per share in cash, subject to the completion of customary due diligence, negotiation and execution of a definitive transaction agreement and the approval of Party A's board of directors.

        On August 16, 2012, the non-management members of the Board met in an executive session, at which representatives of Guggenheim Securities and Greenberg Traurig, LLP, which we refer to as Greenberg Traurig, participated. Greenberg Traurig was invited to this meeting because it had previously represented the Board in connection with certain corporate governance matters. At this meeting, the non-management members of the Board reviewed and discussed with Guggenheim Securities and Greenberg Traurig Party A's written indication of interest. Also at this meeting, representatives of Guggenheim Securities provided an overview of Party A's business operations, recent financial performance and strategy and reviewed Guggenheim Securities' preliminary financial analysis relating to the proposed purchase price of $33.00 per share. Following such discussion, Greenberg Traurig reviewed with the non-management members of the Board their fiduciary and other duties in connection with a possible sale transaction involving the Company and explained that Mr. Lubell had a potential conflict of interest with respect to the Company's proposed acquisition by Party A because Mr. Lubell's employment agreement with the Company provided for a potentially large payment to him in connection with a change of control of the Company and because he might be asked to join the management of Party A. Accordingly, the non-management members of the Board decided to call a special meeting of the full Board for the purpose of discussing the formal establishment of a special committee comprised of non-management members of the Board to review and evaluate Party A's proposal.

        Later in the day on August 16, 2012, the Board convened a special telephonic meeting with all directors present at which it formed a special committee of the Board, which we refer to as the Special Committee, comprised of the six independent, non-management directors, who were Mr. Johnson, Marcello Bottoli, Joseph Coulombe, G. Louis Graziadio, III, Robert L. Harris, II and Mr. Maron, with authority (i) to review, consider and evaluate the terms of Party A's proposal and any alternate transaction proposals that it may identify in the course of reviewing, considering and evaluating

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Party A's proposal and any other potential transaction involving the sale of the Company and (ii) to the extent the Special Committee deems appropriate and to the extent permitted by applicable law (A) to negotiate the terms and conditions of any potential transaction, (B) to accept or reject any proposal with respect to a potential transaction and (C) to make recommendations to the Board in respect of any potential transaction, in each case in the manner the Special Committee deems appropriate in its sole discretion (in accordance with its members' fiduciary duties to the Company and the Company's stockholders). Also at this meeting, the Board determined that it should formally engage a financial advisor to assist the Special Committee in its evaluation of any such potential transaction. Due to its familiarity with the Company, the prior discussions with Party A and its familiarity with the industry in which the Company operates, the Board agreed to formally engage Guggenheim Securities to act as the Special Committee's financial advisor. In addition, the Company formally retained Greenberg Traurig as legal counsel to the Special Committee and the Company to work with Akin Gump Strauss Hauer & Feld LLP, which we refer to as Akin Gump, the Company's general corporate counsel, in connection with the potential sale of the Company. At the conclusion of this meeting, the Special Committee authorized Guggenheim Securities to communicate to Party A that Party A would need to increase its proposed per share purchase price and execute a confidentiality agreement with the Company containing customary standstill provisions before the Special Committee would consider engaging in further discussions regarding Party A's proposal and providing Party A with access to the Company's management team and non-public information regarding the Company.

        Following this meeting, the Special Committee informed Mr. Collins, Lynne Koplin, the Company's President, and other members of the Company's management team of Party A's proposal and the potential acquisition of the Company. The Special Committee requested that management assist Guggenheim Securities and Greenberg Traurig in compiling the appropriate due diligence materials in the event negotiations with Party A, or any other potential bidder, progressed.

        During the next two weeks, Greenberg Traurig advised the Special Committee in its negotiation of the terms of an engagement letter with Guggenheim Securities. On September 4, 2012, the Company entered into an engagement letter agreement with Guggenheim Securities pursuant to which Guggenheim Securities agreed to act as the Company's financial advisor in connection with a review of the Company's strategic alternatives, including a potential sale of the Company.

        On August 17, 2012, representatives of Guggenheim Securities had a telephonic conversation with representatives of Party A, during which they informed Party A that the Company had formed the Special Committee to evaluate Party A's proposal and that the Company was not prepared to provide non-public information regarding the Company until Party A submitted a proposal at a higher price and entered into a customary confidentiality and standstill agreement with the Company.

        On August 20, 2012, a representative of Guggenheim Securities had telephonic conversations with a representative of J.P. Morgan, during which the representative of J.P. Morgan indicated that the management of Party A believed they could increase the $33.00 proposal with the benefit of access to business due diligence information and further discussions with senior management of the Company regarding potential synergies and strategic fit. Guggenheim Securities informed the Special Committee of this communication at a telephonic meeting held on August 22, 2012. Representatives of Guggenheim Securities then reiterated to Party A the Special Committee's position that the Company was not prepared to provide non-public information regarding the Company until Party A submitted a proposal at a higher price and entered into a customary confidentiality and standstill agreement with the Company.

        On August 24, 2012, representatives of Guggenheim Securities met with Ms. Koplin and Mr. Collins to review the Company's draft financial projections and to receive an update on key trends in the Company's business.

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        On September 13, 2012, a representative of a private equity firm that specializes in investments in the consumer and retail sectors, which we refer to as Party B, contacted Guggenheim Securities to discuss its interest in a potential acquisition of the Company, but did not make any proposal regarding the price or structure of any such transaction. Guggenheim Securities conveyed this information to the Special Committee.

        On September 20, 2012, a representative of Guggenheim Securities had a telephonic conversation with a representative of Party A. In this discussion, Party A indicated that it had drafted a revised letter to the Company reflecting a proposal for a higher price. However, Party A explained that its Chief Executive Officer was travelling outside of the U.S. and had not yet had an opportunity to review the submission of such revised proposal with Party A's board of directors and, therefore, Party A's board of directors had not yet authorized the submission of such revised proposal to the Company. Guggenheim Securities informed the Special Committee of this communication.

        On September 27, 2012, the Board convened a special telephonic meeting, at which representatives of Greenberg Traurig participated, to discuss Party B's interest in an acquisition of the Company. After such discussion, the Board instructed Guggenheim Securities to engage further with Party B regarding its interest in a potential acquisition of the Company and to continue discussions with Party A.

        On September 28, 2012, a representative of Party B contacted Mr. Johnson to discuss Party B's interest in an acquisition of the Company, but did not make any proposal regarding the price or structure of any such transaction.

        On or about October 3, 2012, representatives of Party A contacted Guggenheim Securities and indicated that Party A was unable to deliver a revised proposal and would terminate discussions with the Company regarding a proposed acquisition of the Company.

        On October 3, 2012, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities and Greenberg Traurig participated, to receive, among other things, an update on Guggenheim Securities' discussions, on behalf of the Company, with Party A and Party B. The representatives of Guggenheim Securities informed the Special Committee that Party A had indicated to Guggenheim Securities that Party A was unable to deliver a revised proposal and had decided to terminate discussions with the Company regarding the proposed transaction. Guggenheim Securities then provided the Special Committee with an overview of Party B's investment history and management team and, although Party B had not yet submitted a proposed price to the Company, certain illustrative financial analyses of a potential acquisition of the Company at various price levels. Guggenheim Securities also provided the Special Committee with an overview of Guggenheim Securities' preliminary assessment of the Company's management's financial projections, the key trends in the Company's business as reported by management and a comparison of the financial impact of management's plan as compared to the potential stockholder return potentially available in an acquisition transaction.

        The Special Committee then discussed with Guggenheim Securities and Greenberg Traurig the possibility, in light of the Company's recent receipt of indications of interest regarding an acquisition of the Company from Party A and Party B, of the Company publicly announcing its intention to explore strategic alternatives and its engagement of financial and legal advisors in connection with such exploration. Representatives of Guggenheim Securities discussed with the Special Committee certain timing and market considerations relating to the announcement of such a process. At the conclusion of this discussion, the Special Committee determined that before deciding whether to make such an announcement Guggenheim Securities should first obtain additional information regarding Party B's intentions with respect to a potential acquisition of the Company.

        On October 4, 2012 and October 5, 2012, representatives of Guggenheim Securities had multiple discussions with representatives of Party B regarding Party B's interest in pursuing a potential acquisition of the Company. Following such discussions, Party B provided an oral preliminary indication

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of interest at a per share purchase price in the "mid-30s" and indicated that it would be in a position to consummate a transaction on an expedited basis.

        On October 8, 2012, the Special Committee convened a special telephonic meeting, at which representatives of Guggenheim Securities and Greenberg Traurig participated, during which representatives of Guggenheim Securities updated the Special Committee on its discussions with Party B. During the course of that meeting, the Special Committee discussed various strategic alternatives available to the Company to return value to its stockholders, including the continuation of the Company as an independent company, the declaration of a special dividend and stock repurchases. The Special Committee also discussed the Company's recent operating performance, including (i) the declines in operating margins since fiscal year 2010, which resulted in operating income growing significantly slower than net sales, (ii) the declines in women's merchandise sales in the U.S. wholesale segment during this period and on a same-store sales basis in its U.S. retail stores, and (iii) the declines in the Company's international segment's operating income during this period. The Special Committee then discussed the risks and challenges of executing on the Company's long-term plan and whether a sale transaction at the prices preliminarily indicated would provide a more certain return of value to the Company's stockholders. After considering these various factors, the Special Committee determined that it would be appropriate for the Special Committee to conduct a thorough consideration of strategic alternatives, including the potential sale of the Company.

        The Special Committee then discussed the advantages and disadvantages of the Company announcing publicly that it would explore strategic alternatives as compared to continuing discussions with Party B while conducting a more targeted process. Following this discussion, with the advice of Guggenheim Securities, the Special Committee determined that a broad sale process would maximize the value to be received by the Company's stockholders in any sale transaction and therefore would be in the best interest of the Company and its stockholders. The Special Committee directed Guggenheim Securities to inform Party B of the Special Committee's decision, but to explain that the Special Committee would like to pursue further Party B's oral preliminary proposal concurrently with the sale process.

        On October 9, 2012, the Board convened a special telephonic meeting, at which Mr. Lubell, Ms. Koplin and Mr. Collins and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss a draft press release regarding the Company's exploration of strategic alternatives.

        Early in the morning on October 10, 2012, the Company issued a press release announcing that the Board had formed the Special Committee to explore and evaluate potential strategic alternatives available to the Company, including a possible sale transaction, in order to maximize stockholder value, and that it had retained financial and legal advisors.

        From October 10, 2012 through November 28, 2012, Guggenheim Securities, at the direction of the Special Committee, contacted 91 parties, including both strategic parties and financial sponsors (among them, TowerBrook), to ascertain their interest in a potential acquisition of the Company. Twenty-six of the parties contacted (including Party B but not including TowerBrook at the time) negotiated and executed confidentiality agreements with the Company in order to receive confidential information of the Company in connection with their evaluation of a potential acquisition. Also during this period, the Company's management team provided various business, financial, accounting, tax and legal due diligence materials to Guggenheim Securities and Greenberg Traurig, which were uploaded to a virtual data room. Selected potential bidders were also provided an opportunity to have introductory meetings with management upon request.

        On October 24, 2012, the Board held a regularly scheduled meeting, at which Ms. Koplin, Mr. Collins, Deborah Greaves, General Counsel to the Company, and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated. During this meeting, representatives of

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Guggenheim Securities discussed with the Board the status of the sale process and discussions with potentially interested parties, including a review of the institutions (including TowerBrook) that had been contacted during the process, the institutions that had engaged in negotiations regarding a confidentiality agreement with the Company and the institutions that had signed confidentiality agreements with the Company.

        At that meeting, Mr. Johnson reported that Mr. Lubell and Mr. Collins had expressed concern that the uncertainty of the treatment of unvested awards under the Plan was having a negative impact on morale among non-executive employees of the Company and could potentially distract key employees during the review of strategic alternatives. The Board discussed the merits and demerits of committing to the employees that their unvested awards would be vested on a change in control of the Company in order to remove this uncertainty and management distraction. Following that discussion, the Board authorized the acceleration of vesting of unvested shares of restricted stock of the Company held by employees upon a change in control of the Company if the employee is employed by the Company at the time any such change in control occurred.

        On October 31, 2012, Party A publicly announced that it had entered into a definitive agreement to be acquired by a strategic partner.

        By November 28, 2012, of the 26 potential bidders that executed confidentiality agreements with the Company and received confidential information of the Company, Party B submitted a written indication of interest at a per share price ranging from $31.00 to $33.00 per share; another private equity firm, which we refer to as Party C, submitted a written indication of interest at a per share price ranging from $30.00 to $31.00 per share; another private equity firm, which we refer to as Party D, submitted a written indication of interest at a per share price ranging from $30.00 to $32.00 per share; two other private equity firms, which we refer to as Party E and Party F, separately informed Guggenheim Securities that they intended to submit formal indications of interest in the near term at per share prices ranging from $30.00 to $33.00 per share; two other private equity firms, which we refer to as Party G and Party H, conveyed oral indications of interest at prices below $30.00 per share; four other private equity firms remained interested but were still in the process of assessing value (however, none of these four parties subsequently submitted an indication of interest); and the remaining 15 parties declined to submit an initial indication of interest.

        On November 28, 2012, the Board convened a special telephonic meeting, at which Ms. Koplin, Mr. Collins, Ms. Greaves and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss, among other things, (i) the initial indications of interest received by Guggenheim Securities to date regarding a potential acquisition of the Company, (ii) recent statistics with respect to public trading in the Company's common stock, (iii) general public market trends in the Company's industry, (iv) an overview of the Company's current financial forecast and (v) an updated illustrative financial analysis of a potential acquisition of the Company at various price levels. Also at this meeting, representatives of Guggenheim Securities discussed with the Board various strategic alternatives that might be available to the Company other than a sale of the entire company, including returning capital to the Company's stockholders through the payment of a special dividend, stock repurchases and/or seeking a strategic investment from a minority partner at a premium to the current market price, which we refer to as a PIPE investment, with the proceeds to be used to return capital to stockholders. Following this discussion, the Board decided to defer any decision on other strategic alternatives until receiving a further update from Guggenheim Securities on the ongoing sale process at the next meeting of the Board or the Special Committee.

        Immediately following the November 28, 2012 meeting, at the direction of the Special Committee, Guggenheim Securities communicated to Party G and Party H that the Special Committee would not be interested in their continued participation in the sale process at the valuation levels that had been offered.

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        On November 30, 2012, Party F contacted Guggenheim Securities and indicated that it would not be submitting a formal indication of interest. Soon thereafter, Party E communicated that it too would not be submitting a formal indication of interest.

        On December 3, 2012, Guggenheim Securities contacted another private equity firm, which was not among the initial 91 parties contacted by Guggenheim Securities in October and November of 2012, to ascertain its interest in participating in the sale process. This party executed a confidentiality agreement with the Company and received certain confidential information of the Company but subsequently declined to engage in the sale process.

        On December 4, 2012, representatives of Party B attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California, received a store tour and had further meetings with management over dinner.

        On December 5, 2012, each of Party B, Party C and Party D was provided access to the Company's virtual data room to continue its due diligence review of the Company.

        On December 10, 2012, representatives of Party C attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California, received a store tour and had further meetings with management over dinner.

        On December 12, 2012, the Board held a regularly scheduled meeting, at which Ms. Koplin, Mr. Collins, Ms. Greaves and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated. At this meeting, representatives of Guggenheim Securities updated the Board regarding the current sale process and the feedback received from the remaining bidders following their meetings with Company management and initial review of the Company's diligence materials provided in the virtual data room. The Board then discussed, with the assistance of Guggenheim Securities and in the context of the anticipated increase in personal federal tax rates in calendar year 2013, the advantages and disadvantages of returning additional capital to the Company's stockholders, either through the payment of a special dividend or conducting a self-tender offer at a premium to the Company's then current stock price, prior to the end of calendar year 2012 while the current sale process was ongoing. Following such discussion, the Board determined that the payment of a special dividend and/or conducting a self-tender offer at that time could be detrimental to the progress of the current sale process, and therefore, would not be in the best interests of the Company's stockholders. However, the Board decided to accelerate the payment of the Company's fourth quarter 2012 regular cash dividend, which was scheduled to be paid in the first quarter of 2013, so that it would be paid before the end of 2012.

        On December 13, 2012, representatives of Party D attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California, received a store tour and had further meetings with management over dinner.

        From December 13, 2012 through early January 2013, Party B, Party C and Party D continued to conduct due diligence by reviewing materials in the virtual data room and participating in due diligence calls with Company management.

        On January 2, 2013, a representative of Guggenheim Securities contacted a representative of TowerBrook and solicited TowerBrook's reengagement in the sale process. TowerBrook indicated a potential interest in reengagement, but only if the Company would agree, at an appropriate juncture, to engage in exclusive discussions with TowerBrook.

        On January 8, 2013, representatives of Guggenheim Securities had a telephonic conversation with representatives of TowerBrook to discuss the Company's business, positioning and current sale process. Representatives of Guggenheim Securities shortly thereafter provided TowerBrook with certain public information about the Company.

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        Also on January 8, 2013, Party D contacted Guggenheim Securities and indicated it was no longer interested in pursuing a transaction with the Company.

        On January 14, 2013, TowerBrook executed a customary confidentiality and standstill agreement with the Company and gained access to the Company's confidential information memorandum and virtual data room.

        In the morning of January 14, 2013, Party B contacted Guggenheim Securities and indicated that based on its diligence review of the Company it would be unable to proceed with an acquisition of the Company at a per share price that it believed would be attractive to the Special Committee. However, Party B also indicated that it may be interested in making a PIPE investment by acquiring up to $150 million in convertible preferred stock, subject to further negotiations with the Company regarding price, liquidation preference, governance rights and other terms and conditions.

        On January 14, 2013, at the direction of the Special Committee, Guggenheim Securities delivered a final bid process letter to each of Party B and Party C. These bid process letters requested that a definitive proposal be submitted for the Special Committee's review no later than February 6, 2013, along with the potential bidder's markup of the draft merger agreement, a copy of which was to be subsequently provided. Despite Party B's indication earlier in the day that it would be unable to offer an attractive valuation to the Special Committee in the context of an acquisition of the Company, Guggenheim Securities encouraged Party B to submit a proposal to acquire the Company.

        On January 15, 2013, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated. At this meeting, representatives of Guggenheim Securities updated the Special Committee regarding the current sale process and indicated that (i) Party D had dropped out of the process, (ii) Party B remained engaged and was continuing its due diligence review but, based on current feedback received by Guggenheim Securities, was likely to submit a bid too low to be of interest to the Special Committee and (iii) Party C continued to express significant interest and was the most likely potential bidder to submit a bid at a level attractive to the Special Committee. Guggenheim Securities then reported to the Special Committee that TowerBrook had commenced its due diligence and explained that TowerBrook would require a period of exclusivity if it decided to proceed with further discussions regarding a potential acquisition of the Company. The Special Committee then reviewed and discussed with Greenberg Traurig and Akin Gump the initial draft merger agreement to be sent to the potential bidders that remained in the process.

        On January 16, 2013, a representative of Party E contacted Guggenheim Securities to express its interest in reengaging in the Company's sale process. Party E, which had already entered into a confidentiality agreement with the Company, was provided access to the Company's virtual data room and indicated to Guggenheim Securities that it planned to commence its due diligence review on an expedited basis in the coming weeks.

        Also on January 16, 2013, a representative of Guggenheim Securities and a representative of TowerBrook met to discuss the Company and its recent performance.

        On January 24, 2013, Party C contacted Guggenheim Securities and indicated that based on its due diligence review of the Company it had decided not to proceed further in the process as it would not be able to pay more than $28.00 per share.

        Also on January 24, 2013, Guggenheim Securities contacted a representative of a private equity firm that was not among the initial 91 parties contacted by Guggenheim Securities in October and November of 2012, which we refer to as Party I, to ascertain Party I's interest in participating in the sale process.

        On January 28 and 29, 2013, representatives of TowerBrook attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California, received a store tour and had further meetings with management over dinner.

        On January 30, 2013, Party I expressed its interest in engaging in the sale process, entered into a confidentiality agreement with the Company, was provided access to the Company's virtual data room and began its due diligence review of the Company.

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        Also on January 30, 2013, the Board held a regularly scheduled meeting, at which Mr. Collins, Ms. Greaves and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated. At this meeting, representatives of Guggenheim Securities updated the Board regarding the recent developments in the current sale process, including a discussion regarding those parties that had withdrawn from the process and those parties that had reengaged in the process. Also at this meeting, the Board and Guggenheim Securities discussed various proposed terms of a potential PIPE investment, various alternatives regarding the structure of a PIPE investment, a case study of previously completed PIPE investments in other U.S. public companies in the retail sector and an illustrative financial analysis of the effect of a PIPE investment on the future value of the Company. During this discussion, Greenberg Traurig also reviewed the various legal issues associated with a PIPE investment.

        Following such discussion, members of the Company's management team and representatives of Guggenheim Securities left the meeting and the Special Committee met in an executive session. During this executive session, the Special Committee discussed (i) the advantages and disadvantages of a PIPE investment, including whether such a strategic partnership would be beneficial to the Company's long-term plans, (ii) the need for the terms of such a PIPE investment to reflect the investor's assumption of significant down-side risk and (iii) the timing of engaging in negotiations with a potential investor regarding such a PIPE investment. Following such discussion, representatives of Guggenheim Securities rejoined the meeting. The Special Committee then instructed Guggenheim Securities to continue the current sale process and to report back to the Special Committee and the Board regarding any additional bids received for an acquisition of the entire Company. The Special Committee then instructed Guggenheim Securities to prepare a proposed PIPE investment term sheet based on the terms discussed during the Board meeting, and specifically to incorporate terms that would reflect the purchase of equity at a premium and the potential investor's assumption of significant down-side risk.

        Following the executive session of the Special Committee, members of the Company's management team rejoined the meeting and the full Board reconvened its regularly scheduled meeting. The Company's management then reviewed with the Board the Company's results of operations for the fourth quarter and full year 2012. Net sales for the fourth quarter were approximately as projected by management, but management reported that this was achieved through a different sales mix than that projected, in particular (i) operating income and U.S. consumer direct sales did not meet management's expectations, (ii) U.S. consumer direct same-store-sales for women's merchandise declined by 6.5% compared with the prior period; and (iii) operating margins declined by 220 basis points compared to the prior period, primarily due to the decline in the women's business and declines in international operating margins. Management then provided the Board a revised draft 2013 budget, reflecting its assessments following the 2012 fourth quarter results. The Board discussed with management the key assumptions on which the annual operating plan was based and management's assessment of the outlook for each of the Company's operating segments. Following this discussion, the Board requested management to report at a special meeting to be held on February 5, 2013 on any revisions to the annual operating plan that would be warranted in light of the Board's discussions.

        Also on January 30, 2013, Guggenheim Securities contacted a representative of a private equity firm that was among the initial 91 parties contacted by Guggenheim Securities in October and November 2012 but did not express interest at that time, which we refer to as Party J, to ascertain Party J's interest in participating in the sale process. Party J expressed its interest in engaging in the process, but only to evaluate a potential PIPE investment.

        On February 1, 2013, Party J entered into a confidentiality agreement with the Company, was provided access to the Company's virtual data room and began its due diligence review of the Company.

        Also on February 1, 2013, Guggenheim Securities received an inbound inquiry from a strategic party, which was not among the initial 91 parties contacted by Guggenheim Securities in October and November 2012, regarding its interest in a potential acquisition of the Company. This party received a

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draft confidentiality agreement with the Company, but subsequently declined to engage in the sale process.

        On February 5, 2013, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss an update provided by Guggenheim Securities covering, among other things, the possible terms for a potential PIPE investment as requested by the Special Committee during their prior meeting. During this discussion, Guggenheim Securities noted that the structure outlined would be viewed by potential minority investors as aggressive in light of recent precedent minority investment transactions but that Guggenheim Securities believed that certain of the private equity firms that had previously withdrawn from the sale process might be interested in pursuing a PIPE investment transaction. Guggenheim Securities then reviewed with the Special Committee an updated illustrative financial analysis of the effect of a PIPE investment on the future value of the Company. Following this discussion, the Special Committee determined that Guggenheim Securities should solicit interest from third parties regarding a PIPE investment but that it would be in the best interests of the Company's stockholders to complete a full sale of the Company, rather than a PIPE investment, if a potential bidder offered an attractive price. Therefore, the Special Committee decided it would wait to review the bids submitted by each of TowerBrook, Party E and Party I, if any, before deciding whether to pursue a PIPE investment.

        On February 5, 2013, the Board convened a special meeting at which Ms. Koplin, Mr. Collins, Ms. Greaves and representatives of Akin Gump were present. At this meeting, management presented to the Board a revised operating plan for 2013 reflecting a lower rate of same-store-sales increases (2.6% compared to 5.5% in the prior version) and lower annual net sales in both the U.S. wholesale and international segments. Management's revised forecast reflected a continued decline in the Company's women's business, slower growth in the international business and gross margin pressure resulting from increased sales in the off-price and outlet channels. The annual plan, as presented, was dependent on planned initiatives for 2013 to improve the Company's performance, including new product designs to be introduced in the fall of 2013, changes in personnel, improvements in production and inventory management and other changes which the Company's management believed would result in improved performance in 2013 and subsequent periods. The Company's management reported that the results of these initiatives would not likely be reflected in the Company's operating results until the fourth quarter of 2013.

        On February 6, 2013, representatives of Party G received a store tour.

        Between February 7, 2013 and February 19, 2013, Guggenheim Securities contacted, on behalf of the Company, six parties regarding their interest in a PIPE investment transaction with the Company. Such parties included Party B, Party C, Party D, Party G, Party J and one other private equity firm that was among the initial 91 parties contacted by Guggenheim Securities in October and November 2012 in connection with a potential acquisition of the Company. Guggenheim Securities submitted to each party a copy of the proposed PIPE investment term sheet previously discussed with the Special Committee. Of the six parties contacted, only Party B and Party G expressed interest in a PIPE investment, but neither of Party B nor Party G engaged in discussions or negotiations with Guggenheim Securities on any of the specific terms outlined in the proposed term sheet.

        On February 7, 2013 representatives of Party G attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California.

        On February 8, 2013, Party I informed Guggenheim Securities that, following its preliminary due diligence review of the Company, it was no longer interested in pursuing a transaction with the Company at this time.

        On February 8, 2013, representatives of Party E received a store tour.

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        On February 11, 2013, representatives of Party E attended a management presentation and due diligence meeting at the Company's headquarters in Vernon, California.

        Also on February 11, 2013, representatives of Party J indicated to Guggenheim Securities that it was unable to offer a PIPE investment at a premium to the Company's current stock price. Moreover, Party J indicated that a PIPE investment transaction did not offer the level of upside return required for capital and time allocation. Party J indicated that an acquisition of the whole Company could be of interest but only at prices below the current market price.

        On February 12, 2013, representatives of TowerBrook attended follow-up meetings in New York with members of the Company's management regarding the Company's wholesale business.

        On February 19, 2013, representatives of TowerBrook attended a follow-up telephonic meeting with members of the Company's management regarding the Company's international business.

        On February 21, 2013, a representative of Party E informed Guggenheim Securities that, following its due diligence review of the Company, it was unable submit an offer to acquire the Company at a premium to the Company's current stock price and, therefore, it would withdraw from the sale process.

        On February 22, 2013, TowerBrook submitted a non-binding written indication of interest to acquire the Company at a price of $30.50 per share in cash. TowerBrook also indicated in its letter that the $30.50 per share price was based on an assumption that no "change of control" severance payment would be payable to Mr. Lubell as a result of TowerBrook's acquisition of the Company, and that TowerBrook would require that the Company enter into an exclusivity agreement granting TowerBrook an eight-week exclusivity period to complete its due diligence review of the Company and obligating the Company to reimburse TowerBrook for its expenses with respect to activities undertaken during the exclusivity period if TowerBrook's acquisition of the Company were not completed.

        Later in the day on February 22, 2013, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss TowerBrook's proposal and to receive an update from Guggenheim Securities about its discussions with third parties regarding a potential PIPE investment. During this meeting, Greenberg Traurig reviewed the terms of TowerBrook's proposal and provided guidance with respect to current market practice with respect to exclusivity periods and expense reimbursement provisions. Guggenheim Securities then updated the Special Committee regarding Party B's and Party G's interest in a PIPE investment and noted that, while neither party had yet discussed specific financial terms of such an investment, both parties expressed a general desire for increased down-side protection on such an investment. Guggenheim Securities also discussed the potential for an acquisition by the Company of a strategic business, which was rumored to be a divestiture candidate from its parent company and which we refer to as Party K. Following this discussion, the Special Committee determined that neither a PIPE investment nor a combination with Party K would be in the best interests of the Company or its stockholders at this time. The Special Committee then discussed with Guggenheim Securities, Greenberg Traurig and Akin Gump how the Special Committee should respond to TowerBrook's initial indication of interest. During this discussion, the Special Committee noted that, since it had last reviewed Guggenheim Securities' illustrative financial analysis of the Company, the Company's management had updated the Company's 2013 annual operating budget. The Special Committee determined that, before responding to TowerBrook, the Company's management should develop five-year projections, which we refer to as the 5-Year Plan, as the current projections available to Guggenheim Securities had not reflected the assumptions incorporated into the 2013 annual operating budget and all previous projections had thus far been for three years, and Guggenheim Securities should prepare a discounted cash flow analysis of the Company using the 5-Year Plan. The Special Committee would then evaluate TowerBrook's proposal in the context of a more recent financial analysis of the Company.

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        On February 26, 2013, the Company informed Mr. Lubell in writing that it had determined not to extend the term of his employment agreement with the Company upon its scheduled expiration on June 30, 2013. Pursuant to the terms of Mr. Lubell's employment agreement with the Company, the term of Mr. Lubell's employment with the Company would have automatically extended for an additional three-year period unless the Company notified Mr. Lubell, in writing, of its election not to so extend on or prior to March 2, 2013. The Company indicated to Mr. Lubell that, in light of the Special Committee's continuing review of strategic alternatives available to the Company, the Company believed that it would not be appropriate to renew his employment agreement for an additional three-year period at that time. The Company further informed Mr. Lubell that it would like the opportunity to explore an alternative arrangement with him in the coming weeks.

        On February 28, 2013, representatives of TowerBrook attended a telephonic meeting with Company management to discuss the Company's product line and merchandising mix.

        On March 5, 2013, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss TowerBrook's proposal in light of the updated financial analysis by Guggenheim Securities based on the 5-Year Plan, which by this time had been prepared by management and provided to the Board and Guggenheim Securities. Representatives of Guggenheim Securities began the meeting by reviewing with the Special Committee their observations and analysis with respect to the 5-Year Plan, including the various assumptions and components incorporated therein. Representatives of Guggenheim Securities then reviewed with the Special Committee its financial analysis of the Company, including an updated discounted cash flow analysis of the Company based on the 5-Year Plan. Finally, the representatives of Guggenheim Securities reviewed with the Special Committee Guggenheim Securities' financial analysis of the $30.50 per share price submitted by TowerBrook. Following Guggenheim Securities' presentation, the Special Committee discussed how to respond to TowerBrook regarding its written indication of interest, including whether to include in such response an indication that TowerBrook would need to increase its proposal above $30.50 per share to proceed with further discussions regarding an acquisition of the Company, and more generally discussed their preliminary views regarding whether continuing the Company on a stand-alone basis with a restructured management team could create more value for the Company's stockholders than a sale of the entire Company, and the valuation at which a sale might be compelling. During the discussion, the Special Committee discussed the risks attendant to implementing successfully the Company's management's planned structural and operating initiatives and achieving the goals of the 5-Year Plan. Also during this discussion, Greenberg Traurig reviewed with the members of the Special Committee their fiduciary and other duties in connection with a possible sale transaction involving the Company. Following such discussion, the Special Committee determined that before responding to TowerBrook, the Special Committee would request that Ms. Koplin and Mr. Collins present to the Special Committee their proposals regarding the structural and operational changes needed to improve the Company's performance in the event a sale of the Company were not completed.

        On March 8, 2013, the Special Committee convened an in-person meeting, at which Ms. Koplin, Mr. Collins and representatives of Akin Gump attended and representatives of Greenberg Traurig participated by telephone conference. At this meeting, Ms. Koplin and Mr. Collins engaged in a lengthy discussion with the Special Committee regarding their assessment of the management, operational and brand image issues that the Company was facing as well as certain key strategic initiatives and proposed management and operational structural changes that would be required to improve the Company's financial performance in the future.

        Later that day, the Special Committee reconvened a telephonic meeting, at which representatives of Greenberg Traurig and Akin Gump participated. At this meeting, the Special Committee discussed the presentations made by Ms. Koplin and Mr. Collins earlier that day and how to respond to TowerBrook's proposal to acquire the Company at a $30.50 per share purchase price. Following such

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discussion, the Special Committee determined that, in light of the various financial analyses prepared by Guggenheim Securities relating to TowerBrook's proposal of $30.50 per share and the prospects of the Company as outlined in Ms. Koplin's and Mr. Collins' presentation earlier that day, TowerBrook's proposal of $30.50 did not provide sufficient value to the Company's stockholders. As a result, the Special Committee determined to reject TowerBrook's proposal of $30.50 per share and, unless another attractive option were presented, terminate the Special Committee's exploration and evaluation of a sale of the Company and instead evaluate a return of capital to the Company's stockholders. The Special Committee then discussed various options relating to returning capital to the Company's stockholders, including the payment of a special dividend and/or stock repurchases. Following the conclusion of the Special Committee meeting, at the direction of the Special Committee, Greenberg Traurig informed Guggenheim Securities of the Special Committee's decision. Guggenheim Securities conveyed the same to TowerBrook and stated that if TowerBrook desired to continue discussions, it would need to submit a revised proposal quickly and at a higher valuation to cause the Special Committee to reengage in discussions regarding a possible sale of the Company.

        On March 9, 2013, a representative of TowerBrook contacted Guggenheim Securities and indicated that TowerBrook may be prepared to increase its proposed purchase price to $34.00 per share. Guggenheim Securities promptly conveyed this information to Mr. Johnson, who then conveyed it to the rest of the Special Committee. A representative of TowerBrook also contacted Ms. Koplin and conveyed the same information.

        Later in the day on March 9, 2013, in response to the Special Committee's rejection of its initial proposal, TowerBrook submitted an updated non-binding written indication of interest at a price of $34.00 per share in cash. TowerBrook also indicated in its letter that it would only require a 30-day exclusivity period to complete its due diligence review of the Company and would only require the Company to reimburse TowerBrook for its expenses with respect to activities undertaken during the exclusivity period if, at the end of the exclusivity period, TowerBrook remained interested in pursuing an acquisition of the Company at a purchase price of not less than $34.00 per share and the Company decided to no longer proceed with a transaction with TowerBrook.

        On March 11, 2013, the Special Committee convened a telephonic meeting, at which representatives of Greenberg Traurig and Akin Gump participated, to discuss TowerBrook's updated proposal. At this meeting, the Special Committee determined that, in light of TowerBrook's significantly increased price of $34.00 per share, it would be in the best interests of the Company and its stockholders to resume its exploration and evaluation of a sale of the entire Company to TowerBrook. The Special Committee then directed Greenberg Traurig to instruct Guggenheim Securities to respond to TowerBrook on behalf of the Special Committee and indicate that, if TowerBrook would increase its proposed purchase price to $35.00 per share, subject to the mutual agreement regarding the reimbursement of TowerBrook's reasonable out-of-pocket third-party expenses up to $1.8 million in the event a transaction were not completed, the Special Committee would grant TowerBrook exclusivity for up to thirty days to complete its due diligence of the Company and enter into a definitive transaction agreement. Later on March 11, 2013, Guggenheim Securities delivered a draft merger agreement to representatives of TowerBrook.

        On March 12, 2013, representatives of TowerBrook informed Guggenheim Securities that it would only increase its proposed price to $34.50 per share. Guggenheim Securities conveyed this information to the Special Committee and, the Special Committee authorized Greenberg Traurig to commence negotiations with TowerBrook's legal counsel regarding an exclusivity agreement based on a price of $34.50 per share.

        Over the course of the next few days, Greenberg Traurig, on behalf of the Company and at the direction of the Special Committee, negotiated the terms of an exclusivity agreement with TowerBrook's legal counsel, Wachtell, Lipton, Rosen & Katz, which we refer to as Wachtell Lipton.

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        On March 18, 2013, representatives of TowerBrook, which at this point included accounting, operational and IT consultants, attended a second management presentation and due diligence meeting at the Company's headquarters in Vernon, California.

        On March 19, 2013, the Company publicly announced that Mr. Lubell had decided to step down as Chairman, Chief Executive Officer and Creative Director of the Company and that his employment with the Company terminated at such time. In addition, Mr. Lubell agreed to serve as Chairman Emeritus and as a creative consultant to the Company for a period of two years. Also, on March 19, 2013, the Board appointed Ms. Koplin to serve in the position of Interim Chief Executive Officer of the Company, while continuing to serve in her current position as President of the Company.

        On March 22, 2013, the Company entered into an exclusivity agreement with TowerBrook, which we refer to as the exclusivity agreement, pursuant to which TowerBrook was granted the right to engage in exclusive discussions with the Company regarding a potential acquisition of the Company until April 26, 2013; provided that if, on or within two business days of April 26, 2013, TowerBrook reaffirmed in writing to the Company its interest in pursuing an acquisition of the Company at a purchase price of at least $34.50 per share in cash, and on certain other terms as described in the exclusivity agreement, then the term of the exclusivity agreement would be extended until May 7, 2013. The exclusivity agreement also provided that, in the event that either (i) the Company terminated the exclusivity agreement in accordance with the terms thereof following its receipt of an unsolicited alternative acquisition proposal for more than 50% of the outstanding shares of common stock of the Company which the Board deemed to be more favorable to the Company's stockholders than the proposed transaction with TowerBrook or (ii) prior to the expiration of the term of the exclusivity agreement, TowerBrook notified the Company in writing that it was prepared to enter into a definitive agreement for an acquisition of the Company at a purchase price of at least $34.50 per share in cash and on certain other terms as described in the exclusivity agreement, and, subject to TowerBrook not rescinding its notice and providing certain confirmations, the Company did not enter into such definitive agreement within three business days, then the Company would reimburse TowerBrook for its reasonable out-of-pocket third-party expenses incurred with respect to activities undertaken during the exclusivity period up to an aggregate amount of $1.8 million.

        Over the course of the next several weeks, the Company provided additional business, financial, accounting, tax, legal and other due diligence information to TowerBrook and its representatives through the virtual data room and, with the assistance of Guggenheim Securities and Greenberg Traurig, responded to additional due diligence inquiries from TowerBrook and its representatives with respect to such information. In addition to the review of documents in the virtual data room, TowerBrook conducted various diligence meetings and other discussions with Company management telephonically and in person, and conducted site visits to select Company locations in Europe.

        On April 15, 2013, representatives of TowerBrook and Ms. Koplin held a meeting, at which a representative of Guggenheim Securities was present, with potential debt financing sources in TowerBrook's New York City offices.

        On April 18, 2013, the Company revised its 2013 financial projections based on the Company's first quarter performance. Projections for years 2014 through 2017 contained in the 5-Year Plan were not changed.

        On April 24, 2013, TowerBrook submitted a letter to the Company, in accordance with the terms of the exclusivity agreement, reaffirming its interest in pursuing a potential acquisition of the Company at a purchase price of at least $34.50 per share in cash and on certain other terms as described in the exclusivity agreement, and confirming to the Company that it continued to pursue the potential acquisition of the Company in good faith.

        Also on April 24, 2013, the Board, which now consisted only of the members of the Special Committee, convened a telephonic meeting, at which representatives of Guggenheim Securities,

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Greenberg Traurig and Akin Gump participated, to discuss, among other things, TowerBrook's April 24, 2013 letter reaffirming its interest in an acquisition of the Company. At this meeting, Guggenheim Securities provided an update to the Board regarding the progress of TowerBrook's diligence review of the Company and the status of TowerBrook's discussions with potential financing sources. Also at this meeting, the Company's management discussed with the Board the Company's results of operations for the first quarter of 2013. During this discussion, management reported that, while the first-quarter financial statements had not been finalized and the Company's outside accountants had not yet completed their review, preliminary results indicated that the Company's operating income and operating margins were expected to be significantly down from prior year results and management's projections. As part of this discussion, the Board noted that the revised 2013 forecasts continued to place reliance on the Company's improved operating results in the latter part of 2013 as a result of the structural and operating initiatives being implemented by the Company's management.

        At the conclusion of the meeting, the Board noted to Guggenheim Securities and Greenberg Traurig that, although it agreed that TowerBrook was entitled to an extended exclusivity period until May 7, 2013, it was concerned about the distractions to the Company's management team caused by the ongoing sale process and did not want to delay a decision of whether a definitive agreement could be reached much longer. As a result, the Board instructed Guggenheim Securities and Greenberg Traurig to contact TowerBrook and its representatives to convey that the Company would require that TowerBrook enter into a definitive agreement no later than May 10, 2013.

        On April 25, 2013, Wachtell Lipton submitted its markup to the initial draft merger agreement.

        On April 30, 2013, a representative of TowerBrook separately contacted Ms. Koplin and Guggenheim Securities to report that TowerBrook's recent review of final diligence and valuation presentations by its advisors and consultants had revealed various areas of concerns with respect to the prospects of the Company's business, including risks to the business and management challenges. As a result of such concerns, and in light of the Company's lower than expected performance during the first quarter 2013, the members of TowerBrook's investment committee had indicated during a meeting earlier in the day that it was no longer supportive of an acquisition of the Company at a price of $34.50 per share and, appreciating the Company's indicated sensitivity to timing, TowerBrook would no longer pursue the acquisition of the Company. Guggenheim Securities promptly conveyed this information to the Special Committee.

        On May 1, 2013, representatives of Guggenheim Securities continued discussions with TowerBrook on behalf of the Company. During these discussions, TowerBrook indicated that it might consider re-engaging in discussions regarding a potential acquisition of the Company, but any further proposal would be on revised terms and at a revised valuation lower than $34.50 per share in light of the challenges to the Company revealed by TowerBrook's recently completed due diligence. Representatives of Guggenheim Securities suggested that TowerBrook submit a revised proposal for the Special Committee's consideration.

        Later that day, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss whether the Special Committee should re-engage in discussions with TowerBrook at a price lower than $34.50 per share. During such discussion, Guggenheim Securities reviewed with the Special Committee an updated financial analysis of a potential acquisition of the Company at various price levels, as well as alternatives to return capital to stockholders. Following such discussion, the Special Committee determined that it would terminate the sale process. However, the Special Committee directed Guggenheim Securities to inform TowerBrook that if TowerBrook submitted a revised proposal, the Special Committee would still review and consider such proposal at that time. Guggenheim Securities conveyed this information to TowerBrook. Barring a revised proposal from TowerBrook that provided terms acceptable to the Special Committee, the Special Committee intended to announce the termination of the review of strategic alternatives on the Company's May 10, 2013 earnings call.

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        On May 3, 2013, a representative of TowerBrook contacted Guggenheim Securities and indicated that TowerBrook would be prepared to re-engage with negotiations to acquire the Company at a purchase price of $31.00 per share and was willing to work towards finalizing a definitive agreement by May 10, 2013. Representatives of TowerBrook also provided representatives of Guggenheim Securities with a summary of the material findings that TowerBrook had made in its due diligence and their impact on TowerBrook's valuation of the Company. Guggenheim Securities promptly conveyed this information to the Special Committee.

        Later that day, the Special Committee convened a telephonic meeting, at which Ms. Koplin, Mr. Collins and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss methods of returning capital to stockholders. During this meeting, representatives of Guggenheim Securities and Greenberg Traurig conveyed TowerBrook's revised price, but the Special Committee did not reach a determination as to whether to move forward with the revised proposal from TowerBrook at this meeting.

        On May 5, 2013, representatives of TowerBrook engaged in discussions with senior management of the Company and representatives of Guggenheim Securities regarding the assumptions made by TowerBrook in revising its proposal, including its assumptions regarding the amount of cash held by the Company.

        Later that day, the Special Committee convened a telephonic meeting, at which Ms. Koplin, Mr. Collins and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss further TowerBrook's revised proposal. At this meeting, the members of the Special Committee discussed at length the advantages and disadvantages of accepting a firm offer at $31.00 per share as compared to terminating the sale process and working with management to improve the Company's operations and performance going forward. During such discussion, the Special Committee discussed, among other things, (i) that the sale process had been ongoing for approximately six months, during which 94 parties were contacted, and that TowerBrook was the only bidder to submit a firm proposal, (ii) the then current state of the credit markets, which would allow TowerBrook to execute a private equity transaction on favorable terms that may not be available in the future if the Company decided to pursue a sale transaction at that point, and (iii) the Company's business, operations, financial condition, management, earnings, prospects and strategy and the operational risks associated with pursuing the Company's long-term plans if it were to remain independent, including, the risks and challenges of maintaining same-store-sales growth in light of the Company's increasing reliance on the off-price and outlet sales channels and management's assessment that achieving its long-term plans depended in part on consumer acceptance of new product designs and offerings yet to be launched; the risks and challenges associated with turning around a multi-year decline in the Company's women's business; the risks and challenges of continuing the pace of U.S. store openings while maintaining store margins; the fact that the Company's growth strategy might require additional capital and marketing investments not currently contemplated within management's plans; the Board's assessment that the management team will need to be augmented with key management personnel who had not yet been identified; and the Company's slow progress to date in implementing changes needed to execute on the long-term strategy and the Board's uncertainty as to the Company's ability to execute fully such strategy within a reasonable period of time.

        The Special Committee also discussed with Ms. Koplin and Mr. Collins their view regarding the current state of the Company's operations, the future prospects of the Company's business and the likelihood that the Company's current management team could improve the Company's performance going forward. Following this discussion, the Special Committee determined that it would reconvene the following day to discuss further and vote on whether to recommend that the Board accept TowerBrook's revised proposal of $31.00 per share.

        Later in the day on May 5, 2013 and continuing in the morning of May 6, 2013, representatives of Guggenheim Securities discussed with representatives of TowerBrook its revised proposal and the possibility of increasing the price per share that TowerBrook was proposing.

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        On May 6, 2013, TowerBrook submitted an updated, non-binding written indication of interest to acquire the Company at a price of $32.00 per share in cash. Such proposal was characterized by a representative of TowerBrook to a representative of Guggenheim Securities as "best and final" and was subject to certain conditions. In particular, representatives of TowerBrook indicated that the increase in price from $31.00 to $32.00 per share was predicated on revised assumptions regarding the Company's cash balance and that, consequently, the revised proposal was conditioned on the Company not declaring or paying any dividends prior to the signing of a definitive transaction agreement and that the definitive transaction agreement would prohibit the Company from declaring or paying any dividends to its stockholders prior to earlier of the closing of the proposed transaction and the termination of such agreement.

        Later that day, the Special Committee convened a telephonic meeting, at which representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to discuss TowerBrook's revised proposal. At this meeting, the Special Committee engaged in a lengthy discussion regarding the risks involved if they rejected TowerBrook's proposal, chose to remain independent and allowed the current management team to pursue the Company's long-range plans and execute on its proposed initiatives to achieve improved profitability and enhance stockholder value. Also at this meeting, Greenberg Traurig reviewed with the members of the Special Committee their fiduciary and other duties in connection with a possible sale transaction involving the Company. The Special Committee also discussed in detail the draft merger agreement with representatives of Greenberg Traurig. During such discussion, the Special Committee asked numerous questions regarding the remaining open points, including the provisions related to the certainty of TowerBrook's consummation of the merger and the termination fee payable to the Company in the event TowerBrook did not consummate the merger. Following such discussion, the Special Committee instructed Greenberg Traurig to inform Wachtell Lipton that in order to move forward in the negotiations, the final merger agreement must contain provisions that would provide sufficient certainty of the consummation of the merger at the agreed purchase price and a reverse termination fee payable by TowerBrook to the Company (in circumstances to be agreed) equal to approximately 7% of the aggregate merger consideration and that a definitive agreement must be entered into by May 10, 2013.

        Guggenheim Securities then reviewed with the Special Committee its updated financial analyses of a potential acquisition of the Company at $32.00 per share. Guggenheim Securities also indicated to the Special Committee that, based upon its valuation analyses and subject to internal review by its Fairness Opinion and Valuation Committee, Guggenheim Securities believed it would be able to render an opinion that the $32.00 per share purchase was fair, from a financial, point of view, to the Company's stockholders. Following such discussion, representatives of Guggenheim Securities left the meeting. The Special Committee then continued its discussion regarding TowerBrook's $32.00 per share proposal as well as the likelihood of achieving the results reflected in the 5-Year Plan in light of the Company's recent financial performance, including the Company's lower than expected results during the first quarter of 2013, the Company's decreasing profit margins and the similar decreases in profit margins of the Company's direct competitors. Following such discussion, the Special Committee determined that, while the Company's prospects have significant potential, the ability to improve the Company's financial performance in a manner consistent with the 5-Year Plan would entail significant execution risk, and that accepting TowerBrook's proposal of $32.00 per share was in the best interest of the Company and its stockholders. As a result, the Special Committee unanimously determined that it would recommend that the Board (i) approve and declare the advisability of the merger and (ii) recommend that the Company's stockholders approve the merger. Representatives of Guggenheim Securities were then invited to rejoin the meeting at which time the Special Committee directed Guggenheim Securities to inform TowerBrook of its decision. The Special Committee then directed Greenberg Traurig to contact Wachtell Lipton and commence further negotiations on the terms of a definitive merger agreement and ancillary agreements.

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        Between May 6, 2013 and May 9, 2013, representatives of the Company, Guggenheim Securities, Greenberg Traurig, Akin Gump, TowerBrook and Wachtell Lipton continued negotiations regarding the terms of the merger agreement and ancillary agreements, including the equity and debt commitment letters and the limited guarantee.

        On the evening of May 8, 2013, in light of the evolving nature of the merger agreement and in particular the increasing specificity of the financing commitments as terms for the transaction approached resolution, TowerBrook and Wachtell Lipton proposed that the merger agreement contain a condition to TowerBrook's obligation to consummate the merger that the Company has at least $228 million in cash freely available to be used to pay the aggregate merger consideration immediately prior to the effective time of the merger. Following subsequent discussions with the Board and members of management regarding management's estimates of future Company cash flows and transaction costs, at the Board's direction, Greenberg Traurig negotiated with Wachtell Lipton the terms of such proposed condition, which negotiations resulted in an agreement that the merger agreement would contain a condition to TowerBrook's obligation to consummate the merger that the Company have at least $190 million of freely available cash (net of certain transaction costs) immediately prior to the effective time of the merger.

        On May 9, 2013, the Board convened a special telephonic meeting, at which members of Company management and representatives of Guggenheim Securities, Greenberg Traurig and Akin Gump participated, to consider entering into the merger agreement with TowerBrook. At this meeting, representatives of Greenberg Traurig reviewed with the Board the terms of the current drafts of the merger agreement, the equity and debt commitment letters and the limited guarantee previously disseminated to the Board and again reviewed with the members of the Board their fiduciary and other duties in connection with a possible sale transaction involving the Company. During this review, the Board engaged in robust discussions regarding the terms of the draft merger agreement, particularly those terms with respect to the certainty of the consummation of the merger, including that the agreed purchase price was fixed and not subject to reduction or adjustment, and ensuring that TowerBrook would be obligated to pay a large reverse termination fee in the event TowerBrook failed to consummate the merger under the circumstances set forth in the draft merger agreement.

        Also at this meeting, representatives of Guggenheim Securities presented their financial analyses relating to the proposed purchase price of $32.00 per share and rendered to the Board its oral opinion, which opinion was subsequently confirmed in a written opinion, dated May 9, 2013, to the Special Committee and the Board, to the effect that, as of that date and based upon and subject to the qualifications, limitations and assumptions stated in its written opinion, the per share merger consideration of $32.00 to be received by the Company's stockholders in the merger was fair, from a financial point of view, to such stockholders. See "The Merger—Opinion of Guggenheim Securities" in this proxy statement for more information about Guggenheim Securities' opinion.

        After further deliberation and discussion on the terms of the draft merger agreement and ancillary documents, consideration of other relevant issues, and a variety of business, financial and market factors, including those set forth below under "The Merger—Reasons for the Merger" and the delivery of Guggenheim Securities' oral fairness opinion, the Board unanimously (i) determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were advisable and fair to and in the best interests of the Company and its stockholders, (ii) approved and adopted the form, terms and provisions of the merger agreement, (iii) approved the merger and the other transactions contemplated by the merger agreement, (iv) resolved that the merger agreement be submitted to the Company's stockholders for their consideration at a special meeting of the Company's stockholders to be called and held for such purpose and (v) resolved that the Board would recommend to the Company's stockholders that they adopt the merger agreement.

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        Following this meeting, representatives of the Company, Guggenheim Securities, Greenberg Traurig, Akin Gump, TowerBrook and Wachtell Lipton finalized the remaining open terms of the merger agreement in accordance with the direction given by the Board.

        On May 10, 2013, the Company and TowerBrook executed the merger agreement and limited guarantee and TowerBrook delivered to the Company copies of its executed equity commitment letter and debt commitment letter. Thereafter, on the morning of May 10, 2013, the Company and TowerBrook issued a joint press release announcing the execution of the merger agreement.

Reasons for the Merger; Recommendation of the Board

        The Board, at a meeting held on May 9, 2013, unanimously determined, upon the recommendation of the Special Committee, that the merger is advisable and fair to, and in the best interests of, the Company and its stockholders, approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and the other transaction documents, resolved that the merger agreement be submitted for consideration by the stockholders of the Company at a Special Meeting of stockholders, and recommended that the stockholders of the Company vote to adopt the merger agreement. The Board consulted with the Company's outside financial and legal advisors and senior management at various times and considered a number of factors, including the following (not in any relative order of importance) that the Board believes support its decision:

•

the fact that the all-cash merger consideration will provide our stockholders with immediate fair value, in cash, for their shares of our common stock, while avoiding long-term business risk, and while also providing such stockholders with certainty of value for their shares of our common stock;



•

the fact that the merger consideration represents a premium of approximately 52.3% to the closing price of our common stock on October 9, 2012, the date prior to the announcement that the Board had formed a Special Committee comprised of its non-management directors to explore and evaluate strategic alternatives available to the Company, a premium of approximately 16.4% to the one month volume weighted average trading price of our common stock prior to May 10, 2013, the date of the public announcement of the execution of the merger agreement, a premium of approximately 8.7% to the closing price of our common stock on May 9, 2013, the last trading day prior to May 10, 2013, a premium of approximately 14.2% to the closing price of our common stock on May 3, 2013, the last trading day prior to the Company's receipt of such proposal, and a premium of approximately 20.2% to the closing price of our common stock on February 21, 2013, the last trading day prior to the Company's receipt of TowerBrook's original proposal;



•

the fact that the merger consideration exceeds the price at which our common stock has traded, during the three year period prior to the execution of the merger agreement, except for (i) six trading days between July 29, 2011 and August 15, 2011 and (ii) commencing from October 14, 2011 through February 9, 2012 (other than a four consecutive trading day period in October 2011);



•

the Board's analyses of the possible alternatives to the merger, including returning capital to the Company's stockholders through the payment of a special dividend, a self-tender offer at a premium to the Company's current stock price and/or a share repurchase program or seeking a strategic investment from a minority partner, and the risks associated with these alternatives, each of which the Board determined not to pursue in light of its belief that the merger is more favorable to the Company's stockholders than such alternatives;



•

the Board's review, with the assistance of Guggenheim Securities and Company management, of the Company's business, operations, financial condition, management, earnings, prospects and

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strategy and the operational risks associated with pursuing the Company's long-range plans if it were to remain independent, including:

•

the risks and challenges of maintaining same store sales growth in light of the Company's increasing reliance on the off-price and outlet sales channels and management's assessment that achieving its long-range plans is dependent in part on consumer acceptance of new product designs and offerings yet to be launched;



•

the risks and challenges associated with turning around a multi-year decline in the Company's women's business;



•

the risks and challenges of continuing the pace of U.S. store openings while maintaining store margins;



•

the fact that the Company's operating margin has declined by 250 basis points from fiscal year 2010 to fiscal year 2012, which resulted in operating income having grown only 10.5% despite net sales increasing 22.2% during this period;



•

the declines in the Company's international segment's operating income from fiscal year 2010 to fiscal year 2012;



•

the fact that achieving the Company's growth strategy may require additional capital and marketing investments not currently contemplated in management's plans;



•

the Board's assessment that the management team will need to be augmented with key management personnel who have not yet been identified;



•

the Company's slow progress to date in implementing changes needed to execute on the long-term strategy; and



•

the Board's uncertainty as to the Company's ability to execute fully the strategy within a reasonable period of time, including achieving the results in the 5-Year Plan in light of the Company's recent financial performance, including the Company's lower than expected results during the first quarter of 2013, the Company's decreasing profit margins and the similar decreases in profit margins of the Company's direct competitors.

These and other factors are more fully described under the caption "The Merger—Background of the Merger" beginning on page     •    ;

•

the fact that the Company had conducted an extensive public process to elicit interest from prospective buyers of the entire Company over an extended period of time. The process relating to the possible sale of the entire Company was managed through a nationally recognized financial advisor, announced publicly and resulted in contacts with 94 parties, including 31 strategic bidders and 63 private equity sponsors, 30 of which, including 1 strategic bidder and 29 private equity sponsors, signed confidentiality agreements. The final proposal made by TowerBrook represented the most attractive proposal to acquire the Company. In light of the extensive process that had been employed, the Special Committee and the Board believed that it was unlikely that a more attractive proposal would be forthcoming from any other bidder;



•

the benefits that the Company and its advisors were able to obtain as a result of extensive negotiations with TowerBrook, which, notwithstanding TowerBrook decreasing its price from its highest price proposed during negotiations, represented an increase in TowerBrook's initial proposal of $30.50 per share on February 22, 2013 to $32.00 per share as provided for in the merger agreement. The Board concluded that the merger consideration provided for in the merger agreement reflected the best value that TowerBrook would be willing to provide at the present time;

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•

management's and the Board's views and opinions on the current retail industry generally;



•

the financial analyses presented to the Board by Guggenheim Securities, as well as the written opinion of Guggenheim Securities, dated May 9, 2013, to the Board and the Special Committee to the effect that, as of that date, and based upon and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken as set forth therein, the merger consideration to be received by the holders of our common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders as more fully described below under the caption "The Merger—Opinion of Guggenheim Securities" beginning on page     •    ;



•

the likelihood that the merger would be completed based on, among other things (not in any relative order of importance):



•

the fact that there is no financing or due diligence condition to the completion of the merger in the merger agreement;



•

management's estimates of future Company cash flows and transaction costs and their conclusion that it is highly likely that the Company will satisfy the condition to the closing of the merger that the Company have cash deposited in U.S. banks in a minimum amount of $190 million (net of unpaid Company transaction costs, certain of which Company transaction costs may not exceed, in the aggregate, the estimates provided to Parent by the Company) immediately prior to the effective time of the merger given that the Company has $209.3 million of available cash as of March 31, 2013, and projects additional free cash flow between the date of this proxy statement and the closing of the merger;



•

the fact that the merger agreement provides that, in the event of a failure of the merger to be consummated under certain circumstances, Parent will pay the Company a $58,439,000 termination fee, without the Company having to establish any damages, which we refer to as the Reverse Termination Fee;



•

the receipt of the debt commitment letter, the terms thereof and the reputation of the debt financing sources which, in the reasonable judgment of the Board, increase the likelihood of such financings being completed;



•

the belief that the debt commitment letter represents a strong commitment on the part of the debt financing sources with few conditions that would permit the debt financing sources to terminate their commitments;



•

the Company's ability, under certain circumstances, to seek specific performance of TowerBrook's obligations to fund their respective commitments under the equity commitment letter; and



•

the Company's ability, under certain circumstances pursuant to the merger agreement, to seek specific performance to prevent breaches of the merger agreement by Parent and Merger Sub and to enforce specifically the terms of the merger agreement;



•

the ability of the Board, under certain circumstances, to change, qualify, withhold, withdraw or modify its recommendation to stockholders concerning the transactions contemplated by the merger agreement;



•

the ability of the Board to terminate the merger agreement to enter into a superior proposal (as described below), subject to certain conditions (including certain rights of Parent to have an opportunity to match the superior proposal and the payment of the Termination Fee by the Company to Parent of $29,219,000), as described under "The Merger Agreement—Solicitation of

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Acquisition Proposals" beginning on page     •    and "The Merger Agreement—Termination Fees" beginning on page     •    ; and

•

the rights of Company stockholders to demand appraisal of their shares and receive payment of the "fair value" of such shares pursuant to Section 262 of the DGCL if they comply in all respects with Section 262 of the DGCL.

        The Board also considered a variety of potentially negative factors in its deliberations concerning the merger agreement and the merger, including the following (not in any relative order of importance):

•

the fact that the merger would preclude the Company's stockholders from participating in the future performance of the Company's assets and any potential future appreciation of the value of our common stock;



•

the fact that the merger is conditioned upon the Company having cash deposited in U.S. banks in a minimum amount of $190 million (net of unpaid Company transaction costs, certain of which Company transaction costs may not exceed, in the aggregate, the estimates provided to Parent by the Company) as of immediately prior to the effective time of the merger;



•

the fact that the Company may be obligated to pay the Termination Fee to Parent under the circumstances specified in the merger agreement (see the section entitled "The Merger Agreement—Termination Fees" beginning on page     •    );



•

the restrictions on the conduct of the Company's business prior to the completion of the merger, which, subject to specific exceptions, could delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company absent the pending completion of the merger;



•

the fact that significant costs are involved in connection with entering into and completing the merger and substantial time and effort of management is required to complete the merger, potentially resulting in disruptions to the operation of the Company's business;



•

the fact that the announcement and pendency of the merger, or failure to complete the merger, may cause substantial harm to relationships with the Company's employees, suppliers, and customers and may divert management and employee attention away from the day-to-day operation of the Company's business;



•

the fact that, while the Company expects that the merger will be consummated, there can be no assurance that all conditions to the parties' obligations to consummate the merger will be satisfied, and, as a result, the merger may not be consummated;



•

the fact that Parent and Merger Sub are newly-formed corporations with essentially no assets other than their rights under the equity commitment letter and the debt commitment letter, and that our remedy in the event of the termination of the merger agreement may be limited to receipt of the Reverse Termination Fee;



•

the risk that the financing contemplated by the debt commitment letter for the consummation of the merger might not be obtained;



•

the fact that the Company's directors and executive officers may have interests in the merger that are different from, or in addition to, the Company's stockholders. See "The Merger—Interests of Certain Persons in the Merger" beginning on page     •    ; and



•

the fact that an all-cash transaction generally would be taxable to the Company's stockholders that are U.S. holders for U.S. federal income tax purposes.

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        The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive, but includes the material factors considered by the Board. In view of the variety of factors considered in connection with its evaluation of the merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the totality of the information presented.

Opinion of Guggenheim Securities

Overview

        Pursuant to an engagement letter dated September 4, 2012, the Special Committee retained Guggenheim Securities to act as its financial advisor with respect to the potential sale of the Company. In selecting Guggenheim Securities as the Special Committee's financial advisor, the Board considered that, among other things, Guggenheim Securities is an internationally recognized investment management, investment banking and financial advisory firm whose senior professionals have substantial experience advising companies in the retail industry as well as significant experience providing strategic and financial advisory services. Guggenheim Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and securities in connection with mergers and acquisitions, restructurings and recapitalizations, spin-offs/split-offs, securities offerings in both the private and public capital markets and valuations for corporate and other purposes.

        At the May 9, 2013 meeting of the Board, Guggenheim Securities delivered its oral opinion to the Special Committee and the Board, which subsequently was confirmed in writing, to the effect that, as of May 9, 2013 and based on the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the merger consideration was fair, from a financial point of view, to holders of our common stock.

        The full text of Guggenheim Securities' written opinion is attached as Annex C to this proxy statement and you should read the opinion carefully and in its entirety. Guggenheim Securities' written opinion sets forth the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken by Guggenheim Securities. Guggenheim Securities' opinion, which was authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities, is subject to the assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim Securities, as of the date of such opinion. Guggenheim Securities has no responsibility for updating or revising its opinion based on facts, circumstances or events occurring after the date of the rendering of the opinion.

        In reading the discussion of the opinion set forth below, you should be aware that Guggenheim Securities' opinion:

•

was provided to the Special Committee and the Board (solely in that capacity) for their information and assistance in connection with their consideration of the merger and not intended to be used or relied upon for any other purpose or by any other person or entity;



•

did not constitute a recommendation to the Special Committee or to the Board with respect to the merger;



•

does not constitute advice or a recommendation to any holder of our common stock as to how to vote in connection with the merger or otherwise;

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•

did not address the Company's underlying business or financial decision to pursue the merger, the relative merits of the merger as compared to any alternative business or financial strategies that might exist for the Company, the financing of the merger or the effects of any other transaction in which the Company might engage;



•

addressed only the fairness, from a financial point of view, of the merger consideration pursuant to the merger agreement;



•

expressed no view or opinion as to (i) any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or to be entered into or amended in connection with the merger or (ii) the fairness, financial or otherwise, of the merger to, or of any consideration to be paid to or received by, the holders of any other class of securities, creditors or other constituencies of the Company; and



•

expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of the Company's officers, directors or employees, or any class of such persons, in connection with the merger relative to the merger consideration.

        In the course of performing its reviews and analyses for rendering its opinion, Guggenheim Securities:

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reviewed a draft of the merger agreement as of May 9, 2013;



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reviewed a draft of the limited guarantee as of May 8, 2013 made by the TowerBrook Funds in favor of the Company;



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reviewed draft copies as of May 8, 2013 of the debt commitment letters and the equity commitment letter with respect to TowerBrook's contemplated financing of the merger;



•

reviewed certain publicly available business and financial information regarding the Company;



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reviewed certain non-public business and financial information regarding the Company's business and prospects (including certain financial projections for the Company), all as prepared and provided to Guggenheim Securities by the Company's senior management;



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discussed with the Company's senior management their views of the Company's business, operations, historical and projected financial results and future prospects;



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reviewed the historical prices, trading multiples and trading volume of the shares of our common stock;



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compared the financial performance of the Company and the trading multiples and trading activity of the our common stock with relevant data for certain publicly traded companies which Guggenheim Securities deemed generally comparable to the Company;



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reviewed the valuation and financial metrics of certain relevant mergers and acquisitions involving companies which Guggenheim Securities deemed generally comparable to the Company;



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performed discounted cash flow analyses based on the projections for the Company furnished to Guggenheim Securities by the Company;



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performed illustrative leveraged buyout analyses based on the financial projections for the Company furnished to Guggenheim Securities by the Company;



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reviewed the premia paid in precedent merger and acquisition transactions involving selected targets in the retail sector; and



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conducted such other studies, analyses, inquiries and investigations as Guggenheim Securities deemed appropriate.

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        In connection with rendering its opinion:

•

Guggenheim Securities relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information (including, without limitation, any financial projections, other estimates and other forward-looking information) provided to or discussed with Guggenheim Securities by the Company or obtained by Guggenheim Securities from public sources, data suppliers and other third parties.



•

Guggenheim Securities (i) did not and does not assume any responsibility, obligation or liability (whether direct or indirect, in contract or tort or otherwise) for the accuracy, completeness, reasonableness, achievability or independent verification of, and Guggenheim Securities did not independently verify, any information described in the preceding bullet (including, without limitation, any financial projections, other estimates and other forward-looking information), (ii) did not and does not express any view, opinion, representation, guaranty or warranty (in each case, express or implied) regarding the reasonableness or achievability of any financial projections, other estimates and other forward-looking information or the assumptions upon which they are based, and (iii) relied upon the assurances of the Company's senior management that they were unaware of any facts or circumstances that would have made such information (including, without limitation, any financial projections, other estimates and other forward-looking information) incomplete, inaccurate or misleading.



•

Specifically, with respect to all (i) financial projections, other estimates and other forward-looking information provided to or discussed with Guggenheim Securities by the Company, Guggenheim Securities was advised by the Company's senior management, and Guggenheim Securities assumed, that such financial projections, other estimates and other forward-looking information had been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of the Company's senior management as to the expected future performance of the Company and (ii) financial projections, other estimates and/or other forward-looking information obtained by Guggenheim Securities from public sources, data suppliers and other third parties, Guggenheim Securities assumed that such information was reasonable and reliable.



•

During the course of its engagement, Guggenheim Securities was asked by the Special Committee to solicit indications of interest from various potential strategic and private equity acquirors regarding a potential transaction with the Company, and Guggenheim Securities considered the results of such solicitation in rendering its opinion.



•

Guggenheim Securities did not perform or obtain any independent appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of the Company, nor was Guggenheim Securities furnished with any such appraisals.



•

Guggenheim Securities did not express any view or render any opinion regarding the tax consequences to the Company of the merger. Guggenheim Securities is not a legal, regulatory, tax, accounting or actuarial expert and it relied on the assessments made by the Company and its advisors with respect to such issues.



•

Guggenheim Securities assumed that:



•

In all respects material to its analyses, (i) the final executed form of the merger agreement would not differ from the draft that Guggenheim Securities reviewed, (ii) the Company and Parent will comply with all terms of the merger agreement and (iii) the representations and warranties of the Company, Parent and Merger Sub contained in the merger agreement were true and correct and all conditions to the obligations of each party to the merger agreement to consummate the merger would be satisfied without any waiver thereof; and

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•

The merger would be consummated in a timely manner and in accordance with the terms of the merger agreement, without any limitations, restrictions, conditions, amendments or modifications, regulatory or otherwise, that would have an adverse effect on the Company.



•

Guggenheim Securities expressed no view or opinion as to the price or range of prices at which the shares of common stock or other securities of the Company may trade at any time, including, without limitation, subsequent to the announcement or consummation of the merger.

Summary of Valuation and Financial Analyses

Overview/Definitions

        This "Summary of Valuation and Financial Analyses" presents a summary of the principal valuation and financial analyses performed by Guggenheim Securities and presented to the Special Committee and the Board in connection with rendering its opinion.

        Some of the valuation and financial analyses summarized below include summary data and information presented in tabular format. In order to understand fully such valuation and financial analyses, the summary data and tables must be read together with the full text of the summary. Considering the summary data and tables alone could create a misleading or incomplete view of Guggenheim Securities' valuation and financial analyses.

        Throughout this "Summary of Valuation and Financial Analyses," the following financial terms are used in connection with Guggenheim Securities' various valuation and financial analyses:

•

Enterprise value: represents the relevant company's net equity value plus (i) the principal or face amount of total debt and preferred stock and (ii) the estimated fair market value, or, if not publicly quoted, book value of any non-controlling/minority interests less (iii) cash, cash equivalents and available-for-sale securities, (iv) the estimated fair market value, or, if not publicly quoted, book value of any non-consolidated investments and (v) the estimated fair market value, or, if not publicly quoted, book value of any non-cash generating assets.



•

Net equity value: represents the relevant company's (i) gross equity value as calculated (a) based on outstanding common shares plus shares issuable upon the conversion or exercise of all in-the-money convertible securities, stock options and/or stock warrants multiplied by (b) the relevant company's stock price less (ii) the cash proceeds from the assumed exercise of stock options and stock warrants with an exercise price in excess of the trading price of such company's price per share.



•

EBIT: means the relevant company's operating earnings (after deduction of stock-based compensation), excluding non-recurring expenses and/or income, before interest and taxes.



•

EBITDA: means the relevant company's operating earnings (after deduction of stock-based compensation), excluding non-recurring expenses and/or income, before interest, taxes, depreciation, amortization and impairments.



•

EBITDAR: means the relevant company's operating earnings (after deduction of stock-based compensation), excluding non-recurring expenses and/or income, before interest, taxes, depreciation, amortization, impairments and rent expense.



•

EBIT multiple: represents the relevant company's enterprise value divided by its historical or projected EBIT.



•

EBITDA multiple: represents the relevant company's enterprise value divided by its historical or projected EBITDA.



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EPS: means the relevant company's earnings per share.

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•

P/E ratio: represents the relevant company's stock price divided by its historical or projected EPS.



•

Cash adjusted price: means the relevant company's price per share after adjusting its equity value by deducting such company's cash, cash equivalents and available-for-sale securities as of the relevant balance sheet date from net equity value.



•

LTM: means last 12 months.



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CAGR: means compound annual growth rate.



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CapEx: means capital expenditures.



•

Unlevered free cash flow or ULFCF: means the relevant company's after-tax unlevered operating cash flow minus CapEx and changes in working capital.



•

DCF: means discounted cash flow.



•

WACC: means weighted average cost of capital.



•

Adjusted Debt: means total debt plus capitalized rent, assuming a capitalization multiple of 8 times, consistent with the approach taken by Moody's Investors Service, Inc.

Summary Merger and Market Valuation Multiples

        Based on the merger consideration of $32.00 per share and the Company's closing stock price of $28.52 as of May 8, 2013, Guggenheim Securities reviewed the implied (i) EBITDA multiples for the LTM period ending March 31, 2013 and estimated calendar year 2013, which we refer to as CY 2013E, (ii) EBIT multiples for the LTM period ending March 31, 2013 and CY 2013E and (iii) P/E ratios for CY 2013E, as summarized in the following table: