NOTE 13 — Employee Benefit Plans and Employment Agreements

401(k) Plan

The Company has established a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code for the benefit of all employees who meet certain eligibility requirements, which are primarily age, length of service and hours of service. The plan allows eligible employees to invest from 1% to 60% of their compensation, subject to dollar limits as established by the federal government. The plan allows for discretionary Company matching contributions. Effective March 8, 2009, the Company discontinued its discretionary matching contributions. The Company reinstated its discretionary matching contributions during fiscal 2013, and made matching contributions totaling approximately $0.5 million, $0.5 million and $0.2 million in fiscal 2015, fiscal 2014 and fiscal 2013, respectively. The Company does not offer any other post-retirement, post-employment or pension benefits to directors or employees.

Severance Agreements

In April 2014, the Company entered into the same form of severance agreements (the “Severance Agreement”) with each of its executive officers, other than its Chief Executive Officer and President, and in November 2015 with its recently hired Vice President, Controller (each an “Executive”). Per the terms of the Severance Agreement, the Executive is and remains an at-will employee, and thus may be terminated at any time with or without “Cause”, as such term is defined in the Severance Agreement. If the Executive is involuntarily terminated by the Company without “Cause”, and executes a general release of claims in favor of the Company, the Company will be obligated to pay the Executive a severance payment equal to twelve months of the Executive’s highest annual salary at any time during the twelve months preceding the date of termination. In addition, the Severance Agreement provides that the Company will pay the Company portion of COBRA health and dental premiums for up to twelve months after termination.

The Severance Agreement also provides that, notwithstanding the foregoing, if, 180 days prior to, or twelve months after a “Change in Control” the Executive is terminated without “Cause” or resigns for “Good Reason”, as such terms are defined in the Severance Agreement, then the Executive, based on his or her position, shall be entitled to receive a severance payment in one lump sum and adjusted for any severance payments previously made by the Company, generally equal to the following:


			Executive Vice Presidents: The sum of (A) eighteen months of his or her highest annual salary at any time during the twelve month period preceding the date of termination; (B) 1.5 times his or her then current on-target bonus; and (C) the value of eighteen months of the Company portion of COBRA health and dental premiums, unless the executive is eligible for a government subsidy with respect to such COBRA benefits.


			Senior Vice Presidents and Vice President, Controller: The sum of (A) twelve months of his or her highest annual salary at any time during the twelve month period preceding the date of termination; (B) 1.0 times his or her then current on-target bonus; and (C) the value of twelve months of the Company portion of COBRA health and dental premiums, unless the executive is eligible for a government subsidy with respect to such COBRA benefits.

The Severance Agreement also provides for a “cutback” such that any severance payment shall be reduced below the amount that would trigger an excise tax liability. The Company is not obligated to pay an “excise tax” under Section 4999 of the Internal Revenue Code of 1986, as amended, and there are no tax “gross-up” provisions in the Severance Agreement.

Additionally, the Severance Agreement contains a provision prohibiting the Executive during the period of his or her employment and, for a period of twelve months after the Executive’s termination, from (i) engaging in certain competitive activities; (ii) soliciting employees to either leave their employment with the Company or its affiliates or to establish a relationship with a “Competitor” (as such term is defined in the Severance Agreement); or (iii) soliciting, engaging or inducing a vendor or supplier of the Company or its affiliates to sever or materially alter its relationship with the Company or to establish a relationship with a Competitor.

As of January 30, 2016 and January 31, 2015, our severance liability for Executive Officers was not material.

Management Retention Plan

On July 5, 2012, the Compensation Committee (the “Committee”) of the Board approved a Management Retention Plan (the “Plan”) and the entry into of retention agreements (the “Retention Agreements”), issued pursuant to the Plan, with certain members of management, including the Chief Financial Officer and one additional “named executive officer,” as determined pursuant to Item 402 of Regulation S-K for purposes of the Company’s Proxy Statement filed May 15, 2012 (the “Proxy Statement”). The Company had received an unsolicited offer to acquire the Company, which the Board and the Committee recognized can be highly disruptive to the Company’s day-to-day operations, and may cause certain key members of management to consider other employment opportunities. In order to ensure that the most critical members of management remain fully engaged and focused on driving improved performance at the Company for the benefit of the Company’s stockholders, the Committee approved and adopted the Plan and the Retention Agreements.

The Retention Agreements provided for a lump-sum cash award. The term of the award was for one year from adoption, unless accelerated due to a change in control. Pursuant to the Plan and the Retention Agreements, if there were a change in control event prior to the completion of the term, and a recipient’s employment were terminated without “cause” or with “good reason” (as each such term is defined in the Plan) prior to the completion of the term, the recipient would receive the award payment in full upon such termination.

The amount of the award for each of the recipients was equal to such recipient’s annualized base salary without regard to bonuses and other incentive compensation in effect immediately prior to the distribution, but not less than such recipient’s highest annualized base salary in effect within the twelve month period immediately preceding the change in control.

The awards under the Plan were paid in July 2013 and the Plan is no longer in force or effect.