COMMITMENTS AND CONTINGENCIES

On March 16, 2012, Neil Holmes, a former employee of the Company, individually and on behalf of all those similarly situated, filed a Complaint against the Company in the Superior Court of California, County of Santa Clara, Case No. 112CV220780 alleging various violations of California wage and labor laws. The Complaint seeks, among other things, certification of the case as a class action, injunctive relief, monetary damages, penalties, restitution, other equitable relief, interest, attorney's fees and costs. We intend to defend this lawsuit vigorously.

In addition to the litigation discussed above, we are a party to routine litigation matters that are incidental to our business. From time to time, additional legal matters in which we may be named as a defendant are expected to arise in the normal course of our business activities.

The resolution of our litigation matters cannot be accurately predicted and we have not estimated the costs or potential losses, if any, associated with these matters. Accordingly, we cannot determine whether our insurance coverage, if any, would be sufficient to cover such costs or potential losses, if any, and we have not recorded any provision for cost or loss associated with these actions. It is possible that our consolidated financial statements could be materially impacted in a particular fiscal quarter or year by an unfavorable outcome or settlement of any of these actions.

Employment Agreements and Performance-Based Incentive Compensation — We have employment agreements with certain of our executives expiring at the end of either fiscal January 2013 or fiscal January 2014, with aggregated base compensation of $5.1 million (not including annual adjustments) over the terms. Depending on the circumstances of termination, we have severance obligations to these and certain other executives aggregating up to approximately $4.3 million, not including annual adjustments. These executives are also eligible for additional performance-based incentive payments. In addition, other employees are eligible for incentive-based payments based on performance, including store managers and regional sales directors, although these payments are not based on employment agreements. Performance-based incentive compensation expense (excluding commissions) for all eligible employees was approximately $8.5 million in fiscal year 2009, $9.2 million in fiscal year 2010 and $7.8 million in fiscal year 2011.

Lease Obligations — We have numerous noncancelable operating leases for retail stores, distribution center, office and tailoring space and equipment. Certain facility leases provide for annual base minimum rentals, plus contingent rentals based on sales. Renewal options are available under the majority of the leases.

Future minimum lease payments, including rent escalations, under noncancelable operating leases for stores and other leased facilities opened and equipment placed in service as of fiscal year-end 2011, were as follows:



Fiscal Year Ending	Amount
	(In thousands)
Fiscal year 2012	$	68,828
Fiscal year 2013	64,165
Fiscal year 2014	55,395
Fiscal year 2015	46,079
Fiscal year 2016	38,080
Thereafter	90,806
Total	$	363,353

The minimum rentals above do not include additional payments for contingent percentage rent, which is typically based on sales, deferred rent amortization, insurance, property taxes, utilities and other common area maintenance costs that may be due as provided for in the leases.

Total minimum rental expense for operating leases was approximately $52.0 million, $57.0 million and $62.8 million for fiscal years 2009, 2010 and 2011, respectively. Contingent rent expense in fiscal years 2009, 2010 and 2011, which was based on a percentage of net sales at the applicable properties, was approximately $2.2 million, $2.5 million and $3.6 million, respectively.

As of fiscal year-end 2011, we have also entered into various lease agreements for stores to be opened and equipment placed in service subsequent to year end. The future minimum lease payments under these agreements are $0.2 million in fiscal year 2012, $0.4 million in each of fiscal years 2013, 2014, 2015 and 2016, and $2.4 million thereafter.

Inventories — We ordinarily place orders for the purchases of inventory at least one to two seasons in advance. Approximately 2% of the total product purchases (including piece goods) in fiscal year 2011 were sourced from United States suppliers, and approximately 98% were sourced from suppliers in other countries. In fiscal year 2011, approximately 33% of the total product purchases were from suppliers in China (including Hong Kong), 23% in Mexico, 8% in Bangladesh, 8% in Malaysia, 7% in India and 6% in Sri Lanka. In fiscal year 2011, we purchased approximately 57% of our finished product through a single buying agent who sources the products from various vendors, including those described above. No other country represented more than 5% of total product purchases in fiscal year 2011. These percentages reflect the countries where the suppliers are primarily operating or manufacturing, which may not always be where the suppliers are actually domiciled. We purchase the raw materials for approximately 9% of our finished products. Five vendors accounted for over 69% of the raw materials purchased directly by us in fiscal year 2011. The remainder of our finished products are purchased as finished units, with the vendor responsible for the acquisition of the raw materials based on our specifications.

Other — We have a consulting agreement with our current Chairman of the Board to consult on matters of strategic planning and initiatives commencing February 1, 2009 at a fee of $0.8 million per year for a period of three years. On November 30, 2010, the consulting agreement was extended from January 31, 2012 to January 26, 2014 with all other terms of the Consulting agreement remaining unchanged. We have an agreement with David Leadbetter, a golf professional, which allows us to produce golf and other apparel under Leadbetter's name. The agreement expires in January 2016. The minimum royalty under this agreement was $0.2 million in each of fiscal years 2009, 2010 and 2011 and is expected to be $0.2 million for fiscal year 2012.