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 (the "Holmes 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 Holmes Complaint seeks, among other relief, certification of the case as a class action, injunctive relief, monetary damages, penalties, restitution, other equitable relief, interest, attorney's fees and costs.

On December 21, 2012, the parties accepted a mediator’s proposal to settle this case. The proposed settlement has been recorded by the Company. The parties are in the process of negotiating a settlement agreement pursuant to the mediator’s proposal. Any such settlement agreement will be subject to the approval of the said Superior Court. Although we expect the parties to enter into a settlement agreement and the Superior Court to approve the settlement agreement, we cannot provide any assurance that such events will occur.

On April 5, 2012, James Waldron and Matthew Villani, on their own behalf and on behalf of all others similarly situated, filed a putative class action against the Company in the United States District Court for the District of New Jersey (Case 2:33- av-00001). On August 6, 2012, the named plaintiffs filed an Amended Class Action Complaint (the "Waldron Complaint") alleging, among other things, that the Company’s merchandise is perpetually on sale and the sale price is actually the price at which the merchandise is regularly offered. As a result, the Waldron Complaint alleges the Company’s advertising practices violate the New Jersey Consumer Fraud Act and constitute unjust enrichment. The Waldron Complaint seeks, among other relief, certification of the case as a national (or New Jersey only) class action, injunctive relief, declaratory relief, disgorgement of profits, monetary damages (including treble damages), restitution, costs and attorneys’ fees, statutory pre-judgment interest and other legal and equitable relief. On January 28, 2013, upon the motion of the Company, the said U.S. District Court issued an Order and Opinion dismissing the Waldron Complaint in its entirety, without prejudice.

On August 29, 2012, Patrick Edward Camasta, individually and as the representative of a class of similarly situated persons, filed a putative class action complaint (the “Original Camasta Complaint”) against the Company in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois (Case No. 12CH4405). The Company removed the case to the United States District Court for the Northern District of Illinois, Eastern Division (Case No. 12 CV 7782). The Original Camasta Complaint alleges, among other things, that the Company's pattern and practice of advertising its normal retail prices as temporary price reductions violate the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Uniform Deceptive Trade Practices Act. The Original Camasta Complaint seeks, among other relief, certification of the case as a class action, actual and punitive damages, attorney fees and costs and injunctive relief. On February 7, 2013, upon the motion of the Company, the said U.S. District Court issued a Memorandum Opinion and Order dismissing the Original Camasta Complaint in its entirety, without prejudice. On March 1, 2013, Camasta filed a First Amended Class Action Complaint in the said United States District Court making substantially the same allegations as in the Original Camasta Complaint. 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 and are currently not expected to be material. 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 fiscal year January 2014, with aggregated base compensation of $5.9 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 $9.2 million in fiscal year 2010, $7.8 million in fiscal year 2011 and $2.1 million in fiscal year 2012.

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 2012, were as follows:



Fiscal Year Ending	Amount
	(In thousands)
Fiscal year 2013	75,846
Fiscal year 2014	67,947
Fiscal year 2015	58,379
Fiscal year 2016	50,756
Fiscal year 2017	41,973
Thereafter	110,133
Total	$	405,034

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, common area maintenance and other common costs that may be due as provided for in the leases.

Total minimum rental expense for operating leases was approximately $57.0 million, $62.8 million and $68.0 million for fiscal years 2010, 2011 and 2012, respectively. Contingent rent expense in fiscal years 2010, 2011 and 2012, which was based on a percentage of net sales at the applicable properties, was approximately $2.5 million, $3.6 million and $4.0 million, respectively.

As of fiscal year-end 2012, 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 $0.5 million in fiscal year 2013, $0.8 million in each of fiscal years 2014, 2015, 2016 and 2017, and $4.5 million thereafter.

Inventories — We ordinarily place orders for the purchases of inventory at least one to two seasons in advance. Approximately 1% of the total product purchases (including piece goods) in fiscal year 2012 were sourced from United States suppliers, and approximately 99% were sourced from suppliers in other countries. In fiscal year 2012, approximately 28% of the total product purchases were from suppliers in China (including Hong Kong), 28% in Mexico, 9% in Malaysia, 8% in India, 6% in Bangladesh, and 6% in the Philippines. In fiscal year 2012, we purchased approximately 53% 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 2012. 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 63% of the raw materials purchased directly by us in fiscal year 2012. 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 at a fee of $0.8 million per year. The agreement commenced on February 1, 2009 and is set to expire on January 30, 2016. 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 2010, 2011 and 2012 and is expected to be $0.2 million for fiscal year 2013.