ITEM 1. BUSINESS

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. This Form 10-K includes forward-looking statements that could differ from actual future results. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "thinks" and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, including the factors described below, that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, we cannot assure you that our goals will be achieved. These forward-looking statements are made as of the date of this Form 10-K, and we assume no obligation to update or revise them or provide reasons why actual results may differ. Factors that might cause such a difference include, but are not limited to, miscalculation of the demand for our products, effective management of our growth, decline in comparable store sales performance, ongoing competitive pressures in the apparel industry, changes in the level of consumer spending or preferences in apparel, and/or other factors discussed in "Risk Factors" and elsewhere in this Form 10-K.

COMPANY OVERVIEW

We design, develop and produce a distinctive line of contemporary women's apparel and accessories. We market our products under the bebe, bebe moda and bbsp brand names through our 124 specialty retail stores located in 27 states, the District of Columbia, Canada, the United Kingdom and our on-line store at www.bebe.com. While we attract a broad audience, our target customers are 18- to 35-year-old women who seek current fashion trends interpreted to suit their lifestyle needs. The "bebe look," with an unmistakable hint of sensuality, appeals to a hip, sophisticated, body-conscious woman who takes pride in her appearance. The bebe customer is a discriminating consumer who demands value in the form of quality at a competitive price. Our broad product offering includes suits, tops, pants, skirts, dresses, logo and other activewear, outerwear, and handbags and other accessories. We design and develop most of our merchandise in-house. The merchandise is then manufactured to our specifications. The balance is developed primarily in conjunction with third-party apparel manufacturers or, in some cases, selected directly from these manufacturers' lines.

Founded by Manny Mashouf, our current Chairman, President and Chief Executive Officer, we opened our first store in San Francisco, California in 1976. In the last four years, we significantly strengthened our employee base and have implemented several strategic initiatives that have contributed to our strong performance. These strategic initiatives address various aspects of our operations, in particular the merchandising, planning, manufacturing and distribution functions. Our merchandising initiatives focus primarily on expanding our product line to include a broader selection of tops, pants, dresses, accessories and logo items. While the traditional bebe product offering spoke to the "nine to five" needs of a young professional woman, the expanded product line provides head-to-toe lifestyle dressing at a competitive price that easily adapts from day into evening. Also, the logo portion of the product line, which highlights the bebe logo on a variety of active and casual styles, enhances brand awareness while providing younger, "aspirational" customers an entry to the bebe product line at lower price points. The strategic initiatives that relate to the planning, manufacturing and distribution functions focus primarily on implementing more sophisticated procedures. Also, these initiatives involve a more disciplined approach to our business operations.

We reinforce our brand with a distinctive lifestyle image advertising campaign, using prominent fashion photographers. We believe that our emphasis on non-product specific lifestyle advertising

promotes brand awareness and attracts customers who are intrigued by the playfully sensual and evocative imagery. We communicate the images to consumers through a variety of advertising vehicles including fashion magazines, bus shelters, in-store displays and customer mailings. We further enhance the bebe brand image by designing our on-line and retail stores to create an upscale, inviting boutique environment.

OPERATING STRATEGY

While the market for women's apparel is extremely large, we believe that our distinctive, contemporary point of view that offers quality merchandise to a specialized market segment, presents us with opportunities for future growth. Our objective is to become a global brand, offering quality merchandise that enhances the spirit and playful sensuality of the contemporary woman. The principal elements of our operating strategy to achieve this objective are as follows:

1. PROVIDE DISTINCTIVE FASHION THROUGHOUT A BROAD PRODUCT LINE. Fashion from throughout the world inspires our designers and merchandisers. They interpret contemporary ideas for silhouettes, fabrications and colors into products and styles to meet the everyday lifestyle needs of the bebe customer. While many of our styles and products are represented season after season with variations in color, fabric or trim, our designers and merchandisers are committed to bringing newness into the merchandise mix in response to emerging trends. We carefully plan our product lines to represent a broad selection of sleek, fashionable goods, emphasizing career wear, evening wear and weekend wear, with a continued focus on day-into-evening styles. Our product line is further supported by a broad selection of accessories that help our customers create a distinctive ensemble, while logo-embellished items provide an entry point for younger, aspirational customers.

2. VERTICALLY INTEGRATE DESIGN, PRODUCTION, MERCHANDISING AND RETAIL FUNCTIONS. We believe that our vertical integration of processes from design to market coupled with our financial discipline enable us to produce distinctive quality merchandise of exceptional value. We maintain flexibility in our sourcing by subcontracting production of our own designs, developing exclusive products in conjunction with third-party apparel manufacturers, or selecting exclusive merchandise directly from manufacturers' lines. This approach also enables us to respond quickly to changing fashion trends, while reducing our risk of excess inventory.

3. MANAGE MERCHANDISE MIX. We believe that a disciplined approach to merchandising and a proactive inventory management program is critical to our success. By actively monitoring sell-through rates and managing the mix of categories and products in our stores, we believe that we are able to respond to emerging trends in a timely manner, minimize our dependence on any particular category, style or fabrication, and preserve a balanced, coordinated presentation of merchandise within each store.

4. CONTROL DISTRIBUTION OF MERCHANDISE. We believe that distributing our core apparel line through bebe stores, our on-line web-site and licensee stores greatly enhances our brand image. This controlled distribution strategy enables us to display the full assortment of our products, control the pricing, visual presentation and flow of goods, test new products and reinforce the brand's identity in the eyes of our customers.

5. ENHANCE BRAND IMAGE. Through an edgy, high-impact, visual advertising campaign using print, outdoor, in-store and direct mail communication vehicles, we attract customers who are intrigued by the playfully sensual and evocative imagery of the bebe lifestyle. We also offer a line of merchandise branded with the distinctive bebe logo to increase brand awareness. Within our stores and through our on-line virtual store, we seek to create an upscale, inviting environment that further enhances the bebe brand and builds customer loyalty and demand for bebe merchandise. Furthermore, we train our sales associates to be responsive and knowledgeable and encourage them to reflect the bebe image.

GROWTH STRATEGY

We plan to grow our operations in a controlled manner, primarily through the opening of new stores. We opened 24 stores in fiscal 2000, we currently plan to open approximately 25 to 30 stores in fiscal 2001, the majority of which will be in existing markets. We continually review our store base and have identified five under-performing stores that we are considering closing during fiscal 2001.

We also plan to grow by introducing new product categories. These can either be internally developed or developed in conjunction with licensees. During fiscal 2000, we introduced a denim product line, and our footwear licensee expanded its product offering. We continually explore opportunities for licensing the bebe name. To date, we have entered into licensing agreements for footwear, eyewear, watches and swimwear. Under the terms of these agreements, the licensees will manufacture and distribute products branded with the bebe logo to be sold at bebe stores and selected retailers.

To support the introduction of new product categories in recent years and to handle higher sales volumes, we have developed a store prototype larger than the average of 3,250 square feet for our existing stores. Our new store prototype is approximately 3,000 to 5,000 square feet. However, in selected markets, we may open larger flagship stores. As opportunities arise, we also may expand certain existing stores.

We are currently testing a new concept store format for the bbsp product line and are monitoring the results of these bbsp stores before expanding with this concept. The bbsp product line is a combination of activewear and streetwear featuring cotton logo knits, fleece, casual woven bottoms and denim, down and accessories that are easy, sexy and modern. The average bbsp store is 1,500 square feet, which allows us to display the full bbsp assortment. We plan to open bbsp stores in high traffic malls and tourist locations. As of June 30, 2000, we operate two bbsp concept stores with a third opened in July 2000.

Additionally, we are upgrading our on-line store to simplify and enhance our customers' on-line shopping experience and expect to continue to invest in such upgrades to further capitalize on the encouraging performance of our on-line store.

In addition to our domestic expansion, we are expanding internationally primarily through licensing agreements. Our licensees currently operate stores in Greece, Israel, United Arab Emirates and Singapore. Under the terms of these agreements, licensees will open bebe stores that will be stocked with inventory purchased from us.

MERCHANDISING

Our merchandising strategy is to provide current, timely fashions in a broad selection of categories to suit the lifestyle needs of our customers. We market all of our merchandise under the bebe, bebe moda and bbsp brand names. We design and develop most of our merchandise in-house and contract to have the merchandise manufactured to our specifications. In some cases, we select merchandise directly from third-party apparel manufacturers' lines. We do not have long-term contracts with any third party apparel manufacturers and purchase all of the merchandise from such manufacturers by purchase order. Such merchandise always carries our "bebe," "bebe moda" or "bbsp" labels and in most instances is supplied to us on an exclusive basis.

PRODUCT CATEGORIES. After building a strong suiting business in the early 1990s, we diversified our product line in response to a decrease in demand for our suiting in fiscal 1996. We significantly increased the breadth of our product offerings by expanding categories such as knits, tops, related separates, leather, dresses, logo and accessories. While each category's contribution as a percentage of total net sales varies seasonally, each of the product classifications is represented throughout the year.

We regularly evaluate new categories that may be appropriate for introduction. In fall 1999, we introduced a denim product line. We have also entered into licensing agreements pursuant to which licensees will manufacture and distribute footwear, eyewear, swimwear and watches branded with the bebe

logo to be sold at bebe stores and selected retailers. We believe additional licensing opportunities exist for other product categories such as fragrance and handbags.

PRODUCT DEVELOPMENT. We take a disciplined approach to the product development process. This allows our merchants to gain as much information as possible concerning current fashion trends before making fabric or product purchase commitments. We control the process with a detailed product development calendar, which highlights key color selection, fabric order, pattern development and production order deadlines. We establish the deadlines to ensure an adequate flow of inventory into the stores. While the product development calendar is established on a seasonal basis, we make commitments monthly based on current sales and fashion trends. This enhances our ability to react promptly to customer demand. Merchandising teams and designers work together to continuously develop new styles to be presented at monthly product review and selection meetings. These new styles incorporate variations on existing styles in an effort to capitalize further on the more popular silhouettes or, to a lesser extent, entirely new styles and fabrications that respond to emerging trends or customer preferences.

In addition, a detailed merchandising plan supports the product development process. This merchandising plan includes sales, inventory and profitability targets for each product classification. The plan is reconciled with our store sales plan, a compilation of individual store sales projections. We update the merchandising plan on a semi-monthly basis to reflect current sales and inventory trends. The plan is then distributed throughout the merchandising department. We use the updated merchandising plan to adjust production orders as needed to meet inventory and sales targets. If we miscalculate consumer demand for our products, we may be faced with significant excess inventory and fabric for some products and missed opportunities for others. Weak sales and resulting markdowns could cause our profitability to be impaired.

MARKETING

In recent years, we have initiated an extensive image advertising program, which addresses the lifestyles and aspirations of our target customers. Through an edgy, high-impact, visual advertising campaign, we attract customers who are intrigued by the playfully sensual and evocative imagery. We believe that our emphasis on non-product specific lifestyle advertising promotes brand awareness and supports numerous product line expansion opportunities. An outside advertising agency works with our internal Marketing Department to create a lifestyle advertising campaign. This campaign, which emphasizes a forward-looking view of fashion, is communicated to consumers through a variety of means including fashion magazines, bus shelters, in-store displays and customer mailings. In addition, our Public Relations Department communicates directly with fashion editors and supplies them with a continuous flow of product information. On occasion, we have co-sponsored promotional events with fashion magazines, such as ELLE, GLAMOUR, MARIE CLAIRE, VOGUE and VANITY FAIR.

STORES

STORE LOCATIONS AND ENVIRONMENT. As of June 30, 2000, we operated 124 stores in 27 states, the District of Columbia, Canada and the United Kingdom. Our stores average approximately 3,250 square feet and are primarily located in regional shopping malls and freestanding street locations. Our stores are designed to create a clean, upscale boutique environment, featuring contemporary finished floors and recessed lighting. Glass exteriors allow passersby to see easily into the store. The open floor design allows customers to readily view the majority of the merchandise on display while store fixtures allow for the efficient display of garments and accessories.

We provide the stores with specific merchandise display directions on a weekly or bi-weekly basis from the corporate office based on currently available merchandise receipts. Our in-store product presentation utilizes a variety of different fixtures to highlight the product line's breadth and versatility. Complete outfits are displayed throughout the store using garments from a variety of product categories. By

emphasizing outfits in this manner, we allow the customer to see how different pieces can be combined to create multiple ensembles.

EXPANSION OPPORTUNITIES. In fiscal 1998, we, together with a real estate consulting firm, developed a profile of current customers and applied the profile to the largest 150 metropolitan areas in the United States. We currently operate bebe stores in approximately 45 of these top geographic market areas and have identified additional geographic markets that we believe can support one or more bebe stores. Also, we believe that there is a significant opportunity to expand the number of stores in many markets within which bebe stores are currently located. We, together with our real estate consultant, also have identified specific mall and street locations within many markets to be considered for new bebe store locations. In selecting a specific site, we look for high traffic locations primarily in regional shopping centers and in free- standing street locations. We evaluate proposed sites based on the traffic pattern, co-tenancies, average sales per square foot achieved by neighboring stores, lease economics and other factors considered important within the specific location.

We opened 24 new stores in fiscal 2000 and plan to open approximately 25 to 30 stores in fiscal 2001, the majority of which will be in existing markets. Our new store prototype is approximately 3,000 to 5,000 square feet, although in selected markets we may open larger stores that will be designed to enhance further the bebe image.

During fiscal 2000, the average new store size was approximately 3,850 square feet. New store construction costs (before tenant allowances) averaged $397,000. The average gross inventory investment was $114,000 while pre-opening costs, which are expensed as incurred, were approximately $29,000 per store. Our stores typically have achieved profitability at the store operating level within the first full quarter of operation; however, we cannot assure that our stores will do so in the future. Actual store growth and future store profitability and rates of return will depend on a number of factors that include, but are not limited to, individual store economics and suitability of available sites. Because of their higher cost structure, larger stores are not expected to achieve operating margins comparable to our other stores.

In addition to opening new stores, we expanded or relocated five existing stores to larger spaces during fiscal 2000. We believe that as awareness of bebe's brand name increases, our product offering expands and our stores mature, additional expansions may be appropriate.

Our ability to expand will depend on a number of factors, including the availability of desirable locations, the negotiation of acceptable leases and our ability to manage expansion and to source adequate inventory. We cannot assure you that we will be able to achieve our planned expansion on a timely and profitable basis. Furthermore, we cannot assure you that store openings in existing markets will not result in reduced net sales volumes and profitability of existing stores in those markets.

OUTLET STORES. As of June 30, 2000, ten of our 124 stores were located in outlet malls throughout the United States. In order to promote a better merchandise presentation within the full price specialty stores, the products offered in outlet stores are primarily slow moving inventory. Additionally, we round out the inventory of our outlet stores with casual logo styles sold at full price and, to a lesser extent, garments specifically produced for the outlet stores.

The average outlet store size was approximately 2,900 square feet. New store construction costs (before tenant allowances) averaged approximately $275,000, and the average inventory investment was approximately $142,000. Of the 24 stores opened in fiscal 2000, two were outlet stores. Of the 25 to 30 stores planned to be opened in fiscal 2001, 3 to 5 are expected to be outlet stores.

BBSP CONCEPT STORES. We are currently testing a new concept store format for the bbsp product line and are monitoring the results of these bbsp stores before expanding with this concept. The bbsp product line is a combination of activewear and streetwear featuring cotton logo knits, fleece, casual woven bottoms and denim, down and accessories that are easy, sexy and modern. The average bbsp store is 1,500

square feet, which allows us to display the full bbsp assortment. We plan to open bbsp stores in high traffic malls and tourist locations. As of June 30, 2000, we operate two bbsp concept stores with a third opened in July 2000.

STORE CLOSURES. We monitor the financial performance of our stores and, from time to time, have closed in the past and will close in the future, stores that we do not consider to be viable. Many of the store leases contain early termination options that allow us to close the stores in certain specified years of the leases if certain minimum sales levels are not achieved. We closed one store during fiscal 2000. We have reviewed our existing store base and have identified three to five under-performing stores that we plan to close prior to the end of fiscal 2001. Two of these underperforming stores are our two stores in the United Kingdom. We are currently reviewing alternatives to maintain our presence in such market, such as a licensing or joint venture arrangement.

STORE OPERATIONS

Store operations are organized into four regions and twenty districts. Each region is managed by a regional manager, and each district is managed by a district manager. Each regional manager is typically responsible for four to six districts, and each district manager is typically responsible for four to eight stores. Each store is typically staffed with two to four managers in addition to sales associates and store support employees.

We seek to instill enthusiasm and dedication in our store management personnel and sales associates through incentive programs and regular communication with the stores. Sales associates receive commissions on sales with a guaranteed minimum hourly compensation. Store managers receive base compensation plus incentive compensation based on sales and inventory control. Regional and district managers receive base compensation plus incentive compensation based on meeting profitability benchmarks.

We have well-established store operating policies and procedures and use an in-store training regimen for all new store employees. The Visual Merchandising staff provides the stores with merchandise presentation instructions, which include photographs of fixture presentations on a regular basis. In addition, we provide product descriptions to sales associates to enable them to gain familiarity with our product offerings. We offer our sales associates a discount on bebe merchandise to encourage them to wear our apparel and reflect the bebe image while on the selling floor.

We also maintain a Loss Prevention Department that develops and implements programs for controlling losses. These programs include installing electronic surveillance systems in all stores, monitoring returns, voids, employee sales and deposits, and educating store personnel on loss prevention.

SOURCING, QUALITY CONTROL AND DISTRIBUTION

All of our merchandise is marketed under the bebe, bebe moda and bbsp brand names. Much of this merchandise is designed and developed in-house and manufactured to our specifications. The balance is developed primarily in conjunction with third-party apparel manufacturers. In some cases, we select merchandise directly from these manufacturers' lines. When we contract for merchandise production, we use facilities in the United States and foreign manufacturers. These facilities produce garments based on designs, patterns and detailed specifications produced by us.

We use computer aided design systems to develop patterns and production markers as part of our product development process. We fit test sample garments before production to make sure patterns are accurate. We maintain a formalized quality control program. This program includes inspection of fabrics upon receipt at our distribution center. Additionally, a percentage of merchandise receipts are inspected and fit tested a second time prior to being shipped to our stores. Garments that do not pass inspection are returned to the manufacturer for rework or accepted at reduced prices for sale in our outlet stores.

All of the merchandise for our domestic stores is received, inspected, processed, warehoused and distributed through our distribution center that is adjacent to our corporate offices. Details about each receipt are supplied to merchandise planners who determine how the product should be distributed among the stores based on current inventory levels, sales trends and specific product characteristics. Advance shipping notices are electronically communicated to the stores and any goods not shipped are stored for replenishment purposes. Merchandise typically is shipped to the stores on a weekly basis using common carriers; however, during peak selling periods, or for high volume stores, shipments may be made two or even three times a week.

We do not have any long-term contracts with any manufacturer or supplier and place all of our orders by purchase order. If we fail to obtain sufficient quantities of manufacturing capacity or raw materials, it would have a harmful effect on our business, financial condition and results of operations. We have received in the past, and may receive in the future, shipments of products from manufacturers that fail to conform to our quality control standards. In such event, unless we are able to obtain replacement products in a timely manner, we may lose sales which could harm our operating results.

COMPETITION

The retail and apparel industries are highly competitive and are characterized by low barriers to entry. We expect competition in our markets to increase. The primary competitive factors in our markets are:

1. brand name recognition;
2. product styling;
3. product quality;
4. product presentation;
5. product pricing;
6. store ambiance;
7. customer service; and
8. convenience.

We compete with traditional department stores, specialty store retailers, business to consumer websites, off-price retailers and direct marketers for, among other things, raw materials, market share, retail space, finished goods, sourcing and personnel. Because many of these competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the resources to adequately compete with them. If we fail to compete in any way, it may have a harmful effect on our business, financial condition and results of operations.

LICENSING, INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

LICENSING. We strive to provide our customers with high quality products and to maintain a consistent image in all of our advertising and marketing programs. We regularly evaluate opportunities to expand our product offering. Accordingly, we may from time to time selectively enter into licensing or joint venture agreements with third parties. In entering into such licensing and joint venture agreements, we seek to preserve the integrity of our brand by closely monitoring the design and quality of the products sold by licensees or joint venture partners and by controlling the manner in which our products are advertised, marketed and distributed. In addition to distributing such new products through bebe stores, we may elect to distribute these licensed products with the bebe logo through other channels. We have entered into license agreements where licensees manufacture and distribute footwear, eyewear, watches and swimwear branded with the bebe logo to be sold at bebe stores and other retailers.

We have also signed licensing agreements to license the bebe brand name internationally to licensees who will open bebe stores. We have signed licensing agreements with companies who currently operate bebe retail stores in Greece, Israel, United Arab Emirates and Singapore. Under these agreements, we provide the use of our name, store design and advertising images, and the licensees purchase inventory from us.

TRADEMARKS AND SERVICE MARKS. We believe that our trademarks and other proprietary rights are important to our success. We have registered "bebe" and "bebe moda" in the United States and certain foreign jurisdictions and have applied for "bbsp" in the United States and certain foreign jurisdictions. Even though we take actions to establish and protect our trademarks and other proprietary rights, we cannot assure that others will not imitate our products or infringe on our intellectual property rights. In addition, we cannot assure that others will not resist or seek to block the sale of our products as infringements of their trademark and proprietary rights. In certain jurisdictions, other entities may have rights to names that contain the word "bebe," which could limit our ability to expand in such jurisdictions.

We are seeking to register our trademarks in targeted international markets that we believe represent large potential markets for our products. In some of these markets, local companies currently have registered competing marks, and/or regulatory obstacles exist that may prevent us from obtaining a trademark for the bebe name or related names. In such countries, we may be unable to use the bebe name unless we purchase the right or obtain a license to use the bebe name. We may not be able to register trademarks in these international markets, purchase the right or obtain a license to use the bebe name on commercially reasonable terms. If we fail to obtain trademark, ownership or license rights, it would limit our ability to expand into certain international markets or enter such markets with the bebe name, and to capitalize on the value of our brand.

Furthermore in some jurisdictions, despite successful registration of our trademarks, third parties may allege infringement and bring actions against us.

INFORMATION SERVICES AND TECHNOLOGY

We are committed to utilizing technology to enhance our competitive position. Our information systems provide integration of the store, merchandising, distribution and financial systems. The core business systems, which consist of both purchased and internally developed software, are accessed over a Company-wide network providing corporate employees with access to all key business applications. Daily sales and cash deposit information are electronically collected from the stores' point-of-sale terminals nightly. During this process, we also obtain information concerning inventory receipts and transfers and send to the stores pricing, markdown and shipment notification data. In addition, we collect customer names and addresses to update our customer database. The merchandising staff evaluates the sales and inventory information collected from the stores to make key merchandise planning decisions, including replenishment and markdowns. These decisions enhance our ability to optimize sales while limiting

markdowns and minimizing inventory risk by properly marking down slow selling styles, reordering existing styles and effectively distributing new inventory receipts to the stores.

In the past, our investments in information systems have focused on our core store, merchandise and financial accounting systems. Currently, our focus is on upgrading our capabilities and systems associated with our production, merchandise allocation and distribution functions, which have not kept pace with our growth. We made significant investments to improve existing management information systems and implemented new systems during fiscal 2000 and plan to make significant additional investments in fiscal 2001. We cannot assure you that we will be successful with the implementation of these new systems or plans. Failure to implement and integrate such systems or plans could have a harmful effect on our business, financial condition and results of operations.

EMPLOYEES

As of June 30, 2000, we had approximately 1,900 employees, of whom approximately 340 were employed in general and administrative functions at the corporate offices and distribution center. The remaining 1,560 employees were employed in store operations. Approximately 810 were full-time employees and 1,090 were employed on a part-time basis. None of our employees are represented by a labor union, and we believe our relationship with our employees is good.

NAME                                          AGE                       POSITION
----                                        --------                    --------
Manny Mashouf(1)..........................     62      Chairman, President and Chief Executive
                                                         Officer
Barbara Bass(2)...........................     49      Director
Corrado Federico(2).......................     59      Director
Neda Mashouf..............................     37      Director and Merchandising Advisor
Philip Schlein(2).........................     66      Director
George Arvan(1)...........................     53      Vice President of Sourcing and Production
Karen Ioli................................     40      Vice President of Licensing
Blair Lambert(1)..........................     42      Chief Financial Officer
Tim Millen................................     40      Vice President of Information Services and
                                                         Technology
Ferrell Ostrow............................     41      Vice President of Loss Prevention
Christina Perozzi.........................     31      Vice President of Finance
Lilliemae Stephens(1).....................     29      Vice President, General Counsel and
                                                         Corporate Secretary

(1) Executive Officer.

(2) Member, Audit Committee and Compensation Committee.

MANNY MASHOUF founded the Company and has served as Chairman, Chief Executive Officer and President of the Company since the Company's incorporation in 1976. Mr. Mashouf is the husband of Neda Mashouf, a Director of the Company.

BARBARA BASS has served as a Director of the Company since February 1997. Since 1993, Ms. Bass has served as the President of the Gerson Bakar Foundation. From 1989 to 1992, Ms. Bass served as President

and Chief Executive Officer of the Emporium Weinstock Division of Carter Hawley Hale Stores, Inc., a department store chain. Ms. Bass also serves on the Board of Directors of Starbucks Corporation, DFS Group Limited and The Bombay Company, Inc.

CORRADO FEDERICO has served as a Director of the Company since November 1996. Mr. Federico is President of Solaris Properties and has served as the President of Corado, Inc., a land development firm, since 1991. From 1986 to 1991, Mr. Federico held the position of President and Chief Executive Officer of Esprit de Corp, Inc., a wholesaler and retailer of junior and children's apparel, footwear and accessories ("Esprit"). Mr. Federico also serves on the Board of Directors of Hot Topic, Inc.

NEDA MASHOUF has served as a Director of the Company since September 1984 and has been employed by the Company since 1984, most recently as Merchandising Advisor. Ms. Mashouf is the wife of Manny Mashouf, the Chairman, President and Chief Executive Officer of the Company.

PHILIP SCHLEIN has served as a Director of the Company since December 1996. Since April 1985, Mr. Schlein has been a general partner of U.S. Venture Partners, a venture capital firm specializing in retail and consumer products companies. From January 1974 to January 1985, Mr. Schlein served as President and Chief Executive Officer of Macy's California, a division of R. H. Macy & Co, Inc., a department store chain. Mr. Schlein also serves on the Board of Directors of Ross Stores, Inc., NBC Internet, Inc., QRS Corporation and Burnham Pacific Properties, Inc.

GEORGE ARVAN has served as the Vice President of Sourcing and Production of the Company since September 1997. Prior to his employment with bebe, Mr. Arvan founded New Planet Sourcing, an apparel sourcing company, and served as its President from September 1996 to September 1997. During the period from 1991 to 1996, Mr. Arvan was the Chief Operating Officer of Berkeley Shirt Company, a men's wholesale apparel company.

KAREN IOLI has served as Vice President of Licensing of the Company since January 1998. From January 1996 to January 1998, Ms. Ioli served as Vice President of Licensing for Mossimo, Inc., an apparel wholesale company. From July 1992 to September 1995, Ms. Ioli was employed by Guess?, Inc., an apparel retail and wholesale company, as Vice President of Licensing.

BLAIR LAMBERT has served as Chief Financial Officer of the Company since June 1996. From 1988 to 1996, Mr. Lambert was employed by Esprit, most recently as Corporate Vice President of Finance. Mr. Lambert is a Certified Public Accountant.

TIM MILLEN has served as Vice President of Information Services and Technology of the Company since November 1997. From July 1996 to November 1997, Mr. Millen served as Vice President of Information Systems for AZ3 Inc. (d.b.a. BCBG), a women's apparel retail and wholesale company. From August, 1994 to July 1996, Mr. Millen served as Vice President of Management Information Systems for Francine Browner Inc., an apparel wholesale company. From 1991 to 1994, Mr. Millen was an independent information technology consultant, focusing on the retail and wholesale apparel market.

FERRELL OSTROW has served as Vice President of Loss Prevention for the Company since March 1999. From February 1998 to February 1999, Mr. Ostrow served as the Director of Loss Prevention for The Wet Seal Inc. From February 1988 to February 1998, Mr. Ostrow served as Director of Loss Prevention with Pacific Sunwear of California Inc.

CHRISTINA PEROZZI has been employed by the Company since April 1995, most recently as Vice President of Finance. From October 1993 to April 1995, Ms. Perozzi served as Revenue Manager at Gap Inc.

LILLIEMAE STEPHENS has served as General Counsel of the Company since January 1999. In June 2000, Ms. Stephens became the Company's Vice President of Legal and Business Affairs. In October 1999, Ms. Stephens became the Company's Corporate Secretary. From October 1996 to January 1999, Ms. Stephens served as an attorney at Gray Cary Ware & Freidenrich LLP.