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. As described in our prior Quarterly Report on Form 10-Q, the parties entered into a settlement agreement on April 19, 2013. On September 13, 2013, the Court issued an Order and Judgement granting, among other things, final approval of a class action settlement which was paid in 2013. The settlement amount had been previously recorded by the Company.

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. On July 25, 2013, upon the motion of the Company, the said U.S. District Court issued a Memorandum Opinion and Order dismissing the First Amended Class Action Complaint in its entirety, with prejudice. Camasta has appealed the dismissal to the United States Court of Appreals for the Seventh Circuit.

On July 30, 2013, Matthew B. Johnson, et al., on behalf of themselves and all Ohio residents similarly situated (the “Johnson Plaintiffs”), filed a putative class action complaint (the “Original Johnson Complaint”) against the Company in the U.S. District Court for the Southern District of Ohio, Eastern District (Case No. 2:13-cv-756). The Original Johnson Complaint alleges, among other things, deceptive sales and marketing practices by the Company relating to its use of the words “free” and “regular price.” The Original Johnson Complaint seeks, among other relief, class certification, compensatory damages, declaratory relief, injunctive relief and costs and disbursements (including attorneys’ fees). On January 8, 2014, upon the motion of the Company, the U.S. District Court issued an Opinion and Order dismissing the Original Johnson Complaint in its entirety, without prejudice. On January 31, 2014, the Johnson Plaintiffs filed a First Amended Class Action Complaint in the U.S. District Court making substantially the same allegations as the Original Johnson Complaint. On February 21, 2014, the Company filed a motion to dismiss. The Company believes the claims are without merit and intends to defend against them vigorously. (The law firm which filed the original Johnson Complaint and amended complaint on behalf of the plaintiffs is one of the law firms which filed the "Schneider Complaint," which is discussed in our Quarterly Report on Form 10-Q for the quarterly period ended May 4, 2013. On July 24, 2013, the Schneider Complaint was voluntarily dismissed by the plaintiffs from the United States District Court for the Northern District of Ohio. Approximately one week later, the substantially similar Johnson Complaint was filed in United States District Court for the Southern District of Ohio.)

On January 29, 2014, State-Boston Retirement System (“Boston”), a purported Company stockholder, filed a purported class action complaint against the Company’s directors (the “Boston Defendants”) in the Delaware Court of Chancery, captioned State-Boston Retirement System v. Wildrick, et al., C.A. No. 9291. In its complaint, Boston asks the court to: (i) certify a purported class action lawsuit, designating Boston and Boston’s counsel as representatives of the purported class; (ii) declare that the Boston Defendants breached their fiduciary duties of loyalty and care to the Company; (iii) enjoin the Boston Defendants from committing any further purported fiduciary duty breaches; (iv) enjoin the effectuation of the Company’s Rights Agreement, forcing the Board to redeem or invalidate the Rights Agreement; (v) enjoin the Boston Defendants from entering into any agreement on behalf of the Company to acquire another company or material assets; (vi) award Boston costs, expenses and disbursements of the Boston litigation, including attorneys’ and experts’ fees and, if applicable, pre-judgment and post-judgment interest; and (v) award Boston and the purported class such other relief as the court deems just, equitable, and proper.

On March 4, 2014, Boston filed a motion for leave to file a second amended complaint that purports to raise direct claims against the Boston Defendants (the “Amended Boston Complaint”). In addition to the allegations described above, the Amended Boston Complaint, among other things, alleges that the Boston Defendants breached their fiduciary duties by moving forward with the Everest Transactions while failing to give good-faith consideration of a revised offer from Java to acquire all outstanding Shares at a price of $63.50 per share. In addition to the requests mentioned above, the Amended Boston Complaint asks the court to (i) determine that the action is a proper derivative action and to excuse demand, and (ii) enjoin the Company from consummating the Everest Transactions. On March 11, 2014, the Company, Men's Wearhouse and Java entered into the Merger Agreement and the Company terminated the Everest Purchase Agreement. The Company believes the claims are without merit and intends to defend against them 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.

Except as otherwise set forth above, 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 2014, with aggregated base compensation of $2.9 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. As a result of the Merger Agreement with Men's Wearhouse, the Company has expected cash commitments related to retention bonuses of approximately $7.0 million, which are not contingent upon the deal closing, and other employee severance agreements of approximately $8.8 million, which are contingent upon the deal closing and other factors. 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 $7.8 million in fiscal year 2011, $2.1 million in fiscal year 2012 and $1.7 million in fiscal year 2013.

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 2013, were as follows:



Fiscal Year Ending	Amount
	(In thousands)
Fiscal year 2014	$	78,585
Fiscal year 2015	71,928
Fiscal year 2016	63,998
Fiscal year 2017	55,569
Fiscal year 2018	46,510
Thereafter	120,495
Total	$	437,085

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 $62.8 million, $68.0 million and $74.9 million for fiscal years 2011, 2012 and 2013, respectively. Contingent rent expense in fiscal years 2011, 2012 and 2013, which was based on a percentage of net sales at the applicable properties, was approximately $3.6 million, $4.0 million and $3.0 million, respectively.

As of fiscal year-end 2013, 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 $0.8 million in fiscal year 2014, $1.0 million in each of fiscal years 2015, 2016, 2017 and 2018, and $5.0 million thereafter.

On January 2, 2014, the Company entered into agreements with the owner of one of our leased distribution center properties. The agreements, commencing in the first quarter of fiscal year 2014, are summarized as follows:

Lease agreement - 15-year real estate lease for a significant portion of the warehouse and office space in the lessor's real estate complex at a fixed annual base rent of approximately $1.6 million, plus other leasing costs estimated at approximately $0.5 million in the first lease year and escalating thereafter. The agreement includes three options to renew the lease with predetermined base rent increases. Transfer of ownership or control of the real estate complex to a third party will result in a reduction of approximately $0.6 million in annual base rent.

Option to purchase real estate - a purchase option agreement to purchase the real estate complex for an amount based primarily on the payoff balance of the owner’s mortgage, plus a profit to the owner. The agreement grants us the right of first refusal to purchase the property at the price of the third-party offer or to exercise the purchase option. The purchase option agreement also allows for the separate purchase of a parcel of land to be subdivided in the future.

Cash sharing agreement - as a condition of the lease agreement, the lessor agrees to pay us up to approximately $0.6 million per year based on a portion of its annual net operating income, if any. The cash sharing payments are payable quarterly. As part of the cash sharing agreement, the Company will have the right to approve the lessor’s annual budget (which approval shall not be unreasonably withheld, delayed or conditioned) and the lessor has agreed to modify their budget to reflect any reasonable changes requested by the Company.

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 2013 were sourced from United States suppliers, and approximately 99% were sourced from suppliers in other countries. In fiscal year 2013, approximately 28% of the total product purchases were from suppliers in Mexico, 23% in China (including Hong Kong), 11% in India, 8% in Malaysia, and 7% in Bangladesh. During fiscal year 2013, two buying agents sourced, respectively, approximately 52% and 6% of our total product purchases. No other country represented more than 5% of total product purchases in fiscal year 2013. 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 70% of the raw materials purchased directly by us in fiscal year 2013. 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 (also see Note 13). 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 2011, 2012 and 2013 and is expected to be $0.2 million for fiscal year 2014.