7. Related Party Transactions

Transactions with Limited Brands

On July 29, 2011, Limited Brands divested of its remaining ownership in the Company, and as a result of the disposition, Limited Brands and their affiliates are no longer related parties as of the end of the second quarter of 2011. The 2011 related party activity with Limited Brands and their affiliates described below includes only those expenses transacted prior to Limited Brands' disposition of the Company's common stock.

The Company incurred charges from affiliates of Limited Brands, including Mast Global Logistics ("Mast"), for various transaction services, including home office rent which is included in selling, general, and administrative expenses. The costs of merchandise sourcing services and logistics services, including distribution center rent, are included in cost of goods sold, buying, and occupancy costs. The amounts included in the unaudited Consolidated Statements of Income and Comprehensive Income are as follows:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)				(in thousands)
Merchandise Sourcing	$	109,649	$	104,067	$	198,162	$	190,901
Transaction and Logistics Services	$	12,772	$	14,361	$	24,778	$	30,542

On July 29, 2011, amounts due to Limited Brands totaling $77.6 million and $9.3 million were reclassified to accounts payable and accrued expenses on the unaudited Consolidated Balance Sheets, respectively, since Limited Brands was no longer considered a related party as of the end of the second quarter of 2011. The Company’s outstanding liability related to merchandise sourcing and transaction and logistics services provided by Limited Brands, including Mast, included in accounts payable and accrued expenses – related parties on the unaudited Consolidated Balance Sheets was $68.3 million and $8.6 million, respectively, as of January 29, 2011.

As part of a home office lease with an affiliate of Limited Brands, the Company is entitled to a construction allowance of $8.0 million. As of July 30, 2011, approximately $7.4 million of costs were incurred against the $8.0 million construction allowance. The construction allowance and related leasehold improvements have been recorded on the unaudited Consolidated Balance Sheets and are considered non-cash transactions.

Furthermore, under the Limited Liability Company Agreement of Express Parent ("LLC Agreement"), Limited Brands was entitled to receive a cash payment at the same time payments were made under an advisory agreement with Golden Gate ("Advisory Agreement") equal to the product of (i) the amount of the fees actually paid in cash under the Advisory Agreement and (ii) the quotient of the number of units held by Limited Brands over the number of units held by Golden Gate at the time of payment of such Advisory Agreement fees. Effective May 12, 2010, the LLC Agreement, including the advisory arrangement with Limited Brands, was terminated in connection with the Company’s conversion to a corporation and IPO. The Company paid Limited Brands a one-time termination fee of $3.3 million in the second quarter of 2010 in connection with the termination of the LLC Agreement.

The Company incurred the following charges from Limited Brands related to advisory fees and the termination of the LLC Agreement. These charges are included in other operating expense (income), net, in the unaudited Consolidated Statements of Income and Comprehensive Income:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)				(in thousands)
Limited Brands LLC Agreement Fee (including termination fee)	$	—	$	3,401	$	—	$	4,156

As a result of the termination of the LLC Agreement, the Company had no financial obligation to Limited Brands related to this agreement as of July 30, 2011 or January 29, 2011.

Transactions with Golden Gate

In connection with the Golden Gate Acquisition, the Company entered into an Advisory Agreement with Golden Gate that was originally scheduled to expire in July 2017. Pursuant to the Advisory Agreement, the Company paid Golden Gate an annual management fee equal to the greater of (i) $2.0 million per fiscal year or (ii) 3% of adjusted EBITDA of Express Holding. Additionally, the Company reimbursed Golden Gate for reasonable out-of-pocket expenses incurred as a result of providing on-going advisory services. Effective May 12, 2010, the Advisory Agreement was terminated in connection with the Company’s conversion to a corporation and IPO. The Company paid Golden Gate a one-time termination fee of $10.0 million in the second quarter of 2010 in connection with the termination of the Advisory Agreement.

The Company incurred the following charges from Golden Gate related to advisory fees, out-of-pocket expenses, and the termination of the Advisory Agreement. These charges are included in other operating expense (income), net in the unaudited Consolidated Statements of Income and Comprehensive Income:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)				(in thousands)
Advisory fees and out-of-pocket expenses (including Advisory Agreement termination fee)	$	—	$	10,477	$	—	$	12,752

As a result of the termination of the Advisory Agreement, the Company had no financial obligation to Golden Gate related to this agreement as of July 30, 2011 or January 29, 2011.

Transactions with Other Golden Gate Affiliates

The Company also transacts with affiliates of Golden Gate for e-commerce warehouse and fulfillment services, software license purchases, and consulting and software maintenance services. The Company incurred the following charges, included primarily in cost of goods sold, buying, and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2011		July 31, 2010		July 30, 2011		July 31, 2010
	(in thousands)				(in thousands)
E-commerce warehouse and fulfillment	$	6,998	$	1,544	$	13,904	$	5,162
Software licenses and maintenance and consulting	$	25	$	161	$	143	$	226

On March 25, 2010, the Company elected to prepay its e-commerce service provider, a Golden Gate affiliate, $10.2 million for services from April 2010 through January 2011 in exchange for a discount on those services. This prepaid amount was expensed as services were rendered with $3.0 million and $4.0 million being included primarily in costs of goods sold, buying, and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income during the thirteen and twenty-six weeks ended July 31, 2010, respectively. The prepaid balance related to this Golden Gate affiliate was fully amortized as of January 29, 2011.

The Company’s outstanding liability to other Golden Gate affiliates, included in accounts payable and accrued expenses - related parties on the unaudited Consolidated Balance Sheets, was $3.9 million and $3.0 million as of July 30, 2011 and January 29, 2011, respectively.

In December 2009, the Company began providing real estate services to multiple Golden Gate affiliates. Income recognized for these services during the thirteen and twenty-six weeks ended July 30, 2011 was $0.1 million and $0.3 million, respectively. Minimal income was recognized for these services during the thirteen and twenty-six weeks ended July 31, 2010. The Company's receivable balance related to these services was $0.1 million as of July 30, 2011 and January 29, 2011.

As part of the prepayment in full of the 14.5% Topco Term C Loan ("Term C Loan") in February 2010, an affiliate of Golden Gate received a payment consisting of $50.0 million of principal, $0.6 million of interest, and a $1.0 million prepayment penalty. As part of the prepayment in full of the 13.5% Topco Term B Loan ("Term B Loan") in May 2010, an affiliate of Golden Gate received a payment consisting of $58.3 million of principal, $2.1 million of interest, and a $3.5 million prepayment penalty. Total interest expense on the Term C Loan and Term B Loan, collectively referred to as the "Topco Credit Facility", attributed to Golden Gate affiliates was $0.3 million and $2.7 million during the thirteen and twenty-six weeks ended July 31, 2010, respectively. The Company did not incur any interest expense under the Topco Credit Facility during the thirteen and twenty-six weeks ended July 30, 2011 due to the termination of the Topco Credit Facility last year.

During the first and second quarters of 2011, the Company repurchased $25.0 million and $24.2 million of the Senior Notes, respectively, in open market transactions. Of the $49.2 million of Senior Notes repurchased, $40.0 million were held by a Golden Gate affiliate, leaving $10.0 million of Senior Notes owned by a Golden Gate affiliate outstanding as of July 30, 2011. Interest expense incurred on the Senior Notes attributable to the Golden Gate affiliate was $0.4 million and $1.3 million during the thirteen and twenty-six weeks ended July 30, 2011, respectively; and $1.2 million and $1.9 million during the thirteen and twenty-six weeks ended July 31, 2010, respectively.