UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 28, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-13057
RALPH LAUREN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
650 Madison Avenue, New York, New York
(Address of principal executive offices)
13-2622036
(I.R.S. Employer Identification No.)
10022
(Zip Code)
(212) 318-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock, $.01 par value
Trading Symbol(s)
RL
Name of Each Exchange on which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
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Accelerated filer
Smaller reporting company
Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the registrant's voting common stock held by non-affiliates of the registrant was $4,649,512,283 as of September 27, 2019, the last
business day of the registrant's most recently completed second fiscal quarter based on the closing price of the common stock on the New York Stock Exchange.
At May 22, 2020, 47,777,235 shares of the registrant's Class A common stock, $.01 par value and 24,881,276 shares of the registrant's Class B common stock, $.01 par
value were outstanding.
Part III incorporates by reference information from certain portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days after the fiscal year ended March 28, 2020.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Various statements in this Form 10-K or incorporated by reference into this Form 10-K, in future filings by us with the Securities and Exchange
Commission (the "SEC"), in our press releases, and in oral statements made from time to time by us or on our behalf constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements
regarding our future operating results and sources of liquidity (especially in light of the COVID 19 pandemic), the impact of our strategic plans, initiatives
and capital expenses, and our ability to meet environmental, social, and governance goals. Forward looking statements are based on current expectations
and are indicated by words or phrases such as "anticipate," "outlook," "estimate," "expect," "project," "believe," "envision," "goal," "target," "can," "will,"
and similar words or phrases and involve known and unknown risks, uncertainties, and other factors which may cause actual results, performance, or
achievements to be materially different from the future results, performance, or achievements expressed in or implied by such forward-looking statements.
These risks, uncertainties, and other factors include, among others:
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the loss of key personnel, including Mr. Ralph Lauren, or other changes in our executive and senior management team or to our operating
structure, and our ability to effectively transfer knowledge during periods of transition;
the impact to our business resulting from the COVID-19 pandemic, including the temporary closure of our stores, distribution centers, and
corporate facilities, as well as those of our wholesale customers, licensing partners, suppliers, and vendors, and potential changes to consumer
behavior, spending levels, and/or shopping preferences, such as their willingness to congregate in shopping centers or other populated
locations;
our ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments;
our ability to maintain adequate levels of liquidity to provide for our cash needs, including our debt obligations, tax obligations, payment of
dividends, capital expenditures, and potential repurchases of our Class A common stock, as well as the ability of our customers, suppliers,
vendors, and lenders to access sources of liquidity to provide for their own cash needs;
the impact to our business resulting from changes in consumers' ability, willingness, or preferences to purchase discretionary items and luxury
retail products, which tends to decline during recessionary periods, and our ability to accurately forecast consumer demand, the failure of
which could result in either a build-up or shortage of inventory;
the impact of economic, political, and other conditions on us, our customers, suppliers, vendors, and lenders, including business disruptions
related to pandemic diseases such as COVID-19 and political unrest such as the recent protests in Hong Kong;
the potential impact to our business resulting from the financial difficulties of certain of our large wholesale customers, which may result in
consolidations, liquidations, restructurings, and other ownership changes in the retail industry, as well as other changes in the competitive
marketplace, including the introduction of new products or pricing changes by our competitors;
our ability to successfully implement our long-term growth strategy;
our ability to continue to expand and grow our business internationally and the impact of related changes in our customer, channel, and
geographic sales mix as a result, as well as our ability to accelerate growth in certain product categories;
our ability to open new retail stores and concession shops, as well as enhance and expand our digital footprint and capabilities, all in an effort
to expand our direct-to-consumer presence;
our ability to respond to constantly changing fashion and retail trends and consumer demands in a timely manner, develop products that
resonate with our existing customers and attract new customers, and execute marketing and advertising programs that appeal to consumers;
our ability to effectively manage inventory levels and the increasing pressure on our margins in a highly promotional retail environment;
our ability to continue to maintain our brand image and reputation and protect our trademarks;
our ability to competitively price our products and create an acceptable value proposition for consumers;
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a variety of legal, regulatory, tax, political, and economic risks, including risks related to the importation and exportation of products which
our operations are currently subject to, or may become subject to as a result of potential changes in legislation, and other risks associated with
our international operations, such as compliance with the Foreign Corrupt Practices Act or violations of other anti-bribery and corruption laws
prohibiting improper payments, and the burdens of complying with a variety of foreign laws and regulations, including tax laws, trade and
labor restrictions, and related laws that may reduce the flexibility of our business;
the potential impact to our business resulting from the imposition of additional duties, tariffs, taxes, and other charges or barriers to trade,
including those resulting from current trade developments with China and the related impact to global stock markets, as well as our ability to
implement mitigating sourcing strategies;
the impact to our business resulting from the United Kingdom's exit from the European Union and the uncertainty surrounding its future
relationship with the European Union, including trade agreements, as well as the related impact to global stock markets and currency
exchange rates;
the impact to our business resulting from increases in the costs of raw materials, transportation, and labor, including wages, healthcare, and
other benefit-related costs;
our ability to secure our facilities and systems and those of our third-party service providers from, among other things, cybersecurity breaches,
acts of vandalism, computer viruses, or similar Internet or email events;
our efforts to successfully enhance, upgrade, and/or transition our global information technology systems and digital commerce platforms;
the potential impact to our business if any of our distribution centers were to become inoperable or inaccessible;
the potential impact on our operations and on our suppliers and customers resulting from man-made or natural disasters, including pandemic
diseases such as COVID-19, severe weather, geological events, and other catastrophic events;
changes in our tax obligations and effective tax rate due to a variety of other factors, including potential changes in U.S. or foreign tax laws
and regulations, accounting rules, or the mix and level of earnings by jurisdiction in future periods that are not currently known or anticipated;
our exposure to currency exchange rate fluctuations from both a transactional and translational perspective;
the impact to our business resulting from potential costs and obligations related to the early or temporary closure of our stores or termination
of our long-term, non-cancellable leases;
our ability to achieve anticipated operating enhancements and cost reductions from our restructuring plans, as well as the impact to our
business resulting from restructuring-related charges, which may be dilutive to our earnings in the short term;
the impact to our business of events of unrest and instability that are currently taking place in certain parts of the world, as well as from any
terrorist action, retaliation, and the threat of further action or retaliation;
the potential impact to the trading prices of our securities if our Class A common stock share repurchase activity and/or cash dividend
payments differ from investors' expectations;
our ability to maintain our credit profile and ratings within the financial community;
our intention to introduce new products or brands, or enter into or renew alliances;
changes in the business of, and our relationships with, major wholesale customers and licensing partners;
our ability to achieve our goals regarding environmental, social, and governance practices; and
our ability to make certain strategic acquisitions and successfully integrate the acquired businesses into our existing operations.
These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many
of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to
differ materially from our expectations is described in Part I of this Form 10-K
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under the heading of "Risk Factors." We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
WEBSITE ACCESS TO COMPANY REPORTS AND OTHER INFORMATION
Our investor website is http://investor.ralphlauren.com. We were incorporated in June 1997 under the laws of the State of Delaware. Our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the
SEC pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, are available free of charge at our investor website under the
caption "SEC Filings" promptly after we electronically file such materials with or furnish such materials to the SEC. All such filings are also available on
the SEC's website at https://www.sec.gov. Information relating to corporate governance at Ralph Lauren Corporation, including our Corporate Governance
Policies, our Code of Business Conduct and Ethics for all directors, officers, and employees, our Code of Ethics for Principal Executive Officers and Senior
Financial Officers, and information concerning our directors, Committees of the Board of Directors, including Committee charters, and transactions
involving Ralph Lauren Corporation securities by directors and executive officers, are available at our website under the captions "Corporate Governance"
and "SEC Filings." Paper copies of these filings and corporate governance documents are available to stockholders without charge by written request to
Investor Relations, Ralph Lauren Corporation, 650 Madison Avenue, New York, New York 10022.
In this Form 10-K, references to "Ralph Lauren," "ourselves," "we," "our," "us," and the "Company" refer to Ralph Lauren Corporation and its
subsidiaries, unless the context indicates otherwise. Due to the collaborative and ongoing nature of our relationships with our licensees, such licensees are
sometimes referred to in this Form 10-K as "licensing alliances." Our fiscal year ends on the Saturday closest to March 31. All references to "Fiscal 2021"
represent the 52-week fiscal year ending March 27, 2021. All references to "Fiscal 2020" represent the 52-week fiscal year ended March 28, 2020. All
references to "Fiscal 2019" represent the 52-week fiscal year ended March 30, 2019. All references to "Fiscal 2018" represent the 52-week fiscal year
ended March 31, 2018.
Item 1.
Business.
PART I
General
Founded in 1967 by Mr. Ralph Lauren, we are a global leader in the design, marketing, and distribution of premium lifestyle products, including
apparel, footwear, accessories, home furnishings, fragrances and hospitality. Our long-standing reputation and distinctive image have been developed
across an expanding number of products, brands, sales channels, and international markets. We believe that our global reach, breadth of product offerings,
and multi-channel distribution are unique among luxury and apparel companies.
We diversify our business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail, wholesale, and
licensing). This allows us to maintain a dynamic balance as our operating results do not depend solely on the performance of any single geographic area or
channel of distribution. We sell directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-
shops, and digital commerce operations around the world. Our wholesale sales are made principally to major department stores, specialty stores, and third-
party digital partners around the world, as well as to certain third-party-owned stores to which we have licensed the right to operate in defined geographic
territories using our trademarks. In addition, we license to third parties for specified periods the right to access our various trademarks in connection with
the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.
We organize our business into the following three reportable segments: North America, Europe, and Asia. In addition to these reportable segments,
we also have other non-reportable segments. See "Our Segments" for further discussion of our segment reporting structure.
Our global reach is extensive, as we sell directly to customers throughout the world via our 530 retail stores and 654 concession-based shop-within-
shops, as well as through our own digital commerce sites and those of various third-party digital partners. Merchandise is also available through our
wholesale distribution channels at over 11,000 doors worldwide, the majority in specialty stores, as well as through the digital commerce sites of many of
our wholesale customers. In addition to our directly-operated stores and shops, our international licensing partners operate 80 Ralph Lauren stores, 31
Ralph Lauren concession shops, and 139 Club Monaco stores and shops.
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We continue to invest in our business to stimulate growth. Over the past five fiscal years, we have invested approximately $1.331 billion for capital
improvements, primarily funded through strong operating cash flow. We also have continued to return value to our shareholders through our common stock
share repurchases and payment of quarterly cash dividends. Over the past five fiscal years, the cost of shares of Class A common stock repurchased
pursuant to our common stock repurchase program was approximately $1.800 billion and dividends paid amounted to approximately $892 million.
We have been controlled by the Lauren family since the founding of our Company. As of March 28, 2020, Mr. R. Lauren, or entities controlled by
the Lauren family, held approximately 84% of the voting power of the Company's outstanding common stock.
Objectives and Opportunities
We believe that our size and the global scope of our operations provide us with design, sourcing, and distribution synergies across our different
businesses. Our core strengths include a portfolio of global premium lifestyle brands, a well-diversified global multi-channel distribution network, an
investment philosophy supported by a strong balance sheet, and an experienced management team. Despite the various risks and uncertainties associated
with the current global economic environment, as discussed further in Item 7 — "Management's Discussion and Analysis of Financial Condition and
Results of Operations — Global Economic Conditions and Industry Trends," we believe our core strengths will allow us to execute our long-term growth
strategy.
An overview of our long-term growth strategy is presented below:
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Global Citizenship and Sustainability
Global citizenship and sustainability at Ralph Lauren Corporation is rooted in the heritage of our brand and our purpose to inspire the dream of a
better life through authenticity and timeless style. We believe that delivering the next 50 years for Ralph Lauren means rethinking our impact on the
environment and society and utilizing creativity, the power of design, and innovative technologies to drive meaningful change.
Although we are at the beginning of this journey, the values and purpose that have defined our business for half a century underline the authenticity
of our commitment for our next 50 years. We call our plan "Design the Change," which is guided by the following three pillars:
1. Create Timeless Style
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Sustainable Product Design — We commit to designing more sustainable products and experiences by sourcing responsibly, manufacturing
efficiently, and investing in innovation that advances these efforts.
Sourcing & Traceability — We are committed to sourcing responsibly, securing a long-term, sustainable supply for key raw materials, as well
as implementing a supplier engagement strategy that drives transparency, efficiency and partnerships that advance our work to deliver positive
social and environmental impacts across our value chain.
Chemical Management — We commit to monitor and reduce hazardous chemical use and discharge, ultimately eliminating all hazardous
chemicals from the production of our products.
2. Protect the Environment
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Carbon and Energy — We commit to address the issue of global climate change and the contributing impacts of our business by reducing
greenhouse gas emissions across our value chain.
• Waste Management — We commit to integrating zero waste principles across our business with an aim to divert waste from landfill through
increasing recycling and upcycling, reducing waste at its source, and implementing other best practices.
• Water Stewardship — We commit to reducing water consumption across our value chain, and to safeguarding and preserving water resources
in the communities where we operate.
3. Champion Better Lives
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Diversity and Inclusion — We are committed to advancing an inclusive environment where everyone has a sense of belonging throughout our
value chain.
Health, Safety & Working Conditions — We aim to enrich the quality of work and life for all workers in our value chain by ensuring that
everyone has the opportunity to reach their full potential in a safe and comfortable work environment.
Community Engagement & Philanthropy — We commit to meaningfully engaging our communities through our work across cancer care as
well as our global employee volunteerism program.
Additional information relating to Design the Change can be found in our annual sustainability report, which is available at our website at
http://investor.ralphlauren.com under the caption "Global Citizenship & Sustainability Report." The content of our sustainability reports are not
incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC.
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COVID-19 Pandemic
Recent Developments
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all
major geographies in which we operate (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as
significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as
temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have
resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty,
companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work
furloughs and reduced pay, which could lower consumers’ disposable income levels or willingness to purchase discretionary items. Further, even after such
government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as their willingness to
congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores,
distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors. For example, a significant number
of our stores in parts of Asia were closed for a substantial portion of our fourth quarter of Fiscal 2020. Although our stores in Asia were largely reopened
by the end of our Fiscal 2020, certain countries, including Japan, began imposing new restrictions during our first quarter of Fiscal 2021. Retail traffic also
continues to be challenging in those regions in which our stores are open. Additionally, our stores in North America and the majority in Europe closed mid-
March or earlier, and although certain stores have since reopened, a large number remain closed and we are uncertain when they will reopen. Our wholesale
business has also been adversely affected, particularly in North America and Europe, as a result of department store closures and lower traffic and
consumer demand.
In response to the COVID-19 pandemic, we have taken preemptive actions to preserve cash and strengthen our liquidity, including:
drawing down $475 million from our Global Credit Facility to bolster cash balances;
entering into a new credit facility with the same lenders that are parties to the Global Credit Facility, which provides for an additional $500 million
senior unsecured revolving line of credit that matures on May 25, 2021, or earlier in the event we are able to obtain other additional financing, as
described in Note 11 to the accompanying consolidated financial statements;
temporarily suspending our common stock repurchase program and our quarterly cash dividend;
temporarily reducing the base compensation of our executives and senior management team, as well as our Board of Directors;
carefully managing our expense structure across all key areas of spend, including aligning inventory levels with anticipated demand and
postponing non-critical capital build-out and other investments and activities; and
temporarily furloughing or reducing work hours for a significant portion of our employees who nevertheless remain eligible for employee benefits
during such period.
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The COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis. Accordingly, we cannot predict for how long and to what
extent this crisis will impact our business operations or the global economy as a whole. We will continue to assess our operations location-by-location,
taking into account the guidance of local governments and global health organizations to determine when our operations can begin returning to normal
course of business. See Item 1A — "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse
effect on our business" for additional discussion regarding risks to our business associated with the COVID-19 pandemic.
Swiss Tax Reform
In May 2019, a public referendum was held in Switzerland that approved the Federal Act on Tax Reform and AHV Financing (the "Swiss Tax Act"),
which became effective January 1, 2020. The Swiss Tax Act eliminates certain preferential tax items at both the federal and cantonal levels for
multinational companies and provides the cantons with parameters for establishing local tax rates and regulations. The Swiss Tax Act also provides
transitional provisions, one of which allows eligible companies to
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increase the tax basis of certain assets based on the value generated by their business in previous years, and to amortize such adjustment as a tax deduction
over a transitional period. In connection with this transitional provision, we recorded a one-time income tax benefit and corresponding deferred tax asset of
$122.9 million during Fiscal 2020, which decreased our effective tax rate by 3,760 basis points.
See Note 10 to the accompanying consolidated financial statements for additional discussion regarding the Swiss Tax Act.
Fiscal 2019 Restructuring Plan
On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive
sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i)
rightsizing and consolidation of our global distribution network and corporate offices; (ii) targeted severance-related actions; and (iii) closure of certain of
our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan are expected to result in gross annualized expense savings of
approximately $60 million to $80 million.
In connection with the Fiscal 2019 Restructuring Plan, we have recorded cumulative charges of $145.8 million since its inception, of which $48.5
million and $97.3 million were recorded during Fiscal 2020 and Fiscal 2019, respectively. Actions associated with the Fiscal 2019 Restructuring Plan are
complete and no additional charges are expected to be incurred in connection with this plan.
See Note 9 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal
2019 Restructuring Plan.
Our Brands and Products
Our products, which include apparel, footwear, accessories, and fragrance collections for men and women, as well as childrenswear and home
furnishings, together with our hospitality portfolio, comprise one of the most widely recognized families of consumer brands. Reflecting a distinctive
American perspective, we have been an innovator in aspirational lifestyle branding and believe that, under the direction of internationally renowned
designer Mr. Ralph Lauren, we have had a considerable influence on the way people dress and the way that fashion is advertised throughout the world.
We combine consumer insight with our design, marketing, and imaging skills to offer, along with our licensing alliances, broad lifestyle product
collections with a unified vision:
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Apparel — Our apparel products include extensive collections of men's, women's, and children's clothing, which are sold under various brand
names, including Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Golf
Ralph Lauren, Ralph Lauren Golf, RLX Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others;
Footwear and Accessories — Our range of footwear and accessories encompasses men's, women's, and children's, including casual shoes,
dress shoes, boots, sneakers, sandals, eyewear, watches, fashion and fine jewelry, scarves, hats, gloves, umbrellas, and leather goods,
including handbags, luggage, small leather goods, and belts, which are sold under the Ralph Lauren Collection, Ralph Lauren Purple Label,
Double RL, Polo Ralph Lauren, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco brands;
Fragrance — Our fragrance offerings capture the essence of Ralph Lauren's men's and women's brands with numerous labels, designed to
appeal to a variety of audiences. Women's fragrance products are sold under our Ralph Lauren Collection, Woman by Ralph Lauren, Romance
Collection, Ralph Collection, and Big Pony Women's brands. Men's fragrance products are sold under our Polo Blue, Safari, Purple Label,
Polo Red, Polo Green, Polo Black, Polo Supreme, Polo Sport, and Big Pony Men's brands;
Home — Our coordinated home products include bedding and bath products, furniture, fabric and wallpaper, lighting, tabletop,
floorcoverings, and giftware; and
Hospitality — Continuing to engage our consumers with experiential and unique expressions of the brand, our hospitality portfolio is a natural
extension of the World of Ralph Lauren as expressed through the culinary arts. Ralph Lauren's global hospitality collection is comprised of
our restaurants including The Polo Bar in New York City, RL
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Restaurant located in Chicago, Ralph's located in Paris, and our Ralph's Coffee concept in various cities around the world.
Our lifestyle brand image is reinforced by our distribution through our stores and concession-based shop-within-shops, our wholesale channels of
distribution, our global digital commerce sites, and our Ralph Lauren restaurants. We sell our products under the following key brand platforms:
1. Ralph Lauren Luxury — Our Luxury group includes:
Ralph Lauren Collection and Ralph Lauren Purple Label. Ralph Lauren Collection embodies the highest expression of chic, feminine
glamour. Each piece is inspired by a vision of timeless luxury and modern elegance, and is crafted with unparalleled passion and artistry. For men,
Ralph Lauren Purple Label is the ultimate expression of luxury for the modern gentleman. Refined suitings are hand-tailored, including custom
made-to-measure suits crafted in the time-honored traditions of Savile Row. Purple Label's sophisticated sportswear is designed with a meticulous
attention to detail, capturing the elegance and ease of Ralph Lauren's signature, timeless style. Ralph Lauren Collection and Ralph Lauren Purple
Label are available in Ralph Lauren stores around the world, an exclusive selection of the finest specialty stores, and online at our Ralph Lauren
digital commerce sites, including RalphLauren.com.
Double RL. Founded in 1993 and named after Ralph Lauren's working cattle ranch in Colorado, Double RL is a tribute to America's
pioneering spirit and tradition of rugged independence. The foundation of Double RL lies in timeless wardrobe staples, including authentic
American made selvedge denim, military-grade chinos, tube-knit t-shirts, thermals, and flannels. Beyond these iconic styles are added seasonal
vintage-inspired collections, along with a full collection of footwear and accessories, including quality belts, bags, and leather goods. Double RL is
available at Double RL stores, at select Ralph Lauren stores, and an exclusive selection of the finest specialty stores around the world, as well as
online at our Ralph Lauren digital commerce sites, including RalphLauren.com.
Ralph Lauren Home. Ralph Lauren Home represents a full expression of modern luxury — style is a life well-lived. Based on an immersive
design ethos, the collection includes furniture, lighting, bed and bath linens, tabletop, decorative accessories and gifts, as well as fabric,
wallcoverings, and floorcoverings. Each piece is crafted with the greatest attention to detail. Ralph Lauren Home offers exclusive luxury goods at
select Ralph Lauren stores, home specialty stores, trade showrooms, and online at our Ralph Lauren digital commerce sites, including
RalphLauren.com. The complete world of Ralph Lauren Home can be explored online at RalphLaurenHome.com.
Ralph Lauren Watches and Fine Jewelry. We offer a premier collection of timepieces, which embody Ralph Lauren's passion for impeccable
quality and exquisite design. We also offer premium collections of fine jewelry, which capture the glamour and craftsmanship of Ralph Lauren's
most luxurious designs. Ralph Lauren watches and fine jewelry are available at select Ralph Lauren stores and flagship locations around the world.
A selection of watches is also available online at RalphLauren.com and the finest watch retailers.
2. Polo Ralph Lauren — The Polo Ralph Lauren group includes:
Polo Ralph Lauren. Men's Polo combines Ivy League classics and time-honored English haberdashery with downtown styles and all-
American sporting looks in sportswear and tailored clothing. Women's Polo represents the epitome of classic and iconic American style with a
modern and cool twist. Polo's signature aesthetic includes our renowned polo player logo. Men's and Women's Polo apparel, footwear, and
accessories are available in Polo and Ralph Lauren stores around the world, better department and specialty stores, and online at our Ralph Lauren
digital commerce sites, including RalphLauren.com.
Polo Ralph Lauren Children. Polo Ralph Lauren Children is designed to reflect the timeless heritage and modern spirit of Ralph Lauren's
collections for men and women. Signature classics include iconic polo knit shirts and luxurious cashmere cable-knit sweaters. Polo Ralph Lauren
Children is available in a full range of sizes, from baby to girls 2-16 and boys 2-20. Polo Ralph Lauren Children can be found in select Polo and
Ralph Lauren stores around the world, better department stores, and online at our Ralph Lauren digital commerce sites, including RalphLauren.com,
as well as certain of our retailer partner digital commerce sites.
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Polo Golf Ralph Lauren, Ralph Lauren Golf, and RLX Ralph Lauren. Tested and worn by top-ranked professional golfers, Polo Golf Ralph
Lauren, Ralph Lauren Golf, and RLX Ralph Lauren for men and women define excellence in the world of golf. With a sharpened focus on the needs
of the modern player but rooted in the rich design tradition of Ralph Lauren, the Golf collections combine state-of-the-art performance wear with
luxurious finishing touches. Our Golf collections are available in select Polo stores, exclusive private clubs and resorts, and online at
RalphLauren.com.
Pink Pony. Established in 2000, the Pink Pony campaign is our worldwide initiative in the fight against cancer. In the U.S., a percentage of
sales from Pink Pony products benefit the Pink Pony Fund of the Ralph Lauren Corporate Foundation (formerly known as the Polo Ralph Lauren
Foundation), which supports programs for early diagnosis, education, treatment, and research, and is dedicated to bringing patient navigation and
quality cancer care to medically underserved communities. Internationally, a network of local cancer charities around the world benefit from the sale
of Pink Pony products. Pink Pony consists of dual gender sportswear and accessories. Pink Pony items feature our iconic pink polo player – a
symbol of our commitment to the fight against cancer. Pink Pony is available at select Polo and Ralph Lauren stores and online at our Ralph Lauren
digital commerce sites, including RalphLauren.com. Pink Pony is also available at select Macy's stores and online at Macys.com.
3. Lauren Ralph Lauren — Our Lauren group includes:
Lauren Ralph Lauren. Lauren for women combines timeless style with modern femininity in a lifestyle collection of sportswear, denim, and
dresses, as well as footwear and accessories at a more accessible price point. Lauren for women is available in select department stores around the
world and online at select digital commerce sites, including RalphLauren.com. Lauren for men offers a complete collection of men's tailored
clothing, including suits, sport coats, dress shirts, dress pants, tuxedos, topcoats, and ties at a more accessible price point. Lauren for men is available
at select department stores in North America and Europe.
Lauren Home. Launched in 2017, the Lauren Home collection includes accessibly-priced, timeless bath and bedding designs, updated with a
fresh, modern spirit. The collection is built upon an assortment of essentials that is designed to be periodically augmented with trend-relevant colors
and patterns.
4. Chaps — Launched in 1978, Chaps celebrates real American style, delivering classic collections updated for modern lifestyles for men, women,
children and home. The modern lifestyle collection offers versatile sportswear, workday essentials, tailored clothing, and occasion dresses that are
wearable from season to season. Chaps is available in select department stores and retail partner digital commerce sites across the U.S., Canada,
Mexico, and China.
5. Club Monaco — Founded in 1985, Club Monaco is a modern, urban-minded brand with an element of ease and a spark of entrepreneurship. The
brand prides itself on creating elevated essentials recognized for their style, design, fit, and functionality with a relaxed, of-the-moment sensibility.
Club Monaco apparel, footwear, and accessories are available at Club Monaco stores and select department stores in North America and around the
world, as well as online at ClubMonaco.com and ClubMonaco.ca.
9
We organize our business into the following three reportable segments:
Our Segments
•
•
•
North America — Our North America segment, representing approximately 51% of our Fiscal 2020 net revenues, primarily consists of sales
of our Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through our retail and wholesale
businesses in the U.S. and Canada, excluding Club Monaco. In North America, our retail business is primarily comprised of our Ralph Lauren
stores, our factory stores, and our digital commerce site, www.RalphLauren.com. Our wholesale business in North America is comprised
primarily of sales to department stores, and to a lesser extent, specialty stores.
Europe — Our Europe segment, representing approximately 26% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph
Lauren branded apparel, footwear, accessories, home furnishings, and related products made through our retail and wholesale businesses in
Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, our retail business is primarily comprised of our Ralph
Lauren stores, our factory stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in
Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various
third-party digital partners.
Asia — Our Asia segment, representing approximately 17% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph Lauren
branded apparel, footwear, accessories, home furnishings, and related products made through our retail and wholesale businesses in Asia,
Australia, and New Zealand. Our retail business in Asia is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-
based shop-within-shops, and our digital commerce site, www.RalphLauren.cn, which launched in September 2018. In addition, we sell our
products online through various third-party digital partner commerce sites. In Asia, our wholesale business is comprised primarily of sales to
department stores, with related products distributed through shop-within-shops.
No operating segments were aggregated to form our reportable segments. In addition to these reportable segments, we also have other non-reportable
segments, representing approximately 6% of our Fiscal 2020 net revenues, which primarily consist of (i) sales of Club Monaco branded products made
through our retail and wholesale businesses in the U.S., Canada, and Europe, and our licensing alliances in Europe and Asia, and (ii) royalty revenues
earned through our global licensing alliances, excluding Club Monaco.
This segment structure is consistent with how we establish our overall business strategy, allocate resources, and assess performance of our Company.
Effective beginning in the first quarter of Fiscal 2020, operating results related to our business in Latin America are included within our Europe
segment due to a change in how we manage this business. Previously, such results were included within our other non-reportable segments. All prior period
segment information has been recast to reflect this change on a comparative basis.
Approximately 46% of our Fiscal 2020 net revenues were earned outside of the U.S. See Note 20 to the accompanying consolidated financial
statements for a summary of net revenues and operating income by segment, as well as net revenues and long-lived assets by geographic location.
Our Retail Business
Our retail business sells directly to customers throughout the world via our 530 retail stores and 654 concession-based shop-within-shops, totaling
approximately 4.1 million and 0.7 million square feet, respectively, as well as through our own digital commerce sites and those of various third-party
digital partners. We operate our business using a global omni-channel retailing strategy that seeks to deliver an integrated shopping experience with a
consistent message of our brands and products to our customers, regardless of whether they are shopping for our products in physical stores or online.
Ralph Lauren Stores
Our Ralph Lauren stores feature a broad range of apparel, footwear, accessories, watch and jewelry, fragrance, and home product assortments in an
atmosphere reflecting the distinctive attitude and image of the Ralph Lauren, Polo, and Double RL brands, including exclusive merchandise that is not sold
in department stores. During Fiscal 2020, we opened 23 new Ralph Lauren
10
stores and closed six stores. Our Ralph Lauren stores are primarily situated in major upscale street locations and upscale regional malls, generally in large
urban markets.
The following table presents the number of Ralph Lauren stores by segment as of March 28, 2020:
North America
Europe
Asia
Total
Ralph Lauren Stores
41
30
67
138
Our nine flagship Ralph Lauren regional store locations showcase our iconic styles and products and demonstrate our most refined merchandising
techniques. In addition to generating sales of our products, our worldwide Ralph Lauren stores establish, reinforce, and capitalize on the image of our
brands. Our Ralph Lauren stores range in size from approximately 600 to 37,900 square feet.
Factory Stores
We extend our reach to additional consumer groups through our 318 factory stores worldwide, which are principally located in major outlet centers.
Our worldwide factory stores offer selections of our apparel, footwear, accessories, and fragrances. In addition to these product offerings, certain of our
factory stores in North America and Europe offer home furnishings. During Fiscal 2020, we opened 24 new factory stores and closed 11 factory stores.
The following table presents the number of factory stores by segment as of March 28, 2020:
North America
Europe
Asia
Total
Factory Stores
189
64
65
318
Our factory stores range in size from approximately 1,100 to 28,300 square feet. Factory stores obtain products from our suppliers, our product
licensing partners, and our other retail stores and digital commerce operations, and also serve as a secondary distribution channel for our excess and out-of-
season products.
Concession-based Shop-within-Shops
The terms of trade for shop-within-shops are largely conducted on a concession basis, whereby inventory continues to be owned by us (not the
department store) until ultimate sale to the end consumer. The salespeople involved in the sales transactions are generally our employees and not those of
the department store.
The following table presents the number of concession-based shop-within-shops by segment as of March 28, 2020:
North America
Europe
Asia
Other non-reportable segments
Total(a)
Concession-based
Shop-within-Shops
2
29
619
4
654
(a) Our concession-based shop-within-shops were located at approximately 300 retail locations.
The size of our concession-based shop-within-shops ranges from approximately 100 to 3,500 square feet. We may share in the cost of building out
certain of these shop-within-shops with our department store partners.
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Club Monaco Stores
Our Club Monaco stores feature fashion apparel, footwear, and accessories for both men and women with clean and contemporary signature styles.
During Fiscal 2020, we opened one new Club Monaco store and closed two stores. Our Club Monaco stores range in size from approximately 1,500 to
17,400 square feet.
The following table presents the number of Club Monaco stores by geographic location as of March 28, 2020:
North America
Europe
Total(a)
Club Monaco Stores
70
4
74
(a) Our Club Monaco business has been aggregated with other non-reportable segments.
Directly-Operated Digital Commerce Websites
In addition to our stores, our retail business sells products online in North America and Europe through our various directly-operated digital
commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others, as well as through our Polo mobile app in North
America and the United Kingdom. In Asia, we sell products online through our directly-operated digital commerce site, www.RalphLauren.cn, which
launched in September 2018, as well as through various third-party digital partner commerce sites.
Our Ralph Lauren digital commerce sites offer our customers access to a broad array of Ralph Lauren, Polo, and Double RL apparel, footwear,
accessories, watch and jewelry, fragrance, and home product assortments, and reinforce the luxury image of our brands. While investing in digital
commerce operations remains a primary focus, it is an extension of our investment in the integrated omni-channel strategy used to operate our overall retail
business, in which our digital commerce operations are interdependent with our physical stores.
Our Club Monaco digital commerce sites offer our domestic and Canadian customers access to our global assortment of Club Monaco apparel,
footwear, and accessories product lines, as well as select online exclusives.
Our Wholesale Business
Our wholesale business sells our products globally to leading upscale and certain mid-tier department stores, specialty stores, and golf and pro shops,
as well as to various third-party digital partners. We have continued to focus on elevating our brand by improving in-store product assortment and
presentation, as well as full-price sell-throughs to consumers. As of the end of Fiscal 2020, our wholesale products were sold through over 11,000 doors
worldwide, with the majority in specialty stores. Our products are also increasingly being sold through the digital commerce sites of many of our wholesale
customers.
The primary product offerings sold through our wholesale channels of distribution include apparel, footwear, accessories, and home furnishings. Our
luxury brands, including Ralph Lauren Collection and Ralph Lauren Purple Label, are distributed worldwide through a limited number of premier fashion
retailers. In North America, our wholesale business is comprised primarily of sales to department stores, and to a lesser extent, specialty stores. In Europe,
our wholesale business is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various
third-party digital partners. In Asia, our wholesale business is comprised primarily of sales to department stores, with related products distributed through
shop-within-shops. We also distribute our wholesale products to certain licensed stores operated by our partners in Latin America, Asia, Europe, and the
Middle East.
We sell the majority of our excess and out-of-season products through secondary distribution channels worldwide, including our retail factory stores.
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Worldwide Wholesale Distribution Channels
The following table presents by segment the number of wholesale doors in our primary channels of distribution as of March 28, 2020:
North America
Europe
Asia
Total
Doors
5,735
4,928
500
11,163
We have three key wholesale customers that generate significant sales volume. During Fiscal 2020, sales to our three largest wholesale customers
accounted for approximately 18% of our total net revenues. Substantially all sales to our three largest wholesale customers related to our North America
segment.
Our products are sold primarily by our own sales forces. Our wholesale business maintains its primary showrooms in New York City. In addition, we
maintain regional showrooms in London, Madrid, Milan, Munich, Paris, and Stockholm.
Shop-within-Shops. As a critical element of our distribution to department stores, we and our licensing partners utilize shop-within-shops to
enhance brand recognition, to permit more complete merchandising of our lines by the department stores, and to differentiate the presentation of our
products.
The following table presents by segment the number of shop-within-shops in our primary channels of distribution as of March 28, 2020:
North America
Europe
Asia
Total
Shop-within-Shops
12,623
7,229
685
20,537
The size of our shop-within-shops ranges from approximately 85 to 9,200 square feet. Shop-within-shop fixed assets primarily include items such as
customized freestanding fixtures, wall cases and components, decorative items, and flooring. We normally share in the cost of building out these shop-
within-shops with our wholesale customers.
Replenishment Program. Core products such as knit shirts, chino pants, oxford cloth shirts, select accessories, and home products can be ordered
by our wholesale customers at any time through our replenishment program. We generally ship these products within two to five days of order receipt.
Through licensing alliances, we combine our consumer insight, design, and marketing skills with the specific product or geographic competencies of
our licensing partners to create and build new businesses. We generally seek out licensing partners who are leaders in their respective markets, contribute
the majority of product development costs, provide the operational infrastructure required to support the business, and own the inventory. Our licensing
business has been aggregated with other non-reportable segments.
Our Licensing Business
Product Licensing
We grant our product licensees the right to access our various trademarks in connection with the licensees' manufacture and sale of designated
products, such as certain apparel, eyewear, fragrances, and home furnishings. Each product licensing partner pays us royalties based upon its sales of our
products, generally subject to a minimum royalty requirement for the right to use our trademarks and design services. In addition, our licensing partners
may be required to allocate a portion of their revenues to advertising our products and sharing in the creative costs associated with these products. Larger
allocations typically are required in connection with launches of new products or in new territories. Our license agreements generally have two to five-year
terms and may grant the licensees conditional renewal options.
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We work closely with all of our licensing partners to ensure that their products are developed, marketed, and distributed to reach the intended
consumer and are presented consistently across product categories to convey the distinctive identity and lifestyle associated with our brands. Virtually all
aspects of the design, production quality, packaging, merchandising, distribution, advertising, and promotion of Ralph Lauren products are subject to our
prior approval and continuing oversight. We perform a broader range of services for most of our Ralph Lauren Home licensing partners than we do for our
other licensing partners, including design, operating showrooms, marketing, and advertising.
The following table lists our largest licensing agreements as of March 28, 2020 for the product categories presented. Except as noted in the table,
these product licenses cover North America only.
Category
Licensed Products
Licensing Partners
Men's Apparel
Underwear and Sleepwear
Hanesbrands, Inc. (includes Japan)
Chaps, Lauren, and Ralph Tailored Clothing
Peerless Clothing International, Inc.
Women's Apparel
Outerwear
Swimwear
S. Rothschild & Co., Inc.
Manhattan Beachwear, Inc. (includes Australia, Europe, New
Zealand, and portions of South America)
Beauty Products
Fragrances, Cosmetics, Color, and Skin Care
L'Oreal S.A. (global)
Accessories
Eyewear
Luxottica Group S.p.A. (global)
Home
Bedding and Bath
Utility and Blankets
Fabric and Wallpaper
International Licensing
Ichida Co., Ltd. (Japan only)
Ichida Co., Ltd. (Japan only) and Hollander Sleep Products LLC
P. Kaufmann, Inc. (includes Australia, New Zealand, South Africa,
and portions of South America and Asia)
Our international licensing partners acquire the right to sell, promote, market, and/or distribute various categories of our products in a given
geographic area and source products from us, our product licensing partners, and independent sources. International licensees' rights may include the right
to own and operate retail stores. As of March 28, 2020, our international licensing partners operated 80 Ralph Lauren stores, 31 Ralph Lauren concession
shops, and 139 Club Monaco stores and shops.
Digital Ecosystem
Investing in our digital ecosystem remains a primary focus and is a key component of our integrated global omni-channel strategy that spans across
owned and partnered channels, both physical and digital. Our digital ecosystem is comprised of directly-operated platforms, wholesale partner websites,
third-party digital pure players, and social commerce.
Our directly-operated digital commerce sites represent our digital flagships, displaying the most elevated expression of our brands. The strategy for
our digital flagships is to deliver distinct and immersive brand experiences, continuously enhance consumer experience, and develop digital content that
drives deeper consumer engagement and conversion. With the ongoing launch of our localized sites, including in Ireland and Switzerland this year, we
continue to expand the reach of our digital flagship experience. In connection with our long-term growth strategy, we are also working to broaden our
omni-channel service offerings, such as buy online and pickup and return in store. In addition to our directly-operated digital commerce sites, we have also
recently launched our Polo mobile app in the United Kingdom, our first mobile app launch outside of North America.
Our products are also sold through the digital commerce sites of many of our wholesale customers across the globe. With all partners in our
ecosystem, we seek to showcase the brand consistently with our values. We collaborate with our key wholesale customers to deliver the right content to the
right audience, and leverage consumer insights to develop a holistic, channel-agnostic view of our consumer.
We also sell our products online through various third-party digital pure-play sites to reach younger consumers and amplify our brand messages. On
many of these sites, we have created digital shop-in-shop environments with a consistent brand experience, tailored product stories, and an assortment that
is carefully curated by our merchants. We also partner closely with our pure-play
14
customers on marketing content and events, as well as optimizing search and other data analyses to drive higher traffic and conversion for our brands. We
also continue to tap into the social commerce opportunity, such as our launch of Instagram shopping in Europe this year.
In connection with our digital commerce operations, we engage consumers through various digital and social media platforms, which are supported
through our collaboration with influencers who have an authentic connection to our brand.
Seasonality of Business
Our business is typically affected by seasonal trends, with higher levels of retail sales in our second and third fiscal quarters and higher wholesale
sales in our second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping
periods impacting our retail business and timing of seasonal wholesale shipments. As a result of changes in our business, consumer spending patterns, and
the macroeconomic environment, historical quarterly operating trends and working capital requirements may not be indicative of our future performance.
In addition, fluctuations in sales, operating income, and cash flows in any fiscal quarter may be affected by other events affecting retail sales, such as
changes in weather patterns.
Working capital requirements vary throughout the year. Working capital requirements typically increase during the first half of the fiscal year as
inventory builds to support peak shipping/selling periods and, accordingly, typically decrease during the second half of the fiscal year as inventory is
shipped/sold. Cash provided by operating activities is typically higher in the second half of the fiscal year due to reduced working capital requirements
during that period.
Product Design
Our products reflect a timeless and innovative interpretation of American style with a strong international appeal. Our consistent emphasis on new
and distinctive design has been an important contributor to the prominence, strength, and reputation of the Ralph Lauren brands.
Our Ralph Lauren products are designed by, and under the direction of, Mr. Ralph Lauren and our design staff. We form design teams around our
brands and product categories to develop concepts, themes, and products for each brand and category. Through close collaboration with merchandising,
sales, and production staff, these teams support all of our businesses in order to gain market information and other valuable input.
Marketing and Advertising
Our marketing and advertising programs communicate the themes and images of our brands and are integral to the success of our product offerings.
The majority of our advertising program is created and executed by our in-house creative and advertising agency to ensure consistency of presentation,
which is complemented by our marketing experts in each region who help to execute our international strategies.
We create distinctive image advertising for our brands, conveying the particular message of each one within the context of the overall Ralph Lauren
aesthetic. Advertisements generally portray a lifestyle rather than a specific item and include a variety of products offered by us and, in some cases, our
licensing partners. Our communication campaigns are increasingly being executed through digital and social media platforms to drive further engagement
with the younger consumer, with a focus on influencers. With regard to influencers, we believe in fostering long-term relationships with those who have an
authentic connection to our brand and influence the areas of culture that matter most to our audiences. We also continue to advertise through print and
outdoor media, and, to a lesser extent, through television and cinema.
Our digital advertising programs focus on high impact and innovative digital media outlets, which allow us to convey our key brand messages and
lifestyle positioning. We also develop digital editorial initiatives that allow for deeper education and engagement around the Ralph Lauren lifestyle,
including the RL Magazine, RL Style Guide, and a wide array of video and social media content. We deploy these marketing and advertising initiatives
through online, mobile, video, email, and social media. Our digital commerce sites present the Ralph Lauren lifestyle online, while offering a broad array
of our apparel, footwear, accessories, and home product lines.
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Additionally, we advertise in consumer and trade publications, and participate in cooperative advertising on a shared cost basis with some of our
retail and licensing partners. We have outdoor advertising placements in key cities as well, focusing on impact and reach. We also provide point-of-sale
fixtures and signage to our wholesale customers to enhance the presentation of our products at their retail locations. In addition, when our licensing partners
are required to spend an amount equal to a percentage of their licensed product sales on advertising, in certain cases we coordinate the advertising
placement on their behalf. We believe our investments in shop-within-shop environments and retail stores, including our global flagship locations,
contribute to and enhance the themes of our brands to consumers.
We also conduct a variety of public relations activities. For example, we typically introduce each of the spring and fall menswear and womenswear
collections at press presentations in major cities such as New York City and Milan. Such fashion events, in addition to celebrity red carpet dressing
moments and events hosted in our stores and restaurants, including The Polo Bar in New York City, generate extensive domestic and international media
and social coverage.
We continue to be the official outfitter for all on-court officials at both the Wimbledon and the U.S. Open tennis tournaments. Both tournaments
provide worldwide exposure for our brand in a relevant lifestyle environment. We also continue to be the exclusive Official Parade Outfitter for the U.S.
Olympic and Paralympic Teams, with the right to manufacture, distribute, advertise, promote, and sell products in the U.S. which replicate the Parade
Outfits and associated leisure wear. Most recently, we dressed Team U.S.A. for the 2018 Olympic Winter Games in PyeongChang, South Korea, and will
be dressing the team for the next Summer Olympic Games in Tokyo, Japan. As part of our involvement with Team U.S.A., we have established a
partnership with athletes serving as brand ambassadors and as the faces of our advertising, marketing, and public relations campaigns. We are also the
official apparel outfitter for the Professional Golfers' Association ("PGA") of America, the PGA Championship, and the U.S. Ryder Cup Team, as well as a
partner of the American Junior Golf Association. We sponsor a roster of professional golfers, including Billy Horschel, Davis Love III, Doc Redman, Justin
Thomas, Nick Watney, and Tom Watson.
We believe our partnerships with such prestigious global athletic events reinforce our brand's sporting heritage in a truly authentic way and serve to
connect our Company and brands to our consumers through their individual areas of passion.
Sourcing, Production and Quality
We contract for the manufacture of our products and do not own or operate any production facilities. Over 500 different manufacturers worldwide
produce our apparel, footwear, accessories, and home products, with no one manufacturer providing more than 4% of our total production during Fiscal
2020. We source both finished products and raw materials. Raw materials include fabric, buttons, and other trim. Finished products consist of manufactured
and fully assembled products ready for shipment to our customers. In Fiscal 2020, approximately 98% of our products (by dollar value) were produced
outside of the U.S., primarily in Asia, Europe, and Latin America, with approximately 25% of our products sourced from China. See "Import Restrictions
and Other Government Regulations," Item 1A — "Risk Factors — Economic conditions could have a negative impact on our major customers, suppliers,
vendors, and lenders, which in turn could materially adversely affect our business," and Item 1A — "Risk Factors — Our business is subject to risks
associated with importing products and the ability of our manufacturers to produce our goods on time and to our specifications."
Most of our businesses must commit to the manufacturing of our garments before we sell finished goods, whether to wholly-owned retail stores or to
wholesale customers. We also must commit to the purchase of fabric from mills well in advance of our sales. If we overestimate our primary customers'
demand for a particular product or the need for a particular fabric or yarn, we primarily sell the excess products or garments made from such fabric or yarn
in our factory stores or through other secondary distribution channels.
Suppliers operate under the close supervision of our global manufacturing division and buying agents headquartered in Asia, the Americas, the
Middle East, and Europe. All products are produced according to our specifications and standards. Production and quality control staff in Asia, the
Americas, the Middle East, and Europe monitor manufacturing at supplier facilities in order to correct problems prior to shipment of the final product.
Procedures have been implemented under our vendor certification and compliance programs so that quality assurance is reviewed early in the production
process, allowing merchandise to be received at the distribution facilities and shipped to customers with minimal interruption.
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Competition is very strong in the segments of the fashion and consumer product industries in which we operate. We compete with numerous
designers and manufacturers of apparel, footwear, accessories, fragrances, and home furnishing products, both domestic and international. We also face
increasing competition from companies selling our product categories through the Internet. Some of our competitors may be significantly larger and have
substantially greater resources than us. We compete primarily on the basis of fashion, quality, value, and service, which depend on our ability to:
Competition
•
•
•
•
•
•
•
•
•
•
anticipate and respond to changing consumer demands and shopping preferences, including the increasing shift to digital brand engagement,
social media communications, and online shopping;
create and maintain favorable brand recognition, loyalty, and reputation for quality;
develop and produce innovative, high-quality products that appeal to consumers of varying age groups;
competitively price our products and create an acceptable value proposition for consumers;
provide strong and effective marketing support;
obtain additional points of distribution and sufficient retail floor space, and effectively present our products to consumers;
attract consumer traffic to stores, shop-within-shops, and websites;
source raw materials at cost-effective prices;
anticipate and maintain proper inventory levels;
ensure product availability and optimize supply chain and distribution efficiencies;
• maintain and grow market share;
•
•
recruit and retain key employees; and
protect our intellectual property.
See Item 1A — "Risk Factors — We face intense competition worldwide in the markets in which we operate."
To facilitate global distribution, our products are shipped from manufacturers to a network of distribution centers around the world for inspection,
sorting, packing, and delivery to our retail locations and digital commerce and wholesale customers. This network includes the following primary
distribution facilities:
Facility Location
Geographic Region Serviced
Facility
Ownership
Distribution
N. Pendleton Street, High Point, North Carolina
NC Highway 66, High Point, North Carolina
Greensboro, North Carolina
Chino Hills, California
Miami, Florida
Toronto, Ontario
Parma, Italy
Yokohama, Japan
Bugok, South Korea
Tuen Mun, Hong Kong
U.S.
U.S.
U.S.
U.S.
U.S.
Canada
Europe and Latin America
Japan
South Korea
China and Southeast Asia(a)
Owned
Leased
Leased
Third-party
Third-party
Third-party
Third-party
Third-party
Leased
Third-party
(a)
Includes Australia, China, Hong Kong, India, Macau, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand, and Vietnam.
17
All facilities are designed to allow for high-density cube storage and value-added services, and utilize unit and carton tracking technology to
facilitate process control and inventory management. The distribution network is managed through globally integrated information technology systems.
Our information systems facilitate business processes, consumer experiences, and decision-making support across the Company and our extended
ecosystem of manufacturers, vendors, business partners, and customers. Our system applications are connected to support the flow of information across
functions, including:
Information Systems
•
•
•
product design, sourcing, and production;
comprehensive order processing, fulfillment, and distribution;
retail store and digital commerce operations;
• marketing and advertising;
•
•
financial accounting and management reporting; and
human resources.
Our retail operation systems, including point-of-sale registers and merchandising, planning, and inventory management systems, support operational
processes within our store network and link with our digital commerce processes to support omni-channel capabilities.
We are continually improving and upgrading our computer systems and software. During Fiscal 2020, we migrated our Asia operations to a new
financial reporting information technology system, Microsoft AX Dynamics 365. In addition to this system implementation, during Fiscal 2020, we began
reconfiguring the financial reporting information technology system used by our Europe operations, SAP, in order to utilize enhanced financial reporting
functionality. We are also continually enhancing the consumer experience by adding new functionality on our digital commerce sites.
We have a longstanding information security risk program committed to regular risk management practices surrounding the protection of
confidential data. This program includes various technical controls, including security monitoring, data leakage protection, network segmentation and
access controls around the computer resources that house confidential or sensitive data. We have also implemented employee awareness training programs
around phishing, malware, and other cyber risks. We continually evaluate the security environment surrounding the handling and control of our critical
data, especially the private data we receive from our customers, employees and partners, and have instituted additional measures to help protect us from
system intrusion or data breaches. Additionally, we have purchased network security and cyber liability insurance in order to provide a level of financial
protection, should a data breach occur.
See Item 1A — "Risk Factors — A data security or privacy breach could damage our reputation and our relationships with our customers or
employees, expose us to litigation risk, and adversely affect our business" and "Risk Factors — Our business could suffer if our computer systems and
websites are disrupted or cease to operate effectively."
Wholesale Credit Control
We manage our own credit function. We sell our merchandise principally to major department stores, specialty stores, and third-party digital
partners, and extend credit based on an evaluation of the wholesale customer's financial capacity and condition, usually without requiring collateral. We
monitor credit levels and the financial condition of our wholesale customers on a continuing basis to minimize credit risk. We do not factor or underwrite
our accounts receivables, nor do we maintain credit insurance to manage the risk of bad debts. In North America, collection and deduction transactional
activities are provided through a third-party service provider. See Item 1A — "Risk Factors — A substantial portion of our revenue is derived from a
limited number of large wholesale customers. Our business could be adversely affected as a result of consolidations, liquidations, restructurings, other
ownership changes in the retail industry, and/or any financial instability of our large wholesale customers."
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Wholesale Backlog
We generally receive wholesale orders approximately three to five months prior to the time the products are delivered to customers, with the
exception of orders received through our replenishment program, which ship within two to five days of order receipt. Our wholesale orders are generally
subject to broad cancellation rights.
The following table presents our wholesale backlog by segment as of March 28, 2020 and March 30, 2019:
North America
Europe
Total
March 28,
2020
March 30,
2019
$
$
(billions)
0.6 $
0.5
1.1 $
0.6
0.4
1.0
Approximately 45% of our wholesale backlog was subsequently canceled during the first quarter of Fiscal 2021 driven by adverse impacts
associated with COVID-19 business disruptions, which include temporary department and specialty store closures worldwide, as well as declines in retail
traffic, tourism, and consumer spending on discretionary items. The COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis.
Accordingly, we cannot predict at this time how much of our remaining wholesale backlog will be fulfilled within the next 12 months.
The size of our order backlog depends upon a number of factors, including the timing of the market weeks for our particular lines during which a
significant percentage of our orders are received and the timing of shipments, which varies from year-to-year with consideration for holidays, consumer
trends, concept plans, and the replenishment program's usage. As a consequence, a comparison of the size of our order backlog from period-to-period may
not be meaningful, nor may it be indicative of eventual shipments.
We own the RALPH LAUREN, POLO, POLO BY RALPH LAUREN DESIGN, and the famous polo player astride a horse trademarks in the
U.S. and approximately 120 countries worldwide. Other trademarks that we own include:
Trademarks
•
•
•
•
•
•
•
•
•
•
•
PURPLE LABEL;
DOUBLE RL;
RRL;
RLX;
LAUREN RALPH LAUREN;
PINK PONY;
LAUREN;
RALPH;
CHAPS;
CLUB MONACO; and
Various other trademarks, including those pertaining to fragrances and cosmetics.
Mr. Ralph Lauren has the royalty-free right to use as trademarks RALPH LAUREN, DOUBLE RL, and RRL in perpetuity in connection with,
among other things, beef and living animals. The trademarks DOUBLE RL and RRL are currently used by the Double RL Company, an entity wholly
owned by Mr. R. Lauren. In addition, Mr. R. Lauren has the right to engage in personal projects involving film or theatrical productions (not including or
relating to our business) through RRL Productions, Inc., a company wholly owned by Mr. R. Lauren. Any activity by these companies has no impact on us.
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Our trademarks are the subject of registrations and pending applications throughout the world for use on a variety of items of apparel, apparel-
related products, home furnishings, restaurant and café services, online services and online publications, and beauty products, as well as in connection with
retail services, and we continue to expand our worldwide usage and registration of related trademarks. In general, trademarks remain valid and enforceable
as long as the marks are used in connection with the related products and services and the required registration renewals are filed. We regard the license to
use the trademarks and our other proprietary rights in and to the trademarks as extremely valuable assets in marketing our products and, on a worldwide
basis, vigorously seek to protect them against infringement. As a result of the appeal of our trademarks, our products have been the object of counterfeiting.
While we have a broad enforcement program which has been generally effective in protecting our intellectual property rights and limiting the sale of
counterfeit products in the U.S. and in most major markets abroad, we face greater challenges with respect to enforcing our rights against trademark
infringement in certain parts of Asia.
In markets outside of the U.S., our rights to some or all of our trademarks may not be clearly established. In the course of our international
expansion, we have experienced conflicts with various third parties who have acquired ownership rights in certain trademarks, including POLO and/or a
representation of a Polo Player Design, which impede our use and registration of our principal trademarks. While such conflicts are common and may arise
again from time to time as we continue our international expansion, we have, in general, successfully resolved such conflicts in the past through both legal
action and negotiated settlements with third-party owners of the conflicting marks (see Item 1A — "Risk Factors — Our trademarks and other intellectual
property rights may not be adequately protected outside the U.S." and Item 3 — "Legal Proceedings" for further discussion). Although we have not
suffered any material restraints or restrictions on doing business in desirable markets in the past, we cannot assure that significant impediments will not
arise in the future as we expand product offerings and introduce trademarks to new markets.
Import Restrictions and Other Government Regulations
Virtually all of our merchandise imported into the Americas, Europe, Asia, Australia, and New Zealand is subject to duties. In addition, most of the
countries to which we ship could impose safeguard quotas and duties to protect their local industries from import surges that threaten to create market
disruption. The U.S. and other countries may also unilaterally impose additional duties in response to a particular product being imported (from China or
other countries) at unfairly traded prices in such increased quantities that would cause (or threaten) injury to the relevant domestic industry (generally
known as "anti-dumping" actions). If dumping is suspected in the U.S., the U.S. government may self-initiate a dumping case on behalf of the U.S. textile
industry which could significantly affect our costs. Furthermore, additional duties, generally known as countervailing duties, can also be imposed by the
U.S. government to offset subsidies provided by a foreign government to foreign manufacturers if the importation of such subsidized merchandise injures
or threatens to injure a U.S. industry.
In addition, each of the countries in which our products are sold has laws and regulations covering imports. Because the U.S. and the other countries
in which our products are manufactured and sold may, from time to time, impose new duties, tariffs, surcharges, or other import controls or restrictions, or
adjust presently prevailing duty or tariff rates or levels, we maintain a program of intensive monitoring of import restrictions and opportunities. We seek to
minimize our potential exposure to import-related risks through, among other measures, adjustments in product design and fabrication, shifts of production
among countries and manufacturers, and through geographical diversification of our sources of supply.
As almost all of our products are manufactured by foreign suppliers, the enactment of new legislation or the administration of current international
trade regulations or executive action affecting textile agreements, or changes in sourcing patterns could adversely affect our operations. See
Item 1A — "Risk Factors — Our ability to conduct business globally may be affected by a variety of legal, regulatory, political, and economic risks" and
"Risk Factors — Our business is subject to risks associated with importing products and the ability of our manufacturers to produce our goods on time and
to our specifications."
We are also subject to other international trade agreements, such as the North American Free Trade Agreement, now known as the U.S.-Mexico-
Canada Agreement, the Central American Free Trade Agreement, the U.S.-Peru Free Trade Agreement, the U.S.-Jordan Free Trade Agreement, the U.S.-
Korea Free Trade Agreement and other special trade preference programs. A portion of our imported products are eligible for certain of these duty-
advantaged programs.
Apparel and other products sold by us are under the jurisdiction of multiple governmental agencies, including, in the U.S., the Federal Trade
Commission, the U.S. Fish and Wildlife Service, the Environmental Protection Agency, and the Consumer Products Safety Commission. Our products are
also subject to regulation in the U.S. and other countries, including the U.S. Consumer Product Safety Improvement Act, which relate principally to
product labeling, licensing requirements, and consumer product safety requirements and regulatory testing, particularly with respect to products used by
children. Any failure to comply with such requirements could result in significant penalties and require us to recall products, which could have a material
adverse effect on our business or operating results. We believe that we are in substantial compliance with these regulations, as well as
20
applicable federal, state, local, and foreign rules and regulations governing the discharge of materials hazardous to the environment. We do not anticipate
any significant capital expenditures for environmental control matters either in the next fiscal year or in the near future. Our licensed products, licensing
partners, buying/sourcing agents, and the vendors and factories with which we contract for the manufacture and distribution of our products are also subject
to regulation. Our agreements require our licensing partners, buying/sourcing agents, vendors, and factories to operate in compliance with all applicable
laws and regulations, and we are not aware of any violations which could reasonably be expected to have a material adverse effect on our business or
operating results.
We are also subject to disclosure and reporting requirements, established under existing or new federal or state laws, such as the requirements to
identify the origin and existence of certain "conflict minerals" under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and disclosures of
specific actions to eradicate abusive labor practices in our supply chain under the California Transparency in Supply Chains Act. While we require our
suppliers to operate in compliance with all applicable laws and our operating guidelines which promote ethical and socially responsible business practices,
any violation of labor, environmental, health, and safety or other laws, or any divergence by an independent supplier's labor practices from generally
accepted industry standards, could damage our reputation, disrupt our sourcing capabilities, and increase the cost of doing business, adversely affecting our
results of operations. See Item 1A — "Risk Factors — Our business could suffer if we fail to comply with labor laws or if one of our manufacturers fails to
use acceptable labor or environmental practices."
Although we have not suffered any material restriction from doing business in desirable markets in the past, we cannot assure that significant
impediments will not arise in the future as we expand product offerings and introduce additional trademarks to new markets.
As of March 28, 2020, we had approximately 24,900 employees, comprised of approximately 13,700 full-time and approximately 11,200 part-time
employees. Approximately 13,800 of our employees are located in the U.S. and approximately 11,100 are located in foreign countries. Approximately 15 of
our U.S. production employees in the womenswear business are members of Workers United (which was previously known as UNITE HERE) under an
industry association collective bargaining agreement, which our womenswear subsidiary has adopted. We consider our relations with both our union and
non-union employees to be good.
Employees
The following are our current executive officers and their principal recent business experience:
Information About Our Executive Officers
Ralph Lauren
Age 80
Patrice Louvet
Age 55
Mr. Ralph Lauren founded our business in 1967 and, for five decades, has cultivated the
iconography of America into a global lifestyle brand. He has been our Executive
Chairman and Chief Creative Officer since November 2015, and a director of the
Company since prior to our initial public offering in 1997. He had previously been our
Chairman and Chief Executive Officer since prior to our initial public offering in 1997
until November 2015. In addition, he was previously a member of our Advisory Board
or the Board of Directors of our predecessors since their organization.
Mr. Louvet has served as our President and Chief Executive Officer, and a director of the
Company since July 2017. Prior to joining the Company, he served as the Group
President, Global Beauty, of Procter & Gamble Co. ("P&G") since February 2015. Prior
to that role, Mr. Louvet held successively senior leadership positions at P&G, including
the roles of Group President, Global Grooming (Gillette), and President of P&G's Global
Prestige Business. Before he joined P&G, he served as a Naval Officer, Admiral Aide de
Camp in the French Navy from 1987 to 1989. Mr. Louvet graduated from École
Supérieure de Commerce de Paris and received his M.B.A. from the University of
Illinois. He has served as a member of the board of directors of Bacardi Limited since
July 2012.
21
Jane Hamilton Nielsen
Age 56
Andrew Howard Smith
Age 49
David Lauren
Age 48
Ms. Nielsen has been our Chief Financial Officer since September 2016 and our Chief
Operating Officer since April 2019. She served as Chief Financial Officer of Coach, Inc.
from September 2011 to August 2016. From 2009 to 2011, she was Senior Vice
President and Chief Financial Officer of PepsiCo Beverages Americas and the Global
Nutrition Group, divisions of PepsiCo, Inc., with responsibility for all financial
management including financial reporting, performance management, capital allocation,
and strategic planning. Prior to that, Ms. Nielsen held various senior roles in finance at
PepsiCo, Inc. and Pepsi Bottling Group starting in 1996. She also served on the board of
directors of Pinnacle Foods Inc. Ms. Nielsen received her M.B.A. from the Harvard
Business School and B.A. from Smith College.
Mr. Smith has served as our Chief Commercial Officer since April 2019. He has been
with our Company for over 16 years, having worked in various capacities based in the
U.S., Europe, and Asia. Prior to his current role, he was responsible for our International
Division based in Geneva, Switzerland, with general management responsibility for all
markets outside of North America. Prior to this, he led our businesses across Asia as
Group President of Asia Pacific, and before that he was responsible for our Japan market
as President & Representative Director of Japan. His roles before this include SVP
Global Supply Chain, based in New York, where he worked around the world on
operational acquisition integrations through our license buy-back phase, and various
roles based in Europe in Supply Chain, Sales Order Management, and Merchandise
Allocation. He has been instrumental in turning our Asia businesses to growth, and
driving brand elevation and accelerating profitable growth across all of our International
markets. Prior to joining our Company, Mr. Smith served as Head of Supply Chain for
Selfridges & Co., the UK based department store group. Mr. Smith is a graduate of City,
University of London.
Mr. David Lauren is our Chief Innovation Officer, Strategic Advisor to the CEO, and
Vice Chairman of the Board. He has served as our Chief Innovation Officer and Vice
Chairman of the Board since October 2016. From November 2010 to October 2016, he
served as our Executive Vice President of Global Advertising, Marketing and
Communications. Prior to that, he served in numerous leadership roles at the Company
with responsibility for advertising, marketing, and communications. He has been a
director of the Company since August 2013. Mr. D. Lauren oversees the Company's
innovation processes and capabilities to drive its brand strength and financial
performance across all channels. He has been instrumental in growing the Company's
global digital commerce business and pioneering our technology initiatives. He serves on
the board of trustees of the Ralph Lauren Center for Cancer Care and Prevention and the
board of directors of The National Museum of American History. Mr. D. Lauren is also
the Head of the Ralph Lauren Corporate Foundation (formerly known as the Polo Ralph
Lauren Foundation). Before joining the Company in 2000, he was Editor-In-Chief and
President of Swing, a general interest publication for Generation X. Mr. D. Lauren is the
son of Mr. R. Lauren.
22
Item 1A. Risk Factors
There are risks associated with an investment in our securities. The following risk factors should be read carefully in connection with evaluating our
business and the forward-looking statements contained in this Annual Report on Form 10-K. Any of the following risk factors could materially adversely
affect our business, our prospects, our results of operations, our financial condition, our liquidity, the trading price of our securities, and/or the actual
outcome of matters as to which forward-looking statements are made in this report. Additional risks and uncertainties not currently known to us or that we
currently view as immaterial may also materially adversely affect our business, results of operations, and financial condition in future periods or if
circumstances change.
The loss of the services of Mr. Ralph Lauren, members of our executive management team, or other key personnel could have a material adverse
effect on our business.
Mr. Ralph Lauren's leadership in the design and marketing areas of our business has been a critical element of our success since the inception of our
Company. Mr. R. Lauren is instrumental to, and closely identified with, our brand that bears his name. Our ability to maintain our brand image and leverage
the goodwill associated with Mr. R. Lauren's name may be damaged if we were to lose his services. The death or disability of Mr. R. Lauren or other
extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material
adverse effect on our business, results of operations, and financial condition.
We also depend on the service and management experience of other key executive officers and other members of senior management who have
substantial experience and expertise in our industry and our business and have made significant contributions to our growth and success. Competition in
our industry to attract and retain these employees is intense and is influenced by our reputation, our ability to offer competitive compensation and benefits,
and economic conditions, among other factors. The loss of the services of any of our key executive officers or other members of senior management, or one
or more of our other key personnel, or the concurrent loss of several of these individuals or any negative public perception with respect to these individuals,
could also have a material adverse effect on our business, results of operations, and financial condition.
We are not protected by a material amount of key-man or similar life insurance covering our executive officers, including Mr. R. Lauren, or other
members of senior management. We have entered into employment agreements with certain of our executive officers, but competition for experienced
executives in our industry is intense and the non-compete period with respect to certain of our executive officers could, in some circumstances in the event
of their termination of employment with our Company, end prior to the employment term set forth in their employment agreements.
Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business.
Our business could be adversely affected by infectious disease outbreaks, such as the recent novel strain of coronavirus commonly referred to as
COVID-19. COVID-19 has spread rapidly across the globe in recent months, including throughout all major geographies in which we operate (North
America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as significant volatility in global financial markets.
Governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and
stay-at-home orders, all in an effort to reduce the spread of the virus.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores,
distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors, as described in
Item 1 — "Business — Recent Developments." The COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis. Accordingly, we
cannot predict for how long and to what extent this crisis will impact our business operations or the global economy as a whole. Potential impacts to our
business include, but are not limited to, the following:
•
•
•
our ability to successfully execute our long-term growth strategy during these uncertain times;
temporary closures of our stores, distribution centers, and corporate facilities for unknown periods of time, as well as those of our wholesale
customers and licensing partners;
potential declines in the level of consumer purchases of discretionary items and luxury retail products, including our products, caused by lower
disposal income levels, travel restrictions, or other factors beyond our control;
23
•
•
•
•
•
•
the potential build-up of excess inventory as a result of store closures and/or lower consumer demand, including those resulting from potential
changes in consumer behavior and/or shopping preferences, such as their willingness to congregate in shopping centers or other populated
locations;
supply chain disruptions resulting from closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods
produced in infected areas;
our ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments, as well as the ability
of our key customers, suppliers, and vendors to do the same in regard to their own obligations;
the potential loss of one or more of our significant wholesale customers, or the loss of a large number of smaller wholesale customers, if they are
not able to withstand prolonged periods of adverse economic conditions, and our ability to collect outstanding receivables;
our ability to maintain an effective system of internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002; and
diversion of management attention and resources from ongoing business activities and/or a decrease in employee morale.
Additional discussion related to the various risks and uncertainties described above is included elsewhere within this "Risk Factors" section of our
Form 10-K.
Economic, political, and other conditions may adversely affect the level of consumer purchases of discretionary items and luxury retail products,
including our products.
The industries in which we operate are cyclical. Many economic and other factors outside of our control affect the level of consumer spending in the
apparel, footwear, accessory, and home product industries, including, among others:
• man-made or natural disasters, including pandemic diseases such as COVID-19;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
consumer perceptions of personal well-being and safety;
consumer perceptions of current and future economic conditions;
employment levels and wage rates;
stock market performance;
inflation;
interest rates;
foreign currency exchange rates;
the housing market;
consumer debt levels;
the availability of consumer credit;
commodity prices, including fuel and energy costs;
taxation;
general domestic and international political conditions;
the threat, outbreak, or escalation of terrorism, military conflicts, or other hostilities; and
weather conditions.
Consumer purchases of discretionary items and luxury retail products, including our products, tend to decline during recessionary periods and at
other times when disposable income is lower. Unfavorable economic conditions and other factors, such as disease pandemics and other health-related
concerns, political unrest, war, and acts of terrorism, may also reduce consumers' willingness and ability to travel to major cities and vacation destinations
in which our stores and shop-within-shops are located.
24
Further, consumers may prefer to spend more of their discretionary income on "experiences," such as dining and entertainment, over consumer goods. A
downturn or an uncertain outlook in the economies in which we, or our wholesale customers and licensing partners, sell our products may materially
adversely affect our business, results of operations, and financial condition. See Item 7 — "Management's Discussion and Analysis of Financial Condition
and Results of Operations — Global Economic Conditions and Industry Trends" for further discussion.
Our profitability may decline if we are unable to effectively manage inventory or as a result of increasing pressure on margins.
We have implemented key strategic initiatives designed to optimize our inventory levels and improve the efficiency and responsiveness of our
supply chain. Although we have shortened lead times for the design, sourcing, and production of certain of our product lines, we expect to continue to place
orders with our vendors for the majority of products in advance of the related selling season. As a result, we are vulnerable to changes in consumer
preferences and demand and pricing shifts. Our failure to continue to shorten lead times or to correctly anticipate consumer preferences and demand could
result in the build-up of excess inventory. Other factors beyond our control could also result in the build-up of excess inventory, including unforeseen
adverse economic conditions or business disruptions, such as those caused by the COVID-19 pandemic. Excess inventory levels could result in the
utilization of less-preferred distribution channels, markdowns, promotional sales, destruction, or donations to dispose of such excess or slow-moving
inventory, which may negatively impact our overall profitability and/or impair the image of our brands. Conversely, if we underestimate consumer demand
for our products or if manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages, which may negatively
impact customer relationships, diminish brand loyalty, and result in lost sales. Any of these outcomes could have a material adverse effect on our business,
results of operations, and financial condition.
Additionally, our industry is subject to significant pricing pressure caused by many factors, including intense competition and a highly promotional
retail environment, consolidation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer spending patterns.
Although we continue to limit our promotional activity in connection with our quality of sales initiatives, these factors may cause us to reduce our sales
prices to retailers and consumers, which could cause our gross margin to decline if we are unable to appropriately manage inventory levels and/or otherwise
offset price reductions with comparable reductions in our costs. If our sales prices decline and we fail to sufficiently reduce our product costs or operating
expenses, our profitability will decline. This could have a material adverse effect on our business, results of operations, and financial condition. In addition,
changes in our customer, channel, and geographic sales mix could have a negative impact on our profitability.
A substantial portion of our revenue is derived from a limited number of large wholesale customers. Our business could be adversely affected as a
result of consolidations, liquidations, restructurings, other ownership changes in the retail industry, and/or any financial instability of our large
wholesale customers.
Several of our department store customers, including some under common ownership, account for a significant portion of our wholesale net sales. A
substantial portion of sales of our licensed products by our domestic licensing partners are also made to our largest department store customers. During
Fiscal 2020, sales to our three largest wholesale customers, accounted for approximately 18% of total net revenues for Fiscal 2020, and constituted
approximately 32% of our total gross trade accounts receivable outstanding as of March 28, 2020. Substantially all sales to our three largest wholesale
customers related to our North America segment.
We typically do not enter into long-term agreements with our customers. Instead, we enter into a number of purchase order commitments with our
customers for each of our product lines every season. A decision by the controlling owner of a group of stores or any other significant customer, whether
motivated by economic conditions, financial difficulties, competitive conditions, or otherwise, to decrease or eliminate the amount of merchandise
purchased from us or our licensing partners or to change their manner of doing business with us or our licensing partners or their new strategic and
operational initiatives, including their continued focus on further development of their "private label" initiatives, could have a material adverse effect on our
business, results of operations, and financial condition.
Additionally, as a result of the COVID-19 pandemic, our wholesale customers have experienced significant business disruptions, including reduced
traffic and temporary store closures. There can be no assurance that our wholesale customers have adequate financial resources and/or access to additional
capital to withstand prolonged periods of such adverse economic conditions. The loss of one or more significant wholesale customers, or the loss of a large
number of smaller wholesale customers, could have a material adverse effect on our business, results of operations, and financial condition.
25
Further, prior to the COVID-19 pandemic, certain of our large wholesale customers, particularly those located in the U.S., have been highly
promotional and have aggressively marked down their merchandise, including our products. The continuation of such promotional activity could negatively
impact our brand image and/or lead to requests from those customers for increased markdown allowances at the end of the season, which could have a
material adverse effect on our business, results of operations, and financial condition. In response and in connection with our growth plan, we strategically
reduce shipments to certain of our customers when deemed appropriate.
The department store sector has also experienced numerous consolidations, restructurings, reorganizations, and other ownership changes in recent
years, which could potentially increase in frequency in the near-term given the COVID-19 pandemic. Any such actions could result in a reduction in the
number of stores that carry our products, and the stores that remain open may purchase fewer of our products and/or reduce the retail floor space designated
to our brands. There can be no assurance that consolidations, restructurings, reorganizations, or other ownership changes in the department store sector will
not have a material adverse effect on our business, results of operations, and financial condition.
We sell our wholesale merchandise primarily to major department stores, specialty stores, and third-party digital partners across North America,
Europe, Asia, and Australia, and extend credit based on an evaluation of each wholesale customer's financial condition, usually without requiring collateral.
However, the financial difficulties of a wholesale customer, including those resulting from the COVID-19 pandemic, could cause us to limit or eliminate
our business with that customer. We may also assume more credit risk relating to that customer's receivables. Our inability to collect on our trade accounts
receivable from any one of these customers could have a material adverse effect on our business, results of operations, and financial condition. See
Item 1 — "Business — Wholesale Credit Control."
Economic conditions could have a negative impact on our major customers, suppliers, vendors, and lenders, which in turn could materially
adversely affect our business.
Although we believe that our existing cash and investments, cash provided by operations, and available borrowing capacity under our credit facilities
and commercial paper borrowing program will provide us with sufficient liquidity, the impact of economic conditions on our major customers, suppliers,
vendors, and lenders, including those resulting from the COVID-19 pandemic, and their ability to access global capital markets cannot be predicted. The
inability of major manufacturers to ship our products could impair our ability to meet the delivery date requirements of our customers. Deterioration in
global financial or capital markets could affect our ability to access sources of liquidity to provide for our future cash needs, increase the cost of any future
financing, or cause our lenders to be unable to meet their funding commitments under our credit facilities. A disruption in the ability of our significant
customers to access liquidity could cause serious disruptions or an overall deterioration of their businesses which could lead to a significant reduction in
their future orders of our products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material
adverse effect on our business, results of operations, and financial condition.
We cannot assure the successful implementation of our growth strategy.
We have developed a long-term growth strategy with the objective of delivering sustainable, profitable growth and long-term value creation for
shareholders, as described in Item 1 — "Business — Objectives and Opportunities." Our ability to successfully execute our growth strategy is subject to
various risks and uncertainties, as described within this "Risk Factors" section of our Form 10-K.
Although we believe that our growth strategy will lead to long-term growth in revenue and profitability, there can be no assurance regarding the
timing of or extent to which we will realize the anticipated benefits, if at all. Our failure to realize the anticipated benefits, which may be due to our
inability to execute the various elements of our growth strategy, changes in consumer preferences, competition, economic conditions, and other risks
described herein, such as those related to the COVID-19 pandemic, could have a material adverse effect on our business, results of operations, and financial
condition. Such a failure could also result in the implementation of additional restructuring-related activities, which may be dilutive to our earnings in the
short term.
Achievement of our growth strategy may require investment in new capabilities, distribution channels, and technologies. These investments may
result in short-term costs without accompanying current revenues and, therefore, may be dilutive to our earnings in the short term. There can be no
assurance regarding the timing of or extent to which we will realize the anticipated benefits of these investments and other costs, if at all.
26
We may not be successful in the expansion of our multi-channel distribution network or accelerating growth in certain product categories.
Implementation of our growth strategy involves the continuation and expansion of our multi-channel distribution network, including within
international markets such as China, which is subject to many factors, including, but not limited to, our ability to:
•
•
•
•
•
•
•
•
identify new or underpenetrated markets where our products and brand will be accepted by consumers;
attract customers, particularly in new markets;
identify desirable freestanding and department store locations, the availability of which may be out of our control;
negotiate acceptable lease terms, including desired tenant improvement allowances;
efficiently and cost effectively build-out stores and shop-within-shops;
source sufficient inventory levels to meet the needs of the new stores and shop-within-shops;
hire, train, and retain competent store personnel; and
integrate new stores and shop-within-shops into our existing systems and operations.
Any of these challenges could delay or otherwise prevent us from successfully executing our distribution expansion strategy. There can be no
assurance that our new stores and shop-within-shops will be successful and profitable or if the capital costs associated with the build-out of such new
locations will be recovered. Further, entry into new markets may bring us into competition with new or existing competitors that have a more established
market presence than us or other competitive advantages. Other risks related to our international expansion plans include general economic conditions in
specific countries or markets, changes in diplomatic and trade relationships and any resulting anti-American sentiment, political instability, and foreign
government regulation, among other risks described herein. If our expansion plans are unsuccessful or do not deliver an appropriate return on our
investments, our business, results of operations, and financial condition could be adversely affected.
The success of our business also depends on our ability to continue to maintain, enhance, and expand our digital footprint and capabilities.
Consumers are increasingly shopping online using computers, smartphones, tablets, and other devices. Any failure on our part, or on the part of our third-
party digital partners, to provide attractive, reliable, secure, and user-friendly digital commerce platforms, including mobile apps, could negatively impact
our customers' shopping experience resulting in reduced website traffic, diminished loyalty to our brands, and lost sales. In addition, as we continue to
expand and increase the global presence of our digital commerce business, sales from our brick and mortar stores and wholesale channels of distribution in
areas where digital commerce sites are introduced may decline due to changes in consumer shopping habits and cannibalization.
Our growth strategy also includes accelerating growth in certain high-value, underdeveloped product categories, comprised of denim, wear to work,
outerwear, footwear, and accessories. We compete with other retailers in these product categories, some of which may be significantly larger than us and
more established in these product categories, and competition is intense, as described within other risk factors herein. There can be no assurance that our
targeted expansion in these product categories will be successful.
The success of our business depends on our ability to respond to constantly changing fashion and retail trends and consumer preferences in a
timely manner, develop products that resonate with our existing customers and attract new customers, and provide a seamless shopping
experience to our customers.
The industries in which we operate have historically been subject to rapidly changing fashion trends and consumer preferences. Our success depends
in large part on our ability to originate and define fashion product and home product trends, as well as to anticipate, gauge, and react to changing consumer
preferences in a timely manner. Our products must appeal to a broad range of consumers worldwide whose preferences cannot be predicted with certainty
and are subject to rapid change, influenced by fashion trends, current economic conditions, and weather conditions, among other factors. This issue is
further compounded by the increasing use of digital and social media by consumers and the speed by which information and opinions are shared across the
globe. We cannot assure that we will be able to continue to develop appealing styles or successfully meet constantly changing consumer preferences in the
future. In addition, we cannot assure that any new products or brands that we introduce will be successfully received by consumers. Any failure on our part
to anticipate, identify, and respond effectively to changing consumer preferences and fashion trends could adversely affect retail and consumer acceptance
of our products and leave us with a substantial amount of unsold inventory or missed opportunities. Conversely, if we underestimate consumer demand for
our products or if
27
manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages. Any of these outcomes could have a material
adverse effect on our business, results of operations, and financial condition. For a discussion of risks related to our inventory management, see "Our
profitability may decline if we are unable to effectively manage inventory or as a result of increasing pressure on margins."
Our marketing and advertising programs are integral to the success of our product offerings and on our ability to attract new customers and retain
existing customers. Our communication campaigns are increasingly being executed through digital and social media platforms to drive further engagement
with the younger consumer, with a focus on influencers. However, we cannot assure that our marketing and advertising programs will be successful or
appeal to consumers.
The success of our business also depends on our ability to continue to develop and maintain a reliable omni-channel experience for our customers.
Our business has evolved from an in-store experience to a shopping experience through multiple technologies, including computers, smartphones, tablets,
and other devices, as our customers have become increasingly technologically savvy. We are increasingly using digital and social media platforms to
interact with customers and enhance their shopping experience. If we are unable to develop and continuously improve our customer-facing technologies,
we may not be able to provide a convenient and consistent experience to our customers regardless of the sales channel. This could negatively affect our
ability to compete with other retailers and result in diminished loyalty to our brands, which could adversely impact our business, results of operations, and
financial condition.
We have also implemented, and expect to continue to implement, new store design concepts as part of our growth strategy. There can be no
assurance that any of our store designs will resonate with customers or otherwise achieve the desired sales and profitability measures necessary to recover
our initial capital investments. If customers are not receptive to the design layout or visual merchandising of our stores, our business, results of operations,
and financial condition could be adversely affected. In addition, the failure of our store designs to achieve acceptable results could lead to our decision to
close a store prior to the lease expiration date. For additional discussion of risks related to the early termination of our leases, see "Our business is subject
to risks associated with leasing real estate and other assets under long-term, non-cancellable leases."
The success of our business depends on our ability to retain the value and reputation of our brands.
Our success depends on the value and reputation of our brands and our ability to consistently anticipate, identify, and respond to customers'
demands, preferences, and fashion trends in the design, pricing, and production of our products, including the preference for certain products to be
manufactured in the U.S. As the Ralph Lauren name is integral to our business, any negative publicity regarding Mr. R. Lauren or our Company, especially
through social media which accelerates and increases the potential scope of negative publicity, could negatively impact the image of our brands with our
customers and result in diminished loyalty to our brands, even if the subject of such publicity is unverified or inaccurate. There is also increased focus from
consumers, employees, investors, and other stakeholders concerning corporate citizenship and sustainability matters. Although we have established certain
long-term initiatives and goals regarding our impact on the environment and society as a whole, there can be no assurance that our various stakeholders will
agree with our initiatives or if we will be successful in achieving our goals. Our failure to comply with ethical, social, product safety, labor, health,
environmental or other standards and regulations could damage the reputation of our brands and lead to adverse consumer actions and/or investment
decisions by investors, as well as expose us to government enforcement action and/or private litigation. Even if we react appropriately to negative publicity,
our customers' perception of our brand image and our reputation could be negatively impacted. Any failure on our part to retain the value and reputation of
brands could adversely impact our business, results of operations, and financial condition.
We face intense competition worldwide in the markets in which we operate.
We face increasing competition from companies selling apparel, footwear, accessories, home, and other of our product categories through the
Internet. Although we sell our products through the Internet, increased competition and promotional activity in the worldwide apparel, footwear, accessory,
and home product industries from Internet-based competitors could reduce our sales, prices, and margins and adversely affect our business, results of
operations, and financial condition. We also face intense competition from other domestic and foreign fashion-oriented apparel, footwear, accessory, and
casual apparel producers that sell products through brick and mortar stores and wholesale and licensing channels. We compete with these companies
primarily on the basis of:
•
•
anticipating and responding in a timely fashion to changing consumer demands and shopping preferences, including the increasing shift to
digital brand engagement, social media communications, and online shopping;
creating and maintaining favorable brand recognition, loyalty, and a reputation for quality;
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•
•
•
•
•
•
•
•
developing and producing innovative, high-quality products in sizes, colors, and styles that appeal to consumers of varying age groups;
competitively pricing our products and creating an acceptable value proposition for consumers;
providing strong and effective marketing support;
obtaining sufficient retail floor space and effective presentation of our products at stores and shop-within-shops;
attracting consumer traffic to stores, shop-within-shops, and websites;
sourcing raw materials at cost-effective prices;
anticipating and maintaining proper inventory levels;
ensuring product availability and optimizing supply chain and distribution efficiencies with third-party manufacturers and retailers;
• maintaining and growing market share;
•
•
•
recruiting and retaining key employees;
protecting our intellectual property; and
the ability to withstand prolonged periods of adverse economic conditions or business disruptions.
Some of our competitors may be significantly larger and more diversified and may have greater financial, marketing, and distribution resources,
more desirable store locations, and/or greater digital commerce presence than us, among other competitive advantages. Such competitive advantages may
enable them to better withstand unfavorable economic conditions, compete more effectively on the basis of price and production, and/or more quickly
respond to rapidly changing fashion trends and consumer preferences than us. In addition, technological advances and the retail industry's low barriers to
entry allow for the introduction of new competitors and products at a rapid pace.
Any increased competition, or our failure to adequately address any of these competitive factors, could result in reduced market share or sales, which
could adversely affect our business, results of operations, and financial condition.
We have a substantial amount of indebtedness, which could restrict our ability to engage in additional capital-related transactions in the future.
As of March 28, 2020, our consolidated indebtedness was approximately $1.171 billion, comprised of our outstanding borrowings under our Global
Credit Facility and Senior Notes. Additionally, in accordance with the terms of the original agreement, we have the ability to expand our borrowing
availability under the Global Credit Facility from $500 million to $1 billion through the full term of the facility, subject to the agreement of one or more
new or existing lenders under the facility to increase their commitments. Further, in May 2020, we entered into a new credit facility with the same lenders
that are parties to the Global Credit Facility, which provides for an additional $500 million senior unsecured revolving line of credit that matures on May
25, 2021, or earlier in the event we are able to obtain other additional financing, as described in Note 11 to the accompanying consolidated financial
statements.
We rely on our operating cash flows to repay our outstanding borrowings, as well as to fund any working capital needs, capital expenditures,
dividend payments, share repurchases, and other general corporate purposes. Prolonged periods of adverse economic conditions or business disruptions in
any of our key regions, or a combination thereof, such as our recent store closures in North America, Europe, and Asia due to COVID-19, could impede
our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our
operations.
In addition, certain of our debt instruments contain a number of affirmative and negative covenants. On May 26, 2020, we entered into an
amendment to our Global Credit Facility that relaxed certain financial covenants while providing additional restrictions under our negative covenants for a
specified period of time as further described in Note 11 to the accompanying consolidated financial statements. Our failure to comply with such covenants,
or otherwise secure temporary waivers of non-compliance, could result in our lenders demanding all amounts outstanding to be immediately repaid. Credit
rating agencies also periodically review our capital structure and our ability to generate earnings. A prolonged period of deteriorated financial performance
or our inability to comply with debt covenants could make future financing more difficult to secure and/or expensive.
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Moreover, our Global Credit Facility contains representations and warranties, including that there has been no material adverse change in the business,
operations, property or condition (financial or otherwise) of the Company and its subsidiaries, taken as a wholes, since March 2019. It is a condition to
making each borrowing and to the issuance, increase, renewal or extension of each letter of credit that our representations be true at the time of the event in
question. The recent amendment to the Global Credit Facility provides that through March 31, 2021, the impact of the COVID-19 pandemic as disclosed to
the lenders in May 2020 or reasonably foreseeable based on the disclosure to the lenders will be disregarded for purposes of determining whether a material
adverse change has occurred.
Further, factors beyond our control, such as adverse economic conditions, could disrupt capital markets and limit the availability or willingness of
financial institutions to extend capital to us in the future. Any of these factors could have a material adverse effect on our business, results of operations,
and financial condition.
Our ability to conduct business globally may be affected by a variety of legal, regulatory, political, and economic risks.
Our ability to capitalize on growth in new international markets and to maintain our current level of operations in our existing markets is subject to
certain risks associated with operating in various locations around the globe. These include, but are not limited to:
•
•
•
•
•
•
•
•
complying with a variety of U.S. and foreign laws and regulations, including, but not limited to, trade, labor, product labeling, and product
safety restrictions, as well as the Foreign Corrupt Practices Act, which prohibits U.S. companies from making improper payments to foreign
officials for the purpose of obtaining or retaining business, and similar foreign country laws, such as the U.K. Bribery Act, which prohibits
U.K. and related companies from any form of bribery;
adapting to local customs and culture;
unexpected changes in laws, judicial processes, or regulatory requirements;
the imposition of additional duties, tariffs, taxes, and other charges or other barriers to trade;
changes in diplomatic and trade relationships;
political instability, such as the recent protests in Hong Kong, and terrorist attacks;
pandemic diseases, such as COVID-19; and
general economic fluctuations in specific countries or markets.
Changes in regulatory, geopolitical, social, economic, or monetary policies and other factors may have a material adverse effect on our business in
the future or may require us to exit a particular market or significantly modify our current business practices. For example, although trade relations between
the U.S. and China have begun to ease, both countries have imposed new tariffs on each other related to the importation of certain product categories,
including imports of apparel into the U.S. from China. As a result of actions to mitigate our exposure to the resulting tariffs, which include diverting
production to and sourcing from other countries, driving productivity within our existing supplier base, and taking pricing actions, the tariffs enacted to
date are not expected to have a material adverse impact on our business operations. However, if the U.S. decides to impose additional tariffs on apparel or
other of our goods imported from China, there can be no assurance that we will be able to offset all related increased costs, which could be material to our
business operations as approximately 25% of our products are sourced from China. There have also been recent changes to U.S. participation in, and
discussion regarding the potential renegotiation of, certain international trade agreements such as the North American Free Trade Agreement, now known
as the U.S.-Mexico-Canada Agreement. We cannot predict if, and to what extent, there will be changes to international trade agreements or the resulting
impact such changes would have on our business operations. For a discussion of risks associated with the importation of products, see "Our business is
subject to risks associated with importing products and the ability of our manufacturers to produce our goods on time and to our specifications."
Our business could also be impacted by changes to the tax laws and regulations in the countries where we operate. For example, the Organisation for
Economic Co-operation and Development (the "OECD"), which represents a coalition of member countries, has proposed changes to numerous long-
standing tax principles through its Base Erosion and Profit Shifting project, which is focused on a number of issues, including the shifting of profits among
affiliated entities located in different tax jurisdictions. In response, certain member countries are beginning to implement legislation to align their
in
international
Item 1 — "Business — Recent Developments." Taxing authorities of certain state, local, and other foreign jurisdictions may also decide to modify existing
tax
the OECD's recommendations, such as Switzerland’s recently enacted Swiss Tax Act, as described
tax rules with
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laws. We cannot predict which, if any, of these items or others will be enacted into law or the resulting impact any such enactment will have on our
business operations. However, if new legislation were enacted, it could have a material adverse effect on our business, results of operations, and financial
condition.
Additionally, the United Kingdom recently withdrew from the European Union, commonly referred to as "Brexit." Although it ceased to be a
member of the European Union effective January 31, 2020, the United Kingdom is now in a “transition period” during which its existing trading
relationship with the European Union will remain in place and it will continue to follow the European Union’s rules. Negotiations during the transition
period to determine the United Kingdom’s future relationship with the European Union post-transition period, including terms of trade, are expected to be
complex. It is not clear at this time what, if any, agreements will be reached by the current December 31, 2020 transition period deadline. Brexit could
significantly disrupt the free movement of goods, services, and people between the United Kingdom and the European Union, and result in increased legal
and regulatory complexities, as well as potential higher costs of conducting business in Europe. The uncertainty surrounding the United Kingdom's future
relationship with the European Union could also adversely impact consumer and investor confidence, and the level of consumer purchases of discretionary
items and luxury retail products, including our products. Although we are closely monitoring the latest developments regarding Brexit and are assessing
risk and opportunities and developing strategies to mitigate our exposure once the transition period expires, any of these effects, among others, could
materially adversely affect our business, results of operations, and financial condition. Brexit has also contributed to significant volatility and uncertainty in
global stock markets and currency exchange rates, and such volatility could continue to occur as the negotiation process progresses. For a discussion of
risks related to currency exchange fluctuations, see "Our business is exposed to domestic and foreign currency fluctuations."
Our business is subject to risks associated with importing products and the ability of our manufacturers to produce our goods on time and to our
specifications.
We do not own or operate any manufacturing facilities and depend exclusively on independent third parties for the manufacture of our products. Our
products are manufactured to our specifications through arrangements with over 500 foreign manufacturers in various countries. In Fiscal 2020,
approximately 98% of our products (by dollar value) were produced outside of the U.S., primarily in Asia, Europe, and Latin America, with approximately
25% of our products sourced from China. Risks inherent in importing our products include:
•
•
•
•
•
•
•
•
•
•
pandemic diseases, such as COVID-19, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or
embargoing of goods produced in infected areas;
changes in social, political, and economic conditions or terrorist acts that could result in the disruption of trade from the countries in which
our manufacturers or suppliers are located;
the imposition of additional regulations, quotas, or safeguards relating to imports or exports, and costs of complying with such regulations and
other laws relating to the identification and reporting of the sources of minerals used in our products;
the imposition of additional duties, tariffs, taxes, and other charges on imports or exports;
unfavorable changes in the availability, cost, or quality of raw materials and commodities;
increases in the cost of labor, travel, and transportation;
disruptions of shipping and international trade caused by natural and man-made disasters, labor shortages (stemming from labor disputes,
strikes, or otherwise), or other unforeseen events;
heightened terrorism-related cargo and supply chain security concerns, which could subject imported or exported goods to additional, more
frequent, or more thorough inspections, leading to delays in the delivery of cargo;
decreased scrutiny by customs officials for counterfeit goods, leading to lost sales, increased costs for our anti-counterfeiting measures, and
damage to the reputation of our brands; and
the imposition of sanctions in the form of additional duties either by the U.S. or its trading partners to remedy perceived illegal actions by
national governments.
Any one of these factors could have a material adverse effect on our business, results of operations, and financial condition. For a discussion of risks
related to the potential imposition of additional regulations and laws, see "Our ability to conduct business globally may be affected by a variety of legal,
regulatory, political, and economic risks."
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In addition, the inability of a manufacturer to ship orders of our products in a timely manner or to meet our strict quality standards could cause us to
miss the delivery date requirements of our customers for those items, which could result in cancellation of orders, refusal to accept deliveries, or a
substantial reduction in purchase prices, any of which could have a material adverse effect on our business, results of operations, and financial condition.
Prices of raw materials used to manufacture our products may also fluctuate significantly as a result of many factors, including general economic
conditions, energy prices, crop yields, and availability of labor and the related costs of such labor. Any increases in prices of such raw materials could have
a material adverse effect on our cost of sales. Furthermore, the cost of labor at many of our third-party manufacturers has been increasing significantly and,
as the middle class in developing countries such as China continues to grow, it is unlikely that such cost pressure will abate. The cost of transportation
remains significant as well, and it is likely that such cost will fluctuate significantly if oil prices remain volatile. We may not be able to offset such increases
in raw materials, freight, or labor costs through pricing actions or other means.
A data security or privacy breach could damage our reputation and our relationships with our customers or employees, expose us to litigation
risk, and adversely affect our business.
We are dependent on information technology systems and networks, including the Internet, for a significant portion of our direct-to-consumer sales,
including our digital commerce operations and retail business credit card transaction authorization and processing. We are also responsible for storing data
relating to our customers and employees and rely on third parties for the operation of our digital commerce websites and for the various social media tools
and websites we use as part of our marketing strategy. In our normal course of business, we often collect, transmit, and/or retain certain sensitive and
confidential customer information, including credit card information. There is significant concern by consumers, employees, and lawmakers alike over the
security of personal information transmitted over the Internet, consumer identity theft, and user privacy, as cyber-criminals are becoming increasingly more
sophisticated in their attempts to gain unauthorized access to computer systems and confidential or sensitive data.
Despite the security measures we currently have in place (including those described in Item 1 — "Business — Information Systems"), our facilities
and systems and those of our third-party service providers may be vulnerable to security breaches, acts of vandalism, phishing attacks, computer viruses,
malware, ransomware, misplaced or lost data, programming and/or human errors, or other Internet or email events. The increased use of smartphones,
tablets, and other wireless devices, as well as the need for a substantial portion of our corporate employees to work remotely during the COVID-19
pandemic, may also heighten these and other operational risks. The retail industry in particular continues to be the target of many cyber-attacks, which are
becoming increasingly more difficult to anticipate and prevent due to their rapidly evolving nature. Although we have purchased network security and
cyber liability insurance to provide a level of financial protection should a data breach occur, such insurance may not cover us against all claims or costs
associated with such a breach. Additionally, the technology we use to protect our systems from being breached or compromised could become outdated as a
result of advances in computer capabilities or other technological developments. Further, measures we implement to protect our computer systems against
cyber-attacks may make them harder to use or reduce the speed at which they operate, which in turn could negatively impact our customers' shopping
experience resulting in reduced website traffic, diminished loyalty to our brands, and lost sales.
Any perceived or actual electronic or physical security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential
or personally identifiable information, including penetration of our network security, whether by us or by a third party, could disrupt our business, severely
damage our reputation and our relationships with our customers or employees, expose us to risks of litigation, significant fines and penalties, and liability,
and result in deterioration in our customers' and employees' confidence in us, and adversely affect our business, results of operations, and financial
condition. Since we do not control third-party service providers and cannot guarantee that no electronic or physical computer break-ins and security
breaches will occur in the future, any perceived or actual unauthorized disclosure of personally identifiable information regarding our employees,
customers or website visitors could harm our reputation and credibility, result in lost sales, impair our ability to attract website visitors, and/or reduce our
ability to attract and retain employees and customers. As these threats develop and grow, we may find it necessary to make significant further investments
to protect data and our infrastructure, including the implementation of new computer systems or upgrades to existing systems, deployment of additional
personnel and protection-related technologies, engagement of third-party consultants, and training of employees.
In addition, the regulatory environment relating to information security and privacy is becoming increasingly more demanding with frequent new
requirements surrounding the handling, protection, and use of personal and sensitive information. We may incur significant costs in complying with the
various applicable state, federal, and foreign laws regarding protection of, and unauthorized disclosure of, personal information. Additionally, failing to
comply with such laws and regulations could damage the reputation of our brands and lead to adverse consumer actions, as well as expose us to
government enforcement action and/or private litigation, any of which could adversely affect our business, results of operations, and financial condition.
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Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively.
We are dependent on our computer systems to record and process transactions and manage and operate our business, including designing, marketing,
manufacturing, importing, tracking, and distributing our products, processing payments, accounting for and reporting financial results, and managing our
employees and employee benefit programs. In addition, we have digital commerce and other informational websites in North America, Europe, and Asia,
including Australia and New Zealand, and have plans for additional digital commerce sites in the future. Given the complexity of our business and the
significant number of transactions that we engage in on a daily basis, it is imperative that we maintain uninterrupted operation of our computer hardware
and software systems.
Despite our preventative efforts, our systems are vulnerable to damage or interruption from, among other things, security breaches, computer
viruses, technical malfunctions, inadequate system capacity, power outages, natural disasters, and usage errors by our employees or third-party consultants.
If our information technology systems become damaged or otherwise cease to function properly, we may have to make significant investments to repair or
replace them. Additionally, confidential or sensitive data related to our customers or employees could be lost or compromised. We are continually
improving and upgrading our computer systems and software, which also involves risks and uncertainties. Any disruptions, delays, or deficiencies in the
design, implementation, or transition of such systems could result in increased costs, disruptions in the sourcing, sale, and shipment of our product, delays
in the collection of cash from our customers, and/or adversely affect our ability to accurately report our financial results in a timely manner. Any material
disruptions in our information technology systems could have a material adverse effect on our business, results of operations, and financial condition.
Our business could suffer if we need to replace manufacturers or distribution centers.
We do not own or operate any manufacturing facilities and depend exclusively on independent third parties for the manufacture of our products. We
compete with other companies for the production capacity of our manufacturers. Some of these competitors may place larger orders than we do, and thus
may have an advantage in securing production capacity. If we experience a significant increase in demand, or if an existing manufacturer of ours must be
replaced, we may have to expand our third-party manufacturing capacity. We cannot guarantee that this additional capacity will be available when required
on terms that are acceptable to us. See Item 1 — "Business - Sourcing, Production and Quality." We enter into purchase order commitments each season
specifying a time for delivery, method of payment, design and quality specifications, and other standard industry provisions, but do not have long-term
contracts with any manufacturer. None of the manufacturers we use produce our products exclusively.
In addition, we rely on a number of owned, leased, and independently-operated distribution facilities around the world to warehouse and ship
products to our customers and perform other related logistic services. Our ability to meet the needs of our customers depends on the proper operation of
these distribution centers. Our distributions centers generally utilize computer-controlled and automated equipment, which are subject to various risks,
including software viruses, security breaches, power interruptions, or other system failures. If any of our distribution centers were to close or become
inoperable or inaccessible for any reason, including pandemic diseases such as COVID-19, or if we fail to successfully consolidate existing facilities or
transition to new facilities, we could experience a substantial loss of inventory, disruption of deliveries to our customers and our stores, increased costs, and
longer lead times associated with the distribution of products during the period that would be required to reopen or replace the facility. These disruptions
could have a material adverse effect on our business, results of operations, and financial condition.
We also rely upon third-party transportation providers for substantially all of our product shipments, including shipments to and from our
distribution centers, to our stores and shop-within-shops, and to our digital commerce and wholesale customers. Our utilization of these shipping services is
subject to various risks, including, but not limited to, potential labor shortages (stemming from labor disputes, strikes, or otherwise), severe weather, and
pandemic diseases, which could delay the timing of shipments, and increases in wages and fuel prices, which could result in higher transportation costs.
Any delays in the timing of our product shipments or increases in transportation costs could have a material adverse effect on our business, results of
operations, and financial condition.
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Our business could be adversely affected by man-made or natural disasters and other catastrophic events in the locations in which we or our
customers or suppliers operate.
We have operations, including retail, distribution, and warehousing operations, in locations subject to man-made or natural disasters, including
pandemic diseases such as COVID-19, severe weather, geological events, and other catastrophic events, such as terrorist attacks and military conflict, any
of which could disrupt our operations. In addition, our customers and suppliers also have operations in these locations and could experience similar
disruptions. The occurrence of natural disasters or other catastrophic events may result in sudden disruptions in the business operations of the local
economies affected, as well as of the regional and global economies. The occurrence of such events could also adversely affect financial markets and the
availability of capital. In addition, our business can be affected by unseasonable weather conditions, such as extended periods of unseasonably warm
temperatures in the winter or unseasonably cold temperatures in the summer. Any of these events could result in decreased demand for our products and
disruptions in our sales channels and manufacturing and distribution networks, which could have a material adverse effect on our business, results of
operations, and financial condition.
Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results.
We are subject to income and non-income taxes in many U.S. and certain foreign jurisdictions, with the applicable tax rates varying by jurisdiction.
We record tax expense based on our estimates of future payments, which include reserves for uncertain tax positions in multiple tax jurisdictions. At any
given time, multiple tax years are subject to audit by various taxing authorities. The results of these audits and negotiations with taxing authorities may
affect the ultimate settlement of these issues. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as
events occur and exposures are evaluated. Our effective tax rate in a given financial statement period may also be materially impacted by changes in the
mix and level of earnings by jurisdiction or by changes to existing accounting rules. Additionally, our products are subject to import and excise duties,
and/or sales, consumption, value-added taxes ("VAT"), and other non-income taxes in certain international jurisdictions. Failure to correctly calculate or
submit the appropriate amount of income or non-income taxes could subject us to substantial fines and penalties and adversely affect our business, results
of operations, and financial condition.
In addition, the tax laws and regulations in the countries where we operate may change, such as the recently-enacted Swiss Tax Act, or there may be
changes in interpretation and enforcement of existing tax laws, which could materially affect our income tax expense in our consolidated financial
statements. For a discussion of risks related to the potential imposition of additional regulations and laws, see "Our ability to conduct business globally may
be affected by a variety of legal, regulatory, political, and economic risks."
Our business is exposed to domestic and foreign currency fluctuations.
Our business is exposed to foreign currency exchange risk. Specifically, changes in exchange rates between the U.S. dollar and other currencies
impact our financial results from a transactional perspective, as our foreign operations generally purchase inventory in U.S. dollars, as is common for most
apparel companies. Given that we source most of our products overseas, the cost of these products may be affected by changes in the value of the relevant
currencies. Changes in currency exchange rates may also impact consumers' willingness or ability to travel abroad and/or purchase our products while
traveling, as well as affect the U.S. Dollar value of the foreign currency denominated prices at which our international businesses sell products.
Additionally, the operating results and financial position of our international subsidiaries are exposed to foreign exchange rate fluctuations as their financial
results are translated from the respective local currency into U.S. Dollars during the financial statement consolidation process. The foreign currencies to
which we are exposed to from a transactional and translational perspective primarily include the Euro, the Japanese Yen, the South Korean Won, the
Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, and the Chinese Renminbi. The expansion of our international business
increases our exposure to foreign currency exchange risk.
Although we hedge certain exposures to changes in foreign currency exchange rates arising in the ordinary course of business, we cannot fully
anticipate all of our currency exposures and therefore foreign currency fluctuations may have a material adverse impact on our business, results of
operations, and financial condition. In addition, factors that could impact the effectiveness of our hedging activities include the volatility of currency
markets, the accuracy of forecasted transactions, and the availability of hedging instruments. As such, our hedging activities may not completely mitigate
the impact of foreign currency fluctuations on our results of operations. See Item 7 — "Management's Discussion and Analysis of Financial Condition and
Results of Operations — Market Risk Management."
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Our business is subject to risks associated with leasing real estate and other assets under long-term, non-cancellable leases.
We generally operate most of our stores and corporate facilities under long-term, non-cancellable leasing arrangements. Our retail store leases
typically require us to make minimum rental payments, and often contingent rental payments based upon sales. In addition, our leases generally require us
to pay our proportionate share of the cost of insurance, taxes, maintenance, and utilities. We generally cannot cancel our leases at our option. If we decide
to close a store, or if we decide to downsize, consolidate, or relocate any of our corporate facilities, we may be required to record an impairment charge
and/or exit costs associated with the disposal of the store or corporate facility. In addition, we may remain obligated under the applicable lease for, among
other things, payment of the base rent for the remaining lease term, even after the space is exited or otherwise closed (such as our recent temporary store
closures resulting from the COVID-19 pandemic). Such costs and obligations related to the early or temporary closure of our stores or termination of our
leases could have a material adverse effect on our business, results of operations, and financial condition. In addition, as each of our leases naturally
expires, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, which could lead to store closures resulting in lost sales.
The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial
performance, including our ability to return value to shareholders.
Our business planning process is designed to maximize our long-term strength, growth, and profitability, and not to achieve an earnings target in any
particular fiscal quarter. We believe that this longer-term focus is in the best interests of our Company and our stockholders. At the same time, however, we
recognize that, from time to time, it may be helpful to provide investors with guidance as to our quarterly and annual forecast of net sales and earnings.
While we generally expect to provide updates to our guidance when we report our results each fiscal quarter, we do not have any responsibility to update
any of our guidance or other forward-looking statements at such times or otherwise. In addition, any longer-term guidance that we provide is based on
goals that we believe, at the time guidance is given, are reasonably attainable. However, such long-range targets are more difficult to predict than our
current quarter and full fiscal year expectations. Additionally, external analysts and investors may publish their own independent predictions of our future
performance. We do not endorse such predictions or assume any responsibility to correct such predictions when they differ from our own expectations. If,
or when, we announce actual results that differ from those that have been predicted by us, outside analysts, or others, the market price of our securities
could be adversely affected. Investors who rely on these predictions when making investment decisions with respect to our securities do so at their own
risk. We take no responsibility for any losses suffered as a result of such changes in the prices of our securities.
In addition, we periodically return value to shareholders through our payment of quarterly cash dividends and common stock share repurchases.
Investors may have an expectation that we will continue to pay quarterly cash dividends, further increase our cash dividend rate, and/or repurchase shares
available under our Class A common stock repurchase program. Our ability to pay quarterly cash dividends and repurchase our Class A common stock will
depend on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial, competitive,
and other factors that are beyond our control, such as impacts related to COVID-19, which has resulted in us temporarily suspending our quarterly cash
dividend and share repurchases during the crisis. Further, our Board of Directors may, at its discretion, elect to suspend or otherwise alter these programs at
any time. The market price of our securities could be adversely affected if our cash dividend payments and/or Class A common stock share repurchase
activity differ from investors' expectations.
We may not fully realize the expected cost savings and/or operating efficiencies from our restructuring plans.
We have implemented restructuring plans to support key strategic initiatives, such as the Fiscal 2019 Restructuring Plan, as described in
Item 1 — "Business — Recent Developments." Although designed to deliver long-term sustainable growth, restructuring plans present significant potential
risks that may impair our ability to achieve anticipated operating enhancements and/or cost reductions, or otherwise harm our business, including:
•
•
•
•
higher than anticipated costs in implementing planned workforce reductions, particularly in highly regulated locations outside the U.S.;
higher than anticipated lease termination and store closure costs (see "Our business is subject to risks associated with leasing real estate and
other assets under long-term, non-cancellable leases");
failure to meet operational targets or customer requirements due to the loss of employees or inadequate transfer of knowledge;
failure to maintain adequate controls and procedures while executing, and subsequent to completing, our restructuring plans;
35
•
•
•
diversion of management attention and resources from ongoing business activities and/or a decrease in employee morale;
attrition beyond any planned reduction in workforce; and
damage to our reputation and brand image due to our restructuring-related activities, including the closure of certain of our stores.
If we are not successful in implementing and managing our restructuring plans, we may not be able to achieve targeted operating enhancements,
sales growth, and/or cost reductions, which could adversely impact our business, results of operations, and financial condition. Our failure to achieve
targeted results for any reason, including the impact of the COVID-19 pandemic, could also lead to the implementation of additional restructuring-related
activities, which may be dilutive to our earnings in the short term.
Changes in our executive and senior management team may be disruptive to, or cause uncertainty in, our business.
Certain members of our executive and senior management team have departed in recent years, and we may implement other management and
organizational changes in connection with our growth strategy. Any changes in our executive and senior management team may be disruptive to, or cause
uncertainty in, our business and future strategic direction. The departure of certain key individuals and the failure to ensure a smooth transition and
effective transfer of knowledge involving senior employees could hinder or delay our strategic planning and execution, as well as adversely affect our
ability to attract and retain other experienced and talented employees. Further, our recent decision to furlough a significant portion of our employees in
response to the COVID-19 pandemic could disrupt our business operations and processes, as well as our ability to maintain an effective system of internal
controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002. Any such disruption or uncertainty could have a material adverse
impact on our business, results of operations, and financial condition.
Our trademarks and other intellectual property rights may not be adequately protected outside the U.S.
We believe that our trademarks, intellectual property, and other proprietary rights are extremely important to our success and our competitive
position. We devote substantial resources to the establishment and protection of our trademarks and anti-counterfeiting activities worldwide. However,
significant counterfeiting and imitation of our products continue to exist. In addition, the laws of certain foreign countries may not protect trademarks or
other proprietary rights to the same extent as do the laws of the U.S. and, as a result, our intellectual property may be more vulnerable and difficult to
protect in such countries. Over the course of our international expansion, we have experienced conflicts with various third parties that have acquired or
claimed ownership rights to some of our key trademarks that include Polo and/or a representation of a polo player astride a horse, or otherwise have
contested our rights to our trademarks. We have resolved certain of these conflicts through both legal action and negotiated settlements. We cannot
guarantee that the actions we have taken to establish and protect our trademarks and other proprietary rights will be adequate to prevent counterfeiting, lost
business, or brand dilution, any of which may have a material adverse effect on our business. We expect to continue to devote substantial resources to
challenge brands arising from imitation of our products. Also, there can be no assurance that others will not assert rights in, or ownership of, trademarks
and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts to our satisfaction or at all. See Item 1 —
"Business — Trademarks," and Item 3 — "Legal Proceedings."
Our business could suffer if we fail to comply with labor laws or if one of our manufacturers fails to use acceptable labor or environmental
practices.
We are subject to labor laws governing relationships with employees, including minimum wage requirements, overtime, working conditions, and
citizenship requirements. Compliance with these laws may lead to increased costs and operational complexity and may increase our exposure to
governmental investigations or litigation.
In addition, we require our licensing partners and independent manufacturers to operate in compliance with applicable laws and regulations. While
our internal and vendor operating guidelines promote ethical business practices and our employees periodically visit and monitor the operations of our
independent manufacturers, we do not control these manufacturers or their labor practices. The violation of labor, environmental, or other laws by an
independent manufacturer used by us or one of our licensing partners, or the divergence of an independent manufacturer's or licensing partner's labor or
environmental practices from those generally accepted as ethical or appropriate in the U.S., could interrupt or otherwise disrupt the shipment of finished
products to us or damage our reputation. Any of these events, in turn, could have a material adverse effect on our business, results of operations, and
financial condition.
36
Certain legal proceedings, regulatory matters, and accounting changes could adversely affect our business.
We are involved in certain legal proceedings and regulatory matters and are subject from time to time to various claims involving alleged breach of
contract claims, intellectual property and other related claims, escheatment and unclaimed property, credit card fraud, security breaches in certain of our
retail store information systems, employment issues, consumer matters, and other litigation. Certain of these lawsuits and claims, if decided adversely to us
or settled by us, could result in material liability to our Company or have a negative impact on our reputation or relations with our employees, customers,
licensees, or other third parties. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings could result in
substantial costs and may require our Company to devote substantial time and resources to defend itself. Further, changes in governmental regulations both
in the U.S. and in other countries where we conduct business operations could have an adverse impact on our business, results of operations, and financial
condition. See Item 3 — "Legal Proceedings" for further discussion of our Company's legal matters.
In addition, we are subject to changes in accounting rules and interpretations issued by the Financial Accounting Standards Board and other
regulatory agencies. If and when effective, such changes to accounting standards could have a material impact on our consolidated financial statements. See
Note 4 to the accompanying consolidated financial statements for a discussion of certain recently issued accounting standards.
The voting shares of our Company's stock are concentrated in one majority stockholder.
As of March 28, 2020, Mr. Ralph Lauren, or entities controlled by the Lauren family, held approximately 84% of the voting power of the
outstanding common stock of our Company. In addition, Mr. R. Lauren serves as our Executive Chairman and Chief Creative Officer, Mr. R. Lauren's son,
Mr. David Lauren, serves as our Chief Innovation Officer, Strategic Advisor to the CEO, and Vice Chairman of the Board of Directors, and we employ
other members of the Lauren family. From time to time, we may have other business dealings with Mr. R. Lauren, members of the Lauren family, or
entities affiliated with Mr. R. Lauren or the Lauren family. As a result of his stock ownership and position in our Company, Mr. R. Lauren has the ability to
exercise significant control over our business, including, without limitation, (i) the election of our Class B common stock directors, voting separately as a
class and (ii) any action requiring the approval of our stockholders, including the adoption of amendments to our certificate of incorporation and the
approval of mergers or sales of all or substantially all of our assets.
We rely on our licensing partners to preserve the value of our licenses. Failure to maintain licensing partners could harm our business.
The risks associated with our own products also apply to our licensed products in addition to any number of possible risks specific to a licensing
partner's business, including risks associated with a particular licensing partner's ability to:
•
•
obtain capital;
execute its business plans;
• manage its labor relations;
• maintain relationships with its suppliers and customers; and
• manage its credit and bankruptcy risks effectively.
Although a number of our license agreements prohibit our licensing partners from entering into licensing arrangements with our competitors, our
licensing partners generally are not precluded from offering, under other non-competitor brands, the types of products covered by their license agreements
with us. A substantial portion of sales of our products by our domestic licensing partners are also made to our largest customers. While we have significant
control over our licensing partners' products and advertising, we rely on our licensing partners for, among other things, operational and financial control
over their businesses. Changes in management, reduced sales of licensed products, poor execution, or financial difficulties with respect to any of our
licensing partners could adversely affect our revenues, both directly from reduced licensing revenue received and indirectly from reduced sales of our other
products.
Although we believe that we could replace our existing licensing partners in most circumstances, if necessary, our inability to do so for any period of
time could adversely affect our revenues, both directly from reduced licensing revenue received and indirectly from reduced sales of our other products.
See Item 1 — "Business — Our Licensing Business."
37
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2.
Properties.
We lease space for our retail stores, showrooms, warehouses, and offices in various domestic and international locations. We do not own any real
property except for our retail digital commerce call center and distribution facility in High Point, North Carolina; and our retail stores in Southampton and
Easthampton, New York, and Nantucket, Massachusetts.
We believe that our existing facilities are well maintained, in good operating condition, and are adequate for our present level of operations.
The following table sets forth information relating to our key properties as of March 28, 2020:
Location
Use
NC Highway 66, High Point, NC
Wholesale and retail distribution facility
N. Pendleton Street, High Point, NC
Retail digital commerce call center and distribution facility
Greensboro, NC
601 West 26th Street, NYC
650 Madison Avenue, NYC
Nutley, NJ
Geneva, Switzerland
7th Avenue, NYC
Spinners Building, Hong Kong
Gateway Office, Hong Kong
888 Madison Avenue, NYC
N. Michigan Avenue, Chicago
New Bond Street, London, UK
867 Madison Avenue, NYC
Paris, France
Tokyo, Japan
N. Rodeo Drive, Beverly Hills
Regent Street, London, UK
Prince's Building, Hong Kong
Wholesale and retail distribution facility
Corporate offices
Executive and corporate offices, design studio, and showrooms
Corporate and retail administrative offices and showrooms
European corporate offices
Corporate offices, design studio, and Women's showrooms
Asia sourcing offices
Asia corporate offices
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Retail flagship store
Approximate
Square Feet
847,000
805,000
337,700
304,900
273,200
255,000
107,000
78,800
67,000
37,500
37,900
37,500
31,500
27,700
25,700
25,000
19,400
19,000
9,800
As of March 28, 2020, we directly operated 530 retail stores, totaling approximately 4.1 million square feet. We anticipate that we will be able to
extend our retail store leases, as well as those leases for our non-retail facilities, which expire in the near future on satisfactory terms or relocate to desirable
alternate locations. We generally lease our freestanding retail stores for initial periods ranging from 5 to 15 years, with renewal options. See
Item 1A — "Risk Factors — Our business is subject to risks associated with leasing real estate and other assets under long-term, non-cancellable leases."
38
Item 3.
Legal Proceedings.
We are involved, from time to time, in litigation, other legal claims, and proceedings involving matters associated with or incidental to our business,
including, among other things, matters involving credit card fraud, trademark and other intellectual property, licensing, importation and exportation of
products, taxation, unclaimed property, and employee relations. We believe at present that the resolution of currently pending matters will not individually
or in the aggregate have a material adverse effect on our consolidated financial statements. However, our assessment of any litigation or other legal claims
could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in
accord with management's evaluation of the possible liability or outcome of such litigation or claims.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of May 22, 2020, there were 667 holders of record of our Class A common stock and 6 holders of record of our Class B common stock. Our
Class A common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "RL." All of our outstanding shares of Class B common
stock are owned by Mr. Ralph Lauren, Executive Chairman and Chief Creative Officer, and entities controlled by the Lauren family. Shares of our Class B
common stock may be converted immediately into Class A common stock on a one-for-one basis by the holder. There is no cash or other consideration paid
by the holder converting the shares and, accordingly, there is no cash or other consideration received by the Company. The shares of Class A common stock
issued by the Company in such conversions are exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. No shares
of our Class B common stock were converted into Class A common stock during the fiscal quarter ended March 28, 2020.
The following table sets forth repurchases of shares of our Class A common stock during the fiscal quarter ended March 28, 2020:
Total Number of
Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
December 29, 2019 to January 25, 2020
January 26, 2020 to February 22, 2020
February 23, 2020 to March 28, 2020
—
$
783,395
555,265 (a)
1,338,660
—
121.29
104.18
— $
783,395
543,438
1,326,833
Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under the
Plans or Programs(b)
(millions)
732
637
580
(a)
Includes 11,827 shares surrendered to or withheld by the Company in satisfaction of withholding taxes in connection with the vesting of awards
issued under its long-term stock incentive plans.
(b) As of March 28, 2020, the remaining availability under our Class A common stock repurchase program was approximately $580 million,
reflecting the May 13, 2019 approval by our Board of Directors to expand the program by up to an additional $600 million of Class A common
stock repurchases. Repurchases of shares of Class A common stock are subject to overall business and market conditions. Accordingly, as a
result of current business disruptions related to the COVID-19 pandemic, we have temporarily suspended our common stock repurchase
program as a preemptive action to preserve cash and strengthen our liquidity.
39
The following graph compares the cumulative total stockholder return (stock price appreciation plus dividends) on our Class A common stock to the
cumulative total return of the Standard & Poor's 500 Index and a peer group index of companies that we believe are closest to ours (the "Peer Group") for
the period from March 28, 2015, the last day of our 2015 fiscal year, through March 28, 2020, the last day of our 2020 fiscal year. Our Peer Group consists
of Burberry Group PLC, Compagnie Financière Richemont SA, EssilorLuxottica SA, The Estée Lauder Companies Inc., Hermes International, Kering,
LVMH, PVH Corp., Tapestry, Inc., Tiffany & Co., Tod's S.p.A., and V.F. Corporation. All calculations for foreign companies in our Peer Group are
performed using the local foreign issue of such companies. The returns are calculated by assuming a $100 investment made on March 28, 2015 in Class A
common stock or March 31, 2015 in an index, with all dividends reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Ralph Lauren Corporation, the S&P 500 Index, and a Peer Group
Item 6.
Selected Financial Data
See the "Index to Consolidated Financial Statements and Supplementary Information," and specifically "Selected Financial Information" appearing
at the end of this Annual Report on Form 10-K. This selected financial data should be read in conjunction with Item 7 — "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 8 — "Financial Statements and Supplementary Data" included in this Annual Report
on Form 10-K. Historical results may not be indicative of future results.
40
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following management's discussion and analysis of financial condition and results of operations ("MD&A") should be read together with our
audited consolidated financial statements and notes thereto, which are included in this Annual Report on Form 10-K. We utilize a 52-53 week fiscal year
ending on the Saturday closest to March 31. As such, Fiscal 2020 ended on March 28, 2020 and was a 52-week period; Fiscal 2019 ended on March 30,
2019 and was a 52-week period; Fiscal 2018 ended on March 31, 2018 and was a 52-week period; and Fiscal 2021 will end on March 27, 2021 and will be
a 52-week period.
INTRODUCTION
MD&A is provided as a supplement to the accompanying consolidated financial statements and notes thereto to help provide an understanding of our
results of operations, financial condition, and liquidity. MD&A is organized as follows:
•
•
•
Overview. This section provides a general description of our business, global economic conditions and industry trends, and a summary of
our financial performance for Fiscal 2020. In addition, this section includes a discussion of recent developments and transactions affecting
comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future
trends.
Results of operations. This section provides an analysis of our results of operations for Fiscal 2020 and Fiscal 2019 as compared to the
respective prior fiscal year.
Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of March 28, 2020, which
includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for
Fiscal 2020 and Fiscal 2019 as compared to the respective prior fiscal year; (iii) an analysis of our liquidity, including the availability under
our commercial paper borrowing program and credit facilities, common stock repurchases, payments of dividends, and our outstanding debt
and covenant compliance; and (iv) a summary of our contractual and other obligations as of March 28, 2020.
• Market risk management. This section discusses how we manage our risk exposures related to foreign currency exchange rates, interest
rates, and our investments as of March 28, 2020.
•
•
Critical accounting policies. This section discusses accounting policies considered to be important to our results of operations and financial
condition, which typically require significant judgment and estimation on the part of management in their application. In addition, all of our
significant accounting policies, including our critical accounting policies, are summarized in Note 3 to the accompanying consolidated
financial statements.
Recently issued accounting standards. This section discusses the potential impact on our reported results of operations and financial
condition of certain accounting standards that have been recently issued.
OVERVIEW
Our Business
Our Company is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories,
home furnishings, fragrances, and hospitality. Our long-standing reputation and distinctive image have been developed across an expanding number of
products, brands, sales channels, and international markets. Our brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label,
Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others.
We diversify our business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail, wholesale, and
licensing). This allows us to maintain a dynamic balance as our operating results do not depend solely on the performance of any single geographic area or
channel of distribution. We sell directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-
shops, and digital commerce operations around the world. Our wholesale sales are made principally to major department stores, specialty stores, and third-
party digital partners around the world, as well as to certain third-party-owned stores to which we have licensed the right to operate in defined geographic
territories using our trademarks. In addition, we license to third parties for specified periods the right to access our various trademarks in connection with
the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.
41
We organize our business into the following three reportable segments:
•
•
•
North America — Our North America segment, representing approximately 51% of our Fiscal 2020 net revenues, primarily consists of sales
of our Ralph Lauren branded products made through our retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In
North America, our retail business is comprised of our Ralph Lauren stores, our factory stores, and our digital commerce site,
www.RalphLauren.com. Our wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent,
specialty stores.
Europe — Our Europe segment, representing approximately 26% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph
Lauren branded products made through our retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club
Monaco. In Europe, our retail business is comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops,
and our various digital commerce sites. Our wholesale business in Europe is comprised of a varying mix of sales to both department stores
and specialty stores, depending on the country, as well as to various third-party digital partners.
Asia — Our Asia segment, representing approximately 17% of our Fiscal 2020 net revenues, primarily consists of sales of our Ralph Lauren
branded products made through our retail and wholesale businesses in Asia, Australia, and New Zealand. Our retail business in Asia is
primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our digital commerce site,
www.RalphLauren.cn, which launched in September 2018. In addition, we sell our products online through various third-party digital partner
commerce sites. In Asia, our wholesale business is comprised primarily of sales to department stores, with related products distributed
through shop-within-shops.
No operating segments were aggregated to form our reportable segments. In addition to these reportable segments, we also have other non-reportable
segments, representing approximately 6% of our Fiscal 2020 net revenues, which primarily consist of (i) sales of Club Monaco branded products made
through our retail and wholesale businesses in the U.S., Canada, and Europe, and our licensing alliances in Europe and Asia, and (ii) royalty revenues
earned through our global licensing alliances, excluding Club Monaco.
Effective beginning in the first quarter of Fiscal 2020, operating results related to our business in Latin America are included within our Europe
segment due to a change in how we manage this business. Previously, such results were included within our other non-reportable segments. All prior period
segment information has been recast to reflect this change on a comparative basis.
Approximately 46% of our Fiscal 2020 net revenues were earned outside of the U.S. See Note 20 to the accompanying consolidated financial
statements for further discussion of our segment reporting structure.
Our business is typically affected by seasonal trends, with higher levels of retail sales in our second and third fiscal quarters and higher wholesale
sales in our second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping
periods impacting our retail business and the timing of seasonal wholesale shipments.
Recent Developments
COVID-19 Pandemic
A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the globe in recent months, including throughout all
major geographies in which we operate (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as
significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as
temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have
resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty,
companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work
furloughs and reduced pay, which could lower consumers’ disposable income levels or willingness to purchase discretionary items. Further, even after such
government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as their willingness to
congregate in shopping centers or other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores,
distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors. For example, a significant number
of our stores in parts of Asia were closed for a substantial portion of our fourth
42
quarter of Fiscal 2020. Although our stores in Asia were largely reopened by the end of our Fiscal 2020, certain countries, including Japan, began imposing
new restrictions during our first quarter of Fiscal 2021. Retail traffic also continues to be challenging in those regions in which our stores are open.
Additionally, our stores in North America and the majority in Europe closed mid-March or earlier, and although certain stores have since reopened, a large
number remain closed and we are uncertain when they will reopen. Our wholesale business has also been adversely affected, particularly in North America
and Europe, as a result of department store closures and lower traffic and consumer demand.
In response to the COVID-19 pandemic, we have taken preemptive actions to preserve cash and strengthen our liquidity, including:
drawing down $475 million from our Global Credit Facility to bolster cash balances;
entering into a new credit facility with the same lenders that are parties to the Global Credit Facility, which provides for an additional $500 million
senior unsecured revolving line of credit that matures on May 25, 2021, or earlier in the event we are able to obtain other additional financing, as
described in Note 11 to the accompanying consolidated financial statements;
temporarily suspending our common stock repurchase program and our quarterly cash dividend;
temporarily reducing the base compensation of our executives and senior management team, as well as our Board of Directors;
carefully managing our expense structure across all key areas of spend, including aligning inventory levels with anticipated demand and
postponing non-critical capital build-out and other investments and activities; and
temporarily furloughing or reducing work hours for a significant portion of our employees who nevertheless remain eligible for employee benefits
during such period.
•
•
•
•
•
•
The COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis. Accordingly, we cannot predict for how long and to what
extent this crisis will impact our business operations or the global economy as a whole. We will continue to assess our operations location-by-location,
taking into account the guidance of local governments and global health organizations to determine when our operations can begin returning to normal
course of business. See Item 1A — "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse
effect on our business" for additional discussion regarding risks to our business associated with the COVID-19 pandemic.
Swiss Tax Reform
In May 2019, a public referendum was held in Switzerland that approved the Federal Act on Tax Reform and AHV Financing (the "Swiss Tax Act"),
which became effective January 1, 2020. The Swiss Tax Act eliminates certain preferential tax items at both the federal and cantonal levels for
multinational companies and provides the cantons with parameters for establishing local tax rates and regulations. The Swiss Tax Act also provides
transitional provisions, one of which allows eligible companies to increase the tax basis of certain assets based on the value generated by their business in
previous years, and to amortize such adjustment as a tax deduction over a transitional period. In connection with this transitional provision, we recorded a
one-time income tax benefit and corresponding deferred tax asset of $122.9 million during Fiscal 2020, which decreased our effective tax rate by 3,760
basis points.
See Note 10 to the accompanying consolidated financial statements for additional discussion regarding the Swiss Tax Act.
Fiscal 2019 Restructuring Plan
On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive
sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-related activities: (i)
rightsizing and consolidation of our global distribution network and corporate offices; (ii) targeted severance-related actions; and (iii) closure of certain of
our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan are expected to result in gross annualized expense savings of
approximately $60 million to $80 million.
In connection with the Fiscal 2019 Restructuring Plan, we have recorded cumulative charges of $145.8 million since its inception, of which $48.5
million and $97.3 million were recorded during Fiscal 2020 and Fiscal 2019, respectively. Actions
43
associated with the Fiscal 2019 Restructuring Plan are complete and no additional charges are expected to be incurred in connection with this plan.
See Note 9 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal
2019 Restructuring Plan.
U.S. Tax Reform
On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"),
which became effective January 1, 2018. The TCJA significantly revised U.S. tax law by, among other provisions, lowering the U.S. federal statutory
income tax rate from 35% to 21%, creating a territorial tax system that includes a one-time mandatory transition tax on previously deferred foreign
earnings, and eliminating or reducing certain income tax deductions.
During Fiscal 2018, we recorded net charges of $221.4 million within our income tax provision in connection with the TCJA, which increased our
effective tax rate by 4,520 basis points. Subsequently, during Fiscal 2019, we recorded net measurement period adjustments of $27.6 million as permitted
by SEC Staff Accounting Bulletin No. 118 ("SAB 118"). These measurement period adjustments increased our effective tax rate by 470 basis points during
Fiscal 2019.
See Note 10 to the accompanying consolidated financial statements for additional discussion regarding the TCJA.
Global Economic Conditions and Industry Trends
The global economy and retail industry are impacted by many different factors. The recent outbreak of COVID-19 has resulted in heightened
uncertainty surrounding the future state of the global economy, as well as significant volatility in global financial markets. As discussed in "Recent
Developments," governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced
business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such actions, together with changes in consumers' willingness
to congregate in populated areas and lower levels of disposal income due to rising unemployment rates, have resulted in significant business disruptions
across a wide array of industries and an overall decline of the global economy.
The global economy has also been impacted by the domestic and international political environment, including volatile international trade relations
and political unrest. Although trade relations between the U.S. and China have begun to ease, both countries have imposed new tariffs on each other related
to the importation of certain product categories. Concerns also exist regarding the United Kingdom's recent withdrawal from the European Union,
commonly referred to as "Brexit." The United Kingdom ceased to be a member of the European Union, effective January 31, 2020, and has entered a
"transition period" during which its existing trading relationship with the European Union will remain in place and it will continue to follow the European
Union's rules. Negotiations during the transition period to determine the United Kingdom's future relationship with the European Union, including terms of
trade, are expected to be complex. It is not clear at this time what, if any, agreements will be reached by the current December 31, 2020 transition period
deadline and the resulting impact on consumer sentiment. Additionally, certain other worldwide events, including political protests such as those that
recently took place in Hong Kong, acts of terrorism, taxation or monetary policy changes, fluctuations in commodity prices, and rising healthcare costs,
also increase volatility in the global economy.
The retail landscape in which we operate has been significantly disrupted by the COVID-19 pandemic, including widespread temporary closures of
stores and distribution centers and declines in retail traffic, tourism, and consumer spending on discretionary items. Prior to the COVID-19 pandemic,
consumers had been increasingly shifting their shopping preference from physical stores to online. This shift in preference could potentially be amplified in
the future as a byproduct of the COVID-19 pandemic, as consumers may prefer to avoid populated locations, such as shopping centers, in fear of exposing
themselves to infectious diseases. Even before the COVID-19 pandemic, many retailers, including certain of our large wholesale customers, have been
highly promotional and have aggressively marked down their merchandise on a periodic basis in an attempt to offset declines in physical store traffic. The
retail industry, particularly in the U.S., has also experienced numerous bankruptcies, restructurings, and ownership changes in recent years. The COVID-19
pandemic could exacerbate these trends if companies do not have adequate financial resources and/or access to additional capital to withstand prolonged
periods of adverse economic conditions. The continuation of these industry trends could further impact consumer spending and consumption behavior in
our industry, which could have a material adverse effect on our business or operating results.
We have implemented various strategies globally to help address many of these current challenges and continue to build a foundation for long-term
profitable growth centered around strengthening our consumer-facing areas of product, stores, and
44
marketing across channels and driving a more efficient operating model. In response to the COVID-19 pandemic, we have taken preemptive actions to
preserve cash and strengthen our liquidity, as described in "Recent Developments." Investing in our digital ecosystem remains a primary focus and is a key
component of our integrated global omni-channel strategy, particularly in light of the current COVID-19 pandemic, which could reshape consumer
shopping preferences. We also continue to take deliberate actions to ensure promotional consistency across channels and to enhance the overall brand and
shopping experience, including better aligning shipments and inventory levels with underlying demand. We also remain committed to optimizing our
wholesale distribution channel and enhancing our department store consumer experience. Further, in response to the recent trade developments between the
U.S. and China, we have taken steps to mitigate our exposure to the resulting tariffs, including diverting production to and sourcing from other countries,
driving productivity within our existing supplier base, and taking pricing actions. As a result of these efforts, the tariffs enacted to date are not expected to
have a material impact on our consolidated financial statements. We are also closely monitoring the latest Brexit developments and are assessing risks and
opportunities and developing strategies to mitigate our exposure once the transition period expires, including evaluating scenarios in which the transition
period ends without trade agreements in place.
We will continue to monitor these conditions and trends and will evaluate and adjust our operating strategies and foreign currency and cost
management opportunities to help mitigate the related impacts on our results of operations, while remaining focused on the long-term growth of our
business and protecting and elevating the value of our brand.
For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see
Part I, Item 1A — "Risk Factors" included in this Annual Report on Form 10-K.
Summary of Financial Performance
Operating Results
In Fiscal 2020, we reported net revenues of $6.160 billion, net income of $384.3 million, and net income per diluted share of $4.98, as compared to
net revenues of $6.313 billion, net income of $430.9 million, and net income per diluted share of $5.27 in Fiscal 2019. The comparability of our operating
results has been affected by adverse impacts related to COVID-19 and Hong Kong protest business disruptions, as well as restructuring-related charges,
impairment of assets, and certain other charges. Our operating results have also been affected by international and domestic tax reform.
Our operating performance for Fiscal 2020 reflected revenue declines of 2.4% on a reported basis and 1.2% on a constant currency basis, as defined
within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below, reflecting adverse impacts related to
COVID-19 and Hong Kong protest business disruptions.
Our gross profit as a percentage of net revenues decreased by 230 basis points to 59.3% during Fiscal 2020, primarily driven by inventory charges
recorded in connection with COVID-19 business disruptions, partially offset by favorable geographic, channel, and product mix, improved pricing, and
lower levels of promotional activity.
Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 240 basis points to 52.6% during Fiscal 2020,
primarily driven by operating deleverage on lower net revenues and higher bad debt expense, both largely attributable to COVID-19 business disruptions,
as well as the unfavorable impact attributable to geographic and channel mix.
Net income decreased by $46.6 million to $384.3 million in Fiscal 2020 as compared to Fiscal 2019, primarily due to a $244.8 million decrease in
operating income reflecting adverse impacts related to COVID-19 and Hong Kong protest business disruptions, partially offset by a $209.5 million
decrease in our income tax provision largely driven by the combined impact of international and domestic tax reform. Net income per diluted share
decreased by $0.29 to $4.98 per share in Fiscal 2020 as compared to Fiscal 2019, due to lower net income, partially offset by lower weighted-average
diluted shares outstanding during Fiscal 2020.
Net income during Fiscal 2020 reflected a one-time income tax benefit of $122.9 million, or $1.59 per diluted share, recorded in connection with the
Swiss Tax Act and and net income during Fiscal 2019 reflected TCJA enactment-related charges of $27.6 million, or $0.34 per diluted share. Our operating
results during Fiscal 2020 and Fiscal 2019 were also negatively impacted by restructuring-related charges, impairment of assets (including an equity
method investment), and certain other charges (including those related to COVID-19 business disruptions) totaling $321.8 million and $163.1 million,
respectively, which had an after-tax effect of reducing net income by $244.8 million, or $3.17 per diluted share, and $129.0 million, or $1.58 per diluted
share, respectively.
45
Financial Condition and Liquidity
We ended Fiscal 2020 in a net cash and investments position (cash and cash equivalents plus short-term and non-current investments, less total debt)
of $945.3 million, compared to $1.343 billion as of the end of Fiscal 2019. The decrease in our net cash and investments position was primarily due to our
use of cash to support Class A common stock repurchases of $694.8 million, including withholdings in satisfaction of tax obligations for stock-based
compensation awards, to invest in our business through $270.3 million in capital expenditures, and to make dividend payments of $203.9 million, partially
offset by our operating cash flows of $754.6 million.
We generated $754.6 million of cash from operations during Fiscal 2020, compared to $783.8 million during Fiscal 2019. The decline in cash
provided by operating activities was due to a decrease in net income before non-cash charges, partially offset by a net favorable change related to our
operating assets and liabilities, including our working capital, as compared to the prior fiscal year period.
Our equity decreased to $2.693 billion as of March 28, 2020, compared to $3.287 billion as of March 30, 2019, primarily due to our share
repurchase activity, dividends declared, and cumulative adjustments from our adoption of new accounting standards, partially offset by our comprehensive
income and the impact of stock-based compensation arrangements during Fiscal 2020.
Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition
The comparability of our operating results for the three fiscal years presented herein has been affected by certain events, including:
•
pretax charges incurred in connection with our restructuring plans, as well as certain other asset impairments and other charges, including
those related to COVID-19 business disruptions, as summarized below (references to "Notes" are to the notes to the accompanying
consolidated financial statements):
Non-routine inventory charges(a)
Restructuring and other charges (see Note 9)
COVID-19-related bad debt expense(b)
Impairment of assets (see Note 8)(c)
Total charges
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
(159.5) $
(7.2) $
(67.2)
(56.4)
(38.7)
(130.1)
—
(25.8)
$
(321.8) $
(163.1) $
(7.6)
(108.0)
—
(50.0)
(165.6)
(a) Non-routine inventory charges are recorded within cost of goods sold in the consolidated statements of operations. Fiscal 2020 includes
non-routine inventory charges of $157.3 million related to adverse impacts associated with COVID-19 business disruptions. All other
non-routine inventory charges related to our restructuring plans (see Note 9).
(b) COVID-19-related bad debt expense is recorded within SG&A expenses in the consolidated statements of operations.
(c) Fiscal 2020 includes a $7.1 million impairment of an equity method investment recorded within other income (expense), net in the
consolidated statements of operations. All other impairment charges were recorded within impairment of assets in the consolidated
statements of operations.
•
•
•
adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including, but not limited to, incremental inventory
charges and bad debt expense recorded during Fiscal 2020, as summarized in the table above;
a one-time benefit of $122.9 million recorded within our income tax provision in the consolidated statements of operations during Fiscal 2020
in connection with the Swiss Tax Act, which decreased our effective tax rate by 3,760 basis points. See Note 10 to the accompanying
consolidated financial statements for further discussion; and
TCJA enactment-related charges of $27.6 million and $221.4 million recorded within the income tax provision in the consolidated statements
of operations during Fiscal 2019 and Fiscal 2018, respectively, which increased our effective tax rate by 470 basis points and 4,520 basis
points, respectively. See Note 10 to the accompanying consolidated financial statements for further discussion.
46
Since we are a global company, the comparability of our operating results reported in U.S. Dollars is also affected by foreign currency exchange rate
fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. Such fluctuations can have a
significant effect on our reported results. As such, in addition to financial measures prepared in accordance with accounting principles generally accepted in
the U.S. ("U.S. GAAP"), our discussions often contain references to constant currency measures, which are calculated by translating current-year and prior-
year reported amounts into comparable amounts using a single foreign exchange rate for each currency. We present constant currency financial information,
which is a non-U.S. GAAP financial measure, as a supplement to our reported operating results. We use constant currency information to provide a
framework for assessing how our businesses performed excluding the effects of foreign currency exchange rate fluctuations. We believe this information is
useful to investors for facilitating comparisons of operating results and better identifying trends in our businesses. The constant currency performance
measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with U.S. GAAP.
Reconciliations between this non-U.S. GAAP financial measure and the most directly comparable U.S. GAAP measure are included in the "Results of
Operations" section where applicable.
Our discussion also includes reference to comparable store sales. Comparable store sales refer to the change in sales of our stores that have been
open for at least 13 full fiscal months. Sales from our digital commerce sites are also included within comparable sales for those geographies that have been
serviced by the related site for at least 13 full fiscal months. Sales for stores or digital commerce sites that are closed or shut down during the year are
excluded from the calculation of comparable store sales. Sales for stores that are either relocated, enlarged (as defined by gross square footage expansion of
25% or greater), or generally closed for 30 or more consecutive days for renovation are also excluded from the calculation of comparable store sales until
such stores have been operating in their new location or in their newly renovated state for at least 13 full fiscal months. All comparable store sales metrics
are calculated on a constant currency basis.
Our "Results of Operations" discussion that follows includes the significant changes in operating results arising from these items affecting
comparability. However, unusual items or transactions may occur in any period. Accordingly, investors and other financial statement users should consider
the types of events and transactions that have affected operating trends.
47
RESULTS OF OPERATIONS
Fiscal 2020 Compared to Fiscal 2019
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement
captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
Change
% / bps
Change
Net revenues
Cost of goods sold
Gross profit
Gross profit as % of net revenues
$
(millions, except per share data)
$
6,313.0
$
6,159.8
(2,506.5)
3,653.3
(2,427.0)
3,886.0
59.3%
61.6%
(153.2)
(79.5)
(232.7)
Selling, general, and administrative expenses
(3,237.5)
(3,168.3)
(69.2)
SG&A expenses as % of net revenues
52.6%
50.2%
Impairment of assets
Restructuring and other charges
Operating income
(31.6)
(67.2)
317.0
(25.8)
(130.1)
561.8
Operating income as % of net revenues
5.1%
8.9%
Interest expense
Interest income
Other income (expense), net
Income before income taxes
Income tax benefit (provision)
Effective tax rate(a)
Net income
Net income per common share:
Basic
Diluted
(17.6)
34.4
(7.4)
326.4
57.9
(20.7)
40.8
0.6
582.5
(151.6)
(17.7%)
384.3
$
26.0%
$
430.9
(4,370 bps)
(46.6)
(10.8%)
5.07
4.98
$
$
5.35
5.27
$
$
(0.28)
(0.29)
(5.2%)
(5.5%)
$
$
$
(2.4%)
3.3%
(6.0%)
(230 bps)
2.2%
240 bps
22.8%
(48.4%)
(43.6%)
(380 bps)
(14.8%)
(15.8%)
NM
(44.0%)
NM
(5.8)
62.9
(244.8)
3.1
(6.4)
(8.0)
(256.1)
209.5
Effective tax rate is calculated by dividing the income tax benefit (provision) by income before income taxes.
(a)
NM Not meaningful.
Net Revenues. Net revenues decreased by $153.2 million, or 2.4%, to $6.160 billion in Fiscal 2020 as compared to Fiscal 2019, including net
unfavorable foreign currency effects of $77.1 million. On a constant currency basis, net revenues decreased by $76.1 million, or 1.2%, reflecting adverse
impacts related to COVID-19 and Hong Kong protest business disruptions.
The following table summarizes the percentage change in our Fiscal 2020 consolidated comparable store sales as compared to the prior fiscal year,
inclusive of adverse impacts related to COVID-19 and Hong Kong protest business disruptions:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
48
% Change
3%
(3%)
(2%)
Our global average store count increased by 43 stores and concession shops during Fiscal 2020 compared with the prior fiscal year, largely driven by
new openings in Asia and Europe. The following table details our retail store presence by segment as of the periods presented:
Freestanding Stores:
North America
Europe
Asia
Other non-reportable segments
Total freestanding stores
Concession Shops:
North America
Europe
Asia
Other non-reportable segments
Total concession shops
Total stores
March 28,
2020
March 30,
2019
230
94
132
74
530
2
29
619
4
654
224
87
115
75
501
2
29
622
5
658
1,184
1,159
In addition to our stores, we sell products online in North America and Europe through our various digital commerce sites, which include
www.RalphLauren.com and www.ClubMonaco.com, among others, as well as through our Polo mobile app in North America and the United Kingdom. In
Asia, we sell products online through our digital commerce site, www.RalphLauren.cn, which launched in September 2018, as well as through various
third-party digital partner commerce sites.
Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the prior fiscal year, are
provided below:
Fiscal Years Ended
March 28,
2020
March 30,
2019
$ Change
As
Reported
(millions)
Foreign
Exchange
Impact
$ Change
Constant
Currency
% Change
As
Reported
Constant
Currency
Net Revenues:
North America
Europe
Asia
Other non-reportable segments
$
3,140.5 $
3,202.9 $
(62.4) $
(1.4) $
1,632.2
1,017.2
369.9
1,683.0
1,041.0
386.1
(50.8)
(23.8)
(16.2)
(63.6)
(11.6)
(0.5)
Total net revenues
$
6,159.8 $
6,313.0 $
(153.2) $
(77.1) $
(61.0)
12.8
(12.2)
(15.7)
(76.1)
(2.0%)
(3.0%)
(2.3%)
(4.2%)
(2.4%)
(1.9%)
0.8%
(1.2%)
(4.1%)
(1.2%)
North America net revenues — Net revenues decreased by $62.4 million, or 2.0%, during Fiscal 2020 as compared to Fiscal 2019, including net
unfavorable foreign currency effects of $1.4 million. On a constant currency basis, net revenues decreased by $61.0 million, or 1.9%, reflecting adverse
impacts related to COVID-19 business disruptions.
The $62.4 million net decline in North America net revenues was driven by:
•
a $101.2 million net decrease related to our North America wholesale business, largely driven by weaker demand and challenging department
store traffic trends, as well as COVID-19 business disruptions.
This decrease was partially offset by:
•
an increase of $38.8 million related to our North America retail business, inclusive of net unfavorable foreign currency effects of $0.7 million
and the adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues increased by $39.5 million driven by
an increase of $47.1 million in non-comparable store sales, partially offset by a decrease of $7.6 million in comparable store sales. The
following table summarizes the percentage change
49
in comparable store sales related to our North America retail business, inclusive of adverse impacts related to COVID-19 business
disruptions:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
1%
(1%)
—%
Europe net revenues — Net revenues decreased by $50.8 million, or 3.0%, during Fiscal 2020 as compared to Fiscal 2019, including net unfavorable
foreign currency effects of $63.6 million. On a constant currency basis, net revenues increased by $12.8 million, or 0.8%, despite adverse impacts related to
COVID-19 business disruptions.
The $50.8 million net decline in Europe net revenues was driven by:
•
•
a $44.3 million net decrease related to our Europe wholesale business driven by net unfavorable foreign currency effects of $32.3 million and
COVID-19 business disruptions, partially offset by stronger demand prior to the COVID-19 pandemic; and
a $6.5 million net decrease related to our Europe retail business, inclusive of net unfavorable foreign currency effects of $31.3 million and the
adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues increased by $24.8 million driven by an
increase of $32.4 million in non-comparable store sales, partially offset by a decrease of $7.6 million in comparable store sales. The following
table summarizes the percentage change in comparable store sales related to our Europe retail business, inclusive of adverse impacts related to
COVID-19 business disruptions:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
11%
(2%)
(1%)
Asia net revenues — Net revenues decreased by $23.8 million, or 2.3%, during Fiscal 2020 as compared to Fiscal 2019, including net unfavorable
foreign currency effects of $11.6 million. On a constant currency basis, net revenues decreased by $12.2 million, or 1.2%, reflecting estimated adverse
impacts related to COVID-19 and Hong Kong protest business disruptions.
The $23.8 million net decline in Asia net revenues was driven by:
•
a $21.9 million net decrease related to our Asia retail business, inclusive of net unfavorable foreign currency effects of $10.7 million and the
adverse impacts of COVID-19 and Hong Kong protest business disruptions. On a constant currency basis, net revenues decreased by $11.2
million, reflecting a decrease of $36.4 million in comparable store sales, partially offset by an increase of $25.2 million in non-comparable
store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business, inclusive of
adverse impacts related to COVID-19 and Hong Kong protest business disruptions:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
22%
(5%)
(4%)
•
a $1.9 million net decrease related to our Asia wholesale business, inclusive of net unfavorable foreign currency effects of $0.9 million and
the adverse impact of COVID-19 business disruptions.
Gross Profit. Gross profit decreased by $232.7 million, or 6.0%, to $3.653 billion in Fiscal 2020, including net unfavorable foreign currency
effects of $53.7 million. The decline in gross profit reflects adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including
incremental inventory charges of $157.3 million. Gross profit during Fiscal 2020 and Fiscal 2019 also reflected inventory charges of $2.2 million and $7.2
million, respectively, recorded in connection with our restructuring plans. Gross profit as a percentage of net revenues decreased to 59.3% in Fiscal 2020
from 61.6% in Fiscal 2019.
50
The 230 basis point decline was primarily driven by higher inventory charges and deleverage on lower net revenues, partially offset by favorable
geographic, channel, and product mix, improved pricing, and lower levels of promotional activity.
Gross profit as a percentage of net revenues is dependent upon a variety of factors, including changes in the relative sales mix among distribution
channels, changes in the mix of products sold, the timing and level of promotional activities, foreign currency exchange rates, and fluctuations in material
costs. These factors, among others, may cause gross profit as a percentage of net revenues to fluctuate from year to year.
Selling, General, and Administrative Expenses. SG&A expenses include compensation and benefits, advertising and marketing, rent and
occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses
increased by $69.2 million, or 2.2%, to $3.238 billion in Fiscal 2020, including net favorable foreign currency effect of $35.5 million. The increase in
SG&A expenses reflects net adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including incremental bad debt expense of
$56.4 million. SG&A expenses as a percentage of net revenues increased to 52.6% in Fiscal 2020 from 50.2% in Fiscal 2019. The 240 basis point increase
was primarily due to operating deleverage on lower net revenues and higher bad debt expense, both primarily attributable to the COVID-19 pandemic, as
well as the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our retail businesses
(which typically carry higher operating expense margins).
The $69.2 million net increase in SG&A expenses was driven by:
SG&A expense category:
Bad debt expense
Compensation-related expenses
Marketing and advertising expenses
Staff-related expenses
Rent and occupancy expenses
Other
Total net increase in SG&A expenses
Fiscal 2020
Compared to
Fiscal 2019
(millions)
58.3
29.4
5.2
(21.4)
(14.3)
12.0
69.2
$
$
In response to the COVID-19 pandemic, we are carefully managing our expense structure across all areas of spend, including temporarily
postponing non-critical capital build-out and other investments and activities. However, we remain committed to spending on key strategic initiatives
including marketing, digital, expanding and renovating our global retail stores and concession shops, and investing in productivity-enhancing
infrastructure. We expect to make these investments while continuing to manage our cost base with discipline.
Impairment of Assets. During Fiscal 2020 and Fiscal 2019, we recorded non-cash impairment charges of $31.6 million and $21.2 million,
respectively, to write-down certain long-lived assets in connection with our restructuring plans and identification of underperforming stores. Additionally,
as a result of our decision to sell our corporate jet in connection with our cost savings initiative, we recorded a non-cash impairment charge of $4.6 million
during Fiscal 2019 to reduce the carrying value of the asset held-for-sale to its estimated fair value, less costs to sell. See Note 8 to the accompanying
consolidated financial statements.
Restructuring and Other Charges. During Fiscal 2020 and Fiscal 2019, we recorded restructuring charges of $37.6 million and $93.6 million,
respectively, in connection with our restructuring plans, primarily consisting of severance and benefits costs, as well as a loss on sale of property during the
prior fiscal year period. Additionally, during Fiscal 2020, we recorded other charges of $29.6 million primarily related to the charitable donation of the net
cash proceeds received from the sale of our corporate jet, and rent and occupancy costs associated with certain previously exited real estate locations for
which the related lease agreements have not yet expired. During Fiscal 2019, we recorded other charges of $36.5 million primarily related to our sabbatical
leave program initiated during the fourth quarter of Fiscal 2019, depreciation expense associated with our former Polo store at 711 Fifth Avenue in New
York City, and a customs audit. See Note 9 to the accompanying consolidated financial statements.
51
Operating Income. Operating income decreased by $244.8 million, or 43.6%, to $317.0 million in Fiscal 2020, including net unfavorable foreign
currency effect of $18.2 million. The decline in operating income reflects net adverse impacts related to COVID-19 and Hong Kong protest business
disruptions, including total incremental inventory charges and bad debt expense of $213.7 million, as previously discussed. Our operating results during
Fiscal 2020 and Fiscal 2019 were also negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $101.0
million and $163.1 million, respectively, as previously discussed. Operating income as a percentage of net revenues decreased to 5.1% in Fiscal 2020 from
8.9% in Fiscal 2019. The 380 basis point decline was primarily driven by the decline in our gross margin and the increase in SG&A expenses as a
percentage of net revenues, partially offset by lower restructuring-related charges recorded during Fiscal 2020 as compared to the prior fiscal year, all as
previously discussed.
Operating income and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the prior
fiscal year, are provided below:
Segment:
North America
Europe
Asia
Fiscal Years Ended
March 28, 2020
March 30, 2019
Operating
Income
(millions)
Operating
Margin
Operating
Income
(millions)
Operating
Margin
$
Change
(millions)
Margin
Change
$
486.6
15.5% $
682.8
21.3% $ (196.2)
(580 bps)
336.3
20.6%
392.8
23.3%
(56.5)
(270 bps)
124.8
12.3%
161.0
15.5%
(36.2)
(320 bps)
Other non-reportable segments
85.2
23.0%
118.7
30.7%
(33.5)
(770 bps)
Unallocated corporate expenses
Unallocated restructuring and other charges
1,032.9
(648.7)
(67.2)
1,355.3
(663.4)
(130.1)
(322.4)
14.7
62.9
Total operating income
$
317.0
5.1% $
561.8
8.9% $ (244.8)
(380 bps)
North America operating margin declined by 580 basis points, primarily due to the unfavorable impact of 440 basis points related to incremental
inventory charges and bad debt expense recorded in connection with COVID-19 business disruptions. The remaining 140 basis point decline largely related
to adverse market conditions driven by the COVID-19 pandemic.
Europe operating margin declined by 270 basis points, primarily due to the net unfavorable impact of 210 basis points related to incremental
inventory charges and bad debt expense recorded in connection with COVID-19 business disruptions, partially offset by lower non-cash charges recorded
in connection with our restructuring plans during Fiscal 2020 as compared to the prior fiscal year. The decline in operating margin also reflected a 40 basis
point decline largely related to adverse market conditions driven by the COVID-19 pandemic, as well as a 20 basis point decline related unfavorable
foreign currency.
Asia operating margin declined by 320 basis points, primarily due to the unfavorable impact of 160 basis points related to incremental inventory
charges and bad debt expense recorded in connection with COVID-19 business disruptions. The remaining 160 basis point decline largely related to
adverse market conditions driven by the COVID-19 pandemic and Hong Kong protests.
Unallocated corporate expenses decreased by $14.7 million to $648.7 million in Fiscal 2020. The decline in unallocated corporate expenses was due
to lower compensation-related expenses of $11.5 million, lower staff-related expenses of $8.8 million, lower consulting fees of $6.7 million, and lower
marketing and advertising expenses of $5.9 million, partially offset by lower intercompany sourcing commission income of $10.2 million (which is offset
at the segment level and eliminates in consolidation) and higher other expenses of $8.0 million.
Unallocated restructuring and other charges decreased by $62.9 million to $67.2 million in Fiscal 2020, as previously discussed above and in Note
9 to the accompanying consolidated financial statements.
52
Non-operating Income (Expense), Net. Non-operating income (expense), net is comprised of interest expense, interest income, and other income
(expense), net, which includes foreign currency gains (losses), equity in income (losses) from our equity-method investees, and other non-operating
expenses. During Fiscal 2020, we reported non-operating income, net, of $9.4 million, as compared to $20.7 million in Fiscal 2019. The $11.3 million
decline was primarily driven by:
•
•
an $8.0 million increase in other expense, net, driven by a $7.1 million impairment of an equity method investment. See Note 8 to the
accompanying consolidated financial statements; and
a $6.4 million decrease in interest income driven by the lower balance of our investment portfolio, as well as lower interest rates in financial
markets during Fiscal 2020 as compared to the prior fiscal year.
Income Tax Benefit (Provision). The income tax benefit (provision) represents federal, foreign, state and local income taxes. We reported an
income tax benefit and effective tax rate of $57.9 million and (17.7%), respectively, in Fiscal 2020, as compared to an income tax provision and effective
tax rate of $151.6 million and 26.0%, respectively, in Fiscal 2019. The $209.5 million decline in the income tax provision was largely driven by lower
pretax income primarily due to the adverse impacts of COVID-19 and Hong Kong protest business disruptions. The decline in our income provision also
reflected a one-time benefit of $122.9 million recorded in Fiscal 2020 in connection with the Swiss Tax Act, which lowered our effective tax rate by 3,760
basis points, as well as the absence of a $27.6 million TCJA enactment-related charge recorded in the prior fiscal year, which negatively impacted our prior
fiscal year effective tax rate by 470 basis points. In addition to this combined 4,230 basis point improvement related to tax reform impacts, the decline in
our effective tax rate also reflected the net favorable impact of 140 basis points primarily attributable to other factors, including the tax impacts of earnings
in lower taxed foreign jurisdictions versus the U.S. and favorable provision to tax return adjustments, partially offset by the unfavorable impact of
additional income tax reserves associated with certain income tax audits. Our effective tax rate will change from period to period based on various factors
including, but not limited to, the geographic mix of earnings, the timing and amount of foreign dividends, enacted tax legislation, state and local taxes, tax
audit findings and settlements, and the interaction of various global tax strategies. See Note 10 to the accompanying consolidated financial statements for
discussion regarding the Swiss Tax Act and TCJA.
Net Income. Net income decreased to $384.3 million in Fiscal 2020, from $430.9 million in Fiscal 2019. The $46.6 million decline in net income
was primarily due to the decrease in our operating income, partially offset by the decrease in our income tax provision, both as previously discussed. Net
income during Fiscal 2020 and Fiscal 2019 reflected a one-time income tax benefit of $122.9 million recorded in connection with Swiss tax reform and
TCJA enactment-related charges of $27.6 million, respectively, both as previously discussed. Our operating results during Fiscal 2020 and Fiscal 2019
were also negatively impacted by restructuring-related charges, impairment of assets (including an equity method investment), and certain other charges
(including those related to COVID-19 business disruptions) totaling $321.8 million and $163.1 million, respectively, which had an after-tax effect of
reducing net income by $244.8 million and $129.0 million, respectively.
Net Income per Diluted Share. Net income per diluted share decreased to $4.98 in Fiscal 2020, from $5.27 in Fiscal 2019. The $0.29 per share
decline was due to the lower level of net income, as previously discussed, partially offset by lower weighted-average diluted shares outstanding during
Fiscal 2020 driven by our share repurchases during the last twelve months. Net income per diluted share in Fiscal 2020 and Fiscal 2019 were favorably
impacted by $1.59 per share as a result of a one-time income tax benefit recorded in connection with the Swiss Tax Act and negatively impacted by $0.34
per share as a result of TCJA enactment-related charges, respectively, both as previously discussed. Net income per diluted share in Fiscal 2020 and Fiscal
2019 were also negatively impacted by $3.17 per share and $1.58 per share, respectively, as a result of restructuring-related charges, impairment of assets
(including an equity method investment), and certain other charges (including those related to COVID-19 business disruptions), as previously discussed.
53
Fiscal 2019 Compared to Fiscal 2018
The following table summarizes our results of operations and expresses the percentage relationship to net revenues of certain financial statement
captions. All percentages shown in the below table and the discussion that follows have been calculated using unrounded numbers.
Fiscal Years Ended
March 30,
2019
March 31,
2018
$
Change
% / bps
Change
Net revenues
Cost of goods sold
Gross profit
Gross profit as % of net revenues
$
(millions, except per share data)
$
6,182.3
$
6,313.0
(2,427.0)
3,886.0
(2,430.6)
3,751.7
61.6%
60.7%
130.7
3.6
134.3
Selling, general, and administrative expenses
(3,168.3)
(3,095.5)
(72.8)
SG&A expenses as % of net revenues
50.2%
50.1%
Impairment of assets
Restructuring and other charges
Operating income
(25.8)
(130.1)
561.8
(50.0)
(108.0)
498.2
Operating income as % of net revenues
8.9%
8.1%
Interest expense
Interest income
Other income (expense), net
Income before income taxes
Income tax provision
Effective tax rate(a)
Net income
Net income per common share:
Basic
Diluted
(20.7)
40.8
0.6
582.5
(151.6)
(18.2)
12.3
(3.1)
489.2
(326.4)
26.0%
430.9
$
66.7%
$
162.8
(4,070 bps)
268.1
164.6%
5.35
5.27
$
$
1.99
1.97
$
$
3.36
3.30
168.8%
167.5%
$
$
$
2.1%
(0.1%)
3.6%
90 bps
2.4%
10 bps
(48.5%)
20.6%
12.8%
80 bps
13.6%
231.3%
NM
19.1%
(53.5%)
24.2
(22.1)
63.6
(2.5)
28.5
3.7
93.3
174.8
Effective tax rate is calculated by dividing the income tax provision by income before income taxes.
(a)
NM Not meaningful.
Net Revenues. Net revenues increased by $130.7 million, or 2.1%, to $6.313 billion in Fiscal 2019 as compared to Fiscal 2018, including net
unfavorable foreign currency effects of $42.0 million. On a constant currency basis, net revenues increased by $172.7 million, or 2.8%.
The following table summarizes the percentage change in our Fiscal 2019 consolidated comparable store sales as compared to the prior fiscal year:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
54
% Change
9%
—%
1%
Our global average store count increased by 34 stores and concession shops during Fiscal 2019 compared with the prior fiscal year, largely driven by
new openings in Asia. The following table details our retail store presence by segment as of the periods presented:
Freestanding Stores:
North America
Europe
Asia
Other non-reportable segments
Total freestanding stores
Concession Shops:
North America
Europe
Asia
Other non-reportable segments
Total concession shops
Total stores
March 30,
2019
March 31,
2018
224
87
115
75
501
2
29
622
5
658
215
81
105
71
472
2
25
603
2
632
1,159
1,104
In addition to our stores, we sold products online in North America and Europe through our various digital commerce sites, which include
www.RalphLauren.com and www.ClubMonaco.com, among others. In Asia, we sold products online through our digital commerce site,
www.RalphLauren.cn, which launched in September 2018, as well as through various third-party digital partner commerce sites.
Net revenues for our segments, as well as a discussion of the changes in each reportable segment's net revenues from the prior fiscal year, are
provided below:
Fiscal Years Ended
March 30,
2019
March 31,
2018
$ Change
As
Reported
(millions)
Foreign
Exchange
Impact
$ Change
Constant
Currency
% Change
As
Reported
Constant
Currency
Net Revenues:
North America
Europe
Asia
Other non-reportable segments
$
3,202.9 $
3,231.0 $
(28.1) $
(3.3) $
1,683.0
1,041.0
386.1
1,608.3
933.7
409.3
74.7
107.3
(23.2)
(27.7)
(10.9)
(0.1)
Total net revenues
$
6,313.0 $
6,182.3 $
130.7 $
(42.0) $
(24.8)
102.4
118.2
(23.1)
172.7
(0.9%)
4.6%
11.5%
(5.7%)
2.1%
(0.8%)
6.4%
12.7%
(5.7%)
2.8%
North America net revenues — Net revenues decreased by $28.1 million, or 0.9%, during Fiscal 2019 as compared to Fiscal 2018, including net
unfavorable foreign currency effects of $3.3 million. On a constant currency basis, net revenues decreased by $24.8 million, or 0.8%.
The $28.1 million net decline in North America net revenues was driven by a $57.0 million net decrease related to our North America wholesale
business, largely driven by a strategic reduction of shipments (including within the off-price channel) and points of distribution in connection with our
long-term growth strategy.
This decline was partially offset by:
•
a $28.9 million net increase related to our North America retail business, inclusive of net unfavorable foreign currency effects of $1.8 million.
On a constant currency basis, net revenues increased by $30.7 million driven by an increase of $30.3 million in non-comparable store sales.
The following table summarizes the percentage change in comparable store sales related to our North America retail business:
55
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
10%
(2%)
—%
Europe net revenues — Net revenues increased by $74.7 million, or 4.6%, during Fiscal 2019 as compared to Fiscal 2018, including net unfavorable
foreign currency effects of $27.7 million. On a constant currency basis, net revenues increased by $102.4 million, or 6.4%.
The $74.7 million net increase in Europe net revenues was driven by:
•
•
a $51.5 million net increase related to our Europe wholesale business largely driven by stronger demand, partially offset by net unfavorable
foreign currency effects of $18.2 million; and
a $23.2 million net increase related to our Europe retail business, inclusive of net unfavorable foreign currency effects of $9.5 million. On a
constant currency basis, net revenues increased by $32.7 million driven by an increase of $38.6 million in non-comparable store sales,
partially offset by a decrease of $5.9 million in comparable store sales. The following table summarizes the percentage change in comparable
store sales related to our Europe retail business:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
6%
(1%)
(1%)
Asia net revenues — Net revenues increased by $107.3 million, or 11.5%, during Fiscal 2019 as compared to Fiscal 2018, including net unfavorable
foreign currency effects of $10.9 million. On a constant currency basis, net revenues increased by $118.2 million, or 12.7%.
The $107.3 million net increase in Asia net revenues was driven by:
•
a $95.6 million net increase related to our Asia retail business, inclusive of net unfavorable foreign currency effects of $9.1 million. On a
constant currency basis, net revenues increased by $104.7 million, reflecting increases of $65.3 million in non-comparable store sales and
$39.4 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia
retail business:
Digital commerce comparable store sales
Comparable store sales excluding digital commerce
Total comparable store sales
% Change
51%
4%
5%
•
an $11.7 million net increase related to our Asia wholesale business, primarily driven by our expansion in Japan, South Korea, and Southeast
Asia.
Gross Profit. Gross profit increased by $134.3 million, or 3.6%, to $3.886 billion in Fiscal 2019. Gross profit during Fiscal 2019 and Fiscal 2018
reflected inventory charges of $7.2 million and $7.6 million, respectively, recorded in connection with our restructuring plans. The increase in gross profit
also included a net unfavorable foreign currency effect of $15.2 million. Gross profit as a percentage of net revenues increased to 61.6% in Fiscal 2019
from 60.7% in Fiscal 2018. The 90 basis point increase was primarily driven by improved pricing and lower levels of promotional activity in connection
with our long-term growth strategy, and favorable product and geographic mix, partially offset by higher inventory reserves.
Selling, General, and Administrative Expenses. SG&A expenses increased by $72.8 million, or 2.4%, to $3.168 billion in Fiscal 2019. This
increase included a net favorable foreign currency effect of $17.4 million. SG&A expenses as a percentage of net revenues increased slightly to 50.2% in
Fiscal 2019 from 50.1% in Fiscal 2018. The 10 basis point increase was primarily due to our increased marketing investment, new store expansion, and the
unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our retail businesses (which typically
carry higher operating expense margins). These increases were partially offset by our operational discipline.
56
The $72.8 million net increase in SG&A expenses was driven by:
SG&A expense category:
Marketing and advertising expenses
Compensation-related expenses
Selling-related expenses
Rent and occupancy expenses
Depreciation and amortization expense
Other
Total net increase in SG&A expenses
Fiscal 2019
Compared to
Fiscal 2018
(millions)
31.7
22.8
20.0
15.0
(13.7)
(3.0)
72.8
$
$
Impairment of Assets. During Fiscal 2019 and Fiscal 2018, we recorded non-cash impairment charges of $21.2 million and $41.2 million,
respectively, to write-down certain long-lived assets related to our restructuring plans and identification of underperforming stores. Additionally, as a result
of our decision to sell our corporate jet, we recorded a non-cash impairment charge of $4.6 million during Fiscal 2019 to reduce the carrying value of the
asset held-for-sale to its estimated fair value, less costs to sell. During Fiscal 2018, we also recorded a non-cash impairment charge of $8.8 million to
reduce the carrying value of a certain intangible asset to its estimated fair value as a result of a change in the planned usage of the asset. See Note 8 to the
accompanying consolidated financial statements.
Restructuring and Other Charges. During Fiscal 2019 and Fiscal 2018, we recorded restructuring charges of $93.6 million and $79.2 million,
respectively, in connection with our restructuring plans, primarily consisting of severance and benefits costs, and lease termination and store closure costs.
In addition, during Fiscal 2019, we recorded other charges of $36.5 million primarily related to our sabbatical leave program initiated during the fourth
quarter of Fiscal 2019, depreciation expense associated with our former Polo store at 711 Fifth Avenue in New York City, and a customs audit. During
Fiscal 2018, we recorded other net charges of $28.8 million primarily related to depreciation expense associated with our former Polo store at 711 Fifth
Avenue in New York City, a customs audit, the departure of Mr. Stefan Larsson, and the reversal of reserves associated with the settlement of certain non-
income tax issues. See Note 9 to the accompanying consolidated financial statements.
Operating Income. Operating income increased by $63.6 million, or 12.8%, to $561.8 million in Fiscal 2019. Our operating results during Fiscal
2019 and Fiscal 2018 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $163.1 million
and $165.6 million, respectively, as previously discussed. Foreign currency effects did not have a meaningful impact on operating income during Fiscal
2019. Operating income as a percentage of net revenues increased to 8.9% in Fiscal 2019 from 8.1% in Fiscal 2018. The 80 basis point increase was
primarily driven by the increase in our gross profit margin, partially offset by the slight increase in SG&A expenses as a percentage of net revenues, all as
previously discussed.
57
Operating income and margin for our segments, as well as a discussion of the changes in each reportable segment's operating margin from the prior
fiscal year, are provided below:
Segment:
North America
Europe
Asia
Other non-reportable segments
Unallocated corporate expenses
Unallocated restructuring and other charges
Fiscal Years Ended
March 30, 2019
March 31, 2018
Operating
Income
(millions)
Operating
Margin
Operating
Income
(millions)
Operating
Margin
$
Change
(millions)
$
682.8
21.3% $
677.6
21.0% $
392.8
23.3%
361.0
22.4%
161.0
15.5%
137.2
14.7%
118.7
30.7%
103.2
25.2%
1,355.3
(663.4)
(130.1)
1,279.0
(672.8)
(108.0)
5.2
31.8
23.8
15.5
76.3
9.4
(22.1)
Margin
Change
30 bps
90 bps
80 bps
550 bps
Total operating income
$
561.8
8.9% $
498.2
8.1% $
63.6
80 bps
North America operating margin improved by 30 basis points, primarily due to the favorable impact of 50 basis points related to our wholesale
business, largely driven by a decline in SG&A expenses as a percentage of net revenues and an increase in our gross profit margin. Partially offsetting this
increase was 20 basis points attributable to unfavorable channel mix.
Europe operating margin improved by 90 basis points, primarily due to the favorable impacts of 80 basis points related to foreign currency effects
and 60 basis points related to our retail business, largely driven by an increase in our gross profit margin. The increase in operating margin also reflected a
favorable impact of 10 basis points related to channel mix. Partially offsetting these increases in our operating margin was a 40 basis point unfavorable
impact related to higher non-cash charges recorded in connection with our restructuring plans during Fiscal 2019 as compared to the prior fiscal year, as
well as a 20 basis point decline related to our wholesale business, largely driven by a decrease in our gross profit margin, partially offset by a decline in
SG&A expenses as a percentage of net revenues.
Asia operating margin improved by 80 basis points, primarily due to the favorable impacts of 50 basis points related to our wholesale business and
30 basis points related to our retail business, both largely driven by a decline in SG&A expenses as a percentage of net revenues, partially offset by a
decrease in our gross profit margin.
Unallocated corporate expenses decreased by $9.4 million to $663.4 million in Fiscal 2019, primarily due to lower impairment of asset charges of
$14.8 million and lower compensation-related expenses of $8.4 million, partially offset by higher consulting fees of $6.1 million, higher marketing and
advertising expenses of $5.1 million, and higher other expenses of $2.6 million.
Unallocated restructuring and other charges increased by $22.1 million to $130.1 million in Fiscal 2019, as previously discussed above and in Note
9 to the accompanying consolidated financial statements.
Non-operating Income (Expense), Net. During Fiscal 2019, we reported non-operating income, net, of $20.7 million, as compared to non-operating
expense, net, of $9.0 million in Fiscal 2018. The $29.7 million improvement was primarily driven by higher interest income of $28.5 million due to the
increased balance of our investment portfolio, as well as a favorable shift to higher interest rate environments attributable to cash repatriations from our
foreign subsidiaries.
Income Tax Provision. The income tax provision and effective tax rate in Fiscal 2019 were $151.6 million and 26.0%, respectively, as compared to
$326.4 million and 66.7%, respectively, in Fiscal 2018. The $174.8 million decline in the income tax provision was primarily due to lower TCJA
enactment-related charges recorded during Fiscal 2019 as compared to the prior fiscal year, partially offset by the increase in pretax income. During Fiscal
2019 and Fiscal 2018, we recorded TCJA enactment-related charges of $27.6 million and $221.4 million, respectively, which increased our effective tax
rates by 470 basis points and 4,520 basis points, respectively. In addition to this 4,050 basis point improvement attributable to lower TCJA enactment-
related charges recorded, the decline in our effective tax rate also reflected the net favorable impact of 20 basis points due to other factors, including a net
favorable change related to compensation-related adjustments, partially offset by the tax impact of the change in geographic
58
mix of our worldwide earnings. See Note 10 to the accompanying consolidated financial statements for discussion regarding the TCJA.
Net Income. Net income increased to $430.9 million in Fiscal 2019, from $162.8 million in Fiscal 2018. The $268.1 million increase in net income
was primarily due to the decrease in our income tax provision and the increases in operating income and interest income, all as previously discussed. Net
income during Fiscal 2019 and Fiscal 2018 reflected TCJA enactment-related charges of $27.6 million and $221.4 million, respectively, as previously
discussed. Our operating results during Fiscal 2019 and Fiscal 2018 were also negatively impacted by restructuring-related charges, impairment of assets,
and certain other charges totaling $163.1 million and $165.6 million, respectively, which had an after-tax effect of reducing net income by $129.0 million
and $113.3 million, respectively.
Net Income per Diluted Share. Net income per diluted share increased to $5.27 in Fiscal 2019, from $1.97 in Fiscal 2018. The $3.30 per share
increase was due to the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during Fiscal 2019
driven by our share repurchases during the last twelve months. Net income per diluted share in Fiscal 2019 and Fiscal 2018 were negatively impacted by
$0.34 per share and $2.68 per share, respectively, as a result of TCJA enactment-related charges. Net income per diluted share in Fiscal 2019 and Fiscal
2018 were also negatively impacted by $1.58 per share and $1.38 per share, respectively, as a result of restructuring-related charges, impairment of assets,
and certain other charges, as previously discussed.
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition
The following table presents our financial condition as of March 28, 2020 and March 30, 2019.
Cash and cash equivalents
Short-term investments
Non-current investments(a)
Short-term debt(b)
Current portion of long-term debt(b)
Long-term debt(b)
Net cash and investments(c)
Equity
March 28,
2020
March 30,
2019
(millions)
$
Change
$
1,620.4 $
495.9
—
(475.0)
(299.6)
(396.4)
945.3 $
2,693.1 $
$
$
584.1 $
1,403.4
44.9
—
—
(689.1)
1,343.3 $
3,287.2 $
1,036.3
(907.5)
(44.9)
(475.0)
(299.6)
292.7
(398.0)
(594.1)
(a) Recorded within other non-current assets in our consolidated balance sheets.
(b) See Note 11 to the accompanying consolidated financial statements for discussion of the carrying values of our debt.
(c) "Net cash and investments" is defined as cash and cash equivalents, plus short-term and non-current investments, less total debt.
The decrease in our net cash and investments position at March 28, 2020 as compared to March 30, 2019 was primarily due to our use of cash to
support Class A common stock repurchases of $694.8 million, including withholdings in satisfaction of tax obligations for stock-based compensation
awards, to invest in our business through $270.3 million in capital expenditures, and to make dividend payments of $203.9 million, partially offset by our
operating cash flows of $754.6 million.
The decrease in equity was primarily attributable to our share repurchase activity, dividends declared, and cumulative adjustments from our adoption
of new accounting standards, partially offset by our comprehensive income and the impact of stock-based compensation arrangements during Fiscal 2020.
59
Cash Flows
Fiscal 2020 Compared to Fiscal 2019
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Fiscal Years Ended
March 28,
2020
March 30,
2019
(millions)
$
Change
$
754.6 $
783.8 $
(29.2)
702.1
(438.2)
(15.2)
(879.3)
(605.7)
(27.8)
1,581.4
167.5
12.6
Net increase (decrease) in cash, cash equivalents, and restricted cash
$
1,003.3 $
(729.0) $
1,732.3
Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $754.6 million during Fiscal 2020, from $783.8
million during Fiscal 2019. The $29.2 million net decline in cash provided by operating activities was due to a decrease in net income before non-cash
charges, partially offset by a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior
fiscal year. The net favorable change related to our operating assets and liabilities, including our working capital, was primarily driven by:
•
•
•
a favorable change related to our inventories, largely driven by higher inventory charges primarily related to adverse impacts associated with
COVID-19 business disruptions;
a favorable change related to our prepaid expenses and other current assets, largely driven by the timing of cash payments; and
a favorable change related to our accounts receivable, largely driven by lower wholesale sales during the fourth quarter of Fiscal 2020 as
compared to the prior fiscal year driven by COVID-19 business disruptions, as well as the timing of cash receipts.
These increases related to our operating assets and liabilities were partially offset by:
•
•
an unfavorable change related to our income tax receivables and payables, largely as a result of the absence of charges recorded during the
prior fiscal year in connection with the TCJA's mandatory transition tax; and
an unfavorable change related to our accrued liabilities driven by larger decreases in our bonus accrual and restructuring reserves as compared
to the prior fiscal year, as well as the timing of cash payments.
Net Cash Provided by (Used in) Investing Activities. Net cash provided by investing activities was $702.1 million during Fiscal 2020, as compared
to net cash used in investing activities of $879.3 million during Fiscal 2019. The $1.581 billion net increase in cash provided by investing activities was
primarily driven by:
•
•
a $1.624 billion increase in proceeds from sales and maturities of investments, less purchases of investments. During Fiscal 2020, we received
net proceeds from sales and maturities of investments of $950.7 million, as compared to making net investment purchases of $673.3 million
during Fiscal 2019; and
a $23.8 million decrease in payments made to settle net investment hedges.
These increases in cash provided by investing activities were partially offset by:
•
a $72.6 million increase in capital expenditures. During Fiscal 2020, we spent $270.3 million on capital expenditures, as compared to $197.7
million during Fiscal 2019. Our capital expenditures during Fiscal 2020 primarily related to new store openings, retail and department store
renovations, enhancements to our information technology systems, and the consolidation of our corporate office footprint.
60
In response to the COVID-19 pandemic, we are temporarily postponing non-critical capital expenditures as a preemptive action to preserve cash and
strengthen our liquidity. However, we remain committed to expanding and renovating our global store fleet and investing in our digital ecosystem.
Net Cash Used in Financing Activities. Net cash used in financing activities was $438.2 million during Fiscal 2020, as compared to $605.7 million
during Fiscal 2019. The $167.5 million net decrease in cash used in financing activities was primarily driven by:
•
a $386.8 million increase in cash proceeds from the issuance of debt, less debt repayments. During Fiscal 2020, we borrowed $475.0 million
under the Global Credit Facility as a preemptive action to preserve cash and strengthen our liquidity in response to the COVID-19 pandemic.
During Fiscal 2019, we received $398.1 million in proceeds from our issuance of 3.750% unsecured senior notes in August 2018, a portion of
which was used to repay $300.0 million of our 2.125% unsecured senior notes that matured in September 2018. Additionally, during Fiscal
2019 we repaid approximately $10 million that had been borrowed under our credit facilities during Fiscal 2018.
This decrease in cash used in financing activities was partially offset by:
•
•
•
a $192.2 million increase in cash used to repurchase shares of our Class A common stock. During Fiscal 2020, we used $650.3 million to
repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $44.5 million in shares of
Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our
long-term stock incentive plans. On a comparative basis, during Fiscal 2019, $470.0 million in shares of Class A common stock were
repurchased and $32.6 million in shares of Class A common stock were surrendered or withheld for taxes;
a $21.8 million decrease in proceeds from exercise of stock options; and
a $13.2 million increase in payments of dividends, driven by an increase to the quarterly cash dividend per share (as discussed within
"Dividends" below). Dividends paid amounted to $203.9 million and $190.7 million during Fiscal 2020 and Fiscal 2019, respectively.
Fiscal 2019 Compared to Fiscal 2018
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Fiscal Years Ended
March 30,
2019
March 31,
2018
(millions)
$
783.8 $
975.1 $
(879.3)
(605.7)
(27.8)
(189.1)
(197.5)
55.2
$
Change
(191.3)
(690.2)
(408.2)
(83.0)
Net increase (decrease) in cash, cash equivalents, and restricted cash
$
(729.0) $
643.7 $
(1,372.7)
Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $783.8 million during Fiscal 2019, from $975.1
million during Fiscal 2018. The $191.3 million net decline in cash provided by operating activities was due to a net unfavorable change related to our
operating assets and liabilities, including our working capital, as compared to the prior fiscal year, partially offset by an increase in net income before non-
cash charges. The net unfavorable change related to our operating assets and liabilities, including our working capital, was primarily driven by:
•
•
•
a year-over-year increase in our inventory levels largely to support revenue growth, as well as the timing of inventory receipts;
an unfavorable change related to our income tax payable, largely a result of the decrease in charges recorded in connection with the TCJA's
mandatory transition tax as compared to the prior fiscal year;
an unfavorable change related to accrued expenses and other current liabilities largely driven by fluctuations associated with our derivative
instruments; and
61
•
unfavorable changes related to our accounts receivable and prepaid expenses and other current assets, largely driven by the timing of cash
receipts and payments, respectively.
Net Cash Used in Investing Activities. Net cash used in investing activities was $879.3 million during Fiscal 2019, as compared to $189.1 million
during Fiscal 2018. The $690.2 million net increase in cash used in investing activities was primarily driven by:
•
•
•
a $650.4 million increase in purchases of investments, less proceeds from sales and maturities of investments. During Fiscal 2019, we made
net investment purchases of $673.3 million, as compared to $22.9 million during Fiscal 2018;
a $36.1 million increase in capital expenditures. During Fiscal 2019, we spent $197.7 million on capital expenditures, as compared to $161.6
million during Fiscal 2018. Our capital expenditures during Fiscal 2019 primarily related to new store openings, retail and department store
renovations, and enhancements to our information technology systems; and
a $23.8 million increase in payments made to settle net investment hedges.
These increases in cash used in investing activities were partially offset by cash proceeds of $20.0 million from the sale of one of our distribution
centers in North America during Fiscal 2019.
Net Cash Used in Financing Activities. Net cash used in financing activities was $605.7 million during Fiscal 2019, as compared to $197.5 million
during Fiscal 2018. The $408.2 million net increase in cash used in financing activities was primarily driven by:
•
•
a $485.5 million increase in cash used to repurchase shares of our Class A common stock. During Fiscal 2019, we used $470.0 million to
repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $32.6 million in shares of
Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our
long-term stock incentive plans. On a comparative basis, during Fiscal 2018, no shares of Class A common stock were repurchased and $17.1
million in shares of Class A common stock were surrendered or withheld for taxes; and
a $28.3 million increase in payments of dividends, driven by an increase to the quarterly cash dividend per share. Dividends paid amounted to
$190.7 million and $162.4 million during Fiscal 2019 and Fiscal 2018, respectively.
These increases in cash used in financing activities were partially offset by:
•
a $78.1 million increase in cash proceeds from the issuance of debt, less debt repayments. During Fiscal 2019, we received $398.1 million in
proceeds from our issuance of 3.750% unsecured senior notes in August 2018, a portion of which was used to repay $300.0 million of our
2.125% unsecured senior notes that matured in September 2018. Additionally, during Fiscal 2019 we repaid approximately $10 million that
had been borrowed under our credit facilities during Fiscal 2018; and
•
a $21.7 million increase in proceeds from exercise of stock options.
Sources of Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term
investments, availability under our credit facilities and commercial paper program, and other available financing options.
During Fiscal 2020, we generated $754.6 million of net cash flows from our operations. As of March 28, 2020, we had $2.116 billion in cash, cash
equivalents, and short-term investments, of which $587.9 million were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign
cash to fund our domestic operations. Undistributed foreign earnings that were subject to the TCJA's one-time mandatory transition tax as of December 31,
2017 are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We
intend to permanently reinvest undistributed foreign earnings generated after December 31, 2017 that were not subject to the one-time mandatory transition
tax. However, if our plans change and we choose to repatriate post-2017 earnings to the U.S. in the future, we would be subject to applicable U.S. and
foreign taxes.
62
The following table presents our total availability, borrowings outstanding, and remaining availability under our credit facilities and Commercial
Paper Program as of March 28, 2020:
Description(a)
Total
Availability
March 28, 2020
Borrowings
Outstanding
(millions)
Remaining
Availability
Global Credit Facility and Commercial Paper Program(b)
Pan-Asia Credit Facilities
$
500
$
32
484 (c) $
—
16
32
(a) As defined in Note 11 to the accompanying consolidated financial statements.
(b) Borrowings under the Commercial Paper Program are supported by the Global Credit Facility. Accordingly, we do not expect combined
borrowings outstanding under the Commercial Paper Program and the Global Credit Facility to exceed $500 million.
(c)
Includes $9.0 million of outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of March 28,
2020.
We believe that the Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of
March 28, 2020, there were eight financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum
commitment percentage in excess of 20%. In accordance with the terms of the agreement, we have the ability to expand our borrowing availability under
the Global Credit Facility to $1 billion through the full term of the facility, subject to the agreement of one or more new or existing lenders under the
facility to increase their commitments. Further, in May 2020, we entered into a new credit facility with the same lenders that are parties to the Global Credit
Facility, which provides for an additional $500 million senior unsecured revolving line of credit and matures on May 25, 2021, or earlier in the event we
are able to obtain other additional financing, as described in Note 11 to the accompanying consolidated financial statements.
Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the participating
regional branches of JPMorgan Chase (the "Banks"), subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. We have
no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the
Global Credit Facility and the Pan-Asia Credit Facilities in the event of our election to draw additional funds in the foreseeable future.
Our sources of liquidity are used to fund our ongoing cash requirements, including working capital requirements, global retail store and digital
commerce expansion, construction and renovation of shop-within-shops, investment in infrastructure, including technology, acquisitions, joint ventures,
payment of dividends, debt repayments, Class A common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and
other corporate activities, including our restructuring actions. We believe that our existing sources of cash, the availability under our credit facilities, and
our ability to access capital markets will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, the ongoing
development of our businesses, and our plans for further business expansion. However, prolonged periods of adverse economic conditions or business
disruptions in any of our key regions, or a combination thereof, such as our recent temporary store closures due to the COVID-19 pandemic, could impede
our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our
operations.
See Note 11 to the accompanying consolidated financial statements for additional information relating to our credit facilities.
Debt and Covenant Compliance
In August 2015, we completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due
August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). In August 2018, we completed another
registered public debt offering and issued an additional $400 million aggregate principal amount of unsecured senior notes due September 15, 2025, which
bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes").
63
The indenture and supplemental indentures governing the 2.625% Senior Notes and 3.750% Senior Notes (as supplemented, the "Indenture") contain
certain covenants that restrict our ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or
merge with another party; or sell, lease, or convey all or substantially all of our property or assets to another party. However, the Indenture does not contain
any financial covenants.
We have a credit facility that provides for a $500 million senior unsecured revolving line of credit through August 12, 2024, also used to support the
issuance of letters of credit and the maintenance of the Commercial Paper Program (the "Global Credit Facility"). Borrowings under the Global Credit
Facility may be denominated in U.S. Dollars and other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. We have the ability to expand
the borrowing availability under the Global Credit Facility to $1 billion, subject to the agreement of one or more new or existing lenders under the facility
to increase their commitments. Further, in May 2020, we entered into a new credit facility with the same lenders that are parties to the Global Credit
Facility, which provides for an additional $500 million senior unsecured revolving line of credit that matures on May 25, 2021, or earlier in the event we
are able to obtain other additional financing, as described in Note 11 to the accompanying consolidated financial statements. There are no mandatory
reductions in borrowing ability throughout the term of the Global Credit Facility.
In March 2020, we borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen our liquidity in
response to the COVID-19 pandemic. These borrowings have been classified as short-term debt in our consolidated balance sheet as of March 28, 2020.
We were also contingently liable for $9.0 million of outstanding letters of credit, resulting in remaining availability under the Global Credit Facility of
$16.0 million as of March 28, 2020.
The Global Credit Facility contains a number of covenants, as described in Note 11 to the accompanying consolidated financial statements. As of
March 28, 2020, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The
Pan-Asia Credit Facilities do not contain any financial covenants.
See Note 11 to the accompanying consolidated financial statements for additional information relating to our debt and covenant compliance.
Common Stock Repurchase Program
On May 13, 2019, our Board of Directors approved an expansion of our existing common stock repurchase program that allowed us to repurchase up
to an additional $600 million of Class A common stock. As of March 28, 2020, the remaining availability under our Class A common stock repurchase
program was approximately $580 million. Repurchases of shares of Class A common stock are subject to overall business and market conditions.
Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, we have temporarily suspended our common stock repurchase
program as a preemptive action to preserve cash and strengthen our liquidity.
See Note 16 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase
program.
Dividends
Since 2003, we have maintained a regular quarterly cash dividend program on our common stock. On May 13, 2019, our Board of Directors
approved an increase to the quarterly cash dividend on our common stock from $0.625 to $0.6875 per share.
As a result of current business disruptions related to the COVID-19 pandemic, we have temporarily suspended our quarterly cash dividend program
as a preemptive action to preserve cash and strengthen our liquidity. Any decision to declare and pay dividends in the future will be made at the discretion
of our Board of Directors and will depend on our results of operations, cash requirements, financial condition, and other factors that the Board of Directors
may deem relevant, including economic and market conditions.
See Note 16 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.
64
Contractual and Other Obligations
Firm Commitments
The following table summarizes certain of our aggregate contractual obligations as of March 28, 2020, and the estimated timing and effect that such
obligations are expected to have on our liquidity and cash flows in future periods. We expect to fund these firm commitments with operating cash flows
generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.
Fiscal
2021
Fiscal
2022-2023
Fiscal
2024-2025
(millions)
Fiscal
2026 and
Thereafter
Total
Senior Notes
$
300.0 $
— $
— $
400.0 $
Borrowings under credit facilities
Interest payments on debt
Operating leases
Finance leases
Other lease commitments
Inventory purchase commitments
Mandatory transition tax payments
Other commitments
Total
475.0
23.1
323.6
16.0
5.3
534.9
14.0
28.0
—
30.0
618.0
44.9
21.4
—
28.0
3.1
—
30.0
466.0
44.6
26.2
—
61.1
—
—
7.5
615.7
153.8
66.4
—
43.6
—
700.0
475.0
90.6
2,023.3
259.3
119.3
534.9
146.7
31.1
$
1,719.9 $
745.4 $
627.9 $
1,287.0 $
4,380.2
The following is a description of our material, firmly committed obligations as of March 28, 2020:
•
•
•
•
•
Senior Notes represent the principal amount of our outstanding 2.625% Senior Notes and 3.750% Senior Notes. Amounts do not include any
fair value adjustments, call premiums, unamortized debt issuance costs, or interest payments (see below);
Borrowings under credit facilities represents the principal amount outstanding under our Global Credit Facility. Amounts do not include any
fair value adjustments, call premiums, unamortized debt issuance costs, or interest payments (see below);
Interest payments on debt represent the semi-annual contractual interest payments due on our 2.625% Senior Notes and 3.750% Senior Notes
and the interest payments due on the borrowings under our Global Credit Facility. Amounts do not include the impact of potential cash flows
underlying our related swap contracts (see Note 13 to the accompanying consolidated financial statements for discussion of our swap
contracts);
Lease obligations represent fixed payments due over the lease term of our noncancelable leases of real estate and operating equipment,
including rent, real estate taxes, insurance, common area maintenance fees, and/or certain other costs. For lease terms that have commenced,
information has been presented separately for operating and finance leases. Other lease commitments relate to executed lease agreements for
which the related lease terms have not yet commenced;
Inventory purchase commitments represent our legally-binding agreements to purchase fixed or minimum quantities of goods at determinable
prices;
• Mandatory transition tax payments represent our remaining tax obligation incurred in connection with the deemed repatriation of previously
deferred foreign earnings pursuant to the TCJA (see Note 10 to the accompanying consolidated financial statements for discussion of the
TCJA); and
•
Other commitments primarily represent our legally-binding obligations under sponsorship, licensing, and other marketing and advertising
agreements; information technology-related service agreements; and pension-related obligations.
65
Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $88.9 million as of March 28,
2020, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever. The above table also excludes the following: (i) other
than lease obligations and mandatory transition tax payments, amounts recorded in current liabilities in our consolidated balance sheet as of March 28,
2020, which will be paid within one year; and (ii) non-current liabilities that have no cash outflows associated with them (e.g., deferred income), or the
cash outflows associated with them are uncertain or do not represent a "purchase obligation" as the term is used herein (e.g., deferred taxes, derivative
financial instruments, and other miscellaneous items).
We also have certain contractual arrangements that would require us to make payments if certain events or circumstances occur. See Note 15 to the
accompanying consolidated financial statements for a description of our contingent commitments not included in the above table.
Off-Balance Sheet Arrangements
In addition to the commitments included in the above table, our other off-balance sheet firm commitments relating to our outstanding letters of credit
amounted to $9.0 million as of March 28, 2020. We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other
relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements.
MARKET RISK MANAGEMENT
As discussed in Note 13 to the accompanying consolidated financial statements, we are exposed to a variety of risks, including the impact of changes
in currency exchange rates on foreign currency-denominated balances, certain anticipated cash flows of our international operations, and the value of
reported net assets of our foreign operations, as well as changes in the fair value of our fixed-rate debt obligations relating to fluctuations in benchmark
interest rates. Accordingly, in the normal course of business, we employ established policies and procedures to manage such risks, including the use of
derivative financial instruments. We do not use derivatives for speculative or trading purposes.
Given our use of derivative instruments, we are exposed to the risk that the counterparties to such contracts will fail to meet their contractual
obligations. To mitigate such counterparty credit risk, it is our policy to only enter into contracts with carefully selected financial institutions based upon an
evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for
mitigating credit risk include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements
with counterparties, when possible, to further mitigate credit risk. As a result of the above considerations, we do not believe that we are exposed to undue
concentration of counterparty risk with respect to our derivative contracts as of March 28, 2020. However, we do have in aggregate $56.6 million of
derivative instruments in net asset positions with seven creditworthy financial institutions.
Foreign Currency Risk Management
We manage our exposure to changes in foreign currency exchange rates using forward foreign currency exchange and cross-currency swap contracts.
Refer to Note 13 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward
foreign currency exchange and cross-currency swap contracts, as well as the impact on earnings and other comprehensive income of such instruments for
the fiscal periods presented.
Forward Foreign Currency Exchange Contracts
We enter into forward foreign currency exchange contracts to mitigate risk related to exchange rate fluctuations on inventory transactions made in an
entity's non-functional currency, the settlement of foreign currency-denominated balances, and the translation of certain foreign operations' net assets into
U.S. Dollars. As part of our overall strategy for managing the level of exposure to such exchange rate risk, relating primarily to the Euro, the Japanese Yen,
the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, and the Chinese Renminbi, we generally
hedge a portion of our related exposures anticipated over the next twelve months using forward foreign currency exchange contracts with maturities of two
months to one year to provide continuing coverage over the period of the respective exposure.
Our foreign exchange risk management activities are governed by established policies and procedures. These policies and procedures provide a
framework that allows for the management of currency exposures while ensuring the activities are conducted within our established guidelines. Our
policies include guidelines for the organizational structure of our risk management function and for internal controls over foreign exchange risk
management activities, including, but not limited to, authorization levels,
66
transaction limits, and credit quality controls, as well as various measurements for monitoring compliance. We monitor foreign exchange risk using
different techniques, including periodic review of market values and performance of sensitivity analyses.
Our forward foreign currency exchange contracts are recorded at fair value in our consolidated balance sheets. To the extent such contracts are
designated as qualifying cash flow hedges of inventory transactions, related gains or losses are initially deferred in equity as a component of accumulated
other comprehensive income ("AOCI") and are subsequently recognized within cost of goods sold in our consolidated statements of operations when the
related inventory is sold.
Cross-Currency Swap Contracts
During our fiscal year ended April 2, 2016 ("Fiscal 2016"), we entered into two pay-floating rate, receive-floating rate cross-currency swaps with
notional amounts of €280 million and €274 million which we designated as hedges of our net investment in certain of our European subsidiaries. The €280
million notional cross-currency swap, which was settled during the second quarter of Fiscal 2019, swapped the U.S. Dollar-denominated variable interest
rate payments based on the 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread (as paid under the 2.125% Interest Rate Swap
discussed below) for Euro-denominated variable interest rate payments based on the 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed
spread, which, in combination with the 2.125% Interest Rate Swap, economically converted our previously-outstanding $300 million fixed-rate 2.125%
Senior Notes obligation to a €280 million floating-rate Euro-denominated obligation. Similarly, the €274 million notional cross-currency swap, which
matures on August 18, 2020, swaps the U.S. Dollar-denominated variable interest rate payments based on the 3-month LIBOR plus a fixed spread (as paid
under the 2.625% Interest Rate Swap discussed below) for Euro-denominated variable interest rate payments based on the 3-month EURIBOR plus a fixed
spread, which, in combination with the 2.625% Interest Rate Swap, economically converts our $300 million fixed-rate 2.625% Senior Notes obligation to a
€274 million floating-rate Euro-denominated obligation.
Additionally, in August 2018, we entered into pay-fixed rate, receive-fixed rate cross-currency swap contracts with an aggregate notional amount of
€346 million which we designated as hedges of our net investment in certain of our European subsidiaries. These contracts, which mature on September 15,
2025, swap the U.S. Dollar-denominated fixed interest rate payments on our 3.750% Senior Notes for Euro-denominated 1.29% fixed interest rate
payments, thereby economically converting our $400 million fixed-rate 3.750% Senior Notes obligation to a €346 million fixed-rate 1.29% Euro-
denominated obligation.
Sensitivity
We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our forward foreign currency
exchange and cross-currency swap contracts. In doing so, we assess the risk of loss in the fair values of these contracts that would result from hypothetical
changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar.
As of March 28, 2020, a 10% appreciation or depreciation of the U.S. Dollar against the foreign currencies under contract would result in a net increase or
decrease, respectively, in the fair value of our derivative portfolio of approximately $123 million. This hypothetical net change in fair value should
ultimately be largely offset by the net change in fair values of the underlying hedged items.
Interest Rate Risk Management
During Fiscal 2016, we entered into two pay-floating rate, receive-fixed rate interest rate swap contracts which we designated as hedges against
changes in the respective fair values of our previously-outstanding fixed-rate 2.125% Senior Notes and our fixed-rate 2.625% Senior Notes attributed to
changes in a benchmark interest rate. The interest rate swap related to the 2.125% Senior Notes (the "2.125% Interest Rate Swap"), which matured on
September 26, 2018 concurrent with the maturity of the related debt, had a notional amount of $300 million and swapped the fixed interest rate on the
2.125% Senior Notes for a variable interest rate based on 3-month LIBOR plus a fixed spread. The interest rate swap related to the 2.625% Senior Notes
(the "2.625% Interest Rate Swap"), which matures on August 18, 2020 and also has a notional amount of $300 million, swaps the fixed interest rate on the
2.625% Senior Notes for a variable interest rate based on 3-month LIBOR plus a fixed spread.
Sensitivity
As of March 28, 2020, we had no variable-rate debt outstanding. As such, our exposure to changes in interest rates primarily relates to changes in the
fair values of our fixed-rate Senior Notes. As of March 28, 2020, the aggregate fair values of our Senior Notes were $714.9 million. A 25-basis point
increase or decrease in interest rates would decrease or increase, respectively, the aggregate fair values of our Senior Notes by approximately $5 million
based on certain simplifying assumptions, including an immediate across-the-board increase or decrease in the level of interest rates with no other
subsequent changes for the remainder
67
of the period. Such potential increases or decreases in the fair value of our debt would only be realized if we were to retire all or a portion of the debt prior
to its maturity.
Investment Risk Management
As of March 28, 2020, we had cash and cash equivalents on-hand of $1.620 billion, consisting of deposits in interest bearing accounts, investments
in money market deposit accounts, and investments in time deposits with original maturities of 90 days or less. Our other significant investments included
$495.9 million of short-term investments, consisting of investments in time deposits and commercial paper with original maturities greater than 90 days;
and $9.4 million of restricted cash held in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax
matters and real estate leases.
We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and
procedures, which include monitoring both general and issuer-specific economic conditions, as discussed in Note 3 to the accompanying consolidated
financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit
risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 13 to the accompanying consolidated financial
statements for further detail of the composition of our investment portfolio as of March 28, 2020.
CRITICAL ACCOUNTING POLICIES
An accounting policy is considered to be critical if it is important to our results of operations, financial condition, and cash flows, and requires
significant judgment and estimates on the part of management in its application. Our estimates are often based on complex judgments, assessments of
probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other
professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated
amounts. We believe that the following list represents our critical accounting policies. For a discussion of all of our significant accounting policies,
including our critical accounting policies, see Note 3 to the accompanying consolidated financial statements.
Sales Reserves and Uncollectible Accounts
A significant area of judgment affecting reported revenue and net income involves estimating sales reserves, which represent the portion of gross
revenues not expected to be realized. In particular, revenue related to our wholesale business is reduced by estimates of returns, discounts, end-of-season
markdowns, operational chargebacks, and certain cooperative advertising allowances. Revenue related to our retail business, including digital commerce
sales, is also reduced by an estimate of returns.
In determining estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and cooperative advertising allowances, we
analyze historical trends, actual and forecasted seasonal results, current economic and market conditions, retailer performance, and, in certain cases,
contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends.
We review and refine these estimates on a quarterly basis. Our historical estimates of these costs have not differed materially from actual results. However,
unforeseen adverse future economic and market conditions, such as those resulting from disease pandemics and other catastrophic events, could result in
our actual results differing materially from our estimates. A hypothetical 1% increase in our reserves for returns, discounts, end-of-season markdowns,
operational chargebacks, and certain cooperative advertising allowances as of March 28, 2020 would have decreased our Fiscal 2020 net revenues by
approximately $2 million.
Similarly, we evaluate our accounts receivable balances to determine if they will ultimately be collected. Significant judgments and estimates are
involved in this evaluation, including an analysis of specific risks on a customer-by-customer basis for larger accounts (including consideration of their
financial condition and ability to withstand prolonged periods of adverse economic conditions), a receivables aging analysis that determines the percentage
of receivables that has historically been uncollected by aged category, and current economic and market conditions. Based on this information, we provide
a reserve for the estimated amounts believed to be uncollectible. Although we believe that we have adequately provided for those risks as part of our bad
debt reserve, a severe and prolonged adverse impact on our major customers' business operations, such as those resulting from business disruptions caused
by disease pandemics and other catastrophic events, could have a corresponding material adverse effect on our net sales, cash flows, and/or financial
condition. A hypothetical 1% increase in the level of our allowance for doubtful accounts as of March 28, 2020 would have increased our Fiscal 2020
SG&A expenses by approximately $1 million.
See "Accounts Receivable" in Note 3 to the accompanying consolidated financial statements for an analysis of the activity in our sales reserves and
allowance for doubtful accounts for each of the three fiscal years presented.
68
Inventories
We hold inventory that is sold through wholesale distribution channels to major department stores and specialty retail stores. We also hold retail
inventory that is sold in our own stores and digital commerce sites directly to consumers. Substantially all of our inventories are comprised of finished
goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-average cost basis.
The estimated net realizable value of inventory is determined based on an analysis of historical sales trends of our individual product lines, the
impact of market trends and economic conditions, and a forecast of future demand, giving consideration to the value of current orders in-house for future
sales of inventory, as well as plans to sell inventory through our factory stores, among other liquidation channels. Actual results may differ from estimates
due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and economic and market conditions. Reserves for
inventory shrinkage, representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon physical
inventory counts. Our historical estimates of these costs and the related provisions have not differed materially from actual results. However, unforeseen
adverse future economic and market conditions, such as those resulting from disease pandemics and other catastrophic events, could result in our actual
results differing materially from our estimates.
A hypothetical 1% increase in the level of our inventory reserves as of March 28, 2020 would have decreased our Fiscal 2020 gross profit by
approximately $3 million.
Impairment of Goodwill and Other Intangible Assets
Goodwill and certain other intangible assets deemed to have indefinite useful lives are not amortized. Rather, goodwill and indefinite-lived
intangible assets are assessed for impairment at least annually. Finite-lived intangible assets are amortized over their respective estimated useful lives and,
along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their carrying
values may not be fully recoverable.
We generally perform our annual goodwill impairment assessment using a qualitative approach to determine whether it is more likely than not that
the fair value of a reporting unit is less than its respective carrying value. However, in order to reassess the fair values of our reporting units, we
periodically perform a quantitative impairment analysis in lieu of using the qualitative approach.
Performance of the qualitative goodwill impairment assessment requires judgment in identifying and considering the significance of relevant key
factors, events, and circumstances that affect the fair values of our reporting units. This requires consideration and assessment of external factors such as
macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give
consideration to the difference between each reporting unit's fair value and carrying value as of the most recent date that a fair value measurement was
performed. If the results of the qualitative assessment conclude that it is not more likely than not that the fair value of a reporting unit exceeds its carrying
value, additional quantitative impairment testing is performed.
The quantitative goodwill impairment test involves comparing the fair value of a reporting unit with its carrying value, including goodwill. If the fair
value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. However, if the carrying value of a
reporting unit exceeds its fair value, an impairment loss is recorded in an amount equal to that excess. Any impairment charge recognized is limited to the
amount of the respective reporting unit's allocated goodwill.
Determining the fair value of a reporting unit under the quantitative goodwill impairment test requires judgment and often involves the use of
significant estimates and assumptions, including an assessment of external factors such as macroeconomic, industry, and market conditions, as well as
entity-specific factors, such as actual and planned financial performance. Similarly, estimates and assumptions are used when determining the fair values of
other indefinite-lived intangible assets. These estimates and assumptions could have a significant impact on whether or not an impairment charge is
recognized and the magnitude of any such charge. To assist management in the process of determining any potential goodwill impairment, we may review
and consider appraisals from accredited independent valuation firms. Estimates of fair value are primarily determined using discounted cash flows, market
comparisons, and recent transactions. These approaches involve significant estimates and assumptions, including projected future cash flows (including
timing), discount rates reflecting the risks inherent in those future cash flows, perpetual growth rates, and selection of appropriate market comparable
metrics and transactions.
69
We performed our annual goodwill impairment assessment as of the beginning of the second quarter of Fiscal 2020 using the qualitative approach
discussed above, while giving consideration to our then-most recent quantitative goodwill impairment test (the results of which indicated that the fair
values of our reporting units with allocated goodwill significantly exceeded their respective carrying values). Based on the results of the qualitative
impairment assessment performed, we concluded that it is more likely than not that the fair values of these reporting units significantly exceeded their
respective carrying values and there were no reporting units at risk of impairment.
Subsequent to performing our Fiscal 2020 annual goodwill impairment assessment, we determined that indicators of impairment were present during
the fourth quarter of Fiscal 2020 as a result of adverse business disruptions related to the COVID-19 pandemic, including the temporary closure of our
stores in North America, Europe, and Asia. As a result, we performed an interim assessment of the recoverability of goodwill assigned to our reporting
units using a quantitative approach as of March 28, 2020. The estimated fair values of our reporting units were determined with the assistance of an
independent third-party valuation firm using discounted cash flows and market comparisons. Based on the results of the quantitative impairment
assessment, we concluded that the fair values of our reporting units significantly exceeded their respective carrying values and were not at risk of
impairment. No goodwill impairment charges were recorded during any of the fiscal years presented. See Note 12 to the accompanying consolidated
financial statements for further discussion.
In evaluating finite-lived intangible assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset
and its eventual disposition where probable. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its
carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external
market participant assumptions.
During Fiscal 2018, we recorded a non-cash impairment charge of $8.8 million as a result of a change in the planned usage of a certain intangible
asset to reduce the value of the intangible asset to its estimated fair value. There were no other finite-lived intangible asset impairment charges recorded
during any of the fiscal periods presented. See Note 8 to the accompanying consolidated financial statements for further discussion.
It is possible that our conclusions regarding impairment or recoverability of goodwill or other intangible assets could change in future periods if, for
example, (i) our businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions, (iii) business
conditions or strategies change from our current assumptions, or (iv) the identification of our reporting units change, among other factors. Such changes
could result in a future impairment charge of goodwill or other intangible assets, which could have a material adverse effect on our consolidated financial
position or results of operations.
Impairment of Other Long-Lived Assets
Property and equipment and lease-related right-of-use ("ROU") assets, along with other long-lived assets, are evaluated for impairment periodically
whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. In evaluating long-lived assets for
recoverability, we use our best estimate of future cash flows expected to result from the use of the asset (including any potential sublease income for lease-
related ROU assets) and its eventual disposition, where applicable. To the extent that estimated future undiscounted net cash flows attributable to the asset
are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value,
considering external market participant assumptions. Assets to be disposed of and for which there is a committed plan of disposal (commonly referred to as
assets held-for-sale) are reported at the lower of carrying value or fair value, less costs to sell.
In determining future cash flows, we take various factors into account, including changes in merchandising strategy, the emphasis on retail store cost
controls, the effects of macroeconomic trends such as consumer spending, and the impacts of more experienced retail store managers and increased local
advertising. Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash
flows do not meet expectations. For example, unforeseen adverse future economic and market conditions, such as those resulting from disease pandemics
and other catastrophic events, could negatively impact consumer behavior, spending levels, and/or shopping preferences and result in actual results
differing from our estimates. Additionally, we may review and consider appraisals from accredited independent valuation firms to determine the fair value
of long-lived assets, where applicable.
During Fiscal 2020, Fiscal 2019, and Fiscal 2018, we recorded non-cash impairment charges of $38.7 million, $21.2 million, and $41.2 million,
respectively, to write-down the carrying values of certain long-lived assets based upon their assumed fair values. Additionally, during Fiscal 2019, we
recorded a non-cash charge of $4.6 million to reduce the carrying value of a certain asset held-for-sale to its estimated fair value, less costs to sell. See Note
8 to the accompanying consolidated financial statements for further discussion.
70
Income Taxes
In determining our income tax provision for financial reporting purposes, we establish a reserve for uncertain tax positions. If we consider that a tax
position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the tax benefit. We
measure the tax benefit by determining the largest amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position
is examined by the appropriate taxing authority that has full knowledge of all relevant information. These assessments can be complex and require
significant judgment, and we often obtain assistance from external advisors. To the extent that our estimates change or the final tax outcome of these
matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made.
If the initial assessment of a position fails to result in the recognition of a tax benefit, we will recognize the tax benefit if (i) there are changes in tax law or
analogous case law that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) the statute of
limitations expires; or (iii) there is a completion of an audit resulting in a settlement of that tax year with the appropriate agency.
Deferred income taxes reflect the tax effect of certain net operating losses, capital losses, general business credit carryforwards, and the net tax
effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under
enacted tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or all of a
deferred tax asset will not be realized. Tax valuation allowances are analyzed periodically by assessing the adequacy of future expected taxable income,
which typically involves the use of significant estimates. Such allowances are adjusted as events occur, or circumstances change, that warrant adjustments
to those balances.
See Note 10 to the accompanying consolidated financial statements for further discussion of income taxes.
Contingencies
We are periodically exposed to various contingencies in the ordinary course of conducting our business, including certain litigation, alleged
information system security breaches, contractual disputes, employee relation matters, various tax or other governmental audits, and trademark and
intellectual property matters and disputes. We record a liability for such contingencies to the extent that we conclude their occurrence is probable and the
related losses are estimable. In addition, if it is reasonably possible that an unfavorable settlement of a contingency could exceed the established liability,
we disclose the estimated impact on our liquidity, financial condition, and results of operations, if practicable. Management considers many factors in
making these assessments. As the ultimate resolution of contingencies is inherently unpredictable, these assessments can involve a series of complex
judgments about future events including, but not limited to, court rulings, negotiations between affected parties, and governmental actions. As a result, the
accounting for loss contingencies relies heavily on management's judgment in developing the related estimates and assumptions.
Stock-Based Compensation
We expense all stock-based compensation awarded to employees and non-employee directors based on the grant date fair value of the awards over
the requisite service period, adjusted for forfeitures which are estimated based on an analysis of historical experience and expected future trends.
Restricted Stock and Restricted Stock Units ("RSUs")
We have granted restricted shares of our Class A common stock to our non-employee directors and grant service-based RSUs to certain of our senior
executives and other employees, as well as to our non-employee directors. In addition, we grant RSUs with performance-based and market-based vesting
conditions to such senior executives and other key employees.
The fair values of our restricted stock, service-based RSU, and performance-based RSU awards are measured based on the fair value of our Class A
common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which dividend equivalent amounts do not accrue while
outstanding and unvested. Related compensation expense for performance-based RSUs is recognized over the employees' requisite service period, to the
extent that our attainment of performance goals (upon which vesting is dependent) is deemed probable, and involves judgment as to expectations
surrounding our achievement of certain defined operating performance metrics.
71
The fair value of our market-based RSU awards, for which vesting is dependent upon total shareholder return ("TSR") of our Class A common stock
over a three-year performance period relative to that of a pre-established peer group, is measured on the grant date based on estimated projections of our
relative TSR over the performance period. These estimates are made using a Monte Carlo simulation, which models multiple stock price paths of our Class
A common stock and that of the peer group to evaluate and determine our ultimate expected relative TSR performance ranking. Related compensation
expense, net of estimated forfeitures, is recorded regardless of whether, and the extent to which, the market condition is ultimately satisfied. See Note 18 to
the accompanying consolidated financial statements for further discussion.
Stock Options
Stock options have been granted to employees and non-employee directors with exercise prices equal to the fair market value of our Class A
common stock on the date of grant. We use the Black-Scholes option-pricing model to estimate the grant date fair value of stock options, which requires the
use of both subjective and objective assumptions. Certain key assumptions involve estimating future uncertain events. The key factors influencing the
estimation process include the expected term of the option, expected volatility of our stock price, our expected dividend yield, and the risk-free interest rate,
among others. Generally, once stock option values are determined, accounting practices do not permit them to be changed, even if the estimates used are
different from actual results.
No stock options were granted during any of the fiscal years presented. See Note 18 to the accompanying consolidated financial statements for
further discussion.
Sensitivity
The assumptions used in calculating the grant date fair values of our stock-based compensation awards represent our best estimates. In addition,
projecting the achievement level of certain performance-based awards, as well as estimating the number of awards expected to be forfeited, requires
judgment. If actual results or forfeitures differ significantly from our estimates and assumptions, or if assumptions used to estimate the grant date fair value
of future stock-based award grants are significantly changed, stock-based compensation expense and, therefore, our results of operations could be
materially impacted. A hypothetical 10% change in our Fiscal 2020 stock-based compensation expense would have affected net income by approximately
$9 million.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 4 to the accompanying consolidated financial statements for a description of certain recently issued accounting standards which have
impacted our consolidated financial statements, or may impact our consolidated financial statements in future reporting periods.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
For a discussion of our exposure to market risk, see "Market Risk Management" in Item 7 included elsewhere in this Annual Report on Form 10-K.
Item 8.
Financial Statements and Supplementary Data.
See the "Index to Consolidated Financial Statements" appearing at the end of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
72
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are the controls and other procedures of an issuer that are designed to provide reasonable assurance that
information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that material information required to be disclosed by an issuer in the
reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer's management, including its
principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.
We have evaluated, under the supervision and with the participation of management, including our principal executive and principal financial
officers, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as of the end of the fiscal year covered by this annual report. Based on that evaluation, our principal executive and principal financial officers have
concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level, as of the fiscal year-end covered by this
Annual Report on Form 10-K.
(b) Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act
Rule 13a-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
preparation of financial statements for external purposes in accordance with U.S. Generally Accepted Accounting Principles. Internal control over financial
reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that
transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of the
Company's assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or
disposition of the Company's assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because
of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial
statements would be prevented or detected. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific
date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies and procedures may decline.
Under the supervision and with the participation of management, including our principal executive and principal financial officers, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this report based on the framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based
on this evaluation, management concluded that the Company's internal controls over financial reporting were effective at the reasonable assurance level as
of the fiscal year-end covered by this Annual Report on Form 10-K.
Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an attestation report on the Company's internal control
over financial reporting as included elsewhere herein.
(c) Changes in Internal Controls over Financial Reporting
Except as discussed below, there has been no change in our internal control over financial reporting during the fourth quarter of Fiscal 2020 that has
materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
In addition to the changes discussed below, we have experienced varying degrees of business disruptions related to the COVID-19 pandemic,
including periods of closure of our stores, distribution centers, and corporate facilities beginning during the fourth quarter of Fiscal 2020, as described
within "Recent Developments." In response to the COVID-19 pandemic, we have taken various preemptive actions to preserve cash and strengthen our
liquidity, including temporarily furloughing and/or reducing work hours for a significant portion of both our store and corporate employees, with those
corporate employees not furloughed in affected regions working remotely. Despite such actions, we have not experienced any material changes to our
internal controls over financial reporting. We will continue to evaluate and monitor the impact of the COVID-19 pandemic on our internal controls. See
Item 1A — "Risk Factors — Infectious disease outbreaks, such as the recent COVID-19 pandemic, could have a material adverse effect on our business"
for additional discussion regarding risks to our business associated with the COVID-19 pandemic.
73
Leases
In connection with our adoption of ASU 2016-02 as of the beginning of the first quarter of Fiscal 2020, changes were made to certain lease-related
processes and control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting. We will
continue to evaluate and monitor our internal controls as our lease-related processes and procedures evolve. See Note 4 to the accompanying consolidated
financial statements for additional discussion regarding our adoption of ASU 2016-02.
Implementation and Reconfiguration of Financial Reporting Systems
In connection with our initiative to integrate and upgrade our global systems and processes, we migrated our Asia operations to a new financial
reporting information technology system, Microsoft AX Dynamics 365, in Fiscal 2020. In addition to this system implementation, during Fiscal 2020, we
began reconfiguring the financial reporting information technology system used by our Europe operations, SAP, in order to utilize enhanced financial
reporting functionality.
As a result of these actions, we expect to experience certain changes to our processes and procedures which, in turn, will result in changes to our
internal control over financial reporting. While we expect these system changes to strengthen our internal financial controls by automating certain manual
processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal
controls as processes and procedures in each of the affected areas evolve. For a discussion of risks related to the implementation of new systems, see
Item 1A — "Risk Factors — Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively."
Item 9B. Other Information.
On May 26, 2020, we and certain of our foreign subsidiaries (collectively with the Company, the "Borrowers") entered into the First Amendment
(the "Amendment") to the Global Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent (the "Administrative Agent"). The Amendment
amended our Global Credit Facility as further described in Note 11 to the accompanying consolidated financial statements.
On May 26, 2020, the Borrowers entered into a new credit facility (the "364 Day Facility") with JPMorgan Chase Bank, N.A., as administrative
agent, the Bank of America, N.A. as syndication agent, Deutsche Bank Securities, Inc., ING Bank N.V., Dublin Branch, Sumitomo Mitsui Banking
Corporation and HSBC Bank USA, N.A., as co-documentation agents, and a syndicate of financial institutions and institutional lenders (the "Lenders").
The 364 Day Facility provides for an additional $500 million senior unsecured revolving line of credit that matures on May 25, 2021, or earlier in the event
we are able to obtain other additional financing, as described in Note 11 to the accompanying consolidated financial statements.
In the ordinary course of their business, the Administrative Agent, the Lenders and certain of their affiliates have in the past or may in the future
engage in investment and commercial banking or other transactions of a financial nature with the Company or its affiliates, including the provision of
certain advisory services and the making of loans to the Company and its affiliates.
The summary in this Annual Report on Form 10-K of the Amendment and the 364 Day Facility does not purport to be complete and is qualified in
its entirety by reference to conformed copy of the Global Credit Facility as amended by the Amendment and the 364 Day Facility, each of which is attached
hereto as Exhibits 10.41 and 10.42, respectively.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information relating to our directors and corporate governance will be set forth in the Company's proxy statement for its 2020 annual meeting of
stockholders to be filed within 120 days after March 28, 2020 (the "Proxy Statement") and is incorporated by reference herein. Information relating to our
executive officers is set forth in Item 1 of this Annual Report on Form 10-K under the caption "Information About Our Executive Officers."
We have a Code of Ethics for Principal Executive Officers and Senior Financial Officers that covers the Company's principal executive officer,
principal operating officer, principal financial officer, principal accounting officer, controller, and any person performing similar functions, as applicable.
We also have a Code of Business Conduct and Ethics that covers the Company's
74
directors, officers, and employees. You can find our Code of Ethics for Principal Executive Officers and Senior Financial Officers and our Code of
Business Conduct and Ethics (collectively, the "Codes") on our Internet site, http://investor.ralphlauren.com. We will post any amendments to the Codes
and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE on our Internet site.
Item 11. Executive Compensation.
Information relating to executive and director compensation will be set forth in the Proxy Statement and such information is incorporated by
reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information
The following table sets forth information as of March 28, 2020 regarding compensation plans under which the Company's equity securities are
authorized for issuance:
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by
security holders
Total
(a)
Numbers of
Securities to be
Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights
(b)
(c)
Weighted-Average
Exercise Price of
Outstanding Options ($)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
3,249,194 (1) $
169.37 (2)
3,765,684 (3)
—
3,249,194
$
—
169.37
—
3,765,684
(1) Consists of 517,602 options to purchase shares of our Class A common stock and 2,731,592 restricted stock units that are payable solely in
shares of Class A common stock (including 469,853 service-based restricted stock units that have fully vested but for which the underlying
shares have not yet been delivered as of March 28, 2020). Does not include 3,584 outstanding restricted shares that are subject to forfeiture.
(2) Represents the weighted-average exercise price of outstanding stock options.
(3) All of the securities remaining available for future issuance set forth in column (c) may be in the form of options, stock appreciation rights,
restricted stock, restricted stock units, performance awards, or other stock-based awards under the Company's 2019 Incentive Plan. An
additional 3,584 outstanding shares of restricted stock granted under the Company's Plans that remain subject to forfeiture are not reflected in
column (c).
Other information relating to security ownership of certain beneficial owners and management will be set forth in the Proxy Statement and such
information is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required to be included by Item 13 of Form 10-K will be included in the Proxy Statement and such information is incorporated by
reference herein.
Item 14. Principal Accounting Fees and Services.
The information required to be included by Item 14 of Form 10-K will be included in the Proxy Statement and such information is incorporated by
reference herein.
75
Item 15. Exhibits, Financial Statement Schedules.
PART IV
(a) 1., 2. Financial Statements and Financial Statement Schedules. See index on Page F-1.
3. Exhibits
Exhibit
Number
3.1
3.2
3.3
4.1
4.2
4.3
4.4*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11*
10.12
10.13
10.14*
10.15
10.16
Description
Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Registration Statement on
Form S-1 (File No. 333-24733) (the "S-1"))
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Form 8-K
filed August 16, 2011)
Fourth Amended and Restated By-laws of the Company (filed as Exhibit 3.3 to the Form 10-Q for the quarterly period ended July 1, 2017)
Indenture, dated as of September 26, 2013, by and between the Company and Wells Fargo Bank, National Association (including the form
of Note) (filed as Exhibit 4.1 to the Form 8-K filed September 26, 2013)
Second Supplemental Indenture, dated as of August 18, 2015, by and between the Company and Wells Fargo Bank, National Association
(filed as Exhibit 4.2 to the Form 8-K filed August 18, 2015)
Third Supplemental Indenture, dated as of August 9, 2018, by and between Ralph Lauren Corporation and Wells Fargo Bank, National
Association (filed as Exhibit 4.2 to the Form 8-K filed August 9, 2018)
Description of Securities Registered Under Section 12 of the Exchange Act
Registration Rights Agreement dated as of June 9, 1997 by and among Ralph Lauren, GS Capital Partners, L.P., GS Capital Partner PRL
Holding I, L.P., GS Capital Partners PRL Holding II, L.P., Stone Street Fund 1994, L.P., Stone Street 1994 Subsidiary Corp., Bridge Street
Fund 1994, L.P., and the Company (filed as Exhibit 10.3 to the S-1)
Form of Indemnification Agreement between the Company and its Directors and Executive Officers (filed as Exhibit 10.26 to the S-1)†
Amended and Restated Employment Agreement, effective as of April 2, 2017, between the Company and Ralph Lauren (filed as Exhibit
10.1 to the Form 8-K filed March 31, 2017)†
Employment Agreement, dated May 13, 2017, between the Company and Patrice Louvet (filed as Exhibit 10.1 to the Form 8-K filed May
17, 2017)†
Amendment No. 1 to the Employment Agreement, dated June 30, 2017, between the Company and Patrice Louvet (filed as Exhibit 10.1 to
the Form 10-Q for the quarterly period ended July 1, 2017)†
Amended and Restated Employment Agreement, effective as of April 4, 2016, between the Company and Valérie Hermann (filed as
Exhibit 10.1 to the Form 8-K filed May 4, 2016)†
Amendment No. 1 to the Amended and Restated Employment Agreement, dated as of November 9, 2016, between the Company and
Valérie Hermann (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended October 1, 2016)†
Employment Separation Agreement and Release, between the Company and Valérie Hermann (filed as Exhibit 10.1 to the Form 8-K filed
July 19, 2019)†
Amendment No. 1 to the Employment Separation Agreement and Release, effective as of November 6, 2019, between the Company and
Valérie Hermann (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 28, 2019)†
Amended and Restated Employment Agreement, dated February 28, 2019, between the Company and Jane Nielsen (filed as Exhibit 10.1
to the Form 8-K filed March 1, 2019)†
Amended and Restated Employment Agreement, effective as of March 31, 2019, between the Company and Howard Smith†
Restricted Stock Unit Award Agreement, dated as of June 8, 2004, between the Company and Ralph Lauren (filed as Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2005)†
Executive Officer Annual Incentive Plan, as amended as of August 10, 2017 (filed as Exhibit 10.2 to the Form 10-Q for the quarterly
period ended July 1, 2017)†
Executive Officer Annual Incentive Plan, as amended as of May 20, 2020†
1997 Long-Term Stock Incentive Plan, as Amended and Restated as of August 12, 2004 (filed as Exhibit 99.1 to the Form 8-K filed
October 4, 2004)†
Amendment, as of June 30, 2006, to the 1997 Long-Term Stock Incentive Plan, as Amended and Restated as of August 12, 2004 (filed as
Exhibit 10.4 to the Form 10-Q for the quarterly period ended July 1, 2006)†
76
Exhibit
Number
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
Description
Amendment No. 2, dated as of May 21, 2009, to the 1997 Long-Term Stock Incentive Plan, as Amended and Restated as of August 12,
2004 (filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2009)†
Amended and Restated 2010 Long-Term Incentive Plan, amended as of August 11, 2016 (filed as Exhibit 10.4 to the Form 10-Q for the
quarterly period ended July 2, 2016)†
2019 Long-Term Stock Incentive Plan (filed as Appendix C to the Company's Definitive Proxy Statement dated June 21, 2019)†
Cliff Restricted Performance Share Unit Award Overview containing the standard terms of cliff restricted performance share unit awards
under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.25 to the Company's Annual Report on Form
10-K for the fiscal year ended March 29, 2014 (the "Fiscal 2014 10-K"))†
Pro-Rata Restricted Performance Share Unit Award Overview containing the standard terms of restricted performance share unit awards
under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.26 to the Fiscal 2014 10-K)†
Stock Option Award Overview containing the standard terms of stock option awards under the Amended and Restated 2010 Long-Term
Stock Incentive Plan (filed as Exhibit 10.27 to the Fiscal 2014 10-K)†
Cliff Restricted Performance Share Unit with TSR Modifier Award Overview containing the standard terms of cliff restricted performance
share unit awards under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.28 to the Fiscal 2014 10-K)†
Form of Performance Share Unit Award Agreement under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2015 (the "Fiscal 2015 10-K"))†
Form of Performance-Based Restricted Stock Unit Award Agreement under the Amended and Restated 2010 Long-Term Stock Incentive
Plan (filed as Exhibit 10.39 to the Fiscal 2015 10-K)†
Form of Restricted Stock Unit Award Agreement under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit
10.1 to the Form 10-Q for the quarterly period ended June 27, 2015)†
Performance Share Unit Award Overview containing the standard terms of performance share unit awards under the Amended and
Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30,
2017)†
Performance-Based Restricted Stock Unit - Award Notification containing the standard terms of performance-based restricted stock unit
awards under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.2 to the Form 10-Q for the quarterly
period ended September 30, 2017)†
Restricted Stock Unit Overview containing the standard terms of restricted stock unit awards under the Amended and Restated 2010 Long-
Term Stock Incentive Plan (filed as Exhibit 10.3 to the Form 10-Q for the quarterly period ended September 30, 2017)†
Performance Share Unit Award Overview containing the standard terms of performance share unit awards under the Amended and
Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended December 29,
2018)†
Performance-Based Restricted Stock Unit - Award Notification containing the standard terms of performance-based restricted stock unit
awards under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.2 to the Form 10-Q for the quarterly
period ended December 29, 2018)†
Restricted Stock Unit Overview containing the standard terms of restricted stock unit awards under the Amended and Restated 2010 Long-
Term Stock Incentive Plan (filed as Exhibit 10.3 to the Form 10-Q for the quarterly period December 29, 2018)†
Performance Share Unit Award Overview containing the standard terms of performance share unit awards under the Amended and
Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.2 to the Form 10-Q for the quarterly period ended June 29, 2019)†
One-time Fiscal 2020 Performance Share Unit - Award Notification containing the standard terms of the one-time Fiscal 2020 performance
share unit awards under the Amended and Restated 2010 Long-Term Stock Incentive Plan (filed as Exhibit 10.3 to the Form 10-Q for the
quarterly period ended June 29, 2019)†
Restricted Stock Unit Overview containing the standard terms of restricted stock unit awards under the Amended and Restated 2010 Long-
Term Stock Incentive Plan (filed as Exhibit 10.4 to the Form 10-Q for the quarterly period ended June 29, 2019)†
Performance Share Unit Award Overview containing the standard terms of performance share unit awards under the 2019 Long-Term
Stock Incentive Plan (filed as Exhibit 10.2 to the Form 10-Q for the quarterly period ended September 28, 2019)†
77
Exhibit
Number
10.37
10.38
10.39
10.40
10.41*
10.42*
14.1
14.2
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
Description
Form of Performance-Based Restricted Stock Unit Award Notification under the 2019 Long-Term Stock Incentive Plan (filed as Exhibit
10.3 to the Form 10-Q for the quarterly period ended September 28, 2019)†
Restricted Stock Unit Overview containing the standard terms of restricted stock unit awards under the 2019 Long-Term Stock Incentive
Plan (filed as Exhibit 10.4 to the Form 10-Q for the quarterly period ended September 28, 2019)†
Form of Non-Employee Director Restricted Stock Unit Award Agreement under the 2019 Long-Term Stock Incentive Plan (filed as
Exhibit 10.5 to the Form 10-Q for the quarterly period ended September 28, 2019)†
Amended and Restated Polo Ralph Lauren Supplemental Executive Retirement Plan (filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarterly period ended December 31, 2005)†
Credit Agreement, dated as of August 12, 2019 and as amended by the First Amendment, dated as of May 26, 2020, among the Company,
Ralph Lauren Europe Sàrl, RL Finance B.V. and Ralph Lauren Asia Pacific Limited as the borrowers, the lenders party thereto, Bank of
America, N.A., as syndication agent, Wells Fargo Bank, N.A., HSBC Bank USA, N.A., ING Bank N.V., Dublin Branch, and Deutsche
Bank Securities Inc., as co-documentation agents, and JPMorgan Chase Bank, N.A., as administrative agent
Credit Agreement, dated as of May 26, 2020, among the Company, Ralph Lauren Europe Sàrl, RL Finance B.V. and Ralph Lauren Asia
Pacific Limited as the borrowers, the lenders party thereto, Bank of America, N.A., as syndication agent, Deutsche Bank Securities Inc.,
ING Bank N.V., Dublin Branch, Sumitomo Mitsui Banking Corporation and HSBC Bank USA, N.A., as co-documentation agents, and
JPMorgan Chase Bank, N.A., as administrative agent
Code of Ethics for Principal Executive Officers and Senior Financial Officers (filed as Exhibit 14.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 29, 2003 and available, as amended, on the Company's Internet site)
Code of Business Conduct and Ethics of the Company (filed as Exhibit 14.1 to the Form 10-Q for the quarterly period ended June 27, 2015
and available, as amended, on the Company's Internet site)
List of Significant Subsidiaries of the Company
Consent of Ernst & Young LLP
Certification of Principal Executive Officer pursuant to 17 CFR 240.13a-14(a)
Certification of Principal Financial Officer pursuant to 17 CFR 240.13a-14(a)
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
101.INS* XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document.
101.SCH* XBRL Taxonomy Extension Schema Document.
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.
Exhibits 32.1 and 32.2 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of
that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of
1934.
*
†
Filed herewith.
Management contract or compensatory plan or arrangement.
78
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
RALPH LAUREN CORPORATION
By:
/S/ JANE HAMILTON NIELSEN
Jane Hamilton Nielsen
Chief Operating Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 27, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/S/ RALPH LAUREN
Executive Chairman, Chief Creative Officer, and Director
May 27, 2020
Ralph Lauren
/S/ PATRICE LOUVET
President, Chief Executive Officer, and Director (Principal
May 27, 2020
Patrice Louvet
Executive Officer)
/S/ JANE HAMILTON NIELSEN
Chief Operating Officer and Chief Financial Officer (Principal
May 27, 2020
Jane Hamilton Nielsen
Financial and Accounting Officer)
/s/ DAVID LAUREN
Vice Chairman, Chief Innovation Officer, Strategic Advisor to
May 27, 2020
David Lauren
the CEO, and Director
/S/ ANGELA AHRENDTS
Director
Angela Ahrendts
/S/ JOHN R. ALCHIN
Director
John R. Alchin
/S/ FRANK A. BENNACK, JR.
Director
Frank A. Bennack, Jr.
/S/ DR. JOYCE F. BROWN
Director
Dr. Joyce F. Brown
/S/ JOEL L. FLEISHMAN
Director
Joel L. Fleishman
/s/ MICHAEL A. GEORGE
Director
Michael A. George
79
May 27, 2020
May 27, 2020
May 27, 2020
May 27, 2020
May 27, 2020
May 27, 2020
Signature
Title
/S/ HUBERT JOLY
Director
Hubert Joly
/S/ LINDA FINDLEY KOZLOWSKI
Director
Linda Findley Kozlowski
/S/ JUDITH MCHALE
Director
Judith McHale
/S/ ROBERT C. WRIGHT
Director
Robert C. Wright
80
Date
May 27, 2020
May 27, 2020
May 27, 2020
May 27, 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
RALPH LAUREN CORPORATION
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Management's Report on Responsibility For Financial Statements
Reports of Independent Registered Public Accounting Firm
Supplementary Information:
Selected Financial Information
Quarterly Financial Information
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-58
F-59
F-63
F-65
RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
March 28,
2020
March 30,
2019
(millions)
ASSETS
$
1,620.4 $
Accounts receivable, net of allowances of $276.2 million and $192.2 million
Current assets:
Cash and cash equivalents
Short-term investments
Inventories
Income tax receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Deferred tax assets
Goodwill
Intangible assets, net
Other non-current assets
Total assets
Current liabilities:
Short-term debt
Current portion of long-term debt
Accounts payable
Income tax payable
Current operating lease liabilities
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
Long-term operating lease liabilities
Income tax payable
Non-current liability for unrecognized tax benefits
Other non-current liabilities
Commitments and contingencies (Note 15)
Total liabilities
Equity:
495.9
277.1
736.2
84.8
160.8
3,375.2
979.5
1,511.6
245.2
915.5
141.0
111.9
584.1
1,403.4
398.1
817.8
32.1
359.3
3,594.8
1,039.2
—
67.0
919.6
163.7
158.5
LIABILITIES AND EQUITY
$
$
7,279.9 $
5,942.8
475.0 $
299.6
246.8
65.1
288.4
717.1
2,092.0
396.4
1,568.3
132.7
88.9
308.5
—
—
202.3
29.4
—
968.4
1,200.1
689.1
—
146.7
78.8
540.9
Class A common stock, par value $.01 per share; 104.9 million and 102.9 million shares issued;
47.6 million and 52.2 million shares outstanding
Class B common stock, par value $.01 per share; 24.9 million issued and outstanding; 25.9 million
shares issued and outstanding
Additional paid-in-capital
Retained earnings
Treasury stock, Class A, at cost; 57.3 million and 50.7 million shares
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
See accompanying notes.
F-2
4,586.8
2,655.6
1.0
0.3
2,594.4
5,994.0
(5,778.4)
(118.2)
2,693.1
$
7,279.9 $
1.0
0.3
2,493.8
5,979.1
(5,083.6)
(103.4)
3,287.2
5,942.8
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Net revenues
Cost of goods sold
Gross profit
Selling, general, and administrative expenses
Impairment of assets
Restructuring and other charges
Total other operating expenses, net
Operating income
Interest expense
Interest income
Other income (expense), net
Income before income taxes
Income tax benefit (provision)
Net income
Net income per common share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Dividends declared per share
March 28,
2020
Fiscal Years Ended
March 30,
2019
March 31,
2018
$
(millions, except per share data)
6,313.0 $
6,159.8 $
(2,506.5)
3,653.3
(3,237.5)
(31.6)
(67.2)
(3,336.3)
317.0
(17.6)
34.4
(7.4)
326.4
57.9
(2,427.0)
3,886.0
(3,168.3)
(25.8)
(130.1)
(3,324.2)
561.8
(20.7)
40.8
0.6
582.5
(151.6)
$
$
$
$
384.3 $
430.9 $
5.07 $
4.98 $
75.8
77.2
2.75 $
5.35 $
5.27 $
80.6
81.7
2.50 $
6,182.3
(2,430.6)
3,751.7
(3,095.5)
(50.0)
(108.0)
(3,253.5)
498.2
(18.2)
12.3
(3.1)
489.2
(326.4)
162.8
1.99
1.97
81.7
82.5
2.00
See accompanying notes.
F-3
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation gains (losses)
Net gains (losses) on cash flow hedges
Net gains (losses) on defined benefit plans
Other comprehensive income (loss), net of tax
Total comprehensive income
See accompanying notes.
F-4
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
384.3 $
430.9 $
162.8
(11.9)
(2.2)
(0.7)
(14.8)
(39.2)
36.2
(1.9)
(4.9)
$
369.5 $
426.0 $
126.9
(30.6)
3.6
99.9
262.7
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense
Deferred income tax expense (benefit)
Loss on sale of property
Non-cash stock-based compensation expense
Non-cash impairment of assets, including equity method investment
Bad debt expense
Other non-cash charges
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Income tax receivables and payables
Deferred income
Other balance sheet changes
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Purchases of investments
Proceeds from sales and maturities of investments
Acquisitions and ventures
Proceeds from sale of property
Settlement of net investment hedges
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from credit facilities
Repayments of borrowings on credit facilities
Proceeds from the issuance of long-term debt
Repayments of long-term debt
Payments of finance lease obligations
Payments of dividends
Repurchases of common stock, including shares surrendered for tax withholdings
Proceeds from exercise of stock options
Other financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
See accompanying notes.
F-5
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
384.3 $
430.9 $
162.8
269.5
(168.8)
—
100.6
38.7
58.7
(2.3)
57.6
72.3
58.2
(64.3)
(42.5)
—
(7.4)
754.6
(270.3)
(1,289.7)
2,240.4
0.9
20.8
—
702.1
475.0
—
—
—
(13.6)
(203.9)
(694.8)
—
(0.9)
(438.2)
(15.2)
1,003.3
626.5
281.3
295.2
8.5
11.6
88.6
25.8
0.4
6.5
10.1
(83.6)
(40.5)
(4.7)
29.7
(16.5)
35.7
783.8
(197.7)
(3,030.8)
2,357.5
(4.5)
20.0
(23.8)
(879.3)
—
(9.9)
398.1
(300.0)
(19.6)
(190.7)
(502.6)
21.8
(2.8)
(605.7)
(27.8)
(729.0)
1,355.5
84.1
—
74.5
50.0
10.2
1.7
34.5
65.4
(15.1)
64.6
165.1
1.4
(19.3)
975.1
(161.6)
(1,605.6)
1,582.7
(4.6)
—
—
(189.1)
10.1
—
—
—
(28.2)
(162.4)
(17.1)
0.1
—
(197.5)
55.2
643.7
711.8
$
1,629.8 $
626.5 $
1,355.5
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock(a)
Shares
Amount
Additional
Paid-in
Capital
Treasury Stock
Retained
at Cost
Earnings
Shares
Amount
AOCI(b)
Total
Equity
127.4
$
1.2
$
2,308.8
$
5,751.9
46.4 $
(4,563.9) $ (198.4) $
3,299.6
(millions)
162.8
(162.5)
0.2
(17.1)
99.9
262.7
(162.5)
(17.1)
74.5
0.2
74.5
0.1
$
2,383.4
$
5,752.2
46.6 $
(4,581.0) $
(98.5) $
3,457.4
0.5
127.9
$
0.1
1.3
430.9
(198.9)
(5.1)
(4.9)
4.1
(502.6)
426.0
(198.9)
(502.6)
88.6
21.8
(5.1)
0.9
—
88.6
21.8
128.8
$
1.3
$
2,493.8
$
5,979.1
50.7 $
(5,083.6) $ (103.4) $
3,287.2
384.3
(204.9)
(14.8)
6.6
(694.8)
100.6
1.0
—
—
129.8
$
1.3
$
2,594.4
$
(164.5)
5,994.0
57.3 $
(5,778.4) $ (118.2) $
2,693.1
369.5
(204.9)
(694.8)
100.6
—
(164.5)
Balance at April 1, 2017
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Dividends declared
Repurchases of common stock
Stock-based compensation
Shares issued pursuant to stock-based
compensation plans
Balance at March 31, 2018
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends declared
Repurchases of common stock
Stock-based compensation
Shares issued pursuant to stock-based
compensation plans
Cumulative adjustment from adoption of new accounting
standards
Balance at March 30, 2019
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends declared
Repurchases of common stock
Stock-based compensation
Shares issued pursuant to stock-based
compensation plans
Cumulative adjustment from adoption of new accounting
standards (see Note 4)
Balance at March 28, 2020
(a)
(b)
Includes Class A and Class B common stock. In Fiscal 2020, 1.0 million shares of Class B common stock were converted into an equal number of shares of Class A
common stock pursuant to the terms of the Class B common stock (see Note 16).
Accumulated other comprehensive income (loss).
See accompanying notes.
F-6
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business
Ralph Lauren Corporation ("RLC") is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel,
footwear, accessories, home furnishings, fragrances, and hospitality. RLC's long-standing reputation and distinctive image have been developed across an
expanding number of products, brands, sales channels, and international markets. RLC's brand names include Ralph Lauren, Ralph Lauren Collection,
Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others.
RLC and its subsidiaries are collectively referred to herein as the "Company," "we," "us," "our," and "ourselves," unless the context indicates otherwise.
The Company diversifies its business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail,
wholesale, and licensing). This allows the Company to maintain a dynamic balance as its operating results do not depend solely on the performance of any
single geographic area or channel of distribution. The Company sells directly to consumers through its integrated retail channel, which includes its retail
stores, concession-based shop-within-shops, and digital commerce operations around the world. The Company's wholesale sales are made principally to
major department stores, specialty stores, and third-party digital partners around the world, as well as to certain third-party-owned stores to which the
Company has licensed the right to operate in defined geographic territories using its trademarks. In addition, the Company licenses to third parties for
specified periods the right to access its various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain
apparel, eyewear, fragrances, and home furnishings.
The Company organizes its business into the following three reportable segments: North America, Europe, and Asia. In addition to these reportable
segments, the Company also has other non-reportable segments. See Note 20 for further discussion of the Company's segment reporting structure.
2.
Basis of Presentation
Basis of Consolidation
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP")
and present the consolidated financial position, income, comprehensive income, and cash flows of the Company, including all entities in which the
Company has a controlling financial interest and is determined to be the primary beneficiary. All significant intercompany balances and transactions have
been eliminated in consolidation.
Fiscal Year
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 2020 ended on March 28, 2020 and
was a 52-week period ("Fiscal 2020"); fiscal year 2019 ended on March 30, 2019 and was a 52-week period ("Fiscal 2019"); fiscal year 2018 ended on
March 31, 2018 and was a 52-week period ("Fiscal 2018"); and fiscal year 2021 will end on March 27, 2021 and will be a 52-week period ("Fiscal 2021").
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect
the amounts reported in the financial statements and notes thereto. Actual results could differ materially from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include reserves for bad debt, customer returns, discounts,
end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances; the realizability of inventory; reserves for litigation
and other contingencies; useful lives and impairments of long-lived tangible and intangible assets; fair value measurements; accounting for income taxes
and related uncertain tax positions; valuation of stock-based compensation awards and related forfeiture rates; reserves for restructuring activity; and
accounting for business combinations, among others.
Reclassifications
Certain reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation, including
a change to the Company's segment reporting structure as further described in Note 20.
F-7
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of
promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to
direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of
sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and
is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related taxes collected from customers
and remitted to government authorities are excluded from revenue.
Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the
point of sale for merchandise purchased at the Company's retail stores and concession-based shop-within-shops, or upon receipt of shipment for
merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends.
Payment is due at the point of sale.
Gift cards issued to customers by the Company are recorded as a liability until they are redeemed, at which point revenue is recognized. The
Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it
does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such
estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions.
Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is
transferred to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of
products by the customer. Wholesale revenue is recorded net of estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and
certain cooperative advertising allowances. Returns and allowances require pre-approval from management and discounts are based on trade terms.
Estimates for end-of-season markdown reserves are based on historical trends, actual and forecasted seasonal results, an evaluation of current economic and
market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer
notifications of order fulfillment discrepancies and historical trends. The Company reviews and refines these estimates on at least a quarterly basis. The
Company's historical estimates of these amounts have not differed materially from actual results.
Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's
trademarks (i.e., symbolic intellectual property) and benefit from such access through their sales of licensed products. These arrangements require licensees
to pay a sales-based royalty, which for most arrangements may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally
due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Company recognizes revenue for sales-
based royalty arrangements (including those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are
sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the minimum is
recognized as revenue ratably over the contractual period. This sales-based output measure of progress and pattern of recognition best represents the value
transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive in exchange for
providing access to its trademarks. As of March 28, 2020, contractually-guaranteed minimum royalty amounts expected to be recognized as revenue during
future periods were as follows:
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025 and thereafter
Total
F-8
Contractually-Guaranteed
Minimum Royalties(a)
(millions)
$
$
119.0
80.7
45.1
27.2
1.1
273.1
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a) Amounts presented do not contemplate anticipated contract renewals or royalties earned in excess of the contractually guaranteed minimums.
Disaggregated Net Revenues
The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of
revenues and cash flows are affected by economic factors for the fiscal periods presented:
Sales Channel(a):
Retail
Wholesale
Licensing
Total
Sales Channel(a):
Retail
Wholesale
Licensing
Total
Sales Channel(a):
Retail
Wholesale
Licensing
Total
North America
Europe
Fiscal Year Ended
March 28, 2020
Asia
(millions)
Other
Total
$
1,727.3 $
874.6 $
948.0 $
191.0 $
1,413.2
—
757.6
—
69.2
—
10.8
168.1
$
3,140.5 $
1,632.2 $
1,017.2 $
369.9 $
3,740.9
2,250.8
168.1
6,159.8
North America
Europe
Fiscal Year Ended
March 30, 2019
Asia
(millions)
Other
Total
$
1,688.5 $
881.1 $
969.9 $
208.3 $
1,514.4
—
801.9
—
71.1
—
5.1
172.7
$
3,202.9 $
1,683.0 $
1,041.0 $
386.1 $
3,747.8
2,392.5
172.7
6,313.0
North America
Europe
Fiscal Year Ended
March 31, 2018
Asia
(millions)
Other
Total
$
1,659.6 $
857.9 $
874.1 $
224.8 $
1,571.4
—
750.4
—
59.6
—
7.8
176.7
$
3,231.0 $
1,608.3 $
933.7 $
409.3 $
3,616.4
2,389.2
176.7
6,182.3
(a) Net revenues from the Company's retail and wholesale businesses are recognized at a point in time. Net revenues from the Company's licensing
business are recognized over time.
F-9
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred Income
Deferred income represents cash payments received in advance of the Company's transfer of control of products or services to its customers and is
generally comprised of unredeemed gift cards, net of breakage, and advance royalty payments from licensees. The Company's deferred income balances
were $14.6 million and $14.8 million as of March 28, 2020 and March 30, 2019, respectively, and were primarily recorded within accrued expenses and
other current liabilities within the consolidated balance sheets. During Fiscal 2020, the Company recognized $9.3 million of net revenues from amounts
recorded as deferred income as of March 30, 2019. The majority of the deferred income balance as of March 28, 2020 is expected to be recognized as
revenue within the next twelve months.
Cost of Goods Sold and Selling Expenses
Cost of goods sold includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight-in, and import costs, as
well as changes in reserves for shrinkage and inventory realizability. Gains and losses associated with forward foreign currency exchange contracts that are
designated as qualifying cash flow hedges of inventory transactions are also recognized within cost of goods sold when the hedged inventory is sold. The
costs of selling merchandise, including those associated with preparing merchandise for sale, such as picking, packing, warehousing, and order charges
("handling costs"), are included in selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations.
Shipping and Handling Costs
Costs associated with shipping goods to customers are accounted for as fulfillment activities and reflected as a component of SG&A expenses in the
consolidated statements of operations. Shipping and handling costs (described above) billed to customers are included in revenue. A summary of shipping
and handling costs is as follows:
Shipping costs
Handling costs
Advertising and Marketing Costs
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
46.7 $
154.0
49.1 $
153.1
39.1
155.4
Advertising costs, including the costs to produce advertising, are expensed when the advertisement is first exhibited. Advertising costs paid to
wholesale customers under cooperative advertising programs are not included in advertising costs, but rather are reflected as a reduction of revenue since
generally the benefits are not sufficiently separable from the purchases of the Company's products by customers. Costs associated with the marketing and
promotion of the Company's products are included within SG&A expenses.
Advertising and marketing expenses were $278.0 million, $272.8 million, and $241.1 million in Fiscal 2020, Fiscal 2019, and Fiscal 2018,
respectively. Deferred advertising, marketing, and promotional costs, which principally relate to advertisements that have not yet been exhibited or services
that have not yet been received, were $10.1 million and $9.6 million at the end of Fiscal 2020 and Fiscal 2019, respectively, and were recorded within
prepaid expenses and other current assets in the Company's consolidated balance sheets.
Foreign Currency Translation and Transactions
The financial position and operating results of the Company's foreign operations are accounted for in their respective functional currencies, which
are primarily consistent with the local currency. For purposes of consolidation, local currency assets and liabilities are translated to U.S. Dollars at the rates
of exchange in effect on the balance sheet date, and local currency revenues and expenses are translated to U.S. Dollars at average rates of exchange in
effect during the period. The resulting translation gains or losses are included in the consolidated statements of comprehensive income as a component of
other comprehensive income (loss) ("OCI") and in the consolidated statements of equity within accumulated other comprehensive income (loss) ("AOCI").
Gains and losses on the translation of intercompany loans made to foreign subsidiaries that are of a long-term investment nature are also included within
this component of equity.
F-10
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company also recognizes gains and losses on both third-party and intercompany balances that are denominated in a currency other than the
respective entity's functional currency. Such foreign currency transactional gains and losses are recognized within other income (expense), net in the
consolidated statements of operations, inclusive of the effects of any related hedging activities, and reflected net losses of $1.1 million and $2.8 million in
Fiscal 2020 and Fiscal 2019, respectively, and net gains of $4.5 million in Fiscal 2018.
Comprehensive Income
Comprehensive income, which is reported in the consolidated statements of comprehensive income and consolidated statements of equity, consists
of net income and certain other gains and losses affecting equity that, under U.S. GAAP, are excluded from net income and referred to as OCI. Components
of OCI consist of foreign currency translation gains (losses); net realized and unrealized gains (losses) on cash flow hedges, such as forward foreign
currency exchange contracts; net realized and unrealized gains (losses) on available-for-sale investments; and net realized and unrealized gains (losses)
related to the Company's defined benefit plans.
Net Income per Common Share
Basic net income per common share is computed by dividing net income attributable to common shares by the weighted-average number of common
shares outstanding during the period. Weighted-average common shares include shares of the Company's Class A and Class B common stock. Diluted net
income per common share adjusts basic net income per common share for the dilutive effects of outstanding restricted stock units ("RSUs"), stock options,
and any other potentially dilutive instruments, only in the periods in which such effects are dilutive.
The weighted-average number of common shares outstanding used to calculate basic net income per common share is reconciled to shares used to
calculate diluted net income per common share as follows:
Basic shares
Dilutive effect of RSUs and stock options
Diluted shares
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
75.8
1.4
77.2
80.6
1.1
81.7
81.7
0.8
82.5
All earnings per share amounts have been calculated using unrounded numbers. The Company has outstanding performance-based and market-based
RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance or market conditions (i) have been
satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency
period and the result would be dilutive. In addition, options to purchase shares of the Company's Class A common stock at an exercise price greater than
the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net
income per common share. As of the end of Fiscal 2020, Fiscal 2019, and Fiscal 2018, there were 0.8 million, 1.4 million, and 2.0 million, respectively, of
additional shares issuable contingent on vesting of performance-based RSUs and upon exercise of anti-dilutive options, that were excluded from the diluted
shares calculations.
Stock-Based Compensation
The Company recognizes expense for all stock-based compensation awards granted to employees and non-employee directors based on the grant
date fair value of the awards over the requisite service period, adjusted for forfeitures which are estimated based on an analysis of historical experience and
expected future trends. The grant date fair value of the Company's market-based RSU awards, for which vesting is dependent upon total shareholder return
("TSR") of its Class A common stock over a three-year performance period relative to that of a pre-established peer group, is estimated using a Monte
Carlo simulation model. The grant date fair values of restricted stock awards, service-based RSUs, and performance-based RSUs are determined based on
the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which dividend
equivalent amounts do not accrue while outstanding and unvested. The Company uses the Black-Scholes valuation model to estimate the grant date fair
value of any stock option awards. Compensation expense for all performance-based RSUs is recognized over the requisite service period when attainment
of the performance goal is deemed
F-11
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
probable, net of estimated forfeitures. Compensation expense for market-based RSUs, net of estimated forfeitures, is recognized over the requisite service
period regardless of whether, and the extent to which, the market condition is ultimately satisfied. The Company recognizes compensation expense on an
accelerated basis for all awards with graded vesting terms, including restricted stock, certain RSUs, and stock options. For RSU awards with cliff vesting
terms, compensation expense is recognized on a straight-line basis. For certain RSU awards granted to retirement-eligible employees, or employees who
will become retirement-eligible prior to the end of the awards' respective stated vesting periods, the related stock-based compensation expense is
recognized on an accelerated basis over a term commensurate with the period that the employee is required to provide service in order to vest in the award.
See Note 18 for further discussion of the Company's stock-based compensation plans.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of 90 days or less, including investments in time deposits
and debt securities. Investments in debt securities are diversified across high-credit quality issuers in accordance with the Company's risk-management
policies.
Restricted Cash
The Company is periodically required to place cash in escrow with various banks as collateral, primarily to secure guarantees of corresponding
amounts made by the banks to international tax authorities on behalf of the Company, such as to secure refunds of value-added tax payments in certain
international tax jurisdictions or in the case of certain international tax audits, as well as to secure guarantees related to certain real estate leases. Such cash
is classified as restricted cash and reported as a component of either prepaid expenses and other current assets or other non-current assets in the Company's
consolidated balance sheets.
Investments
The Company's investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit
risk, and achievement of maximum returns within the guidelines set forth in the Company's investment policy.
Short-term investments consist of investments which the Company expects to convert into cash within one year, including time deposits and debt
securities, which have original maturities greater than 90 days. Non-current investments, which are classified within other non-current assets in the
consolidated balance sheets, consist of those investments which the Company does not expect to convert into cash within one year.
The Company classifies all of its investments at the time of purchase as available-for-sale. These investments are recorded at fair value with
unrealized gains or losses classified as a component of AOCI in the consolidated balance sheets, and related realized gains or losses recorded within
income (expense), net, in the consolidated statements of operations. Cash inflows and outflows related to the sale and purchase of investments are classified
as investing activities in the Company's consolidated statements of cash flows.
Equity-method Investments
Investment ownership interests that provide the Company with significant influence, but less than a controlling interest, over an investee are
accounted for using the equity method of accounting. Significant influence is generally presumed to exist when the Company owns between 20% and 50%
of the investee.
Under the equity method of accounting, the following amounts are generally recorded in the Company's consolidated financial statements: the
Company's original investment, as subsequently adjusted for its share of the investee's earnings (losses) and reduced by any dividends received and other-
than-temporary impairments recorded, is included in the consolidated balance sheets; the Company's share of the investee's periodic earnings (losses) is
included in the consolidated statements of operations; and dividends and other cash distributions received from the investee and additional cash
investments made in or other cash paid to the investee are included in the consolidated statements of cash flows.
The Company's share of equity-method investee earnings and losses is recognized within other income (expense), net, in the consolidated statements
of operations, and reflected net gains of $0.1 million and $2.9 million in Fiscal 2020 and Fiscal 2019, respectively, and net losses of $4.5 million in Fiscal
2018.
F-12
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impairment Assessment
The Company evaluates its investments that are in unrealized loss positions, if any, and equity method investments for other-than-temporary
impairment on a quarterly basis (see Note 12). Such evaluation involves a variety of considerations, including assessments of the risks and uncertainties
associated with general economic conditions and distinct conditions affecting specific issuers or investees. Factors considered by the Company include
(i) the length of time and the extent to which an investment's fair value has been below its cost; (ii) the financial condition, credit worthiness, and near-term
prospects of the issuer; (iii) the length of time to maturity; (iv) future economic conditions and market forecasts; (v) the Company's intent and ability to
retain its investment for a period of time sufficient to allow for recovery of market value; (vi) an assessment of whether it is more likely than not that the
Company will be required to sell its investment before recovery of market value; and (vii) whether events or changes in circumstances indicate that the
investment's carrying amount might not be recoverable. See Note 13 for further information relating to the Company's investments.
During Fiscal 2020, the Company recorded a $7.1 million impairment charge within other income (expense), net in the consolidated statements of
operations relating to an equity method investment (see Note 8).
Accounts Receivable
In the normal course of business, the Company extends credit to wholesale customers that satisfy defined credit criteria. Payment is generally due
within 30 to 120 days and does not include a significant financing component. Accounts receivable is recorded at carrying value, which approximates fair
value, and is presented in the Company's consolidated balance sheets net of certain reserves and allowances. These reserves and allowances consist of
(i) reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances (see the "Revenue
Recognition" section above for further discussion of related accounting policies) and (ii) allowances for doubtful accounts.
A rollforward of the activity in the Company's reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain
cooperative advertising allowances is presented below:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Beginning reserve balance
$
176.5 $
202.5 $
Amount charged against revenue to increase reserve
Amount credited against customer accounts to decrease reserve
Foreign currency translation
Ending reserve balance
580.1
(550.3)
(1.6)
543.8
(563.0)
(6.8)
$
204.7 $
176.5 $
202.8
585.0
(596.6)
11.3
202.5
An allowance for doubtful accounts is determined through an analysis of accounts receivable aging, assessments of collectability based on
evaluation of historical and anticipated trends, the financial condition of the Company's customers and their ability to withstand prolonged periods of
adverse economic conditions, and evaluation of the impact of other economic and market conditions, among other factors. The Company's estimated
allowance for doubtful accounts as of March 28, 2020 reflects adverse impacts associated with COVID-19 business disruptions, which include temporary
department and specialty store closures worldwide, as well as declines in retail traffic, tourism, and consumer spending on discretionary items.
F-13
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A rollforward of the activity in the Company's allowance for doubtful accounts is presented below:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Beginning reserve balance
$
15.7 $
19.7 $
Amount recorded to expense to increase reserve(a)
Amount written-off against customer accounts to decrease reserve
Foreign currency translation
Ending reserve balance
58.7
(2.6)
(0.3)
0.4
(3.5)
(0.9)
$
71.5 $
15.7 $
11.6
10.2
(3.2)
1.1
19.7
(a) Amounts recorded to bad debt expense are included within SG&A expenses in the consolidated statements of operations.
Concentration of Credit Risk
The Company sells its wholesale merchandise primarily to major department stores, specialty stores, and third-party digital partners around the
world, and extends credit based on an evaluation of each customer's financial capacity and condition, usually without requiring collateral. In the Company's
wholesale business, concentration of credit risk is relatively limited due to the large number of customers and their dispersion across many geographic
areas. However, the Company has three key wholesale customers that generate significant sales volume. During Fiscal 2020, the Company's sales to its
three largest wholesale customers accounted for approximately 18% of total net revenues. Substantially all of the Company's sales to its three largest
wholesale customers related to its North America segment. As of March 28, 2020, these three key wholesale customers constituted approximately 32% of
total gross accounts receivable.
Inventories
The Company holds inventory that is sold in its retail stores and digital commerce sites directly to consumers. The Company also holds inventory
that is sold through wholesale distribution channels to major department stores, specialty stores, and third-party digital partners. Substantially all of the
Company's inventories consist of finished goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-
average cost basis.
The estimated realizable value of inventory is determined based on an analysis of historical sales trends of the Company's individual product lines,
the impact of market trends and economic conditions, and a forecast of future demand, giving consideration to the value of current in-house orders for
future sales of inventory, as well as plans to sell inventory through the Company's factory stores, among other liquidation channels. Actual results may
differ from estimates due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and actual economic and market
conditions. In addition, reserves for inventory shrinkage, representing the risk of physical loss of inventory, are estimated based on historical experience
and are adjusted based upon physical inventory counts. The Company's historical estimates of the realizable value of its inventory and its reserves for
inventory shrinkage have not differed materially from actual results. However, unforeseen adverse future economic and market conditions, such as those
resulting from disease pandemics and other catastrophic events, could result in the Company's actual results differing materially from its estimates.
The Company's estimated realizable value of its inventory as of March 28, 2020 reflects adverse impacts associated with COVID-19 business
disruptions, which include temporary closures of the Company's stores and those of its wholesale customers worldwide, as well as declines in retail traffic,
tourism, and consumer spending on discretionary items.
Property and Equipment, Net
Property and equipment, net is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method based upon the
estimated useful lives of depreciable assets, which range from three to seven years for furniture and fixtures, machinery and equipment, and capitalized
software; and from ten to forty years for buildings and improvements. Leasehold improvements are depreciated over the shorter of the estimated useful
lives of the respective assets or the term of the related lease.
F-14
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and equipment, along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances
indicate that their related carrying values may not be fully recoverable (see Note 12). In evaluating long-lived assets for recoverability, including finite-
lived intangibles as described below, the Company uses its best estimate of future cash flows expected to result from the use of the asset and its eventual
disposition. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is
recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions. Assets
to be disposed of and for which there is a committed plan for disposal are reported at the lower of carrying value or fair value, less costs to sell.
Leases
As discussed in Note 4, the Company adopted a new lease accounting standard as of the beginning of Fiscal 2020.
The Company's lease arrangements primarily relate to real estate, including its retail stores, concession-based shop-within-shops, corporate offices,
and warehouse facilities, and to a lesser extent, certain equipment and other assets. The Company's leases generally have initial terms ranging from three to
fifteen years and may include renewal or early-termination options, rent escalation clauses, and/or lease incentives in the form of construction allowances
and rent abatements. Renewal rent payment terms generally reflect market rates prevailing at the time of renewal. The Company is typically required to
make fixed minimum rent payments, variable rent payments based on performance (e.g., percentage-of-sales-based payments), or a combination thereof,
directly related to its right to use an underlying leased asset. The Company is also often required to pay for certain other costs that do not relate specifically
to its right to use an underlying leased asset, but that are associated with the asset, including real estate taxes, insurance, common area maintenance fees,
and/or certain other costs (referred to collectively herein as "non-lease components"), which may be fixed or variable in amount, depending on the terms of
the respective lease agreement. The Company's leases do not contain significant residual value guarantees or restrictive covenants.
The Company determines whether an arrangement contains a lease at the arrangement's inception. If a lease is determined to exist, its related term is
assessed at lease commencement, once the underlying asset is made available by the lessor for the Company's use. The Company's assessment of the lease
term reflects the non-cancellable period of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options for which the
Company is not considered reasonably certain of exercising, as well as periods covered by renewal options for which it is considered reasonably certain of
exercising. The Company also determines lease classification as either operating or finance (formerly referred to as "capital") at lease commencement,
which governs the pattern of expense recognition and the presentation thereof reflected in the consolidated statements of operations over the lease term.
For leases with a lease term exceeding 12 months, a lease liability is recorded on the Company's consolidated balance sheet at lease commencement
reflecting the present value of its fixed payment obligations over such term. A corresponding right-of-use ("ROU") asset equal to the initial lease liability is
also recorded, increased by any prepaid rent and/or initial direct costs incurred in connection with execution of the lease, and reduced by any lease
incentives received. The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease
liabilities, as it elects to account for lease and non-lease components together as a single lease component. Variable lease payments are not included in the
measurement of ROU assets and lease liabilities. ROU assets associated with finance leases are presented separate from those associated with operating
leases, and are included within property and equipment, net on the Company's consolidated balance sheet. For purposes of measuring the present value of
its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease
commencement, as rates implicit in its leasing arrangements are not readily determinable. The Company's incremental borrowing rate reflects the rate it
would pay to borrow on a secured basis an amount equal to the lease payments and incorporates the term and economic environment of the lease.
For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases, the
initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease
liability, which is ultimately reduced by the related fixed payments as they are made. For leases with a lease term of 12 months or less (referred to as a
"short-term lease"), any fixed lease payments are recognized on a straight-line basis over such term and are not recognized on the consolidated balance
sheet. Variable lease cost, if any, is recognized as incurred for all leases.
ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment whenever events or circumstances indicate that
their carrying values may not be fully recoverable (see Note 12). To the extent that an ROU asset and any related long-lived assets are determined to be
impaired, they are written down accordingly on a relative carrying amount basis,
F-15
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
with the ROU asset written down to an amount no lower than its estimated fair value. Subsequent to the recognition of any such impairment, total
remaining lease cost is recognized on a front-loaded basis over the remaining lease term.
See Note 14 for further discussion of the Company's leases.
Goodwill and Other Intangible Assets
At acquisition, the Company estimates and records the fair value of purchased intangible assets, which typically consist of reacquired license
agreements, customer relationships, non-compete agreements, and/or order backlog. The fair values of these intangible assets are estimated based on
management's assessment, considering independent third-party appraisals when necessary. The excess of the purchase consideration over the fair value of
net assets acquired, both tangible and intangible, is recorded as goodwill. Goodwill and certain other intangible assets deemed to have indefinite useful
lives are not amortized. Rather, goodwill and such indefinite-lived intangible assets are assessed for impairment at least annually. The Company generally
performs its annual goodwill and indefinite-lived intangible assets impairment analyses using a qualitative approach to determine whether it is more likely
than not that the fair values of such assets are less than their respective carrying values. If, based on the results of the qualitative assessment, it is concluded
that it is not more likely than not that the fair value of the asset exceeds its carrying value, a quantitative test is performed. Under the quantitative test, if the
carrying value of the asset exceeds its fair value, an impairment loss is recognized in the amount of the excess. The Company also periodically performs a
quantitative test to assess its goodwill for impairment in lieu of using the qualitative approach in order to reassess the fair values of its reporting units.
Finite-lived intangible assets are amortized over their respective estimated useful lives and, along with other long-lived assets as noted above, are
evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable.
See discussion of the Company's accounting policy for long-lived asset impairment as previously described under the caption "Property and Equipment,
Net."
Income Taxes
Income taxes are provided using the asset and liability method. Under this method, income taxes (i.e., deferred tax assets and liabilities, current taxes
payable/refunds receivable, and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any
difference between U.S. GAAP and tax reporting. Deferred income taxes reflect the tax effect of certain net operating losses, capital losses, general
business credit carryforwards, and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement
and income tax purposes, as determined under enacted tax laws and rates. The Company accounts for the financial effect of changes in tax laws or rates in
the period of enactment.
In addition, valuation allowances are established when management determines that it is more likely than not that some portion or all of a deferred
tax asset will not be realized. Tax valuation allowances are analyzed periodically and adjusted as events occur or circumstances change that warrant
adjustments.
In determining the income tax benefit (provision) for financial reporting purposes, the Company establishes a reserve for uncertain tax positions. If
the Company considers that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, it
recognizes the tax benefit. The Company measures the tax benefit by determining the largest amount that is greater than 50% likely of being realized upon
settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. These
assessments can be complex and the Company often obtains assistance from external advisors. To the extent that the Company's estimates change or the
final tax outcome of these matters is different than the amounts recorded, such differences will impact the income tax benefit (provision) in the period in
which such determinations are made. If the initial assessment fails to result in the recognition of a tax benefit, the Company regularly monitors its position
and subsequently recognizes the tax benefit if (i) there are changes in tax law or analogous case law that sufficiently raise the likelihood of prevailing on
the technical merits of the position to more likely than not; (ii) the statute of limitations expires; or (iii) there is a completion of an audit resulting in a
settlement of that tax year with the appropriate agency. Uncertain tax positions are classified as current only when the Company expects to pay cash within
the next twelve months. Interest and penalties are recorded within the income tax benefit (provision) in the Company's consolidated statements of
operations and are classified on the consolidated balance sheets together with the related liability for unrecognized tax benefits.
See Note 10 for further discussion of the Company's income taxes.
F-16
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Derivative Financial Instruments
The Company records derivative financial instruments on its consolidated balance sheets at fair value. Changes in the fair value of derivative
instruments that are designated and qualify for hedge accounting are either (i) offset through earnings against the changes in fair value of the related hedged
assets, liabilities, or firm commitments or (ii) recognized in equity as a component of AOCI until the hedged item is recognized in earnings, depending on
whether the instrument is hedging against changes in fair value or cash flows and net investments, respectively.
Each derivative instrument that qualifies for hedge accounting is expected to be highly effective in offsetting the risk associated with the related
exposure. For each instrument that is designated as a hedge, the Company documents the related risk management objective and strategy, including
identification of the hedging instrument, the hedged item, and the risk exposure, as well as how hedge effectiveness will be assessed over the instrument's
term. To assess hedge effectiveness at the inception of a hedging relationship, the Company generally uses regression analysis, a statistical method, to
compare changes in the fair value of the derivative instrument to changes in the fair value or cash flows of the related hedged item. The extent to which a
hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed by the
Company on at least a quarterly basis.
Given its use of derivative instruments, the Company is exposed to the risk that counterparties to such contracts will fail to meet their contractual
obligations. To mitigate such counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions
based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. The Company's established
policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of its counterparties'
creditworthiness. The Company also enters into master netting arrangements with counterparties, when possible, to further mitigate credit risk. In the event
of default or termination (as such terms are defined within the respective master netting arrangement), these arrangements allow the Company to net-settle
amounts payable and receivable related to multiple derivative transactions with the same counterparty. The master netting arrangements specify a number
of events of default and termination, including the failure to make timely payments.
The fair values of the Company's derivative instruments are recorded on its consolidated balance sheets on a gross basis. For cash flow reporting
purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being
hedged, primarily within cash flows from operating activities.
Cash Flow Hedges
The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions
made in an entity's non-functional currency. To the extent designated as cash flow hedges, related gains or losses on such instruments are initially deferred
in equity as a component of AOCI and are subsequently recognized within cost of goods sold in the consolidated statements of operations when the related
inventory is sold.
If a derivative instrument is dedesignated or if hedge accounting is discontinued because the instrument is not expected to be highly effective in
hedging the designated exposure, any further gains (losses) are recognized in earnings each period within other income (expense), net. Upon
discontinuance of hedge accounting, the cumulative change in fair value of the derivative instrument recorded in AOCI is recognized in earnings when the
related hedged item affects earnings, consistent with the hedging strategy, unless the related forecasted transaction is probable of not occurring, in which
case the accumulated amount is immediately recognized in earnings within other income (expense), net.
Hedges of Net Investments in Foreign Operations
The Company periodically uses cross-currency swap contracts and forward foreign currency exchange contracts to reduce risk associated with
exchange rate fluctuations on certain of its net investments in foreign subsidiaries. Changes in the fair values of such derivative instruments that are
designated as hedges of net investments in foreign operations are recorded in equity as a component of AOCI in the same manner as foreign currency
translation adjustments. In assessing the effectiveness of such hedges, the Company uses a method based on changes in spot rates to measure the impact of
foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related hedging instrument. Under this method, changes in
the fair value of the hedging instrument other than those due to changes in the spot rate are initially recorded in AOCI as a translation adjustment and are
amortized into earnings as interest expense using a systematic and rational method over the instrument's term. Changes in fair value associated with the
effective portion (i.e., those due to changes in the spot rate) are recorded in AOCI as a translation adjustment and are released and recognized in earnings
only upon the sale or liquidation of the hedged net investment.
F-17
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Hedges
Changes in the fair value of a derivative instrument that is designated as a fair value hedge, along with offsetting changes in the fair value of the
related hedged item attributable to the hedged risk, are recorded in earnings. To the extent that the change in the fair value of the hedged item does not fully
offset the change in the fair value of the hedging instrument, the resulting net impact is reflected in earnings within the income statement line item
associated with the hedged item.
Undesignated Hedges
The Company uses undesignated hedges primarily to hedge foreign currency exchange rate risk related to third-party and intercompany balances and
exposures. Changes in the fair value of undesignated derivative instruments are recognized in earnings each period within other income (expense), net.
See Note 13 for further discussion of the Company's derivative financial instruments.
4.
Recently Issued Accounting Standards
Implementation Costs in Cloud Computing Arrangements
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-15, "Customer's
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15"). ASU 2018-15 addresses
diversity in practice surrounding the accounting for costs incurred to implement a cloud computing hosting arrangement that is a service contract by
establishing a model for capitalizing or expensing such costs, depending on their nature and the stage of the implementation project during which they are
incurred. Any capitalized costs are to be amortized over the reasonably certain term of the hosting arrangement and presented in the same line within the
statement of operations as the related service arrangement's fees. ASU 2018-15 also requires enhanced qualitative and quantitative disclosures surrounding
hosting arrangements that are service contracts. ASU 2018-15 is effective for the Company beginning in its Fiscal 2021, with early adoption permitted, and
may be adopted on either a retrospective or prospective basis. Other than the new disclosure requirements, the Company does not currently expect that the
adoption of ASU 2018-15 will have a material impact on its consolidated financial statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"
("ASU 2018-02"). Existing accounting guidance requires the remeasurement of deferred tax assets and liabilities resulting from a change in tax laws or
rates to be included in net income, including the remeasurement of deferred taxes related to items recorded within AOCI. ASU 2018-02 provides an entity
with the option to adjust AOCI for the "stranded" tax effect of such remeasurements resulting from the reduction in the U.S. federal statutory income tax
rate under the 2017 Tax Cuts and Jobs Act (the "TCJA") through a reclassification to retained earnings.
The Company adopted ASU 2018-02 as of the beginning of the first quarter of Fiscal 2020 and elected to reclassify the income tax effect stranded in
AOCI related to the TCJA, inclusive of state income tax-related effects, resulting in a $4.9 million increase to its opening retained earnings. The
Company generally releases income tax effects from AOCI when the corresponding pretax AOCI items are reclassified to earnings.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13,
which was further updated and clarified by the FASB through issuance of additional related ASUs, amends the guidance surrounding measurement and
recognition of credit losses on financial assets measured at amortized cost, including trade receivables and investments in certain debt securities, by
requiring upfront recognition of an allowance for credit losses expected to be incurred over an asset's lifetime based on relevant information about past
events, current conditions, and supportable forecasts impacting its ultimate collectibility. It is expected that application of this "expected loss" model will
result in earlier recognition of credit losses than the current "as incurred" model, under which losses are recognized only upon occurrence of an event that
gives rise to the incurrence of a probable loss. While the Company's historical bad debt write-off activity has generally been insignificant, similar to current
practice, the extent of losses ultimately recognized will depend on prevailing
F-18
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
conditions and ongoing consideration of information and forecasts that inform assessments of collectability. ASU 2016-13 is effective for the Company
beginning in its Fiscal 2021, with early adoption permitted, and is to be adopted on a modified retrospective basis.
Leases
In February 2016, the FASB issued ASU No. 2016-02, "Leases." ASU No. 2016-02, along with certain other ASUs that were subsequently issued
to clarify and modify certain of its provisions (collectively "ASU 2016-02"), supersedes historical lease accounting guidance and requires that, among its
provisions, a lessee's rights and fixed payment obligations under most leases be recognized as ROU assets and lease liabilities on its balance sheet, initially
measured based on the present value of its fixed payment obligations over the lease term. Under historical guidance, only those leases classified as capital
were recognized on a lessee's balance sheet; operating leases were not recognized on the balance sheet. ASU 2016-02 retains a dual model for classifying
leases as either finance (formerly referred to as "capital") or operating, consistent with historical guidance, which governs the pattern of expense
recognition reflected in the statement of operations over the lease term. Accordingly, recognition of lease expense in the statement of operations will not
significantly change. Additionally, variable lease payments based on performance, such as percentage-of-sales-based payments, are not included in the
measurement of ROU assets and lease liabilities and, consistent with historical practice, are recognized as an expense in the period incurred. The standard
also requires enhanced quantitative and qualitative lease-related disclosures.
The Company adopted ASU 2016-02 as of the beginning of the first quarter of Fiscal 2020 using a modified retrospective approach under which
the cumulative effect of initially applying the standard was recognized as an adjustment to its opening retained earnings (discussed further below), with no
restatement of prior year amounts. In connection therewith, the Company applied an optional package of practical expedients intended to ease transition to
the standard for existing leases by, among its provisions, carrying forward its original lease classification conclusions without reassessment. Upon adoption
of ASU 2016-02, the Company recognized initial ROU asset and lease liability balances of approximately $1.60 billion and $1.75 billion, respectively, on
its consolidated balance sheet.
Additionally, in connection with its adoption of ASU 2016-02, the Company recorded an adjustment to reduce its opening retained earnings
balance by $131.6 million, net of related income tax benefits, reflecting the impairment of an ROU asset for a certain real estate lease of which, under
historical accounting guidance, the Company was previously deemed the owner for accounting purposes (commonly referred to as a "build-to-suit" lease
arrangement). Specifically, although the Company no longer generates revenue or other cash flows from its rights underlying the leased asset given it no
longer actively uses the space for commercial purposes, the asset was previously not considered impaired under historical accounting guidance as its fair
value, assessed from an ownership perspective (and not from that of a lessee), exceeded its carrying value. However, in accordance with and upon
transitioning to ASU 2016-02, the Company derecognized the remaining asset and liability balances previously recognized solely as a result of the
arrangement's build-to-suit designation, as the related construction activities that originally gave rise to such designation have since ended, and established
initial ROU asset and lease liability balances measured based on the Company's remaining fixed payment obligations under the lease. The initial ROU asset
was then assessed for impairment based on the aggregate estimated cash flows that could be generated by transferring the lease to a market participant
sublessee for the remainder of its term, which were lower than the aggregate remaining lease payments underlying the measurement of the initial ROU
asset. Accordingly, the Company impaired the initial ROU asset by $175.4 million to its estimated fair value which was recorded as a reduction to its
opening retained earnings balance, net of related income tax benefits of $43.8 million, upon adoption of ASU 2016-02, as previously noted.
The Company also recorded other initial ROU asset impairments to reduce its opening retained earnings balance upon adoption of the standard
related to leases of certain underperforming retail locations for which the carrying value of the respective store's initial operating lease ROU asset exceeded
its fair value. These impairments totaled $49.7 million and were recorded as adjustments to reduce the Company's opening retained earnings balance by
$37.8 million, net of related income tax effects. Leasehold improvements related to these underperforming retail locations were previously fully-impaired
prior to the adoption of ASU 2016-02.
See Notes 3 and 14 for further discussion of the Company's lease accounting policy and other related disclosures.
F-19
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5.
Property and Equipment
Property and equipment, net consists of the following:
Land and improvements
Buildings and improvements
Furniture and fixtures
Machinery and equipment
Capitalized software
Leasehold improvements
Construction in progress
Less: accumulated depreciation
Property and equipment, net
March 28,
2020
March 30,
2019
$
(millions)
15.3 $
309.0
629.5
378.8
543.3
1,194.5
37.5
3,107.9
(2,128.4)
$
979.5 $
15.3
387.8
626.4
350.4
534.0
1,169.4
58.7
3,142.0
(2,102.8)
1,039.2
Depreciation expense was $246.6 million, $257.8 million, and $271.2 million during Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively, and is
recorded primarily within SG&A expenses in the consolidated statements of operations.
6.
Goodwill and Other Intangible Assets
Goodwill
The following table details the changes in goodwill for each of the Company's segments during Fiscal 2020 and Fiscal 2019:
Balance at March 31, 2018
Foreign currency translation
Balance at March 30, 2019
Foreign currency translation
Balance at March 28, 2020
North
America
Europe
Asia
(millions)
Other Non-
reportable
Segments(a)
Total(a)
$
421.8 $
317.9 $
78.8 $
132.0 $
950.5
—
421.8
—
(27.9)
290.0
(4.9)
(3.0)
75.8
0.8
—
132.0
—
(30.9)
919.6
(4.1)
$
421.8 $
285.1 $
76.6 $
132.0 $
915.5
(a) The goodwill balance for each period presented is net of accumulated impairment charges of $5.2 million related to the Company's other non-
reportable segments.
Based on the results of the Company's goodwill impairment testing in Fiscal 2020, Fiscal 2019, and Fiscal 2018, no goodwill impairment charges
were recorded. See Note 12 for further discussion of the Company's goodwill impairment testing.
F-20
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Intangible Assets
Other intangible assets consist of the following:
Intangible assets subject to amortization:
Re-acquired licensed trademarks
Customer relationships
Other
March 28, 2020
March 30, 2019
Gross
Carrying
Amount
Accum.
Amort.
Net
Gross
Carrying
Amount
Accum.
Amort.
Net
(millions)
$
231.6 $ (155.4) $
76.2 $
231.3 $ (146.8) $
253.9
(199.0)
10.1
(7.5)
54.9
2.6
253.2
(184.0)
10.1
(7.4)
84.5
69.2
2.7
Total intangible assets subject to amortization
495.6
(361.9)
133.7
494.6
(338.2)
156.4
Intangible assets not subject to amortization:
Trademarks and brands
Total intangible assets
Amortization Expense
7.3
N/A
7.3
7.3
N/A
7.3
$
502.9 $ (361.9) $
141.0 $
501.9 $ (338.2) $
163.7
Amortization expense was $22.9 million, $23.5 million, and $24.0 million during Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively, and is
recorded within SG&A expenses in the consolidated statements of operations.
Based on the balance of the Company's finite-lived intangible assets subject to amortization as of March 28, 2020, the expected amortization
expense for each of the next five fiscal years and thereafter is as follows:
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026 and thereafter
Total
Amortization Expense
(millions)
$
$
19.8
17.9
14.4
13.2
12.9
55.5
133.7
The expected future amortization expense above reflects weighted-average estimated remaining useful lives of 9.9 years for re-acquired licensed
trademarks, 7.9 years for customer relationships, and 9.2 years for the Company's finite-lived intangible assets in total.
F-21
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7.
Other Assets and Liabilities
Prepaid expenses and other current assets consist of the following:
Non-trade receivables
Other taxes receivable
Prepaid software maintenance
Derivative financial instruments
Prepaid advertising and marketing
Inventory return asset
Prepaid occupancy expense
Tenant allowances receivable
Restricted cash
Assets held-for-sale(a)
Other prepaid expenses and current assets
Total prepaid expenses and other current assets
March 28,
2020
March 30,
2019
$
(millions)
27.0 $
24.7
23.2
13.7
10.1
8.9
6.7
1.8
1.4
—
$
43.3
160.8 $
30.8
137.9
19.8
19.8
9.6
18.4
38.0
8.2
11.9
20.8
44.1
359.3
(a) Balance as of March 30, 2019 related to the estimated fair value, less costs to sell, of the Company's corporate jet. The jet was sold during Fiscal
2020 with no gain or loss recognized on sale. The Company donated the $20.8 million net cash proceeds received from the sale to the Ralph
Lauren Corporate Foundation (formerly known as the Polo Ralph Lauren Foundation), a non-profit, charitable foundation that supports various
philanthropic programs.
Other non-current assets consist of the following:
Derivative financial instruments
Security deposits
Restricted cash
Non-current investments
Other non-current assets
Total other non-current assets
March 28,
2020
March 30,
2019
$
(millions)
48.6 $
29.4
8.0
—
25.9
$
111.9 $
12.2
24.5
30.5
44.9
46.4
158.5
F-22
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accrued expenses and other current liabilities consist of the following:
March 28,
2020
March 30,
2019
Accrued payroll and benefits
Accrued operating expenses
Accrued inventory
Dividends payable
Other taxes payable
Accrued capital expenditures
Restructuring reserve
Deferred income
Finance lease obligations
Derivative financial instruments
Other accrued expenses and current liabilities
$
(millions)
186.2 $
176.4
167.1
49.8
47.9
29.1
25.5
14.6
9.8
6.9
3.8
Total accrued expenses and other current liabilities
$
717.1 $
232.5
235.2
141.0
48.8
158.3
47.6
60.4
14.1
22.3
3.6
4.6
968.4
Other non-current liabilities consist of the following:
Finance lease obligations
Deferred lease incentives and obligations
Accrued benefits and deferred compensation
Deferred tax liabilities
Restructuring reserve
Derivative financial instruments
Other non-current liabilities
Total other non-current liabilities
8.
Impairment of Assets
March 28,
2020
March 30,
2019
$
(millions)
189.4 $
57.8
19.5
10.0
2.0
—
29.8
$
308.5 $
212.6
202.7
26.2
50.2
11.4
11.9
25.9
540.9
During Fiscal 2020, the Company recorded non-cash impairment charges of $31.6 million to write-down certain long-lived assets, of which $8.7
million was recorded in connection with its restructuring plans (see Note 9) and $22.9 million of which related to underperforming stores identified through
its on-going store portfolio evaluation and adverse impacts associated with COVID-19 business disruptions. These charges were recorded within
impairment of assets in the consolidated statements of operations. In addition, the Company recorded a $7.1 million impairment charge within other income
(expense), net in the consolidated statements of operations during Fiscal 2020 relating to an equity method investment.
During Fiscal 2019, the Company recorded non-cash impairment charges of $21.2 million to write-down certain long-lived assets, of which $10.7
million was recorded in connection with its restructuring plans (see Note 9) and $10.5 million of which related to underperforming stores identified as a
result of its on-going store portfolio evaluation. Additionally, as a result of its decision to sell its corporate jet in connection with its cost savings initiative,
the Company recorded a non-cash impairment charge of $4.6 million during Fiscal 2019 to reduce the carrying value of the asset held-for-sale to its
estimated fair value, less costs to sell.
During Fiscal 2018, the Company recorded non-cash impairment charges of $41.2 million, to write-down certain long-lived assets, of which $16.0
million was recorded in connection with its restructuring plans (see Note 9) and $25.2 million of which related to underperforming stores identified as a
result of its on-going store portfolio evaluation. Additionally, as a result of a
F-23
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
change in the planned usage of a certain intangible asset, the Company recorded a non-cash impairment charge of $8.8 million during Fiscal 2018 to reduce
the carrying value of the intangible asset to its estimated fair value.
See Note 12 for further discussion of the non-cash impairment charges recorded during the fiscal years presented.
9.
Restructuring and Other Charges
A description of significant restructuring and other activities and their related costs is included below.
Fiscal 2019 Restructuring Plan
On June 4, 2018, the Company's Board of Directors approved a restructuring plan associated with the Company's strategic objective of operating
with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan includes the following restructuring-
related activities: (i) rightsizing and consolidation of the Company's global distribution network and corporate offices; (ii) targeted severance-related
actions; and (iii) closure of certain of its stores and shop-within-shops.
Actions associated with the Fiscal 2019 Restructuring Plan are complete and no additional charges are expected to be incurred in connection with
this plan. A summary of the charges recorded in connection with the Fiscal 2019 Restructuring Plan during the fiscal periods presented, as well as the
cumulative charges recorded since its inception, is as follows:
Fiscal Year Ended
March 28,
2020
March 30,
2019
(millions)
Cumulative
Charges
Cash-related restructuring charges:
Severance and benefit costs
Lease termination and store closure costs
Other cash charges
Total cash-related restructuring charges
Non-cash charges:
Impairment of assets (see Note 8)
Inventory-related charges(a)
Accelerated stock-based compensation expense(b)
Loss on sale of property(c)
Total non-cash charges
Total charges
$
30.1 $
60.2 $
0.5
3.4
34.0
8.7
2.2
3.6
—
14.5
48.5 $
$
1.8
7.4
69.4
10.3
6.0
—
11.6
27.9
90.3
2.3
10.8
103.4
19.0
8.2
3.6
11.6
42.4
97.3 $
145.8
Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
(a)
(b) Accelerated stock-based compensation expense, which is recorded within restructuring and other charges in the consolidated statements of
operations, was recorded in connection with vesting provisions associated with certain separation agreements.
(c) Loss on sale of property, which was recorded within restructuring and other charges in the consolidated statements of operations during Fiscal
2019, was incurred in connection with the sale of one of the Company's distribution centers in North America. Total cash proceeds from the sale
were $20.0 million.
F-24
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of the activity in the restructuring reserve related to the Fiscal 2019 Restructuring Plan is as follows:
Severance and
Benefit Costs
Lease Termination
and Store
Closure Costs
Other Cash
Charges
Total
Balance at March 31, 2018
Additions charged to expense
Cash payments charged against reserve
Non-cash adjustments
Balance at March 30, 2019
Additions charged to expense
Cash payments charged against reserve
Non-cash adjustments(a)
$
— $
60.2
(19.0)
(0.2)
41.0
30.1
(47.6)
—
(millions)
— $
1.8
(2.1)
0.8
0.5
0.5
(0.6)
(0.4)
— $
7.4
(7.3)
—
0.1
3.4
(2.9)
—
Balance at March 28, 2020
$
23.5 $
— $
0.6 $
—
69.4
(28.4)
0.6
41.6
34.0
(51.1)
(0.4)
24.1
(a) Certain lease-related liabilities previously recognized in connection with the Company's closure and cessation of use of real estate locations
were reclassified and reflected as reductions of the respective operating lease ROU assets initially recognized upon adoption of ASU 2016-02
(see Note 4).
Way Forward Plan
On June 2, 2016, the Company's Board of Directors approved a restructuring plan with the objective of delivering sustainable, profitable sales
growth and long-term value creation for shareholders (the "Way Forward Plan"). In connection with the Way Forward Plan, the Company refocused on its
core brands and its product, marketing, and shopping experience to increase desirability and relevance. It also evolved its operating model by significantly
improving quality of sales, reducing supply chain lead times, improving its sourcing, and executing a disciplined multi-channel distribution and expansion
strategy. The Company reduced its cost structure and implemented a return on investment-driven financial model to free up resources to invest in the brand
and drive high-quality sales. The Company also strengthened its leadership team and created a more nimble organization by moving from an average of
nine to six layers of management. The Way Forward Plan also included the discontinuance of the Company's Denim & Supply brand and the integration of
its denim product offerings into its Polo Ralph Lauren brand. Collectively, these actions, which were substantially completed during the Company's fiscal
year ended April 1, 2017 ("Fiscal 2017"), resulted in a reduction in workforce and the closure of certain stores and shop-within-shops.
On March 30, 2017, the Company's Board of Directors approved the following additional restructuring-related activities associated with the Way
Forward Plan: (i) the restructuring of its in-house global digital commerce platform which was in development and shifting to a more cost-effective,
flexible platform through a new agreement with Salesforce's Commerce Cloud, formerly known as Demandware; (ii) the closure of its Polo store at 711
Fifth Avenue in New York City; and (iii) the further streamlining of the organization and the execution of other key corporate actions. These additional
restructuring-related activities were largely completed during Fiscal 2018 and resulted in a further reduction in workforce and the closure of certain
corporate office and store locations.
F-25
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Actions associated with the Way Forward Plan are complete and no additional charges are expected to be incurred in connection with this plan. A
summary of the charges recorded in connection with the Way Forward Plan during the fiscal periods presented, as well as the cumulative charges recorded
since its inception, is as follows:
Cash-related restructuring charges:
Severance and benefits costs
Lease termination and store closure costs
Other cash charges
Total cash-related restructuring charges
Non-cash charges:
Impairment of assets (see Note 8)
Inventory-related charges(a)
Accelerated stock-based compensation expense(b)
Other non-cash charges
Total non-cash charges
Total charges
Fiscal Years Ended
March 30,
2019
March 31,
2018
(millions)
Cumulative
Charges
$
7.0 $
39.0 $
1.4
0.8
9.2
0.4
1.2
—
3.4
5.0
33.2
6.3
78.5
16.0
7.6
0.7
—
24.3
$
14.2 $
102.8 $
228.7
121.9
26.2
376.8
251.0
206.7
0.7
3.4
461.8
838.6
(a) Cumulative inventory-related charges include $155.2 million associated with the destruction of inventory out of current liquidation channels.
Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
(b) Accelerated stock-based compensation expense, which is recorded within restructuring and other charges in the consolidated statements of
operations, was recorded in connection with vesting provisions associated with certain separation agreements.
A summary of the activity in the restructuring reserve related to the Way Forward Plan is as follows:
Severance and
Benefits Costs
Lease Termination
and Store
Closure Costs
Other Cash
Charges
Total
Balance at April 1, 2017
Additions charged to expense
Cash payments charged against reserve
Non-cash adjustments
Balance at March 31, 2018
Additions charged to expense
Cash payments charged against reserve
Non-cash adjustments
Balance at March 30, 2019
Additions charged to expense
Cash payments charged against reserve
Non-cash adjustments(a)
$
94.3 $
(millions)
34.3 $
39.0
(97.9)
2.2
37.6
7.0
(37.7)
(0.4)
6.5
—
(4.9)
—
33.2
(22.8)
8.8
53.5
1.4
(33.6)
0.6
21.9
—
(2.1)
(18.3)
6.6 $
6.3
(11.1)
—
1.8
0.8
(2.2)
—
0.4
—
(0.1)
—
Balance at March 28, 2020
$
1.6 $
1.5 $
0.3 $
135.2
78.5
(131.8)
11.0
92.9
9.2
(73.5)
0.2
28.8
—
(7.1)
(18.3)
3.4
F-26
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a)
Includes $17.7 million of certain lease-related liabilities previously recognized in connection with the Company's closure and cessation of use of
real estate locations that were reclassified and reflected as reductions of the respective operating lease ROU assets initially recognized upon
adoption of ASU 2016-02 (see Note 4).
Other Restructuring Plans
The Company made cash payments of $0.2 million, $3.2 million, and $7.6 million during Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively,
which were applied against the reserve associated with its restructuring plan initiated prior to Fiscal 2017. Additionally, during Fiscal 2020, $1.2 million of
lease-related liabilities previously recognized in connection with the Company's closure and cessation of use of real estate locations were reclassified and
reflected as reductions of the respective operating lease ROU assets initially recognized upon adoption of ASU 2016-02 (see Note 4). As of March 28,
2020, there was no remaining restructuring reserve associated with this plan, and no charges were recorded for this plan in any of the fiscal years presented.
Other Charges
During Fiscal 2020, the Company recorded other charges of $20.8 million related to the donation of net cash proceeds received from the sale of its
corporate jet. This donation was made to the Ralph Lauren Corporate Foundation (formerly known as the Polo Ralph Lauren Foundation), a non-profit,
charitable foundation that supports various philanthropic programs. Additionally, during Fiscal 2020, the Company recorded other charges of $8.8 million
primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not
yet expired.
During Fiscal 2019, the Company recorded other charges of $14.1 million related to depreciation expense associated with the Company's former
Polo store at 711 Fifth Avenue in New York City, recorded after the store closed during the first quarter of Fiscal 2018. Additionally, during Fiscal 2019,
the Company recorded other charges of $4.2 million primarily related to a customs audit, as well as $18.2 million primarily related to the launch of its new
sabbatical leave program, which entitles eligible employees to periodic paid leave based on the attainment of certain employment tenure milestones. Other
than this initial charge to establish its estimated liability for services rendered to-date, the Company does not expect there will be a significant, ongoing
impact to the consolidated financial statements in future periods related to its sabbatical leave program.
During Fiscal 2018, the Company recorded other charges of $14.1 million related to depreciation expense associated with the Company's former
Polo store at 711 Fifth Avenue in New York City, $10.2 million related to a customs audit, and $6.7 million (inclusive of accelerated stock-based
compensation expense of $2.1 million) primarily related to the departure of Mr. Stefan Larsson as the Company's President and Chief Executive Officer
and as a member of its Board of Directors, effective as of May 1, 2017. Refer to the Form 8-K filed on February 2, 2017 for additional discussion regarding
the departure of Mr. Larsson. These other charges recorded in Fiscal 2018 were partially offset by the favorable impact of $2.2 million related to the
reversal of reserves associated with the settlement of certain non-income tax issues.
10.
Income Taxes
Swiss Tax Reform
In May 2019, a public referendum was held in Switzerland that approved the Federal Act on Tax Reform and AHV Financing (the "Swiss Tax Act"),
which became effective January 1, 2020. The Swiss Tax Act eliminates certain preferential tax items at both the federal and cantonal levels for
multinational companies and provides the cantons with parameters for establishing local tax rates and regulations. The Swiss Tax Act also provides
transitional provisions, one of which allows eligible companies to increase the tax basis of certain assets based on the value generated by their business in
previous years, and to amortize such adjustment as a tax deduction over a transitional period.
During the second quarter of Fiscal 2020, the Swiss Tax Act was enacted into law, resulting in an immaterial adjustment associated with the
revaluation of the Company's Swiss deferred tax assets and liabilities and estimated annual effective tax rate. Subsequently, as a result of additional
information received from the tax authorities and analyses performed related to the transitional provision noted above, the Company recorded a one-time
income tax benefit and corresponding deferred tax asset of $122.9 million during Fiscal 2020. This one-time benefit decreased the Company's effective tax
rate by 3,760 basis points during Fiscal 2020.
F-27
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
U.S. Tax Reform
On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"),
which became effective January 1, 2018. The TCJA significantly revised U.S. tax law by, among other provisions, lowering the U.S. federal statutory
income tax rate from 35% to 21%, creating a territorial tax system that includes a one-time mandatory transition tax on previously deferred foreign
earnings, and eliminating or reducing certain income tax deductions.
ASC Topic 740, "Income Taxes," requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted.
However, due to the complexity and significance of the TCJA's provisions, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") on
December 22, 2017, which allowed companies to record the tax effects of the TCJA on a provisional basis based on a reasonable estimate, and then, if
necessary, subsequently adjust such amounts during a limited measurement period as additional information became available and further analyses were
completed. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, not to
extend beyond one year from enactment.
During the third quarter of Fiscal 2018, the Company recorded charges of $231.3 million within its income tax provision in connection with the
TCJA, of which $215.5 million related to the mandatory transition tax, and $15.8 million related to the revaluation of the Company's deferred tax assets
and liabilities. Subsequently, as a result of finalizing its full Fiscal 2018 operating results, the issuance of new interpretive guidance, and other analyses
performed, the Company recorded measurement period adjustments during the fourth quarter of Fiscal 2018, whereby it reversed $6.2 million of the
charges related to the mandatory transition tax and $5.5 million related to the revaluation of its deferred taxes. These reversals were partially offset by an
incremental charge of $1.8 million related to the expected future remittance of certain previously deferred foreign earnings. Collectively, these net charges
of $221.4 million, which were recorded on a provisional basis, increased the Company's effective tax rate by 4,520 basis points during Fiscal 2018.
During the second quarter of Fiscal 2019, the Company recorded an additional measurement period adjustment as a result of the issuance of new
interpretive guidance related to stock-based compensation for certain executives, whereby it recorded an income tax benefit and corresponding deferred tax
asset of $4.7 million. Subsequently, during the third quarter of Fiscal 2019, the Company completed its analyses and recorded its final measurement period
adjustments, whereby it recorded incremental charges of $32.3 million within its income tax provision, substantially all of which related to the mandatory
transition tax. These measurement period adjustments increased the Company's effective tax rate by 470 basis points during Fiscal 2019. Approximately
$241 million of the cumulative TCJA enactment-related charges recorded related to the mandatory transition tax (see Note 15).
Additionally, during the fourth quarter of Fiscal 2018 the Company reevaluated its permanent reinvestment assertion and determined that
undistributed foreign earnings that were subject to the one-time mandatory transition tax were no longer considered to be permanently reinvested, effective
December 31, 2017. The mandatory transition tax does not apply to undistributed foreign earnings generated after December 31, 2017, and therefore the
Company intends to permanently reinvest such earnings. See "Deferred Taxes" for additional discussion.
The Company also decided to account for the minimum tax on global intangible low-taxed income ("GILTI") in the period in which it is incurred
and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for Fiscal 2019.
Taxes on Income
Domestic and foreign pretax income are as follows:
Domestic
Foreign
Total income before income taxes
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
$
(82.9) $
409.3
326.4 $
66.6 $
515.9
582.5 $
16.4
472.8
489.2
F-28
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Benefits (provisions) for current and deferred income taxes are as follows:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
1.5 $
(37.3) $
(19.8)
(92.6)
(110.9)
18.0
5.6
145.2
168.8
(11.9)
(93.9)
(143.1)
(5.0)
(6.9)
3.4
(8.5)
(154.6)
(5.0)
(82.7)
(242.3)
(64.1)
(12.6)
(7.4)
(84.1)
Total income tax benefit (provision)
$
57.9 $
(151.6) $
(326.4)
Tax Rate Reconciliation
The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as set forth below:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Provision for income taxes at the U.S. federal statutory rate(a)
$
(68.5)
$
(122.3)
$
(154.3)
Change due to:
State and local income taxes, net of federal benefit
Foreign income taxed at different rates, net of U.S. foreign tax credits
Unrecognized tax benefits and settlements of tax examinations
Changes in valuation allowance on deferred tax assets
TCJA enactment-related charges
Swiss Tax Act benefit
Compensation-related adjustments
Other
Total income tax benefit (provision)
Effective tax rate(b)
(1.5)
24.7
(9.2)
(1.7)
—
125.3
(10.7)
(0.5)
(12.4)
27.6
(3.4)
(1.4)
(27.6)
—
(11.6)
(0.5)
(1.6)
74.7
(14.4)
2.5
(221.4)
—
(15.4)
3.5
$
57.9
$
(151.6)
$
(326.4)
(17.7%)
26.0%
66.7%
(a) The U.S. federal statutory income tax rate was 21.0% during Fiscal 2020 and Fiscal 2019. The previous statutory rate of 35.0% was reduced to
21.0% by the TCJA effective January 1, 2018, resulting in a blended statutory rate of 31.5% for the Company's Fiscal 2018.
(b) Effective tax rate is calculated by dividing the income tax benefit (provision) by income (loss) before income taxes.
The Company's Fiscal 2020 effective tax rate was lower than the U.S. federal statutory income tax rate of 21% primarily due to the one-time income
tax benefit recorded in connection with the Swiss Tax Act, as previously discussed, the favorable impact of the change in geographic mix of its worldwide
earnings and the favorable impact of tax benefits associated with provision to tax return adjustments, partially offset by the unfavorable impact of
additional income tax reserves associated with certain income tax audits. The Company's Fiscal 2019 effective tax rate was higher than the U.S. federal
statutory income tax rate of 21%
F-29
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
primarily due to the SAB 118 measurement period adjustments recorded, as previously discussed, state and local income taxes, and compensation-related
adjustments, partially offset by the favorable impact of the proportion of earnings generated in lower taxed jurisdictions. The Company's Fiscal 2018
effective tax rate was higher than the blended statutory rate of 31.5% primarily due to the enactment-related charges recorded in connection with the TCJA,
as previously discussed, the negative impact of the adoption of ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU
2016-09"), and the unfavorable impact of additional income tax reserves associated with certain income tax audits, partially offset by the favorable impact
of the proportion of earnings generated in lower taxed foreign jurisdictions versus the U.S. and tax benefits associated with adjustments recorded on
deferred tax assets and provision to tax return adjustments.
Deferred Taxes
Significant components of the Company's deferred tax assets and liabilities are as follows:
Lease liabilities
Inventory basis difference
Deferred compensation
Receivable allowances and reserves
Net operating loss carryforwards
Unrecognized tax benefits
Accrued expenses
Transfer pricing
Property and equipment
Deferred income
Deferred rent
Lease right-of-use assets
Goodwill and other intangible assets
Cumulative translation adjustment and hedges
Undistributed foreign earnings
Other
Valuation allowance
Net deferred tax assets(a)
March 28,
2020
March 30,
2019
$
(millions)
428.9 $
54.0
50.2
45.6
42.6
17.1
10.5
9.0
3.0
0.2
—
(353.0)
(30.0)
(17.6)
(3.3)
15.3
(37.3)
$
235.2 $
44.6
19.0
53.4
25.6
48.9
8.1
11.8
9.0
(24.6)
1.2
7.3
—
(149.8)
(7.8)
(4.7)
13.2
(38.4)
16.8
(a) Net deferred tax balances as of March 28, 2020 and March 30, 2019 were comprised of non-current deferred tax assets of $245.2 million and
$67.0 million, respectively, recorded within deferred tax assets, and non-current deferred tax liabilities of $10.0 million and $50.2 million,
respectively, recorded within other non-current liabilities in the consolidated balance sheets.
The Company has available state and foreign net operating loss carryforwards of $0.7 million and $5.9 million (both net of tax), respectively, for tax
purposes to offset future taxable income. The net operating loss carryforwards expire beginning in Fiscal 2021.
The Company also has available state and foreign net operating loss carryforwards of $7.8 million and $28.1 million (both net of tax), respectively,
for which no net deferred tax asset has been recognized. A full valuation allowance has been recorded against these carryforwards since the Company does
not believe that it will more likely than not be able to utilize these carryforwards to offset future taxable income. Subsequent recognition of these deferred
tax assets would result in an income tax benefit in the year of such recognition. The valuation allowance relating to state net operating loss carryforwards
increased by $0.6 million (net of tax) as a result of net operating losses in certain jurisdictions where the Company does not believe that it will more likely
than not be able to utilize these carryforwards in the future. The valuation allowance relating to foreign net operating loss carryforwards decreased by $1.1
million as a result of reductions in net operating losses in certain jurisdictions.
F-30
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a result of the taxation of undistributed foreign earnings in connection with the TCJA, the Company reevaluated its permanent reinvestment
assertion and determined that undistributed foreign earnings that were subject to the TCJA's one-time mandatory transition tax were no longer considered
to be permanently reinvested, effective December 31, 2017. The mandatory transition tax does not apply to undistributed foreign earnings generated after
December 31, 2017. Accordingly, provision has not been made for U.S. or additional foreign taxes on approximately $924 million of undistributed earnings
of foreign subsidiaries generated after December 31, 2017, as such earnings are expected to be permanently reinvested. These earnings could become
subject to tax if they were remitted as dividends, if foreign earnings were lent to RLC, a subsidiary or a U.S. affiliate of RLC, or if the stock of the
subsidiaries were sold. Determination of the amount of unrecognized deferred tax liability with respect to such earnings is not practicable.
Uncertain Income Tax Benefits
Fiscal 2020, Fiscal 2019, and Fiscal 2018 Activity
Reconciliations of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for Fiscal 2020, Fiscal 2019, and
Fiscal 2018 are presented below:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Unrecognized tax benefits beginning balance
Additions related to current period tax positions
Additions related to prior period tax positions
Reductions related to prior period tax positions
Reductions related to expiration of statutes of limitations
Reductions related to settlements with taxing authorities
Additions (reductions) related to foreign currency translation
$
65.2
$
64.2
$
6.0
30.5
(18.7)
(1.2)
(8.8)
(0.3)
4.9
11.7
(5.5)
(4.1)
(3.1)
(2.9)
Unrecognized tax benefits ending balance
$
72.7
$
65.2
$
49.9
6.8
9.5
(1.3)
(3.3)
(0.7)
3.3
64.2
The Company classifies interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. Reconciliations of the
beginning and ending amounts of accrued interest and penalties related to unrecognized tax benefits for Fiscal 2020, Fiscal 2019, and Fiscal 2018 are
presented below:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Accrued interest and penalties beginning balance
$
13.6
$
15.0
$
Net additions charged to expense
Reductions related to prior period tax positions
Reductions related to settlements with taxing authorities
Additions (reductions) related to foreign currency translation
7.0
(1.9)
(2.5)
—
3.0
(3.4)
(0.8)
(0.2)
Accrued interest and penalties ending balance
$
16.2
$
13.6
$
12.8
3.8
(1.6)
(0.3)
0.3
15.0
The total amount of unrecognized tax benefits, including interest and penalties, was $88.9 million and $78.8 million as of March 28, 2020 and
March 30, 2019, respectively, and was included within the non-current liability for unrecognized tax benefits in the consolidated balance sheets. The total
amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate was $71.7 million and $70.7 million as of March 28,
2020 and March 30, 2019, respectively.
F-31
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future Changes in Unrecognized Tax Benefits
The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not
limited to, settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Although the outcomes and timing of
such events are highly uncertain, the Company does not anticipate that the balance of gross unrecognized tax benefits, excluding interest and penalties, will
change significantly during the next twelve months. However, changes in the occurrence, expected outcomes, and timing of such events could cause the
Company's current estimate to change materially in the future.
The Company files a consolidated U.S. federal income tax return, as well as tax returns in various state, local, and foreign jurisdictions. The
Company is generally no longer subject to examinations by the relevant tax authorities for years prior to its fiscal year ended March 30, 2013.
11.
Debt
Debt consists of the following:
$300 million 2.625% Senior Notes(a)
$400 million 3.750% Senior Notes(b)
Borrowings outstanding under credit facilities
Total debt
Less: short-term debt and current portion of long-term debt
Total long-term debt
March 28,
2020
March 30,
2019
$
(millions)
299.6 $
396.4
475.0
1,171.0
774.6
$
396.4 $
293.4
395.7
—
689.1
—
689.1
(a) The carrying value of the 2.625% Senior Notes as of March 28, 2020 and March 30, 2019 reflects adjustments of $0.2 million and $5.9 million,
respectively, associated with the Company's related interest rate swap contract (see Note 13). The carrying value of the 2.625% Senior Notes is
also presented net of unamortized debt issuance costs and discount of $0.2 million and $0.7 million as of March 28, 2020 and March 30, 2019,
respectively.
(b) The carrying value of the 3.750% Senior Notes is presented net of unamortized debt issuance costs and discount of $3.6 million and $4.3
million as of March 28, 2020 and March 30, 2019, respectively.
Senior Notes
In August 2015, the Company completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior
notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes"). The 2.625% Senior Notes
were issued at a price equal to 99.795% of their principal amount. The proceeds from this offering were used for general corporate purposes.
In August 2018, the Company completed another registered public debt offering and issued an additional $400 million aggregate principal amount of
unsecured senior notes due September 15, 2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the "3.750% Senior Notes"). The
3.750% Senior Notes were issued at a price equal to 99.521% of their principal amount. The proceeds from this offering were used for general corporate
purposes, including repayment of the Company's previously outstanding $300 million principal amount of unsecured 2.125% senior notes that matured
September 26, 2018 (the "2.125% Senior Notes").
The Company has the option to redeem the 2.625% Senior Notes and 3.750% Senior Notes (collectively, the "Senior Notes"), in whole or in part, at
any time at a price equal to accrued and unpaid interest on the redemption date plus the greater of (i) 100% of the principal amount of the series of Senior
Notes to be redeemed or (ii) the sum of the present value of Remaining Scheduled Payments, as defined in the supplemental indentures governing such
Senior Notes (together with the indenture governing the Senior Notes, the "Indenture"). The Indenture contains certain covenants that restrict the
Company's ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party;
or sell, lease,
F-32
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
or convey all or substantially all of the Company's property or assets to another party. However, the Indenture does not contain any financial covenants.
Commercial Paper
The Company has a commercial paper borrowing program that allows it to issue up to $500 million of unsecured commercial paper notes through
private placement using third-party broker-dealers (the "Commercial Paper Program").
Borrowings under the Commercial Paper Program are supported by the Global Credit Facility, as defined below. Accordingly, the Company does not
expect combined borrowings outstanding under the Commercial Paper Program and Global Credit Facility to exceed $500 million. Commercial Paper
Program borrowings may be used to support the Company's general working capital and corporate needs. Maturities of commercial paper notes vary, but
cannot exceed 397 days from the date of issuance. Commercial paper notes issued under the Commercial Paper Program rank equally with the Company's
other forms of unsecured indebtedness. As of March 28, 2020, there were no borrowings outstanding under the Commercial Paper Program.
Revolving Credit Facilities
Global Credit Facility
In August 2019, the Company replaced its existing credit facility and entered into a new credit facility that provides for a $500 million senior
unsecured revolving line of credit through August 12, 2024 (the "Global Credit Facility") under terms and conditions substantially similar to those of the
previous facility. The Global Credit Facility is also used to support the issuance of letters of credit and maintenance of the Commercial Paper Program.
Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and certain other currencies, including Euros, Hong Kong Dollars, and
Japanese Yen, and are guaranteed by all of the Company's domestic significant subsidiaries. In accordance with the terms of the agreement governing the
Global Credit Facility, the Company has the ability to expand its borrowing availability under the Global Credit Facility to $1 billion, subject to the
agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability
throughout the term of the Global Credit Facility.
In March 2020, the Company borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen its
liquidity in response to the COVID-19 pandemic. This borrowing has been classified as short-term debt in the Company's consolidated balance sheet as of
March 28, 2020. The Company was also contingently liable for $9.0 million of outstanding letters of credit, resulting in remaining availability under the
Global Credit Facility of $16.0 million as of March 28, 2020.
Under the Global Credit Facility as originally implemented, U.S. Dollar-denominated borrowings under the Global Credit Facility bear interest, at
the Company's option, either at (a) a base rate, by reference to the greatest of: (i) the annual prime commercial lending rate of JPMorgan Chase Bank, N.A.
in effect from time to time, (ii) the weighted-average overnight Federal funds rate plus 50 basis points, or (iii) the one-month London Interbank Offered
Rate ("LIBOR") plus 100 basis points; or (b) LIBOR, adjusted for the Federal Reserve Board's Eurocurrency liabilities maximum reserve percentage, plus
a spread of 75 basis points, subject to adjustment based on the Company's credit ratings ("Adjusted LIBOR"). Foreign currency-denominated borrowings
bear interest at Adjusted LIBOR.
In addition to paying interest on any outstanding borrowings under the Global Credit Facility, the Company is required to pay a commitment fee to
the lenders under the Global Credit Facility relating to the unutilized commitments. The commitment fee rate of 6.5 basis points is subject to adjustment
based on the Company's credit ratings. These provisions were amended in May 2020, as discussed below.
The Global Credit Facility contains a number of covenants that, among other things, restrict the Company's ability, subject to specified exceptions, to
incur additional debt; incur liens; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself; engage in businesses that are
not in a related line of business; make loans, advances, or guarantees; engage in transactions with affiliates; and make certain investments. As originally
implemented, the Global Credit Facility also required the Company to maintain a maximum ratio of Adjusted Debt to Consolidated EBITDAR (the
"leverage ratio") of no greater than 4.25 as of the date of measurement for the four most recent consecutive fiscal quarters. Adjusted Debt is defined
generally as consolidated debt outstanding, including finance lease obligations, plus all operating lease obligations. Consolidated EBITDAR is defined
generally as consolidated net income plus (i) income tax expense, (ii) net interest expense, (iii) depreciation and amortization expense, (iv) operating lease
cost, (v) restructuring and other non-recurring expenses, and (vi) acquisition-related
F-33
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
costs. This requirement was amended in May 2020, as discussed below. As of March 28, 2020, no Event of Default (as such term is defined pursuant to the
Global Credit Facility) has occurred under the Company's Global Credit Facility.
Upon the occurrence of an Event of Default under the Global Credit Facility, the lenders may cease making loans, terminate the Global Credit
Facility, and declare all amounts outstanding to be immediately due and payable. The Global Credit Facility specifies a number of events of default (many
of which are subject to applicable grace periods), including, among others, the failure to make timely principal, interest, and fee payments or to satisfy the
covenants, including the financial covenant described above. Additionally, the Global Credit Facility provides that an Event of Default will occur if
Mr. Ralph Lauren, the Company's Executive Chairman and Chief Creative Officer, and entities controlled by the Lauren family fail to maintain a specified
minimum percentage of the voting power of the Company's common stock.
In May 2020, the Company entered into an amendment of its Global Credit Facility (the "Amendment"). Under the Amendment, until the earlier of
(a) the date on which the Company provides the periodic reporting information required under the Global Credit Facility for the quarter ending
September 30, 2021 and (b) the date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no
greater than 4.25 (the "Ratings-Based Toggle Date"), for loans based on Adjusted LIBOR, the spread over Adjusted LIBOR will be increased to 187.5 basis
points, the spread on loans based on the base rate will be 87.5 basis points and the commitment fee will be increased to 25 basis points, in each case with no
adjustments based on the Company's credit rating. The pricing will return to the original levels set forth in the Global Credit Facility on the Ratings-Based
Toggle Date. Additionally, the leverage ratio requirements have been waived until the quarter ending September 30, 2021. For that Fiscal Quarter the
maximum permitted leverage ratio would be 5.25 to 1.00. For the fiscal quarter ending December 31, 2021 and the fiscal quarter ending March 31, 2022
the maximum would be 4.75 to 1.00. For each fiscal quarter ending on or after June 30, 2022, the leverage ratio test would return to 4.25 to 1.00. The
Amendment also (a) imposes a new requirement that would remain in effect until the Ratings-Based Toggle Date that the aggregate amount of unrestricted
cash of the Company and its subsidiaries plus the undrawn amounts available under the Global Credit Facility may not be less than $750 million, (b)
restricts the amount of dividends and distributions on, or purchases, redemptions, retirements or acquisitions of, the Company's stock until the Specified
Period Termination Date (as defined below), (c) until March 31, 2021, amends the material adverse change representation to disregard pandemic-related
impacts to the business and (d) until the Specified Period Termination Date, adds certain other restrictions on indebtedness incurred by the Company and its
subsidiaries and investments and acquisitions by the Company and its subsidiaries. The "Specified Period Termination Date" is the earlier of (i) the date on
which the Company provides the periodic reporting information required under the Global Credit Facility for the quarter ending June 30, 2022 and (ii) the
date on which the Company certifies that its leverage ratio as of the last day of the two most recent fiscal quarters was no greater than 4.25.
364 Day Facility
In May 2020, the Company entered into a new credit facility with the same lenders that are parties to the Global Credit Facility (the "364 Day
Facility"). The 364 Day Facility provides for a $500 million senior unsecured revolving line of credit and matures on May 25, 2021; provided that the
maturity date may be earlier if the Company issues senior notes other than to refinance the currently outstanding senior notes due in August 2020. The
terms of the 364 Day Facility are otherwise substantially similar to the terms of the Global Credit Facility as in effect until the Specified Period Termination
Date, including with respect to having the same borrowers and guarantors, including with respect to having the same borrowers and guarantors, except that
(a) no letters of credit may be issued under the 364 Day Facility, (b) the interest rate under the 364 Day Facility is 187.5 basis points above Adjusted
LIBOR or 87.5 basis points above the alternate base rate, and the commitment fee is 25 basis points per annum, in each case subject to adjustment based on
the Company's credit rating, (c) the 364 Day Facility contains provisions that limit borrowings if consolidated unrestricted cash and liquid investments of
the Company exceed $1 billion and (d) there is no leverage ratio requirement under the 364 Day Facility. Under the terms of the 364 Day Facility, if the
Company does not satisfy certain customary closing conditions by June 15, 2020 (which date will be extended to June 17, 2020 under certain
circumstances), the lenders' commitment to make loans will expire.
Pan-Asia Credit Facilities
Certain of the Company's subsidiaries in Asia have uncommitted credit facilities with regional branches of JPMorgan Chase (the "Banks") in China
and South Korea (the "Pan-Asia Credit Facilities"). These credit facilities are subject to annual renewal and may be used to fund general working capital
and corporate needs of the Company's operations in the respective countries. Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent
company and are granted at the sole discretion of the Banks, subject to availability of the Banks' funds and satisfaction of certain regulatory requirements.
The Pan-Asia Credit Facilities do not contain any financial covenants. The Company's Pan-Asia Credit Facilities by country are as follows:
F-34
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
•
•
China Credit Facility — provides Ralph Lauren Trading (Shanghai) Co., Ltd. with a revolving line of credit of up to 50 million Chinese
Renminbi (approximately $7 million) through April 3, 2021, which is also able to be used to support bank guarantees.
South Korea Credit Facility — provides Ralph Lauren (Korea) Ltd. with a revolving line of credit of up to 30 billion South Korean Won
(approximately $25 million) through October 30, 2020.
As of March 28, 2020, there were no borrowings outstanding under the Pan-Asia Credit Facilities.
12.
Fair Value Measurements
U.S. GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within
the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs
are market-based (observable) or internally-derived (unobservable). A financial instrument's categorization within the valuation hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
•
•
•
Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the
full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full
term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.
Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value
measurement.
The following table summarizes the Company's financial assets and liabilities that are measured and recorded at fair value on a recurring basis,
excluding accrued interest components:
Investments in commercial paper(a)(b)
Derivative assets(a)
Derivative liabilities(a)
$
March 28,
2020
March 30,
2019
(millions)
243.6 $
62.3
6.9
290.7
32.0
15.5
(a) Based on Level 2 measurements.
(b) Amount as of March 28, 2020 was included within short-term investments in the consolidated balance sheet. As of March 30, 2019, $54.7
million was included within cash and cash equivalents and $236.0 million was included within short-term investments in the consolidated
balance sheet.
The Company's investments in commercial paper are classified as available-for-sale and recorded at fair value in its consolidated balance sheets
using external pricing data, based on interest rates and credit ratings for similar issuances with the same remaining term as the Company's investments. To
the extent the Company invests in bonds, such investments are also classified as available-for-sale and recorded at fair value in its consolidated balance
sheets based on quoted prices in active markets.
The Company's derivative financial instruments are recorded at fair value in its consolidated balance sheets and are valued using pricing models that
are primarily based on market observable external inputs, including spot and forward currency exchange rates, benchmark interest rates, and discount rates
consistent with the instrument's tenor, and consider the impact of the Company's own credit risk, if any. Changes in counterparty credit risk are also
considered in the valuation of derivative financial instruments.
The Company's cash and cash equivalents, restricted cash, and time deposits are recorded at carrying value, which generally approximates fair value
based on Level 1 measurements.
F-35
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's debt instruments are recorded at their carrying values in its consolidated balance sheets, which may differ from their respective fair
values. The fair values of the Senior Notes are estimated based on external pricing data, including available quoted market prices, and with reference to
comparable debt instruments with similar interest rates, credit ratings, and trading frequency, among other factors. The fair values of the Company's
commercial paper notes and borrowings outstanding under its credit facilities, if any, are estimated using external pricing data, based on interest rates and
credit ratings for similar issuances with the same remaining term as the Company's outstanding borrowings. Due to their short-term nature, the fair values
of the Company's commercial paper notes and borrowings outstanding under its credit facilities, if any, generally approximate their carrying values.
The following table summarizes the carrying values and the estimated fair values of the Company's debt instruments:
March 28, 2020
March 30, 2019
Carrying Value(a)
Fair Value(b)
Carrying Value(a)
Fair Value(b)
$300 million 2.625% Senior Notes
$400 million 3.750% Senior Notes
Borrowings outstanding under credit facilities
$
299.6 $
396.4
475.0
(millions)
299.8 $
415.1
473.0
293.4 $
395.7
—
299.1
410.0
—
(a) See Note 11 for discussion of the carrying values of the Company's senior notes.
(b) Based on Level 2 measurements.
Unrealized gains or losses resulting from changes in the fair value of the Company's debt instruments do not result in the realization or expenditure
of cash, unless the debt is retired prior to its maturity.
Non-financial Assets and Liabilities
The Company's non-financial assets, which primarily consist of goodwill, other intangible assets, property and equipment, and lease-related ROU
assets, are not required to be measured at fair value on a recurring basis, and instead are reported at carrying value in its consolidated balance sheet.
However, on a periodic basis or whenever events or changes in circumstances indicate that they may not be fully recoverable (and at least annually for
goodwill and indefinite-lived intangible assets), the respective carrying value of non-financial assets are assessed for impairment and, if ultimately
considered impaired, are adjusted and written down to their fair value, as estimated based on consideration of external market participant assumptions.
During Fiscal 2020, Fiscal 2019, and Fiscal 2018, the Company recorded non-cash impairment charges to reduce the carrying values of certain long-
lived assets to their estimated fair values. The fair values of these assets were determined based on Level 3 measurements, the related inputs of which
included estimates of the amount and timing of the assets' net future discounted cash flows (including any potential sublease income for lease-related ROU
assets), based on historical experience and consideration of current trends, market conditions, and comparable sales, as applicable.
The following tables summarize non-cash impairment charges recorded by the Company during the fiscal years presented in order to reduce the
carrying values of certain long-lived assets to their estimated fair values as of the assessment date:
Long-Lived Asset Category
Fair Value
As of Impairment
Date
Total
Impairments(a)
Fair Value
As of
Impairment Date
Total
Impairments(a)
Fair Value
As of
Impairment Date
Total
Impairments(a)
March 28, 2020
Fiscal Years Ended
March 30, 2019
March 31, 2018
Property and equipment, net(b)
$
2.4 $
Operating lease right-of-use assets(c)
Intangible assets, net(d)
Equity method investment
120.8
N/A
1.3
16.8 $
239.9
—
7.1
F-36
(millions)
20.8 $
N/A
N/A
N/A
25.8 $
N/A
—
—
— $
N/A
2.9
N/A
41.2
N/A
8.8
—
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a)
Impairment of equity method investment is recorded within other income (expense), net in the consolidated statements of operations. All other
impairment charges are recorded within impairments of assets in the consolidated statements of operations, unless otherwise noted.
(b) Total impairment charges for Fiscal 2019 includes $4.6 million recorded to reduce the carrying value of the Company's held-for-sale corporate
jet to its estimated fair value less costs to sell of $20.8 million as of March 30, 2019. Balance was reclassified from property and equipment, net
to prepaid expenses and other current assets in the consolidated balance sheet upon being classified as an asset held-for-sale. The asset was
subsequently sold during Fiscal 2020 (see Note 7).
(c) Total impairment charges for Fiscal 2020 includes $225.1 million recorded in connection with the Company's adoption of ASC 2016-02 as of
the beginning of Fiscal 2020 which, net of related income tax benefits, reduced its opening retained earnings balance by $169.4 million (see
Note 4).
(d) Non-cash impairment charge recorded during Fiscal 2018 relates a change in the planned usage of a certain intangible asset.
See Note 8 for additional discussion regarding non-cash impairment charges recorded by the Company within the consolidated statements of
operations during the fiscal years presented.
No goodwill impairment charges were recorded during any of the fiscal years presented. In Fiscal 2020, the Company performed its annual goodwill
impairment assessment using a qualitative approach as of the beginning of the second quarter of the fiscal year. In performing the assessment, the Company
identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of its
reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-
specific factors, such as the Company's actual and expected financial performance. Additionally, the results of the Company's then-most recent quantitative
goodwill impairment test indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results
of its qualitative goodwill impairment assessment, the Company concluded that it is not more likely than not that the fair values of its reporting units are
less than their respective carrying values, and there were no reporting units at risk of impairment.
Subsequent to performing its Fiscal 2020 annual goodwill impairment assessment, the Company determined that indicators of impairment were
present during the fourth quarter of Fiscal 2020 as a result of adverse business disruptions related to the COVID-19 pandemic, including the temporary
closure of its stores in North America, Europe, and Asia. As a result, the Company performed an interim assessment of the recoverability of goodwill
assigned to its reporting units using a quantitative approach as of March 28, 2020. The estimated fair values of the Company's reporting units were
determined with the assistance of an independent third-party valuation firm using discounted cash flows and market comparisons. Based on the results of
the quantitative impairment assessment, the Company concluded that the fair values of its reporting units significantly exceeded their respective carrying
values and were not at risk of impairment. Accordingly, no goodwill impairment charges were recorded.
F-37
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13.
Financial Instruments
Derivative Financial Instruments
The Company is exposed to changes in foreign currency exchange rates, primarily relating to certain anticipated cash flows and the value of the
reported net assets of its international operations, as well as changes in the fair value of its fixed-rate debt obligations attributed to changes in a benchmark
interest rate. Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not use derivatives for
speculative or trading purposes.
The following table summarizes the Company's outstanding derivative instruments recorded on its consolidated balance sheets as of March 28, 2020
and March 30, 2019:
Derivative Instrument(a)
Notional Amounts
March 28,
2020
March 30,
2019
Derivative Assets
Derivative Liabilities
March 28,
2020
March 30,
2019
March 28,
2020
March 30,
2019
Balance
Sheet
Line(b)
Fair
Value
Balance
Sheet
Line(b)
Fair
Value
Balance
Sheet
Line(b)
Fair
Value
Balance
Sheet
Line(b)
Fair
Value
Designated Hedges:
FC — Cash flow hedges
$
IRS — Fixed-rate debt
Net investment hedges(c)
$
229.0
300.0
683.6
636.3
300.0
695.3
PP
$
ONCA
Total Designated Hedges
1,212.6
1,631.6
Undesignated Hedges:
(millions)
PP
$
ONCA
7.4
—
48.6
56.0
19.5
—
12.2
31.7
FC — Undesignated hedges(d)
473.5
Total Hedges
$
1,686.1
$
146.6
1,778.2
PP
6.3
62.3
PP
0.3
32.0
$
$
AE
AE
AE
AE
$
AE
$
ONCL
ONCL
0.4
0.2
4.0
4.6
2.3
6.9
AE
$
$
2.3
5.9
6.0
14.2
1.3
15.5
(a) FC = Forward foreign currency exchange contracts; IRS = Interest rate swap contracts.
(b) PP = Prepaid expenses and other current assets; AE = Accrued expenses and other current liabilities; ONCA = Other non-current assets; ONCL =
Other non-current liabilities.
Includes cross-currency swaps designated as hedges of the Company's net investment in certain foreign operations.
(c)
(d) Relates to third-party and intercompany foreign currency-denominated exposures and balances.
The Company presents the fair values of its derivative assets and liabilities recorded on its consolidated balance sheets on a gross basis, even when
they are subject to master netting arrangements. However, if the Company were to offset and record the asset and liability balances of all of its derivative
instruments on a net basis in accordance with the terms of each of its master netting arrangements, spread across eight separate counterparties, the amounts
presented in the consolidated balance sheets as of March 28, 2020 and March 30, 2019 would be adjusted from the current gross presentation as detailed in
the following table:
March 28, 2020
Gross Amounts Not
Offset in the Balance
Sheet that are Subject to
Master Netting
Agreements
Gross Amounts
Presented in the
Balance Sheet
Net
Amount
Gross Amounts
Presented in the
Balance Sheet
March 30, 2019
Gross Amounts Not
Offset in the Balance
Sheet that are Subject
to Master Netting
Agreements
Net
Amount
Derivative assets
Derivative liabilities
$
$
62.3
6.9
$
(6.1)
(6.1)
(millions)
56.2 $
0.8
32.0 $
15.5
(4.8) $
(4.8)
27.2
10.7
F-38
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties. See Note 3 for further
discussion of the Company's master netting arrangements.
The following tables summarize the pretax impact of gains and losses from the Company's designated derivative instruments on its consolidated
financial statements for the fiscal years presented:
Designated Hedges:
FC — Cash flow hedges
Net investment hedges — effective portion
Net investment hedges — portion excluded from assessment of hedge effectiveness
Total Designated Hedges
Gains (Losses)
Recognized in OCI
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
March 28,
2020
$
$
24.0 $
7.7
30.7
62.4 $
47.5 $
64.5
1.6
113.6 $
(45.5)
(90.9)
—
(136.4)
Location and Amount of Gains (Losses)
from Cash Flow Hedges Reclassified from AOCI to Earnings
March 28, 2020
Fiscal Years Ended
March 30, 2019
March 31, 2018
Cost of
goods sold
Other income
(expense), net
Cost of
goods sold
Other income
(expense), net
Cost of
goods sold
Other income
(expense), net
(millions)
Total amounts presented in the consolidated statements of
operations in which the effects of related cash flow hedges
are recorded
Effects of cash flow hedging:
FC — Cash flow hedges
$
(2,506.5)
$
(7.4)
$
(2,427.0) $
0.6 $
(2,430.6) $
24.9
1.1
5.0
1.7
(8.2)
(3.1)
(2.9)
Gains (Losses) from Net Investment Hedges
Recognized in Earnings
Fiscal Years Ended
March 28,
2020
March 30,
2019
March 31,
2018
Location of
Gains (Losses)
Recognized in Earnings
(millions)
Net Investment Hedges:
Net investment hedges — portion excluded from assessment of hedge effectiveness(a)
Total Net Investment Hedges
$
$
19.0
19.0
$
$
19.0 $
19.0 $
10.5 Interest expense
10.5
(a) Amounts recognized in OCI relating to the effective portion of the Company's net investment hedges would be recognized in earnings only upon the
sale or liquidation of the hedged net investment.
As of March 28, 2020, it is estimated that $20.7 million of pretax net gains on both outstanding and matured derivative instruments designated and
qualifying as cash flow hedges deferred in AOCI will be recognized in earnings over the next twelve months. Amounts ultimately recognized in earnings
will depend on exchange rates in effect when outstanding derivative instruments are settled.
F-39
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the pretax impact of gains and losses from the Company's undesignated derivative instruments on its consolidated
financial statements for the fiscal years presented:
Gains (Losses)
Recognized in Earnings
Fiscal Years Ended
March 28,
2020
March 30,
2019
(millions)
March 31,
2018
Location of
Gains (Losses)
Recognized
in Earnings
$
$
16.0
16.0
$
$
3.1 $
3.1 $
2.4 Other income (expense), net
2.4
Undesignated Hedges:
FC — Undesignated hedges
Total Undesignated Hedges
Risk Management Strategies
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions
made in an entity's non-functional currency, the settlement of foreign currency-denominated balances, and the translation of certain foreign operations' net
assets into U.S. dollars. As part of its overall strategy for managing the level of exposure to such exchange rate risk, relating primarily to the Euro, the
Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, the Swiss Franc, and the Chinese Renminbi,
the Company generally hedges a portion of its related exposures anticipated over the next twelve months using forward foreign currency exchange
contracts with maturities of two months to one year to provide continuing coverage over the period of the respective exposure.
Interest Rate Swap Contracts
During Fiscal 2016, the Company entered into two pay-floating rate, receive-fixed rate interest rate swap contracts which it designated as hedges
against changes in the respective fair values of its fixed-rate 2.125% Senior Notes and its fixed-rate 2.625% Senior Notes, attributed to changes in a
benchmark interest rate (the "Interest Rate Swaps"). The interest rate swap related to the 2.125% Senior Notes (the "2.125% Interest Rate Swap"), which
matured on September 26, 2018 concurrent with the maturity of the related debt, had a notional amount of $300 million and swapped the fixed interest rate
on the 2.125% Senior Notes for a variable interest rate based on the 3-month LIBOR plus a fixed spread. The interest rate swap related to the 2.625%
Senior Notes (the "2.625% Interest Rate Swap"), which matures on August 18, 2020 and also has a notional amount of $300 million, swaps the fixed
interest rate on the 2.625% Senior Notes for a variable interest rate based on 3-month LIBOR plus a fixed spread. Changes in the fair values of the Interest
Rate Swaps were offset by changes in the fair values of the 2.125% Senior Notes and 2.625% Senior Notes attributed to changes in the benchmark interest
rate, with no resulting net impact reflected in earnings during any of the fiscal years presented.
The following table summarizes the carrying values of the 2.625% Senior Notes and the impacts of the related fair value hedging adjustments as of
March 28, 2020 and March 30, 2019:
Hedged Item
Balance Sheet Line in which the Hedged
Item is Included
March 28,
2020
March 30,
2019
March 28,
2020
March 30,
2019
$300 million 2.625% Senior Notes
$300 million 2.625% Senior Notes
Current portion of long-term debt
Long-term debt
$
299.6
N/A $
(millions)
N/A $
293.4
(0.2)
N/A $
N/A
(5.9)
Carrying Value of
the Hedged Item
Cumulative Amount of Fair Value
Hedging Adjustment Included in the
Carrying Value of the Hedged Item
F-40
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cross-Currency Swap Contracts
During Fiscal 2016, the Company entered into two pay-floating rate, receive-floating rate cross-currency swap contracts with notional amounts of
€280 million and €274 million that were designated as hedges of its net investment in certain of its European subsidiaries. The €280 million notional cross-
currency swap, which was settled during the second quarter of Fiscal 2019, swapped the U.S. Dollar-denominated variable interest rate payments based on
3-month LIBOR plus a fixed spread (as paid under the 2.125% Interest Rate Swap discussed above) for Euro-denominated variable interest rate payments
based on the 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread, which, in combination with the 2.125% Interest Rate Swap,
economically converted the Company's previously-outstanding $300 million fixed-rate 2.125% Senior Notes obligation to a €280 million floating-rate
Euro-denominated obligation. Similarly, the €274 million notional cross-currency swap, which matures on August 18, 2020, swaps the U.S. Dollar-
denominated variable interest rate payments based on 3-month LIBOR plus a fixed spread (as paid under the 2.625% Interest Rate Swap discussed above)
for Euro-denominated variable interest rate payments based on 3-month EURIBOR plus a fixed spread, which in combination with the 2.625% Interest
Rate Swap, economically converts the Company's $300 million fixed-rate 2.625% Senior Notes obligation to a €274 million floating-rate Euro-
denominated obligation.
Additionally, in August 2018, the Company entered into pay-fixed rate, receive-fixed rate cross-currency swap contracts with an aggregate notional
amount of €346 million that were designated as hedges of its net investment in certain of its European subsidiaries. These contracts, which mature on
September 15, 2025, swap the U.S. Dollar-denominated fixed interest rate payments on the Company's 3.750% Senior Notes for Euro-denominated 1.29%
fixed interest rate payments, thereby economically converting the Company's $400 million fixed-rate 3.750% Senior Notes obligation to a €346 million
fixed-rate 1.29% Euro-denominated obligation.
See Note 3 for further discussion of the Company's accounting policies relating to its derivative financial instruments.
Investments
As of March 28, 2020, the Company's investments were all classified as short-term and consisted of $252.3 million of time deposits and $243.6
million of commercial paper. As of March 30, 2019, the Company's short-term investments consisted of $1.167 billion of time deposits and $236.0 million
of commercial paper, and its non-current investments consisted of $44.9 million of time deposits.
No significant realized or unrealized gains or losses on available-for-sale investments or impairment charges were recorded in any of the fiscal years
presented.
See Note 3 for further discussion of the Company's accounting policies relating to its investments.
F-41
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14.
Leases
The following table summarizes ROU assets and lease liabilities recorded on the Company's consolidated balance sheet as of March 28, 2020:
Assets:
Operating leases
Finance leases
Total lease assets
Liabilities:
Operating leases:
Current portion
Non-current portion
Total operating lease liabilities
Finance leases:
Current portion
Non-current portion
Total finance lease liabilities
Total lease liabilities
March 28,
2020
(millions)
Location Recorded on Balance Sheet
$
1,511.6 Operating lease right-of-use assets
166.4 Property and equipment, net
$
1,678.0
$
288.4 Current operating lease liabilities
1,568.3 Long-term operating lease liabilities
1,856.7
9.8 Accrued expenses and other current liabilities
189.4 Other non-current liabilities
$
199.2
2,055.9
The following table summarizes the composition of net lease cost during Fiscal 2020:
Operating lease cost
Finance lease costs:
Depreciation of leased assets
Accretion of lease liabilities
Variable lease cost
Short-term lease cost
Sublease income
Total lease cost
Fiscal Year Ended
March 28,
2020
$
322.0 (a)
Location Recorded in Earnings
18.1 SG&A expenses
8.1 Interest expense
298.0 (b)
5.5 SG&A expenses
(2.9) Restructuring and other charges
$
648.8
(a) $4.4 million included within cost of goods sold, $307.3 million included within SG&A expenses, and $10.3 million included within
restructuring and other charges.
(b) $4.7 million included within cost of goods sold, $290.3 million included within SG&A expenses, and $3.0 million included within restructuring
and other charges.
In accordance with lease accounting guidance in effect prior to its adoption of ASU 2016-02, during Fiscal 2019 and Fiscal 2018, the Company
recognized rent expense of approximately $449.3 million and $443.1 million, respectively, net of insignificant sublease income, related to its operating
leases, which included contingent rental charges of approximately $192.0 million and $175.9 million, respectively. Such amounts do not include expense
recognized related to non-lease components.
F-42
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes certain cash flow information related to the Company's leases during Fiscal 2020:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Fiscal Year Ended
March 28,
2020
(millions)
$
383.9
8.0
13.6
See Note 21 for supplemental non-cash information related to ROU assets obtained in exchange for new lease liabilities.
The following table presents a maturity analysis summary of the Company's lease liabilities recorded on the consolidated balance sheet as of
March 28, 2020:
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026 and thereafter
Total lease payments
Less: interest
Total lease liabilities
March 28, 2020
Operating
Leases
Finance
Leases
$
(millions)
323.6 $
325.4
292.6
259.2
206.8
615.7
2,023.3
(166.6)
$
1,856.7 $
16.0
22.6
22.3
22.3
22.3
153.8
259.3
(60.1)
199.2
Additionally, the Company has approximately $119 million of future payment obligations related to executed lease agreements for which the related
lease terms had not yet commenced as of March 28, 2020.
The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates related to the Company's
operating and finance leases recorded on the consolidated balance sheet as of March 28, 2020:
Weighted-average remaining lease term (years)
Weighted-average discount rate
See Note 3 for discussion of the Company's accounting policies related to its leasing activities.
F-43
March 28, 2020
Operating
Leases
Finance
Leases
7.6
2.1%
12.7
4.1%
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15.
Commitments and Contingencies
U.S. Tax Reform
In connection with the TCJA's provision that subjects previously deferred foreign earnings to a one-time mandatory transition tax, the Company
recorded cumulative charges of approximately $241 million within its income tax provision in prior fiscal years (as described in Note 10). The remaining
related income tax payable obligation of $146.7 million as of March 28, 2020, which was reduced by foreign tax credits and other federal income tax
activity, is expected to be paid as follows:
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026 and thereafter
Total mandatory transition tax payments
Mandatory Transition
Tax Payments(a)
(millions)
$
$
14.0
14.0
14.0
26.2
34.9
43.6
146.7
(a)
Included within current and non-current income tax payable in the consolidated balance sheets based upon the estimated timing of payments.
See Note 10 for further discussion of the TCJA and its enactment-related impacts on the Company's consolidated financial statements.
Employee Agreements
The Company has employment agreements with certain executives in the normal course of business which provide for compensation and certain
other benefits. These agreements also provide for severance payments under certain circumstances.
Other Commitments
Other off-balance sheet firm commitments amounted to $665.6 million as of March 28, 2020, including inventory purchase commitments of $534.9
million, outstanding letters of credit of $9.0 million, interest payments related to the Company's debt of $90.6 million, and other commitments of $31.1
million, comprised of the Company's legally-binding obligations under sponsorship, licensing, and other marketing and advertising agreements,
information technology-related service agreements, and pension-related obligations.
Other Matters
The Company is involved, from time to time, in litigation, other legal claims, and proceedings involving matters associated with or incidental to its
business, including, among other things, matters involving credit card fraud, trademark and other intellectual property, licensing, importation and
exportation of its products, taxation, unclaimed property, and employee relations. The Company believes at present that the resolution of currently pending
matters will not individually or in the aggregate have a material adverse effect on its consolidated financial statements. However, the Company's
assessment of any current litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations
by judges, juries, or other finders of fact which are not in accord with management's evaluation of the possible liability or outcome of such litigation or
claims.
In the normal course of business, the Company enters into agreements that provide general indemnifications. The Company has not made any
significant indemnification payments under such agreements in the past and does not currently anticipate incurring any material indemnification payments.
F-44
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16.
Equity
Capital Stock
The Company's capital stock consists of two classes of common stock. There are 500 million shares of Class A common stock and 100 million
shares of Class B common stock authorized to be issued. Shares of Class A and Class B common stock have substantially identical rights, except with
respect to voting rights. Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes
per share. Holders of both classes of stock vote together as a single class on all matters presented to the stockholders for their approval, except with respect
to the election and removal of directors or as otherwise required by applicable law. All outstanding shares of Class B common stock are owned by
Mr. Ralph Lauren, the Company's Executive Chairman and Chief Creative Officer, and entities controlled by the Lauren family, and are convertible at any
time into shares of Class A common stock on a one-for-one basis.
Class B Common Stock Conversions
During Fiscal 2020, the Lauren Family, L.L.C., a limited liability company managed by the children of Mr. Ralph Lauren, converted 1.0 million
shares of Class B common stock into an equal number of shares of Class A common stock pursuant to the terms of the security. These conversions occurred
in advance of a sales plan providing for the sale of such shares of Class A common stock pursuant to Rule 10b5-1 subject to the conditions set forth therein.
These transactions resulted in a reclassification within equity and had no effect on the Company's consolidated balance sheet.
Common Stock Repurchase Program
A summary of the Company's repurchases of Class A common stock under its common stock repurchase program is as follows:
Cost of shares repurchased
Number of shares repurchased
March 28,
2020
Fiscal Years Ended
March 30,
2019
(in millions)
March 31,
2018
$
650.3 $
6.2
470.0 $
3.8
—
0.0
On May 13, 2019, the Company's Board of Directors approved an expansion of the Company's existing common stock repurchase program that
allowed it to repurchase up to an additional $600 million of Class A common stock. As of March 28, 2020, the remaining availability under the Company's
Class A common stock repurchase program was approximately $580 million. Repurchases of shares of Class A common stock are subject to overall
business and market conditions. Accordingly, as a result of current business disruptions related to the COVID-19 pandemic, the Company has temporarily
suspended its common stock repurchase program as a preemptive action to preserve cash and strengthen its liquidity.
In addition, during Fiscal 2020, Fiscal 2019, and Fiscal 2018, 0.4 million, 0.3 million, and 0.2 million shares of Class A common stock, respectively,
at a cost of $44.5 million, $32.6 million, and $17.1 million, respectively, were surrendered to or withheld by the Company in satisfaction of withholding
taxes in connection with the vesting of awards under the Company's long-term stock incentive plans.
Repurchased and surrendered shares are accounted for as treasury stock at cost and held in treasury for future use.
Dividends
Since 2003, the Company has maintained a regular quarterly cash dividend program on its common stock. On May 13, 2019, the Company's Board
of Directors approved an increase to the Company's quarterly cash dividend on its common stock from $0.625 to $0.6875 per share. Dividends paid
amounted to $203.9 million, $190.7 million, and $162.4 million in Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively.
As a result of current business disruptions related to the COVID-19 pandemic, the Company has temporarily suspended its quarterly cash dividend
program as a preemptive action to preserve cash and strengthen its liquidity. Any decision to declare and pay dividends in the future will be made at the
discretion of the Company's Board of Directors and will depend on the Company's
F-45
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
results of operations, cash requirements, financial condition, and other factors that the Board of Directors may deem relevant, including economic and
market conditions.
17.
Accumulated Other Comprehensive Income (Loss)
The following table presents OCI activity, net of tax, accumulated in equity:
Balance at April 1, 2017
$
(206.2) $
(millions)
14.6 $
(6.8) $
(198.4)
Foreign Currency
Translation Gains
(Losses)(a)
Net Unrealized
Gains (Losses) on
Cash Flow Hedges(b)
Net Unrealized
Gains (Losses) on
Defined Benefit
Plans(c)
Total Accumulated
Other
Comprehensive
Income (Loss)
Other comprehensive income (loss), net of tax:
OCI before reclassifications
Amounts reclassified from AOCI to earnings
Other comprehensive income (loss), net of tax
Balance at March 31, 2018
Other comprehensive income (loss), net of tax:
OCI before reclassifications
Amounts reclassified from AOCI to earnings
Other comprehensive income (loss), net of tax
Balance at March 30, 2019
Other comprehensive income (loss), net of tax:
OCI before reclassifications
Amounts reclassified from AOCI to earnings
Other comprehensive loss, net of tax
126.9
—
126.9
(79.3)
(39.2)
—
(39.2)
(118.5)
(7.0)
(4.9)
(11.9)
(40.5)
9.9
(30.6)
(16.0)
42.2
(6.0)
36.2
20.2
21.2
(23.4)
(2.2)
0.9
2.7
3.6
(3.2)
(2.0)
0.1
(1.9)
(5.1)
(1.6)
0.9
(0.7)
Balance at March 28, 2020
$
(130.4) $
18.0 $
(5.8) $
87.3
12.6
99.9
(98.5)
1.0
(5.9)
(4.9)
(103.4)
12.6
(27.4)
(14.8)
(118.2)
(a) OCI before reclassifications to earnings related to foreign currency translation gains (losses) includes income tax provisions of $9.2 million and
$10.8 million for Fiscal 2020 and Fiscal 2019, respectively, and includes an income tax benefit of $23.3 million for Fiscal 2018. OCI before
reclassifications to earnings includes gains of $29.0 million (net of a $9.4 million income tax provision) and $50.2 million (net of a $15.9
million income tax provision) for Fiscal 2020 and Fiscal 2019, respectively, and includes a loss of $59.6 million (net of a $31.3 million income
tax benefit) for Fiscal 2018, related to the effective portion of changes in the fair values of instruments designated as hedges of the Company's
net investment in certain foreign operations (see Note 13). Amounts reclassified from AOCI to earnings related to foreign currency translation
gains (losses) during Fiscal 2020 relate to the reclassification to retained earnings of income tax effects stranded in AOCI (see Note 4)
(b) OCI before reclassifications to earnings related to net unrealized gains (losses) on cash flow hedges are presented net of income tax provisions
of $2.8 million and $5.3 million for Fiscal 2020 and Fiscal 2019, respectively, and are presented net of an income tax benefit of $5.0 million for
Fiscal 2018. The tax effects on amounts reclassified from AOCI to earnings are presented in a table below.
(c) Activity is presented net of taxes, which were immaterial for all periods presented.
The following table presents reclassifications from AOCI to earnings for cash flow hedges, by component:
F-46
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Gains (losses) on cash flow hedges(a):
FC — Cash flow hedges
FC — Cash flow hedges
Tax effect
Net of tax
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Location of Gains (Losses)
Reclassified from AOCI to Earnings
$
24.9 $
5.0 $
(8.2) Cost of goods sold
1.1
(2.6)
1.7
(0.7)
(2.9) Other income (expense), net
1.2 Income tax benefit (provision)
$
23.4 $
6.0 $
(9.9)
(a) FC = Forward foreign currency exchange contracts.
18.
Stock-based Compensation
Long-term Stock Incentive Plans
On August 1, 2019, the Company's shareholders approved the 2019 Long-Term Stock Incentive Plan (the "2019 Incentive Plan"), which replaced the
Company's Amended and Restated 2010 Long-Term Stock Incentive Plan (the "2010 Incentive Plan"). The 2019 Incentive Plan provides for 1.2 million of
new shares authorized for issuance to the participants, in addition to the approximately 3.0 million shares that remained available for issuance under the
2010 Incentive Plan as of August 1, 2019. In addition, any outstanding awards under the 2010 Incentive Plan or the Company's 1997 Long-Term Stock
Incentive Plan (the "1997 Incentive Plan") that expire, are forfeited, or are surrendered to the Company in satisfaction of taxes, will become available for
issuance under the 2019 Incentive Plan. The 2019 Incentive Plan became effective August 1, 2019 and no further grants will be made under the 2010
Incentive Plan. Outstanding awards issued prior to August 1, 2019 will continue to remain subject to the terms of the 2010 Incentive Plan or 1997 Incentive
Plan, as applicable. As of March 28, 2020, 3.8 million shares remained available for future issuance under the Company's incentive plans.
Stock-based compensation awards that may be made under the 2019 Incentive Plan include, but are not limited to, (i) restricted stock, (ii) RSUs, and
(iii) stock options. During the fiscal periods presented, annual grants consisted entirely of restricted stock and RSUs. Additionally, for RSUs granted to
retirement-eligible employees, or employees who become retirement-eligible prior to the end of the awards' respective stated vesting periods, vesting
continues post-retirement for all or a portion of the remaining unvested RSUs.
Impact on Results
A summary of total stock-based compensation expense and the related income tax benefits recognized is as follows:
Compensation expense(a)
Income tax benefit
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
100.6 $
(15.3)
88.6 $
(13.1)
74.5
(25.3)
(a) Fiscal 2020 and Fiscal 2018 includes $3.6 million and $2.8 million, respectively, of accelerated stock-based compensation expense recorded
within restructuring and other charges in the consolidated statements of operations (see Note 9). All other stock-based compensation expense
was recorded within SG&A expenses.
The Company issues its annual grants of stock-based compensation awards in the first half of each fiscal year. Due to the timing of the annual grants
and other factors, including the timing and magnitude of forfeiture and performance goal achievement adjustments, as well as changes to the size and
composition of the eligible employee population, stock-based compensation expense
F-47
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
recognized during any given fiscal period is not indicative of the level of compensation expense expected to be incurred in future periods.
Restricted Stock Awards and Service-based RSUs
Restricted shares granted to non-employee directors vest ratably over a three-year period, subject to the director's continued service to the Company.
The fair values of restricted stock awards are based on the fair value of the Company's Class A common stock on the date of grant. Holders of restricted
shares are entitled to receive cash dividends in connection with the payments of dividends on the Company's Class A common stock. Effective beginning
Fiscal 2019, non-employee directors are now granted service-based RSUs in lieu of restricted shares.
Service-based RSUs granted to certain of the Company's senior executives and other employees, as well as non-employee directors, generally vest
over a three-year period, subject to the employee's continuing employment (except for awards granted to retirement-eligible employees, or employees who
become retirement-eligible prior to the end of the awards' respective stated vesting periods, as previously discussed). The fair values of service-based RSUs
are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for
which dividend equivalent amounts do not accrue while outstanding and unvested.
A summary of restricted stock and service-based RSU activity during Fiscal 2020 is as follows:
Nonvested at March 30, 2019
Granted
Vested
Forfeited
Nonvested at March 28, 2020
Restricted
Stock
Service-
based RSUs
Number of
Shares
(thousands)
Weighted-
Average Grant
Date Fair Value
Number of
Shares
(thousands)
Weighted-
Average Grant
Date Fair Value
10 $
—
(6)
—
4 $
86.01
N/A
88.30
N/A
81.78
1,112 $
543
(480)
(81)
1,094 $
94.99
102.27
90.64
100.28
100.92
Total unrecognized compensation expense at March 28, 2020 (millions)
$
Weighted-average period expected to be recognized over (years)
Additional information pertaining to restricted stock and service-based RSU activity is as follows:
Restricted
Stock
Service-
based RSUs
— $
0.0
36.6
1.6
Restricted Stock:
Weighted-average grant date fair value of awards granted
Total fair value of awards vested (millions)
Service-based RSUs:
Weighted-average grant date fair value of awards granted
Total fair value of awards vested (millions)
March 28,
2020
Fiscal Years Ended
March 30,
2019
March 31,
2018
N/A
0.9 $
102.27 $
52.5 $
N/A
1.0
113.38 $
50.0 $
N/A
N/A
73.59
30.0
$
$
$
F-48
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Performance-based RSUs
The Company grants performance-based RSUs to its senior executives and other key employees. The fair values of performance-based RSUs are
based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which
dividend equivalent amounts do not accrue while outstanding and unvested. Performance-based RSUs generally vest (i) upon the completion of a three-
year period of time (cliff vesting), subject to the employee's continuing employment (except for awards granted to retirement-eligible employees, or
employees who become retirement-eligible prior to the end of the awards' respective stated vesting periods, as previously discussed) and the Company's
achievement of certain performance goals established at the beginning of the three-year performance period or (ii) ratably, over a three-year period of time
(graded vesting), subject to the employee's continuing employment during the applicable vesting period (except for awards granted to retirement-eligible
employees, or employees who become retirement-eligible prior to the end of the awards' respective stated vesting periods, as previously discussed) and the
achievement by the Company of certain performance goals in the initial year of the three-year vesting period.
For performance-based RSUs subject to cliff vesting, beginning with grants in Fiscal 2019, the number of shares that may be earned ranges between
0% (if the specified threshold performance level is not attained) and 200% (if performance meets or exceeds the maximum achievement level) of the
awards originally granted. For such awards granted in recent years prior to Fiscal 2019, the number of shares that may be earned ranges between 0% (if the
specified threshold performance level is not attained) and 150% (if performance meets or exceeds the maximum achievement level) of the awards
originally granted. If actual performance exceeds the pre-established threshold, the number of shares earned is calculated based on the relative performance
between specified levels of achievement.
A summary of performance-based RSU activity during Fiscal 2020 is as follows:
Nonvested at March 30, 2019
Granted
Change due to performance condition achievement
Vested
Forfeited
Nonvested at March 28, 2020
Total unrecognized compensation expense at March 28, 2020 (millions)
Weighted-average period expected to be recognized over (years)
Additional information pertaining to performance-based RSU activity is as follows:
Performance-based
RSUs
Weighted-
Average Grant
Date Fair Value
Number of
Shares
(thousands)
1,011 $
289
123
(482)
(7)
934 $
84.16
83.16
86.65
86.91
76.40
82.83
Performance-based
RSUs
$
28.2
1.5
Performance-based RSUs:
Weighted-average grant date fair value of awards granted
Total fair value of awards vested (millions)
$
$
83.16 $
52.8 $
129.78 $
31.8 $
69.40
12.9
March 28,
2020
Fiscal Years Ended
March 30,
2019
March 31,
2018
F-49
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Market-based RSUs
During Fiscal 2019, the Company began granting cliff vesting RSU awards to its senior executives and other key employees, which, in addition to
being subject to continuing employment requirements (except for awards granted to retirement-eligible employees, or employees who become retirement-
eligible prior to the end of the awards' respective stated vesting periods, as previously discussed), are also subject to a market condition based on TSR
performance. The number of shares that vest upon the completion of a three-year period of time is determined by comparing the Company's TSR relative to
that of a pre-established peer group over the related three-year performance period. Depending on the Company's level of achievement, the number of
shares that ultimately vest may range from 0% to 200% of the awards originally granted.
The Company estimates the fair value of its TSR awards on the date of grant using a Monte Carlo simulation, which models multiple stock price
paths of the Company's Class A common stock and that of its peer group to evaluate and determine its ultimate expected relative TSR performance
ranking. Compensation expense, net of estimated forfeitures, is recorded regardless of whether, and the extent to which, the market condition is ultimately
satisfied.
The assumptions used to estimate the fair value of TSR awards granted during Fiscal 2020 and Fiscal 2019 were as follows:
Expected term (years)
Expected volatility
Expected dividend yield
Risk-free interest rate
Fiscal Year Ended
March 28,
2020
March 30,
2019
2.6
31.4%
3.2%
1.4%
2.6
33.5%
1.9%
2.6%
Weighted-average grant date fair value
$
90.59
$
177.13
A summary of market-based RSU activity during Fiscal 2020 is as follows:
Nonvested at March 30, 2019
Granted
Change due to market condition achievement
Vested
Forfeited
Nonvested at March 28, 2020
Total unrecognized compensation expense at March 28, 2020 (millions)
Weighted-average period expected to be recognized over (years)
F-50
Market-based
RSUs
Weighted-
Average Grant
Date Fair Value
Number of
Shares
(thousands)
76 $
159
—
—
(1)
234 $
177.31
90.59
N/A
N/A
137.35
118.46
Market-based
RSUs
$
14.1
1.8
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Additional information pertaining to market-based RSU activity is as follows:
Market-based RSUs:
Weighted-average grant date fair value of awards granted
$
Total fair value of awards vested (millions)
90.59 $
N/A
177.13
N/A
N/A
N/A
March 28,
2020
Fiscal Years Ended
March 30,
2019
March 31,
2018
Stock Options
Stock options are granted to employees and non-employee directors with exercise prices equal to the fair market value of the Company's Class A
common stock on the date of grant. Generally, options become exercisable ratably (graded-vesting schedule) over a three-year vesting period, subject to the
employee's continuing employment. Stock options generally expire seven years from the date of grant. No stock options were granted during any of the
fiscal years presented.
A summary of stock option activity during Fiscal 2020 is as follows:
Weighted-
Average Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value(a)
(years)
(millions)
Number of
Shares
(thousands)
Options outstanding at March 30, 2019
834 $
162.53
1.5 $
—
Granted
Exercised
Cancelled/Forfeited
Options outstanding at March 28, 2020
Options vested at March 28, 2020(b)
Options exercisable at March 28, 2020
—
—
N/A
N/A
(316)
151.48
518 $
169.37
518 $
518 $
169.37
169.37
0.9 $
0.9 $
0.9 $
—
—
—
(a) Aggregate intrinsic value is the amount by which the market price of the Company's Class A common stock at the end of the period exceeds the
exercise price of the stock option, multiplied by the number of options.
(b) There were no nonvested stock options as of March 28, 2020. Accordingly, there was no related unrecognized compensation expense as of
March 28, 2020.
Additional information pertaining to the Company's stock option plans is as follows:
Aggregate intrinsic value of stock options exercised(a)
Cash received from the exercise of stock options
Tax benefits realized on exercise of stock options
March 28,
2020
$
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
— $
—
—
1.2 $
21.8
3.7
—
0.1
—
(a) Aggregate intrinsic value is the amount by which the market price of the Company's Class A common stock exceeded the stock option's exercise
price when exercised, multiplied by the number of options.
F-51
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19.
Employee Benefit Plans
Defined Contribution Plans
The Company sponsors defined contribution benefit plans covering substantially all eligible employees in the U.S. and Puerto Rico who are not
covered by a collective bargaining agreement. The plans include a savings plan feature under Section 401(k) of the Internal Revenue Code. The Company
makes matching contributions to the plans equal to 50% of the first 6% of salary contributed by an eligible employee. Additionally, the Company makes a
supplemental matching contribution for plan years in which the Company achieves an "above target" performance level based on certain goals established
at the beginning of each fiscal year, increasing the matching contribution to between 67% and 100% depending on the performance level achieved, of the
first 6% of salary contributed by eligible employees, not to exceed the maximum contribution permitted by the plan.
Under the terms of the plans, a participant becomes 100% vested in the Company's matching contributions after five years of credited service.
Contributions made by the Company under these plans were $8.7 million, $11.2 million, and $10.6 million in Fiscal 2020, Fiscal 2019, and Fiscal 2018,
respectively.
International Defined Benefit Plans
The Company sponsors certain single-employer defined benefit plans and cash balance plans at international locations which are not considered to
be material individually or in the aggregate to the Company's financial statements. Pension benefits under these plans are based on formulas that reflect the
employees' years of service and compensation levels during their employment period. The aggregate funded status of the single-employer defined benefit
plans reflected net liabilities of $4.0 million and $2.8 million as of March 28, 2020 and March 30, 2019, respectively, and were primarily recorded within
other non-current liabilities in the Company's consolidated balance sheets. These single-employer defined benefit plans had aggregate projected benefit
obligations of $52.4 million and aggregate fair values of plan assets of $48.4 million as of March 28, 2020, compared to aggregate projected benefit
obligations of $48.1 million and aggregate fair values of plan assets of $45.3 million as of March 30, 2019. The asset portfolio of the single-employer
defined benefit plans primarily consists of fixed income securities, which have been measured at fair value largely using Level 2 inputs, as described in
Note 12. Net pension expense for these plans was $5.0 million, $4.2 million, and $6.6 million in Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively.
The service cost component of $4.7 million, $4.4 million, and $4.6 million in Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively, was recorded within
SG&A expenses in the Company's consolidated statements of operations. All other components of net pension expense during the fiscal years presented
were recorded within other income (expense), net, in the Company's consolidated statement of operations.
Union Pension Plan
The Company participates in a multi-employer pension plan and is required to make contributions to the Workers United union (which was
previously known as UNITE HERE) (the "Union") for dues based on wages paid to union employees. A portion of these dues is allocated by the Union to a
retirement fund which provides defined benefits to substantially all unionized workers. The Company does not participate in the management of the plan
and has not been furnished with information with respect to the type of benefits provided, vested and non-vested benefits, or assets.
Under the Employee Retirement Income Security Act of 1974, as amended, an employer, upon withdrawal from or termination of a multi-employer
plan, is required to continue funding its proportionate share of the plan's unfunded vested benefits. Such liability was assumed in conjunction with the
acquisition of certain assets from a non-affiliated licensee. The Company has no current intention of withdrawing from the plan.
Other Compensation Plans
The Company had a non-qualified supplemental retirement plan for certain highly compensated employees whose benefits under the 401(k) profit
sharing retirement savings plans were expected to be constrained by the operation of Internal Revenue Code limitations. These supplemental benefits
vested over time and the related compensation expense was recognized over the vesting period. Effective August 2008, the Company amended this plan,
resulting in a suspension of the annual contributions for substantially all plan participants. Further, affected participants were provided with a one-time
election to either withdraw all benefits vested in the plan in a lump sum amount or remain in the plan and receive future distributions of benefits. As of
March 28, 2020 and March 30, 2019, amounts accrued under this plan totaled $3.4 million and $5.1 million, respectively, and were classified within other
non-current liabilities in the consolidated balance sheets. Total compensation expense recognized related to these benefits was not material in any of the
fiscal years presented.
F-52
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20.
Segment Information
The Company has three reportable segments based on its business activities and organization:
•
•
•
North America — The North America segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home
furnishings, and related products made through the Company's retail and wholesale businesses in the U.S. and Canada, excluding Club
Monaco. In North America, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, and its digital
commerce site, www.RalphLauren.com. The Company's wholesale business in North America is comprised primarily of sales to department
stores, and to a lesser extent, specialty stores.
Europe — The Europe segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and
related products made through the Company's retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club
Monaco. In Europe, the Company's retail business is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based
shop-within-shops, and its various digital commerce sites. The Company's wholesale business in Europe is comprised of a varying mix of
sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital partners.
Asia — The Asia segment primarily consists of sales of Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related
products made through the Company's retail and wholesale businesses in Asia, Australia, and New Zealand. The Company's retail business in
Asia is primarily comprised of its Ralph Lauren stores, its factory stores, its concession-based shop-within-shops, and its digital commerce
site, www.RalphLauren.cn, which launched in September 2018. In addition, the Company sells its products online through various third-party
digital partner commerce sites. In Asia, the Company's wholesale business is comprised primarily of sales to department stores, with related
products distributed through shop-within-shops.
No operating segments were aggregated to form the Company's reportable segments. In addition to these reportable segments, the Company also has
other non-reportable segments, which primarily consist of (i) sales of Club Monaco branded products made through its retail and wholesale businesses in
the U.S., Canada, and Europe, and its licensing alliances in Europe and Asia, and (ii) royalty revenues earned through its global licensing alliances,
excluding Club Monaco.
The Company's segment reporting structure is consistent with how it establishes its overall business strategy, allocates resources, and assesses
performance of its business. The accounting policies of the Company's segments are consistent with those described in Notes 2 and 3. Sales and transfers
between segments are generally recorded at cost and treated as transfers of inventory. All intercompany revenues are eliminated in consolidation and are
not reviewed when evaluating segment performance. Each segment's performance is evaluated based upon net revenues and operating income before
restructuring-related charges, impairment of assets, and certain other one-time items, if any. Certain corporate overhead expenses related to global
functions, most notably the Company's executive office, information technology, finance and accounting, human resources, and legal departments, largely
remain at corporate. Additionally, other costs that cannot be allocated to the segments based on specific usage are also maintained at corporate, including
corporate advertising and marketing expenses, depreciation and amortization of corporate assets, and other general and administrative expenses resulting
from corporate-level activities and projects. Asset information by segment is not utilized for purposes of assessing performance or allocating resources, and
therefore such information has not been presented.
Effective beginning in the first quarter of Fiscal 2020, operating results related to the Company's business in Latin America are included within its
Europe segment due to a change in how the Company manages this business. Previously, such results were included within the Company's other non-
reportable segments. All prior period segment information has been recast to reflect this change on a comparative basis.
F-53
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net revenues for each of the Company's segments are as follows:
Net revenues:
North America
Europe
Asia
Other non-reportable segments
Total net revenues
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
3,140.5 $
3,202.9 $
1,632.2
1,017.2
369.9
1,683.0
1,041.0
386.1
$
6,159.8 $
6,313.0 $
3,231.0
1,608.3
933.7
409.3
6,182.3
Operating income for each of the Company's segments is as follows:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Operating income(a):
North America
Europe
Asia
Other non-reportable segments
Unallocated corporate expenses
Unallocated restructuring and other charges(b)
$
486.6 $
682.8 $
336.3
124.8
85.2
1,032.9
(648.7)
(67.2)
392.8
161.0
118.7
1,355.3
(663.4)
(130.1)
Total operating income
$
317.0 $
561.8 $
677.6
361.0
137.2
103.2
1,279.0
(672.8)
(108.0)
498.2
(a) Segment operating income during Fiscal 2020 reflects bad debt expense of $38.7 million, $15.2 million, $1.7 million, and $3.1 million related to
North America, Europe, Asia, and other non-reportable segments, respectively, primarily related to adverse impacts associated with COVID-19
business disruptions. Segment operating income during Fiscal 2020 also reflects higher inventory charges of approximately $108 million, $42
million, $17 million, and $8 million as compared to the prior fiscal year related to North America, Europe, Asia, and other non-reportable
segments, respectively, primarily related to adverse impacts associated with COVID-19 business disruptions. Segment operating income and
unallocated corporate expenses during the fiscal years presented also included asset impairment charges (see Note 8), which are detailed below:
Asset impairment charges:
North America
Europe
Asia
Other non-reportable segments
Unallocated corporate expenses
Total asset impairment charges
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
(1.9) $
(3.1) $
—
(3.7)
(19.3)
(6.7)
(5.4)
(4.4)
(7.0)
(5.9)
$
(31.6) $
(25.8) $
(4.7)
(1.2)
(1.0)
(22.4)
(20.7)
(50.0)
F-54
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(b) The fiscal years presented included certain unallocated restructuring and other charges (see Note 9), which are detailed below:
Unallocated restructuring and other charges:
North America-related
Europe-related
Asia-related
Other non-reportable segment-related
Corporate operations-related
Unallocated restructuring charges
Other charges (see Note 9)
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
(1.2) $
(27.0) $
(3.3)
(0.9)
(0.8)
(31.4)
(37.6)
(29.6)
(14.9)
(0.9)
(4.5)
(46.3)
(93.6)
(36.5)
(15.5)
(4.6)
2.5
(8.4)
(53.2)
(79.2)
(28.8)
Total unallocated restructuring and other charges
$
(67.2) $
(130.1) $
(108.0)
The following tables summarize depreciation and amortization expense and capital expenditures for each of the Company's segments:
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
Depreciation and amortization expense:
North America
Europe
Asia
Other non-reportable segments
Unallocated corporate
Unallocated restructuring and other charges (see Note 9)
$
74.6 $
81.8 $
32.8
59.3
5.4
97.4
—
33.6
49.1
7.2
95.5
14.1
Total depreciation and amortization expense
$
269.5 $
281.3 $
82.5
34.9
50.3
10.6
102.8
14.1
295.2
Capital expenditures:
North America
Europe
Asia
Other non-reportable segments
Unallocated corporate
Total capital expenditures
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
48.5 $
34.3
59.6
7.3
120.6
270.3 $
74.6 $
26.6
45.2
5.0
46.3
197.7 $
41.9
28.8
40.7
5.0
45.2
161.6
$
$
F-55
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net revenues and long-lived assets by geographic location of the reporting subsidiary are as follows:
Net revenues(a):
The Americas(b)
Europe(c)
Asia(d)
Total net revenues
Long-lived assets(a)(e):
The Americas(b)
Europe(c)
Asia(d)
Total long-lived assets
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
$
3,516.4 $
3,602.2 $
1,625.3
1,018.1
1,668.6
1,042.2
6,159.8 $
6,313.0 $
3,652.1
1,595.2
935.0
6,182.3
March 28,
2020
March 30,
2019
(millions)
1,383.6 $
772.9
334.6
2,491.1 $
789.6
140.0
109.6
1,039.2
$
$
(a) Net revenues and long-lived assets for certain of the Company's licensed operations are included within the geographic location of the reporting
subsidiary which holds the respective license.
(b)
(c)
(d)
Includes the U.S., Canada, and Latin America. Net revenues earned in the U.S. were $3.308 billion, $3.379 billion, and $3.427 billion in Fiscal
2020, Fiscal 2019, and Fiscal 2018, respectively. Long-lived assets located in the U.S. were $1.327 billion and $766.1 million as of March 28,
2020 and March 30, 2019, respectively.
Includes the Middle East.
Includes Australia and New Zealand.
(e) Long-lived assets as of March 28, 2020 reflect operating lease ROU assets resulting from the Company’s adoption of ASU 2016-02 (see Note
4).
21.
Additional Financial Information
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
A reconciliation of cash, cash equivalents, and restricted cash as of March 28, 2020 and March 30, 2019 from the consolidated balance sheets to the
consolidated statements of cash flows is as follows:
Cash and cash equivalents
Restricted cash included within prepaid expenses and other current assets
Restricted cash included within other non-current assets
Total cash, cash equivalents, and restricted cash
March 28,
2020
March 30,
2019
$
1,620.4 $
(millions)
1.4
8.0
$
1,629.8 $
584.1
11.9
30.5
626.5
Restricted cash relates to cash held in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international
tax matters and real estate leases.
F-56
RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash Interest and Taxes
Cash paid for interest and income taxes is as follows:
Cash paid for interest
Cash paid for income taxes
Non-cash Transactions
March 28,
2020
Fiscal Years Ended
March 30,
2019
(millions)
March 31,
2018
$
15.4 $
135.5
17.3 $
102.0
11.7
54.0
Operating and finance lease ROU assets recorded in connection with the recognition of new lease liabilities were $374.0 million and $64.0 million,
respectively, during Fiscal 2020. Additionally, during Fiscal 2018, the Company recorded new finance (formerly referred to as "capital") lease assets of
$3.3 million within its consolidated balance sheet.
Non-cash investing activities also included capital expenditures incurred but not yet paid of $29.1 million, $47.6 million, and $37.0 million as of the
end of Fiscal 2020, Fiscal 2019, and Fiscal 2018, respectively.
Non-cash financing activities included the conversion of 1.0 million shares of Class B common stock into an equal number of shares of Class A
common stock during Fiscal 2020, as discussed in Note 16.
There were no other significant non-cash investing or financing activities for any of the fiscal years presented.
F-57
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Ralph Lauren Corporation is responsible for the preparation, objectivity, and integrity of the consolidated financial statements
and other information contained in this Annual Report. The consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States and include some amounts that are based on management's informed judgments and best estimates.
These consolidated financial statements have been audited by Ernst & Young LLP in Fiscal 2020, Fiscal 2019, and Fiscal 2018, which is an
independent registered public accounting firm. They conducted their audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States) and have expressed herein their unqualified opinions on those financial statements.
The Audit Committee of the Board of Directors, which oversees all of the Company's financial reporting process on behalf of the Board of Directors,
consists solely of independent directors, meets with the independent registered accountants, internal auditors, and management periodically to review their
respective activities and the discharge of their respective responsibilities. Both the independent registered public accountants and the internal auditors have
unrestricted access to the Audit Committee, with or without management, to discuss the scope and results of their audits and any recommendations
regarding the system of internal controls.
May 27, 2020
/s/ PATRICE LOUVET
Patrice Louvet
President and Chief Executive Officer
(Principal Executive Officer)
/s/ JANE HAMILTON NIELSEN
Jane Hamilton Nielsen
Chief Operating Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
F-58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Ralph Lauren Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ralph Lauren Corporation (the "Company") as of March 28, 2020 and March 30,
2019, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended
March 28, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at March 28, 2020 and March 30, 2019, and the results of its
operations and its cash flows for each of the three years in the period ended March 28, 2020, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of March 28, 2020, based on the criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 27, 2020 expressed an
unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 4 to the consolidated financial statements, the Company changed its method for accounting for leases in the fiscal year ended
March 28, 2020 due to the adoption of ASU No. 2016-02, Leases (Topic 842). See below for discussion of our related critical audit matter.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.
End-of-season Markdown Reserves
Description of the
Matter
As disclosed in Note 3 of the consolidated financial statements, estimates for end-of-season markdown reserves are based on
historical trends, actual and forecasted seasonal results, an evaluation of current economic and market conditions, retailer
performance, and, in certain cases, contractual terms.
Auditing management's estimate of end-of-season markdown reserves was complex and judgmental as reserve amounts are
sensitive to changes in market or economic conditions (including the effects of the global pandemic), and have a direct,
material impact on the amount of revenue recognized by the Company. There is also significant estimation required to
establish markdown reserve rates by brand and customer, which are based on the Company's review of the seasonal
negotiations with each customer and the expected performance of the products in the customers' stores.
F-59
How We Addressed
the Matter in Our
Audit
Description of the
Matter
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the
Company's process to calculate the end-of-season markdown reserves, including the consideration of historical experience,
actual and forecasted seasonal results, current economic and market conditions, (including the effects of the global
pandemic), retailer performance, and contractual terms as applicable.
To test the estimate of end-of-season markdown reserves, we performed audit procedures that included, among others,
assessing methodologies and testing the assumptions regarding seasonal negotiations with each customer which include the
application of market and economic conditions to individual customers and the expected performance of the products in the
customers' stores that were used by the Company to calculate the projected markdown allowances to be issued upon
settlement. We compared the significant assumptions used by management to current market and economic trends, historical
results and other relevant factors. We assessed the historical accuracy of management's estimates and performed sensitivity
analyses of significant assumptions to substantively test the changes in the estimate that would result from reasonable
changes in the assumptions.
Estimated Realizable Value of Inventory
As of March 28, 2020, the Company's net inventory balance was $736.2 million. As described in Note 3 to the consolidated
financial statements, the valuation of inventory requires management to make assumptions and judgments about the
recoverability of inventory and its estimated realizable value.
The estimated realizable value of inventory is determined based on an analysis of historical sales trends, market trends and
economic conditions (including the effects of the global pandemic), future sales forecasts, on-hand inventory quantities, and
consideration of the value of existing customer orders for future sales of inventory. Given the importance of inventory to the
Company's operations and the materiality of the balance, coupled with the judgment involved in estimating future sales,
auditing management's estimated realizable value involved a higher extent of testing and the involvement of more senior
members of the engagement team in executing, supervising and reviewing the results of the procedures.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process to
determine the estimated realizable value of inventory, including controls over the inputs and assumptions used in
management's calculation as described above.
Our audit procedures to test the estimated realizable value of inventory included, among others, evaluating the
appropriateness of management's inputs to the calculation, including testing the completeness and accuracy of the data used
in management's calculation such as historical sales activity and loss rates for each class of inventory, write-off activity, on-
hand inventory levels and inventory aging. Our procedures also included testing the completeness of any expected net losses
on firm commitments to purchase inventory. To evaluate management's ability to accurately estimate future sales projections,
which is also a key factor in the determination of the reserve, we retrospectively reviewed actual sales compared to
projections and considered the impact of the global pandemic on market trends and economic conditions. We also tested the
mathematical accuracy of the Company's calculation.
Adoption of Accounting Standards Update No. 2016-02, Leases
Description of the
Matter
As discussed above and as described in Note 4 to the consolidated financial statements, the Company adopted Accounting
Standards Update 2016-02, Leases ("ASC 842") on March 31, 2019 and recorded operating lease liabilities and related
operating lease right-of-use-assets of $1.75 billion and $1.60 billion, respectively, on its balance sheet. The Company applied
its incremental borrowing rate ("IBR") to determine the present value of the remaining lease payments for each of its
operating leases when calculating the operating lease liability and the related right-of-use asset. Additionally, in connection
with the adoption of ASC 842, the Company recorded a $131.6 million adjustment to reduce its opening retained earnings
balance for the impairment of a right-of-use asset for one of its real estate leases ("the real estate lease").
F-60
Auditing the Company's methodology and the assumptions applied in developing the IBR involved complex auditor
judgment due to the subjectivity inherent in the calculation. Additionally, auditing the Company's impairment of the right-of-
use asset for the real estate lease upon adoption involved significant audit effort due to the estimation involved in
determining the recoverability and fair value of the right-of-use asset.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the
adoption of ASC 842, including the determination of the IBR and the calculation of the impairment of the right-of-use asset
for the real estate lease. For example, we tested controls over management's review of the assumptions used in the
determination of the IBR and the recoverability of the real estate lease right-of-use asset, as well as the calculation of the
transition adjustment.
To test the Company's IBR, we involved our valuation specialists to assist us in performing audit procedures that included,
among others, evaluating the Company's selection of the IBR methodology and evaluating the significant assumptions used
in applying the selected methodology. We involved our valuation specialists to assist with testing the IBR by performing
corroborative calculations and a regression analysis to estimate the Company's credit rating. To test the Company's right-of-
use impairment adjustment upon adoption for the real estate lease, we involved our valuation specialists to assist with testing
the assumptions used in the Company's valuation.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2008.
New York, New York
May 27, 2020
F-61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Ralph Lauren Corporation
Opinion on Internal Control over Financial Reporting
We have audited Ralph Lauren Corporation's internal control over financial reporting as of March 28, 2020, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, Ralph Lauren Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as
of March 28, 2020, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of March 28, 2020 and March 30, 2019, and the related consolidated statements of operations,
comprehensive income, equity, and cash flows for each of the three years in the period ended March 28, 2020, and the related notes and our report dated
May 27, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
May 27, 2020
F-62
RALPH LAUREN CORPORATION
SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial information as of the dates and for the periods indicated.
The consolidated statement of operations data for each of the three fiscal years in the period ended March 28, 2020, as well as the consolidated
balance sheet data as of March 28, 2020 and March 30, 2019 have been derived from, and should be read in conjunction with, the audited financial
statements, notes, and other financial information presented elsewhere herein. The consolidated statements of operations data for the fiscal years ended
April 1, 2017 and April 2, 2016 and the consolidated balance sheet data at March 31, 2018, April 1, 2017, and April 2, 2016 have been derived from
audited financial statements not included herein. Capitalized terms are as defined and described in the consolidated financial statements or elsewhere
herein. The historical results are not necessarily indicative of the results to be expected in any future period.
Statement of Operations Data:
Net revenues
Gross profit(d)
Impairment of assets
Restructuring and other charges
Operating income (loss)
Interest income (expense), net
Net income (loss)
Net income (loss) per common share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Fiscal Years Ended(a)
March 28,
2020(b)
March 30,
2019(c)
March 31,
2018(c)
April 1,
2017
April 2,
2016
(millions, except per share data)
$ 6,159.8 $ 6,313.0 $ 6,182.3 $ 6,652.8 $ 7,405.2
3,653.3
3,886.0
3,751.7
3,651.1
4,186.7
(31.6)
(67.2)
317.0
16.8
(25.8)
(130.1)
561.8
20.1
(50.0)
(108.0)
498.2
(5.9)
(253.8)
(318.6)
(92.3)
(5.1)
(48.8)
(142.6)
582.8
(14.7)
$
384.3 $
430.9 $
162.8 $
(99.3) $
396.4
$
$
5.07 $
4.98 $
5.35 $
5.27 $
1.99 $
1.97 $
(1.20) $
(1.20) $
75.8
77.2
80.6
81.7
81.7
82.5
82.7
82.7
4.65
4.62
85.2
85.9
2.00
Dividends declared per common share
$
2.75 $
2.50 $
2.00 $
2.00 $
(a) Fiscal 2016 consisted of 53 weeks. All other fiscal years presented consisted of 52 weeks. The inclusion of the 53rd week in Fiscal 2016
resulted in incremental net revenues of $72.2 million and net income of $8.3 million, or $0.10 per diluted share.
(b) Fiscal 2020 reflects a one-time benefit in connection with Swiss tax reform of $122.9 million recorded within the income tax provision (see
Note 10 to the accompanying consolidated financial statements), as well as adverse impacts resulting from COVID-19 business disruptions.
(c) Fiscal 2019 and Fiscal 2018 reflect TCJA enactment-related charges of $27.6 million and $221.4 million, respectively, recorded within the
income tax provision (see Note 10 to the accompanying consolidated financial statements).
(d) Fiscal 2020, Fiscal 2019, Fiscal 2018, Fiscal 2017, and Fiscal 2016 reflect restructuring-related inventory charges of $2.2 million, $7.2 million,
$7.6 million, $197.9 million, and $20.4 million, respectively (see Note 9 to the accompanying consolidated financial statements).
F-63
RALPH LAUREN CORPORATION
SELECTED FINANCIAL INFORMATION (Continued)
Balance Sheet Data:
Cash and cash equivalents
Investments
Working capital(a)
Total assets
Total debt (including current maturities of debt)
Other non-current obligations(b)
Equity
March 28,
2020
March 30,
2019
March 31,
2018
(millions)
April 1,
2017
April 2,
2016
$ 1,620.4 $
584.1 $ 1,304.6 $
668.3 $
495.9
1,448.3
785.6
706.1
1,283.2
2,394.7
1,961.2
1,794.6
7,279.9
5,942.8
6,143.3
5,652.0
1,171.0
322.1
689.1
359.3
596.2
361.2
588.2
250.9
456.3
816.0
1,854.4
6,213.1
713.1
265.7
2,693.1
3,287.2
3,457.4
3,299.6
3,743.5
(a) Working capital is calculated as total current assets less total current liabilities (including current maturities of debt).
(b) Comprised of the Company's non-current finance lease and income tax payable obligations.
F-64
RALPH LAUREN CORPORATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth the quarterly financial information of the Company:
Net revenues
Gross profit
Net income (loss)
Net income (loss) per common share(e):
Basic
Diluted
Dividends declared per common share
Net revenues
Gross profit
Net income
Net income per common share(e):
Basic
Diluted
Dividends declared per common share
Quarterly Periods Ended(a)(b)
June 29,
2019
September 28,
2019
December 28,
2019(c)
March 28,
2020(c)(d)
$
1,428.8 $
1,706.2 $
1,750.7 $
1,274.1
(millions, except per share data)
920.8
117.1
1,049.0
182.1
1,089.1
334.1
1.50 $
1.47 $
2.37 $
2.34 $
4.47 $
4.41 $
594.4
(249.0)
(3.38)
(3.38)
0.6875 $
0.6875 $
0.6875 $
0.6875
$
$
$
Quarterly Periods Ended(a)(f)
June 30,
2018
September 29,
2018(g)
December 29,
2018(g)
March 30,
2019
$
1,390.6 $
1,690.9 $
1,725.8 $
1,505.7
(millions, except per share data)
895.7
109.0
1,029.3
170.3
1,059.5
120.0
$
$
$
1.33 $
1.31 $
0.625 $
2.09 $
2.07 $
0.625 $
1.50 $
1.48 $
0.625 $
901.5
31.6
0.40
0.39
0.625
(a) All fiscal quarters presented consisted of 13 weeks.
(b) Net income (loss) and net income (loss) per common share for the three-month periods ended June 29, 2019, September 28, 2019, December 28,
2019, and March 28, 2020 were negatively impacted by pretax restructuring-related charges, impairment of assets (including an equity method
investment), and certain other charges of $31.4 million, $21.0 million, $21.4 million, and $34.3 million, respectively (see Notes 8 and 9 to the
accompanying consolidated financial statements).
(c) Net income (loss) and net income (loss) per common share for the three-month periods ended December 28, 2019 and March 28, 2020 reflect a
Swiss Tax Act benefit and charge of $134.1 million and $11.2 million, respectively (see Note 10 to the accompanying consolidated financial
statements).
(d) Operating results during the three months ended March 28, 2020 reflected adverse impacts associated with COVID-19 business disruptions.
(e) Per common share amounts for the quarters and full years have been calculated separately. Accordingly, quarterly amounts may not add to the
annual amount because of differences in the average number of common shares outstanding during each period, as well as the exclusion of
potentially dilutive instruments from diluted weighted-average common shares outstanding during quarters with net losses.
(f) Net income and net income per common share for the three-month periods ended June 30, 2018, September 29, 2018, December 29, 2018, and
March 30, 2019 were negatively impacted by pretax restructuring-related charges, impairment of assets, and certain other charges of $23.7
million, $25.7 million, $45.4 million, and $68.3 million, respectively (see Notes 8 and 9 to the accompanying consolidated financial statements).
(g) Net income and net income per common share for the three-month periods ended September 29, 2018 and December 29, 2018 reflect a
favorable TCJA measurement period adjustment of $4.7 million and a TCJA measurement period charge of $32.3 million, respectively (see
Note 10 to the accompanying consolidated financial statements).
F-65
Description of the Registrant’s Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
EXHIBIT 4.4
Ralph Lauren Corporation (“we,” “our,” or “us”) has two classes of common stock outstanding, Class A and Class B.
Our Class A common stock is registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Description of Capital Stock
The following summary of the terms of our capital stock is based upon our Amended and Restated Certificate of
Incorporation, as amended (the “Certificate of Incorporation”), and our Fourth Amended and Restated Bylaws (the “Bylaws”).
The summary is not complete and is qualified by reference to our Certificate of Incorporation and our Bylaws, which are filed as
exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our Certificate
of Incorporation, our Bylaws and the applicable provisions of the Delaware General Corporation Law (the “DGCL”) for
additional information.
At May 22, 2020, our capital stock consists of the following, each having a par value of $.01 per share:
•
•
•
500,000,000 authorized shares of Class A common stock, of which 47,777,235 are outstanding,
100,000,000 authorized shares of Class B common stock, of which 24,881,276 are outstanding, and
30,000,000 authorized shares of preferred stock, none of which are outstanding.
The shares of Class B common stock outstanding are held of record by the members of the Lauren family and entities
controlled by the Lauren family.
Common Stock
The shares of Class A common stock, Class B common stock are identical in all respects, except for:
•
•
•
voting rights,
certain conversion rights, and
transfer restrictions of the Class B common stock.
The number of authorized shares of any class of our capital stock may be increased or decreased by the vote of a majority of the
holders of the voting power of that class of capital stock who are entitled to vote generally in the election of directors, despite the
provisions of Section 242(b)(2) of the DGCL or any equivalent provision enacted.
2
Voting Rights. The holders of Class A common stock are entitled to one vote per share. Holders of Class B common stock
are entitled to ten votes per share. Holders of all classes of common stock entitled to vote are treated as voting together as a single
class on all matters presented to the stockholders for their vote or approval, except for the election and the removal of directors as
discussed below, or otherwise as required by applicable law.
Composition of our Board. Our Certificate of Incorporation provides that our board of directors will have between six and
20 members, plus any directors who are entitled to be elected by any series of preferred stock (these directors are referred to as
the “Preferred Directors”). We currently have 134 directors on our board of directors. Of the 134 directors, holders of Class A
common stock have the right to elect four directors and holders of Class B common stock have the right to elect nine of our
directors.
When there are shares of Class A common stock and Class B common stock outstanding, and, if on the record date for
any meeting of stockholders the number of outstanding shares of Class B common stock is at least 10% of the aggregate number
of outstanding shares of all classes of common stock immediately upon the date of our initial public offering (adjusted for stock
splits, stock dividends, reclassifications, recapitalizations and reverse stock splits and similar transactions), then:
•
the holders of the Class A common stock, voting as a separate class, shall be entitled to elect two (2) directors if
the board of directors (exclusive of Preferred Directors) consists of less than ten directors, three (3) directors if the
board (exclusive of Preferred Directors) consists of at least 10 but less than 13 directors, four (4) directors if the
board (exclusive of Preferred Directors) consists of at least 13 but less than 19 members and five (5) directors if
the board (exclusive of Preferred Directors) consists of 19 or more directors and
•
the holders of Class B common stock, voting as a separate class, shall be entitled to elect all other directors.
Under all circumstances, if on the record date for any meeting of stockholders the number of outstanding
shares of Class B common stock has fallen below 10% of the aggregate number of outstanding shares of all classes of common
stock immediately upon the date of our initial public offering (adjusted for stock splits, stock dividends, reclassifications,
recapitalizations and reverse stock splits and similar transactions), directors that would have been elected by
a separate vote of the holders of the Class A common stock and Class B common stock, respectively, will instead be elected by
the holders of the Class A common stock and the holders of the Class B common stock, voting together, with holders of Class A
common stock having one vote per share and holders of Class B common stock having ten votes per share.
Because of the disproportionate voting rights of the Class B common stock, in certain instances holders of Class B
common stock will still be able to elect a majority of the board of directors entitled to be elected by the holders of common stock,
even though the number of outstanding shares of Class B common stock is less than 10% of the number of shares of all classes of
common stock that were outstanding on the date of our initial public offering.
Removal of Directors and Vacancies. Directors may be removed with or without cause and only by those holders of the
class or classes of common stock or series of preferred stock that, as of the date the removal is effected, would be entitled to elect
that director at the next annual meeting of stockholders.
Vacancies in a directorship may be filled only by the remaining directors who were elected by the holders of each class of
common stock or series of preferred stock that elected the director creating the vacancy, and on the date that vacancy is filled,
would be entitled to elect that director at the next annual meeting of the stockholders, unless there are no remaining directors, in
which case vacancies in a directorship will be filled by the vote of the holders of the class or classes of common stock or series of
preferred stock who, voting as a separate class on the date that vacancy is filled, would be entitled to elect that director at the next
annual meeting of stockholders, or at a meeting of the holders of common stock of that class or classes or series of preferred
stock.
3
As used in this exhibit, the term “members of the Lauren family” includes only:
• Ralph Lauren and his estate, guardian, conservator or committee,
•
•
•
•
the spouse of Ralph Lauren and her estate, guardian, conservator or committee,
each descendant of Ralph Lauren and their respective estates, guardians, conservators or committees,
each “family controlled entity”, and
the trustees of each “Lauren family trust”.
The term “family controlled entity” means:
•
•
•
•
any not-for-profit corporation where a majority of its board of directors is composed of Ralph Lauren, Mr. Lauren’s
spouse and/or descendants of Ralph Lauren,
any other corporation where a majority of the value of its outstanding equity is owned by members of the Lauren
family,
any partnership where a majority of the economic interest of its partnership interests are owned by members of the
Lauren family, and
any limited liability or similar company where a majority of its economic interests is owned by members of the
Lauren family.
The term “Lauren family trust” includes trusts whose primary beneficiaries are Mr. Lauren, Mr. Lauren’s spouse, Lauren
descendants, Mr. Lauren’s siblings, spouses of descendants of Ralph Lauren and each of their respective estates, guardians,
conservators or committees and/or charitable organizations, and any wholly charitable trust, where a majority of its trustees
includes Mr. Lauren, the spouse of Mr. Lauren and/or members of the Lauren family.
4
Dividends. Holders of common stock are entitled to receive dividends at the same rate whenever dividends are declared
by the board out of assets legally available for their payment, after payment of any dividends required to be paid on shares of
preferred stock outstanding. We may not make any dividend or distribution to any holder of any class of common stock unless
we, simultaneously, make the same dividend or distribution to each other outstanding share of common stock regardless of class.
Whenever a dividend or other distribution is payable in shares of a class of common stock, including stock splits or
divisions of common stock:
•
•
•
only shares of Class A common stock may be distributed to Class A stockholders,
only shares of Class B common stock may be distributed to Class B stockholders, and
the number of shares of each class of common stock payable per share of that class of common stock will be equal in
number.
Whenever dividends or other distributions consist of other voting securities of ours or the voting securities of any
corporation which is a wholly owned subsidiary of ours, we will declare and pay those dividends in two separate classes of those
voting securities, identical in all respects except that:
•
•
•
the voting rights of each security issued to the holders of Class A common stock will have one-tenth of the voting
rights of each security issued to holders of Class B common stock,
the security issued to holders of Class B common stock will convert into the security issued to the holders of Class A
common stock upon the same terms and conditions which would apply to the conversion of Class B common stock
into Class A common stock, including having the same restrictions that apply to the transfer and ownership of the
Class B common stock, and
if the securities consist of voting securities of any corporation which is a wholly owned subsidiary of ours, the voting
rights which apply to each security issued to holders of Class A common stock and Class B common stock, relating to
election of directors, will otherwise be as comparable as is practicable to those of, in each case, the Class A common
stock and Class B common stock.
In the case of dividends or other distributions consisting of securities convertible into, or exchangeable for, our voting
securities or of a wholly owned subsidiary of ours, we will provide that those convertible or exchangeable securities and the
underlying securities, be identical in all respects (including the conversion or exchange rate), except that the underlying securities
may have the same differences as they would have if we issued our voting securities, or those of a wholly owned subsidiary of
ours, rather than issuing securities that convert into, or may be exchanged for, our voting securities.
5
Restrictions on Additional Issuances and Transfer. We may not issue or sell any shares of Class B common stock, or any
securities which may be converted into, or exchanged or exercised for shares of Class B common stock, to any person who is not
a member of the Lauren family. The term “securities” includes, but is not limited to, any rights, options, warrants or other
securities.
Shares of Class B common stock may not be transferred, whether by sale, assignment, gift, bequest, appointment or
otherwise, to a person who is not a member of the Lauren family.
Despite these restriction on transfer any member of the Lauren family may pledge its shares of Class B common stock to
a financial institution pursuant to a bona fide pledge of the shares as collateral for indebtedness due to the pledgee so long as:
•
•
•
the shares remain subject to the transfer restrictions,
if the pledgee seeks to foreclose on the indebtedness or other similar action, the pledged shares of Class B common
stock may only be transferred to a member of the Lauren Family or converted into shares of Class A common stock,
as the pledgee may elect, and
the transfer restrictions described immediately above do not apply in the case of a merger, consolidation or business
combination of us with or into another corporation in which all of the outstanding shares of our common stock and
preferred stock regardless of class are purchased by the acquirer.
Conversion. Class A common stock has no conversion rights. Shares of Class B common stock are convertible into Class
A common stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of
Class A common stock for each share of Class B common stock converted.
Whenever a person is no longer a member of the Lauren family, any share of Class B common stock held by that person
at that time will automatically convert into a share of Class A common stock.
Reclassification and Merger. If a reclassification or other similar transaction occurs, and as a result the shares of Class A
common stock are converted into another security, then each holder of Class B common stock will be entitled to receive upon
conversion the amount of the other security that the holder would have received if the conversion had occurred immediately
before the record date of the reclassification or other similar transaction.
No adjustments for dividends will be made upon the conversion of any share of Class B common stock, unless:
•
•
a share is for payment of a dividend or other distribution, and
the share is converted after the record date.
6
In that case, the registered holder of that share at the close of business on that record date will be entitled to receive the dividend
or other distribution which was payable on that record date regardless of the fact that the share has been converted or that we are
in default in paying it.
If we enter into any consolidation, merger, combination or other transaction in which shares of common stock are
exchanged for, or changed into, other stock or securities, cash and/or any other property, then the shares of each class of common
stock will be exchanged for, or changed into, either:
•
•
the same amount of stock, securities, cash and/or any other property into or for which each share of any other class of
common stock is exchanged or changed; unless, the shares of common stock are exchanged for, or changed into,
shares of capital stock. In that case, the shares exchanged for, or changed into, may differ, but only to the extent that
the Class A common stock and the Class B common stock differ as provided in our Certificate of Incorporation, or
if holders of each class of common stock are to receive different distributions of stock, securities, cash and/or any
other property, then an amount of stock, securities, cash and/or property having a value equal to the value per share of
any other class of our common stock that was exchanged or changed as determined by an independent investment
banking firm of national reputation selected by the board of directors.
Liquidation. If we liquidate, any assets remaining after payment of our debts and other liabilities, and setting aside
sufficient amounts for any payment due to any holders of preferred stock, will be distributable ratably among the holders of the
Class A common stock and Class B common stock treated as a single class.
Other Provisions. Except as described below, the holders of common stock are not entitled to preemptive rights. None of
the Class A common stock or Class B common stock may be subdivided or combined in any way unless the other classes are
subdivided or combined in the same proportion.
We may not make any offering of options, rights or warrants to subscribe for shares of Class B common stock. If we make
an offering of options, rights or warrants to subscribe for shares of any other class or classes of capital stock to all holders of a
class of common stock, then we must simultaneously make an identical offering to all holders of the other classes of common
stock, unless any class of holders, voting as a separate class, agree that the offering need not be made to their class. Accordingly,
all of the options, rights or warrants offerings described in this paragraph will offer the respective holders of Class A common
stock and Class B common stock the right to subscribe at the same rate per share.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the Class A common stock is Computershare Trust
Company, N.A.
Preferred Stock
Subject to any limitations under the DGCL, the rules of the New York Stock Exchange or other organizations on whose
systems our capital stock may be quoted or listed and without any act or vote by our stockholders, our board of directors is
authorized to:
7
•
•
•
•
•
issue shares of preferred stock in one or more series,
establish from time to time the number of shares to be included in each series,
fix the rights, powers, preferences and privileges of the shares of each wholly unissued series,
fix any qualifications, limitations or restrictions on that series, and
increase or decrease the number of shares of the series;
unless the shares of preferred stock would have the right to
•
•
vote for the election of directors under ordinary circumstances, or
elect 50% or more of the directors under any circumstances,
in which case, the approval of the holders of at least 75% of the outstanding shares of Class B common stock is required.
No series of our preferred stock may be entitled to vote together with any class of our common stock for the election of
directors who are entitled to be elected by that class of common stock. However, upon the terms of any series of preferred stock
established by our board, any or all series of preferred stock could have preference over the common stock relating to dividends
and other distributions, upon our liquidation or could have voting or conversion rights that could adversely affect the holders of
our outstanding common stock. In addition, our ability to issue preferred stock could delay, defer or prevent a change of control
of us.
Other Charter and Bylaw Provisions
Special meetings of our stockholders may be called by the board, the Chairman of the Board or our Chief Executive
Officer. Except as otherwise required by law, stockholders are not entitled to request or call a special meeting of our stockholders,
except where stockholders holding a majority of the shares of a class of common stock request a meeting in order to vote on a
matter which that class, voting as a separate class, is entitled to vote on.
In addition, our stockholders may not take any action on any matter by written consent unless they are entitled to vote on
the action as a separate class. Various provisions of our Certificate of Incorporation relating to:
•
the issuance of preferred stock,
8
•
•
•
action by stockholders,
calling of special stockholder meetings, and
the procedure for amending our Certificate of Incorporation and the provisions described in the above three bullet
points
may be amended only with the approval of 75% of the outstanding voting power of the common stock voting as a single class, in
addition to any voting requirements under the DGCL.
In addition, the provisions of our Certificate of Incorporation relating to terms of the common stock and the provision
prohibiting preferred stockholders from voting together with any class of common stock for the election of directors entitled to be
elected by that class of common stock, may not be amended in any respect without the approval of the affected class of common
stock, voting as a separate class. The board may from time to time adopt, amend or repeal the Bylaws. However, any bylaws
adopted or amended by the board may be further amended or repealed, and any bylaws may be adopted, by our stockholders by
vote of a majority of the holders of shares of our stock entitled to vote in the election of our directors.
Our Bylaws also establish advance notice procedures with respect to stockholders proposals and the nominations of
candidates for election as directors. In addition, our Bylaws designate a state or federal court located within the State of Delaware
as the sole and exclusive forum for certain litigation that may be initiated by our stockholders.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the DGCL. Under Section 203, certain “business combinations”
between a Delaware corporation whose stock generally is publicly traded or held of record by more than 2,000 stockholders and
an “interested stockholder” are prohibited for a three-year period following the date that such a stockholder became an interested
stockholder, unless
•
•
•
•
the corporation has elected in its original certificate of incorporation or by subsequent amendment not to be governed
by Section 203 (we did not make such an election),
the business combination was approved by the board of directors of the corporation before the other party to the
business combination became an interested stockholder,
upon completion of the transaction that made it an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the commencement of the transaction, excluding voting
stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have
a confidential right to tender or vote stock held by the plan, or
the business combination was approved by the board of directors of the corporation and then ratified by the holders of
at least two-thirds of the voting stock which the interested stockholder did not own.
9
The three-year prohibition also does not apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of certain extraordinary transactions involving the corporation and a person who had
not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of
the majority of the corporation’s directors. The term “business combination” is defined generally to include mergers or
consolidations between a Delaware corporation and an “interested stockholder”, transactions with an “interested stockholder”
involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested
stockholder’s percentage ownership of stock. The term “interested stockholder” is defined generally as a stockholder who,
together with affiliates and associates, owns (or, within three years prior, did own) 15% or more of a Delaware corporation’s
voting stock. Section 203 could prohibit or delay a merger, takeover or other change in control of us and therefore could
discourage attempts to acquire us.
Listing
Our Class A common stock is listed and principally traded on the New York Stock Exchange under the symbol “RL.”
RALPH LAUREN CORPORATION
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT 10.11
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made effective as of the 31st day of March,
2019 (the “Effective Date”), by and between Ralph Lauren Corporation, a Delaware corporation (the “Corporation”), and Andrew Howard Smith (the
“Executive”).
WHEREAS, the Executive has been employed with the Corporation pursuant to an Employment Agreement dated April 2nd, 2017, as
amended (the “2017 Employment Agreement”); and
WHEREAS, the Corporation and Executive wish to amend and restate such 2017 Employment Agreement effective as of the date hereof;
NOW THEREFORE, in consideration of the mutual covenants and premises contained herein, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT
1.1 Employment Term. The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to serve the
Corporation, on the terms and conditions set forth herein and in accordance with the terms of the Term Sheet attached hereto as Exhibit A (the “Term
Sheet”). The Executive’s employment with the Corporation is for no specified period of time and constitutes “at will” employment. As such, either the
Executive or the Corporation may terminate this Agreement and Executive’s employment relationship with the Corporation at any time for any reason, with
or without Cause, as defined below, if by the Corporation, or with or without Good Reason, as defined below, if by the Executive, provided that if the
termination of employment is initiated by Executive, Executive shall provide the Corporation with ninety (90) days advance written notice (the “Notice
Period”). The Notice Period may be waived in whole or in part by the Corporation in its sole and complete discretion. The Executive’s period of
employment under this Agreement is referred to herein as the “Term.”
1.2 Position and Duties. During the Term, the Executive shall faithfully, and in conformity with the directions of the Board of Directors
of the Corporation and any Committee thereof (the “Board”) or the management of the Corporation (“Management”), perform the duties of his
employment, and shall devote to the performance of such duties his full time and attention. During the Term, the Executive shall serve in such position as
the Board or Management may from time to time direct. During the Term, the Executive may engage in outside activities, provided those activities do not
conflict with the duties and responsibilities enumerated hereunder, and provided, further, that the Executive receives written approval in advance from
Management for any outside business activity that may require significant expenditure of the Executive’s time in which the Executive plans to become
involved, whether or not such activity is pursued for profit. The Executive shall be excused from performing any services hereunder during periods of
temporary incapacity and during vacations in accordance with the Corporation’s disability and vacation policies.
1.3 Place of Performance. The Executive shall be employed at the principle offices of the Corporation located in London, England;
provided, however, that the Corporation reserves the right in its sole discretion to end Executive’s international assignment in London, England at any time
and to repatriate him to New York, New York. Executive shall be required to travel both within and outside London, England on the Corporation’s
business.
1.4 Compensation and Related Matters.
Base Compensation. In consideration of his services during the Term, the Corporation shall pay the Executive cash
compensation at an annual rate of not less than one million and fifty thousand dollars ($1,050,000) (“Base Compensation”), less applicable withholdings.
Executive’s Base Compensation shall be subject to such increases as may be approved by the Board or Management. The Base Compensation shall be
payable as current salary, in installments not less frequently than monthly, and at the same rate for any fraction of a month unexpired at the end of the Term.
(a)
annual bonus program the Corporation maintains that would be applicable to the Executive and in accordance with the Term Sheet.
(b)
Bonus. During the Term, the Executive shall have the opportunity to earn an annual bonus in accordance with any
1
Stock Awards. During the Term, the Executive shall be eligible to participate in the Ralph Lauren Corporation 2010
Long-Term Stock Incentive Plan or any successor thereto (the “Incentive Plan”). All equity award grants to the Executive, if any, including but not limited
to the grants set forth in the Term Sheet, are governed by the terms of the Incentive Plan and are subject, in all cases, to approval by the Compensation &
Organizational Development Committee of the Board of Directors in its sole discretion.
(c)
of one thousand five hundred dollars ($1,500) per month, payable consistent with the Corporation's normal payroll practices.
(d)
Auto Allowance. During the Term, the Corporation shall pay the Executive a transportation allowance in the amount
Expenses. During the Term, the Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in performing services hereunder, including all reasonable expenses of travel on business, provided that such expenses
are incurred and accounted for in accordance with the policies and procedures established by the Corporation.
(e)
Vacations. During the Term, the Executive shall be entitled to the number of vacation days in each fiscal year, and to
compensation in respect of earned but unused vacation days, determined in accordance with the Corporation’s vacation program. The Executive shall also
be entitled to all paid holidays given by the Corporation to its employees.
(f)
(g)
Other Benefits. The Executive shall be entitled to participate in all of the Corporation’s employee benefit plans and
programs in effect during the Term as would by their terms be applicable to the Executive, including, without limitation, any life insurance plan, medical
insurance plan, dental care plan, accidental death and disability plan, and sick/personal leave program. The Executive shall also be entitled to the benefits
and allowances listed in Exhibit B to this Agreement in connection with his assignment to London (the “London Assignment”), until such time as the
London Assignment ends, which shall be determined by the Corporation in its sole and complete discretion. The Corporation shall not make any changes in
such plans or programs that would adversely affect the Executive’s benefits thereunder, unless such change occurs pursuant to a plan or program applicable
to other similarly situated employees of the Corporation and does not result in a proportionately greater reduction in the rights or benefits of the Executive
as compared with other similarly situated employees of the Corporation. Except as otherwise specifically provided herein, nothing paid to the Executive
under any plan or program presently in effect or made available in the future shall be in lieu of the Base Compensation or any bonus payable under
Sections 1.4(a) and 1.4(b) hereof.
(h)
Payments upon Transfer. In the event termination payments become payable under the laws of any jurisdiction upon
Executive’s repatriation following the London Assignment; or (ii) transfer to accept a new assignment with any subsidiary or affiliate of the Corporation,
Executive agrees to forfeit in writing his rights to all such payments or, if Executive receives any such payments, Executive agrees to return them to the
Corporation immediately. If for any reason Executive decides not to forfeit and/or return such payments, the Corporation reserves the right to offset fully
the value of any such termination payments from any other form of compensation due to the Executive, including, without limitation, any compensation
due under Sections 2.3(a)(i) or 4.1(a)(i) of this Agreement.
ARTICLE II
TERMINATION OF EMPLOYMENT
circumstances:
2.1 Termination of Employment. The Executive’s employment may terminate prior to the expiration of the Term under the following
services will no longer be required.
(a)
Without Cause. The Executive’s employment shall terminate upon the Corporation notifying the Executive that his
(b)
Death. The Executive’s employment shall terminate upon the Executive’s death.
Disability. If, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have
been absent and unable to perform the duties hereunder on a full-time basis for an entire period of six consecutive months, the Executive’s employment
may be terminated by the Corporation following such six-month period.
(c)
(d)
Cause. The Corporation may terminate the Executive’s employment for Cause. For purposes hereof, “Cause” shall
mean:
failure by the Executive to perform the duties of the Executive hereunder (other than due to disability as
defined in 2.1(c)), provided that the conduct described in this Section 2.1(d)(i) shall not constitute Cause unless and until such failure by Executive to
perform his duties hereunder has not been cured to the satisfaction of the Corporation, in its sole discretion, within thirty (30) days after notice of such
failure has been given by the Corporation to Executive; or
(i)
2
violation of law (other than a traffic violation) committed by the Executive; or
(ii)
an act of fraud, embezzlement, theft, breach of fiduciary duty, dishonesty, or any other misconduct or any
(iii)
(iv)
any action by the Executive causing damage to or misappropriation of Corporation assets; or
the Executive’s wrongful disclosure of confidential information of the Corporation or any of its affiliates;
or
which would constitute a breach of this Agreement and/or of the Executive’s duty of loyalty; or
(v)
the Executive’s breach of Section 5.7 herein or the Executive’s engagement in any competitive activity
the Executive’s breach of any employment policy of the Corporation, including, but not limited to, conduct
relating to falsification of business records, violation of the Corporation’s code of business conduct & ethics, harassment, creation of a hostile work
environment, excessive absenteeism, insubordination, violation of the Corporation’s policy on drug & alcohol use, or violent acts or threats of violence; or
(vi)
sole discretion, to be grossly negligent; or
(vii)
performance by the Executive of his employment duties in a manner deemed by the Corporation, in its
the commission of any act by the Executive, whether or not performed in the workplace, which subjects
or, if publicly known, would be likely to subject the Corporation to public ridicule or embarrassment, or would likely be detrimental or damaging to the
Corporation’s reputation, goodwill, or relationships with its customers, suppliers, vendors, licensees or employees.
(viii)
(e)
Voluntary Termination. The Executive may voluntarily terminate the Executive’s employment with the Corporation
at any time, with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean a termination of employment by the Executive
within sixty (60) days following the occurrence of (A) a material diminution in, or material adverse alteration to, Executive’s title, base salary, or position,
provided that a change in reporting relationship, or the removal of particular business units or functions from Executive’s purview, responsibility or
management shall not constitute a material diminution in or material adverse alteration to the Executive’s “position” for this purpose, (B) the relocation of
the Executive’s principal office outside the area which comprises a fifty (50) mile radius from the Host location as provided in his international assignment
terms as may be in effect from time to time, which is presently London, England, or from New York City, or from Geneva, Switzerland, or from such other
location as may be mutually agreed by the parties to become the location of Executive’s principal office, or (C) a failure of the Corporation to comply with
any material provision of this Agreement, provided that the events described in clauses (A), (B), and (C) above shall not constitute Good Reason (1) until
the Executive provides written notice to the Corporation of the existence of such material diminution, material alteration, relocation or failure, as the case
may be, within thirty (30) days of its occurrence and (2) unless such material diminution, material alteration, relocation or failure, as the case may be, has
not been cured within thirty (30) days after written notice of such noncompliance has been given by the Executive to the Corporation. For the avoidance of
doubt, any decision by the Corporation to terminate the London Assignment and repatriate Executive to the New York City metropolitan area and its
environs shall not constitute Good Reason, and any failure by Executive to repatriate to the New York City metropolitan area and its environs by the date
determined by the Corporation, in its sole discretion, shall constitute a voluntary termination by the Executive without Good Reason.
2.2 Date of Termination. The date of termination shall be:
(a)
(b)
if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death;
if the Executive’s employment is terminated by reason of Executive’s disability pursuant to Section 2.1(c) or by the
Corporation pursuant to Sections 2.1(a) or 2.1(d), the date specified by the Corporation; and
the Notice Period is waived in whole or in part by the Corporation, the date specified by the Corporation.
(c)
if the Executive’s employment is terminated by the Executive, the day after the last day of the Notice Period, or, if
2.3 Effect of Termination of Employment.
resigns for Good Reason pursuant to Section 2.1(e), the Executive shall only be entitled to the following:
(a)
If the Executive’s employment is terminated by the Corporation pursuant to Section 2.1(a), or if the Executive
the first payroll period following the 30th day following the date of termination of Executive’s employment,
(i)
Severance. Subject to Section 2.3(a)(v) and Section 4.1(a) hereof, the Corporation shall: (a) beginning with
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continue to pay the Executive, in accordance with the Corporation’s normal payroll practice, his Base Compensation, as in effect immediately prior to such
termination of employment, for the eighteen-month period commencing on the date of such termination (the “Severance Period”), provided that the initial
payment shall include Base Compensation amounts for all payroll periods from the date of termination through the date of such initial payment; and (b) pay
to the Executive, on the last business day of the Severance Period, an amount equal to one hundred and fifty percent (150%) of Executive’s Base
Compensation. Under no circumstances shall the Executive be entitled to any bonus payment for the fiscal year in which his employment is terminated.
Notwithstanding the foregoing, in order to receive any severance benefits under this Section 2.3(a)(i), the Executive must sign and not timely revoke a
release and waiver of claims against the Corporation, its successors, affiliates, and assigns, in a form acceptable to the Corporation on or prior to the 30th
day following the date of termination of Executive’s employment.
Stock Awards. The Executive’s rights with respect to any equity award grants provided to the Executive by
the Corporation shall be governed by the provisions of the Corporation’s Incentive Plan and the respective award agreements, if any, under which such
awards were granted, except as provided in Section 4.1(a).
(ii)
(iii)
Welfare Plan Coverages. The Executive shall continue to participate during the Severance Period in any
group medical or dental insurance plan he participated in prior to the date of his termination, under substantially similar terms and conditions as an active
employee; provided that participation in such group medical or dental insurance plan shall only continue for as long as permitted under COBRA and
further, shall correspondingly cease at such time as the Executive (a) becomes eligible for a future employer’s medical and/or dental insurance coverage (or
would become eligible if the Executive did not waive coverage) or (b) violates any of the provisions of Article III as determined by the Corporation in its
sole discretion. Notwithstanding the foregoing, the Executive may not continue to participate in such plans on a pre-tax or tax-favored basis.
Retirement Plans. Without limiting the generality of the foregoing, it is specifically provided that the
Executive shall not accrue additional benefits under any pension plan of the Corporation (whether or not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended) during the Severance Period.
(iv)
(v)
Section 409A. Notwithstanding any provision in this Agreement to the contrary, no amounts shall be
payable pursuant to Section 2.3(a) or Section 4.1(a) unless the Executive’s termination of employment constitutes a “separation from service” within the
meaning of Section 1.409A-1(h) of the Department of Treasury Regulations. If the Executive is determined to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended, and the rules and regulations issued thereunder (the “Code”), then no payment that is
payable under Sections 2.3(a)(i) or 4.1(a) hereof (the “Severance Payment”) on account of Executive’s “separation from service” shall be made before the
date that is at least six months after the Executive’s “separation from service” (or if earlier, the date of the Executive’s death), but rather all such payments
shall be made on the date that is five business days after the expiration of that six month period, if and to the extent that the Severance Payment constitutes
deferred compensation (or may be nonqualified deferred compensation) under Section 409A of the Code and such deferral is required to comply with the
requirements of Section 409A of the Code. For the avoidance of doubt, no portion of the Severance Payment shall be delayed for six months after the
Executive’s “separation from service” if such portion (x) constitutes a “short term deferral” within the meaning of Section 1.409A-1(a)(4) of the
Department of Treasury Regulations, or (y) (A) it is being paid due to the Corporation’s termination of the Executive’s employment without Cause or the
Executive’s termination of employment for Good Reason; (B) it does not exceed two times the lesser of (1) the Executive’s annualized compensation from
the Corporation for the calendar year prior to the calendar year in which the termination of the Executive’s employment occurs, or (2) the maximum
amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which the Executive’s employment
terminates; and (C) the payment is required under this Agreement to be paid no later than the last day of the second calendar year following the calendar
year in which the Executive incurs a “separation from service.” For purposes of Section 409A of the Code, the Executive’s right to receive installment
payments pursuant to Section 2.3(a) shall be treated as a right to receive a series of separate and distinct payments. To the extent that any reimbursement of
any expense under Section 1.4(e) or in-kind benefits provided under this Agreement are deemed to constitute taxable compensation to the Executive, such
amounts will be reimbursed or provided no later than December 31 of the year following the year in which the expense was incurred. The amount of any
such expenses reimbursed or in-kind benefits provided in one year shall not affect the expenses or in-kind benefits eligible for reimbursement or payment
in any subsequent year, and the Executive’s right to such reimbursement or payment of any such expenses will not be subject to liquidation or exchange for
any other benefit. The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the
time of the Executive’s separation from service shall be made by the Corporation in accordance with the terms of Section 409A of the Code and applicable
guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).
If the Executive’s employment is terminated by reason of the Executive’s death or disability, pursuant to Sections
2.1(b) or 2.1(c), the Executive (or the Executive’s designee or estate) shall only be entitled to whatever welfare plans benefits are available to the Executive
pursuant to the welfare plans the Executive participated in prior to such termination,
(b)
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and whatever stock awards may have been provided to the Executive by the Corporation the terms of which shall be governed by the provisions of the
Corporation’s Incentive Plan and the respective award agreements, if any, under which such stock awards were provided.
(c)
If the Executive’s employment is terminated by the Corporation for Cause or by the Executive without Good Reason
(as defined in Section 2.1(e)), the Executive shall receive only that portion of the Executive’s then current Base Compensation payable through the
Executive’s termination date. The Executive’s rights with respect to any stock awards provided to the Executive by the Corporation shall be governed by
the provisions of the Corporation’s Incentive Plan and the respective award agreements, if any, under which such stock awards were provided.
ARTICLE III
COVENANTS OF THE EXECUTIVE
3.1 Non-Compete.
(a)
The Corporation and the Executive acknowledge that: (i) the Corporation has a special interest in and derives
significant benefit from the unique skills and experience of the Executive; (ii) the Executive will use and have access to proprietary and valuable
Confidential Information (as defined in Section 3.2 hereof) during the course of the Executive’s employment; and (iii) the agreements and covenants
contained herein are essential to protect the business and goodwill of the Corporation or any of its subsidiaries, affiliates or licensees. Accordingly, except
as otherwise provided in this Agreement, the Executive covenants and agrees that during the Term, and for the twelve (12) month period following the last
day of the Term, the Executive shall not provide any labor, work, services or assistance (whether as an officer, director, employee, partner, agent, owner,
independent contractor, consultant, stockholder or otherwise) to a “Competing Business” in which the Executive has any of the same or similar
responsibilities as Executive’s responsibilities at the Corporation at any time during Executive’s employment with the Corporation, if during the Term, or
within the twenty-four (24) month period immediately preceding termination of employment. For purposes hereof, “Competing Business” shall mean any
company or business engaged in the designing, marketing or distribution of “Relevant Products,” including any of such company’s subsidiaries or licensees
(in the case of licensees to the extent related to the Corporation's products or marks), and shall include, without limitation, those brands and companies that
the Corporation has designated in writing on the date hereof, and incorporated herein by reference and attached as Schedule A, it being understood that the
Corporation may in its sole and absolute discretion modify Schedule A from time to time. For purposes hereof, “Relevant Products” shall mean products
marketed and sold by the Corporation, or any of its subsidiaries or licensees, in any quantity that is not de minimus. Thus, Executive specifically
acknowledges that Executive understands that he may not become employed by any Competing Business in any capacity for the period of one (1) year
following the termination of his employment for any reason, provided that the Executive may (i) own, solely as an investment, securities of any entity
which are traded on a national securities exchange if the Executive is not a controlling person of, or a member of a group that controls such entity and does
not, directly or indirectly, own 2% or more of any class of securities of such entity and (ii) own and invest up to 2% of any hedge funds, private equity
funds or other pooled investment vehicles so long as he is not actively involved with them. For the avoidance of doubt, the Executive shall not violate this
provision by providing services to a private equity firm (or one of its portfolio companies) which invests in a Competing Business so long as the Executive
is not providing services directly or indirectly to such Competing Business.
(b)
It is acknowledged by the Executive that the Corporation has determined to relieve the Executive from any
obligation of non-competition upon the expiration of the one year period following the termination of Executive's employment for any reason. In
consideration of that, and in consideration of all of the compensation provisions in this Agreement (including the potential for the award of equity grants
that may be made to the Executive), Executive agrees to the provisions of Section 3.1 and also agrees that the non-competition obligations imposed herein
are fair and reasonable under all the circumstances.
3.2 Confidential Information.
(a)
The Corporation owns and has developed and compiled, and will own, develop and compile, certain proprietary
techniques and confidential information as described below which have great value to its business (referred to in this Agreement, collectively, as
“Confidential Information”). Confidential Information includes not only information disclosed by the Corporation and/or its affiliates, subsidiaries and
licensees to Executive, but also information developed or learned by Executive during the course of, or as a result of, employment hereunder, which
information Executive acknowledges is and shall be the sole and exclusive property of the Corporation. Confidential Information includes all proprietary
information that has or could have commercial value or other utility in the business in which the Corporation is engaged or contemplates engaging, and all
proprietary information the unauthorized disclosure of which could be detrimental to the interests of the Corporation. Whether or not such information is
specifically labeled as Confidential Information by the Corporation is not determinative. By way of example and without limitation, Confidential
Information includes any and all information developed, obtained or owned by the
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Corporation and/or its subsidiaries, affiliates or licensees concerning trade secrets, techniques, know-how (including designs, plans, procedures, processes
and research records), software, computer programs, innovations, discoveries, improvements, research, development, test results, reports, specifications,
data, formats, marketing data and plans, business plans, strategies, forecasts, unpublished financial information, orders, agreements and other forms of
documents, price and cost information, merchandising opportunities, expansion plans, designs, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential
Information shall not in any event include (A) Executive’s personal knowledge and know-how relating to merchandising and business techniques which
Executive has developed over his career in the apparel business and of which Executive was aware prior to his employment, or (B) information which (i)
was generally known or generally available to the public prior to its disclosure to Executive; (ii) becomes generally known or generally available to the
public subsequent to disclosure to Executive through no wrongful act of any person or (iii) which Executive is required to disclose by applicable law or
regulation (provided that Executive provides the Corporation with prior notice of the contemplated disclosure and reasonably cooperates with the
Corporation at the Corporation’s expense in seeking a protective order or other appropriate protection of such information).
(b)
Executive acknowledges and agrees that in the performance of his duties hereunder the Corporation will from time
to time disclose to Executive and entrust Executive with Confidential Information. Executive also acknowledges and agrees that the unauthorized
disclosure of Confidential Information, among other things, may be prejudicial to the Corporation’s interests, and an improper disclosure of trade secrets.
Executive agrees that he shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any corporation, partnership,
individual or other third party, other than in the course of his assigned duties and for the benefit of the Corporation, any Confidential Information, either
during his Term of employment or thereafter.
The Executive agrees that upon leaving the Corporation’s employ, the Executive shall not take with the Executive
any software, computer programs, disks, tapes, research, development, strategies, designs, reports, study, memoranda, books, papers, plans, information,
letters, e-mails, or other documents or data reflecting any Confidential Information of the Corporation, its subsidiaries, affiliates or licensees.
(c)
(d)
During the Term, Executive shall disclose to the Corporation all designs, inventions and business strategies or plans
developed for the Corporation, including without limitation any process, operation, product or improvement. Executive agrees that all of the foregoing are
and shall be the sole and exclusive property of the Corporation and that Executive shall at the Corporation’s request and cost do whatever is necessary to
secure the rights thereto, by patent, copyright or otherwise, to the Corporation.
Nothing in this Agreement shall be construed to prohibit Executive from reporting possible violations of law or
regulation to any governmental agency or regulatory body or making other disclosures that are protected under any law or regulation, or from filing a
charge with or participating in any investigation or proceeding conducted by any governmental agency or regulatory body.
(e)
(f)
Notwithstanding any other provision of this Agreement: (i) the Executive shall not be held criminally or civilly liable
under any federal or state trade secret law for any disclosure of a trade secret that: (A) is made: (1) in confidence to a federal, state, or local government
official, either directly or indirectly, or to any attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is
made in a complaint or other document that is filed under seal in a lawsuit, arbitration or other proceeding; (ii) if the Executive files a lawsuit or arbitral
action for retaliation by the Corporation for reporting a suspected violation of law, the Executive may disclose the Corporation’s trade secrets to the
Executive’s attorney and use the trade secret information in the court or arbitral proceeding if the Executive: (A) files any document containing the trade
secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
3.3 Non-Solicitation of Employees. The Executive covenants and agrees that during the Term, and for the twelve (12) month period
following the last day of the Term, regardless of the reason for Executive’s termination of employment, the Executive shall not directly or indirectly solicit
or influence any other employee of the Corporation, or any of its subsidiaries, affiliates or licensees, to terminate such employee’s employment with the
Corporation, or any of its subsidiaries, affiliates or licensees, as the case may be, or to become employed by a Competing Business. As used herein,
“solicit” shall include, without limitation, requesting, encouraging, enticing, assisting, or causing, directly or indirectly.
3.4 Nondisparagement. The Executive agrees that during the Term and thereafter whether or not he is receiving any amounts pursuant to
Sections 2.3 and 4.1, the Executive shall not make any statements or comments that reasonably could be considered to shed an adverse light on the business
or reputation of the Corporation or any of its subsidiaries, affiliates or licensees, the Board or any officer of the Corporation or any of its subsidiaries,
affiliates or licensees; provided, however, the foregoing limitation shall not apply to (i) compliance with legal process or subpoena, or (ii) statements in
response to an inquiry from a court or regulatory body.
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3.5 Remedies.
(a)
The Executive acknowledges and agrees that in the event the Corporation reasonably determines that the Executive
has breached any provision of this Article III, that such conduct will constitute a failure of the consideration for which stock awards had been previously
granted to the Executive or could be awarded in the future to Executive, and notwithstanding the terms of any stock award agreement, plan document, or
other provision of this Agreement to the contrary, the Corporation may in its sole discretion notify the Executive that all unexercised stock options,
restricted stock units, and other equity awards that Executive has are forfeited. Further, the Executive shall immediately forfeit the right to receive any
further grants of or vest any further in any unvested stock options, unvested restricted stock units or other unvested equity awards of the Corporation at the
time of such notice, and Executive waives any right to assert that any such conduct by the Corporation violates any federal or state statute, case law or
policy.
(b)
If the Corporation reasonably determines that the Executive has breached any provision contained in this Article III,
the Corporation shall have no further obligation to make any payment or provide any benefit whatsoever to the Executive pursuant to this Agreement, and
may also recover from the Executive all such damages as it may be entitled to at law or in equity. In addition, the Executive acknowledges that any such
breach is likely to result in immediate and irreparable harm to the Corporation for which money damages are likely to be inadequate. Accordingly, the
Executive consents to injunctive and other appropriate equitable relief upon the institution of proceedings therefor by the Corporation in order to protect the
Corporation’s rights hereunder. Such relief may include, without limitation, an injunction to prevent: (i) the breach or continuation of Executive’s breach;
(ii) the Executive from disclosing any trade secrets or Confidential Information (as defined in Section 3.2); (iii) any Competing Business from receiving
from the Executive or using any such trade secrets or Confidential Information; and/or (iv) any such Competing Business from retaining or seeking to
retain any employees of the Corporation.
3.6 The provisions of this Article III shall survive the termination of this Agreement and Executive’s Term of employment.
4.1 Change in Control.
ARTICLE IV
CHANGE IN CONTROL
Effect of a Change in Control. Notwithstanding anything contained herein to the contrary, if the Executive’s
employment is terminated within twelve (12) months following a Change in Control (as defined in Section 4.1(b) hereof) during the Term by the
Corporation for any reason other than Cause, or by the Executive for Good Reason, then:
(a)
(i)
Severance. The Corporation shall pay to the Executive, in lieu of any amounts otherwise due to him under
Section 2.3(a) hereof, within fifteen (15) days of the Executive’s termination of employment, or within the timeframe required by Section 2.3(a)(v) hereof
if applicable, a lump sum amount equal to two (2) times the sum of: (A) the Executive’s Base Compensation, as in effect immediately prior to such
termination of employment; and (B) the bonus paid to the Executive for the most recently completed fiscal year prior to the fiscal year in which his
employment is terminated. Notwithstanding the foregoing, solely to the extent necessary to comply with Section 409A of the Code, a portion of such lump
sum payment will not be payable at such time if the duration of the Severance Period that would have otherwise applied under Section 2.3(a)(i) (had a
Change in Control not occurred during the twelve-month period prior to such termination of employment) would have extended beyond the end of the
second calendar year following the calendar year in which such termination of employment occurs (any such period beyond the end of such second
calendar year is the “Extended Severance Payment Period”). In addition, such other amounts that otherwise would have been payable to the Executive
under Section 2.3(a)(i) had a Change in Control not occurred during the twelve (12) month period prior to such termination of employment, and that would
have constituted nonqualified deferred compensation subject to Section 409A of the Code, will also not be included as part of such lump sum payment. In
such event, an amount equal to the aggregate installment payments that would have been payable during the Extended Severance Payment Period, and the
amounts described in the preceding sentence, shall be deducted from the amount otherwise payable in a lump sum in accordance with the first sentence
hereof. Such deducted amount shall, instead, be payable at the same time that, and in the same manner as, such payments would have been paid if the
Executive’s employment had been terminated pursuant to Section 2.3(a) hereof rather than within a twelve-month period following a Change in Control.
Stock Awards. Subject to Section 2.3(a)(v), the Executive shall immediately become vested in any unvested
stock options granted to the Executive by the Corporation prior to the Change in Control and Executive will have six (6) months from the date of
termination under this circumstance to exercise all vested options (but in no event later than the expiration date of such options). In addition, subject to
Section 2.3(a)(v), any awards of PSUs and restricted shares which are unvested shall be deemed vested immediately prior to such Change in Control.
(ii)
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(b)
Definition. For purposes hereof, a “Change in Control” shall mean the occurrence of any of the following:
substantially all of the assets of the Corporation to any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934 (“Act”)) other than Permitted Holders;
(i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or
(ii) any person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Act,
except that a person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or indirectly, of more than 50 percent of the total voting power of the voting stock of the
Corporation, including by way of merger, consolidation or otherwise; provided, however, that for purposes of this Agreement, the following acquisitions
shall not constitute a Change in Control: (I) any acquisition by the Corporation or any affiliate, (II) any acquisition by any employee benefit plan sponsored
or maintained by the Corporation or any affiliate, (III) any acquisition by one or more of the Permitted Holders, or (IV) any acquisition which complies
with clauses (A), (B) and (C) of subsection (v) below;
constitute a majority of the Board;
(iii) during any period of twelve (12) consecutive months, Present and/or New Directors cease for any reason to
below 30 percent and either Ralph Lauren is not nominated for a position on the Board of Directors, or he stands for election to the Board of Directors and
is not elected;
(iv) the Permitted Holders’ beneficial ownership of the total voting power of the voting stock of the Corporation falls
(v) the consummation of a reorganization, recapitalization, merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Corporation that requires the approval of the Corporation’s stockholders, whether for such transaction or the
issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the
total voting power of (x) the entity resulting from such Business Combination (the “Surviving Company”), or (y) if applicable, the ultimate parent entity
that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the
analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the shares of voting stock of the Corporation that were
outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the shares of voting stock of the
Corporation were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same
proportion as the voting power was among the holders of the shares of voting stock of the Corporation that were outstanding immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company, or
one or more Permitted Holders), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding
voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent
Company, the Surviving Company) and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent
Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at
the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination; or
(vi) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation.
For purposes of this Section 4.1(b), the following terms have the meanings indicated: “Permitted Holders” shall mean, as of the date of determination: (A)
any and all of Ralph Lauren, his spouse, his siblings and their spouses, and descendants of them (whether natural or adopted) (collectively, the “Lauren
Group”); and (B) any trust established and maintained primarily for the benefit of any member of the Lauren Group and any entity controlled by any
member of the Lauren Group. “Present Directors” shall mean individuals who at the beginning of any one year period were members of the Board. “New
Directors” shall mean any directors whose election by the Board or whose nomination for election by the shareholders of the Corporation was approved by
a vote of a majority of the directors of the Corporation who, at the time of such vote, were either Present Directors or New Directors but excluding any such
individual whose initial assumption of office occurs solely as a result of an actual or threatened proxy contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.
8
5.1 Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand or by facsimile or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
ARTICLE V
MISCELLANEOUS
If to the Executive:
If to the Corporation:
Andrew Howard Smith
Current home address as maintained in the Corporation’s personnel records, which Executive shall
promptly update for the Corporation upon any move.
Ralph Lauren Corporation
Legal Department
625 Madison Avenue
New York, New York 10022
Attn: General Counsel
Fax: (212) 705-8386
or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
5.2 Modification or Waiver; Entire Agreement. No provision of this Agreement may be modified or waived except in a document signed
by the Executive and the Corporation. This Agreement, along with any documents incorporated herein by reference, including but not limited to the Term
Sheet, constitutes the entire agreement between the parties regarding their employment relationship and supersedes all prior agreements, amendments,
promises, covenants, representations or warranties, including but not limited to the 2017 Employment Agreement, which is no longer of any force or effect,
except for the terms of the One-Time Stock Award set forth in the term sheet attached to the 2017 Employment Agreement, which shall remain in full force
and effect. To the extent that this Agreement is in any way inconsistent with any prior or contemporaneous stock award agreements between the parties,
this Agreement shall control. No agreements or representations, oral or otherwise, with respect to the subject matter hereof have been made by either party
that are not set forth expressly in this Agreement. Any amendments to this Agreement must be in writing and must be signed and agreed to by both the
Corporation and the Executive. Executive agrees that if the Corporation informs him that an amendment to this Agreement is required in order for
Executive and/or the Corporation to comply with a material change in law or governmental regulation, Executive will not unreasonably withhold his
agreement to such an amendment.
5.3 Governing Law. The validity, interpretation, construction, performance, and enforcement of this Agreement shall be governed by the
laws of the State of New York without reference to New York’s choice of law rules. Any controversy, claim or dispute arising out of or relating to this
Agreement or Executive’s employment, whether contractual or non-contractual, including without limitation any federal or state statutory claim, common
law or tort claim, or claim for attorneys fees, as well as any such controversy, claim or dispute between Executive and an officer, director or employee of
the Corporation related to Executive’s employment or to this Agreement, shall be brought before a three-member arbitration panel and held in New York
City in accordance with the rules of the American Arbitration Association (“AAA”) then in effect. The arbitrators shall issue a full written opinion setting
forth the reasons for their decision. Such arbitration, all filings, evidence and testimony connected with the arbitration, and all relevant allegations and
events leading up to the arbitration, shall be held in strict confidence, unless disclosure is required by law or SEC or other governmental reporting
obligation. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Executive acknowledges that any arbitration brought under
this Agreement must be on an individual basis, and Executive may not join or consolidate claims in arbitration by other employees, or litigate in court or
arbitrate any claims as a representative or member of a class. Notwithstanding the foregoing, the Corporation may seek injunctive or other declaratory relief
to enforce any provision of Article III of this Agreement in any court of competent jurisdiction.
not be obligated to seek other employment following such termination and there shall be no offset of the payments or benefits set forth herein.
5.4 No Mitigation or Offset. In the event the Executive’s employment with the Corporation terminates for any reason, the Executive shall
5.5 Withholding. All payments required to be made by the Corporation hereunder to the Executive or the Executive’s estate or
beneficiaries shall be subject to the withholding of such amounts as the Corporation may reasonably determine it should withhold pursuant to any
applicable law.
9
and/or the employment relationship.
5.6 Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred in any action or dispute arising out of this Agreement
5.7 No Conflict. Executive represents and warrants that he is not party to any agreement, contract, understanding, covenant, judgment or
decree or under any obligation, contractual or otherwise, with any other party that in any way restricts or adversely affects his ability to act for the
Corporation in all of the respects contemplated hereby, including but not limited to any obligations to comply with any non-compete or non-solicitation
provisions. Executive represents and warrants that he has not disclosed, will not disclose, and has no intention of disclosing any trade secrets or any
confidential and/or proprietary business information of any other company to the Corporation or to any individual employed by or associated with the
Corporation, nor has he used or will he use any such information for the Corporation’s or his benefit.
5.8 Enforceability. Each of the covenants and agreements set forth in this Agreement are separate and independent covenants, each of
which has been separately bargained for and the parties hereto intend that the provisions of each such covenant shall be enforced to the fullest extent
permissible. Should the whole or any part or provision of any such separate covenant be held or declared invalid, such invalidity shall not in any way affect
the validity of any other such covenant or of any part or provision of the same covenant not also held or declared invalid. If any covenant shall be found to
be invalid but would be valid if some part thereof were deleted or the period or area of application reduced, then such covenant shall apply with such
minimum modification as may be necessary to make it valid and effective. The failure of either party at any time to require performance by the other party
of any provision hereunder will in no way affect the right of that party thereafter to enforce the same, nor will it affect any other party’s right to enforce the
same, or to enforce any of the other provisions in this Agreement; nor will the waiver by either party of the breach of any provision hereof be taken or held
to be a waiver of any prior or subsequent breach of such provision or as a waiver of the provision itself.
5.9 Miscellaneous. No right or interest to, or in, any payments shall be assignable by the Executive; provided, however, that this
provision shall not preclude the Executive from designating in writing one or more beneficiaries to receive any amount that may be payable after the
Executive’s death and shall not preclude the legal representative of the Executive’s estate from assigning any right hereunder to the person or persons
entitled thereto. If the Executive should die while any amounts would still be payable to the Executive hereunder, all such amounts shall be paid in
accordance with the terms of this Agreement to the Executive’s written designee or, if there be no such designee, to the Executive’s estate. This Agreement
shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the Executive, the Executive’s heirs and legal representatives and the
Corporation and its successors. The section headings shall not be taken into account for purposes of the construction of any provision of this Agreement.
5.10 Meaning of Signing This Agreement. By signing this Agreement, Executive expressly acknowledges and agrees that (a) he has
carefully read it and fully understands what it means; (b) he has been advised in writing to discuss this Agreement with an independent attorney of his own
choosing before signing it and has had a reasonable opportunity to confer with his attorney and has discussed and reviewed this Agreement with his
attorney prior to executing it and delivering it to the Corporation; (c) he has had answered to his satisfaction any questions he has with regard to the
meaning and significance of any of the provisions of this Agreement; and (d) he has agreed to this Agreement knowingly and voluntarily of his own free
will and was not subjected to any undue influence or duress, and assents to all the terms and conditions contained herein with the intent to be bound hereby.
5.11 Compliance with Section 409A. The parties acknowledge and agree that, to the extent applicable, this Agreement shall be
interpreted in accordance with, and the parties agree to use their best efforts to achieve timely compliance with, Section 409A of the Code and the
Department of Treasury Regulations and other interpretive guidance issued thereunder (“Section 409A”), including without limitation any such regulations
or other guidance that may be issued after the Effective Date. Notwithstanding any provision of this Agreement to the contrary, in the event that the
Corporation determines that any compensation or benefits payable or provided hereunder may be subject to Section 409A, the Corporation reserves the
right (without any obligation to do so or to indemnify the Executive for failure to do so) to adopt such limited amendments to this Agreement and
appropriate policies and procedures, including amendments and policies with retroactive effect, that the Corporation reasonably determines are necessary or
appropriate to (a) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve the intended tax treatment of the
compensation and benefits provided with respect to this Agreement or (b) comply with the requirements of Section 409A.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date and year first above written.
RALPH LAUREN CORPORATION
/s/ Roseann Lynch
By: Roseann Lynch
Title: Executive Vice President, Chief People Officer and
Global Human Rights Officer
/s/ Andrew Howard Smith
ANDREW HOWARD SMITH
11
Abercrombie & Fitch Co.
Ann Taylor Stores Corp.
Belk, Inc.
Brooks Brothers Group, Inc.
Brunello Cucinelli S.p.A.
Burberry Limited
Campagnie Financiere Richemont SA
Chanel S.A.
Coach, Inc.
Dillard’s Inc.
Dolce & Gabbana srl
G-III Apparel Group, Ltd.
Gap Inc.
Giorgio Armani Corp.
Gilt Groupe Holdings Inc.
Hermes International SCA
Hudson’s Bay Company
Hugo Boss AG
J. Crew Group, Inc.
J.C. Penney Company, Inc.
Kate Spade & Company
Kering S.A.
Limited Brands, Inc.
LVMH Moet Hennessy - Louis Vuitton S.E.
Macy’s Inc.
Michael Kors, Inc.
Neiman Marcus Group, Inc.
Nike, Inc.
Nordstrom, Inc.
Prada (aka I Pellettieri d'Italia S.P.A.)
PVH Corp.
Restoration Hardware Holdings, Inc.
Salvatore Ferragamo Italia S.P.A.
TJX Companies, Inc.
Tory Burch LLC
Vineyard Vines LLC
YOOX Net-a-Porter Group
Under Armour, Inc.
Urban Outfitters, Inc.
VF Corporation
Williams-Sonoma, Inc.
SCHEDULE A
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EXHIBIT A
Term Sheet
Andrew Howard Smith
Title:
Executive Vice President, Chief Commercial Officer
Effective Date:
March 31, 2019
Reports To:
President and Chief Executive Officer
Base Salary:
$1,050,000 annually (less all applicable taxes and other deductions)
Executive Officer
Annual Incentive
Plan:
Long-Term
Incentive Plan:
You will be eligible to participate in the Executive Officer Annual Incentive Plan (EOAIP) for fiscal 2020, which begins on
March 31, 2019.
•
•
•
•
Bonus target is 150% of fiscal year salary earnings
Bonus opportunity will be based 100% on total Company performance
Calculation can flex up or down by -10% to +10% based on achievement of strategic goals
The maximum bonus opportunity (including strategic goal adjustment) is capped at 300% of your fiscal year salary earnings
(At all times your bonus opportunity will be governed by and subject to the terms and conditions of the Company’s EOAIP as set
forth in its annual EOAIP overviews or other similar documents, and nothing contained herein restricts the Company’s rights to
alter, amend or terminate the EOAIP at any time.)
You are eligible to participate in the Ralph Lauren Corporation 2010 Long-Term Stock Incentive Plan (“LTSIP”), as may be
amended from time to time. Stock awards are subject to ratification by the Compensation and Organizational Development
Committee of the Board of Directors (“Compensation Committee”). In accordance with the terms of the LTSIP, you will be
eligible to receive an annual stock award with a target grant value of $2,750,000 beginning with the fiscal 2020 annual grant
cycle.
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Exhibit B
Andrew Howard Smith London Assignment Benefits
This Exhibit B confirms the terms and conditions governing your expatriate assignment from New York, US (Home Location) to London, United Kingdom
(Host Location) and provides details of the support you will receive under the Ralph Lauren Long Term Global Assignment Policy. The terms and
conditions outlined in this letter are in effect only for the period of the Assignment, which may be terminated by the Company at any time in its sole
discretion. Following the end of the Assignment, you will no longer receive the premiums, allowances, differentials and other assignment-specific benefits
provided while on the Assignment.
GENERAL INFORMATION
Term
Your international assignment to London, United Kingdom (the “Assignment”) will begin on March 31, 2019 (“Assignment Start Date”).
Immigration
This agreement is contingent upon your obtaining the appropriate government clearances, visas and work permits. The Company will assist you in ensuring
these immigration matters are properly handled and will bear the costs for you to obtain the necessary visas, medical examinations and/or immunizations,
as well as reasonable travel expenses associated with fulfilling these requirements. The Assignment will immediately terminate and you will be repatriated
if any necessary immigration visa(s), work permit(s) and related documentation are withheld, withdrawn or expire without renewal.
Point-of-Origin
Your Home office location has been designated as New York, New York, US, and it is anticipated that you will return to this location upon the end of your
assignment.
EMPLOYEE BENEFITS
Employee Benefits
During the Assignment, with the exception of your medical and dental plans, you will maintain benefit coverage under the US benefit plans as offered to
US employees. We will provide medical coverage for you and your family under our UHC Global Medical plan and information will be provided
separately. Questions about your other US benefit plans should be addressed to the Company’s benefits department. Employee contributions for benefits
will be deducted from your paycheck.
Relocation
You will relocate from Geneva, Switzerland to London, United Kingdom where you will be based for the length of the Assignment. The Company will
provide the services of a relocation company to assist you in settling in to your new surroundings. This service will include home search and area tours to
familiarize you with the neighborhoods where you will live and work. All reasonable costs for this service will be borne by the Company.
Relocation Allowance
To assist with the cost of establishing a residence, a net relocation allowance of $50,000 or local equivalent will be provided at the time of relocation
through the Company’s vendor that assists with relocations. This allowance is to be used at your discretion to cover ancillary expenses such as but not
limited to: driver’s licenses and fees, bank charges, renter’s insurance; small appliances; cleaning or handyman services, membership fees, etc.
Immigration Assistance
The Company will assist you in obtaining all required passports, work permits and visas. The time required to obtain these documents and for processing
work papers varies greatly by country.
Relocation Services
The Company will provide the services of a relocation company to assist you in settling in to your new surroundings. This service will include:
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House Hunting Trip (Pre-move)
The Company will cover the cost of one house hunting trip for you and your spouse/domestic partner if applicable. Reasonable expenses for up to
seven days will be reimbursed related to transportation, hotel, food, rental car and incidentals based on the Company’s Business Travel Policy.
Shipment of Household Goods
The Company will pay all reasonable expenses for packing, transporting and insuring your household and personal goods as well as any applicable
customs, duties or fees incurred.
Storage of Household Goods
The Company will pay all reasonable expenses for storage of belongings for the duration of your assignment and up to 60 days upon completion
of the assignment.
Relocation Airfare
The Company will cover the cost of direct route one-way airfare for you and your accompanying dependents and car service to/from the airport, in
accordance with the Business Travel Policy.
Temporary Living
For a period of up to 30 days, you will be provided with a corporate apartment in your new work location. You will also be provided with up to 7
days in a hotel if required in your Origin Country. This assistance is also provided upon repatriation, prior to your departure to return home.
ASSIGNMENT ALLOWANCES
The Company provides allowances designed to equalize your purchasing power and living standard to comparable levels experienced in your Home
country and has engaged the services of a recognized international consulting firm to provide economic data, cost of living indices and exchange rate
fluctuations for this purpose. This data is updated several times each year in consideration of changes in inflation or currency. Applying this data, the
following allowances will be delivered to you via your bi-weekly paycheck, effective upon moving into your permanent living quarters in the host location.
Goods & Services Differential (G&S)
A G&S differential targets your pre-assignment purchasing level and is determined on the basis of a “typical” market basket of goods and services. While
the market basket may not be the exact replica of your own spending habits, it has been properly weighted by the international economic consulting service.
G&S is based on current market data supplied by a third-party vendor. The market data compares the cost of goods and services in your home location
versus your host location, as well as fluctuations in exchange rates. This also takes into account any changes in family size (number of dependents) that is
with you on assignment.
Your initial G&S differential will be $27,464 per year or $1,056.31 per pay period. This G&S differential will be reviewed and adjusted (if applicable)
when your assignment commences. Any tax assessed on this assistance will be borne by the Company.
This allowance is reviewed semi-annually (February/March and August/September) and may be adjusted in accordance with changes in costs, either up or
down. If there is a change of more than 5% in either direction, your G&S will be adjusted. Please note that, as standard practice, we cap any single decrease
at 15% unless there is a decrease in the family size.
Please note that your G&S differential includes an amount for utilities and no additional coverage for utilities will be provided by the Company.
Should the family size that is with you on assignment change at any time while on assignment, the G&S allowance will be updated accordingly to reflect
this change. Please notify global mobility immediately if there is a change in the number of the family size that is on assignment with you.
Housing Allowance
While on the Assignment, you are expected to contribute to the cost of your housing. A “housing norm” represents a statistical average that a person would
have paid had they remained at home, based on family size and income level. This amount, according to the international consulting firm data based on
your income and family size is $56,604 annually. Your annual housing cost is expected to be $164,113 annually (or $13,676 per month. As a result, the
Company will provide you with a housing allowance of up to $107,509 per year (Housing cost of $164,113 less $56,604 housing norm). Any tax assessed
on this allowance will be borne by the Company.
15
In addition, the Company will pay the cost of associated rental agency fees, any required advance rent payments and security deposits. You will be
responsible for any charges or damages applied against the security deposit.
Note: In general, home ownership in the host location while on global assignment is discouraged because it can impact residential status and have negative
tax implications. Therefore, should you choose to purchase housing, Company housing assistance would be discontinued. In addition, the Company will
not reimburse any costs or expenses associated with the purchase or subsequent sale of any residence. Any increase in tax liability as a result of home
purchase would be your responsibility.
Home Leave Allowance
The Company will provide you with a home leave allowance of $30,000 per year paid bi-weekly through your U.S international payroll, to be used for your
and your family’s travel. The Home Leave allowance will be reflected in your paycheck once the assignment has started. Home leave is counted as vacation
time (except any time spent conducting business). Any additional expenses (ie, car service, airport transfers etc.) will be your responsibility. All taxes
assessed with this payment will be borne by the Company. Should the family size change at any time while on assignment, the travel allowance will be
updated accordingly to reflect this change. Home leave cannot be booked via the Company’s travel department.
Emergency Travel
In the event of the serious illness, accident or death of a member of your immediate family, the Company will reimburse emergency round trip travel costs
for you and accompanying dependents. All travel will be based on the Company’s business Travel Policy and must be arranged through the Company’s
travel department. Please reach out to Global Mobility to coordinate the booking as airfare costs will be charged to the Global Mobility credit card.
Education Assistance
Education assistance will be provided for your school aged children (from 3 years up to the age of 18) to attend school in the United Kingdom. The
Company or its internartional assignment vendor will reimburse or pay the school directly upon providing all the supporting invoices and/or receipts. The
company will cover up to $30,000 per child annually. Any additional costs will be your responsibility. Any tax assessed on this assistance will be borne by
the Company.
PERSONAL INCOME TAXES
During the Assignment, you may be subject to income tax and reporting requirements in both your Home and Host country. To ensure that you incur no
additional income tax cost as a result of your international service, the Company provides protection under a Tax Equalization policy for actual taxes
assessed on your Company sourced income for the duration of the Assignment.
You continue to be responsible for your Home country income and social security taxes on your compensation, i.e., base salary, bonus, PSU, PRSU, RSU
vesting and stock option exercises, as if you remained at home. While on assignment, this obligation becomes known as your hypothetical tax liability
and is deducted from your pay each cycle to satisfy federal, state, or local taxes payable on Company sourced income. Additionally, your social security tax
will continue to be deducted on an actual basis as required by law.
The Company will provide and pay for the services of an international accounting firm to calculate your hypothetical liability and prepare your actual
Home and Host tax returns while on assignment. Because your hypothetical tax payments are an approximation of your Home country tax liability based
on your Company sourced income only, at the end of each tax year, the accounting firm will prepare a tax equalization calculation to determine if your final
home country tax liability is greater than the hypothetical tax withheld from your pay. If so, you will be responsible to the Company for the difference. If it
is less, the Company will pay you the difference.
The intent of any tax assistance is to make you no better or worse off than if you stayed continually in your home location. Taxes paid on your behalf may
result in an increase of tax refunds due to you or a reduction in your U.S. tax obligation. If your refund is increased or your obligation decreased as a result
of credits included from company funded tax payments, you will need to return this funding to the Company. Note that in many circumstances, tax services
are required for years after completion of an assignment. You are agreeing that the accounting firm will provide a detailed summary outlining the impact of
the taxes paid.
16
TRAVEL CALENDAR
You are responsible for maintaining records of your travel for the duration of the Assignment and providing this information to the accounting firm for the
preparation of all required tax returns. In addition, you agree to provide all necessary information and documents, in a timely manner, to the accounting
firm so they may prepare your tax returns in the time required by law. If you do not comply with these requirements, the cost of any penalties assessed by
the taxing authorities in each location will be your responsibility.
If you terminate your employment other than for “Good Reason” (as defined in the Agreement), or if the Company terminates your employment for
“Cause” (as defined in the Agreement), in each case within twelve (12) months of the Assignment Start Date, then you shall reimburse the Company for the
full amount of the relocation benefits and any up-front housing allowance benefits paid to you in accordance with this Exhibit B to the Agreement within
30 days of the date of termination of your employment. If you do not repay the aforementioned payments within this time period, the Company has the
right to immediately recover the aforementioned payments from you, as well as any attorneys’ fees and costs incurred in recovering the aforementioned
payments.
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EXHIBIT 10.14
RALPH LAUREN CORPORATION
AMENDED AND RESTATED EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
(As Amended as of May 20, 2020)
1. PURPOSE.
The purposes of the Plan are to promote the success of the Company; to provide designated Executive Officers with an opportunity to receive
incentive compensation dependent upon that success; and to attract, retain and motivate such individuals.
2. DEFINITIONS.
“Affiliate” shall mean (i) any Person that, directly or indirectly, is controlled by, or controls or is under common control with the Company and
(ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee.
“Award” means an incentive award made pursuant to the Plan.
“Award Schedule” means the Award Schedule established pursuant to Section 4.1.
“Board of Directors” means the Board of Directors of the Company.
“Change in Control” has the meaning given such term in the Company’s 2019 Long-Term Stock Incentive Plan, or any successor plan, each as may
be amended from time to time.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means a committee or subcommittee of the Board of Directors that is designated by the Board of Directors to administer the Plan and
is composed of not less than two directors.
“Company” means Ralph Lauren Corporation and its successors.
“Executive Officer” means a person who is an executive officer of the Company for purposes of the Securities Exchange Act of 1934, as amended.
“Participant” means an Executive Officer selected from time to time by the Committee to participate in the Plan.
“Performance Award” means an Award the vesting of which is intended to be subject to achievement of performance, as determined by the
Committee.
“Performance Criteria” shall mean the criterion or criteria that the Committee may select for purposes of establishing the Performance Goal(s) for a
Performance Period with respect to any Performance Award under the Plan. In such event, the Performance Criteria that will be used to establish the
Performance Goal(s) shall be determined in the sole discretion of the Committee, and may include one or more qualitative or quantitative measures of
performance, which may be based on the attainment of specific levels of performance of the Company (and/or one or more subsidiaries, Affiliates,
divisions or operational and/or business units, product lines, brands, business segments, administrative departments or any combination of the foregoing),
including but not limited to, one or more of the following: (a) net earnings or net income (before or after taxes); (b) basic or diluted earnings per share
(before or after taxes); (c) net revenue or net revenue growth; (d) gross revenue or gross revenue growth, or gross profit or gross profit growth; (e) net
operating profit (before or after taxes); (f) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested
capital, equity, or sales); (g) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital), which
may but are not required to be measured on a per share basis; (h) earnings before or after taxes, interest, depreciation and/or amortization; (i) gross or net
operating margins; (j) productivity ratios; (k) share price (including, but not limited to, growth measures and total stockholder return); (l) expense targets or
cost reduction goals; (m) general and administrative expense savings; (n) operating efficiency; (o) objective measures of customer satisfaction; (p) working
capital targets; (q) measures of economic value added or other “value creation” metrics; (r) inventory control; (s) enterprise value; (t) customer retention;
(u) competitive market metrics; (v) employee retention; (w) timely completion of new product rollouts; (x) timely launch of new facilities; (y) objective
measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific
acquisitions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting
divisional or project budgets); (z) royalty income; (aa) same store sales (comparable sales), comparisons of continuing operations to other operations;
(bb) market share; (cc) new store openings (gross or net), store remodelings; (dd) cost of capital, debt leverage year-end cash position or book value; (ee)
strategic objectives, development of new product lines and related revenue, sales and margin targets, franchisee growth and retention, menu design and
growth, co-branding or international operations; or (ii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a
percentage of another Performance Criterion, or used on an absolute or relative basis to measure the performance of the Company, subsidiary and/or
Affiliate as a whole or any divisions or operational and/or business units, product lines, brands, business segments, or administrative departments of the
Company, subsidiary and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or
1
any of the above Performance Criteria may be compared to the performance of a group of comparator companies, or published or special index that the
Committee, in its sole discretion, deems appropriate, or compared to various stock market indices. In the event that applicable tax and/or securities laws
permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such changes, the Committee shall have
sole discretion to make such changes without obtaining stockholder approval.
“Performance Formula” shall mean, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to
determine, with regard to the Performance Award of a particular Participant, whether all, some portion but less than all, or none of the Award has been
earned for the Performance Period.
“Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based
upon the Performance Criteria. The Committee is authorized at any time in its sole and absolute discretion, to adjust or modify the calculation of a
Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants, including but not limited to the
occurrence of one or more of the following events: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax
laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) items that are
unusual in nature or infrequently occurring as described in the Financial Accounting Standards Board Accounting Standards Codification Topic 225-20 (or
any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the
Company’s annual report to stockholders for the applicable year, (f) acquisitions or divestitures, (g) any other specific, unusual or nonrecurring events, or
objectively determinable category thereof, (h) foreign exchange gains and losses, and (i) a change in the Company’s fiscal year.
“Performance Period” shall mean the one or more periods of time, as the Committee may select, over which the attainment of one or more time-
based vesting conditions will be measured (or, over which the Performance Goals will be measured) for the purpose of determining a Participant’s right to
and the payment of an Award.
“Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
“Plan” means this Amended and Restated Ralph Lauren Corporation Executive Officer Annual Incentive Plan.
“Plan Year” means the Company’s fiscal year.
3. PARTICIPATION.
Participants shall be selected by the Committee from among the Executive Officers. The selection of an Executive Officer as a Participant to receive
an Award (including a Performance Award) shall not entitle such individual to be selected as a Participant with respect to any subsequent Awards.
4. AWARDS.
4.1. Award Schedules. With respect to each Award, the Committee shall establish for such Performance Period an Award Schedule for each
Participant. The Award Schedule shall set forth the applicable Performance Period (and in the case of Performance Awards, the Performance Criteria,
Performance Goal(s), and Performance Formula(s)) and such other information as the Committee may determine. Award Schedules may vary from
Performance Period to Performance Period and from Participant to Participant.
4.2. Determination of Awards. A Participant shall be eligible to receive payment in respect of an Award only to the extent that the applicable
conditions of such Award are satisfied, and, in the case of a Performance Award, to the extent that the Performance Goal(s) for such Award are achieved
and the Performance Formula as applied against such Performance Goal(s) determines that all or some portion of such Participant’s Award has been earned
for the Performance Period, all as determined by the Committee. As soon as practicable after the close of each Performance Period, the Committee shall
review and determine whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to calculate that
amount of the Award earned by each Participant for such Performance Period based upon such Participant’s Performance Formula. Anything in this Plan to
the contrary notwithstanding, the maximum Award payable to any Participant with respect to each Plan Year (or portion thereof) shall be $20,000,000.
4.3. Payment of Awards. Awards shall be paid in a lump sum cash payment as soon as practicable after the amount thereof has been determined in
accordance with Section 4.2, but in no event later than the fifteenth (15th) day of the third month following the Plan Year for which the Award relates (or
by such later date as would still qualify as a short-term deferral for purposes of Section 409A of the Code). The Committee may, subject to such terms and
conditions and within such limits as it may from time to time establish, permit one or more Participants to defer the receipt of amounts due under the Plan
in a manner consistent with the requirements of Code Section 409A. Notwithstanding the foregoing, to the extent an amount was intended to be paid so as
to qualify as a short-term deferral under Code Section 409A and the applicable regulations, then such payment may be delayed if the requirements of
Treasury Regulation 1.409A-1(b)(4)(ii) are met.
2
5. TERMINATION OF EMPLOYMENT.
Termination of Employment Prior to the Last Day of the Performance Period. Unless otherwise determined by the Committee, no Award with
respect to a Performance Period will be payable to any Participant who is not an employee of the Company on the last day of such Performance Period.
Furthermore, except as otherwise determined by the Committee, a Participant shall be eligible to receive payment of his or her Award earned during a
Performance Period, so long as the Participant is employed on the last day of such Performance Period, notwithstanding any subsequent termination of
employment prior to the actual payment of the Award.
6. ADMINISTRATION.
6.1. In General. The Committee shall have full and complete authority, in its sole and absolute discretion, (i) to exercise all of the powers granted to
it under the Plan, (ii) to construe, interpret and implement the Plan and any related document, (iii) to prescribe, amend and rescind rules relating to the Plan,
(iv) to make all determinations necessary or advisable in administering the Plan, and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan.
6.2. Determinations. The actions and determinations of the Committee or others to whom authority is delegated under the Plan on all matters
relating to the Plan and any Awards shall be final and conclusive. Such determinations need not be uniform and may be made selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
6.3. Appointment of Experts. The Committee may appoint such accountants, counsel, and other experts as it deems necessary or desirable in
connection with the administration of the Plan.
6.4. Delegation. The Committee may delegate to others the authority to execute and deliver such instruments and documents, to do all such acts and
things, and to take all such other steps deemed necessary, advisable or convenient for the effective administration of the Plan in accordance with its terms
and purposes, except that the Committee shall not delegate any authority with respect to decisions regarding Plan eligibility or the amount, timing or other
material terms of Awards.
6.5. Books and Records. The Committee and others to whom the Committee has delegated such duties shall keep a record of all their proceedings
and actions and shall maintain all such books of account, records and other data as shall be necessary for the proper administration of the Plan.
6.6. Payment of Expenses. The Company shall pay all reasonable expenses of administering the Plan, including, but not limited to, the payment of
professional, attorney and expert fees.
6.7. Code Section 409A. Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with
Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes
or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be
imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties
under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or
any beneficiary) harmless from any or all of such taxes or penalties. Notwithstanding any provision of the Plan to the contrary and only to the extent
required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, if any Participant is a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Award that are “deferred compensation” subject to Section 409A of the
Code shall be made to such Participant prior to the date that is six months after the date of Participant’s “separation from service” (as defined in
Section 409A of the Code) or, if earlier, Participant’s date of death. Following any applicable six (6) month delay, all such delayed payments will be paid in
a single lump sum on the earliest permissible payment date. With respect to any Award that is considered “deferred compensation” subject to Section 409A
of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the
meaning of Section 409A of the Code. Unless otherwise provided by the Committee, in the event that the timing of payments in respect of any Award (that
would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (i) a Change in
Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or
effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code
or (ii) a disability, no such acceleration shall be permitted unless the disability also satisfies the definition of “Disability” pursuant to Section 409A of the
Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as
separate payments.
7. MISCELLANEOUS.
7.1. Nonassignability. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
3
7.2. Withholding Taxes. Whenever payments under the Plan are to be made or deferred, the Company will withhold therefrom, or from any other
amounts payable to or in respect of the Participant, an amount sufficient to satisfy any applicable governmental withholding tax requirements related
thereto.
7.3. Amendment or Termination of the Plan. The Plan may be amended or terminated by the Board of Directors in any respect except that (i) no
amendment may be made after the date on which an Executive Officer is selected as a Participant for a Performance Period that would adversely affect the
rights of such Participant with respect to such Performance Period without the consent of the affected Participant and (ii) no amendment shall be effective
without the approval of the stockholders of the Company to increase the maximum Award payable under the Plan.
7.4. Other Payments or Awards. Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award
or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
7.5. Payments to Other Persons. If payments are legally required to be made to any person other than the person to whom any amount is payable
under the Plan, such payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Company under the Plan.
7.6. Unfunded Plan. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the
Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
7.7. Limits of Liability. No member of the Board, the Committee or any employee or agent of the Company (each such person, an “Indemnifiable
Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless
constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with
or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved
by reason of any action taken or omitted to be taken or determination made under the Plan or any Award and against and from any and all amounts paid by
such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any
such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses
promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall
ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided that the Company shall have the
right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense,
the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available
to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such
Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted
from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the
Company’s Certificate of Incorporation or By Laws. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other
rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Amended and Restated Certificate of Incorporation or
By Laws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify
such Indemnifiable Persons or hold them harmless.
7.8. No Right of Employment. Nothing in this Plan will be construed as creating any contract of employment or conferring upon any Participant any
right to continue in the employ or other service of the Company or limit in any way the right of the Company to change such person’s compensation or
other benefits or to terminate the employment or other service of such person with or without Cause.
7.9. Section Headings. The section headings contained herein are for convenience only, and in the event of any conflict, the text of the Plan, rather
than the section headings, will control.
7.10. Invalidity. If any term or provision contained herein is to any extent invalid or unenforceable, such term or provision will be reformed so that
it is valid, and such invalidity or unenforceability will not affect any other provision or part hereof.
7.11. Applicable Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan and any Award shall be
determined in accordance with the laws of the State of New York.
7.12. Effective Date/Term. The Plan as most recently amended and restated became effective upon May 20, 2020, for the 2021 Plan Year. The Plan
shall remain in effect in accordance with its terms unless amended or terminated in accordance with Section 7.3.
7.13. Binding Effect. The obligations of the Company under the Plan shall be binding on any successor corporation or organization resulting from a
merger, consolidation or other reorganization of the Company, or upon any corporation or organization that succeeds to substantially all of the assets or
business of the Company.
7.14. Forfeiture Events. The Committee may specify in an Award that an Executive Officer’s rights, payments, and benefits with respect to an
Award shall be subject to reduction, cancellation, forfeiture, or recoupment, in the reasonable discretion of the Committee, upon the occurrence of certain
specified events, in addition to any otherwise applicable vesting or performance
4
conditions of an Award. Such events may include, but shall not be limited to, termination of the Executive Officer’s employment for cause, material
violation of material written policies of the Company, or breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the
Executive Officer, as determined by the Committee in its reasonable discretion. In addition, if, as a result of an Executive Officer’s intentional misconduct
or gross negligence, as determined by the Committee in its reasonable discretion, the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company with any financial reporting requirement under the securities laws, the Committee may, in its reasonable
discretion, require the Executive Officer to promptly reimburse the Company for the amount of any payment previously received by the Executive Officer
pursuant to any Award that was earned or accrued during the twelve (12) month period following the earlier of the first public issuance or filing with the
United States Securities and Exchange Commission of any financial document embodying such financial reporting requirement that required such
accounting restatement. To the extent required by applicable law or the rules and regulations of the NYSE or other securities exchange on which the
Company’s common stock is listed or quoted and, in such case, if so required pursuant to a written policy adopted by the Company, Awards shall be subject
(including on a retroactive basis) to clawback, forfeiture or similar requirements (and such requirements shall be deemed incorporated by reference into all
outstanding Awards).
5
EXHIBIT 10.41
EXECUTION VERSION
CREDIT AGREEMENT1
dated as of
August 12, 2019
among
RALPH LAUREN CORPORATION, RL FINANCE B.V., RALPH LAUREN EUROPE SÀRL and RALPH LAUREN ASIA
PACIFIC LIMITED,
as Borrowers,
The Lenders Party Hereto
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
BANK OF AMERICA, N.A.,
as Syndication Agent
and
WELLS FARGO BANK, N.A., HSBC BANK USA, N.A., ING BANK N.V., DUBLIN BRANCH, and DEUTSCHE BANK
SECURITIES INC.,
as Co-Documentation Agents
JPMORGAN CHASE BANK, N.A. and
BOFA SECURITIES, INC.,
as Bookrunners and Lead Arrangers
______________________________
1 Conformed to reflect the changes contemplated by the First Amendment, dated as of May 26, 2020.
1
Table of Contents
ARTICLE I DEFINITIONS
SECTION 1.01. Defined Terms
SECTION 1.02. Classification of Loans and Borrowings
SECTION 1.03. Terms Generally
SECTION 1.04. Accounting Terms; GAAP
SECTION 1.05. Exchange Rates
SECTION 1.06. Divisions
SECTION 1.07. Lenders' Status
ARTICLE II THE CREDITS
SECTION 2.01. Commitments
SECTION 2.02. Loans and Borrowings
SECTION 2.03. Requests for Borrowings
SECTION 2.04. Letters of Credit
SECTION 2.05. Funding of Borrowings
SECTION 2.06. Interest Elections
SECTION 2.07. Termination and Reduction of Commitments
SECTION 2.08. Repayment of Loans; Evidence of Debt
SECTION 2.09. Prepayment of Loans
SECTION 2.10. Fees
SECTION 2.11. Interest; Eurocurrency Tranches
SECTION 2.12. Alternate Rate of Interest
SECTION 2.13. Increased Costs
SECTION 2.14. Break Funding Payments
SECTION 2.15. Taxes
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
SECTION 2.17. Mitigation Obligations; Replacement of Lenders
SECTION 2.18. Change in Law
SECTION 2.19. Defaulting Lenders
SECTION 2.20. Extension of Maturity Date.
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers
SECTION 3.02. Authorization; Enforceability
SECTION 3.03. Governmental Approvals; No Conflicts
SECTION 3.04. Financial Condition; No Material Adverse Change
SECTION 3.05. Properties
SECTION 3.06. Litigation and Environmental Matters
SECTION 3.07. Compliance with Laws and Agreements
SECTION 3.08. Investment Company Status
SECTION 3.09. Taxes
SECTION 3.10. ERISA
SECTION 3.11. Disclosure
SECTION 3.12. Subsidiary Guarantors
1
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4
38
38
39
39
40
40
40
40
41
42
43
50
51
53
54
54
55
56
57
58
60
61
64
66
67
68
69
71
71
71
71
71
72
72
73
73
73
73
74
74
SECTION 3.13. Anti-Corruption Laws and Sanctions
SECTION 3.14. EEA Financial Institutions
SECTION 3.15. Plan Assets; Prohibited Transactions
SECTION 3.16. Margin Regulations
SECTION 3.17. Compliance with Swiss Non-Bank Rules
SECTION 3.18. Additional Specified Stimulus Indebtedness
ARTICLE IV CONDITIONS
SECTION 4.01. Effective Date
SECTION 4.02. Each Credit Event
SECTION 4.03. Additional Condition to Initial Borrowing by Subsidiary Borrowers
ARTICLE V AFFIRMATIVE COVENANTS
SECTION 5.01. Financial Statements; Ratings Change and Other Information
SECTION 5.02. Notices of Material Events
SECTION 5.03. Existence; Conduct of Business
SECTION 5.04. Payment of Obligations
SECTION 5.05. Maintenance of Properties; Insurance
SECTION 5.06. Books and Records; Inspection Rights
SECTION 5.07. Compliance with Laws
SECTION 5.08. Compliance with Swiss Non-Bank Rules
SECTION 5.09. Use of Proceeds and Letters of Credit
SECTION 5.10. Guarantee Agreement Supplement
SECTION 5.11. Additional Specified Stimulus Indebtedness
ARTICLE VI NEGATIVE COVENANTS
SECTION 6.01. Indebtedness
SECTION 6.02. Liens
SECTION 6.03. Sale of Assets
SECTION 6.04. Fundamental Changes
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions
SECTION 6.06. Transactions with Affiliates
SECTION 6.07. Financial Covenants
SECTION 6.08. Anti-Corruption Laws and Sanctions
SECTION 6.09. Restricted Payments
ARTICLE VII EVENTS OF DEFAULT
ARTICLE VIII THE ADMINISTRATIVE AGENT
ARTICLE IX GUARANTEE
SECTION 9.01. Guarantee
SECTION 9.02. No Subrogation
SECTION 9.03. Amendments, etc. with respect to the Subsidiary Obligations
SECTION 9.04. Guarantee Absolute and Unconditional
SECTION 9.05. Reinstatement
SECTION 9.06. Payments
2
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74
75
75
75
75
75
75
77
78
78
78
80
80
80
81
81
81
81
82
82
82
82
82
84
85
85
85
86
87
87
87
88
91
94
94
94
95
95
96
96
SECTION 9.07. Keepwell
ARTICLE X MISCELLANEOUS
SECTION 10.01. Notices
SECTION 10.02. Waivers; Amendments
SECTION 10.03. Expenses; Indemnity; Damage Waiver
SECTION 10.04. Successors and Assigns
SECTION 10.05. Survival
SECTION 10.06. Counterparts; Integration; Effectiveness
SECTION 10.07. Severability
SECTION 10.08. Right of Setoff
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process
SECTION 10.10. WAIVER OF JURY TRIAL
SECTION 10.11. Headings
SECTION 10.12. Confidentiality
SECTION 10.13. Satisfaction in Applicable Currency
SECTION 10.14. Acknowledgement and Consent to Bail-In of Affected Financial Institutions
SECTION 10.15. No Fiduciary Duty
SECTION 10.16. USA PATRIOT Act
SECTION 10.17. Acknowledgement Regarding Any Supported QFCs
SECTION 10.18. Existing Credit Agreement.
SCHEDULES:
Schedule 2.01 -- Commitments and Letter of Credit Commitments
Schedule 2.04 -- Existing Letters of Credit
Schedule 3.12 -- Subsidiary Guarantors
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.05 -- Existing Investments
97
97
97
99
100
101
105
106
107
107
107
108
108
109
109
110
110
111
111
112
EXHIBITS:
Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Opinion of Loan Parties’ Counsel
Exhibit C -- Form of Guarantee Agreement
Exhibit D-1 -- Form of New Lender Supplement
Exhibit D-2 -- Form of Commitment Increase Supplement
Exhibit E-1 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Lenders that are not Partnerships for U.S. Federal Income
Tax Purposes
Exhibit E-2 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax
Purposes
Exhibit E-3 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are not Partnerships for U.S. Federal
Income Tax Purposes
Exhibit E-4 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are Partnerships for U.S. Federal Income
Tax Purposes
3
CREDIT AGREEMENT, dated as of August 12, 2019 (this “Agreement”), as amended by the First Amendment, among
RALPH LAUREN CORPORATION, RL FINANCE B.V., RALPH LAUREN EUROPE SÀRL, RALPH LAUREN ASIA
PACIFIC LIMITED, the LENDERS party hereto, BANK OF AMERICA, N.A., as Syndication Agent, WELLS FARGO BANK,
N.A., HSBC BANK USA, N.A., ING BANK N.V., DUBLIN BRANCH and DEUTSCHE BANK SECURITIES INC., as Co-
Documentation Agents, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms.
As used in this Agreement, the following terms have the meanings specified below:
“364-Day Credit Agreement” means the 364-Day Credit Agreement, dated as of May 26, 2020, among the Parent
Borrower, the Subsidiary Borrowers, JPMorgan Chase Bank, N.A., as administrative agent and the other parties party thereto, as
in effect on the First Amendment Effective Date.
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising
such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. Only Loans denominated in
dollars may be ABR Loans.
“Additional Commitment Lender” has the meaning assigned to such term in Section 2.20(d).
“Additional Specified Stimulus Indebtedness” means senior unsecured or subordinated Indebtedness incurred
pursuant to a credit or financial support program of or backed by a Governmental Authority with the intent to mitigate through
liquidity or other financial relief the impact of the Coronavirus pandemic on the business and operations of the Parent Borrower
and its Subsidiaries; provided that (i) the aggregate principal amount of all such Additional Specified Stimulus Indebtedness shall
not exceed $100,000,000, (ii) such Additional Specified Stimulus Indebtedness shall not be subject to any Guarantee by any
Person other than a Loan Party, (iii) both immediately before and immediately after the incurrence of such Additional Specified
Stimulus Indebtedness, no Event of Default shall have occurred and be continuing on the date such Additional Specified Stimulus
Indebtedness is incurred, (iv) the covenants and events of default applicable to such Additional Specified Stimulus Indebtedness
(taken as a whole) shall be reflective of market terms and conditions for the type of Indebtedness incurred or issued pursuant to
the applicable credit or financial support program at the time of issuance or incurrence thereof (as determined by the Parent
Borrower in good faith) and (v) such Indebtedness shall be incurred during the Specified Period.
4
“Additional Specified Notes Indebtedness” means one or more series of senior unsecured notes or subordinated
notes, in the case of securities, whether issued in a public offering, Rule 144A or other private placement in lieu of the foregoing
or otherwise, which Indebtedness is issued or incurred by a Loan Party pursuant to an indenture, note purchase agreement or
otherwise; provided that (i) such Additional Specified Notes Indebtedness shall not be subject to any Guarantee by any Person
other than a Loan Party, (ii) both immediately before and immediately after the incurrence of such Additional Specified Notes
Indebtedness, no Event of Default shall have occurred and be continuing on the date such Additional Specified Notes
Indebtedness is incurred, (iii) the aggregate amount of Additional Specified Notes Indebtedness that matures earlier than the date
that is 91 days after the Maturity Date shall not exceed $500,000,000, (iv) the covenants and events of default applicable to such
Additional Specified Notes Indebtedness (taken as a whole) shall be reflective of market terms and conditions for the type of
Indebtedness incurred or issued at the time of issuance or incurrence thereof (as determined by the Parent Borrower in good faith)
and (v) such Indebtedness shall be incurred during the Specified Period.
“Adjusted Debt” means, for any date, for the Parent Borrower and its Subsidiaries, all Indebtedness plus all
Operating Lease Obligations (in each case, computed on a consolidated basis) outstanding on such date.
“Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate
per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
“Administrative Agent” means JPMorgan in its capacity as administrative agent for the Lenders hereunder,
together with any non-U.S. Affiliate of JPMorgan, to the extent that JPMorgan determines that it is necessary or appropriate to
use such non-U.S. Affiliate in acting as administrative agent hereunder. Any obligations owed by any Borrower to the
Administrative Agent hereunder shall be owed solely to JPMorgan, and not to any Affiliate of JPMorgan, unless such Borrower
otherwise agrees in writing.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative
Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Agent Party” has the meaning assigned to such term in Section 10.01(d).
“Agreement Currency” has the meaning assigned to such term in Section 10.13(b).
5
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest
Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%; provided that for the
purpose of this definition, the Adjusted LIBO Rate for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen
Rate is not available for such one month Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such
day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall
be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate,
respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.12, then the Alternate
Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the
avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.75%, such rate shall
be deemed to be 1.75% for purposes of this Agreement.
“Alternative Currency” means (a) Euros, Hong Kong Dollars and Yen and (b) any other currency (other than
dollars) that is freely available, freely transferable and freely convertible into dollars and in which dealings in deposits are carried
on in the London interbank market, provided that such currency is reasonably acceptable to the Administrative Agent, the
Lenders and, in the case of an Alternative Currency Letter of Credit, the applicable Issuing Bank.
“Alternative Currency LC Exposure” means, at any time, the sum of (a) the Dollar Equivalent, calculated in
accordance with Section 1.05, of the aggregate undrawn and unexpired amount of all outstanding Alternative Currency Letters of
Credit at such time plus (b) the Dollar Equivalent, calculated in each case using the Exchange Rate at the time the applicable LC
Disbursement is made, of the aggregate principal amount of all LC Disbursements in respect of Alternative Currency Letters of
Credit that have not yet been reimbursed at such time.
“Alternative Currency Letter of Credit” means a Letter of Credit denominated in an Alternative Currency.
“Ancillary Document” has the meaning assigned to such term in Section 10.06(b).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Parent
Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption.
“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented
by such Lender’s Commitment; provided that for purposes of Section 2.19 “Applicable Percentage” shall mean the percentage of
the total Commitment (disregarding any Defaulting Lender’s Commitment) represented by each Lender’s Commitment. If the
Commitments have terminated or expired, “Applicable Percentage” shall mean, with respect to any Lender, the percentage of the
aggregate principal amount of the Revolving Credit Exposure represented by the aggregate outstanding principal amount of such
Lender’s Revolving Credit Exposure.
6
“Applicable Rate” means, for any day, with respect to any Eurocurrency Loan, any ABR Loan or with respect to
the commitment fees payable hereunder, or with respect to the Applicable Commercial Letter of Credit Rate, or with respect to
the Applicable Standby Letter of Credit Rate, as the case may be, the applicable rate per annum set forth below (expressed in
basis points) under the caption “Eurocurrency Spread”, “ABR Spread” or “Commitment Fee Rate” or “Applicable Commercial
Letter of Credit Rate” or “Applicable Standby Letter of Credit Rate”, as the case may be, (x) on and after the First Amendment
Effective Date until the Ratings-Based Pricing Toggle Date, as set forth below:
Eurocurrency Spread
ABR Spread
187.50
87.50
Commitment
Fee Rate
25.00
Applicable Standby
Letter of Credit Rate
Applicable Commercial
Letter of Credit Rate
187.50
93.75
and (y) on and after the Ratings-Based Pricing Toggle Date, based upon the ratings by Moody’s and S&P, respectively, applicable
on such date to the Index Debt:
Level
Index Debt Ratings
Level I
Level II
Level III
Level IV
Level V
≥ AA- by S&P or Aa3 by
Moody’s
A+ by S&P or A1 by
Moody’s and not Level I
A by S&P or A2 by
Moody’s and not Level I or
II
A- by S&P or A3 by
Moody’s and not Level I, II
or III
< A- by S&P or A3 by
Moody’s
Eurocurrency
Spread
Commitment
Fee Rate
Applicable Standby
Letter of Credit Rate
Applicable
Commercial Letter
of Credit Rate
50.00
62.50
75.00
87.50
4.00
5.00
6.50
9.00
50.00
62.50
75.00
87.50
100.00
10.00
100.00
25.00
31.25
37.50
43.75
50.00
For purposes of the foregoing, (i) if both Moody’s and S&P shall not have in effect a rating for the Index Debt
(other than by reason of the circumstances referred to in the next-to-last sentence of this definition), then such rating agency shall
be deemed to have established a rating for the Index Debt in Level V; (ii) if the ratings established or deemed to have been
established by Moody’s and S&P for the Index Debt shall fall within different Levels, the Applicable Rate shall be based on the
higher of the two ratings unless one of the two ratings is two or more Levels lower than the other, in which case the Applicable
Rate shall be determined by reference to the Level next below that of the higher of the two ratings; and (iii) if the ratings
established or deemed to have been established by Moody’s and S&P for the Index Debt shall be changed (other than as a result
of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced
by the applicable rating agency, irrespective of when notice of such
7
change shall have been furnished by the Parent Borrower to the Administrative Agent and the Lenders pursuant to Section 5.01
or otherwise. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P
shall change, or if both such rating agencies shall cease to be in the business of rating corporate debt obligations, the Parent
Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the
unavailability of ratings from such rating agencies, and, pending the effectiveness of any such amendment, the Applicable Rate
shall be determined by reference to the rating most recently in effect prior to such change or cessation. If either (but not both) of
Moody’s and S&P shall cease to have in effect a rating (whether as a result of such agency ceasing to be in the business of rating
corporate debt obligations or otherwise), the Applicable Rate shall be determined by reference to the rating of the other rating
agency.
“Approved Fund” has the meaning assigned to such term in Section 10.04.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee
(with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the
Maturity Date and the date of termination of the Commitments.
“Available Commitment” means, as to any Lender at any date of determination, an amount in dollars equal to the
excess, if any, of (a) the amount of such Lender’s Commitment in effect on such date over (b) the Revolving Credit Exposure of
such Lender on such date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution
Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive
2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or
requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b)
with respect to the United
Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law,
regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or
other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or
similar Person charged with the reorganization or liquidation of its business appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a
Bankruptcy Event shall not result solely by virtue of any ownership interest, or the
8
acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further,
that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such
Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such
Person.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required
by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of
ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code, or (c) any Person whose assets include (for purposes
of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such
“employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance
with, 12 U.S.C. 1841(k)) of such party.
“Blocking Regulation” has the meaning assigned to such term in Section 3.13.
“Borrower” means, as applicable, the Parent Borrower or the applicable Subsidiary Borrower.
“Borrower Qualified Keepwell Provider” means any Qualified Keepwell Provider that is a Borrower.
“Borrowing” means Loans of the same Type made, converted or continued on the same date and, in the case of
Eurocurrency Loans, as to which a single Interest Period is in effect.
“Borrowing Request” means a request by the Parent Borrower for a Borrowing in accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New
York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan,
the term “Business Day” shall also exclude (i) any day on which banks are not open for dealings in dollar deposits or deposits in
the applicable Alternative Currency in the London interbank market, (ii) in the case of a Eurocurrency Loan denominated in
Euros, any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer System is not open for
settlement of payment in Euros or (iii) in the case of a Eurocurrency Loan denominated in an Alternative Currency other than
Euro, any day on which banks are not open for dealings in such Alternative Currency in the city which is the principal financial
center of the country of issuance of the applicable Alternative Currency.
9
“Cash Pooling Arrangements” means physical and notional cash pooling arrangements entered into in the ordinary
course of business among the Parent Borrower and/or its Subsidiaries to provide cash management services, including treasury,
depository, electronic funds transfer and other cash management arrangements.
“Change in Control” means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Parent Borrower to any “person” or “group” (as such terms are used in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934 (“Act”)) other than Permitted Holders (as defined below);
(ii) any person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Act,
except that a person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50 percent of
the total voting power of the issued and outstanding Voting Stock of the Parent Borrower, including by way of merger,
consolidation or otherwise; provided, however, that for purposes of this Agreement, the following acquisitions shall not
constitute a Change in Control: (I) any acquisition by the Parent Borrower or (II) any acquisition by one or more of the Permitted
Holders; or
(iii) during any period of 12 consecutive months, Present Directors and/or New Directors (as such terms are
defined below) cease for any reason to constitute a majority of the Parent Borrower’s board of directors; or
(iv) the Parent Borrower ceases to beneficially own, directly or indirectly, and control, directly or indirectly, 100%
of the issued and outstanding Equity Interests of any Subsidiary Borrower (including, without limitation, by means of any third
party claiming a better right in the Equity Interests of a Swiss Borrower before a court in Switzerland).
The following terms have the meanings indicated: “Permitted Holders” shall mean, as of the date of
determination: (A) any and all of Ralph Lauren (an individual), his spouse, his siblings and their spouses, and descendants of
them (whether natural or adopted) (collectively, the “Lauren Group”); and (B) any trust established and maintained primarily for
the benefit of any member of the Lauren Group and any entity controlled by any member of the Lauren Group. “Present
Directors” shall mean individuals who on the Effective Date are members of the Parent Borrower’s board of directors. “New
Directors” shall mean any directors of the board of directors of the Parent Borrower whose election as of or following the
Effective Date by the Parent Borrower’s board of directors or whose nomination for election by the shareholders of the Parent
Borrower was approved by a vote of a majority of the directors of the board of directors of the Parent Borrower who, at the time
of such vote, were either Present Directors or New Directors but excluding any such individual whose initial assumption of office
occurs solely as a result of an actual or threatened proxy contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Parent Borrower’s board of
directors.
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“Change in Law” means (a) the adoption of any law, rule, treaty or regulation after the date of this Agreement, (b)
any change after the date of this Agreement in any law, rule, treaty or regulation or in the interpretation or application thereof by
any Governmental Authority or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 2.13(b), by any
office of such Lender from or at which Loans and/or Letters of Credit are made or issued, or are booked, as the case may be, in
accordance with the terms of this Agreement) with any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement; provided, however, for purposes of this Agreement,
(x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder
or in connection therewith or in implementation thereof and (y) all requests, rules, guidelines or directives promulgated by the
Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the
United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case in clauses (x) and (y) be
deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.
“Co-Documentation Agents” means Wells Fargo Bank, N.A., HSBC Bank USA N.A., ING Bank N.V., Dublin
Branch, and Deutsche Bank Securities Inc., each in its capacity as co-documentation agents and its successors in such capacity.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commercial Letter of Credit” means a commercial documentary letter of credit issued by an Issuing Bank for the
account of the Parent Borrower or jointly and severally for the account of the Parent Borrower and any of its Subsidiaries for the
purchase of goods in the ordinary course of business.
“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section
2.07, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04 or (c)
increased from time to time pursuant to Section 2.01(b), provided that, at the Parent Borrower’s election, up to $500,000,000 of
the Lenders’ commitments hereunder may be denominated in an Alternative Currency. The initial amount of each Lender’s
Commitment is set forth on Schedule 2.01, in the New Lender Supplement pursuant to which such Lender shall become a party
hereto or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable.
The initial aggregate amount of the Lenders’ Commitments is $500,000,000.
“Commitment Increase Supplement” means a supplement to this Agreement substantially in the form of
Exhibit D-2.
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“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to
time, and any successor statute.
“Communications” has the meaning assigned to such term in Section 10.01(d).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income
(however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated EBITDAR” means, for any period, Consolidated Net Income for such period plus, without
duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of
(a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization
expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary or
non-recurring non-cash expenses or losses (including any noncash impairment of assets, and, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of
the ordinary course of business and including non-cash charges arising from the application of Statement of Financial Accounting
Standards No. 142 (or the corresponding Accounting Standards Codification Topic, as applicable)), (f) Consolidated Lease
Expense, (g) charges incurred during such period in connection with restructuring or reorganization changes, including without
limitation post-closing restructuring, reorganization and/or integration charges or costs, and (h) non-recurring fees and expenses
relating to Permitted Acquisitions or other acquisitions of property or a series of related acquisitions of property, provided that for
purposes of clause (g) and this clause (h) the aggregate amount of such charges, fees and expenses shall not exceed in any rolling
four quarter period an amount equal to 20% of Consolidated EBITDAR for such period and minus, (x) to the extent included in
the statement of such Consolidated Net Income for such period, the sum of (i) interest income, (ii) any extraordinary or non-
recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (iii) income
tax credits (to the extent not netted from income tax expense) and (y) any cash payments made during such period in respect of
items described in clause (e) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were
reflected as a charge in the statement of Consolidated Net Income, all as determined on a consolidated basis in accordance with
GAAP; provided, that for the purposes of determining the Consolidated Leverage Ratio of the Parent Borrower as set forth in
Section 6.07 (A) for the four fiscal quarter period ending September 28, 2019, Consolidated EBITDAR shall be deemed to equal
Consolidated EBITDAR for the two fiscal quarters ending September 28, 2019 multiplied by 2 and (B) for the four fiscal quarter
period ending December 28, 2019, Consolidated EBITDAR shall be deemed to equal Consolidated EBITDAR for the three fiscal
quarters ending December 28, 2019 multiplied by 4/3.
For the purposes of calculating Consolidated EBITDAR for any period of four consecutive fiscal quarters (each, a
“Reference Period”) pursuant to any determination of the Consolidated Leverage Ratio, (i) if at any time during such Reference
Period the Parent Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDAR for such
Reference Period shall be reduced by an amount equal to the Consolidated EBITDAR (if positive) attributable to the property
that is the subject of such Material Disposition for such Reference Period
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or increased by an amount equal to the Consolidated EBITDAR (if negative) attributable thereto for such Reference Period, and
(ii) if during such Reference Period the Parent Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated
EBITDAR for such Reference Period shall be calculated after giving pro forma effect thereto (taking into account (A) such cost
savings as may be determined by the Parent Borrower in a manner consistent with the evaluation performed by the Parent
Borrower in deciding to make such Material Acquisition, as presented to the Parent Borrower’s board of directors, provided that
the Parent Borrower may take into account such cost savings only if it in good faith determines on the date of calculation that it is
reasonable to expect that such cost savings will be implemented within 120 days following the date of such Material Acquisition
(or in the case of any calculation made subsequent to such 120th day, that such cost savings have, in fact, been implemented) and
(B) all transactions that are directly related to such Material Acquisition and are entered into in connection and substantially
contemporaneously therewith) as if such Material Acquisition occurred on the first day of such Reference Period. As used in this
definition, “Material Acquisition” means any acquisition of property or other assets or series of related acquisitions of property
that (a) constitutes (i) assets comprising all or substantially all of a business or operating unit of a business, (ii) all or substantially
all of the common stock or other Equity Interests of a Person, (iii) in any case where clauses (i) and (ii) above are inapplicable,
the rights of any licensee (including by means of the termination of such licensee’s rights under such license) under a trademark
license to such licensee from the Parent Borrower or any of its Affiliates (the “Acquired Rights”) or (iv) the acquisitions and
licenses of intellectual property by the Parent Borrower and its Subsidiaries, and (b) involves the payment of consideration by the
Parent Borrower and its Subsidiaries in excess of $25,000,000; “Material Disposition” means any Disposition of property or
series of related Dispositions of property that yields gross proceeds to the Parent Borrower or any of its Subsidiaries in excess of
$25,000,000. In making any calculation pursuant to this paragraph with respect to a Material Acquisition of a Person, business or
rights for which quarterly financial statements are not available, the Parent Borrower shall base such calculation on the financial
statements of such Person, business or rights for the then most recently completed period of 12 consecutive calendar months for
which such financial statements are available and shall deem the contribution of such Person, business or rights to Consolidated
EBITDAR for the period from the beginning of the applicable Reference Period to the date of such Material Acquisition to be
equal to the product of (x) the number of days in such period divided by 365 multiplied by (y) the amount of Consolidated
EBITDAR of such Person, business or rights for the 12-month period referred to above (calculated on the basis set forth in this
definition). In making any calculation pursuant to this paragraph in connection with an acquisition of Acquired Rights to be
followed by the granting of a new license of such Acquired Rights (or any rights derivative therefrom), effect may be given to
such grant of such new license (as if it had occurred on the date of such acquisition) if, and only if, the Parent Borrower in good
faith determines on the date of such calculation that it is reasonable to expect that such grant will be completed within 120 days
following the date of such acquisition (or in the case of any calculation made subsequent to such 120th day, that such grant has,
in fact, been completed).
13
“Consolidated Lease Expense” means, for any period, the aggregate “operating lease cost” (as such amount is
determined in accordance with GAAP) included in the income statement reported in the Parent Borrower’s Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 29, 2019 (and for fiscal periods
reported thereafter), associated with Operating Lease Obligations of the Parent Borrower and its Subsidiaries for each Operating
Lease outstanding during such period. Such amount does not incorporate or include any amounts payable under the Finance
Leases of the Parent Borrower and its Subsidiaries.
“Consolidated Leverage Ratio” means on the last day of any Fiscal Quarter, the ratio of (a) Adjusted Debt on such
day to (b) Consolidated EBITDAR for the period of four consecutive Fiscal Quarters ending on such day.
“Consolidated Net Income” means for any period, the consolidated net income (or loss) of the Parent Borrower
and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Parent Borrower or is merged into or
consolidated with the Parent Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of the Parent Borrower) in which the Parent Borrower or any of its Subsidiaries has an ownership interest, except to
the extent that any such income is actually received by the Parent Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the Parent Borrower to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual
obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.
“Consolidated Net Worth” means as of any date of determination thereof, the excess of (a) the aggregate
consolidated net book value of the assets of the Parent Borrower and its Subsidiaries after all appropriate adjustments in
accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and
amortization) over (b) all of the aggregate liabilities of the Parent Borrower and its Subsidiaries, including all items which, in
accordance with GAAP, would be included on the liability side of the balance sheet (other than Equity Interests, treasury stock,
capital surplus and retained earnings), in each case determined on a consolidated basis (after eliminating all inter-company items)
in accordance with GAAP; provided, however, that in calculating Consolidated Net Worth the effects of the Statement of
Financial Accounting Standards No. 142 (or the corresponding Accounting Standards Codification Topic, as applicable) shall be
disregarded.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling”
and “Controlled” have meanings correlative thereto.
“Covered Entity” means any of the following:
(i)
a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
14
(ii)
a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)
a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning set forth in Section 10.17.
“Credit Party” means the Administrative Agent, the Issuing Bank or any other Lender.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time
or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§
252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be
funded or paid, to (i) fund all or any portion of its Loans, (ii) fund all or any portion of its participation in a Letter of Credit or
(iii) pay over to any other Credit Party any other amount required to be paid by it hereunder that is not subject to a good faith
dispute, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the
result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the
particular default, if any) has not been satisfied, (b) has notified the Parent Borrower or any Credit Party in writing, or has made a
public statement to the effect, that it does not intend or expect to comply with all or any of its funding obligations under this
Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith
determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan
under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has
failed, within three Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from
an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to
fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement, provided that such Lender
shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and
substance satisfactory to it and the Administrative Agent, or (d) has become the subject of (A) a Bankruptcy Event or (B) a Bail-
In Action.
“Disposition” means with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance,
transfer or other disposition thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.
“Dollar Equivalent” means, on any date of determination, with respect to any amount hereunder denominated in
an Alternative Currency, the amount of dollars determined pursuant to Section 1.05 using the Exchange Rate with respect to such
Alternative Currency at the time in effect under the provisions of such Section.
15
“dollars” or “$” refers to lawful money of the United States of America.
“Domestic Subsidiary” means any Subsidiary organized under the laws of any jurisdiction within the United States
of America.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member
Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in
an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to
consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and
Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public
administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any
EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in
accordance with Section 10.02).
“Electronic Signature” means an electronic symbol, or process attached to, or associated with, a contract or other
record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Electronic System” means any electronic system, including e-mail, e-fax, Intralinks®, ClearPar®, Debt Domain,
Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the
Administrative Agent and the Issuing Bank and any of its respective Related Parties or any other Person, providing for access to
data protected by passcodes or other security system.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.04(b)(ii)
(subject to such consents, if any, as may be required under Section 10.04(b)).
“Eligible Contract Participant” means any entity that constitutes an “eligible contract participant” under the
Commodity Exchange Act or any regulations promulgated thereunder.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments,
injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any
way to the environment, preservation or reclamation of natural resources, or to human health and safety (insofar as such health
and safety may be adversely affected by exposure to dangerous or harmful substances or environmental conditions), as have
been, are, or in the future become, in effect.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs
of environmental remediation, fines, penalties or indemnities), of
16
the Parent Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental
Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to
any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability
company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights
entitling the holder thereof to purchase or acquire any such equity interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Loan Party, is
treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section
412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations
issued thereunder with respect to a Plan (other than an event for which notice is waived); (b) with respect to any Plan the failure
to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (d) the incurrence by any Loan Party or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Loan Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint
a trustee to administer any Plan under Section 4042 of ERISA; (f) the incurrence by any Loan Party or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal of any Borrower or any of its ERISA Affiliates
from any Plan or Multiemployer Plan; or (g) the receipt by any Loan Party or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Loan Party or any ERISA Affiliate of any notice, concerning the imposition upon any Loan
Party or any of its ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be,
Insolvent.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market
Association (or any successor Person), as in effect from time to time.
“Euro” means the single currency of participating member states of the European Monetary Union.
“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
17
“Event of Default” has the meaning assigned to such term in Article VII.
“Exchange Rate” means, on any day, with respect to any Alternative Currency, the rate determined by the
Administrative Agent at which such Alternative Currency may be exchanged into dollars, as set forth at approximately 11:00
a.m., London time, on such day (or, in the case of any calculation involving the amount of any LC Disbursement under any
Alternative Currency Letter of Credit, at the time payment thereof is made) on the applicable Reuters World Spot Page. In the
event that any such rate does not appear on any Reuters World Spot Page, the Exchange Rate shall be determined by reference to
such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the
Parent Borrower for such purpose or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic
average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations
in respect of such Alternative Currency are then being conducted, at 11:00 a.m., local time, on such day (or, in the case of any
calculation involving the amount of any LC Disbursement under any Alternative Currency Letter of Credit, at the time payment
thereof is made) for the purchase of the applicable Alternative Currency for delivery two Business Days later, provided that, if at
the time of any such determination, for any reason, no such spot rate is being quoted, after consultation with the Parent Borrower,
the Administrative Agent may use any other reasonable method it deems appropriate to determine such rate, and such
determination shall be presumed correct absent manifest error.
“Exchange Rate Date” means, if on such date any outstanding Loan or Letter of Credit is (or any Loan or Letter of
Credit that has been requested at such time would be) denominated in an Alternative Currency, each of: (a) at least once during
each calendar month, (b) if an Event of Default has occurred and is continuing, any Business Day designated as an Exchange
Rate Date by the Administrative Agent in its sole discretion, and (c) each date (with such date to be reasonably determined by the
Administrative Agent) that is on or about the date of (i) a Borrowing Request or an Interest Election Request or (ii) each request
for the issuance, amendment, renewal or extension of any Letter of Credit.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that,
and only for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest
to secure, as applicable, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange
Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the applicable or official interpretation of
any thereof) by virtue of such Guarantor’s failure to constitute an Eligible Contract Participant at the time the guarantee of (or
grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more than one Swap, such exclusion shall apply
only to the portion of such Swap Obligation that is attributable to Swaps for which such guarantee or security interest is or
becomes illegal.
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other
recipient of any payment to be made by or on account of any obligation of any Loan Party under any Loan Document, (a) income
or franchise taxes imposed on (or measured
18
by) its net income by the United States of America, or by any other Governmental Authority as a result of a present or former
connection between the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by
any Loan Party under any Loan Document and the jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent,
any Lender, any Issuing Bank or any other recipient of any payment to be made by any Loan Party under any Loan Document
having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other
Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other
jurisdiction described in clause (a) above, (c) in the case of a Non-U.S. Lender, including any Issuing Bank that is a Non-U.S.
Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any United States withholding tax
that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party to this
Agreement (or designates a new lending office), except to the extent that such Non-U.S. Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Parent
Borrower with respect to such withholding tax pursuant to Section 2.15(a), (d) any withholding tax that is imposed on amounts
payable to a Lender that is attributable to such Lender’s failure to comply with Section 2.15(e) or (f), (e) any taxes assessed on a
recipient under the laws of the Netherlands, if and to the extent such taxes become payable as a result of such recipient having a
substantial interest (aanmerkelijk beland) as defined in the Dutch Income Tax Act (Wet inkomstenbelasting 2001) in a Loan Party
that is resident in the Netherlands for tax purposes and (f) any United States withholding tax that is imposed by reason of FATCA.
“Existing Credit Agreement” means the Amended and Restated Credit Agreement, dated as of February 11, 2015,
among the Parent Borrower, the additional borrowers party thereto, the several banks and other financial institutions parties
thereto and JPMorgan Chase Bank, N.A., as administrative agent, as heretofore amended, supplemented or otherwise modified.
“Existing Maturity Date” has the meaning assigned to such term in Section 2.20(a).
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or
successor version that is substantively comparable and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any
fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention
among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal
funds transactions by depositary institutions, as determined in such manner as the NYFRB shall set forth on its public website
from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate;
provided that if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero
for the purposes of this Agreement.
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“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of
America.
“Finance Lease” means any lease of property classified as a “finance lease” on both the balance sheet and income
statement for financial reporting purposes under GAAP.
“Finance Lease Obligations” means, as applied to any Person, an obligation that is required to be accounted for as
a Finance Lease (and not an Operating Lease) on both the balance sheet and income statement for financial reporting purposes in
accordance with GAAP. At the time any determination thereof is to be made, the amount of the liability in respect of a Finance
Lease would be the amount required to be reflected as a liability on such balance sheet in accordance with GAAP.
“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the
Parent Borrower.
“First Amendment” means the First Amendment to this Agreement, dated as of the First Amendment Effective
Date.
“First Amendment Effective Date” means May 26, 2020.
“Fiscal Quarter” means with respect to the Parent Borrower and its Subsidiaries, and with respect to any Fiscal
Year, (a) each of the quarterly periods ending 13 calendar weeks, 26 calendar weeks, 39 calendar weeks and 52 or 53 calendar
weeks, as the case may be, after the end of the prior Fiscal Year or (b) such other quarterly periods as the Parent Borrower shall
adopt after giving prior written notice thereof to the Lenders.
“Fiscal Year” means with respect to the Parent Borrower and its Subsidiaries, (a) the 52‑ or 53-week annual
period, as the case may be, ending on the Saturday nearest to March 31 of each calendar year or (b) such other fiscal year as the
Parent Borrower shall adopt with the prior written consent of the Required Lenders (which consent shall not be unreasonably
withheld). Any designation of a particular Fiscal Year by reference to a calendar year shall mean the Fiscal Year ending during
such calendar year.
“Foreign Plan” means any employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not
subject to ERISA) that is not subject to United States law and is maintained or contributed to by any Loan Party or any ERISA
Affiliate.
“Foreign Plan Event” means, with respect to any Foreign Plan, (a) the failure to make or, if applicable, accrue in
accordance with normal accounting practices, any employer or employee contributions required by applicable law or by the terms
of such Foreign Plan, (b) the failure to register or loss of good standing with applicable regulatory authorities of any such Foreign
Plan required to be registered, or (c) the failure of any Foreign Plan to comply with any material provisions of applicable law and
regulations or with the material terms of such Foreign Plan.
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“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means the government of the United States of America, any other nation or any
political subdivision thereof, whether state or local, and any agency, authority, instrumentality, state-owned or state-controlled
entity, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, including supranational bodies (such as the European Union
or European Central Bank).
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to
purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease
property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of
any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of business. For purposes of all calculations provided
for in this Agreement, the amount of any Guarantee of any guarantor shall be deemed to be the lower of (x) an amount equal to
the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (y) the maximum
amount for which such guarantor may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such
primary obligation and the maximum amount for which such guarantor may be liable are not stated or determinable, in which
case the amount of such Guarantee shall be such guarantor’s maximum reasonably anticipated liability in respect thereof as
determined by the Parent Borrower in good faith.
“Guarantee Agreement” means the Guarantee Agreement to be executed and delivered by each Guarantor,
substantially in the form of Exhibit C.
“Guarantor” means (a) with respect to both the Parent Borrower Obligations and the Subsidiary Obligations, each
Domestic Subsidiary that becomes a party to the Guarantee Agreement on the Effective Date and each Domestic Subsidiary that,
subsequent to the Effective Date, becomes a Significant Subsidiary (as defined in Regulation S-X, part 210.1-02 of Title 17 of the
Code of Federal Regulations) and (b) with respect to the Subsidiary Obligations only, the Parent Borrower.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic
substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated
pursuant to any applicable Environmental Law.
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“HKD Screen Rate” means, with respect to any Interest Period, the percentage rate per annum for deposits in
Hong Kong Dollars for a period beginning on the first day of such Interest Period and ending on the last day of such Interest
Period, displayed under the heading “HKAB HKD Interest Settlement Rates” on the Reuters Screen HKABHIBOR Page (or, in
the event such rate does not appear on such Reuters page, on any successor or substitute page on such screen that displays such
rate, or on the appropriate page of such other information service that publishes such rate as selected by the Administrative Agent
from time to time in its reasonable discretion) as of 11:00 a.m. Hong Kong time two business days prior to the commencement of
such Interest Period.
“Hong Kong Dollars” means the lawful currency of Hong Kong.
“IBA” has the meaning assigned to such term in Section 2.12.
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money
or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding accounts payable incurred in the ordinary course of business and any earnout obligations or similar deferred
or contingent purchase price obligations not overdue or which do not appear as a liability on a balance sheet of such Person
incurred in connection with any acquisition of property or series of related acquisitions of property that constitutes (i) assets
comprising all or substantially all of a business or operating unit of a business, (ii) all or substantially all of the common stock or
other Equity Interests of a Person or (iii) in any case where clauses (i) and (ii) above are inapplicable, the Acquired Rights),
(e) all Indebtedness of others secured by any Lien on property owned or acquired by such Person (to the extent of such Person’s
interest in such property), whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of Indebtedness of others, (g) all Finance Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such
Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of
such Person in respect of bankers’ acceptances and (j) all payment and performance obligations of every kind, nature and
description of such Person under or in connection with Swap Agreements. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is
liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor. For purposes of all calculations provided for in this
Agreement, there shall be disregarded any Guarantee of any Person in respect of any Indebtedness of any other Person with
which the accounts of such first Person are then required to be consolidated in accordance with GAAP. For the avoidance of
doubt, any amounts available and not drawn under the Commitment shall be deemed not to be Indebtedness.
“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with respect to any payment made
by or on account of any obligation of any Loan Party under any Loan Document.
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“Indemnitee” has the meaning assigned to it in Section 10.03(b).
“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of the Parent Borrower that is
not guaranteed by any other Person or subject to any other credit enhancement.
“Insolvent” means, with respect to any Multiemployer Plan, the condition that such Multiemployer Plan is
insolvent within the meaning of Section 4245 of ERISA.
“Interest Election Request” means a request by the Parent Borrower to convert or continue a Borrowing in
accordance with Section 2.06.
“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September
and December, beginning September 30, 2019, and (b) with respect to any Eurocurrency Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of
more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’
duration after the first day of such Interest Period.
“Interest Period” means with respect to any Eurocurrency Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Parent Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii)
any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is
made and, in the case of a Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such
Borrowing.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number
of decimal places as the LIBO Screen Rate, or HKD Screen Rate, as applicable) determined by the Administrative Agent (which
determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a
linear basis between: (a) the LIBO Screen Rate, or HKD Screen Rate, as applicable, for the longest period for which the LIBO
Screen Rate, or HKD Screen Rate, as applicable, is available (for the applicable currency) that is shorter than the Impacted
Interest Period; and (b) the LIBO Screen Rate, or HKD Screen Rate, as applicable, for the shortest period (for which that LIBO
Screen Rate, or HKD Screen Rate, as applicable, is available for the applicable currency) that exceeds the Impacted Interest
Period, in each case, at such time.
“Investment” means, as applied to any Person, any direct or indirect purchase or other acquisition by such Person
of Equity Interests or other securities of, or any assets constituting a business unit of, any other Person, or any direct or indirect
loan, advance or capital contribution by such Person to any other Person. In computing the amount involved in any Investment at
the
23
time outstanding, (a) undistributed earnings of, and unpaid interest accrued in respect of Indebtedness owing by, such other
Person shall not be included, (b) there shall not be deducted from the amounts invested in such other Person any amounts
received as earnings (in the form of dividends, interest or otherwise) on such Investment or as loans from such other Person and
(c) unrealized increases or decreases in value, or write-ups, write-downs or write-offs, of Investments in such other Person shall
be disregarded.
“IRS” means the United States Internal Revenue Service.
“Issuing Bank” means, as the context may require, (a) JPMorgan Chase Bank, N.A. or Bank of America, N.A.,
with respect to Letters or Credit issued by each of them or (b) any other Lender that becomes an Issuing Bank pursuant to Section
2.04(l), with respect to Letters of Credit issued by it, and in each case its successors in such capacity as provided in Section
2.04(j); provided that, unless JPMorgan Chase Bank, N.A. or Bank of America, N.A. (as applicable) otherwise agrees in writing
in its sole discretion, Letters of Credit issued by JPMorgan Chase Bank, N.A. and Bank of America, N.A. shall be limited to the
amount set forth on Schedule 2.01. In the event that there is more than one Issuing Bank at any time, references herein and in the
other Loan Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in respect of the applicable Letter of
Credit or to all Issuing Banks, as the context requires. Any Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate; provided, however, that no arrangement of a type described in this
sentence shall be permitted if, immediately after giving effect thereto, amounts would become payable by the Parent Borrower
under Section 2.13 or 2.15 that are in excess of those that would be payable under such Section if such arrangement were not
implemented and, provided, further, that the fees payable to any such Affiliate shall be subject to the second sentence of Section
2.10(b).
“JPMorgan” means JPMorgan Chase Bank, N.A.
“Judgment Currency” has the meaning assigned to such term in Section 10.13(b).
“LC Disbursement” means a payment made by the applicable Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of
Credit (other than Alternative Currency Letters of Credit) at such time, (b) the aggregate amount of all LC Disbursements under
Letters of Credit (other than Alternative Currency Letters of Credit) that have not yet been reimbursed by or on behalf of the
Parent Borrower at such time and (c) the Alternative Currency LC Exposure at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
“Lead Arrangers” means, individually or collectively, JPMorgan Chase Bank, N.A. and BofA Securities, Inc., in
their capacity as lead arrangers, and each of their successors in such capacity.
24
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto
pursuant to an Assignment and Assumption or a New Lender Supplement, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the
Issuing Banks.
“Letter of Credit” means any Commercial Letter of Credit or Standby Letter of Credit.
“LIBO Rate” means, with respect to any Eurocurrency Borrowing for any applicable currency and for any Interest
Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted
Interest Period”) with respect to the applicable currency then the LIBO Rate shall be the Interpolated Rate.
“LIBO Screen Rate” means, for any Interest Period, (i) with respect to any Eurocurrency Borrowing for any
applicable currency (other than Hong Kong Dollars) and for any Interest Period, the London interbank offered rate as
administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for the
relevant currency) for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or
LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on
any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information
service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion), and (ii)
with respect to any Eurocurrency Borrowing denominated in Hong Kong Dollars and for any Interest Period with respect thereto,
the HKD Screen Rate; provided that if the LIBO Screen Rate as determined pursuant to clauses (i) and (ii) of this definition
would be less than 0.75%, the LIBO Screen Rate shall be deemed to 0.75% for the purposes of this Agreement.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement or title retention agreement (or any Finance Lease Obligations having substantially the same economic effect as any of
the foregoing, but in any event not in respect of any Operating Lease Obligations) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with respect to such securities.
“Liquidity” means the sum of the aggregate amount of Unrestricted Cash of the Parent Borrower and its
Subsidiaries plus the Available Commitment (but excluding, for the avoidance of doubt, any available commitments and proceeds
of borrowings under the 364-Day Credit Agreement).
“Loan Documents” means this Agreement, the Guarantee Agreement and the First Amendment.
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“Loan Party” means the Borrowers and the Guarantors.
“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement.
“Margin Stock” means margin stock within the meaning of Regulations T, U and X, as applicable.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition
(financial or otherwise) of the Parent Borrower and the Subsidiaries taken as a whole or (b) the rights and remedies, taken as a
whole, of the Administrative Agent and the Lenders under the Loan Documents.
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect
of one or more Swap Agreements, of any one or more of the Parent Borrower and its Subsidiaries in an aggregate principal
amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of
the Parent Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Parent Borrower or such Subsidiary would be required to pay if such Swap
Agreement were terminated at such time.
“Maturity Date” means, subject to extension in accordance with Section 2.20, August 12, 2024.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA, contributed to or
required to be contributed to by any Loan Party or its ERISA Affiliates.
“Net Income” (“Net Loss”) means with respect to any Person or group of Persons, as the case may be, for any
fiscal period, the difference between (a) gross revenues of such Person or group of Persons and (b) all costs, expenses and other
charges incurred in connection with the generation of such revenue (including, without limitation, taxes on income), determined
on a consolidated or combined basis, as the case may be, and in accordance with GAAP.
“New Lender” has the meaning assigned to such term in Section 2.01(c).
“New Lender Supplement” has the meaning assigned to such term in Section 2.01(c).
“Non-Extending Lender” has the meaning assigned to such term in Section 2.20(b).
“Non-U.S. Lender” means any Lender that is not a U.S. Person.
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“Notice Date” has the meaning assigned to such term in Section 2.20(b).
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and
(b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately
preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB
Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative Agent from
a federal funds broker of recognized standing selected by it in its reasonable discretion; provided, further, that if any of the
aforesaid rates as so determined be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Operating Lease” means any lease of property classified as an “operating lease” on both the balance sheet and
income statement for financial reporting purposes under GAAP.
“Operating Lease Obligations” means, as applied to any Person, an obligation that is required to be accounted for
as an Operating Lease (and not a Finance Lease). At the time any determination thereof is to be made, the amount of the liability
in respect of an Operating Lease would be the amount required to be reflected as a liability on such balance sheet in accordance
with GAAP.
“Other Connection Taxes” means with respect to any Lender, Taxes imposed as a result of a present or former
connection between such Lender and the jurisdiction imposing such Tax (other than connections arising from such Lender having
executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in
any Loan or Loan Document).
“Other Taxes” means any and all present or future stamp, court or documentary, intangible, recording, filing or
similar Taxes that arise from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment
(other than an assignment made pursuant to Section 2.17).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and
overnight Eurocurrency borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be
determined by the NYFRB as set forth on its public website from time to time, and published on the next succeeding Business
Day by the NYFRB as an overnight bank funding rate.
“Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a
subsidiary.
“Parent Borrower” means Ralph Lauren Corporation, a Delaware corporation.
“Parent Borrower Obligations” means the unpaid principal of and interest on the Loans made to and
reimbursement obligations of the Parent Borrower (including, without limitation,
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interest accruing after the maturity of the Loans made to and reimbursement obligations of the Parent Borrower and interest
accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding,
relating to the Parent Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and
all other obligations and liabilities of the Parent Borrower to the Administrative Agent or to any Lender (or, in the case of
Specified Swap Agreements and Specified Cash Management Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Swap Agreement, any Specified
Cash Management Agreement, any guarantee thereof or any other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all
fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the
Parent Borrower pursuant hereto) or otherwise.
“Participant” has the meaning set forth in Section 10.04(c)(i).
“Participant Register” has the meaning set forth in Section 10.04(c)(i).
“Patriot Act” has the meaning assigned to such term in Section 10.16.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor
entity performing similar functions.
“Permitted Acquisition” means any acquisition (in one transaction or a series of related transactions) by the Parent
Borrower or any Subsidiary, on or after the Effective Date (whether effected through a purchase of Equity Interests or assets or
through a merger, consolidation or amalgamation), of (i) another Person including the equity interest of any Person in which the
Borrower or any Subsidiary owns an equity interest, (ii) the assets constituting all or substantially all of a business or operating
business unit of another Person, (iii) in any case where clauses (i) and (ii) above are inapplicable, the rights of any licensee
(including by means of the termination of such license’s rights under such license) under a trademark license to such licensee
from the Parent Borrower or any of its Affiliates or (iv) intellectual property or licenses of intellectual property, provided that:
(a) the assets so acquired or, as the case may be, the assets of the Person so acquired shall be in a Related Line of
Business;
(b) no Default shall have occurred and be continuing at the time thereof or would result therefrom;
(c) such acquisition shall be effected in such manner so that the acquired Equity Interests, assets or rights are
owned either by the Parent Borrower or a Subsidiary and, if effected by merger, consolidation or amalgamation, the
continuing, surviving or resulting entity shall be the Parent Borrower or a Subsidiary, provided that, nothing in this clause
shall be deemed to limit the ability of the Parent Borrower or any Subsidiary to grant to a
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different licensee any acquired license rights described in clause (iii) above (or any rights derivative therefrom); and
(d) the Parent Borrower and its Subsidiaries shall be in compliance, on a pro forma basis after giving effect to
such acquisition, with the covenant contained in Section 6.07 recomputed as at the last day of the most recently ended
fiscal quarter of the Parent Borrower for which financial statements are available, as if such acquisition had occurred on
the first day of each relevant period for testing such compliance.
“Permitted Encumbrances” means:
(a)
Liens imposed by law for taxes and duties, assessments, governmental charges or levies that are not yet due
or are being contested in compliance with Section 5.04;
(b) landlords, carriers’, warehousemen’s, mechanics’, shippers’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30
days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other social security laws or regulations, and pledges and deposits securing liability to
insurance carriers under insurance or self-insurance arrangements;
(d) pledges and deposits to secure the performance of tenders, bids, trade contracts, leases, public or statutory
obligations, warranty requirements, surety and appeal bonds, bonds posted in connection with actions, suits or
proceedings, performance and bid bonds and other obligations of a like nature, in each case in the ordinary course of
business;
(e) Liens incurred in the ordinary course of business in connection with the sale, lease, transfer or other
disposition of any credit card receivables of the Parent Borrower or any of its Subsidiaries;
(f) judgment, attachment or other similar liens in respect of judgments that do not constitute an Event of Default
under clause (k) of Article VII;
(g) easements, zoning restrictions, restrictive covenants, encroachments, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations
and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of
the Parent Borrower or any Subsidiary; and
(h) possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of
Permitted Investments;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.
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“Permitted Investments” means:
(a)
direct obligations of, or obligations the principal of and interest on which are directly and fully guaranteed
or insured by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full
faith and credit of the United States of America);
(b) investments in commercial paper having, at such date of acquisition, a credit rating of at least A-2 from S&P
or P-2 from Moody’s;
(c) investments in certificates of deposit, eurocurrency time deposits, banker’s acceptances and time deposits
maturing within three years from the date of acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any Lender or any commercial bank which has a combined capital and
surplus and undivided profits of not less than $100,000,000;
(d) repurchase agreements with a term of not more than 180 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria described in clause (c) above;
(e) securities with maturities of three years or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States or by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which state, commonwealth or territory,
political subdivision, taxing authority or foreign government (as the case may be) are rated, at such date of acquisition, at
least A- by S&P or A3 by Moody’s;
(f) securities with maturities of three years or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of clause (c) of this definition;
(g) shares of money market funds that (i) comply with the criteria set forth in (a) Securities and Exchange
Commission Rule 2a-7 under the Investment Company Act of 1940, as amended or (b) Securities and Exchange
Commission Rule 3c-7 under the Investment Company Act of 1940, as amended and (ii) have portfolio assets of at least
(x) in the case of funds that invest exclusively in assets satisfying the requirements of clause (a) of this definition,
$250,000,000 and (y) in all other cases, $500,000,000;
(h) in the case of investments by any Foreign Subsidiary, obligations of a credit quality and maturity comparable
to that of the items referred to in clauses (a) through (g) above that are available in local markets; and
(i) corporate debt obligations with a Moody’s rating of at least A3 or an S&P rating of at least A-, or their
equivalent, as follows:
(i) corporate notes and bonds; and
(ii) medium term notes.
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“Person” means any natural person, corporation, limited liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (within the meaning of Section 3(2) of ERISA, but not including
any Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which any Loan Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” (as defined in Section 3(5) of ERISA).
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as
amended from time to time.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or,
if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board
in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no
longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent in its reasonable discretion) or
any similar release by the Federal Reserve Board (as determined by the Administrative Agent in its reasonable discretion). Each
change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being
effective.
“Priority Indebtedness” means (a) Indebtedness of the Parent Borrower or any Subsidiary (other than that
described in Section 6.01(e)) secured by any Lien on any asset(s) of the Parent Borrower or any Subsidiary and (b) Indebtedness
of any Subsidiary which is not a Guarantor, in each case owing to a Person other than the Parent Borrower or any Subsidiary.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such
exemption may be amended from time to time.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in
accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning assigned to it in Section 10.17.
“Qualified Keepwell Provider” means, in respect of any Swap Obligation, each Loan Party (other than any Loan
Party that is a Foreign Subsidiary of the Parent Borrower) that, at all times during the Swap Guarantee Eligibility Period, has total
assets exceeding $10,000,000 or otherwise constitutes an Eligible Contract Participant and can cause another person to qualify as
an Eligible Contract Participant with respect to such Swap Obligation at such time by entering into a keepwell pursuant to section
1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Ratings-Based Pricing Toggle Date” means the earlier to occur of (x) the date upon which the Administrative
Agent receives (i) the financial statements for the Fiscal Quarter ending September 30, 2021 required to be delivered pursuant to
Section 5.01(b) and (ii) the corresponding certificate of a Financial Officer of the Parent Borrower certifying compliance with
Section 6.07 required to be delivered pursuant to Section 5.01(c) and (y) the Specified Period Termination Date.
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“Register” has the meaning set forth in Section 10.04(b)(iv).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Related Line of Business” means: (a) any line of business in which the Parent Borrower or any of its Subsidiaries
is engaged as of, or immediately prior to, the Effective Date, (b) any wholesale, retail or other distribution of products or services
under any domestic or foreign patent, trademark, service mark, trade name, copyright or license or (c) any similar, ancillary or
related business and any business which provides a service and/or supplies products in connection with any business described in
clause (a) or (b) above.
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective
directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Reportable Event” means any “reportable event,” as defined in Section 4043(c) of ERISA or the regulations
issued thereunder, with respect to a Plan, other than those events as to which notice is waived pursuant to DOL Regulation
Section 4043 as in effect on the date hereof (no matter how such notice requirement may be changed in the future).
“Required Lenders” means, subject to Section 2.19(b), at any time, Lenders having Revolving Credit Exposures
and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused
Commitments at such time.
“Requirement of Law” means, as to any Person, the Articles or Certificate of Incorporation and By-Laws, Articles
or Certificate of Formation and Operating Agreement, or Certificate of Partnership or partnership agreement or other
organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a
UK Resolution Authority.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with
respect to any Equity Interests in the Parent Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation
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or termination of any such Equity Interests in the Parent Borrower or any Subsidiary or any option, warrant or other right to
acquire any such Equity Interests in the Parent Borrower or any Subsidiary.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the Dollar Equivalent of the sum of
the outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure at such time.
“Revolving Loan” means a Loan made pursuant to Section 2.03.
“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any
Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons
maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the
United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United
Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any
government that is itself the subject or target of Sanctions or (d) any Person owned or controlled by any such Person or Persons
described in the foregoing clauses (a), (b) or (c), or (e) any Person otherwise the subject of any Sanctions.
“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from
time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any
European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“Specified Cash Management Agreement” means any agreement providing for treasury, depositary, purchasing
card, credit card or cash management services, including in connection with any automated clearing house transfers of funds or
any similar transactions between the Parent Borrower or any of the Subsidiary Borrowers and any Lender or affiliate thereof.
“Specified Period” means the period commencing on the First Amendment Effective Date through (but not
including) the Specified Period Termination Date.
“Specified Period Termination Certificate” means an irrevocable certificate of a Financial Officer the Parent
Borrower (similar in form to a certificate delivered pursuant to Section 5.01(c)) (i) stating that such certificate is a Specified
Period Termination Certificate and (ii) certifying that the Parent Borrower was in compliance with a Consolidated Leverage Ratio
no greater than 4.25 to 1.00 as of the last day of the two most recent Fiscal Quarters ending prior to the date of such Specified
Period Termination Certificate.
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“Specified Period Termination Date”: the earlier of (x) the date of delivery of the (i) the financial statements for
the Fiscal Quarter ending June 30, 2022 required to be delivered pursuant to Section 5.01(b) and (ii) the corresponding certificate
of a Financial Officer of the Parent Borrower certifying compliance with Section 6.07 required to be delivered pursuant to
Section 5.01(c) and (y) the date on which the Parent Borrower delivers to the Administrative Agent a Specified Period
Termination Certificate; provided that the Parent Borrower may only deliver a Specified Period Termination Certificate
concurrently with the delivery of financial statements pursuant to Section 5.01(a) or 5.01(b); provided, further, that the Borrower
may only deliver a Specified Period Termination Certificate once, on which date the Specified Period will terminate permanently
for all purposes of this Agreement and the other Loan Documents.
“Specified Swap Agreement” means any Swap Agreement in respect of interest rates, currency exchange rates or
commodity prices entered into by the Parent Borrower or any of the Subsidiary Borrowers and any Person that is a Lender or an
affiliate of a Lender at the time such Swap Agreement is entered into.
“Standby Letter of Credit” means an irrevocable letter of credit pursuant to which an Issuing Bank agrees to make
payments in dollars or an Alternative Currency for the account of the Parent Borrower or jointly and severally for the account of
the Parent Borrower and any of its Subsidiaries in respect of obligations of the Parent Borrower or any of its Subsidiaries
incurred pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which
the Parent Borrower or any of its Subsidiaries is or proposes to become a party in the ordinary course of the Parent Borrower’s or
any of its Subsidiaries’ business, including, but not limited to, for insurance purposes and in connection with lease transactions.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and
the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the
Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
“Eurocurrency liabilities” in Regulation D). Such reserve percentage shall include those imposed pursuant to Regulation D.
Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D
or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability
company, partnership, association or other Person the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date,
as well as any other corporation, limited liability company, partnership, association or other Person (a) of which securities or
other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of such date, directly or indirectly, owned, controlled
or held, or (b) that is, as of such date, otherwise Controlled, directly or indirectly, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
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“Subsidiary” means any subsidiary of the Parent Borrower.
“Subsidiary Borrower” means, as applicable, RL Finance B.V., a private company with limited liability organized
under the laws of the Netherlands, Ralph Lauren Europe Sàrl (société à responsabilité limitée), a limited liability company
organized under the laws of Switzerland, or Ralph Lauren Asia Pacific Limited, a limited liability company organized under the
laws of Hong Kong.
“Subsidiary Obligations” means the unpaid principal of and interest on the Loans made to and reimbursement
obligations of each Subsidiary Borrower (including, without limitation, interest accruing after the maturity of the Loans made to
and reimbursement obligations of such Subsidiary Borrower and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating to such Subsidiary Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) and all other obligations and liabilities of the
Subsidiary Borrowers to the Administrative Agent or to any Lender (or, in the case of Specified Swap Agreements and Specified
Cash Management Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan
Document, the Letters of Credit, any Specified Swap Agreement, any Specified Cash Management Agreement, any guarantee
thereof or any other document made, delivered or given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise; provided, that for purposes of determining
the obligations of any Guarantor under this Agreement and the Guarantee Agreement, the definition of “Subsidiary Obligations”
shall not create any guarantee by any Guarantor of any Excluded Swap Obligations of such Guarantor.
“Supported QFC” has the meaning set forth in Section 10.17.
“Swap” means any agreement, contract, or transaction that constitutes a “swap” within the meaning of section
1a(47) of the Commodity Exchange Act.
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or
option, cap or collar agreements or similar agreement involving, or settled by reference to, one or more interest or exchange rates,
currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no
phantom stock or similar plan providing for payments only on account of services provided by current or former directors,
officers, employees or consultants of the Parent Borrower or the Subsidiaries shall be a Swap Agreement.
“Swap Guarantee Eligibility Period” means, with respect to a Guarantor and the relevant Swap Obligation, the
period from and including the date on which the relevant guarantee (or grant of the relevant security interest, as applicable)
became effective with respect to such Swap Obligation until the date on which such guarantee (or grant of the relevant security
interest, as applicable) is no longer in effect. For the avoidance of doubt, the Swap Guarantee Eligibility Period shall commence
on the date of the execution of a Swap if the corresponding guarantee (or grant of security interest) is then in effect, and
otherwise it shall commence on the date of execution and
35
delivery of the relevant guarantee (or grant of security interest) unless the guarantee (or relevant collateral agreement or pledge
documentation, as applicable) specifies a subsequent effective date.
“Swap Obligation” means, with respect to any Person, any obligation to pay or perform under any Swap.
“Swiss 10-Non-Bank Rule” means the rule that the aggregate number of creditors (within the meaning of the
Swiss Guidelines) (including the Lenders) of a Swiss Borrower under this Agreement that are not Swiss Qualifying Banks must
not at any time exceed 10, in each case in accordance with the meaning of the Swiss Guidelines or the applicable legislation or
explanatory notes addressing the same issues that are in force at such time.
“Swiss 20-Non-Bank Rule” means the rule that (without duplication) the aggregate number of lenders (including
the Lenders), other than Swiss Qualifying Banks, of a Swiss Borrower under all its outstanding debt relevant for classification as
debenture (Kassenobligation) (including debt arising under this Agreement), facilities and/or private placements) must not at any
time exceed 20, in each case in accordance with the meaning of the Swiss Guidelines or the applicable legislation or explanatory
notes addressing the same issues that are in force at such time.
“Swiss Borrower” means, for purposes of Swiss Withholding Tax, a Borrower that is organized under the laws of
Switzerland or which is treated as resident in Switzerland for Swiss Withholding Tax purposes.
“Swiss Guidelines” means all relevant guidelines or explanatory notes issued by the Swiss Federal Tax
Administration as amended, replaced or newly issued from time to time, including the established practice of the Swiss Federal
Tax Administration or as substituted or superseded and overruled by any law, statute, ordinance, court decision, regulation or the
like as in force from time to time.
“Swiss Loan Party” means a Swiss Borrower and each Loan Party that is organized under the laws of Switzerland
(each, a “Swiss Loan Party”).
“Swiss Non-Bank Rules” means the Swiss 10-Non-Bank Rule and the Swiss 20-Non-Bank Rule.
“Swiss Permitted Non-Qualifying Banks” means, in aggregate, up to 10 Lenders which are not, in each case, a
Swiss Qualifying Bank; and “Swiss Permitted Non-Qualifying Bank” means one of them.
“Swiss Qualifying Bank” means (a) any bank as defined in the Swiss Federal Code for Banks and Savings Banks
dated 8 November 1934 (Bundesgesetz über die Banken und Sparkassen) as amended from time to time; and (b) a person or
entity which effectively conducts banking activities with its own infrastructure and staff as its principal business purpose and
which has a banking license in full force and effect issued in accordance with the banking laws in force in its jurisdiction of
incorporation, or if acting through a branch, issued in accordance with the banking laws in the jurisdiction of such branch, all and
in each case in accordance with the Swiss Guidelines.
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“Swiss Withholding Tax” means the tax imposed based on the Swiss Federal Act on Withholding Tax of 13
October 1965 (Bundesgesetz über die Verrechnungssteuer vom 13. Oktober 1965, SR 642.21), as amended from time to time
together with the related ordinances, regulations and guidelines.
“Switzerland” means the Swiss Confederation.
“Syndication Agent” means Bank of America, N.A., in its capacity as syndication agent, and its successors in such
capacity.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including
backup withholding), assessments, fees, or other charges imposed by any Governmental Authority, including interest, additions to
tax or penalties applicable thereto.
“Transactions” means the execution, delivery and performance by the Borrowers of this Agreement and by the
Guarantors of the Guarantee Agreement, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of
Credit hereunder.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or
on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as
amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within
IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct
Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or
investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having
responsibility for the resolution of any UK Financial Institution.
“Unrestricted Cash” means, with respect to any Person, the cash and Permitted Investments of such Person on a
consolidated basis that are not treated as restricted under GAAP.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“U.S. Special Resolution Regimes” has the meaning set forth in Section 10.17.
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“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.15(f).
“Voting Stock” means stock of any class or classes (however designated), or other Equity Interests, of any Person,
the holders of which are at the time entitled, as such holders, to vote for the election of the directors or other governing body of
the Person involved, whether or not the right so to vote exists by reason of the happening of a contingency.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down
and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA
Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule , and (b) with
respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel,
reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that
liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to
provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation
in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those
powers.
“Yen” means the lawful currency of Japan.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g., a “Eurocurrency Loan”) or currency (e.g., an “Alternative Currency Loan”). Borrowings
also may be classified and referred to by Type (e.g., a “Eurocurrency Borrowing”) or currency (e.g., an “Alternative Currency
Borrowing”).
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any
Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, (e) any reference to any law, rule or regulation herein shall, unless otherwise
specified, refer to such law, rule or regulation as amended,
38
modified or supplemented from time to time and (f) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts
and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that,
notwithstanding anything to the contrary herein, all accounting or financial terms used herein shall be construed, and all financial
computations pursuant hereto shall be made, without giving effect to any election under Statement of Financial Accounting
Standards 159 (or any other Financial Accounting Standard or the corresponding Accounting Standards Codification Topic, as
applicable, having a similar effect); provided, further that, if the Parent Borrower notifies the Administrative Agent that the
Parent Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the
Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance herewith. Without limiting the foregoing, and for the
avoidance of doubt, if such a notice is given regarding a change in GAAP after such change is adopted but prior to its becoming
effective, then the Parent Borrower and the Administrative Agent shall, acting reasonably and in good faith, negotiate an
amendment to the provisions of this Agreement affected by such change in GAAP to preserve the original intent of such
provisions in light of such change (subject to the approval of the Required Lenders), which amendment shall take effect when
such change in GAAP becomes effective.
SECTION 1.05. Exchange Rates. (a) For purposes of calculating the Dollar Equivalent of the principal amount
of any Loan denominated in an Alternative Currency, the Alternative Currency LC Exposure at any time and the Dollar
Equivalent at the time of issuance of any Alternative Currency Letter of Credit then requested to be issued pursuant to Section
2.04(b), the Administrative Agent shall determine the Exchange Rate as of the applicable Exchange Rate Date with respect to
each Alternative Currency in which any requested or outstanding Loan or Alternative Currency Letter of Credit is denominated
and shall apply such Exchange Rate to determine such amount (in each case after giving effect to any Loan to be made or repaid
or Letter of Credit to be issued or to expire or terminate on or prior to the applicable date for such calculation).
(b) For purposes of (i) determining the amount of Indebtedness incurred, outstanding or proposed to be incurred
or outstanding under Section 6.01 (but excluding, for the avoidance of doubt, any calculation of Consolidated Net Worth or
Consolidated EBITDAR), (ii) determining the amount of obligations secured by Liens incurred, outstanding or proposed to be
incurred or outstanding under Section 6.02, or (iii) determining the amount of Material Indebtedness, the net assets of a Person or
judgments outstanding under paragraphs (f), (g), (h), (i), (j) or (k) of Article VII, all amounts incurred, outstanding or proposed to
be incurred or outstanding in currencies other than dollars shall be translated into dollars at the Exchange Rate on the applicable
date, provided that no Default shall arise as a result of any limitation set forth in dollars in Section 6.01 or 6.02 being exceeded
solely as a result of changes in Exchange Rates from those rates applicable
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at the time or times Indebtedness or obligations secured by Liens were initially consummated or acquired in reliance on the
exceptions under such Sections.
SECTION 1.06. Divisions. For all purposes under the Loan Documents, in connection with any division or plan
of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation
or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have
been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new
Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests
at such time.
SECTION 1.07. Lenders' Status.Each Lender hereunder confirms as of the date hereof that it is a Swiss
Qualifying Bank or counts as (only) one Swiss Permitted Non-Qualifying Bank. Each Lender which becomes a party to this
Agreement after the date of this Agreement shall indicate, in the Assignment and Assumption or the New Lender Supplement
whether it is a Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank. If a Lender does not declare its status as a
Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank or declares its status in that regard to be unknown, such
Lender shall be treated as a Lender which is not a Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank.
ARTICLE II
The Credits
SECTION 2.01. Commitments. (a) Subject to the terms and conditions set forth herein, each Lender severally
agrees to make Loans in dollars or an Alternative Currency to the Borrowers from time to time during the Availability Period in
an aggregate principal amount that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s
Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, each Borrower may borrow,
prepay and reborrow Revolving Loans. The obligations of each Borrower under this Agreement are several although the
Subsidiary Obligations are guaranteed by the Parent Borrower under Article IX.
(b) The Parent Borrower and any one or more Lenders (including New Lenders) may from time to time after the
Effective Date agree that such Lender or Lenders shall establish a new Commitment or Commitments or increase the amount of
its or their Commitment or Commitments by executing and delivering to the Administrative Agent, in the case of each New
Lender, a New Lender Supplement meeting the requirements of Section 2.01(c) or, in the case of each Lender which is not a New
Lender, a Commitment Increase Supplement meeting the requirements of Section 2.01(d). Notwithstanding the foregoing,
without the consent of the Required Lenders, (x) the aggregate amount of incremental Commitments established or increased
after the Effective Date pursuant to this paragraph shall not exceed $500,000,000, (y) unless otherwise agreed to by the
Administrative Agent, each increase in the aggregate Commitments effected pursuant to this paragraph shall be in a minimum
aggregate amount of at least $15,000,000 and (z) unless otherwise agreed by the Administrative Agent, increases in
Commitments may be effected on no more than three occasions pursuant to this paragraph. No Lender shall have any obligation
to participate in any increase described in this paragraph unless it agrees to do so in its sole discretion.
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(c) Any additional bank, financial institution or other entity which, with the consent of the Parent Borrower and
the Administrative Agent (which consent of the Administrative Agent shall not be unreasonably withheld), elects to become a
“Lender” under this Agreement in connection with any transaction described in Section 2.01(b) shall execute a New Lender
Supplement (each, a “New Lender Supplement”), substantially in the form of Exhibit D-1, whereupon such bank, financial
institution or other entity (a “New Lender”) shall become a Lender, with a Commitment in the amount set forth therein that is
effective on the date specified therein, for all purposes and to the same extent as if originally a party hereto and shall be bound by
and entitled to the benefits of this Agreement.
(d) Any Lender, which, with the consent of the Parent Borrower and the Administrative Agent, elects to
increase its Commitment under this Agreement shall execute and deliver to the Parent Borrower and the Administrative Agent a
Commitment Increase Supplement specifying (i) the amount of such Commitment increase, (ii) the amount of such Lender’s total
Commitment after giving effect to such Commitment increase, and (iii) the date upon which such Commitment increase shall
become effective.
(e) Unless otherwise agreed by the Administrative Agent, on each date upon which the Commitments shall be
increased pursuant to this Section, each Borrower shall prepay all then outstanding Loans made to it, which prepayment shall be
accompanied by payment of all accrued interest on the amount prepaid and any amounts payable pursuant to Section 2.14 in
connection therewith, and, to the extent it determines to do so, reborrow Loans from all the Lenders (after giving effect to the
new and/or increased Commitments becoming effective on such date). Any prepayment and reborrowing pursuant to the
preceding sentence shall be effected, to the maximum extent practicable, through the netting of amounts payable between each
applicable Borrower and the respective Lenders.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of
the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans
as the Parent Borrower may request on its own behalf or on behalf of any other Borrower in accordance herewith. Each Lender at
its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in
accordance with the terms of this Agreement; and provided, further, that no such option may be exercised by any Lender if,
immediately after giving effect thereto, amounts would become payable by a Loan Party under Section 2.13 or 2.15 that are in
excess of those that would be payable under such Section if such option were not exercised.
(c) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in
an aggregate amount that is (i) in the case of a Eurocurrency Borrowing denominated in dollars, an integral multiple of $500,000
and not less than $5,000,000
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and (ii) in the case of an Alternative Currency Borrowing, the Dollar Equivalent of an integral multiple of $500,000 and not less
than the Dollar Equivalent of $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $500,000 and not less than $500,000; provided that an ABR Borrowing may be
in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.04(e). Borrowings of more than one Type may be
outstanding at the same time; provided that there shall not at any time be more than a total of 15 Eurocurrency Borrowings
outstanding.
(d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect
to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(e) Each Lender may, at its option, make any Loan available to any Subsidiary Borrower by causing any foreign
or domestic branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not increase
the costs to such Subsidiary Borrower with respect to such Loan or affect the obligation of such Subsidiary Borrower to repay
such Loan in accordance with the terms of this Agreement.
SECTION 2.03. Requests for Borrowings. To request a Loan, the Parent Borrower (on its own behalf or on
behalf of any other Borrower) shall notify the Administrative Agent of such request by hand delivery, telecopy or (pursuant to
procedures approved by the Administrative Agent) electronic transmission to the Administrative Agent of a written Borrowing
Request in a form approved by the Administrative Agent and signed by the Parent Borrower (a) in the case of a Eurocurrency
Borrowing denominated in dollars, not later than 11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing, (b) in the case of a Eurocurrency Borrowing denominated in an Alternative Currency, not later than 11:00
a.m., New York City time, four Business Days before the date of the proposed Borrowing, or (c) in the case of an ABR
Borrowing, not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such Borrowing Request
shall be irrevocable and shall specify the following information in compliance with Section 2.02:
(i) the Borrower of the requested Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
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(v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be
a period contemplated by the definition of the term “Interest Period”;
(vi) in the case of a Eurocurrency Borrowing, the currency in which such Borrowing is to be denominated;
and
(vii) the location and number of the applicable Borrower’s account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested Borrowing (i) if such Borrowing is to be denominated
in dollars, shall be an ABR Borrowing and (ii) if such Borrowing is to be denominated in an Alternative Currency, shall be a
Eurocurrency Borrowing. If no election as to the currency of the requested Borrowing is specified, then the requested Borrowing
shall be denominated in dollars. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the
Parent Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a
Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and
of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
SECTION 2.04. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Parent
Borrower may request the issuance of Letters of Credit (or the amendment, renewal or extension of an outstanding Letter of
Credit) in the form of Commercial Letters of Credit or Standby Letters of Credit. Each Letter of Credit shall be issued for the
account of the Parent Borrower or jointly and severally for the account of the Parent Borrower and a Subsidiary (other than Ralph
Lauren Europe Sàrl), in a form reasonably acceptable to the applicable Issuing Bank (provided that each Letter of Credit shall
provide for payment against sight drafts drawn thereunder), at any time and from time to time during the Availability Period. In
the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of
letter of credit application or other agreement submitted by the Parent Borrower (or the Parent Borrower and a Subsidiary) to, or
entered into by the Parent Borrower (or the Parent Borrower and a Subsidiary) with, the applicable Issuing Bank relating to any
Letter of Credit, the terms and conditions of this Agreement shall control. The letters of credit identified on Schedule 2.04 shall
be deemed to be “Letters of Credit” issued on the Effective Date for all purposes of the Loan Documents. No Issuing Bank shall
at any time be obligated to issue any Letter of Credit if such issuance would conflict with, or cause the Issuing Bank or any
Lender to exceed any limits imposed by, any applicable Requirement of Law. Notwithstanding anything herein to the contrary, no
Issuing Bank shall have any obligation hereunder to issue, or shall issue, any Letter of Credit the proceeds of which would be
made available to any Person (i) to fund any activity or business of or with any Sanctioned Person, or in any country or territory
that, at the time of such funding, is the subject of any Sanctions or (ii) in any manner that would result in a violation of any
Sanctions by any party to this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a
Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Parent Borrower shall hand
deliver, telecopy or (pursuant to procedures approved by the applicable Issuing Bank) electronically transmit to the applicable
Issuing
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Bank and, in the case of a Commercial Letter of Credit if the Administrative Agent shall have so requested and in the case of all
Standby Letters of Credit, the Administrative Agent (in the case of (i) Letters of Credit denominated in dollars, reasonably in
advance of the requested date of issuance, amendment, renewal or extension, (ii) Letters of Credit denominated in Euros, prior to
12:00 noon, New York City time, three Business Days in advance of the requested date of issuance, amendment, renewal or
extension and (iii) Letters of Credit denominated in any Alternative Currencies other than Euros, prior to 12:00 noon, New York
City time, four Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date
of issuance, amendment, renewal or extension, the currency in which such Letter of Credit is to be denominated (which shall be
dollars or, subject to Section 2.18, an Alternative Currency), the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter of Credit, provided that in no event shall any
Issuing Bank other than JPMorgan Chase Bank, N.A. or one or more other Issuing Banks designated from time to time by the
Parent Borrower and reasonably acceptable to the Administrative Agent issue any Alternative Currency Letter of Credit
hereunder. If requested by the applicable Issuing Bank, the Parent Borrower (or the Parent Borrower and a Subsidiary) also shall
submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of
each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the Dollar Equivalent of the LC Exposure with respect to Letters of Credit shall not exceed
$50,000,000 and (ii) the total Revolving Credit Exposures shall not exceed the total Commitments. Subsequent to the receipt by
any Issuing Bank of a Notification Instruction (as defined below) from the Administrative Agent which shall not have been
withdrawn, such Issuing Bank will contact the Administrative Agent prior to the issuance or increase in any Letter of Credit to
determine whether or not such issuance or increase would result in any of the limitations set forth in the preceding sentence being
exceeded. For purposes of this Section 2.04(b), a “Notification Instruction” shall mean any instruction from the Administrative
Agent requiring that an Issuing Bank make the calculations described in the preceding sentence, which instruction the
Administrative Agent (i) may deliver at any time when it determines that the percentage which the aggregate Revolving Credit
Exposures constitutes of the aggregate Commitments then in effect is greater than 80% and (ii) will withdraw when it determines
that such percentage is equal to or less than 80%. For purposes of the third preceding sentence the amount of any Alternative
Currency Letter of Credit shall be the Dollar Equivalent thereof calculated on the basis of the applicable Exchange Rate
determined in accordance with Section 1.05.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the
date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year
after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date; provided that any Letter of
Credit may provide for the renewal thereof for additional periods not exceeding one year each pursuant to customary “evergreen”
provisions (which shall in no event extend beyond the date referred to in clause (ii)).
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(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the
amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, such Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit
equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent in dollars, for the account of such Issuing Bank, such Lender’s Applicable Percentage of (i) each LC
Disbursement made by such Issuing Bank in dollars and (ii) the Dollar Equivalent, using the Exchange Rate at the time such
payment is made, of each LC Disbursement made by such Issuing Bank in an Alternative Currency and, in each case, not
reimbursed by the Parent Borrower (or a Subsidiary) on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Parent Borrower (or a Subsidiary) for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit, the occurrence and continuance of a Default or failure to satisfy any of the conditions set forth
in Article IV, the reduction or termination of the Commitments, any setoff, counterclaim, recoupment, defense or other right that
such Lender may have against the Issuing Bank, any Borrower or any other Person for any reason whatsoever, any adverse
change in the condition (financial or otherwise) of any Borrower, any breach of this Agreement or any other Loan Document by
the Borrower or any other Loan Party or any other Lender or any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing and that each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
(e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the
Parent Borrower (or the Subsidiary that is jointly and severally liable with respect to such Letter of Credit) shall reimburse such
LC Disbursement by paying to such Issuing Bank an amount equal to such LC Disbursement in dollars, on the date that such LC
Disbursement is made (or, if such date is not a Business Day, on or before the next Business Day); provided that, if such LC
Disbursement is made under an Alternative Currency Letter of Credit, automatically and with no further action required, the
Parent Borrower’s (or such Subsidiary’s) obligation to reimburse the applicable LC Disbursement shall be permanently converted
into an obligation to reimburse the Dollar Equivalent, calculated using the Exchange Rate at the time such payment is made, of
such LC Disbursement, and provided, further, that, in the case of any such reimbursement obligation which is in an amount of not
less than $500,000, the Parent Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with
Section 2.03 that such payment be financed in dollars with an ABR Borrowing in an equivalent amount and, to the extent so
financed, the Parent Borrower’s (and such Subsidiary’s) obligation to make such payment shall be discharged and replaced by the
resulting ABR Borrowing. If the Parent Borrower (or such Subsidiary) fails to make when due any reimbursement payment
required pursuant to this paragraph, the applicable Issuing Bank shall immediately notify the Administrative Agent, which shall
promptly notify each Lender of the applicable LC Disbursement, the Dollar Equivalent thereof calculated in accordance with the
preceding sentence (if such LC Disbursement relates to an Alternative Currency Letter of Credit), the reimbursement payment
then due from the Parent Borrower (or such Subsidiary) in respect thereof and such Lender’s Applicable Percentage
45
thereof. Promptly following receipt of such notice, each Lender (other than such Issuing Bank) shall pay to the Administrative
Agent in dollars its Applicable Percentage of the reimbursement payment then due from the Parent Borrower (or such
Subsidiary), in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall
apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such
Issuing Bank in dollars the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent
of any payment from the Parent Borrower (or such Subsidiary) pursuant to this paragraph, the Administrative Agent shall
distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any
payment made by a Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the
funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Parent Borrower (and such
Subsidiary) of its obligation to reimburse such LC Disbursement.
(f) Letter of Credit Fees.
(i) Commercial Letter of Credit Fee. The Parent Borrower (or the Subsidiary that is jointly and severally liable
with respect to the Letter of Credit in question) agrees to pay to the Administrative Agent, for the account of the
applicable Issuing Bank and the Lenders, a Commercial Letter of Credit fee calculated at the rate per annum equal to the
Applicable Rate applicable to Commercial Letters of Credit from time to time in effect on the aggregate average daily
amount available to be drawn (calculated, in the case of any Alternative Currency Letter of Credit, on the basis of the
Dollar Equivalent thereof using the applicable Exchange Rate in effect on the date payment of such fee is due) under
each Commercial Letter of Credit issued hereunder. Commercial Letter of Credit Fees accrued through and including the
last day of March, June, September and December of each year shall be payable in arrears on the fifth Business Day
following such last day, commencing on the first such date to occur after the date hereof. The Administrative Agent will
promptly pay to the Issuing Banks and the Lenders their pro rata shares of any amounts received from the Parent
Borrower (or such Subsidiary) in respect of any such fees. Commercial Letter of Credit fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but
excluding the last day).
(ii) Standby Letter of Credit Fees. The Parent Borrower (or the Subsidiary that is jointly and severally liable
with respect to the Letter of Credit in question) agrees to pay to the Administrative Agent, for the account of the
applicable Issuing Bank and the Lenders, a Standby Letter of Credit fee calculated at the rate per annum equal to the
Applicable Rate applicable to Eurocurrency Loans from time to time in effect on the aggregate average daily amount
available to be drawn (calculated, in the case of any Alternative Currency Letter of Credit, on the basis of the Dollar
Equivalent thereof using the applicable Exchange Rate in effect on the date payment of such fee is due) under each
Standby Letter of Credit issued hereunder (and in no event less than $500 with respect to each such Standby Letter of
Credit). Standby Letter of Credit Fees accrued through and including the last day of March, June, September and
December of each year shall be payable in arrears on the fifth Business Day following such last day, commencing on the
first such date to occur after the
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date hereof. The Administrative Agent will promptly pay to the Issuing Banks and the Lenders their pro rata shares of
any amounts received from the Parent Borrower (or such Subsidiary) in respect of any such fees. Standby Letter of
Credit fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(g) Obligations Absolute. The obligation of the Parent Borrower (or the Subsidiary that is jointly and severally
liable with respect to the Letter of Credit in question) to reimburse LC Disbursements as provided in paragraph (e) of this Section
shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit,
any application for the issuance of a Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein
being untrue or inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of, or provide a right of setoff against, the Parent Borrower’s (or such Subsidiary’s)
obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall
have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any
error in interpretation of technical terms or any consequence arising from causes beyond the control of the applicable Issuing
Bank. Notwithstanding the foregoing, nothing in this Section 2.04(g) shall be construed to excuse such Issuing Bank, the Lenders
or the Administrative Agent from liability to the Parent Borrower (or such Subsidiary) to the extent of any direct damages (as
opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Parent
Borrower (and such Subsidiary) to the extent permitted by applicable law) suffered by the Parent Borrower (or such Subsidiary)
that are caused by (x) such Issuing Bank’s failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof or (y) the gross negligence, bad faith or willful misconduct of
such Issuing Bank, the Lenders or the Administrative Agent as found by a final, non-appealable judgment of a court of competent
jurisdiction. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an
Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of
Credit, an Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility
for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such Letter of Credit.
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(h) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify
the Administrative Agent and the Parent Borrower (and the Subsidiary that is jointly and severally liable with respect to the
Letter of Credit in question, if applicable) in writing (by hand delivery, telecopy or (pursuant to procedures approved by the
Administrative Agent) electronic transmission) of such demand for payment and whether such Issuing Bank has made or will
make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Parent
Borrower (or the Subsidiary that is jointly and severally liable with respect to the Letter of Credit in question) of its obligation to
reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.
(i) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless the Parent Borrower (or
the Subsidiary that is jointly and severally liable with respect to the Letter of Credit in question) shall reimburse such LC
Disbursement in full on the date such LC Disbursement is made, including by financing such payment obligation with an ABR
Loan in accordance with paragraph (e) of this Section (or, if such date is not a Business Day, on or prior to the next Business
Day), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to
but excluding the date that the Parent Borrower (or such Subsidiary) reimburses such LC Disbursement, at the rate per annum
then applicable to ABR Loans; provided that, if the Parent Borrower (or such Subsidiary) fails to reimburse such LC
Disbursement when due (including by financing such payment obligation with an ABR Loan) pursuant to paragraph (e) of this
Section, then Section 2.11(d) shall apply; and provided, further, that, in the case of an LC Disbursement made under an
Alternative Currency Letter of Credit, the amount of interest due with respect thereto shall accrue on the Dollar Equivalent,
calculated using the Exchange Rate at the time such LC Disbursement was made, of such LC Disbursement. Interest accrued
pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the
date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account
of such Lender to the extent of such payment.
(j) Replacement and Resignation of any Issuing Bank. Any Issuing Bank may be replaced at any time by
written agreement among the Parent Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank. The Administrative Agent shall notify the Lenders of any such replacement of such Issuing Bank. At the time any such
replacement shall become effective, the Parent Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing
Bank pursuant to Section 2.04(f) and 2.10(b). From and after the effective date of any such replacement, (i) the successor Issuing
Bank shall have all the rights and obligations of such Issuing Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to include a reference to such successor or
to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit or extend or otherwise amend an existing Letter of
Credit. Subject to the appointment and acceptance of a successor Issuing Bank, any Issuing Bank may resign as an Issuing Bank
at any time upon 30 days’ prior written
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notice to the Administrative Agent, the Borrower and the Lenders, in which case, such resigning Issuing Bank shall be replaced
in accordance with this Section.
(k) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the
Parent Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been
accelerated, Lenders with LC Exposure representing greater than 50% of the then total LC Exposure) demanding the deposit of
cash collateral pursuant to this paragraph, the Parent Borrower shall deposit in an account with the Administrative Agent, in the
name of the Administrative Agent and for the benefit of the Lenders, an amount in dollars and in cash equal to the LC Exposure
as of such date plus any accrued and unpaid interest thereon; provided that (i) the portions of such amount attributable to
undrawn Alternative Currency Letters of Credit shall be deposited in the applicable Alternative Currencies in the actual amounts
of such undrawn Letters of Credit and (ii) the obligation to deposit such cash collateral shall become effective immediately, and
such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Parent Borrower described in paragraph (h) or (i) of Article VII. Each deposit pursuant to
this paragraph shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the
Parent Borrower (and any Subsidiary for whose account a Letter of Credit has been issued) under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the Parent Borrower’s risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the
Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed (to be
applied ratably among them according to the respective aggregate amounts of the then unreimbursed LC Disbursements) and, to
the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Parent Borrower (and each
such Subsidiary) for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent
of Lenders with LC Exposure representing greater than 50% of the then total LC Exposure), be applied to satisfy other
obligations of the Parent Borrower (and each such Subsidiary) under this Agreement. If the Parent Borrower is required to
provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default or, in accordance with Section
2.09(c), the total Revolving Credit Exposure exceeding 105% of the total Commitments, such amount (to the extent not applied
as aforesaid) shall be returned to the Parent Borrower within three Business Days after all Events of Default have been cured or
waived or, as the case may be, the total Revolving Credit Exposure not exceeding the total Commitments.
(l) Additional Issuing Banks. The Parent Borrower may, at any time and from time to time with the consent of
the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender, designate one or more additional
Lenders to act as an issuing bank under the terms of this Agreement, provided that the total number of Issuing Banks at any time
shall not exceed four. Any Lender designated as Issuing Bank pursuant to this paragraph (l) shall be deemed to be an “Issuing
Bank” for the purposes of this Agreement (in addition to being a Lender) with respect to Letters of Credit issued by such Lender.
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(m) Reporting. Unless the Administrative Agent otherwise agrees, each Issuing Bank will report in writing to
the Administrative Agent, with a copy to the Parent Borrower, (i) on the first Business Day of each week and on the second
Business Day to occur after the last day of each March, June, September and December, and on such other dates as the
Administrative Agent may reasonably request, the daily activity during the preceding week, calendar quarter or other period, as
the case may be, with respect to Letters of Credit issued by it, including the aggregate outstanding LC Exposure with respect to
such Letters of Credit on each day during such week, quarter or other period, in such form and detail as shall be satisfactory to
the Administrative Agent, (ii) on any Business Day on which the Parent Borrower fails to reimburse an LC Disbursement
required to be reimbursed to such Issuing Bank on such day, the date of such failure and the amount of such LC Disbursement
and (iii) such other information with respect to Letters of Credit issued by such Issuing Bank as the Administrative Agent may
reasonably request.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer of immediately available funds by 12:00 noon., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that if an ABR
Borrowing is requested for disbursement on the same day after 11:00 a.m., New York time, then each Lender shall make the Loan
to be made by it hereunder in such manner by 3:00 p.m., New York City time. The Administrative Agent will make such Loans
available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of the applicable
Borrower maintained with the Administrative Agent and designated by the Parent Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.04(e) shall be
remitted by the Administrative Agent to the applicable Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any
Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available at such time in accordance with paragraph (a)
of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In
such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available to the applicable Borrower to but excluding the
date of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. If such Lender’s share
of such Borrowing is not made available to the Administrative Agent by such Lender within three Business Days after the date
such amount is made available to the applicable Borrower, the Administrative Agent shall promptly notify the Parent Borrower
and any other applicable Borrower of such failure and shall also be entitled to recover such amount from the applicable Borrower,
on demand, with interest thereon at the rate per annum applicable to ABR Loans hereunder accruing from the date of such
Borrowing. If the Parent Borrower or the applicable Borrower shall pay to
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the Administrative Agent such corresponding amount, the Parent Borrower and such applicable Borrower shall have no further
obligations to such Lender with respect to such amount.
SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Parent Borrower (on its own behalf or on behalf of any other Borrower) may elect to convert
such Borrowing (i) in the case of a Eurocurrency Borrowing denominated in dollars, to an ABR Borrowing; or (ii) in the case of
an ABR Borrowing, to a Eurocurrency Borrowing denominated in dollars or to continue such Borrowing in the same currency
and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Parent
Borrower (on behalf of itself or any other Borrower) may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Parent Borrower (on its own behalf or on behalf of another
Borrower) shall notify the Administrative Agent of such election by hand delivery, telecopy or electronic transmission (pursuant
to procedures approved by the Administrative Agent) to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Parent Borrower by the time that a Borrowing Request would be
required under Section 2.03 if the Parent Borrower were requesting a Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such Interest Election Request shall be irrevocable.
(c) Each Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected
with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a
Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and
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(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after
giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Parent
Borrower (on its own behalf or on behalf of another Borrower) shall be deemed to have selected an Interest Period of one
month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e) If the Parent Borrower (on its own behalf or on behalf of another Borrower) fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless
such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing (i) if denominated in dollars, shall
be converted to an ABR Borrowing and (ii) if denominated in an Alternative Currency, shall be converted to a one month Interest
Period denominated in the same currency as the Eurocurrency Borrowing being continued. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the
Required Lenders, so notifies the Parent Borrower, then, so long as such Event of Default is continuing (i) no outstanding
Borrowing denominated in dollars may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each
Eurocurrency Borrowing denominated in dollars shall be converted to an ABR Borrowing at the end of the Interest Period
applicable thereto.
(f) By entering into this Agreement, the parties hereto have assumed in good faith that the interest payable at
the rates specified in this Agreement is not and will not be subject to any Tax deduction on account of Swiss Withholding Tax.
Nevertheless, if a Tax deduction on account of Swiss Withholding Tax is required by Swiss law to be made by a Swiss Borrower
in respect of any interest payable by it under a Loan Document and should it be unlawful for a Swiss Borrower to comply with
Section 2.15 for any reason, and if the gross-up in accordance with Section 2.15 is effectively not paid: (i) the applicable interest
rate in relation to that interest payment shall be (A) the interest rate which would have applied to that interest payment in the
absence of this Section 2.06(f)), divided by (B) one minus the rate at which the relevant deduction on account of Swiss
Withholding Tax is required to be made (where the rate at which the relevant deduction on account of Swiss Withholding Tax is
required to be made is for this purpose expressed as a fraction of one rather than as a percentage); (ii) (A) a Swiss Borrower shall
be obliged to pay the relevant interest at the adjusted rate as set forth in this Section 2.06(f), and (B) a Swiss Borrower shall make
the deduction on account of Swiss Withholding Tax (within the time allowed and in the minimum amount required by law) on the
interest so recalculated; and (iii) all references to a rate of interest under a Loan Document applicable to a Swiss Borrower shall
be construed accordingly. To the extent that interest payable by a Swiss Borrower under this Agreement becomes subject to a
deduction of Swiss Withholding Tax, each relevant Lender and the Swiss Borrower shall promptly cooperate in completing any
procedural formalities (including submitting forms and documents required by the appropriate Tax authority) to the extent
possible and necessary for the Swiss Borrower to obtain authorization to make interest payments without them being subject to
such deduction of Swiss Withholding Tax or to reduce the applicable withholding tax rate. If a Swiss
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Borrower pays the interest recalculated under this Section 2.06(f), the Swiss Borrower shall cooperate with each relevant Lender
to enable that Lender to receive a full or partial refund of the Swiss Withholding Tax under an applicable double taxation treaty.
In the event Swiss Withholding Tax is refunded to a Lender by the Swiss Federal Tax Administration, the relevant Lender shall
immediately forward such amount to the Swiss Borrower. This Section 2.06(f) shall not apply and no interest shall be
recalculated pursuant to this Section 2.06(f) if a deduction of Swiss Withholding Tax is due as a result of any non-compliance by
a Lender with the provisions of Section 10.04 or the Lender (i) making a misrepresentation as to its status according to Section
1.07 as a Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank or (ii) ceasing to be a Swiss Qualifying
Bank or as (only) one Swiss Permitted Non-Qualifying Bank after the time it acceded to this Agreement. Notwithstanding
anything to the contrary herein, for the avoidance of doubt, (i) a Lender who is not treated as not being a Swiss Qualifying Bank
shall not be under any obligation to change its status into a Swiss Qualifying Bank, (ii) the documentation which a Lender
executes on becoming a party hereto shall not be invalidated by any failure of a Lender to comply with this Section 2.06(f),
Section 10.04 or Section 1.07 and (iii) none of the Loan Documents shall be invalidated by any failure of a Lender to comply
with this Section 2.06(f), Section 10.04(b)(i)(A) or Section 1.07 or indicates its status as a Swiss Qualifying Bank or Swiss
Permitted Non-Qualifying Bank as unknown.
SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated in accordance
with this Agreement, the Commitments shall terminate on the Maturity Date.
(b) The Parent Borrower may at any time terminate, or from time to time reduce, the Commitments; provided
that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $100,000 and not less than
$1,000,000, or, if less than $1,000,000, the remaining amount of the total Commitments, and (ii) the Parent Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.09, the total Revolving Credit Exposures would exceed the total Commitments.
(c) The Parent Borrower shall notify the Administrative Agent of any election to terminate or reduce the
Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Parent Borrower pursuant to this Section
shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Parent Borrower may state that
such notice is conditioned upon another event, such as the effectiveness of other credit facilities, in which case such notice may
be revoked by the Parent Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.
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SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby unconditionally promises
to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan made to such
Borrower on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender to such Borrower, including the
amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain a Register pursuant to Section 10.04(b)(iv) and an account for each
Lender in which it shall record (i) the amount of each Loan made hereunder, the Type and currency thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.
(d) The entries made in the accounts and Register maintained pursuant to paragraph (b) or (c) of this Section
shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of
any Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the
applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or,
if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment
pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
SECTION 2.09. Prepayment of Loans. (a) Each Borrower shall have the right at any time and from time to
time to prepay voluntarily any Borrowing made to such Borrower in whole or in part without premium or penalty, subject to prior
notice in accordance with paragraph (b) of this Section.
(b) The Parent Borrower (on its own behalf or on behalf of any other Borrower) shall notify the Administrative
Agent in writing (by hand delivery, telecopy or (pursuant to procedures approved by the Administrative Agent) electronic
transmission) of any voluntary prepayment hereunder prior to (i) in the case of ABR Loans, 11:00 a.m., New York City time, on
such date of prepayment, (ii) in the case of Eurocurrency Loans denominated in dollars, 12:00 noon, New York City time, on the
Business Day immediately preceding such date of prepayment, (iii) in the case of Eurocurrency Loans denominated in Euros,
12:00 noon, New York City time, three Business Days prior to such date of prepayment and (iv) in the case of Eurocurrency
Loans denominated in any Alternative Currencies other than Euros, 12:00 noon, New York City time, four Business Days prior to
such date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of
each Borrowing or portion thereof to be prepaid
54
and whether the prepayment is of Eurocurrency Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each; provided that, if a notice of voluntary prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice
of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial voluntary prepayment of any Borrowing shall be in an
aggregate principal amount of $500,000 or a multiple of $100,000 in excess thereof (or the Dollar Equivalent thereof). Each
voluntary prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.
(c) If on any Exchange Rate Date the Administrative Agent determines that the total Revolving Credit Exposure
exceeds 105% of the total Commitments, the Borrowers shall within three Business Days after such date, prepay Loans and/or
deposit cash collateral in an account with the Administrative Agent established and maintained in accordance with Section
2.04(k) in an aggregate amount such that, after deducting therefrom the amount so prepaid and/or so deposited in such account,
the total Revolving Credit Exposure does not exceed the total Commitments. The Administrative Agent shall promptly release
any collateral theretofore deposited with it pursuant to this Section 2.09 to the extent that on any Exchange Rate Date the total
Revolving Credit Exposure does not exceed the total Commitments.
(d) Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and any
amounts payable pursuant to Section 2.14.
SECTION 2.10. Fees. (a) The Parent Borrower agrees to pay to the Administrative Agent for the account of
each Lender a commitment fee for the period from and including the Effective Date to the last day of the Availability Period,
computed at the Applicable Rate on the average daily amount of the Available Commitment of such Lender during the period for
which payment is made. Commitment fees accrued through and including the last day of March, June, September and December
of each year shall be payable on the fifth Business Day following such last day, commencing on October 7, 2019; provided that
all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on
which the Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(b) The Parent Borrower agrees to pay to each Issuing Bank the fees agreed upon by the Parent Borrower with
such Issuing Bank with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. For the avoidance of doubt, in any case where, in accordance with the second sentence of the definition of
Issuing Bank, an Issuing Bank arranges for one or more Letters of Credit to be issued by an Affiliate of such Issuing Bank, the
fees agreed upon by such Issuing Bank with the Parent Borrower shall be deemed to have been agreed upon by such Affiliate
unless the Parent Borrower and such Affiliate otherwise agree.
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(c) The Parent Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the
amounts and at the times separately agreed upon between the Parent Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the
Administrative Agent (or to each Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees
and participation fees, to the Lenders. Except as may be expressly agreed in writing between the Parent Borrower and the
Administrative Agent with respect to fees to the Administrative Agent, fees paid shall not be refundable under any circumstances
(other than in the case, and to the extent, of any overpayment thereof by the applicable Borrower).
SECTION 2.11. Interest; Eurocurrency Tranches. (a) The Loans comprising each ABR Borrowing shall bear
interest (i) prior to the Ratings-Based Pricing Toggle Date, at the Alternate Base Rate plus the Applicable Rate and (ii) on and
after the Ratings-Based Pricing Toggle Date, at the Alternate Base Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) The interest rate for Loans denominated in Alternative Currencies shall be subject to customary adjustments
if and to the extent loans denominated in such Alternative Currencies are not customarily priced on a LIBO Rate basis; provided,
however that such adjustments shall not apply to Loans denominated in Euros, Yen or Hong Kong Dollars.
(d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount
payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue
principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.
(e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and
upon termination of all of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by
reference to (i) the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate or (ii) the LIBO Rate or
Interpolated Rate at times when the LIBO Rate or Interpolated Rate is based on the HKD Screen Rate shall be computed on the
basis
56
of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a
Eurocurrency Borrowing:
(a) the Administrative Agent reasonably determines (which determination shall be conclusive absent manifest
error) that by reason of circumstances affecting the relevant market adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate (including because the LIBO Screen Rate is not available or
published on a current basis), as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO
Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Parent Borrower (on its own behalf or on behalf of
any other Borrower) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative
Agent notifies the Parent Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency
Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurocurrency Borrowing denominated in dollars, such
Borrowing shall be made as an ABR Borrowing; provided that (A) if the circumstances giving rise to such notice affect only one
Type of Borrowings, then the other Type of Borrowings shall be permitted and (B) if the circumstances giving rise to such notice
affect only one currency, then Borrowings in other permitted currencies shall be permitted. The Administrative Agent agrees to
give prompt notice to the Parent Borrower when the circumstances that gave rise to a notice under this Section 2.12 no longer
exist. If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i)
the circumstances set forth in clause (a) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances
set forth in clause (a) have not arisen but either (w) the supervisor for the administrator of the LIBO Screen Rate has made a
public statement that the administrator of the LIBO Screen Rate is insolvent (and there is no successor administrator that will
continue publication of the LIBO Screen Rate), (x) the administrator of the LIBO Screen Rate has made a public statement
identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published by it (and
there is no successor administrator that will continue publication of the LIBO Screen Rate), (y) the supervisor for the
administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate
will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the LIBO Screen Rate or a
Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific
date after which the LIBO Screen Rate may no longer be used for determining interest rates for loans, then the Administrative
Agent and the Borrower shall enter into an amendment to establish an alternate rate of interest to the LIBO Rate that gives due
consideration to the then prevailing market convention for determining
57
a rate of interest for syndicated loans in the United States at such time and such other related changes to this Agreement as may
be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Rate);
provided that, if such alternate rate of interest as so determined would be less than 0.75%, such rate shall be deemed to be 0.75%
for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 10.02, such amendment shall become
effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not
have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written
notice from the Required Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest
shall be determined in accordance with this paragraph (but, in the case of the circumstances described in clauses (w), (x) or (y)
above, only to the extent the LIBO Screen Rate for the applicable currency and such Interest Period is not available or published
at such time on a current basis), (i) any Interest Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective, (ii) if any Borrowing Request requests a
Eurocurrency Borrowing denominated in dollars, such Borrowing shall be made as an ABR Borrowing. The LIBO Rate is
derived from the London interbank offered rate. The London interbank offered rate is intended to represent the rate at which
contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K.
Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to
make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator,
the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022,
the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon
which to determine the interest rate on Eurocurrency Loans. In light of this eventuality, public and private sector industry
initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank
offered rate. In the event that the London interbank offered rate is no longer available or in certain other circumstances, this
Section provides a mechanism for determining an alternative rate of interest. However, the Administrative Agent does not
warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any
other matter related to the London interbank offered rate or other rates in the definition of “LIBO Rate” or with respect to any
alternative or successor rate thereto, or replacement rate thereof.
SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or any Issuing Bank;
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(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting
this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; or
(iii) shall subject the Administrative Agent, any Lender or the Issuing Bank to any Taxes (other than (A)
Indemnified Taxes indemnified under Section 2.15, (B) Taxes described in clauses (b) through (f) of the definition of
Excluded Taxes or (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other
obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such Lender (or in the case of (iii) to such Administrative
Agent, Lender or Issuing Bank) of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make such
Loan) or to increase the cost to the Administrative Agent, such Lender or such Issuing Bank of participating in, issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by the Administrative Agent, such
Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Parent Borrower will pay to the
Administrative Agent, such Lender or such Issuing Bank, as the case may be, upon demand of such Person, such additional
amount or amounts as will compensate the Administrative Agent, such Lender or such Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If any Lender or any Issuing Bank reasonably determines that any Change in Law regarding capital or
liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital
(or on the capital of any corporation controlling such Lender or such Issuing Bank) as a consequence of this Agreement or the
Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank,
to a level below that which such Lender or such controlling corporation could have achieved but for such Change in Law (taking
into consideration such Lender’s or such Issuing Bank’s or such controlling corporation’s policies with respect to capital
adequacy or liquidity), then from time to time the Parent Borrower will pay to such Lender or such Issuing Bank, as the case may
be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such controlling corporation for
any such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate
such Lender or such Issuing Bank, as the case may be, as specified in paragraph (a), (b) or (e) of this Section, containing (i) a
reasonably detailed explanation of the basis on which such amount or amounts were calculated and the Change in Law by reason
of which it has become entitled to be so compensated and (ii) confirmation of the matters set forth in the last sentence of Section
2.13(d), shall be delivered to the Parent Borrower and shall be conclusive absent manifest error. No Lender or Issuing Bank shall
be entitled to the benefits of this Section 2.13 unless such Lender or Issuing Bank shall have complied with the requirements of
this Section 2.13. The Parent Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due
on any such certificate within 10 days after receipt thereof.
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(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this
Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that
the Parent Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased
costs or reductions incurred more than 90 days prior to the date that such Lender or such Issuing Bank, as the case may be,
notifies the Parent Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such
Issuing Bank’s intention to claim compensation therefor; provided, further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of
retroactive effect thereof. Notwithstanding any other provision of this Section 2.13, no Lender or Issuing Bank shall demand
compensation for any increased costs or reduction referred to above in this Section if it shall not then be the general policy of
such Lender to demand such compensation in similar circumstances from comparable borrowers under comparable provisions of
other credit agreements, if any (it being understood, for the avoidance of doubt, that a waiver by any Lender or Issuing Bank in
any given case of its right to demand such compensation from any given borrower shall not, in and of itself, be deemed to
constitute a change in the general policy of such Lender).
(e) If the cost to any Lender of making or maintaining any Loan to a Subsidiary Borrower that is a Foreign
Subsidiary is increased (or the amount of any sum received or receivable by any Lender or its lending office is reduced) by an
amount deemed by such Lender to be material, by reason of the fact that such Subsidiary Borrower is a Foreign Subsidiary, such
Subsidiary Borrower shall indemnify such Lender for such increased cost or reduction within 15 days after demand by such
Lender (with a copy to the Administrative Agent), which such Lender shall make within 90 days from the day such Lender has
notice of such increased cost or reduction.
SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency
Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the
conversion of any Eurocurrency Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, (c)
the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant
hereto (regardless of whether such notice may be revoked under Section 2.09(b) and is revoked in accordance therewith), or
(d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a
request by the Parent Borrower pursuant to Section 2.17, then, in any such event, the applicable Borrower shall compensate each
Lender for the loss and reasonable cost and expense attributable to such event (excluding loss of margin). In the case of a
Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by
such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in
the applicable eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled
to receive pursuant to this Section,
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containing a reasonably detailed calculation of such amounts, shall be delivered to the Parent Borrower and shall be conclusive
absent manifest error. The applicable Borrower shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof. No Lender or Issuing Bank shall be entitled to the benefits of this Section 2.14 unless such Lender or
Issuing Bank shall have complied with the requirements of this Section 2.14.
SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of any Loan Party under
any Loan Document shall be made free and clear of and without deduction for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or
withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to
make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan
Party shall be increased as necessary so that, after such deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section 2.15), the amounts received with respect to this agreement
equal the sum which would have been received had no such deduction or withholding been made.The Loan Parties shall timely
pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent
timely reimburse it for, Other Taxes.
(c) Each Loan Party shall indemnify the Administrative Agent, each Lender and any Issuing Bank, as promptly
as possible but in any event within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of such Loan Party under any Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) and including any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment
or liability, together with, to the extent available, a certified copy of a receipt issued by such Governmental Authority evidencing
such payment or other evidence of such payment reasonably satisfactory to such Loan Party, delivered to such Loan Party as soon
as practicable after any such payment by a Lender or any Issuing Bank, or by the Administrative Agent on its own behalf or on
behalf of a Lender or any Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a
Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt
issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to the Administrative Agent.
(e) A payment to a Lender shall not be increased under paragraph (a) or (b) of this Section 2.15 and no
indemnification is due under paragraph (c) of this Section 2.15 if on the date on which the payment falls due the payment could
have been made without any deduction on account of Swiss Withholding Tax (i) had the Lender correctly declared its status as to
whether it is a Swiss Qualifying Bank, (ii) had the Lender complied with the assignment, transfer or exposure
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transfer restrictions pursuant to this Agreement, (iii) had the Lender not ceased to be a Swiss Qualifying Bank, or (iv) had the
Swiss Non-Bank Rules not been breached as a result of an assignment or transfer of rights and obligations under this Agreement
after the occurrence of an Event of Default.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax, with respect to
payments made under this Agreement or any Loan Document shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and
executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be
made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower
or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set
forth in Section 2.15(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such
completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or
prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon
the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that
such Lender is exempt from U.S. federal backup withholding tax;
(B) any Lender that is not a U.S. Person shall, to the extent it is legally entitled to do so, deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the
date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(i) in the case of Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a
party (x) with respect to payments of interest under any Loan Document, executed originals of the applicable IRS Form W-8
establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty
and (y) with respect to any other applicable payments under any Loan Document, the applicable IRS Form W-8 establishing an
exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such
tax treaty;
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(ii) executed originals of IRS Form W-8ECI;
(iii) in the case of Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section
881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that such Lender is not a “bank” within
the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section
881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed originals of the applicable IRS Form W-8; or to the extent a Non-U.S. Lender is not
the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, the applicable IRS Form W-
8, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that if such Lender is a partnership and one or more
direct or indirect partners of such Lender are claiming the portfolio interest exemption, such Lender may provide a U.S. Tax
Compliance Certificate substantially in the form of Exhibit E-4 on behalf of each such direct and indirect partner;
(C) any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and
the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which
such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and
(D) If a payment made to a Lender hereunder or under any other Loan Document would be subject to
U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable, or those
under an intergovernmental agreement entered into in connection with the implementation of Sections 1471 through 1474
of the Code), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by
law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation
prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower
and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has
complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such
payment. Solely for purposes of this Section 2.15(f)(ii)(D), “FATCA” shall include any amendments made to FATCA
after the date of this Credit Agreement.
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Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any
respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its
legal inability to do so.
(g) Each Lender shall indemnify the Administrative Agent, within 10 days after demand therefor, for the full
amount of any Taxes imposed by any Governmental Authority, together with any reasonable costs and expenses arising therefrom
or with respect thereto, that are attributable (i) to such Lender and that are payable or paid by the Administrative Agent and (ii) to
a Lender’s failure to comply with the provisions of Section 10.04(c) relating to the maintenance of a Participant Register. A
certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive
absent manifest error.
(h) If the Administrative Agent, a Lender or an Issuing Bank determines that it has received a refund which, in
the good faith judgment of the Administrative Agent, such Lender or such Issuing Bank, as the case may be, is allocable to any
Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has
paid additional amounts pursuant to this Section 2.15, it shall promptly pay over such refund to such Loan Party (but only to the
extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.15 with respect to the
Indemnified Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Administrative
Agent or such Lender or such Issuing Bank and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); provided, that such Loan Party, upon the request of the Administrative Agent or such
Lender or such Issuing Bank, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other
charges imposed by the relevant Governmental Authority attributable to such amount (including the reasonable out-of-pocket
expenses described above of the Administrative Agent or such Lender or such Issuing Bank)) to the Administrative Agent or
such Lender or such Issuing Bank in the event the Administrative Agent or such Lender or such Issuing Bank is required to repay
such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any
Lender or an Issuing Bank to make available its tax returns (or any other information relating to its taxes which it deems
confidential) to any Loan Party or any other Person.
(i) For purposes of this Section, the term “Lender” includes any Issuing Bank and the term “applicable law”
includes FATCA.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Each Borrower shall make
each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when
due, in immediately available funds, without set‑off or counterclaim. Any amounts received after such time on any date may, in
the discretion of the Administrative Agent or an Issuing Bank, as applicable, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative
Agent at its offices at 10 South Dearborn Street, 7th Floor, Chicago, Illinois 60603-2300 and to the wire instructions of the
Administrative Agent set forth in Section 9.06 (or such other address or wire instructions of the Administrative Agent that may
be provided from time to time by the Administrative Agent), except payments to be made directly to an Issuing Bank as expressly
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provided herein and except that payments pursuant to Sections 2.13, 2.14, 2.15 and 10.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in
dollars except (i) payments of principal of and interest on any Alternative Currency Loan shall be paid in the applicable currency
and (ii) as provided in Section 2.04(k).
(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest, fees, expenses and other amounts then due hereunder, such funds
shall be applied (i) first, towards payment of interest, fees, expenses and other amounts then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest, fees, expenses and other amounts then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
Notwithstanding the foregoing, no amounts received from any Guarantor shall be applied to Excluded Swap Obligations of such
Guarantor.
(c) If any Lender shall, by exercising any right of set‑off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; provided that (i) if
any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this
paragraph shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in
any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the applicable Borrower or
any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply), or any payment obtained pursuant to
a court order. Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law,
that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of
set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in
the amount of such participation.
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(d) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders or an Issuing Bank hereunder that such Borrower will
not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or such Issuing Bank, as the case may
be, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders or such Issuing
Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to
such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it
to but excluding the date of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(d) or (e),
2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations
under such Sections until all such unsatisfied obligations are fully paid.
(f) In order to expedite the transactions contemplated by this Agreement, each Subsidiary Borrower hereby
appoints the Parent Borrower to act as agent on behalf of such Subsidiary Borrower for the purpose of (i) giving any notices or
requests contemplated to be given by such Subsidiary Borrower pursuant to this Agreement, including, without limitation,
Borrowing Requests, prepayment notices and Interest Election Requests and (ii) paying on behalf of such Subsidiary Borrower
any Subsidiary Obligations owing by such Subsidiary Borrower; provided, that each Subsidiary Borrower shall retain the right, in
its discretion, to give directly any or all of such notices or requests or to make directly any or all of such payments.
(g) The obligations of each Borrower under this Agreement are several although the Subsidiary Obligations are
guaranteed by the Parent Borrower under Article IX.
SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender (including any Issuing
Bank) requests compensation under Section 2.13, or if any Borrower is required to pay any additional amount to any Lender
(including any Issuing Bank) or any Governmental Authority for the account of any Lender (including any Issuing Bank)
pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or
booking its Loans (or interests in Letters of Credit) hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender (including any Issuing Bank), such designation or assignment (i)
would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not
subject such Lender (including any Issuing Bank) to any material unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender (including any Issuing Bank).
(b) If (i) any Lender (including any Issuing Bank) requests compensation under Section 2.13, (ii) any Borrower
is required to pay any additional amount to any Lender (including any Issuing Bank) or any Governmental Authority for the
account of any Lender (including any Issuing Bank) pursuant to Section 2.15, (iii) any Lender is a Defaulting Lender or (iv) any
Lender
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does not consent to any proposed amendment, supplement, modification, consent or waiver of any provision of this Agreement or
any other Loan Document that requires the consent of each of the Lenders or each of the Lenders affected thereby (so long as the
consent of the Required Lenders (with the percentage in such definition being deemed to be 66 2/3% for this purpose) has been
obtained), then the Parent Borrower may, at its sole expense (in the case of clauses (i), (ii) and (iv) of this Section 2.17(b) only),
upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 10.04, provided that the Parent Borrower shall be required to
pay the processing and recordation fee referred to in Section 10.04(b)(ii)(C), or pursuant to deemed assignment provisions
established by the Administrative Agent to which the Parent Borrower has previously consented in writing), all its interests,
rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Parent Borrower shall have received the prior written consent
of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of
an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrowers (in the case of all other amounts) (and, if such Lender is an Issuing Bank, all Letters
of Credit issued by it shall have been cancelled or other arrangements reasonably satisfactory to such Issuing Bank shall have
been made with respect to such Letters of Credit), (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a
reduction in such compensation or payments and (iv) in the case of an assignment pursuant to clause (iv) above, no Default shall
have occurred and be continuing. A Lender (including any Issuing Bank) shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Parent Borrower to
require such assignment and delegation cease to apply. No such assignment shall be deemed to be a waiver of any rights which
any Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.
SECTION 2.18. Change in Law. If (a) any Change in Law shall make it unlawful for any Issuing Bank to issue
Letters of Credit denominated in an Alternative Currency or (b) there shall have occurred any change in national or international
financial, political or economic conditions (including the imposition of or any change in exchange controls) or currency exchange
rates that would make it impracticable for any Issuing Bank to issue Letters of Credit denominated in such Alternative Currency,
then by prompt written notice thereof to the Parent Borrower and to the Administrative Agent (which notice shall promptly be
withdrawn whenever such circumstances no longer exist), such Issuing Bank may declare that Letters of Credit will not thereafter
be issued by it in the affected Alternative Currency or Alternative Currencies, whereupon the affected Alternative Currency or
Alternative Currencies shall be deemed (until such notice is withdrawn) not to constitute an Alternative Currency for purposes of
the issuance of Letters of Credit by such Issuing Bank.
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SECTION 2.19. Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any
Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting
Lender:
(a) fees shall cease to accrue on the unfunded portion of the Available Commitment of such Defaulting Lender
pursuant to Section 2.10(a);
(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in
determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any
amendment, waiver or other modification pursuant to Section 10.02); provided, that this clause (b) shall not apply to the vote of a
Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of each Lender or each
Lender affected thereby;
(c) if any LC Exposure exists at the time such Lender becomes a Defaulting Lender then:
(i) all or any part of the LC Exposure of such Defaulting Lender shall be reallocated among the non-
Defaulting Lenders in accordance with their respective Commitments but only to the extent the sum of all non-
Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not exceed the total
of all non-Defaulting Lenders’ Commitments;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Parent
Borrower shall within one Business Day following notice by the Administrative Agent cash collateralize for the benefit
of the Issuing Bank only such Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after
giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in
Section 2.04(k) for so long as such LC Exposure is outstanding;
(iii) if the Parent Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant
to clause (ii) above, the Parent Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to
Section 2.04(f) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC
Exposure is cash collateralized;
(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees
payable to the Lenders pursuant to Sections 2.10(a) and 2.04(f) shall be adjusted in accordance with such non-Defaulting
Lenders’ Commitment; and
(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized
pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any other
Lender hereunder, all fees payable under Section 2.04(f) with respect to such Defaulting Lender’s LC Exposure shall be
payable to the applicable Issuing Bank until and to the extent that such LC Exposure is reallocated and/or cash
collateralized; and
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(d) so long as such Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase
any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Lender’s then outstanding LC Exposure will
be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the applicable
Borrower in accordance with Section 2.19(c), and participating interests in any newly issued or increased Letter of Credit shall be
allocated among non-Defaulting Lenders in a manner consistent with Section 2.19(c)(i) (and such Defaulting Lender shall not
participate therein).
If (i) a Bankruptcy Event or a Bail-In Action with respect to a Parent of any Lender shall occur following the date
hereof and for so long as such event shall continue or (ii) the Issuing Bank has a good faith belief that any Lender has defaulted
in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Issuing Bank
shall not be required to issue, amend or increase any Letter of Credit, unless the Issuing Bank, as the case may be, shall have
entered into arrangements with the Parent Borrower or such Lender, satisfactory to the Issuing Bank to defease any risk to it in
respect of such Lender hereunder.
In the event that the Administrative Agent, the Parent Borrower and the Issuing Bank each agrees, acting in good
faith and a commercially reasonable manner, that a Defaulting Lender has adequately remedied all matters that caused such
Lender to be a Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such
Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the
Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its
Commitment.
SECTION 2.20. Extension of Maturity Date.
(a) Request for Extension. The Parent Borrower may, by notice to the Administrative Agent (who shall promptly
notify the Lenders) not earlier than 60 days and not later than 30 days prior to the Maturity Date then in effect hereunder (the
“Existing Maturity Date”), request that each Lender extend such Lender’s Maturity Date for an additional 364 days from the
Existing Maturity Date; provided, however, that the Parent Borrower may not request more than two such extensions pursuant to
this Section 2.20.
(b) Lender Elections to Extend. Each Lender, acting in its sole and individual discretion, shall, by notice to the
Administrative Agent given not earlier than 45 days prior to the Existing Maturity Date and not later than the date (the “Notice
Date”) that is 15 days prior to the Existing Maturity Date, advise the Administrative Agent whether or not such Lender agrees to
such extension (and each Lender that determines not to so extend its Maturity Date (a “Non‑Extending Lender”) shall notify the
Administrative Agent of such fact promptly after such determination (but in any event no later than the Notice Date) and any
Lender that does not so advise the Administrative Agent on or before the Notice Date shall be deemed to be a Non‑Extending
Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree.
(c) Notification by Administrative Agent. The Administrative Agent shall notify the Parent Borrower of each
Lender’s determination under this Section 2.20 no later than the date 15 days prior to the Existing Maturity Date (or, if such date
is not a Business Day, on the next preceding Business Day).
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(d) Additional Commitment Lenders. The Parent Borrower shall have the right on or before the Existing Maturity
Date to replace each Non‑Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more
Eligible Assignees (each, an “Additional Commitment Lender”) as provided in Section 10.04 each of which Additional
Commitment Lenders shall have entered into an Assignment and Assumption pursuant to which such Additional Commitment
Lender shall, effective as of the Existing Maturity Date, undertake a Commitment (and, if any such Additional Commitment
Lender is already a Lender, its Commitment shall be in addition to such Lender’s Commitment hereunder on such date).
(e) Minimum Extension Requirement. If (and only if) the total of the Commitments of the Lenders that have
agreed so to extend their Maturity Dates and the additional Commitments of the Additional Commitment Lenders shall be more
than 50% of the aggregate amount of the Commitments in effect immediately prior to the Existing Maturity Date, then, effective
as of the Existing Maturity Date, the Maturity Date of each Extending Lender and of each Additional Commitment Lender shall
be extended to the date falling 364 days after the Existing Maturity Date (except that, if such date is not a Business Day, such
Commitment Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall
thereupon become a “Lender” for all purposes of this Agreement.
(f) Conditions to Effectiveness of Extensions. Notwithstanding the foregoing, an extension of the Maturity Date
pursuant to this Section 2.20 shall not be effective with respect to any Lender unless:
(i) At the time of and immediately after giving effect to such extension, no Default shall have occurred
and be continuing;
(ii) The representations and warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct in all material respects (or, in the case of any representation and warranty qualified by materiality,
in all respects) on and as of the date of such extension (other than such representations as are made as of a specific earlier
date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier
date (or, in the case of any representation and warranty qualified by materiality, in all respects as of such earlier date); and
(iii) On or before the then applicable Existing Maturity Date, (1) the Borrowers shall have paid in full the
principal of and interest on all of the Loans made by each Non-Extending Lender to the Borrowers hereunder and (2) the
Borrowers shall have paid in full all other amounts owing to such Non-Extending Lender hereunder.
(g) Amendment; Sharing of Payments. In connection with any extension of the Maturity Date, the Borrowers, the
Administrative Agent and each extending Lender may make such amendments to this Agreement as the Administrative Agent
determines to be reasonably necessary to evidence the extension. This Section shall supersede Sections 2.16 and 10.02.
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ARTICLE III
Representations and Warranties
The Parent Borrower represents and warrants and each Subsidiary Borrower represents and warrants (to the extent
specifically applicable to such Subsidiary Borrower) to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrowers, the Guarantors and the Parent Borrower’s
Significant Subsidiaries (as defined in Regulation S-X, part 210.1-02 of Title 17 of the Code of Federal Regulations) is duly
organized, validly existing and, other than the Swiss Loan Party, in good standing (or, if applicable in a foreign jurisdiction,
enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States of America) under the
laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan Party’s corporate powers
and have been duly authorized by all necessary corporate and, if required, stockholder action. Each Loan Document has been
duly executed and delivered by each Loan Party which is a party thereto and constitutes a legal, valid and binding obligation of
such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
liquidation, reconstruction, moratorium or other laws affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or
approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or
made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other
organizational documents of Parent Borrower or any other Loan Party or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture or any material agreement or other material instrument binding upon Parent
Borrower or other Loan Party its assets, or give rise to a right thereunder to require any payment to be made by Parent Borrower
or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of Parent Borrower or any
of other Loan Party.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Parent Borrower has heretofore
furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and
for the Fiscal Year ended March 30, 2019, reported on by Ernst & Young LLP, independent public accountants, and (ii) as of and
for the Fiscal Quarter and the portion of the Fiscal Year ended June 30, 2019, certified by its chief financial officer. Such
financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the
Parent Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to
year-end
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audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.
(b) Since March 30, 2019 there has been no material adverse change in the business, operations, property or
condition (financial or otherwise) of the Parent Borrower and its Subsidiaries, taken as a whole; provided that, only during the
period from the First Amendment Effective Date until March 31, 2021, the impacts of the Coronavirus pandemic on the business,
assets, operations, property or financial condition of the Parent Borrower and its Subsidiaries taken as a whole that (A) have
already occurred and were disclosed in writing to the Lenders in the materials distributed to the Lenders on May 22, 2020 and (B)
that were reasonably foreseeable (in consequence and duration) in light of any event, development or circumstance described in
the foregoing clause (A) (provided that any such additional impacts described in this clause (B) are similar to the previously
disclosed impacts described in the foregoing clause (A)), will in each case be disregarded for purposes of determining whether a
material adverse change in the business, operations, property or financial condition of the Parent Borrower and its Subsidiaries,
taken as a whole, has occurred.
SECTION 3.05. Properties. (a) Each of the Parent Borrower and the other Loan Parties has good title to, or
valid leasehold interests in, all its real and personal property material to the operation of its business, except for minor defects in
title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their
intended purposes or such other defects as, in the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(b) Each of the Parent Borrower and the other Loan Parties owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its business as currently conducted, and the use thereof
by the Parent Borrower and the other Loan Parties does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the knowledge of any Borrower, threatened against or
affecting Parent Borrower or any of its Subsidiaries (i) which could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (except for actions, suits or proceedings disclosed prior to June 30, 2019 in reports publicly
filed by the Parent Borrower under the Securities Exchange Act of 1934, as amended, which disclosure was true and correct in all
material respects as of the date made and as of the Effective Date) or (ii) that involve this Agreement or the Transactions.
(b) Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, neither the Parent Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Laws or to obtain, maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
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SECTION 3.07. Compliance with Laws and Agreements. (a) Each of the Parent Borrower and its Subsidiaries
is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
(b) The Parent Borrower has implemented and maintains in effect policies and procedures designed to ensure
compliance by the Parent Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-
Corruption Laws and applicable Sanctions, and the Parent Borrower, its Subsidiaries and, to the knowledge of the Parent
Borrower, their respective officers, employees, directors and agents, are in compliance with Anti-Corruption Laws and applicable
Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in
Parent Borrower being designated as a Sanctioned Person. None of (a) the Parent Borrower, any Subsidiary or, to the knowledge
of the Parent Borrower, any of their respective directors, officers or employees, or (b) to the knowledge of the Parent Borrower,
any agent of the Parent Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit
facility established hereby, is a Sanctioned Person. No Transactions contemplated by this Agreement will violate any Anti-
Corruption Law or applicable Sanctions.
SECTION 3.08. Investment Company Status. Neither the Parent Borrower nor any of its Subsidiaries
is required to be registered as an “investment company” as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended.
SECTION 3.09. Taxes. Each of the Parent Borrower and its Subsidiaries has timely filed or caused to be filed
all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Parent Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves to the extent required by GAAP or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. (i) Except as could not reasonably be expected to result in a Material Adverse Effect,
each Plan is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Plans and the
regulations and published interpretations thereunder, and each Foreign Plan is in compliance with applicable non-United States
law and regulations thereunder, and (ii) no ERISA Event or Foreign Plan Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events and Foreign Plan Events for which liability has been imposed or is
reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Accounting Standards
Codification No. 715: Compensation Retirement Benefits) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $10,000,000 the fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Accounting Standards
Codification No. 715: Compensation Retirement Benefits) did not, as of the date of the most recent
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financial statements reflecting such amounts, exceed by more than $10,000,000 the fair market value of the assets of all such
underfunded Plans.
SECTION 3.11. Disclosure. All of the reports, financial statements and certificates furnished by or on behalf of
any Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or hereafter
delivered hereunder or reports filed pursuant to the Securities Exchange Act of 1934, as amended (as modified or supplemented
by other information so furnished prior to the date on which this representation and warranty is made or deemed made) do not
contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information,
the Parent Borrower and the Subsidiary Borrowers represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time. As of the Effective Date, to the best knowledge of the Parent Borrower, the
information included in the Beneficial Ownership Certification provided by a Borrower on or prior to the Effective Date to any
Lender in connection with this Agreement is true and correct in all respects.
SECTION 3.12. Subsidiary Guarantors. Set forth on Schedule 3.12 is a list of each Subsidiary which, in
accordance with Section 4.01(b), is required to be a Guarantor under the Guarantee Agreement on the Effective Date.
SECTION 3.13. Anti-Corruption Laws and Sanctions. The Borrowers have implemented and maintain in effect
policies and procedures designed to ensure compliance by the Borrowers, their subsidiaries and their respective directors,
officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrowers, their subsidiaries and
their respective officers and directors and to the knowledge of the Borrowers their employees and agents, are in compliance in all
material respects with Anti-Corruption Laws and applicable Sanctions and are not knowingly engaged in any activity that would
reasonably be expected to result in a Borrower being designated as a Sanctioned Person. None of (a) the Borrowers, any
Subsidiary, any of their respective directors or officers or to the knowledge of the Borrowers or such Subsidiary employees, or (b)
to the knowledge of the Borrowers, any agent of a Borrower or any Subsidiary that will act in any capacity in connection with or
benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or
other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions. The foregoing
representations in this Section 3.13 will not apply to any party hereto to which Council Regulation (EC) 2271/96 (the “Blocking
Regulation”) applies, if and to the extent that such representations are or would be unenforceable by or in respect of that party
pursuant to, or would otherwise result in a breach and/or violation of, (i) any provision of the Blocking Regulation (or any law or
regulation implementing the Blocking Regulation in any member state of the European Union) or (ii) any similar blocking or
anti-boycott law in the United Kingdom.
SECTION 3.14. EEA Financial Institutions. No Loan Party is an Affected Financial Institution.
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SECTION 3.15. Plan Assets; Prohibited Transactions. None of the Borrowers or any of their subsidiaries is an
entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor
performance of the transactions contemplated under this Agreement, including the making of any Loan and the issuance of any
Letter of Credit hereunder, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
SECTION 3.16. Margin Regulations. The Borrowers are not engaged and will not engage, principally or as one
of their important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of
purchasing or carrying Margin Stock, and no part of the proceeds of any Borrowing or Letter of Credit extension hereunder will
be used to buy or carry any Margin Stock. Following the application of the proceeds of each Borrowing or drawing under each
Letter of Credit, not more than 25% of the value of the assets (either of the Borrowers only or of the Borrowers and their
subsidiaries on a consolidated basis) will be Margin Stock.
SECTION 3.17. Compliance with Swiss Non-Bank Rules. (a) Subject to clause (b) below, each Swiss Borrower
represents that it is at all times in compliance with the Swiss Non-Bank Rules; provided, that, if at any time the aggregate number
of Lenders which are not Swiss Qualifying Banks is less than ten in the aggregate, then for the purposes of determining
compliance with the Swiss 20-Non-Bank Rule pursuant to this Section 3.16, the relevant Swiss Borrower shall assume that the
aggregate number of not Swiss Qualifying Banks hereunder is 10. (b) A Swiss Borrower shall not be in breach of its obligations
under clause (a) above if a Swiss Non-Bank Rule is breached as a result of one or more Lenders (i) making a misrepresentation as
to its status according to Section 1.07 as a Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank or (ii)
ceasing to be a Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank after the time it acceded to this
Agreement.
SECTION 3.18. Additional Specified Stimulus Indebtedness. The Parent Borrower hereby represents and
warrants that it and/or its applicable Subsidiaries have determined in good faith in consultation with counsel that it and/or such
Subsidiaries are eligible to participate in all Additional Specified Stimulus Indebtedness programs that the Parent Borrower
and/or such Subsidiaries currently participate in or have applied to participate in, and have taken into consideration in making
such determination the rules, regulations and guidance related to such programs.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Banks to issue
Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or
waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart
of this Agreement signed on behalf of such party or (ii) written
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evidence reasonably satisfactory to the Administrative Agent (which may include telecopy or electronic transmission of a
signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received the Guarantee Agreement executed and delivered by each
Domestic Subsidiary, if any, which, as of the Effective Date, is a Significant Subsidiary (as defined in Regulation S-X,
part 210.1-02 of Title 17 of the Code of Federal Regulations).
(c) [Reserved].
(d) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative
Agent and the Lenders and dated the Effective Date) of Kelley Drye & Warren LLP, counsel for the Loan Parties,
substantially in the form of Exhibit B. The Borrowers hereby request Kelley Drye & Warren LLP to deliver the opinion
provided for in the preceding sentence.
(e) The Administrative Agent shall have received such documents and certificates as the Administrative Agent
or its counsel may reasonably request relating to the organization, existence and good standing of the Loan Parties, the
authorization of the Transactions by the Loan Parties and any other legal matters relating to the Loan Parties, this
Agreement or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its
counsel.
(f) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the
President, a Vice President or a Financial Officer of the Parent Borrower, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 4.02.
(g) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the
Effective Date, including, to the extent invoiced at least one Business Day prior to the Effective Date, reimbursement or
payment of all out‑of‑pocket expenses required to be reimbursed or paid by the Parent Borrower hereunder.
(h) (i) The Administrative Agent shall have received, at least five days prior to the Effective Date, all
documentation and other information regarding the Borrowers requested in connection with applicable “know your
customer” and anti-money laundering rules and regulations, including the Patriot Act, to the extent requested in writing of
the Borrowers at least 10 days prior to the Effective Date and (ii) to the extent a Borrower qualifies as a “legal entity
customer” under the Beneficial Ownership Regulation, at least five days prior to the Effective Date, any Lender that has
requested, in a written notice to such Borrower at least 10 days prior to the Effective Date, a Beneficial Ownership
Certification in relation to such Borrower shall have received such Beneficial Ownership Certification (provided that,
upon the execution and delivery by such Lender of its signature page to this Agreement, the condition set forth in this
clause (ii) shall be deemed to be satisfied; further provided that, the Borrowers shall not be required to provide any
personal data or information with respect to any individual, including without limitation personally
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identifiable information, unless such data or information is required to be provided under applicable “know your
customer” and anti-money laundering rules and regulations).
The Administrative Agent shall notify the Parent Borrower and the Lenders of the Effective Date, and such notice shall be
conclusive and binding. On the Effective Date, (i) the Commitments of the Lenders shall be as set forth on Schedule 2.01 and (ii)
each obligation of the Loan Parties hereunder and under each Loan Document shall be deemed to be obligations of the Loan
Parties under the Loan Documents. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the
Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied
(or waived pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on September, 30, 2019 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate).
SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any
Borrowing, but excluding a conversion of all or a portion of a Borrowing from one Type to the other or a continuation of all or a
portion of a Borrowing of the same Type pursuant to Section 2.06, and of each Issuing Bank to issue, increase, renew or extend
any Letter of Credit, is subject to the satisfaction of the following conditions:
(a) The representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be
true and correct in all material respects (or, in the case of any representation and warranty qualified by materiality, in all
respects) on and as of the date of such Borrowing or the date of issuance, increase, renewal or extension of such Letter of
Credit, as applicable (other than such representations as are made as of a specific earlier date, in which case such
representations and warranties shall be true and correct in all material respects as of such earlier date (or, in the case of
any representation and warranty qualified by materiality, in all respects as of such earlier date)); provided, however, that if
the proceeds of such Loan are being used to refinance maturing commercial paper issued by the Parent Borrower, then the
representations and warranties in Sections 3.04(b) and 3.06(a) shall not apply.
(b) At the time of and immediately after giving effect to such Borrowing or the issuance, increase, renewal or
extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, increase, renewal or extension of a Letter of Credit shall be deemed to constitute a
representation and warranty by the applicable Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of
this Section.
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SECTION 4.03. Additional Condition to Initial Borrowing by Subsidiary Borrowers. The obligations of the
Lenders to make the initial Loan to a particular Subsidiary Borrower shall not become effective, with respect to such Subsidiary
Borrower, until the date on which the Administrative Agent shall have received a favorable written opinion (addressed to the
Administrative Agent and the Lenders) of non-U.S. counsel for such Subsidiary Borrower in form and substance customary and
typical for such opinion and reasonably satisfactory to the Administrative Agent.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees
payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Parent Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements; Ratings Change and Other Information. The Parent Borrower will
furnish to each Lender through the Administrative Agent:
(a) within 90 days after the end of each Fiscal Year, the Parent Borrower’s audited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows as of the end of and for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous Fiscal Year, all reported on by Ernst & Young LLP or
other independent public accountants of recognized national standing (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial condition and results of operations of the Parent
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
provided, however, that, so long as the Parent Borrower is required to file reports under Section 13 of the Securities and
Exchange Act of 1934, as amended, the requirements of this paragraph shall be deemed satisfied by the delivery of, the
Annual Report of the Parent Borrower on Form 10-K (or any successor form as prescribed by the Securities and
Exchange Commission) for such Fiscal Year, signed by the duly authorized officer or officers of the Parent Borrower;
(b) within 60 days after the end of each of the first three Fiscal Quarters, the Parent Borrower’s consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such
Fiscal Quarter and the then elapsed portion of the Fiscal Year, setting forth in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year,
all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results
of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided, however, that,
so long as the Parent Borrower is required to file reports under Section 13 of the Securities and Exchange Act of 1934, as
amended, the requirements
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of this paragraph shall be deemed satisfied by the delivery of the Quarterly Report of the Parent Borrower on Form 10-Q
(or any successor form as prescribed by the Securities and Exchange Commission) for the relevant Fiscal Quarter, signed
by the duly authorized officer or officers of the Parent Borrower.
(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a
Financial Officer of the Parent Borrower (i) stating that he or she has obtained no knowledge that a Default has occurred
(except as set forth in such certificate), (ii) if a Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations demonstrating compliance
with Section 6.07; and (iv) stating whether any change in GAAP or in the application thereof has occurred since the date
of the audited financial statements referred to in Section 3.04 which has had an effect on such financial statements and, if
any such change has occurred, specifying the effect of such change on the financial statements accompanying such
certificate;
(d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting
firm that reported on such financial statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all other periodic and other reports, proxy
statements and other materials filed by the Parent Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any
national securities exchange, or distributed by the Parent Borrower to its shareholders generally, as the case may be;
(f) promptly after the Parent Borrower shall have received notice that Moody’s or S&P has announced a change
in the rating established or deemed to have been established for the Index Debt, written notice of such rating change;
(g) promptly following any request therefor, (x) such other information regarding the business affairs or
financial position of the Parent Borrower or any other Loan Party, or compliance with the terms of this Agreement, as the
Administrative Agent on behalf of any Lender may reasonably request and (y) information and documentation reasonably
requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer”
and anti-money laundering rules and regulations, including the Patriot Act and the Beneficial Ownership Regulation,
provided that the Parent Borrower shall not be required to provide any personal data or information with respect to any
individual, including without limitation personally identifiable information, unless such data or information is required to
be provided under applicable “know your customer” and anti-money laundering rules and regulations; and
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(h) promptly after receipt thereof by any Borrower or any Subsidiary, copies of each written notice or other
written correspondence received from the Securities and Exchange Commission (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by the Securities and
Exchange Commission or such other agency regarding financial or other operational results of any Borrower or any
Subsidiary thereof.
SECTION 5.02. Notices of Material Events. The Parent Borrower will furnish to the Lenders through the
Administrative Agent prompt written notice of the following after the Parent Borrower shall have obtained knowledge thereof:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental
Authority against or affecting the Parent Borrower or its Subsidiaries that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event or Foreign Plan Event that, alone or together with any other ERISA
Events or Foreign Plan Events that have occurred, could reasonably be expected to result in liability of any Loan Party or
any of its ERISA Affiliates in an aggregate amount exceeding $10,000,000;
(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse
Effect; and
(e) any change in the information provided in the Beneficial Ownership Certification delivered to such Lender
that would result in a change to the list of beneficial owners identified in such certification.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of
the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Parent Borrower will, and will cause each of its
Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence
and the rights, licenses, permits, privileges and franchises material to the conduct of its business except, in each case (other than
the case of the foregoing requirements insofar as they relate to the legal existence of the Borrowers and the Guarantors), to the
extent that failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.04.
SECTION 5.04. Payment of Obligations. The Parent Borrower will, and will cause each of its Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, could reasonably be expected to result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good
faith by appropriate proceedings, (b) the Parent Borrower or such Subsidiary has set aside on its
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books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. Except where the failure to do so could not reasonably
be expected to result in a Material Adverse Effect, the Parent Borrower will, and will cause each of its Subsidiaries to, (a) keep
and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear
excepted and except for surplus and obsolete properties, and (b) maintain, with financially sound and reputable insurance
companies, insurance on such of its property and in such amounts and against such risks as are customarily maintained by
companies engaged in the same or similar businesses operating in the same or similar locations.
SECTION 5.06. Books and Records; Inspection Rights. The Parent Borrower will, and will cause each of its
Subsidiaries to, keep proper books of record and account in which entries in conformity in all material respects with all
applicable laws, rules and regulations of any Governmental Authority are made of all dealings and transactions in relation to its
business and activities. The Parent Borrower will, and will cause each of its Subsidiaries to, on an annual basis at the request of
the Administrative Agent (or at any time after the occurrence and during the continuance of a Default), permit any representatives
designated by the Administrative Agent or any Lender (at such Lender’s expense), upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records (other than materials protected by the attorney-
client privilege and materials which the Parent Borrower or such Subsidiary, as applicable, may not disclose without violation of
a confidentiality obligation binding upon it), and to discuss its affairs, finances and condition with its officers and independent
accountants, so long as afforded opportunity to be present, all during reasonable business hours. It is understood that so long as
no Event of Default has occurred and is continuing, such visits and inspections shall be coordinated through the Administrative
Agent.
SECTION 5.07. Compliance with Laws. The Parent Borrower will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The
Parent Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Parent
Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and
applicable Sanctions.
SECTION 5.08. Compliance with Swiss Non-Bank Rules. (a) Subject to clause (b) below, each Swiss Borrower
will comply with the Swiss Non-Bank Rules; provided, that, if at any time the aggregate number of Lenders which are not Swiss
Qualifying Banks is less than ten in the aggregate, then for the purposes of determining compliance with the Swiss 20-Non-Bank
Rule pursuant to this Section 5.08, the relevant Swiss Borrower shall assume that the aggregate number of not Swiss Qualifying
Banks hereunder is 10. (b) A Swiss Borrower shall not be in breach of its obligations under clause (a) above if a Swiss Non-Bank
Rule is breached as a result of one or more Lenders (i) making a misrepresentation as to its status according to Section 1.07 as a
Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank or (ii) ceasing to be a Swiss
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Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank after the time it acceded to this Agreement.
SECTION 5.09. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used only to finance
the working capital needs, capital expenditures, Permitted Acquisitions, Investments permitted under Section 6.05 and general
corporate purposes of the Parent Borrower and its Subsidiaries (including the initiation and maintenance of a commercial paper
program, the refinancing of commercial paper and the refinancing of the Existing Credit Agreement). No part of the proceeds of
any Loan will be used, whether directly or indirectly, for the purpose of purchasing or carrying, or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock or for any other purpose that entails a violation of any such regulations.
The Commercial Letters of Credit shall be used solely to finance purchases of goods by the Parent Borrower and its Subsidiaries
in the ordinary course of their business, and the Standby Letters of Credit shall be used solely for the purposes described in the
definition of such term in Section 1.01.
SECTION 5.10. Guarantee Agreement Supplement. Each Domestic Subsidiary that becomes a Significant
Subsidiary subsequent to the Effective Date shall promptly (and in any event within 60 days of becoming a Significant
Subsidiary) execute and deliver to the Administrative Agent (with a counterpart for each Lender) a supplement to the Guarantee
Agreement pursuant to which such Subsidiary shall become a party thereto as a Guarantor, together with such other documents
and legal opinions with respect thereto as the Administrative Agent shall reasonably request (which documents and opinions shall
be in form and substance reasonably satisfactory to the Administrative Agent).
SECTION 5.11. Additional Specified Stimulus Indebtedness. Before participating in or applying to participate in
any Additional Specified Stimulus Indebtedness relief program, each of the Parent Borrower and/or its applicable Subsidiaries
shall make a determination in good faith in consultation with counsel that it is eligible to participate in such program, and shall
take into consideration in making such determination the rules, regulations and guidance related to such program. Further, the
applicable borrower of such Additional Specified Stimulus Indebtedness shall comply in all material respects with the laws, rules
and regulations (including with respect to use of proceeds) applicable to the relevant credit or financial support program.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees
payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, the Parent Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness. The Parent Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness created hereunder and under the other Loan Documents and Indebtedness created under the
364-Day Credit Agreement;
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(b) Indebtedness existing on the Effective Date and set forth in Schedule 6.01 and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or shorten the final
maturity or weighted average life to maturity thereof;
(c) Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any
other Subsidiary; provided that, during the Specified Period, other than with respect to Cash Pooling Arrangements, the
aggregate amount of Indebtedness incurred by Subsidiaries that are not Loan Parties pursuant to this clause (c) shall not
exceed at any one time outstanding $125,000,000;
(d) Guarantees by the Parent Borrower of Indebtedness of any Subsidiary and by any Subsidiary of
Indebtedness of the Parent Borrower or any other Subsidiary;
(e) Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or
improvement of any real property, fixed or capital assets, including Finance Lease Obligations, and extensions, renewals
and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that
such Indebtedness is incurred no more than 90 days prior to or within 90 days after such acquisition or the completion of
such construction or improvement;
(f) Indebtedness acquired or assumed in Permitted Acquisitions and extensions, renewals and replacements of
any such indebtedness that do not increase the outstanding principal amount thereof or shorten the final maturity or
weighted average life to maturity thereof or have different obligors;
(g) Priority Indebtedness (excluding any Indebtedness permitted by Sections 6.01(e) and (f)) in an aggregate
principal amount at any one time outstanding not to exceed (i) during the Specified Period, $15,000,000 and (ii) on and
after the Specified Period Termination Date, 10% of the Parent Borrower’s then Consolidated Net Worth;
(h) Unsecured Indebtedness (excluding any Indebtedness permitted by Section 6.01(f)), not otherwise permitted
by this Section, of any Borrower or any Subsidiary which is a Guarantor so long as (i) on a pro forma basis after giving
effect to the incurrence of such Indebtedness, the ratio of (x) Adjusted Debt then outstanding to (y) Consolidated
EBITDAR for the then most recently ended period of four consecutive Fiscal Quarters for which financial statements
shall have been delivered to the Lenders pursuant to Section 5.01 is not greater than 3.75 to 1.00;
(i) Indebtedness under Swap Agreements not entered into for speculative purposes;
(j) Any joint and several liability as a result of a fiscal unity (fiscal eenheid) for Dutch tax purposes;
(k) Additional Specified Notes Indebtedness; and
(l) Additional Specified Stimulus Indebtedness.
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For purposes of this subsection 6.01, any Person becoming a Subsidiary of the Parent Borrower after the date of
this Agreement shall be deemed to have incurred all of its then outstanding Indebtedness at the time it becomes a Subsidiary, and
any Indebtedness assumed by the Parent Borrower or any of its Subsidiaries shall be deemed to have been incurred on the date of
assumption.
SECTION 6.02. Liens. The Parent Borrower will not, and will not permit any Subsidiary to, create, incur,
assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) Liens existing on the Effective Date and set forth on Schedule 6.02;
(c) any Lien on any property or asset of the Parent Borrower or any Subsidiary securing Indebtedness permitted
by Section 6.01(e) incurred to acquire, construct or improve such property or asset;
(d) Liens solely constituting the right of any other Person to a share of any licensing royalties (pursuant to a
licensing agreement or other related agreement entered into by the Parent Borrower or any of its Subsidiaries with such
Person in the ordinary course of the Parent Borrower’s or such Subsidiary’s business) otherwise payable to the Parent
Borrower or any of its Subsidiaries, provided that such right shall have been conveyed to such Person for consideration
received by the Parent Borrower or such Subsidiary on an arm’s-length basis;
(e) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to
Operating Leases entered into by the Parent Borrower or any of its Subsidiaries in the ordinary course of business;
(f) Liens securing Indebtedness described in clause (a) of the definition of Priority Indebtedness;
(g) Liens securing Indebtedness permitted under Section 6.01(c);
(h) Bankers’ liens and rights of setoff with respect to customary depository or other banking arrangements
entered into in the ordinary course of business;
(i) Liens attaching solely to cash earnest money or similar deposits in connection with any letter of intent or
purchase agreement in connection with a Permitted Acquisition;
(j) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to
consignments, provided that such Liens extend solely to the assets subject to such consignments; and
(k) Liens, including any netting or set-off, as a result of a fiscal unity (fiscal eenheid) for Dutch tax purposes.
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SECTION 6.03. Sale of Assets. The Parent Borrower will not, nor will it permit any of its Subsidiaries to, sell,
lease, transfer or otherwise dispose of (in one transaction or a series of transactions) all or substantially all of the assets of the
Parent Borrower and its Subsidiaries taken as a whole.
SECTION 6.04. Fundamental Changes. (a) The Parent Borrower will not, and will not permit any Subsidiary
to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate
or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be
continuing, (i) any Subsidiary may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving
corporation, (ii) any Subsidiary (including a Guarantor) may merge into any other Subsidiary in a transaction in which the
surviving entity is a Subsidiary (provided that, in the case of a merger of a Subsidiary that is not a Subsidiary Borrower into a
Subsidiary Borrower in which the surviving Subsidiary is not the Subsidiary Borrower, the surviving Subsidiary shall execute
and deliver to the Administrative Agent an assumption agreement expressly assuming the Subsidiary Obligations of such
Subsidiary Borrower under this Agreement), and (iii) any Subsidiary may liquidate or dissolve if the Parent Borrower determines
in good faith that such liquidation or dissolution is in the best interests of the Parent Borrower and its Subsidiaries and is not
materially disadvantageous to the Lenders and except that the Parent Borrower or any Subsidiary may effect any acquisition
permitted by Section 6.05 by means of a merger of the Person that is the subject of such acquisition with the Parent Borrower or
any of its Subsidiaries (provided that, in the case of a merger with the Parent Borrower, the Parent Borrower is the survivor); and
(b) The Parent Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in
any business other than a Related Line of Business; provided, that the Parent Borrower and any Subsidiary may engage in any
business or businesses which are not Related Lines of Business, so long as the Investments made by the Parent Borrower and/or
the Subsidiaries in such businesses do not exceed $750,000,000 in the aggregate, which amount shall be included in the aggregate
amount for Investments permitted under Section 6.05(j).
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The Parent Borrower will not,
and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit or the
rights of any licensee under a trademark license to such licensee from the Parent Borrower or any of its Affiliates, except:
(a) Permitted Investments;
(b) investments by the Parent Borrower or a Subsidiary in the capital stock of its Subsidiaries;
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(c) loans or advances made by the Parent Borrower to, and Guarantees by the Parent Borrower of obligations
of, any Subsidiary, and loans or advances made by any Subsidiary to, and Guarantees by any Subsidiary of obligations of, the
Parent Borrower or any other Subsidiary;
(d) Guarantees constituting Indebtedness permitted by Section 6.01;
(e) advances or loans made in the ordinary course of business to employees of the Parent Borrower and its
Subsidiaries;
(f) existing Investments not otherwise permitted under this Agreement and described in Schedule 6.05 hereto;
(g) Investments received in connection with the bona fide settlement of any defaulted Indebtedness or other
liability owed to the Parent Borrower or any Subsidiary;
(h) Permitted Acquisitions; provided that if, as a result of a Permitted Acquisition, (i) a new Domestic
Subsidiary shall be created and such Domestic Subsidiary is a “Significant Subsidiary” (as defined in Regulation S-X, part 210.1-
02 of Title 17 of the Code of Federal Regulations) or (ii) any then existing Domestic Subsidiary shall become such a Significant
Subsidiary, such Domestic Subsidiary shall thereafter become party to the Guarantee Agreement as a Guarantor in accordance
with Section 5.10; provided further, that during the Specified Period, the aggregate amount of Permitted Acquisitions made
pursuant to this clause (h), when taken together with all Investments made during such period pursuant to clause (j), shall not
exceed $100,000,000
(i) Swap Agreements not entered into for speculative purposes; and
(j) Investments, in addition to Investments permitted under clauses (a) through (h) of this Section 6.05, but
including Investments permitted under Section 6.04(b) made after the date hereof in an aggregate amount not to exceed
$750,000,000 in any Person or Persons; provided that, during the Specified Period, the aggregate amount of Investments made
pursuant to this clause (j), when taken together with all Permitted Acquisitions made during such period pursuant to clause (h),
shall not exceed $100,000,000.
SECTION 6.06. Transactions with Affiliates. The Parent Borrower will not, and will not permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, (a) any of its Affiliates, (b) a spouse or any relative (by blood,
adoption or marriage) within the third degree of any such Affiliate or (c) any other Person which is an Affiliate of any such
spouse or relative, except (x) in the ordinary course of business at prices and on terms and conditions, in the aggregate (taking
into account all of the Parent Borrower’s or such Subsidiary’s transactions with, and the benefits to the Parent Borrower and its
Subsidiaries derived from the Parent Borrower’s or such Subsidiary’s Investment in, such Affiliate), not less favorable to the
Parent Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, excluding
customary compensation paid to, and indemnity provided on behalf of, directors, officers and employees of the Parent Borrower
and any Subsidiary and (y) transactions between or among the Parent Borrower and its Subsidiaries not involving any other
Affiliate.
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SECTION 6.07. Financial Covenants.
(a) Minimum Liquidity. At all times from the First Amendment Effective Date until the Ratings-Based Pricing
Toggle Date, the Parent Borrower will not permit the aggregate Liquidity of the Parent Borrower and its Subsidiaries to be less
than $750,000,000 at any time (it being understood and agreed that, except as required pursuant to Section 6.01(c), compliance
with this Section 6.07(a) may be certified by a Financial Officer of the Parent Borrower by e-mail to the Administrative Agent).
(b) Consolidated Leverage Ratio. The Parent Borrower will not permit the Consolidated Leverage Ratio (x)
during the Specified Period, to be greater than (i) 5.25 to 1.00 as of the last day of the period of four consecutive Fiscal Quarters
ending on September 30, 2021, (ii) 4.75 to 1.00 as of the last day of the period of four consecutive Fiscal Quarters ending on
December 31, 2021 and the period of four consecutive Fiscal Quarters ending on March 31, 2022 and (iii) 4.25 to 1.00 as of the
last day of any four consecutive Fiscal Quarters ending on or after June 30, 2022, and (y) after the Specified Period Termination
Date, to be greater than 4.25 to 1.00 as of the last day of any four consecutive Fiscal Quarters.
SECTION 6.08. Anti-Corruption Laws and Sanctions. The Parent Borrower will not request any Borrowing or
Letter of Credit, and the Parent Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors,
officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) for the purpose of funding
payments to any officer or employee of a Governmental Authority, or any Person controlled by a Governmental Authority, or any
political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in
furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to
any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities,
business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C) in any manner that would result in
the violation of any Sanctions applicable to any party hereto.
SECTION 6.09. Restricted Payments. At any time prior to the Specified Period Termination Date, the Parent
Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment, except (a) the Parent Borrower may declare and pay dividends with respect to its Equity Interests
payable solely in additional shares of its common stock, (b) Subsidiaries may declare and pay dividends ratably with respect to
their Equity Interests, (c) the Parent Borrower may make Restricted Payments pursuant to and in accordance with stock option
plans or other benefit plans for management or employees of the Borrower and its Subsidiaries and (d) the Parent Borrower and
its Subsidiaries may make any other Restricted Payment in the form of a dividend so long as (i) no Event of Default has occurred
and is continuing prior to making such Restricted Payment or would arise after giving effect thereto and (ii) the aggregate amount
of Restricted Payments made pursuant to this Section 6.09(d) do not exceed (x) $60,000,000 in the aggregate in any Fiscal
Quarter and (y) $200,000,000 in the aggregate in any Fiscal Year.
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ARTICLE VII
Events of Default
If any of the following events (each, an “Event of Default”) shall occur:
(a) any Borrower shall fail to pay (i) any principal of any Loan when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise, or (ii) any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become due and payable and such failure to pay
such reimbursement obligation shall continue unremedied for a period of five Business Days;
(b) any Borrower shall fail to pay any interest on any Loan or unreimbursed LC Disbursement or any fee or any
other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as
the same shall become due and payable, and such failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on behalf of the Parent Borrower or any
Subsidiary in or in connection with this Agreement or the Guarantee Agreement or any amendment or modification
hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or the Guarantee Agreement or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect in any material
respect when made or deemed made;
(d) the Parent Borrower shall fail to observe or perform any covenant, condition or agreement contained in
Section 5.03 (with respect to each Borrower’s existence) or 5.09 or in Article VI;
(e) the Parent Borrower shall fail to observe or perform any covenant, condition or agreement contained in this
Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied
for a period of 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be
given at the request of any Lender);
(f) the Parent Borrower or any Subsidiary shall fail to make any payment of principal or interest, regardless of
amount, in respect of any Material Indebtedness, when and as the same shall become due and payable beyond the period
(without giving effect to any extensions, waivers, amendments or other modifications of or to such period) of grace, if
any, provided in the instrument or agreement under which such Material Indebtedness was created, and, prior to any
termination of Commitments or the acceleration of payment of Loans pursuant to this Article VII, such failure is not
waived in writing by the holders of such Material Indebtedness;
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(g) any event or condition occurs (after giving effect to any applicable grace periods and after giving effect to
any extensions, waivers, amendments or other modifications of any applicable provision or agreement) that results in any
Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any
Material Indebtedness or any trustee or agent on its or their behalf to cause, with the giving of an acceleration or similar
notice if required, any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness to the
extent such Indebtedness is paid when due;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking
(i) liquidation, reorganization or other relief in respect of the Parent Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be
entered; provided, however, that the occurrence of any of the events specified in this paragraph (h) with respect to any
Person other than the Parent Borrower shall not be deemed to be an Event of Default unless (x) the net assets of such
Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most recent audited
financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any such event
and/or (y) the aggregate net assets of all Loan Parties and other Subsidiaries in respect of which any of the events
specified in this paragraph (h) and in paragraphs (i) and (j) of this Article VII shall have occurred shall have exceeded
$50,000,000 as of the date of the most recent audited financial statements delivered to the Lenders pursuant to Section
5.01 or on the date of occurrence of any such event;
(i) the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing; provided, however, that the occurrence of any of the events specified in this paragraph (i) with
respect to any Person other than any Borrower shall not be deemed to be an Event of Default unless (x) the net assets of
such Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most recent
audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any such
event and/or (y) the aggregate net
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assets of all Loan Parties and other Subsidiaries in respect of which any of the events specified in this paragraph (i) and in
paragraphs (h) and (j) of this Article VII shall have occurred shall have exceeded $50,000,000 as of the date of the most
recent audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any
such event;
(j) the Parent Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to
pay its debts as they become due; provided, however, that the occurrence of any of the events specified in this paragraph
(j) with respect to any Person other than any Borrower shall not be deemed to be an Event of Default unless (x) the net
assets of such Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most
recent audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any
such event and/or (y) the aggregate net assets of all Loan Parties and other Subsidiaries in respect of which any of the
events specified in this paragraph (j) and in paragraphs (h) and (i) of this Article VII shall have occurred shall have
exceeded $50,000,000 as of the date of the most recent audited financial statements delivered to the Lenders pursuant to
Section 5.01 or on the date of occurrence of any such event;
(k) one or more judgments for the payment of money in an aggregate amount (not paid or covered by insurance)
in excess of $50,000,000 shall be rendered against the Parent Borrower, any Subsidiary or any combination thereof and (i)
the same shall remain undischarged for a period of 60 consecutive days from the entry thereof during which execution
shall not be effectively stayed or bonded, or (ii) any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Parent Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event or Foreign Plan Event shall have occurred that, in the reasonable opinion of the Required
Lenders, when taken together with all other ERISA Events or Foreign Plan Events that have occurred, could reasonably
be expected to result in a Material Adverse Effect;
(m) a Change in Control shall occur; or
(n) the Guarantee Agreement ceases to be in full force and effect;
then, and in every such event (other than an event with respect to any Borrower described in clause (h) or (i) of this Article), and
at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required
Lenders shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder and under any other
Loan Document, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers; and in case of any
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event with respect to any Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the
Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.
ARTICLE VIII
The Administrative Agent
Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower or any
Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby
that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Parent Borrower or any of its Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any
action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross
negligence, bad faith or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by the Parent Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than
to confirm receipt of items expressly required to be delivered to the Administrative Agent.
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The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and
other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any
such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any
one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of
the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for
herein as well as activities as Administrative Agent.
The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders and the Parent
Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Parent Borrower, to
appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably satisfactory to the Parent Borrower
which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the Parent Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower and such
successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.03 shall continue
in effect for the benefit of such retiring Administrative Agent, its sub‑agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
Each Lender (including each Issuing Bank) acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender (including each Issuing Bank) also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.
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The Syndication Agent and Co-Documentation Agents shall not have any duties or responsibilities under the Loan
Documents in their capacity as such.
Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y)
covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of, the Administrative Agent, and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any
other Loan Party, that at least one of the following is and will be true:
(i) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or
more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the
Loans, the Letters of Credit, the Commitments, or this Agreement,
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain
transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain
transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions
involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving
bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset
managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance
of the Loans, the Letters of Credit, the Commitments and this Agreement,
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the
meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on
behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the
Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans,
the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of
Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-
14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the
Loans, the Letters of Credit, the Commitments and this Agreement, or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative
Agent, in its sole discretion, and such Lender.
In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender
has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding
clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y)
covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of the Administrative Agent, and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any
other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such
Lenders’ entrance into, participation in,
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administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in
connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document
or any documents related hereto or thereto).
ARTICLE IX
Guarantee
SECTION 9.01. Guarantee (a) The Parent Borrower hereby unconditionally and irrevocably guarantees to the
Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Subsidiary Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Subsidiary Obligations (other than, with respect to any Guarantor, any Excluded Swap
Obligations of such Guarantor). As used in this Article IX, the term “Lenders” includes affiliates of Lenders which are parties to
any Specified Cash Management Agreements or Specified Swap Agreements.
(b) The Parent Borrower agrees that the Subsidiary Obligations may at any time and from time to time exceed
the amount of the liability of the Parent Borrower hereunder that would exist in the absence of this Article IX without impairing
this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender hereunder.
(c) This Guarantee shall remain in full force and effect until all the Subsidiary Obligations shall have been
satisfied by payment in full in immediately available funds, no Letter of Credit shall be outstanding and the Commitments shall
be terminated, notwithstanding that from time to time during the term of this Guarantee the Subsidiary Borrowers may be free
from any Subsidiary Obligations.
(d) No payment made by any Borrower, any Guarantor, any other guarantor or any other Person or received or
collected by the Administrative Agent or any Lender from any Borrower, any Guarantor, any other guarantor or any other Person
by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction
of or in payment of the Subsidiary Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the
Parent Borrower hereunder which shall, notwithstanding any such payment (other than any payment made by the Parent
Borrower in respect of the Subsidiary Obligations or any payment received or collected from the Parent Borrower in respect of
the Subsidiary Obligations), remain liable for the Subsidiary Obligations until the Subsidiary Obligations are paid in full in
immediately available funds, no Letter of Credit shall be outstanding and the Commitments are terminated.
SECTION 9.02. No Subrogation. Notwithstanding any payment made by the Parent Borrower hereunder or any
set-off or application of funds of the Parent Borrower by the Administrative Agent or any Lender, the Parent Borrower shall not
be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Subsidiary Borrowers or
any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Subsidiary Obligations nor shall the
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Parent Borrower seek or be entitled to seek any contribution or reimbursement from the Subsidiary Borrowers or any other
Guarantor in respect of payments made by the Parent Borrower under this Guarantee, until all amounts owing to the
Administrative Agent and the Lenders by the Subsidiary Borrowers on account of the Subsidiary Obligations are paid in full in
immediately available funds, no Letter of Credit shall be outstanding and the Commitments are terminated. If any amount shall
be paid to the Parent Borrower on account of such subrogation rights at any time when all of the Subsidiary Obligations shall not
have been paid in full in immediately available funds, such amount shall be held by the Parent Borrower for the benefit of the
Administrative Agent and the Lenders, and shall, forthwith upon receipt by the Parent Borrower, be turned over to the
Administrative Agent in the exact form received by the Parent Borrower (duly indorsed by the Parent Borrower to the
Administrative Agent, if required), to be applied against the Subsidiary Obligations whether matured or unmatured, in such order
as the Administrative Agent may determine.
SECTION 9.03. Amendments, etc. with respect to the Subsidiary Obligations. The Parent Borrower shall
remain obligated under this Guarantee notwithstanding that, without any reservation of rights against the Parent Borrower and
without notice to or further assent by the Parent Borrower, any demand for payment of any of the Subsidiary Obligations made
by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender and any of the
Subsidiary Obligations continued, and the Subsidiary Obligations or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part,
be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and this Agreement and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, in accordance with Section 10.02, as the Administrative
Agent (or the Required Lenders or all Lenders, as the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the
Subsidiary Obligations may be sold, exchanged, waived, surrendered or released without affecting the Parent Borrower’s
obligations under this Article IX. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the Subsidiary Obligations or for this Guarantee.
SECTION 9.04. Guarantee Absolute and Unconditional. The Parent Borrower waives any and all notice of the
creation, renewal, extension or accrual of any of the Subsidiary Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Subsidiary Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Article IX; and all dealings between the Parent Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Article IX. The Parent Borrower waives diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon the Subsidiary Borrowers or any of the Guarantors with respect to the Subsidiary
Obligations. The Parent Borrower understands and agrees that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or enforceability of this Agreement, any of the Subsidiary
Obligations or any other collateral security therefor or guarantee or right of offset with respect
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thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be available to or be asserted by any Subsidiary
Borrower or any other Person against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of any Borrower or any Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Subsidiary Borrowers for the Subsidiary Obligations, or of the Parent Borrower under this
Article IX, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against the Parent Borrower, the Administrative Agent or any Lender may, but shall be under no obligation
to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Subsidiary Borrowers, any
other Guarantor or any other Person or against any collateral security or guarantee for the Subsidiary Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from any Subsidiary Borrower, any other Guarantor or any other Person or to
realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Subsidiary
Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve
the Parent Borrower of any obligation or liability under this Article IX, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against the Parent Borrower
under this Article IX. For the purposes hereof “demand” shall include the commencement and continuance of any legal
proceedings.
SECTION 9.05. Reinstatement. This Article IX shall continue to be effective, or shall be reinstated, as the case
may be, if at any time payment, or any part thereof, of any of the Subsidiary Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
SECTION 9.06. Payments. The Parent Borrower hereby guarantees that payments hereunder will be paid to the
Administrative Agent without set-off or counterclaim in dollars or the applicable Alternative Currency at the office of the
Administrative Agent located at 10 South Dearborn Street, 7th Floor, Chicago, Illinois 60603-2300 and to the following wire
instructions of the Administrative Agent (or such other address or wire instructions of the Administrative Agent that may be
provided from time to time by the Administrative Agent):
Bank: JPMorgan Chase Bank, N.A.
Location: Chicago, Illinois
Account No.: [REDACTED]
ABA No.: 021000021
Beneficiary: Loan Processing D.P.
Reference: Ralph Lauren Corporation
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SECTION 9.07. Keepwell. Each Borrower Qualified Keepwell Provider hereby jointly and severally absolutely,
unconditionally, and irrevocably undertakes to provide such funds or other support as may be needed from time to time for the
Parent Borrower to qualify as an Eligible Contract Participant during the Swap Guarantee Eligibility Period in respect of any
Swap Obligation (provided, however, that each Borrower Qualified Keepwell Provider shall only be liable under this Section
9.07 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section
9.07, or otherwise under this Guarantee, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer,
and not for any greater amount). The obligations of each Borrower Qualified Keepwell Provider under this Section 9.07 shall
remain in full force and effect until the obligations of the Borrowers under this Agreement have expired, been discharged or have
otherwise been terminated in accordance with the terms of this Agreement. Each Borrower Qualified Keepwell Provider intends
that this Section 9.07 constitute, and this Section 9.07 shall be deemed to constitute, a “keepwell, support, or other agreement” for
the benefit of the Parent Borrower for all purposes of section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be
given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein and in the
Guarantee Agreement shall be in writing and shall be delivered by hand or nationally recognized overnight courier service,
mailed by certified or registered mail, U.S. first class postage prepaid, or sent by telecopy, as follows:
(i) if to any Borrower, to Ralph Lauren Corporation, 650 Madison Avenue, New York, New York 10022,
Attention of Jane Hamilton Nielsen, Executive Vice President, Chief Operating Officer and Chief Financial Officer
(Telecopy No. (212) 318-7232), with a copy to Ralph Lauren Corporation, 650 Madison Avenue, New York, New York
10022, Attention of Robert Alexander, Senior Vice President, Treasurer and Global Tax (Telecopy No. (201) 531-6251);
(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 10 South Dearborn Street, 7th Floor,
Chicago, Illinois 60603-2300, Attention of Carla Evans-Ali (Telecopy No. (844) 490-5663; Emails: carla.evans-
ali@chase.com and jpm.agency.servicing.1@jpmchase.com), with a copy to JPMorgan Chase Bank, N.A., Loan and
Agency Services Group, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2300, Attention of Carla Evans-Ali
(Telecopy No. (844) 490-5663; Emails: carla.evans-ali@chase.com and jpm.agency.servicing.1@jpmchase.com); and
(iii) if to any other Lender or any Issuing Bank, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
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Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given
when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the
recipient). Notices delivered through Electronic Systems, to the extent provided in paragraph (b) below, shall be effective as
provided in said paragraph (b).
(b) Notices and other communications to the Lenders (including any Issuing Bank) hereunder may be delivered or
furnished by using Electronic Systems pursuant to procedures approved by the Administrative Agent; provided that the foregoing
shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may
be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes (i) notices and other communications to a Lender (including an
Issuing Bank) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written
acknowledgement), and (ii) notices or communications to a Lender (including an Issuing Bank) posted to an Internet or intranet
website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the
foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor;
provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the
next Business Day for the recipient.
(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder
by notice to the other parties hereto (or, in the case of any Lender, by notice to the Administrative Agent and the Parent
Borrower).
(d) Electronic Systems.
(iv) Each Loan Party, Issuing Bank and Lender agrees that the Administrative Agent may, but shall not be
obligated to, make Communications (as defined below) available to the Issuing Banks and the other Lenders by posting
the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.
(v) Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The
Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability
for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any
warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic
System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have
any liability to any Borrower or the other Loan Parties, any Lender, the Issuing Bank or
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any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential
damages, losses or expenses (whether in tort, contract or otherwise) arising out of the any Loan Party’s or the
Administrative Agent’s transmission of communications through an Electronic System, in each case except as found by a
final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith
or willful misconduct of, or material breach of its obligations under the Loan Documents by, such Agent Party.
“Communications” means, collectively, any notice, demand, communication, information, document or other material
provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein
which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic
communications pursuant to this Section, including through an Electronic System.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, any Issuing Bank
or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the
Issuing Banks and the Lenders hereunder and under the Guarantee Agreement are cumulative and are not exclusive of any rights
or remedies that they would otherwise have. No waiver of any provision of this Agreement or the Guarantee Agreement or
consent to any departure by any Borrower or any Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any
Issuing Bank may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor the Guarantee Agreement nor any provision hereof or thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers or the Guarantors,
as the case may be, and the Required Lenders or by the Borrowers or the Guarantors, as the case may be, and the Administrative
Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any
Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce
the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or
any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in
a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v)
release all or substantially all of the Guarantors from their obligations under the Guarantee Agreement, without the written
consent of each Lender (except that no approval of the Lenders shall be required to release a Guarantor in connection with the
disposition of all the capital stock of such Guarantor not prohibited by the Loan Documents) or (vi) change any of the provisions
of this Section or the definition of “Commitment”, the definition of “Required Lenders”, the definition of “Applicable
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Percentage” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify
any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
provided, further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent
or an Issuing Bank without the prior written consent of the Administrative Agent or such Issuing Bank, as the case may be. If the
Administrative Agent and the Parent Borrower acting together identify any ambiguity, omission, mistake, typographical error or
other defect in any provision of this Agreement or any other Loan Document, then the Administrative Agent and the Parent
Borrower shall be permitted to amend, modify or supplement such provision to cure such ambiguity, omission, mistake,
typographical error or other defect, and such amendment shall become effective without any further action or consent of any
other party to this Agreement.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Parent Borrower shall pay (i) all reasonable
and documented out‑of‑pocket expenses incurred by the Administrative Agent, the Syndication Agent and the Lead Arrangers,
including the reasonable fees, charges and disbursements of one domestic counsel for the Administrative Agent and the Lead
Arrangers, collectively, in connection with the syndication of the credit facilities provided for herein, the preparation of this
Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof and (ii) all
reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or any Lender,
including the reasonable fees, charges and disbursements of one domestic counsel and one foreign counsel, as necessary, in each
applicable jurisdiction for the Administrative Agent, the Syndication Agent, any Issuing Bank or any Lender, in connection with
the enforcement or preservation of its rights in connection with this Agreement and the other Loan Documents, including its
rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such
reasonable and documented out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.
(b) The Parent Borrower shall indemnify the Administrative Agent, the Syndication Agent, the Co-Documentation
Agents, the Lead Arrangers, each Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of
this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby, the performance by the parties
hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by an Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any
property owned or operated by the Parent Borrower or any of its Subsidiaries, or any Environmental Liability related in any way
to the Parent Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not such claim, litigation, investigation or proceeding is brought by the Borrower or
any other Loan Party or their respective equity holders, Affiliates, creditors or any
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other third Person and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of, or material breach of its obligations under the Loan Documents by,
such Indemnitee or such Indemnitee’s employer or any Affiliate of either thereof or any of their respective officers, directors,
employees, advisors or agents. Paragraph (b) of this Section shall not apply with respect to Taxes other than any Taxes that
represent losses, claims, damages, etc. arising from any non-Tax claim.
(c) To the extent that the Parent Borrower fails to pay any amount required to be paid by it to the Administrative
Agent or any Issuing Bank under paragraph (a) or (b) of this Section, but without affecting the Parent Borrower’s obligations
thereunder, each Lender severally agrees to pay to the Administrative Agent or such Issuing Bank, as the case may be, such
Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the Administrative Agent or such Issuing Bank in its capacity as
such.
(d) To the extent permitted by applicable law, no party hereto shall assert, and each such party hereby waives, any
claim against any other party and any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other
Loan Document, or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof; provided that, nothing in this clause (d) shall relieve the Borrowers of any obligation they may
have to indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by
a third party.
(e) All amounts due under this Section shall be payable promptly after written demand therefor.
SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any
Issuing Bank that issues any Letter of Credit), except that (i) a Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by a Borrower
without such consent shall be null and void) and (ii) no Lender (including any Issuing Bank) may assign or otherwise transfer its
rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c)
of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, each
Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the
Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Parent Borrower; provided that no consent of the Parent Borrower shall be required for an
assignment to a Lender, an Affiliate of a Lender (provided that such Affiliate is a Swiss Qualifying Bank or a Swiss
Permitted Non-Qualifying Bank), an Approved Fund (provided that such Approved Fund is a Swiss Permitted Non-
Qualifying Bank) or, if an Event of Default under clause (a), (b), (h) or (i) of Article VII has occurred and is continuing,
any other assignee; provided, further, that the Parent Borrower shall be deemed to have consented to any such assignment
unless the Parent Borrower shall object thereto by written notice to the Administrative Agent within ten Business Days
after having received written notice thereof;
(B) the Administrative Agent; and
(C) in the case of an assignment of a Commitment or an interest in Letters of Credit, each Issuing Bank.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Parent
Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Parent Borrower shall be
required if an Event of Default under clause (a), (b), (h) or (i) of Article VII has occurred and is continuing;
(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning
Lender's rights and obligations under this Agreement;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500;
(D) the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire;
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(E) no assignment (including any assignment to a Lender, an Affiliate of a Lender or an Approved Fund)
shall be permitted if, immediately after giving effect thereto, amounts would become payable by any Borrower under
Section 2.13 or 2.15 (including amounts payable under Section 2.15 in respect of withholding taxes) that are in excess of
those that would be payable under such Section in respect of the amount assigned if such assignment were not made;
(F) no assignment shall be made to a natural person; and
(G) no assignment shall be made to any Borrower or its Affiliates.
(H) For the purposes of this Section 10.04(b), the term “Approved Fund” has the following meaning:
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding
or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the
effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement
(including, in the case of any Non-U.S. Lender (including each Issuing Bank that is a Non-U.S. Lender), obligations under
Section 2.15(f)), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 10.03); provided, however, that no such assignment or
transfer shall be deemed to be a waiver of any rights which any Borrower, the Administrative Agent or any other Lender shall
have against such Lender. Any assignment or transfer by a Lender (including an Issuing Bank) of rights or obligations under this
Agreement that does not comply with this Section 10.04 shall be treated for purposes of this Agreement as a sale by such Lender
of a participation in such rights and obligations in accordance with, and subject to the conditions set forth in, paragraph (c) of this
Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its
offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant
to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and
each Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by any Borrower, any Issuing Bank and (solely with respect to the
Revolving Credit Exposure of such Lender) any Lender, at any reasonable time and from time to time upon reasonable prior
notice.
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(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an
assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Parent Borrower, the Administrative Agent or any Issuing
Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A)
such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (C) the relevant Participant will have no proprietary interest in the
benefit of this Agreement or in any monies received by such Lender under or in relation to this Agreement, (D) the relevant
Participant will under no circumstances be subrogated to, or substituted in respect of, such Lender's claims under this Agreement
or have otherwise any contractual relationship with, or rights against, any Borrower under, or in relation to, this Agreement
(except as set forth in the following sentence with regards to benefits that each Participant is entitled to under Sections 2.13, 2.14
and 2.15 to the same extent as if it were a Lender and had acquired an interest by assignment pursuant to paragraph (b) of this
Section) and (E) the Borrowers, the Administrative Agent, the applicable Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in clauses (i), (ii), (iii), (v) and (vi) of the first proviso to Section 10.02(b)
that affects such Participant. Subject to paragraph (c)(ii) of this Section, each Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant shall also be entitled to the
benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.16(c) as though it
were a Lender; provided that, the foregoing sentence shall not apply to Ralph Lauren Europe Sàrl. Each Lender that sells a
participation, acting solely for this purpose as a non-fiduciary agent of the Borrowers, shall maintain a register on which it enters
the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans
or other obligations under this Agreement (the “Participant Register”); provided that no Lender shall have any obligation to
disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information
relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan
Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or
other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the
Participant Register shall be conclusive, and such Lender, each Loan Party and the Administrative Agent shall treat each Person
whose name is recorded in the Participant Register
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pursuant to the terms hereof as the owner of such participation for all purposes of this Agreement, notwithstanding notice to the
contrary.
(ii) A Participant shall not be entitled to the benefits of Section 2.13, 2.14 or 2.15 unless such Participant shall
have complied with the requirements of such Section; provided, that in any case in which a Participant is so entitled, any such
Participant shall not be entitled to receive any greater payment under Section 2.13, 2.14 or 2.15 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such
Participant is made with the Parent Borrower's prior written consent, except to the extent such entitlement to receive a greater
payment results from a Change in Law that occurs after the Participant acquired the applicable participation. A Participant that
would be a Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Parent Borrower is
notified of the participation sold to such Participant and such Participant agrees, for the benefit of the applicable Borrower, to
comply with Section 2.15(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no
such pledge or assignment of a security interest shall (i) release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto (ii) require any payments to be made by any Borrower or grant to any
person any more extensive rights than those required to be made or granted to the relevant Lender under the Loan Documents, or
(iii) upon any enforcement of such pledge or assignment of a security interest, result in any assignment, transfer or sub-
participation of any such rights under the Loan Documents which is in breach of this Clauses (a), (b) or (c) of this Section 10.04.
SECTION 10.05. Survival. All representations and warranties made by the Borrowers herein and the other
Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, and
shall terminate at such time as no principal of or accrued interest on any Loan or any fee or any other amount payable under this
Agreement (other than contingent indemnification obligations that are not due and payable) is outstanding and unpaid, no Letter
of Credit is outstanding and the Commitments have expired or been terminated. The provisions of Sections 2.13, 2.14, 2.15,
10.03, 10.13 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or
the termination of this Agreement or any provision hereof.
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SECTION 10.06. Counterparts; Integration; Effectiveness. (a) This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Agreement, the Guarantee Agreement and any separate letter agreements with
respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together,
bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
(b) Delivery of an executed counterpart of a signature page of (x) this Agreement, (y) any other Loan Document
and/or (z) any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or
authorization related to this Agreement, any other Loan Document and/or the transactions contemplated hereby and/or thereby
(each an “Ancillary Document”) (which, as applicable, shall be delivered as set forth in Section 10.01) that is an Electronic
Signature transmitted, to the extent permitted by Section 10.01 and this sentence, by telecopy, emailed pdf. or any other
electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually
executed counterpart of this Agreement, such other Loan Document or such Ancillary Document, as applicable; provided that
nothing herein shall require the Administrative Agent to accept Electronic Signatures in any form or format without its prior
written consent and pursuant to procedures approved by it; provided, further, without limiting the foregoing, (i) to the extent the
Administrative Agent has agreed to accept any Electronic Signature, the Administrative Agent and each of the Lenders shall be
entitled to rely on such Electronic Signature purportedly given by or on behalf of the Borrower or any other Loan Party without
further verification thereof and without any obligation to review the appearance or form of any such Electronic signature and (ii)
upon the request of the Administrative Agent, any Borrower, any other Loan Party or any Lender, any such Electronic Signature
shall be promptly followed by a manually executed counterpart. The words “execution,” “signed,” “signature,” “delivery,” and
words of like import in or relating to this Agreement, any other Loan Document and/or any Ancillary Document shall be deemed
to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy,
emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be
of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a
paper-based recordkeeping system, as the case may be. Without limiting the generality of the foregoing, the Borrower and each
Loan Party hereby, subject to the provisos in the first sentence of this Section 10.06(b), (i) agrees that, for all purposes, including
without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation
among the Administrative Agent, the Lenders, the Borrower and the Loan Parties, Electronic Signatures transmitted (to the extent
permitted by Section 10.01 and the first sentence of this Section 10.06(b)) by telecopy, emailed pdf. or any other electronic means
that reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any other Loan
Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, (ii)
the Administrative Agent, each of the Lenders, each Borrower and each other Loan Party may, at its option, create one or more
copies
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of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any
format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document
(and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and
enforceability as a paper record), (iii) waives any argument, defense or right to contest the legal effect, validity or enforceability
of this Agreement, any other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of
this Agreement, such other Loan Document and/or such Ancillary Document, respectively, including with respect to any
signature pages thereto and (iv) waives any claim against any Lender and its related parties for any losses, claims, damages,
liabilities and related expenses arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of
Electronic Signatures and/or transmissions (to the extent permitted by Section 10.01 and the first sentence of this Section
10.06(b)) by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page,
including any losses, claims, damages, liabilities and related expenses arising as a result of the failure of the Borrower and/or any
Loan Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic
Signature.
.SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without
affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender
and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the
obligations of any Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided that,
to the extent prohibited by applicable law as described in the definition of “Excluded Swap Obligation”, no amounts received
from, or set off with respect to, any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor. The rights
of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender
may have.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the
other Loan Documents shall be construed in accordance with and governed by the law of the State of New York without
reference to rules or principles that would require the application of the laws of any other jurisdiction.
(b) Each of the Lenders and the Administrative Agent hereby irrevocably and unconditionally agrees that,
notwithstanding the governing law provisions of any applicable Loan Document, any claims brought against the Administrative
Agent by any Lender relating to this Agreement, any other Loan Document or the consummation or administration of the
transactions contemplated hereby or thereby shall be construed in accordance with and governed by the law of the State of New
York.
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(c) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in the Borough of
Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough
of Manhattan), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement
or any other Loan Document or the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may (and any such claims, cross-claims or third party claims brought against the Administrative Agent or any of its
Related Parties may only) be heard and determined in such Federal (to the extent permitted by law) or New York State court.
Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other
Loan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against the Borrowers, any Loan Party or its properties in the courts of
any jurisdiction.
(d) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(e) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in
Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
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SECTION 10.12. Confidentiality. Each of the Administrative Agent, each Issuing Bank and the Lenders agrees
to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors, in each case who
have a need to know such Information in accordance with customary banking practices (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority,
such as the National Association of Insurance Commissioners) (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject
to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or
any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to any Borrower and its obligations, (g) with the
consent of the Parent Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis from a source other than a Borrower which is not subject to a confidentiality obligation known to the
Administrative Agent and the Lenders with respect to such information. For the purposes of this Section, “Information” means all
information received from any Borrower or any Subsidiary relating to such Borrower, any Subsidiary or their respective
businesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by such Borrower or any Subsidiary and other than information pertaining to this
Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending
industry; provided that, in the case of information received from any Borrower or any Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 10.13. Satisfaction in Applicable Currency. (a) If, for the purpose of obtaining judgment in any
court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the
fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal
banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business
Day immediately preceding the day on which final judgment is given.
(b) The obligation of each Borrower hereunder or in respect of the Letters of Credit to make payments in a
currency (the “Agreement Currency”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than
the Agreement Currency, be discharged only to the extent that, on the Business Day following receipt by the Administrative
Agent and the Lenders of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent and the
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Lenders may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with
the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the
Administrative Agent and the Lenders in the Agreement Currency, the applicable Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Administrative Agent, the Issuing Banks and each Lender (as an alternative
or additional cause of action) against such loss (if any) and if the amount of the Agreement Currency so purchased exceeds the
sum originally due to the Administrative Agent and the Lenders in the Agreement Currency, the Administrative Agent and the
Lenders agree to remit such excess to the applicable Borrower. The obligations of each Borrower contained in this Section 10.13
shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.
SECTION 10.14. Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding
anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the
extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution
Authority and agrees and consents to, and acknowledges and agrees to be bound by:the application of any Write-Down and
Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by
any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected
Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and
that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such
liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers
of the applicable Resolution Authority.
SECTION 10.15. No Fiduciary Duty. The Administrative Agent, each Lender and their Affiliates (collectively,
solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of each of the
Borrowers, its stockholders and/or its affiliates. Each Borrower agrees that nothing in the Loan Documents or otherwise will be
deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one
hand, and any Borrower, its stockholders or its affiliates, on the other. Each Borrower acknowledges and agrees that (i) the
transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are
arm’s-length commercial transactions between the Lenders, on the one hand, and the Borrowers, on the other, and (ii) in
connection therewith and with the process leading thereto, (x) no Lender has assumed
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an advisory or fiduciary responsibility in favor of any Borrower, its stockholders or its affiliates with respect to the transactions
contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of
whether any Lender has advised, is currently advising or will advise any Borrower, its stockholders or its Affiliates on other
matters) or any other obligation to any Borrower except the obligations expressly set forth in the Loan Documents and (y) each
Lender is acting solely as principal and not as the agent or fiduciary of any Borrower, its management, stockholders, creditors or
any other Person. Each Borrower acknowledges and agrees that it has consulted its own legal and financial advisors to the extent
it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and
the process leading thereto. Each Borrower agrees that it will not claim that any Lender has rendered advisory services of any
nature or respect, or owes a fiduciary or similar duty to such Borrower, in connection with such transaction or the process leading
thereto.
SECTION 10.16. USA PATRIOT Act. Each Lender and the Administrative Agent hereby notifies the
Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107‑56 (signed into law October
26, 2001)) (the “Patriot Act”), such Lender and Agent is required to obtain, verify and record information that identifies the
Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrowers shall
provide such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order
to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act.
SECTION 10.17. Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents
provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC
(such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with
respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the
“U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below
applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of
the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a
proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC
Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any
rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective
to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and
such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the
United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party
becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that
might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered
Party are
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permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special
Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a
state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the
parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a
Supported QFC or any QFC Credit Support.
SECTION 10.18. Existing Credit Agreement. (a) The Lenders which are parties to the Existing Credit
Agreement (which Lenders constitute the “Required Lenders” as defined in the Existing Credit Agreement) hereby (i) waive the
requirement, set forth in Section 2.07(c) of the Existing Credit Agreement, that the Parent Borrower give not less than two
Business Days’ notice of any termination of the Commitments (as defined therein), (ii) acknowledge and agree that, for purposes
of determining the total “Revolving Credit Exposures” (as defined therein) that would be outstanding thereunder on the date of
such termination, the letters of credit issued thereunder that are listed on Schedule 2.04 hereof shall (as a result of the operation of
the antepenultimate sentence of Section 2.04(a) of this Agreement, which provides that on the Effective Date such letters of credit
shall be deemed to be “Letters of Credit” issued hereunder) on the Effective Date be deemed no longer outstanding under the
Existing Credit Agreement and (iii) pursuant to Section 9.02 of the Existing Credit Agreement, consent to the execution and
delivery by JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent (under and as defined in the Existing Credit
Agreement) for and on behalf of the Lenders (under and as defined in the Existing Credit Agreement), of this Agreement to
evidence or effectuate (as set forth in Section 10.02(b)) the waivers and agreements set forth in clauses (i) and (ii) above.
(b) JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent as defined in the Existing Credit
Agreement hereby (i) waives, for and on behalf of the Lenders (as defined therein), the requirement, set forth in Section 2.07(c)
of the Existing Credit Agreement, that the Parent Borrower give not less than two Business Days’ notice of any termination of the
Commitments (as defined therein) and (ii) acknowledges and agrees, for and on behalf of the Lenders (as defined therein), that
for purposes of determining the total “Revolving Credit Exposures” (as defined therein) that would be outstanding thereunder on
the date of such termination, the letters of credit issued thereunder that are listed on Schedule 2.04 hereof shall on the Effective
Date be deemed no longer outstanding under the Existing Credit Agreement.
(c) Upon the Effective Date, the Existing Credit Agreement shall deemed to be terminated.
[Remainder of Page Intentionally Left Blank;
Signatures Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
RALPH LAUREN CORPORATION
By:
/s/ Jane Nielsen
Name: Jane Nielsen
Title: Chief Financial Officer and Chief Operating
Officer
RL FINANCE B.V.
By:
/s/ Agnieszka Gradek
Name: Agnieszka Gradek
Title: Managing Director
RALPH LAUREN EUROPE SÀRL
By:
/s/ Robert Alexander
Name: Robert Alexander
Title: Managing Officer (Gérant)
RALPH LAUREN ASIA PACIFIC LIMITED
By:
/s/ Shih Jern Liang
Name: Shih Jern Liang
Title: Director
[Signature Page to First Amendment]
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JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and as a Lender
By:
/s/ Devin Roccisano
Name: Devin Roccisano
Title: Executive Director
[Signature Page to First Amendment]
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Bank of America, N.A., as a Lender
By:
/s/ Kevin Yuen
Name: Kevin Yuen
Title: Senior Vice President
WELLS FARGO BANK, N.A., as a Lender
By:
/s/ Joseph Gricco
Name: Joseph Gricco
Title: Director
HSBC Bank USA, N.A., as a Lender
By:
/s/ Jason Fuqua
Name: Jason Fuqua
Title: Vice President
DEUTSCHE BANK AG NEW YORK BRANCH, as a
Lender
By:
/s/ Ming K. Chu
Name: Ming K. Chu
Title: Director
By:
/s/ Annie Chung
Name: Annie Chung
Title: Director
[Signature Page to First Amendment]
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ING BANK N.V., DUBLIN BRANCH, as a Lender
By:
/s/ Sean Hassett
Name: Sean Hassett
Title: Director
By:
/s/ Cormac Langford
Name: Cormac Langford
Title: Director
SUMITOMO MITSUI BANKING CORPORATION, as a
Lender
By:
/s/ Katie Lee
Name: Katie Lee
Title: Director
GOLDMAN SACHS BANKS USA, as a Lender
By:
/s/ Annie Carr
Name: Annie Carr
Title: Authorized Signatory
[Signature Page to First Amendment]
116
EXHIBIT 10.42
EXECUTION VERSION
CREDIT AGREEMENT
dated as of
May 26, 2020
among
RALPH LAUREN CORPORATION, RL FINANCE B.V., RALPH LAUREN EUROPE SÀRL and RALPH LAUREN ASIA
PACIFIC LIMITED,
as Borrowers,
The Lenders Party Hereto
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
BANK OF AMERICA, N.A.,
as Syndication Agent
and
DEUTSCHE BANK SECURITIES INC., ING BANK N.V., DUBLIN BRANCH,
SUMITOMO MITSUI BANKING CORPORATION and HSBC BANK USA, N.A.,
as Co-Documentation Agents
JPMORGAN CHASE BANK, N.A. and
BOFA SECURITIES, INC.
as Bookrunners and Lead Arrangers
1
Table of Contents
ARTICLE I DEFINITIONS
SECTION 1.01. Defined Terms
SECTION 1.02. Classification of Loans and Borrowings
SECTION 1.03. Terms Generally
SECTION 1.04. Accounting Terms; GAAP
SECTION 1.05. Exchange Rates
SECTION 1.06. Divisions
SECTION 1.07. Lenders’ Status
ARTICLE II THE CREDITS
SECTION 2.01. Commitments
SECTION 2.02. Loans and Borrowings
SECTION 2.03. Requests for Borrowings
SECTION 2.04. [Reserved]
SECTION 2.05. Funding of Borrowings
SECTION 2.06. Interest Elections
SECTION 2.07. Termination and Reduction of Commitments
SECTION 2.08. Repayment of Loans; Evidence of Debt
SECTION 2.09. Prepayment of Loans
SECTION 2.10. Fees
SECTION 2.11. Interest; Eurocurrency Tranches
SECTION 2.12. Alternate Rate of Interest
SECTION 2.13. Increased Costs
SECTION 2.14. Break Funding Payments
SECTION 2.15. Taxes
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
SECTION 2.17. Mitigation Obligations; Replacement of Lenders
SECTION 2.18. [Reserved]
SECTION 2.19. Defaulting Lenders
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers
SECTION 3.02. Authorization; Enforceability
SECTION 3.03. Governmental Approvals; No Conflicts
SECTION 3.04. Financial Condition; No Material Adverse Change
SECTION 3.05. Properties
SECTION 3.06. Litigation and Environmental Matters
SECTION 3.07. Compliance with Laws and Agreements
SECTION 3.08. Investment Company Status
SECTION 3.09. Taxes
SECTION 3.10. ERISA
SECTION 3.11. Disclosure
SECTION 3.12. Subsidiary Guarantors
SECTION 3.13. Anti-Corruption Laws and Sanctions
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SECTION 3.14. EEA Financial Institutions
SECTION 3.15. Plan Assets; Prohibited Transactions
SECTION 3.16. Margin Regulations
SECTION 3.17. Compliance with Swiss Non-Bank Rules
SECTION 3.18. Additional Specified Stimulus Indebtedness
ARTICLE IV CONDITIONS
SECTION 4.01. Effective Date
SECTION 4.02. Each Credit Event
SECTION 4.03. Additional Condition to Initial Borrowing by Subsidiary Borrowers
ARTICLE V AFFIRMATIVE COVENANTS
SECTION 5.01. Financial Statements; Ratings Change and Other Information
SECTION 5.02. Notices of Material Events
SECTION 5.03. Existence; Conduct of Business
SECTION 5.04. Payment of Obligations
SECTION 5.05. Maintenance of Properties; Insurance
SECTION 5.06. Books and Records; Inspection Rights
SECTION 5.07. Compliance with Laws
SECTION 5.08. Compliance with Swiss Non-Bank Rules
SECTION 5.09. Use of Proceeds
SECTION 5.10. Guarantee Agreement Supplement
SECTION 5.11. Additional Specified Stimulus Indebtedness
ARTICLE VI NEGATIVE COVENANTS
SECTION 6.01. Indebtedness
SECTION 6.02. Liens
SECTION 6.03. Sale of Assets
SECTION 6.04. Fundamental Changes
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions
SECTION 6.06. Transactions with Affiliates
SECTION 6.07. Minimum Liquidity
SECTION 6.08. Anti-Corruption Laws and Sanctions
SECTION 6.09. Restricted Payments
ARTICLE VII EVENTS OF DEFAULT
ARTICLE VIII THE ADMINISTRATIVE AGENT
ARTICLE IX GUARANTEE
SECTION 9.01. Guarantee
SECTION 9.02. No Subrogation
SECTION 9.03. Amendments, etc. with respect to the Subsidiary Obligations
SECTION 9.04. Guarantee Absolute and Unconditional
SECTION 9.05. Reinstatement
SECTION 9.06. Payments
SECTION 9.07. Keepwell
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ARTICLE X MISCELLANEOUS
SECTION 10.01. Notices
SECTION 10.02. Waivers; Amendments
SECTION 10.03. Expenses; Indemnity; Damage Waiver
SECTION 10.04. Successors and Assigns
SECTION 10.05. Survival
SECTION 10.06. Counterparts; Integration; Effectiveness
SECTION 10.07. Severability
SECTION 10.08. Right of Setoff
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process
SECTION 10.10. WAIVER OF JURY TRIAL
SECTION 10.11. Headings
SECTION 10.12. Confidentiality
SECTION 10.13. Satisfaction in Applicable Currency
SECTION 10.14. Acknowledgement and Consent to Bail-In of Affected Financial Institutions
SECTION 10.15. No Fiduciary Duty
SECTION 10.16. USA PATRIOT Act
SECTION 10.17. Acknowledgement Regarding Any Supported QFCs
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.12 -- Subsidiary Guarantors
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.05 -- Existing Investments
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EXHIBITS:
Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Opinion of Loan Parties’ Counsel
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- [Reserved]
Exhibit E-1 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Lenders that are not Partnerships for U.S. Federal Income
Tax Purposes
Exhibit E-2 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax
Purposes
Exhibit E-3 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are not Partnerships for U.S. Federal
Income Tax Purposes
Exhibit E-4 -- Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are Partnerships for U.S. Federal Income
Tax Purposes
3
CREDIT AGREEMENT, dated as of May 26, 2020 (this “Agreement”), among RALPH LAUREN CORPORATION, RL
FINANCE B.V., RALPH LAUREN EUROPE SÀRL, RALPH LAUREN ASIA PACIFIC LIMITED, the LENDERS party
hereto, BANK OF AMERICA, N.A., as Syndication Agent, ING BANK N.V., DUBLIN BRANCH, DEUTSCHE BANK
SECURITIES INC., SUMITOMO MITSUI BANKING CORPORATION and HSBC BANK USA, N.A., as Co-Documentation
Agents, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms.
As used in this Agreement, the following terms have the meanings specified below:
“2020 Senior Notes” means the senior unsecured notes of the Parent Borrower due August 18, 2020, which bear
interest at a fixed rate of 2.625%.
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising
such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. Only Loans denominated in
dollars may be ABR Loans.
“Additional Specified Stimulus Indebtedness” means senior unsecured or subordinated Indebtedness incurred
pursuant to a credit or financial support program of or backed by a Governmental Authority with the intent to mitigate through
liquidity or other financial relief the impact of the Coronavirus pandemic on the business and operations of the Parent Borrower
and its Subsidiaries; provided that (i) the aggregate principal amount of all such Additional Specified Stimulus Indebtedness shall
not exceed $100,000,000, (ii) such Additional Specified Stimulus Indebtedness shall not be subject to any Guarantee by any
Person other than a Loan Party, (iii) both immediately before and immediately after the incurrence of such Additional Specified
Stimulus Indebtedness, no Event of Default shall have occurred and be continuing on the date such Additional Specified Stimulus
Indebtedness is incurred, (iv) the covenants and events of default applicable to such Additional Specified Stimulus Indebtedness
(taken as a whole) shall be reflective of market terms and conditions for the type of Indebtedness incurred or issued pursuant to
the applicable credit or financial support program at the time of issuance or incurrence thereof (as determined by the Parent
Borrower in good faith) and (v) such Indebtedness shall be incurred during the Specified Period (as defined in the Five-Year
Credit Agreement).
“Adjusted Debt” means, for any date, for the Parent Borrower and its Subsidiaries, all Indebtedness plus all
Operating Lease Obligations (in each case, computed on a consolidated basis) outstanding on such date.
“Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate
per annum (rounded upwards, if necessary, to the next 1/100
4
of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“Administrative Agent” means JPMorgan in its capacity as administrative agent for the Lenders hereunder,
together with any non-U.S. Affiliate of JPMorgan, to the extent that JPMorgan determines that it is necessary or appropriate to
use such non-U.S. Affiliate in acting as administrative agent hereunder. Any obligations owed by any Borrower to the
Administrative Agent hereunder shall be owed solely to JPMorgan, and not to any Affiliate of JPMorgan, unless such Borrower
otherwise agrees in writing.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative
Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Agent Party” has the meaning assigned to such term in Section 10.01(d).
“Agreement Currency” has the meaning assigned to such term in Section 10.13(b).
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest
Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%; provided that for the
purpose of this definition, the Adjusted LIBO Rate for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen
Rate is not available for such one month Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such
day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall
be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate,
respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.12, then the Alternate
Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the
avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.75%, such rate shall
be deemed to be 1.75% for purposes of this Agreement.
“Alternative Currency” means (a) Euros, Hong Kong Dollars and Yen and (b) any other currency (other than
dollars) that is freely available, freely transferable and freely convertible into dollars and in which dealings in deposits are carried
on in the London interbank market, provided that such currency is reasonably acceptable to the Administrative Agent and the
Lenders.
5
“Ancillary Document” has the meaning assigned to such term in Section 10.06(b).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Parent
Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption.
“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented
by such Lender’s Commitment; provided that for purposes of Section 2.19 “Applicable Percentage” shall mean the percentage of
the total Commitment (disregarding any Defaulting Lender’s Commitment) represented by each Lender’s Commitment. If the
Commitments have terminated or expired, “Applicable Percentage” shall mean, with respect to any Lender, the percentage of the
aggregate principal amount of the Revolving Credit Exposure represented by the aggregate outstanding principal amount of such
Lender’s Revolving Credit Exposure.
“Applicable Rate” means, for any day, with respect to any Eurocurrency Loan, any ABR Loan or with respect to
the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below (expressed in basis
points) under the caption “Eurocurrency Spread”, “ABR Spread” or “Commitment Fee Rate”, as the case may be, based upon the
ratings by Moody’s and S&P, respectively, applicable on such date to the Index Debt:
Level
Level I
Level II
Level III
Level IV
Level V
Index Debt Ratings
Eurocurrency
Spread
ABR Spread
Commitment
Fee Rate
≥ AA- by S&P or Aa3 by Moody’s
A+ by S&P or A1 by Moody’s and not Level I
A by S&P or A2 by Moody’s and not Level I or
II
A- by S&P or A3 by Moody’s and not Level I, II
or III
< A- by S&P or A3 by Moody’s
162.50
175.00
187.50
200.00
212.50
62.50
75.00
87.50
100.00
112.50
22.50
23.50
25.00
27.50
28.50
For purposes of the foregoing, (i) if both Moody’s and S&P shall not have in effect a rating for the Index Debt
(other than by reason of the circumstances referred to in the next-to-last sentence of this definition), then such rating agency shall
be deemed to have established a rating for the Index Debt in Level V; (ii) if the ratings established or deemed to have been
established by Moody’s and S&P for the Index Debt shall fall within different Levels, the Applicable Rate shall be based on the
higher of the two ratings unless one of the two ratings is two or more Levels lower than the other, in which case the Applicable
Rate shall be determined by reference to the Level next below that of the higher of the two ratings; and (iii) if the ratings
established or deemed to have been established by Moody’s and S&P for the Index Debt shall be changed (other than as a result
of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced
by the applicable rating agency, irrespective of when notice of such change shall have been furnished by the Parent Borrower to
the Administrative Agent and the Lenders pursuant to Section 5.01 or otherwise. Each change in the Applicable Rate shall apply
during the period commencing on the effective date of such change
6
and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P
shall change, or if both such rating agencies shall cease to be in the business of rating corporate debt obligations, the Parent
Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the
unavailability of ratings from such rating agencies, and, pending the effectiveness of any such amendment, the Applicable Rate
shall be determined by reference to the rating most recently in effect prior to such change or cessation. If either (but not both) of
Moody’s and S&P shall cease to have in effect a rating (whether as a result of such agency ceasing to be in the business of rating
corporate debt obligations or otherwise), the Applicable Rate shall be determined by reference to the rating of the other rating
agency.
“Approved Fund” has the meaning assigned to such term in Section 10.04.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee
(with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the
Maturity Date and the date of termination of the Commitments.
“Available Commitment” means, as to any Lender at any date of determination, an amount in dollars equal to the
excess, if any, of (a) the amount of such Lender’s Commitment in effect on such date over (b) the Revolving Credit Exposure of
such Lender on such date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution
Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive
2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or
requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b)
with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any
other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment
firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency
proceedings).
“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or
similar Person charged with the reorganization or liquidation of its business appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a
Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such
Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in
or
7
provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments
or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject,
repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required
by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of
ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code, or (c) any Person whose assets include (for purposes
of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such
“employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance
with, 12 U.S.C. 1841(k)) of such party.
“Blocking Regulation” has the meaning assigned to such term in Section 3.13.
“Borrower” means, as applicable, the Parent Borrower or the applicable Subsidiary Borrower.
“Borrower Qualified Keepwell Provider” means any Qualified Keepwell Provider that is a Borrower.
“Borrowing” means Loans of the same Type made, converted or continued on the same date and, in the case of
Eurocurrency Loans, as to which a single Interest Period is in effect.
“Borrowing Request” means a request by the Parent Borrower for a Borrowing in accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New
York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan,
the term “Business Day” shall also exclude (i) any day on which banks are not open for dealings in dollar deposits or deposits in
the applicable Alternative Currency in the London interbank market, (ii) in the case of a Eurocurrency Loan denominated in
Euros, any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer System is not open for
settlement of payment in Euros or (iii) in the case of a Eurocurrency Loan denominated in an Alternative Currency other than
Euro, any day on which banks are not open for dealings in such Alternative Currency in the city which is the principal financial
center of the country of issuance of the applicable Alternative Currency.
“Cash Pooling Arrangements” means physical and notional cash pooling arrangements entered into in the ordinary
course of business among the Parent Borrower and/or
8
its Subsidiaries to provide cash management services, including treasury, depository, electronic funds transfer and other cash
management arrangements.
“Change in Control” means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Parent Borrower to any “person” or “group” (as such terms are used in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934 (“Act”)) other than Permitted Holders (as defined below);
(ii) any person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Act,
except that a person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50 percent of
the total voting power of the issued and outstanding Voting Stock of the Parent Borrower, including by way of merger,
consolidation or otherwise; provided, however, that for purposes of this Agreement, the following acquisitions shall not
constitute a Change in Control: (I) any acquisition by the Parent Borrower or (II) any acquisition by one or more of the Permitted
Holders; or
(iii) during any period of 12 consecutive months, Present Directors and/or New Directors (as such terms are
defined below) cease for any reason to constitute a majority of the Parent Borrower’s board of directors; or
(iv) the Parent Borrower ceases to beneficially own, directly or indirectly, and control, directly or indirectly, 100%
of the issued and outstanding Equity Interests of any Subsidiary Borrower (including, without limitation, by means of any third
party claiming a better right in the Equity Interests of a Swiss Borrower before a court in Switzerland).
The following terms have the meanings indicated: “Permitted Holders” shall mean, as of the date of
determination: (A) any and all of Ralph Lauren (an individual), his spouse, his siblings and their spouses, and descendants of
them (whether natural or adopted) (collectively, the “Lauren Group”); and (B) any trust established and maintained primarily for
the benefit of any member of the Lauren Group and any entity controlled by any member of the Lauren Group. “Present
Directors” shall mean individuals who on the Effective Date are members of the Parent Borrower’s board of directors. “New
Directors” shall mean any directors of the board of directors of the Parent Borrower whose election as of or following the
Effective Date by the Parent Borrower’s board of directors or whose nomination for election by the shareholders of the Parent
Borrower was approved by a vote of a majority of the directors of the board of directors of the Parent Borrower who, at the time
of such vote, were either Present Directors or New Directors but excluding any such individual whose initial assumption of office
occurs solely as a result of an actual or threatened proxy contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Parent Borrower’s board of
directors.
“Change in Law” means (a) the adoption of any law, rule, treaty or regulation after the date of this Agreement, (b)
any change after the date of this Agreement in any law, rule, treaty
9
or regulation or in the interpretation or application thereof by any Governmental Authority or (c) compliance by any Lender (or,
for purposes of Section 2.13(b), by any office of such Lender from or at which Loans are made or are booked, as the case may be,
in accordance with the terms of this Agreement) with any request, guideline or directive (whether or not having the force of law)
of any Governmental Authority made or issued after the date of this Agreement; provided, however, for purposes of this
Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives
thereunder or in connection therewith or in implementation thereof and (y) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case in clauses (x)
and (y) be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.
“Co-Documentation Agents” means ING Bank N.V., Dublin Branch, Deutsche Bank Securities Inc., Sumitomo
Mitsui Banking Corporation and HSBC Bank USA, N.A., each in its capacity as co-documentation agents and its successors in
such capacity.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans, expressed as
an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.07 or (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 10.04, provided that, at the Parent Borrower’s election, up to
$500,000,000 of the Lenders’ commitments hereunder may be denominated in an Alternative Currency. The initial amount of
each Lender’s Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is $500,000,000.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to
time, and any successor statute.
“Communications” has the meaning assigned to such term in Section 10.01(d).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income
(however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated Cash Balance” means, at any time, (a) the aggregate amount of cash (excluding cash in store
registers and cash in transit between stores or between a store and a depositary bank) and Permitted Investments, marketable
securities, treasury bonds and bills, certificates of deposit and investments in money market funds, commercial paper and
Permitted Investments, in each case, held or owned by (either directly or indirectly), credited to the account of or would
otherwise be required to be reflected as an asset on the balance sheet of the Parent Borrower and its Subsidiaries less (b) the sum
of (i) any restricted cash or Permitted Investments to pay royalty obligations, working interest obligations, suspense payments,
severance taxes,
10
payroll, payroll taxes, other taxes, employee wage and benefit payments and trust and fiduciary obligations or other obligations
of the Parent Borrower or any Subsidiary to third parties and for which the Parent Borrower or such Subsidiary has issued checks
or has initiated wires or ACH transfers (or, in the Parent Borrower’s discretion, will issue checks or initiate wires or ACH
transfers within five (5) Business Days) in order to pay, (ii) other amounts for which the Parent Borrower or such Subsidiary has
issued checks or has initiated wires or ACH transfers but have not yet been subtracted from the balance in the relevant account of
the Parent Borrower or such Subsidiary and (iii) while and to the extent refundable, any cash or Permitted Investments of the
Parent Borrower or any Subsidiaries constituting purchase price deposits held in escrow pursuant to a binding and enforceable
purchase and sale agreement with a third party containing customary provisions regarding the payment and refunding of such
deposits.
“Consolidated EBITDAR” means, for any period, Consolidated Net Income for such period plus, without
duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of
(a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization
expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary or
non-recurring non-cash expenses or losses (including any noncash impairment of assets, and, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of
the ordinary course of business and including non-cash charges arising from the application of Statement of Financial Accounting
Standards No. 142 (or the corresponding Accounting Standards Codification Topic, as applicable)), (f) Consolidated Lease
Expense, (g) charges incurred during such period in connection with restructuring or reorganization changes, including without
limitation post-closing restructuring, reorganization and/or integration charges or costs, and (h) non-recurring fees and expenses
relating to Permitted Acquisitions or other acquisitions of property or a series of related acquisitions of property, provided that for
purposes of clause (g) and this clause (h) the aggregate amount of such charges, fees and expenses shall not exceed in any rolling
four quarter period an amount equal to 20% of Consolidated EBITDAR for such period and minus, (x) to the extent included in
the statement of such Consolidated Net Income for such period, the sum of (i) interest income, (ii) any extraordinary or non-
recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (iii) income
tax credits (to the extent not netted from income tax expense) and (y) any cash payments made during such period in respect of
items described in clause (e) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were
reflected as a charge in the statement of Consolidated Net Income, all as determined on a consolidated basis in accordance with
GAAP.
For the purposes of calculating Consolidated EBITDAR for any period of four consecutive fiscal quarters (each, a
“Reference Period”) pursuant to any determination of the Consolidated Leverage Ratio, (i) if at any time during such Reference
Period the Parent Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDAR for such
Reference Period shall be reduced by an amount equal to the Consolidated EBITDAR (if positive) attributable to the property
that is the subject of such Material Disposition for such Reference
11
Period or increased by an amount equal to the Consolidated EBITDAR (if negative) attributable thereto for such Reference
Period, and (ii) if during such Reference Period the Parent Borrower or any Subsidiary shall have made a Material Acquisition,
Consolidated EBITDAR for such Reference Period shall be calculated after giving pro forma effect thereto (taking into account
(A) such cost savings as may be determined by the Parent Borrower in a manner consistent with the evaluation performed by the
Parent Borrower in deciding to make such Material Acquisition, as presented to the Parent Borrower’s board of directors,
provided that the Parent Borrower may take into account such cost savings only if it in good faith determines on the date of
calculation that it is reasonable to expect that such cost savings will be implemented within 120 days following the date of such
Material Acquisition (or in the case of any calculation made subsequent to such 120th day, that such cost savings have, in fact,
been implemented) and (B) all transactions that are directly related to such Material Acquisition and are entered into in
connection and substantially contemporaneously therewith) as if such Material Acquisition occurred on the first day of such
Reference Period. As used in this definition, “Material Acquisition” means any acquisition of property or other assets or series of
related acquisitions of property that (a) constitutes (i) assets comprising all or substantially all of a business or operating unit of a
business, (ii) all or substantially all of the common stock or other Equity Interests of a Person, (iii) in any case where clauses (i)
and (ii) above are inapplicable, the rights of any licensee (including by means of the termination of such licensee’s rights under
such license) under a trademark license to such licensee from the Parent Borrower or any of its Affiliates (the “Acquired Rights”)
or (iv) the acquisitions and licenses of intellectual property by the Parent Borrower and its Subsidiaries, and (b) involves the
payment of consideration by the Parent Borrower and its Subsidiaries in excess of $25,000,000; “Material Disposition” means
any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Parent Borrower or any
of its Subsidiaries in excess of $25,000,000. In making any calculation pursuant to this paragraph with respect to a Material
Acquisition of a Person, business or rights for which quarterly financial statements are not available, the Parent Borrower shall
base such calculation on the financial statements of such Person, business or rights for the then most recently completed period of
12 consecutive calendar months for which such financial statements are available and shall deem the contribution of such Person,
business or rights to Consolidated EBITDAR for the period from the beginning of the applicable Reference Period to the date of
such Material Acquisition to be equal to the product of (x) the number of days in such period divided by 365 multiplied by (y) the
amount of Consolidated EBITDAR of such Person, business or rights for the 12-month period referred to above (calculated on
the basis set forth in this definition). In making any calculation pursuant to this paragraph in connection with an acquisition of
Acquired Rights to be followed by the granting of a new license of such Acquired Rights (or any rights derivative therefrom),
effect may be given to such grant of such new license (as if it had occurred on the date of such acquisition) if, and only if, the
Parent Borrower in good faith determines on the date of such calculation that it is reasonable to expect that such grant will be
completed within 120 days following the date of such acquisition (or in the case of any calculation made subsequent to such
120th day, that such grant has, in fact, been completed).
“Consolidated Lease Expense” means, for any period, the aggregate “operating lease cost” (as such amount is
determined in accordance with GAAP) included in the income statement reported in the Parent Borrower’s Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission for the quarter ended December 30, 2019 (and for fiscal
12
periods reported thereafter), associated with Operating Lease Obligations of the Parent Borrower and its Subsidiaries for each
Operating Lease outstanding during such period. Such amount does not incorporate or include any amounts payable under the
Finance Leases of the Parent Borrower and its Subsidiaries.
“Consolidated Leverage Ratio” means on the last day of any Fiscal Quarter, the ratio of (a) Adjusted Debt on such
day to (b) Consolidated EBITDAR for the period of four consecutive Fiscal Quarters ending on such day.
“Consolidated Net Income” means for any period, the consolidated net income (or loss) of the Parent Borrower
and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Parent Borrower or is merged into or
consolidated with the Parent Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of the Parent Borrower) in which the Parent Borrower or any of its Subsidiaries has an ownership interest, except to
the extent that any such income is actually received by the Parent Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the Parent Borrower to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual
obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.
“Consolidated Net Worth” means as of any date of determination thereof, the excess of (a) the aggregate
consolidated net book value of the assets of the Parent Borrower and its Subsidiaries after all appropriate adjustments in
accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and
amortization) over (b) all of the aggregate liabilities of the Parent Borrower and its Subsidiaries, including all items which, in
accordance with GAAP, would be included on the liability side of the balance sheet (other than Equity Interests, treasury stock,
capital surplus and retained earnings), in each case determined on a consolidated basis (after eliminating all inter-company items)
in accordance with GAAP; provided, however, that in calculating Consolidated Net Worth the effects of the Statement of
Financial Accounting Standards No. 142 (or the corresponding Accounting Standards Codification Topic, as applicable) shall be
disregarded.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling”
and “Controlled” have meanings correlative thereto.
“Covered Entity” means any of the following:
(i)
(ii)
a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
13
(iii)
a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning set forth in Section 10.17.
“Credit Party” means the Administrative Agent or any Lender.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time
or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§
252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means any Lender that (a) has failed, within two Business Days of the date required to be
funded or paid, to (i) fund all or any portion of its Loans or (ii) pay over to any other Credit Party any other amount required to be
paid by it hereunder that is not subject to a good faith dispute, unless, in the case of clause (i) above, such Lender notifies the
Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition
precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the
Parent Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to
comply with all or any of its funding obligations under this Agreement (unless such writing or public statement indicates that
such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including
the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in
which it commits to extend credit, (c) has failed, within three Business Days after request by a Credit Party, acting in good faith,
to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is
financially able to meet such obligations) to fund prospective Loans, provided that such Lender shall cease to be a Defaulting
Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it
and the Administrative Agent, or (d) has become the subject of (A) a Bankruptcy Event or (B) a Bail-In Action.
“Disposition” means with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance,
transfer or other disposition thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.
“Dollar Equivalent” means, on any date of determination, with respect to any amount hereunder denominated in
an Alternative Currency, the amount of dollars determined pursuant to Section 1.05 using the Exchange Rate with respect to such
Alternative Currency at the time in effect under the provisions of such Section.
“dollars” or “$” refers to lawful money of the United States of America.
“Domestic Subsidiary” means any Subsidiary organized under the laws of any jurisdiction within the United States
of America.
14
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member
Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in
an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to
consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and
Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public
administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any
EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in
accordance with Section 10.02).
“Electronic Signature” means an electronic symbol, or process attached to, or associated with, a contract or other
record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Electronic System” means any electronic system, including e-mail, e-fax, Intralinks®, ClearPar®, Debt Domain,
Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the
Administrative Agent and any of its Related Parties or any other Person, providing for access to data protected by passcodes or
other security system.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.04(b)(ii)
(subject to such consents, if any, as may be required under Section 10.04(b)).
“Eligible Contract Participant” means any entity that constitutes an “eligible contract participant” under the
Commodity Exchange Act or any regulations promulgated thereunder.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments,
injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any
way to the environment, preservation or reclamation of natural resources, or to human health and safety (insofar as such health
and safety may be adversely affected by exposure to dangerous or harmful substances or environmental conditions), as have
been, are, or in the future become, in effect.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs
of environmental remediation, fines, penalties or indemnities), of the Parent Borrower or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release
of any Hazardous Materials into the environment or (e) any contract,
15
agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability
company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights
entitling the holder thereof to purchase or acquire any such equity interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Loan Party, is
treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section
412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations
issued thereunder with respect to a Plan (other than an event for which notice is waived); (b) with respect to any Plan the failure
to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (d) the incurrence by any Loan Party or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Loan Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint
a trustee to administer any Plan under Section 4042 of ERISA; (f) the incurrence by any Loan Party or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal of any Borrower or any of its ERISA Affiliates
from any Plan or Multiemployer Plan; or (g) the receipt by any Loan Party or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Loan Party or any ERISA Affiliate of any notice, concerning the imposition upon any Loan
Party or any of its ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be,
Insolvent.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market
Association (or any successor Person), as in effect from time to time.
“Euro” means the single currency of participating member states of the European Monetary Union.
“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned to such term in Article VII.
“Excess Cash Amount” has the meaning assigned to such term in Section 2.09(d).
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“Exchange Rate” means, on any day, with respect to any Alternative Currency, the rate determined by the
Administrative Agent at which such Alternative Currency may be exchanged into dollars, as set forth at approximately 11:00
a.m., London time, on such day on the applicable Reuters World Spot Page. In the event that any such rate does not appear on any
Reuters World Spot Page, the Exchange Rate shall be determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the Administrative Agent and the Parent Borrower for such purpose or, in
the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the
Administrative Agent in the market where its foreign currency exchange operations in respect of such Alternative Currency are
then being conducted, at 11:00 a.m., local time, on such day for the purchase of the applicable Alternative Currency for delivery
two Business Days later, provided that, if at the time of any such determination, for any reason, no such spot rate is being quoted,
after consultation with the Parent Borrower, the Administrative Agent may use any other reasonable method it deems appropriate
to determine such rate, and such determination shall be presumed correct absent manifest error.
“Exchange Rate Date” means, if on such date any outstanding Loan is denominated in an Alternative Currency,
each of: (a) at least once during each calendar month, (b) if an Event of Default has occurred and is continuing, any Business Day
designated as an Exchange Rate Date by the Administrative Agent in its sole discretion, and (c) each date (with such date to be
reasonably determined by the Administrative Agent) that is on or about the date of a Borrowing Request or an Interest Election
Request.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that,
and only for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest
to secure, as applicable, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange
Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the applicable or official interpretation of
any thereof) by virtue of such Guarantor’s failure to constitute an Eligible Contract Participant at the time the guarantee of (or
grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more than one Swap, such exclusion shall apply
only to the portion of such Swap Obligation that is attributable to Swaps for which such guarantee or security interest is or
becomes illegal.
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any
payment to be made by or on account of any obligation of any Loan Party under any Loan Document, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of America, or by any other Governmental Authority as a
result of a present or former connection between the Administrative Agent, any Lender or any other recipient of any payment to
be made by any Loan Party under any Loan Document and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the
Administrative Agent, any Lender or any other recipient of any payment to be made by any Loan Party under any Loan
Document having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or
any other Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by
any
17
other jurisdiction described in clause (a) above, (c) in the case of a Non-U.S. Lender (other than an assignee pursuant to a request
by the Borrower under Section 2.17(b)), any United States withholding tax that is imposed on amounts payable to such Non-U.S.
Lender at the time such Non-U.S. Lender becomes a party to this Agreement (or designates a new lending office), except to the
extent that such Non-U.S. Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Parent Borrower with respect to such withholding tax pursuant to Section
2.15(a), (d) any withholding tax that is imposed on amounts payable to a Lender that is attributable to such Lender’s failure to
comply with Section 2.15(e) or (f), (e) any taxes assessed on a recipient under the laws of the Netherlands, if and to the extent
such taxes become payable as a result of such recipient having a substantial interest (aanmerkelijk beland) as defined in the
Dutch Income Tax Act (Wet inkomstenbelasting 2001) in a Loan Party that is resident in the Netherlands for tax purposes and (f)
any United States withholding tax that is imposed by reason of FATCA.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or
successor version that is substantively comparable and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any
fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention
among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal
funds transactions by depositary institutions, as determined in such manner as the NYFRB shall set forth on its public website
from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate;
provided that if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero
for the purposes of this Agreement.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of
America.
“Finance Lease” means any lease of property classified as a “finance lease” on both the balance sheet and income
statement for financial reporting purposes under GAAP.
“Finance Lease Obligations” means, as applied to any Person, an obligation that is required to be accounted for as
a Finance Lease (and not an Operating Lease) on both the balance sheet and income statement for financial reporting purposes in
accordance with GAAP. At the time any determination thereof is to be made, the amount of the liability in respect of a Finance
Lease would be the amount required to be reflected as a liability on such balance sheet in accordance with GAAP.
“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the
Parent Borrower.
“Fiscal Quarter” means with respect to the Parent Borrower and its Subsidiaries, and with respect to any Fiscal
Year, (a) each of the quarterly periods ending 13 calendar weeks,
18
26 calendar weeks, 39 calendar weeks and 52 or 53 calendar weeks, as the case may be, after the end of the prior Fiscal Year or
(b) such other quarterly periods as the Parent Borrower shall adopt after giving prior written notice thereof to the Lenders.
“Fiscal Year” means with respect to the Parent Borrower and its Subsidiaries, (a) the 52‑ or 53-week annual
period, as the case may be, ending on the Saturday nearest to March 31 of each calendar year or (b) such other fiscal year as the
Parent Borrower shall adopt with the prior written consent of the Required Lenders (which consent shall not be unreasonably
withheld). Any designation of a particular Fiscal Year by reference to a calendar year shall mean the Fiscal Year ending during
such calendar year.
“Five-Year Credit Agreement” means that certain Credit Agreement, dated as of August 12, 2019, among Ralph
Lauren Corporation, RL Finance B.V., Ralph Lauren Europe Sàrl, Ralph Lauren Asia Pacific Limited, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent and the other parties party thereto, as in effect on the date hereof.
“Foreign Plan” means any employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not
subject to ERISA) that is not subject to United States law and is maintained or contributed to by any Loan Party or any ERISA
Affiliate.
“Foreign Plan Event” means, with respect to any Foreign Plan, (a) the failure to make or, if applicable, accrue in
accordance with normal accounting practices, any employer or employee contributions required by applicable law or by the terms
of such Foreign Plan, (b) the failure to register or loss of good standing with applicable regulatory authorities of any such Foreign
Plan required to be registered, or (c) the failure of any Foreign Plan to comply with any material provisions of applicable law and
regulations or with the material terms of such Foreign Plan.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means the government of the United States of America, any other nation or any
political subdivision thereof, whether state or local, and any agency, authority, instrumentality, state-owned or state-controlled
entity, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, including supranational bodies (such as the European Union
or European Central Bank).
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to
purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease
property, securities or services
19
for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. For purposes of all calculations provided for in this Agreement, the
amount of any Guarantee of any guarantor shall be deemed to be the lower of (x) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made and (y) the maximum amount for which such
guarantor may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and
the maximum amount for which such guarantor may be liable are not stated or determinable, in which case the amount of such
Guarantee shall be such guarantor’s maximum reasonably anticipated liability in respect thereof as determined by the Parent
Borrower in good faith.
“Guarantee Agreement” means the Guarantee Agreement to be executed and delivered by each Guarantor,
substantially in the form of Exhibit C.
“Guarantor” means (a) with respect to both the Parent Borrower Obligations and the Subsidiary Obligations, each
Domestic Subsidiary that becomes a party to the Guarantee Agreement on the Effective Date and each Domestic Subsidiary that,
subsequent to the Effective Date, becomes a Significant Subsidiary (as defined in Regulation S-X, part 210.1-02 of Title 17 of the
Code of Federal Regulations) and (b) with respect to the Subsidiary Obligations only, the Parent Borrower.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic
substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated
pursuant to any applicable Environmental Law.
“HKD Screen Rate” means, with respect to any Interest Period, the percentage rate per annum for deposits in
Hong Kong Dollars for a period beginning on the first day of such Interest Period and ending on the last day of such Interest
Period, displayed under the heading “HKAB HKD Interest Settlement Rates” on the Reuters Screen HKABHIBOR Page (or, in
the event such rate does not appear on such Reuters page, on any successor or substitute page on such screen that displays such
rate, or on the appropriate page of such other information service that publishes such rate as selected by the Administrative Agent
from time to time in its reasonable discretion) as of 11:00 a.m. Hong Kong time two business days prior to the commencement of
such Interest Period.
“Hong Kong Dollars” means the lawful currency of Hong Kong.
“IBA” has the meaning assigned to such term in Section 2.12.
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money
or with respect to deposits or advances of any kind, (b) all
20
obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under
conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person
in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of
business and any earnout obligations or similar deferred or contingent purchase price obligations not overdue or which do not
appear as a liability on a balance sheet of such Person incurred in connection with any acquisition of property or series of related
acquisitions of property that constitutes (i) assets comprising all or substantially all of a business or operating unit of a business,
(ii) all or substantially all of the common stock or other Equity Interests of a Person or (iii) in any case where clauses (i) and (ii)
above are inapplicable, the Acquired Rights), (e) all Indebtedness of others secured by any Lien on property owned or acquired
by such Person (to the extent of such Person’s interest in such property), whether or not the Indebtedness secured thereby has
been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Finance Lease Obligations of such Person,
(h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of
guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances and (j) all payment and
performance obligations of every kind, nature and description of such Person under or in connection with Swap Agreements. The
Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is
a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
For purposes of all calculations provided for in this Agreement, there shall be disregarded any Guarantee of any Person in respect
of any Indebtedness of any other Person with which the accounts of such first Person are then required to be consolidated in
accordance with GAAP. For the avoidance of doubt, any amounts available and not drawn under the Commitment shall be
deemed not to be Indebtedness.
“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with respect to any payment made
by or on account of any obligation of any Loan Party under any Loan Document.
“Indemnitee” has the meaning assigned to it in Section 10.03(b).
“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of the Parent Borrower that is
not guaranteed by any other Person or subject to any other credit enhancement.
“Insolvent” means, with respect to any Multiemployer Plan, the condition that such Multiemployer Plan is
insolvent within the meaning of Section 4245 of ERISA.
“Interest Election Request” means a request by the Parent Borrower to convert or continue a Borrowing in
accordance with Section 2.06.
“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September
and December, beginning September 30, 2020, and (b) with respect to any Eurocurrency Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of
more
21
than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’
duration after the first day of such Interest Period.
“Interest Period” means with respect to any Eurocurrency Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Parent Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii)
any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is
made and, in the case of a Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such
Borrowing.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number
of decimal places as the LIBO Screen Rate, or HKD Screen Rate, as applicable) determined by the Administrative Agent (which
determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a
linear basis between: (a) the LIBO Screen Rate, or HKD Screen Rate, as applicable, for the longest period for which the LIBO
Screen Rate, or HKD Screen Rate, as applicable, is available (for the applicable currency) that is shorter than the Impacted
Interest Period; and (b) the LIBO Screen Rate, or HKD Screen Rate, as applicable, for the shortest period (for which that LIBO
Screen Rate, or HKD Screen Rate, as applicable, is available for the applicable currency) that exceeds the Impacted Interest
Period, in each case, at such time.
“Investment” means, as applied to any Person, any direct or indirect purchase or other acquisition by such Person
of Equity Interests or other securities of, or any assets constituting a business unit of, any other Person, or any direct or indirect
loan, advance or capital contribution by such Person to any other Person. In computing the amount involved in any Investment at
the time outstanding, (a) undistributed earnings of, and unpaid interest accrued in respect of Indebtedness owing by, such other
Person shall not be included, (b) there shall not be deducted from the amounts invested in such other Person any amounts
received as earnings (in the form of dividends, interest or otherwise) on such Investment or as loans from such other Person and
(c) unrealized increases or decreases in value, or write-ups, write-downs or write-offs, of Investments in such other Person shall
be disregarded.
“IRS” means the United States Internal Revenue Service.
“JPMorgan” means JPMorgan Chase Bank, N.A.
“Judgment Currency” has the meaning assigned to such term in Section 10.13(b).
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“Lead Arrangers” means, individually or collectively, JPMorgan Chase Bank, N.A. and BofA Securities, Inc., in
their capacity as lead arrangers, and each of their successors in such capacity.
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto
pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Assumption.
“LIBO Rate” means, with respect to any Eurocurrency Borrowing for any applicable currency and for any Interest
Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted
Interest Period”) with respect to the applicable currency then the LIBO Rate shall be the Interpolated Rate.
“LIBO Screen Rate” means, for any Interest Period, (i) with respect to any Eurocurrency Borrowing for any
applicable currency (other than Hong Kong Dollars) and for any Interest Period, the London interbank offered rate as
administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for the
relevant currency) for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or
LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on
any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information
service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion), and (ii)
with respect to any Eurocurrency Borrowing denominated in Hong Kong Dollars and for any Interest Period with respect thereto,
the HKD Screen Rate; provided that if the LIBO Screen Rate as determined pursuant to clauses (i) and (ii) of this definition
would be less than 0.75%, the LIBO Screen Rate shall be deemed to 0.75% for the purposes of this Agreement.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement or title retention agreement (or any Finance Lease Obligations having substantially the same economic effect as any of
the foregoing, but in any event not in respect of any Operating Lease Obligations) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with respect to such securities.
“Liquidity” means the sum of the aggregate amount of Unrestricted Cash of the Parent Borrower and its
Subsidiaries plus the Available Commitment under and as defined in the Five-Year Credit Agreement (but excluding, for the
avoidance of doubt, the Available Commitment hereunder).
“Loan Documents” means this Agreement and the Guarantee Agreement.
“Loan Party” means the Borrowers and the Guarantors.
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“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement.
“Margin Stock” means margin stock within the meaning of Regulations T, U and X, as applicable.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition
(financial or otherwise) of the Parent Borrower and the Subsidiaries taken as a whole or (b) the rights and remedies, taken as a
whole, of the Administrative Agent and the Lenders under the Loan Documents.
“Material Indebtedness” means Indebtedness (other than the Loans), or obligations in respect of one or more Swap
Agreements, of any one or more of the Parent Borrower and its Subsidiaries in an aggregate principal amount exceeding
$50,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Parent
Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Parent Borrower or such Subsidiary would be required to pay if such Swap Agreement
were terminated at such time.
“Maturity Date” means (x) if the Springing Maturity Condition does not occur, May 25, 2021 and (y) if the
Springing Maturity Condition occurs, the Springing Maturity Date; provided that, if such day is not a Business Day, the Maturity
Date shall be the Business Day immediately succeeding such day.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA, contributed to or
required to be contributed to by any Loan Party or its ERISA Affiliates.
“Net Income” (“Net Loss”) means with respect to any Person or group of Persons, as the case may be, for any
fiscal period, the difference between (a) gross revenues of such Person or group of Persons and (b) all costs, expenses and other
charges incurred in connection with the generation of such revenue (including, without limitation, taxes on income), determined
on a consolidated or combined basis, as the case may be, and in accordance with GAAP.
“Non-U.S. Lender” means any Lender that is not a U.S. Person.
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and
(b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately
preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB
Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative Agent from
a federal funds broker of recognized standing selected by it in its reasonable discretion; provided, further, that if any of the
aforesaid rates as so determined be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
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“Operating Lease” means any lease of property classified as an “operating lease” on both the balance sheet and
income statement for financial reporting purposes under GAAP.
“Operating Lease Obligations” means, as applied to any Person, an obligation that is required to be accounted for
as an Operating Lease (and not a Finance Lease). At the time any determination thereof is to be made, the amount of the liability
in respect of an Operating Lease would be the amount required to be reflected as a liability on such balance sheet in accordance
with GAAP.
“Other Connection Taxes” means with respect to any Lender, Taxes imposed as a result of a present or former
connection between such Lender and the jurisdiction imposing such Tax (other than connections arising from such Lender having
executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in
any Loan or Loan Document).
“Other Taxes” means any and all present or future stamp, court or documentary, intangible, recording, filing or
similar Taxes that arise from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment
(other than an assignment made pursuant to Section 2.17).
“Outside Date” means June 15, 2020 provided that if, on or prior to June 15, 2020, the Parent Borrower has
launched and priced Additional Specified Notes Indebtedness (as defined in the Five-Year Credit Agreement), but such
Additional Specified Notes Indebtedness has not been issued and settled, the Outside Date shall instead be June 17, 2020.
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and
overnight Eurocurrency borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be
determined by the NYFRB as set forth on its public website from time to time, and published on the next succeeding Business
Day by the NYFRB as an overnight bank funding rate.
“Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a
subsidiary.
“Parent Borrower” means Ralph Lauren Corporation, a Delaware corporation.
“Parent Borrower Obligations” means the unpaid principal of and interest on the Loans made to and
reimbursement obligations of the Parent Borrower (including, without limitation, interest accruing after the maturity of the Loans
made to and reimbursement obligations of the Parent Borrower and interest accruing after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding, relating to the Parent Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) and all other obligations and liabilities of the Parent
Borrower to the Administrative Agent or to any Lender (or, in the case of Specified Swap Agreements and Specified Cash
Management Agreements, any affiliate of any Lender), whether direct or indirect, absolute or
25
contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, any Specified Swap Agreement, any Specified Cash Management Agreement, any
guarantee thereof or any other document made, delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be paid by the Parent Borrower pursuant hereto) or
otherwise.
“Participant” has the meaning set forth in Section 10.04(c)(i).
“Participant Register” has the meaning set forth in Section 10.04(c)(i).
“Patriot Act” has the meaning assigned to such term in Section 10.16.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor
entity performing similar functions.
“Permitted Acquisition” means any acquisition (in one transaction or a series of related transactions) by the Parent
Borrower or any Subsidiary, on or after the Effective Date (whether effected through a purchase of Equity Interests or assets or
through a merger, consolidation or amalgamation), of (i) another Person including the equity interest of any Person in which the
Borrower or any Subsidiary owns an equity interest, (ii) the assets constituting all or substantially all of a business or operating
business unit of another Person, (iii) in any case where clauses (i) and (ii) above are inapplicable, the rights of any licensee
(including by means of the termination of such license’s rights under such license) under a trademark license to such licensee
from the Parent Borrower or any of its Affiliates or (iv) intellectual property or licenses of intellectual property, provided that:
(a) the assets so acquired or, as the case may be, the assets of the Person so acquired shall be in a Related Line of
Business;
(b) no Default shall have occurred and be continuing at the time thereof or would result therefrom;
(c) such acquisition shall be effected in such manner so that the acquired Equity Interests, assets or rights are
owned either by the Parent Borrower or a Subsidiary and, if effected by merger, consolidation or amalgamation, the
continuing, surviving or resulting entity shall be the Parent Borrower or a Subsidiary, provided that, nothing in this clause
shall be deemed to limit the ability of the Parent Borrower or any Subsidiary to grant to a different licensee any acquired
license rights described in clause (iii) above (or any rights derivative therefrom); and
(d) the Parent Borrower and its Subsidiaries shall be in compliance, on a pro forma basis after giving effect to
such acquisition, with the covenant contained in Section 6.07 recomputed as at the last day of the most recently ended
fiscal quarter of the Parent Borrower for which financial statements are available, as if such acquisition had occurred on
the first day of each relevant period for testing such compliance.
26
“Permitted Encumbrances” means:
(a)
Liens imposed by law for taxes and duties, assessments, governmental charges or levies that are not yet due
or are being contested in compliance with Section 5.04;
(b) landlords, carriers’, warehousemen’s, mechanics’, shippers’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30
days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other social security laws or regulations, and pledges and deposits securing liability to
insurance carriers under insurance or self-insurance arrangements;
(d) pledges and deposits to secure the performance of tenders, bids, trade contracts, leases, public or statutory
obligations, warranty requirements, surety and appeal bonds, bonds posted in connection with actions, suits or
proceedings, performance and bid bonds and other obligations of a like nature, in each case in the ordinary course of
business;
(e) Liens incurred in the ordinary course of business in connection with the sale, lease, transfer or other
disposition of any credit card receivables of the Parent Borrower or any of its Subsidiaries;
(f) judgment, attachment or other similar liens in respect of judgments that do not constitute an Event of Default
under clause (k) of Article VII;
(g) easements, zoning restrictions, restrictive covenants, encroachments, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations
and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of
the Parent Borrower or any Subsidiary; and
(h) possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of
Permitted Investments;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.
“Permitted Investments” means:
(a)
direct obligations of, or obligations the principal of and interest on which are directly and fully guaranteed
or insured by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full
faith and credit of the United States of America);
(b) investments in commercial paper having, at such date of acquisition, a credit rating of at least A-2 from S&P
or P-2 from Moody’s;
27
(c) investments in certificates of deposit, eurocurrency time deposits, banker’s acceptances and time deposits
maturing within three years from the date of acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any Lender or any commercial bank which has a combined capital and
surplus and undivided profits of not less than $100,000,000;
(d) repurchase agreements with a term of not more than 180 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria described in clause (c) above;
(e) securities with maturities of three years or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States or by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which state, commonwealth or territory,
political subdivision, taxing authority or foreign government (as the case may be) are rated, at such date of acquisition, at
least A- by S&P or A3 by Moody’s;
(f) securities with maturities of three years or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of clause (c) of this definition;
(g) shares of money market funds that (i) comply with the criteria set forth in (a) Securities and Exchange
Commission Rule 2a-7 under the Investment Company Act of 1940, as amended or (b) Securities and Exchange
Commission Rule 3c-7 under the Investment Company Act of 1940, as amended and (ii) have portfolio assets of at least
(x) in the case of funds that invest exclusively in assets satisfying the requirements of clause (a) of this definition,
$250,000,000 and (y) in all other cases, $500,000,000;
(h) in the case of investments by any Foreign Subsidiary, obligations of a credit quality and maturity comparable
to that of the items referred to in clauses (a) through (g) above that are available in local markets; and
(i) corporate debt obligations with a Moody’s rating of at least A3 or an S&P rating of at least A-, or their
equivalent, as follows:
(i) corporate notes and bonds; and
(ii) medium term notes.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (within the meaning of Section 3(2) of ERISA, but not including
any Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which any Loan Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” (as defined in Section 3(5) of ERISA).
28
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as
amended from time to time.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or,
if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board
in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no
longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent in its reasonable discretion) or
any similar release by the Federal Reserve Board (as determined by the Administrative Agent in its reasonable discretion). Each
change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being
effective.
“Priority Indebtedness” means (a) Indebtedness of the Parent Borrower or any Subsidiary (other than that
described in Section 6.01(e)) secured by any Lien on any asset(s) of the Parent Borrower or any Subsidiary and (b) Indebtedness
of any Subsidiary which is not a Guarantor, in each case owing to a Person other than the Parent Borrower or any Subsidiary.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such
exemption may be amended from time to time.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in
accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning assigned to it in Section 10.17.
“Qualified Keepwell Provider” means, in respect of any Swap Obligation, each Loan Party (other than any Loan
Party that is a Foreign Subsidiary of the Parent Borrower) that, at all times during the Swap Guarantee Eligibility Period, has total
assets exceeding $10,000,000 or otherwise constitutes an Eligible Contract Participant and can cause another person to qualify as
an Eligible Contract Participant with respect to such Swap Obligation at such time by entering into a keepwell pursuant to section
1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Register” has the meaning set forth in Section 10.04(b)(iv).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official
rulings and interpretations thereunder or thereof.
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“Related Line of Business” means: (a) any line of business in which the Parent Borrower or any of its Subsidiaries
is engaged as of, or immediately prior to, the Effective Date, (b) any wholesale, retail or other distribution of products or services
under any domestic or foreign patent, trademark, service mark, trade name, copyright or license or (c) any similar, ancillary or
related business and any business which provides a service and/or supplies products in connection with any business described in
clause (a) or (b) above.
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective
directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Reportable Event” means any “reportable event,” as defined in Section 4043(c) of ERISA or the regulations
issued thereunder, with respect to a Plan, other than those events as to which notice is waived pursuant to DOL Regulation
Section 4043 as in effect on the date hereof (no matter how such notice requirement may be changed in the future).
“Required Lenders” means, subject to Section 2.19(b), at any time, Lenders having Revolving Credit Exposures
and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused
Commitments at such time.
“Requirement of Law” means, as to any Person, the Articles or Certificate of Incorporation and By-Laws, Articles
or Certificate of Formation and Operating Agreement, or Certificate of Partnership or partnership agreement or other
organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a
UK Resolution Authority.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with
respect to any Equity Interests in the Parent Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Parent Borrower or any Subsidiary or any option, warrant or other
right to acquire any such Equity Interests in the Parent Borrower or any Subsidiary.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the Dollar Equivalent of the sum of
the outstanding principal amount of such Lender’s Revolving Loans at such time.
“Revolving Loan” means a Loan made pursuant to Section 2.03.
“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business.
30
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any
Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons
maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the
United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United
Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any
government that is itself the subject or target of Sanctions or (d) any Person owned or controlled by any such Person or Persons
described in the foregoing clauses (a), (b) or (c), or (e) any Person otherwise the subject of any Sanctions.
“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from
time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any
European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“Specified Cash Management Agreement” means any agreement providing for treasury, depositary, purchasing
card, credit card or cash management services, including in connection with any automated clearing house transfers of funds or
any similar transactions between the Parent Borrower or any of the Subsidiary Borrowers and any Lender or affiliate thereof.
“Specified Swap Agreement” means any Swap Agreement in respect of interest rates, currency exchange rates or
commodity prices entered into by the Parent Borrower or any of the Subsidiary Borrowers and any Person that is a Lender or an
affiliate of a Lender at the time such Swap Agreement is entered into.
“Springing Maturity Condition” means that, to the extent the Maturity Date has not occurred prior to such time,
the Parent Borrower or any Subsidiary shall issue one or more series of senior notes, whether issued in a public offering, Rule
144A, private placement or otherwise (the date of such issuance, the “Springing Maturity Date”), either (x) at any time after the
2020 Senior Notes have been prepaid, redeemed, repurchased, defeased or otherwise satisfied in full or (y) in an amount in
excess of the amount necessary to refinance the 2020 Senior Notes (including fees and expenses payable in connection with such
refinancing).
“Springing Maturity Date” has the meaning set forth in the definition of “Springing Maturity Condition”.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and
the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the
Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding
31
(currently referred to as “Eurocurrency liabilities” in Regulation D). Such reserve percentage shall include those imposed
pursuant to Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to
any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and
as of the effective date of any change in any reserve percentage.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability
company, partnership, association or other Person the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date,
as well as any other corporation, limited liability company, partnership, association or other Person (a) of which securities or
other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of such date, directly or indirectly, owned, controlled
or held, or (b) that is, as of such date, otherwise Controlled, directly or indirectly, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
“Subsidiary” means any subsidiary of the Parent Borrower.
“Subsidiary Borrower” means, as applicable, RL Finance B.V., a private company with limited liability organized
under the laws of the Netherlands, Ralph Lauren Europe Sàrl (société à responsabilité limitée), a limited liability company
organized under the laws of Switzerland, or Ralph Lauren Asia Pacific Limited, a limited liability company organized under the
laws of Hong Kong.
“Subsidiary Obligations” means the unpaid principal of and interest on the Loans made to and reimbursement
obligations of each Subsidiary Borrower (including, without limitation, interest accruing after the maturity of the Loans made to
and reimbursement obligations of such Subsidiary Borrower and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating to such Subsidiary Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) and all other obligations and liabilities of the
Subsidiary Borrowers to the Administrative Agent or to any Lender (or, in the case of Specified Swap Agreements and Specified
Cash Management Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan
Document, any Specified Swap Agreement, any Specified Cash Management Agreement, any guarantee thereof or any other
document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise; provided, that for purposes of determining the obligations of any
Guarantor under this Agreement and the Guarantee Agreement, the definition of “Subsidiary Obligations” shall not create any
guarantee by any Guarantor of any Excluded Swap Obligations of such Guarantor.
32
“Supported QFC” has the meaning set forth in Section 10.17.
“Swap” means any agreement, contract, or transaction that constitutes a “swap” within the meaning of section
1a(47) of the Commodity Exchange Act.
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or
option, cap or collar agreements or similar agreement involving, or settled by reference to, one or more interest or exchange rates,
currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no
phantom stock or similar plan providing for payments only on account of services provided by current or former directors,
officers, employees or consultants of the Parent Borrower or the Subsidiaries shall be a Swap Agreement.
“Swap Guarantee Eligibility Period” means, with respect to a Guarantor and the relevant Swap Obligation, the
period from and including the date on which the relevant guarantee (or grant of the relevant security interest, as applicable)
became effective with respect to such Swap Obligation until the date on which such guarantee (or grant of the relevant security
interest, as applicable) is no longer in effect. For the avoidance of doubt, the Swap Guarantee Eligibility Period shall commence
on the date of the execution of a Swap if the corresponding guarantee (or grant of security interest) is then in effect, and
otherwise it shall commence on the date of execution and delivery of the relevant guarantee (or grant of security interest) unless
the guarantee (or relevant collateral agreement or pledge documentation, as applicable) specifies a subsequent effective date.
“Swap Obligation” means, with respect to any Person, any obligation to pay or perform under any Swap.
“Swiss 10-Non-Bank Rule” means the rule that the aggregate number of creditors (within the meaning of the
Swiss Guidelines) (including the Lenders) of a Swiss Borrower under this Agreement that are not Swiss Qualifying Banks must
not at any time exceed 10, in each case in accordance with the meaning of the Swiss Guidelines or the applicable legislation or
explanatory notes addressing the same issues that are in force at such time.
“Swiss 20-Non-Bank Rule” means the rule that (without duplication) the aggregate number of lenders (including
the Lenders), other than Swiss Qualifying Banks, of a Swiss Borrower under all its outstanding debt relevant for classification as
debenture (Kassenobligation) (including debt arising under this Agreement), facilities and/or private placements) must not at any
time exceed 20, in each case in accordance with the meaning of the Swiss Guidelines or the applicable legislation or explanatory
notes addressing the same issues that are in force at such time.
“Swiss Borrower” means, for purposes of Swiss Withholding Tax, a Borrower that is organized under the laws of
Switzerland or which is treated as resident in Switzerland for Swiss Withholding Tax purposes.
33
“Swiss Guidelines” means all relevant guidelines or explanatory notes issued by the Swiss Federal Tax
Administration as amended, replaced or newly issued from time to time, including the established practice of the Swiss Federal
Tax Administration or as substituted or superseded and overruled by any law, statute, ordinance, court decision, regulation or the
like as in force from time to time.
“Swiss Loan Party” means a Swiss Borrower and each Loan Party that is organized under the laws of Switzerland
(each, a “Swiss Loan Party”).
“Swiss Non-Bank Rules” means the Swiss 10-Non-Bank Rule and the Swiss 20-Non-Bank Rule.
“Swiss Permitted Non-Qualifying Banks” means, in aggregate, up to 10 Lenders which are not, in each case, a
Swiss Qualifying Bank; and “Swiss Permitted Non-Qualifying Bank” means one of them.
“Swiss Qualifying Bank” means (a) any bank as defined in the Swiss Federal Code for Banks and Savings Banks
dated 8 November 1934 (Bundesgesetz über die Banken und Sparkassen) as amended from time to time; and (b) a person or
entity which effectively conducts banking activities with its own infrastructure and staff as its principal business purpose and
which has a banking license in full force and effect issued in accordance with the banking laws in force in its jurisdiction of
incorporation, or if acting through a branch, issued in accordance with the banking laws in the jurisdiction of such branch, all and
in each case in accordance with the Swiss Guidelines.
“Swiss Withholding Tax” means the tax imposed based on the Swiss Federal Act on Withholding Tax of 13
October 1965 (Bundesgesetz über die Verrechnungssteuer vom 13. Oktober 1965, SR 642.21), as amended from time to time
together with the related ordinances, regulations and guidelines.
“Switzerland” means the Swiss Confederation.
“Syndication Agent” means Bank of America, N.A., in its capacity as syndication agent, and its successors in such
capacity.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including
backup withholding), assessments, fees, or other charges imposed by any Governmental Authority, including interest, additions to
tax or penalties applicable thereto.
“Transactions” means the execution, delivery and performance by the Borrowers of this Agreement and by the
Guarantors of the Guarantee Agreement, the borrowing of Loans, the use of the proceeds thereof.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or
on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
34
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as
amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within
IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct
Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or
investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having
responsibility for the resolution of any UK Financial Institution.
“Unrestricted Cash” means, with respect to any Person, the cash and Permitted Investments of such Person on a
consolidated basis that are not treated as restricted under GAAP.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“U.S. Special Resolution Regimes” has the meaning set forth in Section 10.17.
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.15(f).
“Voting Stock” means stock of any class or classes (however designated), or other Equity Interests, of any Person,
the holders of which are at the time entitled, as such holders, to vote for the election of the directors or other governing body of
the Person involved, whether or not the right so to vote exists by reason of the happening of a contingency.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down
and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA
Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with
respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel,
reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that
liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to
provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation
in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those
powers.
“Yen” means the lawful currency of Japan.
35
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g., a “Eurocurrency Loan”) or currency (e.g., an “Alternative Currency Loan”). Borrowings
also may be classified and referred to by Type (e.g., a “Eurocurrency Borrowing”) or currency (e.g., an “Alternative Currency
Borrowing”).
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any
Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, (e) any reference to any law, rule or regulation herein shall, unless otherwise
specified, refer to such law, rule or regulation as amended, modified or supplemented from time to time and (f) the words “asset”
and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that,
notwithstanding anything to the contrary herein, all accounting or financial terms used herein shall be construed, and all financial
computations pursuant hereto shall be made, without giving effect to any election under Statement of Financial Accounting
Standards 159 (or any other Financial Accounting Standard or the corresponding Accounting Standards Codification Topic, as
applicable, having a similar effect); provided, further that, if the Parent Borrower notifies the Administrative Agent that the
Parent Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the
Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance herewith. Without limiting the foregoing, and for the
avoidance of doubt, if such a notice is given regarding a change in GAAP after such change is adopted but prior to its becoming
effective, then the Parent Borrower and the Administrative Agent shall, acting reasonably and in good faith, negotiate an
amendment to the provisions of this Agreement affected by such change in GAAP to preserve the original intent of such
provisions in light of
36
such change (subject to the approval of the Required Lenders), which amendment shall take effect when such change in GAAP
becomes effective.
SECTION 1.05. Exchange Rates. (a) For purposes of calculating the Dollar Equivalent of the principal amount
of any Loan denominated in an Alternative Currency, the Administrative Agent shall determine the Exchange Rate as of the
applicable Exchange Rate Date with respect to each Alternative Currency in which any requested or outstanding Loan is
denominated and shall apply such Exchange Rate to determine such amount (in each case after giving effect to any Loan to be
made or repaid on or prior to the applicable date for such calculation).
(b) For purposes of (i) determining the amount of Indebtedness incurred, outstanding or proposed to be incurred
or outstanding under Section 6.01 (but excluding, for the avoidance of doubt, any calculation of Consolidated Net Worth or
Consolidated EBITDAR), (ii) determining the amount of obligations secured by Liens incurred, outstanding or proposed to be
incurred or outstanding under Section 6.02, or (iii) determining the amount of Material Indebtedness, the net assets of a Person or
judgments outstanding under paragraphs (f), (g), (h), (i), (j) or (k) of Article VII, all amounts incurred, outstanding or proposed to
be incurred or outstanding in currencies other than dollars shall be translated into dollars at the Exchange Rate on the applicable
date, provided that no Default shall arise as a result of any limitation set forth in dollars in Section 6.01 or 6.02 being exceeded
solely as a result of changes in Exchange Rates from those rates applicable at the time or times Indebtedness or obligations
secured by Liens were initially consummated or acquired in reliance on the exceptions under such Sections.
SECTION 1.06. Divisions. For all purposes under the Loan Documents, in connection with any division or plan
of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation
or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have
been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new
Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests
at such time.
SECTION 1.07. Lenders’ Status. Each Lender hereunder confirms as of the date hereof that it is a Swiss
Qualifying Bank or counts as (only) one Swiss Permitted Non-Qualifying Bank. Each Lender which becomes a party to this
Agreement after the date of this Agreement shall indicate, in the Assignment and Assumption or the New Lender Supplement
whether it is a Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank. If a Lender does not declare its status as a
Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank or declares its status in that regard to be unknown, such
Lender shall be treated as a Lender which is not a Swiss Qualifying Bank or a Swiss Permitted Non-Qualifying Bank.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender severally
agrees to make Loans in dollars or an Alternative Currency to the Borrowers from time to time during the Availability Period in
an aggregate principal amount that
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will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment. Within the foregoing limits
and subject to the terms and conditions set forth herein, each Borrower may borrow, prepay and reborrow Revolving Loans. The
obligations of each Borrower under this Agreement are several although the Subsidiary Obligations are guaranteed by the Parent
Borrower under Article IX.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of
the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans
as the Parent Borrower may request on its own behalf or on behalf of any other Borrower in accordance herewith. Each Lender at
its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in
accordance with the terms of this Agreement; and provided, further, that no such option may be exercised by any Lender if,
immediately after giving effect thereto, amounts would become payable by a Loan Party under Section 2.13 or 2.15 that are in
excess of those that would be payable under such Section if such option were not exercised.
(c) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in
an aggregate amount that is (i) in the case of a Eurocurrency Borrowing denominated in dollars, an integral multiple of $500,000
and not less than $5,000,000 and (ii) in the case of an Alternative Currency Borrowing, the Dollar Equivalent of an integral
multiple of $500,000 and not less than the Dollar Equivalent of $5,000,000. At the time that each ABR Borrowing is made, such
Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $500,000; provided that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Borrowings
of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 15
Eurocurrency Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect
to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(e) Each Lender may, at its option, make any Loan available to any Subsidiary Borrower by causing any foreign
or domestic branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not increase
the costs to such Subsidiary Borrower with respect to such Loan or affect the obligation of such Subsidiary Borrower to repay
such Loan in accordance with the terms of this Agreement.
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SECTION 2.03. Requests for Borrowings. To request a Loan, the Parent Borrower (on its own behalf or on
behalf of any other Borrower) shall notify the Administrative Agent of such request by hand delivery, telecopy or (pursuant to
procedures approved by the Administrative Agent) electronic transmission to the Administrative Agent of a written Borrowing
Request in a form approved by the Administrative Agent and signed by the Parent Borrower (a) in the case of a Eurocurrency
Borrowing denominated in dollars, not later than 11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing, (b) in the case of a Eurocurrency Borrowing denominated in an Alternative Currency, not later than 11:00
a.m., New York City time, four Business Days before the date of the proposed Borrowing, or (c) in the case of an ABR
Borrowing, not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such Borrowing Request
shall be irrevocable and shall specify the following information in compliance with Section 2.02:
(i) the Borrower of the requested Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
(v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be
a period contemplated by the definition of the term “Interest Period”;
(vi) in the case of a Eurocurrency Borrowing, the currency in which such Borrowing is to be denominated;
and
(vii) the location and number of the applicable Borrower’s account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested Borrowing (i) if such Borrowing is to be denominated
in dollars, shall be an ABR Borrowing and (ii) if such Borrowing is to be denominated in an Alternative Currency, shall be a
Eurocurrency Borrowing. If no election as to the currency of the requested Borrowing is specified, then the requested Borrowing
shall be denominated in dollars. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the
Parent Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a
Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and
of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
SECTION 2.04. [Reserved].
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer of immediately available funds by 12:00 noon., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that if an ABR
Borrowing is requested for disbursement on the same day after 11:00 a.m., New York time, then
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each Lender shall make the Loan to be made by it hereunder in such manner by 3:00 p.m., New York City time. The
Administrative Agent will make such Loans available to the applicable Borrower by promptly crediting the amounts so received,
in like funds, to an account of the applicable Borrower maintained with the Administrative Agent and designated by the Parent
Borrower in the applicable Borrowing Request.
(a) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any
Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available at such time in accordance with paragraph (a)
of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In
such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available to the applicable Borrower to but excluding the
date of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. If such Lender’s share
of such Borrowing is not made available to the Administrative Agent by such Lender within three Business Days after the date
such amount is made available to the applicable Borrower, the Administrative Agent shall promptly notify the Parent Borrower
and any other applicable Borrower of such failure and shall also be entitled to recover such amount from the applicable Borrower,
on demand, with interest thereon at the rate per annum applicable to ABR Loans hereunder accruing from the date of such
Borrowing. If the Parent Borrower or the applicable Borrower shall pay to the Administrative Agent such corresponding amount,
the Parent Borrower and such applicable Borrower shall have no further obligations to such Lender with respect to such amount.
SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Parent Borrower (on its own behalf or on behalf of any other Borrower) may elect to convert
such Borrowing (i) in the case of a Eurocurrency Borrowing denominated in dollars, to an ABR Borrowing; or (ii) in the case of
an ABR Borrowing, to a Eurocurrency Borrowing denominated in dollars or to continue such Borrowing in the same currency
and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Parent
Borrower (on behalf of itself or any other Borrower) may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Parent Borrower (on its own behalf or on behalf of another
Borrower) shall notify the Administrative Agent of such election by hand delivery, telecopy or electronic transmission (pursuant
to procedures approved by the Administrative Agent) to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Parent Borrower by the time that a
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Borrowing Request would be required under Section 2.03 if the Parent Borrower were requesting a Borrowing of the Type
resulting from such election to be made on the effective date of such election. Each such Interest Election Request shall be
irrevocable.
(c) Each Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected
with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a
Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after
giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Parent
Borrower (on its own behalf or on behalf of another Borrower) shall be deemed to have selected an Interest Period of one
month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e) If the Parent Borrower (on its own behalf or on behalf of another Borrower) fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless
such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing (i) if denominated in dollars, shall
be converted to an ABR Borrowing and (ii) if denominated in an Alternative Currency, shall be converted to a one month Interest
Period denominated in the same currency as the Eurocurrency Borrowing being continued. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the
Required Lenders, so notifies the Parent Borrower, then, so long as such Event of Default is continuing (i) no outstanding
Borrowing denominated in dollars may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each
Eurocurrency Borrowing denominated in dollars shall be converted to an ABR Borrowing at the end of the Interest Period
applicable thereto.
(f) By entering into this Agreement, the parties hereto have assumed in good faith that the interest payable at
the rates specified in this Agreement is not and will not be subject to any Tax deduction on account of Swiss Withholding Tax.
Nevertheless, if a Tax deduction on account of Swiss Withholding Tax is required by Swiss law to be made by a Swiss Borrower
in
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respect of any interest payable by it under a Loan Document and should it be unlawful for a Swiss Borrower to comply with
Section 2.15 for any reason, and if the gross-up in accordance with Section 2.15 is effectively not paid: (i) the applicable interest
rate in relation to that interest payment shall be (A) the interest rate which would have applied to that interest payment in the
absence of this Section 2.06(f)), divided by (B) one minus the rate at which the relevant deduction on account of Swiss
Withholding Tax is required to be made (where the rate at which the relevant deduction on account of Swiss Withholding Tax is
required to be made is for this purpose expressed as a fraction of one rather than as a percentage); (ii) (A) a Swiss Borrower shall
be obliged to pay the relevant interest at the adjusted rate as set forth in this Section 2.06(f), and (B) a Swiss Borrower shall make
the deduction on account of Swiss Withholding Tax (within the time allowed and in the minimum amount required by law) on the
interest so recalculated; and (iii) all references to a rate of interest under a Loan Document applicable to a Swiss Borrower shall
be construed accordingly. To the extent that interest payable by a Swiss Borrower under this Agreement becomes subject to a
deduction of Swiss Withholding Tax, each relevant Lender and the Swiss Borrower shall promptly cooperate in completing any
procedural formalities (including submitting forms and documents required by the appropriate Tax authority) to the extent
possible and necessary for the Swiss Borrower to obtain authorization to make interest payments without them being subject to
such deduction of Swiss Withholding Tax or to reduce the applicable withholding tax rate. If a Swiss Borrower pays the interest
recalculated under this Section 2.06(f), the Swiss Borrower shall cooperate with each relevant Lender to enable that Lender to
receive a full or partial refund of the Swiss Withholding Tax under an applicable double taxation treaty. In the event Swiss
Withholding Tax is refunded to a Lender by the Swiss Federal Tax Administration, the relevant Lender shall immediately forward
such amount to the Swiss Borrower. This Section 2.06(f) shall not apply and no interest shall be recalculated pursuant to this
Section 2.06(f) if a deduction of Swiss Withholding Tax is due as a result of any non-compliance by a Lender with the provisions
of Section 10.04 or the Lender (i) making a misrepresentation as to its status according to Section 1.07 as a Swiss Qualifying
Bank or as (only) one Swiss Permitted Non-Qualifying Bank or (ii) ceasing to be a Swiss Qualifying Bank or as (only) one Swiss
Permitted Non-Qualifying Bank after the time it acceded to this Agreement. Notwithstanding anything to the contrary herein, for
the avoidance of doubt, (i) a Lender who is not treated as not being a Swiss Qualifying Bank shall not be under any obligation to
change its status into a Swiss Qualifying Bank, (ii) the documentation which a Lender executes on becoming a party hereto shall
not be invalidated by any failure of a Lender to comply with this Section 2.06(f), Section 10.04 or Section 1.07 and (iii) none of
the Loan Documents shall be invalidated by any failure of a Lender to comply with this Section 2.06(f), Section 10.04(b)(i)(A) or
Section 1.07 or indicates its status as a Swiss Qualifying Bank or Swiss Permitted Non-Qualifying Bank as unknown.
SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated in accordance
with this Agreement, the Commitments shall terminate on the Maturity Date.
(b) The Parent Borrower may at any time terminate, or from time to time reduce, the Commitments; provided
that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $100,000 and not less than
$1,000,000, or, if less than $1,000,000, the remaining amount of the total Commitments, and (ii) the Parent Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of
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the Loans in accordance with Section 2.09, the total Revolving Credit Exposures would exceed the total Commitments.
(c) The Parent Borrower shall notify the Administrative Agent of any election to terminate or reduce the
Commitments under paragraph (b) of this Section at least two Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Parent Borrower pursuant to this Section
shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Parent Borrower may state that
such notice is conditioned upon another event, such as the effectiveness of other credit facilities, in which case such notice may
be revoked by the Parent Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.
SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby unconditionally promises
to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan made to such
Borrower on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender to such Borrower, including the
amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain a Register pursuant to Section 10.04(b)(iv) and an account for each
Lender in which it shall record (i) the amount of each Loan made hereunder, the Type and currency thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.
(d) The entries made in the accounts and Register maintained pursuant to paragraph (b) or (c) of this Section
shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of
any Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the
applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or,
if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment
pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
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SECTION 2.09. Prepayment of Loans. (a) Each Borrower shall have the right at any time and from time to
time to prepay voluntarily any Borrowing made to such Borrower in whole or in part without premium or penalty, subject to prior
notice in accordance with paragraph (b) of this Section.
(b) The Parent Borrower (on its own behalf or on behalf of any other Borrower) shall notify the Administrative
Agent in writing (by hand delivery, telecopy or (pursuant to procedures approved by the Administrative Agent) electronic
transmission) of any voluntary prepayment hereunder prior to (i) in the case of ABR Loans, 11:00 a.m., New York City time, on
such date of prepayment, (ii) in the case of Eurocurrency Loans denominated in dollars, 12:00 noon, New York City time, on the
Business Day immediately preceding such date of prepayment, (iii) in the case of Eurocurrency Loans denominated in Euros,
12:00 noon, New York City time, three Business Days prior to such date of prepayment and (iv) in the case of Eurocurrency
Loans denominated in any Alternative Currencies other than Euros, 12:00 noon, New York City time, four Business Days prior to
such date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of
each Borrowing or portion thereof to be prepaid and whether the prepayment is of Eurocurrency Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to each; provided that, if a notice of voluntary
prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07,
then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07.
Promptly following receipt of any such notice the Administrative Agent shall advise the Lenders of the contents thereof. Each
partial voluntary prepayment of any Borrowing shall be in an aggregate principal amount of $500,000 or a multiple of $100,000
in excess thereof (or the Dollar Equivalent thereof). Each voluntary prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing.
(c) If on any Exchange Rate Date the Administrative Agent determines that the total Revolving Credit Exposure
exceeds 105% of the total Commitments, the Borrowers shall within three Business Days after such date, prepay Loans in an
aggregate amount such that, after deducting therefrom the amount so prepaid, the total Revolving Credit Exposure does not
exceed the total Commitments.
(d) If, as of the last Business Day of any calendar week, commencing with the first complete calendar week
after the Effective Date, the Consolidated Cash Balance exceeds $1,000,000,000 as of the end of such applicable Business Day
(such excess, the “Excess Cash Amount”), then the Borrowers shall, on the next Business Day thereafter, prepay the Loans in an
aggregate principal amount equal to the lesser of (x) the Excess Cash Amount and (y) the aggregate principal amount of Loans
then outstanding.
(e) Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and any
amounts payable pursuant to Section 2.14.
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SECTION 2.10. Fees. (a) The Parent Borrower agrees to pay to the Administrative Agent for the account of
each Lender a commitment fee for the period from and including the Effective Date to the last day of the Availability Period,
computed at the Applicable Rate on the average daily amount of the Available Commitment of such Lender during the period for
which payment is made. Commitment fees accrued through and including the last day of March, June, September and December
of each year shall be payable on the fifth Business Day following such last day, commencing on October 7, 2020; provided that
all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on
which the Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(b) [Reserved].
(c) The Parent Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the
amounts and at the times separately agreed upon between the Parent Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the
Administrative Agent for distribution, in the case of commitment fees and participation fees, to the Lenders. Except as may be
expressly agreed in writing between the Parent Borrower and the Administrative Agent with respect to fees to the Administrative
Agent, fees paid shall not be refundable under any circumstances (other than in the case, and to the extent, of any overpayment
thereof by the applicable Borrower).
SECTION 2.11. Interest; Eurocurrency Tranches. (a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) The interest rate for Loans denominated in Alternative Currencies shall be subject to customary adjustments
if and to the extent loans denominated in such Alternative Currencies are not customarily priced on a LIBO Rate basis; provided,
however that such adjustments shall not apply to Loans denominated in Euros, Yen or Hong Kong Dollars.
(d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount
payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue
principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.
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(e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and
upon termination of all of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by
reference to (i) the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate or (ii) the LIBO Rate or
Interpolated Rate at times when the LIBO Rate or Interpolated Rate is based on the HKD Screen Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a
Eurocurrency Borrowing:
(a) the Administrative Agent reasonably determines (which determination shall be conclusive absent manifest
error) that by reason of circumstances affecting the relevant market adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate (including because the LIBO Screen Rate is not available or
published on a current basis), as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO
Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Parent Borrower (on its own behalf or on behalf of
any other Borrower) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative
Agent notifies the Parent Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency
Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurocurrency Borrowing denominated in dollars, such
Borrowing shall be made as an ABR Borrowing; provided that (A) if the circumstances giving rise to such notice affect only one
Type of Borrowings, then the other Type of Borrowings shall be permitted and (B) if the circumstances giving rise to such notice
affect only one currency, then Borrowings in other permitted currencies shall be permitted. The Administrative Agent agrees to
give prompt notice to the Parent Borrower when the circumstances that gave rise to a notice under this Section 2.12 no longer
exist. If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i)
the circumstances set forth in clause (a) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances
set forth in clause
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(a) have not arisen but either (w) the supervisor for the administrator of the LIBO Screen Rate has made a public statement that
the administrator of the LIBO Screen Rate is insolvent (and there is no successor administrator that will continue publication of
the LIBO Screen Rate), (x) the administrator of the LIBO Screen Rate has made a public statement identifying a specific date
after which the LIBO Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor
administrator that will continue publication of the LIBO Screen Rate), (y) the supervisor for the administrator of the LIBO Screen
Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely
cease to be published or (z) the supervisor for the administrator of the LIBO Screen Rate or a Governmental Authority having
jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBO Screen
Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall enter
into an amendment to establish an alternate rate of interest to the LIBO Rate that gives due consideration to the then prevailing
market convention for determining a rate of interest for syndicated loans in the United States at such time and such other related
changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a
reduction of the Applicable Rate); provided that, if such alternate rate of interest as so determined would be less than 0.75%, such
rate shall be deemed to be 0.75% for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 10.02,
such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the
Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is
provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such
amendment. Until an alternate rate of interest shall be determined in accordance with this paragraph (but, in the case of the
circumstances described in clauses (w), (x) or (y) above, only to the extent the LIBO Screen Rate for the applicable currency and
such Interest Period is not available or published at such time on a current basis), (i) any Interest Election Request that requests
the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective, (ii) if
any Borrowing Request requests a Eurocurrency Borrowing denominated in dollars, such Borrowing shall be made as an ABR
Borrowing. The LIBO Rate is derived from the London interbank offered rate. The London interbank offered rate is intended to
represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market.
In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel
contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE
Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is
possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an
appropriate reference rate upon which to determine the interest rate on Eurocurrency Loans. In light of this eventuality, public
and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of
the London interbank offered rate. In the event that the London interbank offered rate is no longer available or in certain other
circumstances, this Section provides a mechanism for determining an alternative rate of interest. However, the Administrative
Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration,
submission or any other matter related to the London interbank offered rate or other rates in the definition of “LIBO Rate” or
with respect to any alternative or successor rate thereto, or replacement rate thereof.
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SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate);
(ii) [reserved]; or
(iii) shall subject the Administrative Agent or any Lender to any Taxes (other than (A) Indemnified Taxes
indemnified under Section 2.15, (B) Taxes described in clauses (b) through (f) of the definition of Excluded Taxes or (C)
Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its
deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such Lender (or in the case of (iii) to such Administrative
Agent or Lender) of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make such Loan) or to
increase the cost to the Administrative Agent or such Lender or to reduce the amount of any sum received or receivable by the
Administrative Agent or such Lender hereunder (whether of principal, interest or otherwise), then the Parent Borrower will pay to
the Administrative Agent or such Lender, as the case may be, upon demand of such Person, such additional amount or amounts
as will compensate the Administrative Agent or such Lender, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender reasonably determines that any Change in Law regarding capital or liquidity requirements has
or would have the effect of reducing the rate of return on such Lender’s capital (or on the capital of any corporation controlling
such Lender) as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or
such controlling corporation could have achieved but for such Change in Law (taking into consideration such Lender’s or such
controlling corporation’s policies with respect to capital adequacy or liquidity), then from time to time the Parent Borrower will
pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation for any
such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender as
specified in paragraph (a), (b) or (e) of this Section, containing (i) a reasonably detailed explanation of the basis on which such
amount or amounts were calculated and the Change in Law by reason of which it has become entitled to be so compensated and
(ii) confirmation of the matters set forth in the last sentence of Section 2.13(d), shall be delivered to the Parent Borrower and
shall be conclusive absent manifest error. No Lender shall be entitled to the benefits of this Section 2.13 unless such Lender shall
have complied with the requirements of this Section 2.13. The Parent Borrower shall pay such Lender the amount shown as due
on any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender’s right to demand such compensation; provided that the Parent Borrower shall not be required
to compensate a Lender pursuant to this
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Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies the Parent
Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim
compensation therefor; provided, further that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.
Notwithstanding any other provision of this Section 2.13, no Lender shall demand compensation for any increased costs or
reduction referred to above in this Section if it shall not then be the general policy of such Lender to demand such compensation
in similar circumstances from comparable borrowers under comparable provisions of other credit agreements, if any (it being
understood, for the avoidance of doubt, that a waiver by any Lender in any given case of its right to demand such compensation
from any given borrower shall not, in and of itself, be deemed to constitute a change in the general policy of such Lender).
(e) If the cost to any Lender of making or maintaining any Loan to a Subsidiary Borrower that is a Foreign
Subsidiary is increased (or the amount of any sum received or receivable by any Lender or its lending office is reduced) by an
amount deemed by such Lender to be material, by reason of the fact that such Subsidiary Borrower is a Foreign Subsidiary, such
Subsidiary Borrower shall indemnify such Lender for such increased cost or reduction within 15 days after demand by such
Lender (with a copy to the Administrative Agent), which such Lender shall make within 90 days from the day such Lender has
notice of such increased cost or reduction.
SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency
Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the
conversion of any Eurocurrency Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, (c)
the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant
hereto (regardless of whether such notice may be revoked under Section 2.09(b) and is revoked in accordance therewith), or
(d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a
request by the Parent Borrower pursuant to Section 2.17, then, in any such event, the applicable Borrower shall compensate each
Lender for the loss and reasonable cost and expense attributable to such event (excluding loss of margin). In the case of a
Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by
such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in
the applicable eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled
to receive pursuant to this Section, containing a reasonably detailed calculation of such amounts, shall be delivered to the Parent
Borrower and shall be conclusive absent manifest error. The applicable Borrower shall pay such Lender the amount shown as due
on any such certificate
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within 10 days after receipt thereof. No Lender shall be entitled to the benefits of this Section 2.14 unless such Lender shall have
complied with the requirements of this Section 2.14.
SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of any Loan Party under
any Loan Document shall be made free and clear of and without deduction for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or
withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to
make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan
Party shall be increased as necessary so that, after such deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section 2.15), the amounts received with respect to this agreement
equal the sum which would have been received had no such deduction or withholding been made.
(b) The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable
law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.
(c) Each Loan Party shall indemnify the Administrative Agent and each Lender, as promptly as possible but in
any event within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation
of such Loan Party under any Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and including any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability, together with, to the
extent available, a certified copy of a receipt issued by such Governmental Authority evidencing such payment or other evidence
of such payment reasonably satisfactory to such Loan Party, delivered to such Loan Party as soon as practicable after any such
payment by a Lender or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a
Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt
issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to the Administrative Agent.
(e) A payment to a Lender shall not be increased under paragraph (a) or (b) of this Section 2.15 and no
indemnification is due under paragraph (c) of this Section 2.15 if on the date on which the payment falls due the payment could
have been made without any deduction on account of Swiss Withholding Tax (i) had the Lender correctly declared its status as to
whether it is a Swiss Qualifying Bank, (ii) had the Lender complied with the assignment, transfer or exposure transfer restrictions
pursuant to this Agreement, (iii) had the Lender not ceased to be a
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Swiss Qualifying Bank, or (iv) had the Swiss Non-Bank Rules not been breached as a result of an assignment or transfer of rights
and obligations under this Agreement after the occurrence of an Event of Default.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax, with respect to
payments made under this Agreement or any Loan Document shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and
executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be
made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower
or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set
forth in Section 2.15(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such
completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.
(i) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or
prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon
the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that
such Lender is exempt from U.S. federal backup withholding tax;
(B) any Lender that is not a U.S. Person shall, to the extent it is legally entitled to do so, deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the
date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(i) in the case of Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a
party (x) with respect to payments of interest under any Loan Document, executed originals of the applicable IRS Form W-8
establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty
and (y) with respect to any other applicable payments under any Loan Document, the applicable IRS Form W-8 establishing an
exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such
tax treaty;
(ii) executed originals of IRS Form W-8ECI;
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(iii) in the case of Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section
881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that such Lender is not a “bank” within
the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section
881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed originals of the applicable IRS Form W-8; or to the extent a Non-U.S. Lender is not
the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, the applicable IRS Form W-
8, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that if such Lender is a partnership and one or more
direct or indirect partners of such Lender are claiming the portfolio interest exemption, such Lender may provide a U.S. Tax
Compliance Certificate substantially in the form of Exhibit E-4 on behalf of each such direct and indirect partner;
(C) any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and
the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which
such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and
(D) If a payment made to a Lender hereunder or under any other Loan Document would be subject to
U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable, or those
under an intergovernmental agreement entered into in connection with the implementation of Sections 1471 through 1474
of the Code), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by
law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation
prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower
and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has
complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such
payment. Solely for purposes of this Section 2.15(f)(ii)(D), “FATCA” shall include any amendments made to FATCA
after the date of this Credit Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any
respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its
legal inability to do so.
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(g) Each Lender shall indemnify the Administrative Agent, within 10 days after demand therefor, for the full
amount of any Taxes imposed by any Governmental Authority, together with any reasonable costs and expenses arising therefrom
or with respect thereto, that are attributable (i) to such Lender and that are payable or paid by the Administrative Agent and (ii) to
a Lender’s failure to comply with the provisions of Section 10.04(c) relating to the maintenance of a Participant Register. A
certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive
absent manifest error.
(h) If the Administrative Agent or a Lender determines that it has received a refund which, in the good faith
judgment of the Administrative Agent or such Lender, as the case may be, is allocable to any Indemnified Taxes or Other Taxes
as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant
to this Section 2.15, it shall promptly pay over such refund to such Loan Party (but only to the extent of indemnity payments
made, or additional amounts paid, by such Loan Party under this Section 2.15 with respect to the Indemnified Taxes or Other
Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Administrative Agent or such Lender and
without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that
such Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to such Loan
Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority attributable to such amount
(including the reasonable out-of-pocket expenses described above of the Administrative Agent or such Lender)) to the
Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to
such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make
available its tax returns (or any other information relating to its taxes which it deems confidential) to any Loan Party or any other
Person.
(i) For purposes of this Section, the term “applicable law” includes FATCA.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Each Borrower shall make
each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Section 2.13,
2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds,
without set‑off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative
Agent be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 10 South Dearborn Street, 7th Floor, Chicago, Illinois
60603-2300 and to the wire instructions of the Administrative Agent set forth in Section 9.06 (or such other address or wire
instructions of the Administrative Agent that may be provided from time to time by the Administrative Agent), except that
payments pursuant to Sections 2.13, 2.14, 2.15 and 10.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars except payments
53
of principal of and interest on any Alternative Currency Loan shall be paid in the applicable currency.
(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, interest, fees, expenses and other amounts then due hereunder, such funds shall be applied (i) first, towards
payment of interest, fees, expenses and other amounts then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest, fees, expenses and other amounts then due to such parties, and (ii) second, towards
payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal
then due to such parties. Notwithstanding the foregoing, no amounts received from any Guarantor shall be applied to Excluded
Swap Obligations of such Guarantor.
(c) If any Lender shall, by exercising any right of set‑off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or
any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored
to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any
payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained
by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant,
other than to the applicable Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall
apply), or any payment obtained pursuant to a court order. Each Borrower consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of such Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders hereunder that such Borrower will not make such
payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if such Borrower has not in
fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on interbank compensation.
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(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b) or
2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such
Sections until all such unsatisfied obligations are fully paid.
(f) In order to expedite the transactions contemplated by this Agreement, each Subsidiary Borrower hereby
appoints the Parent Borrower to act as agent on behalf of such Subsidiary Borrower for the purpose of (i) giving any notices or
requests contemplated to be given by such Subsidiary Borrower pursuant to this Agreement, including, without limitation,
Borrowing Requests, prepayment notices and Interest Election Requests and (ii) paying on behalf of such Subsidiary Borrower
any Subsidiary Obligations owing by such Subsidiary Borrower; provided, that each Subsidiary Borrower shall retain the right, in
its discretion, to give directly any or all of such notices or requests or to make directly any or all of such payments.
(g) The obligations of each Borrower under this Agreement are several although the Subsidiary Obligations are
guaranteed by the Parent Borrower under Article IX.
SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation
under Section 2.13, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority
for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any
material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.
(b) If (i) any Lender requests compensation under Section 2.13, (ii) any Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, (iii) any
Lender is a Defaulting Lender or (iv) any Lender does not consent to any proposed amendment, supplement, modification,
consent or waiver of any provision of this Agreement or any other Loan Document that requires the consent of each of the
Lenders or each of the Lenders affected thereby (so long as the consent of the Required Lenders (with the percentage in such
definition being deemed to be 66 2/3% for this purpose) has been obtained), then the Parent Borrower may, at its sole expense (in
the case of clauses (i), (ii) and (iv) of this Section 2.17(b) only), upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in
Section 10.04, provided that the Parent Borrower shall be required to pay the processing and recordation fee referred to in Section
10.04(b)(ii)(C), or pursuant to deemed assignment provisions established by the Administrative Agent to which the Parent
Borrower has previously consented in writing), all its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the
Parent Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably
be withheld, (ii) such Lender shall have received payment of an amount equal to
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the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from
the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other
amounts), (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments
required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments and
(iv) in the case of an assignment pursuant to clause (iv) above, no Default shall have occurred and be continuing. A Lender shall
not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise,
the circumstances entitling the Parent Borrower to require such assignment and delegation cease to apply. No such assignment
shall be deemed to be a waiver of any rights which any Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.
SECTION 2.18. [Reserved].
SECTION 2.19. Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any
Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting
Lender:
(a) fees shall cease to accrue on the unfunded portion of the Available Commitment of such Defaulting Lender
pursuant to Section 2.10(a); and
(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in
determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any
amendment, waiver or other modification pursuant to Section 10.02); provided, that this clause (b) shall not apply to the vote of a
Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of each Lender or each
Lender affected thereby.
ARTICLE III
Representations and Warranties
The Parent Borrower represents and warrants and each Subsidiary Borrower represents and warrants (to the extent
specifically applicable to such Subsidiary Borrower) to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrowers, the Guarantors and the Parent Borrower’s
Significant Subsidiaries (as defined in Regulation S-X, part 210.1-02 of Title 17 of the Code of Federal Regulations) is duly
organized, validly existing and, other than the Swiss Loan Party, in good standing (or, if applicable in a foreign jurisdiction,
enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States of America) under the
laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
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SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan Party’s corporate powers
and have been duly authorized by all necessary corporate and, if required, stockholder action. Each Loan Document has been
duly executed and delivered by each Loan Party which is a party thereto and constitutes a legal, valid and binding obligation of
such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
liquidation, reconstruction, moratorium or other laws affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or
approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or
made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other
organizational documents of Parent Borrower or any other Loan Party or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture or any material agreement or other material instrument binding upon Parent
Borrower or other Loan Party its assets, or give rise to a right thereunder to require any payment to be made by Parent Borrower
or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of Parent Borrower or any
of other Loan Party.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Parent Borrower has heretofore
furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and
for the Fiscal Year ended March 30, 2019, reported on by Ernst & Young LLP, independent public accountants, and (ii) as of and
for the Fiscal Quarters and the portion of the Fiscal Year ended June 30, 2019, September 30, 2019 and December 31, 2019, each
certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Parent Borrower and its consolidated Subsidiaries as of such dates and for such
periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above.
(b) Since March 30, 2019 there has been no material adverse change in the business, operations, property or
condition (financial or otherwise) of the Parent Borrower and its Subsidiaries, taken as a whole; provided that, only during the
period from the Effective Date until March 31, 2021, the impacts of the Coronavirus pandemic on the business, assets,
operations, property or financial condition of the Parent Borrower and its Subsidiaries taken as a whole that (A) have already
occurred and were disclosed in writing to the Lenders in the materials distributed to the Lenders on May 22, 2020 and (B) that
were reasonably foreseeable (in consequence and duration) in light of any event, development or circumstance described in the
foregoing clause (A) (provided that any such additional impacts described in this clause (B) are similar to the previously
disclosed impacts described in the foregoing clause (A)), will in each case be disregarded for purposes of determining whether a
material adverse change in the business, operations, property or financial condition of the Parent Borrower and its Subsidiaries,
taken as a whole, has occurred.
SECTION 3.05. Properties. (a) Each of the Parent Borrower and the other Loan Parties has good title to, or
valid leasehold interests in, all its real and personal property
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material to the operation of its business, except for minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their intended purposes or such other defects as, in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
(b) Each of the Parent Borrower and the other Loan Parties owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its business as currently conducted, and the use thereof
by the Parent Borrower and the other Loan Parties does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the knowledge of any Borrower, threatened against or
affecting Parent Borrower or any of its Subsidiaries (i) which could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (except for actions, suits or proceedings disclosed prior to December 30, 2019 in reports
publicly filed by the Parent Borrower under the Securities Exchange Act of 1934, as amended, which disclosure was true and
correct in all material respects as of the date made and as of the Effective Date) or (ii) that involve this Agreement or the
Transactions.
(b) Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, neither the Parent Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Laws or to obtain, maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
SECTION 3.07. Compliance with Laws and Agreements. (a) Each of the Parent Borrower and its Subsidiaries
is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
(b) The Parent Borrower has implemented and maintains in effect policies and procedures designed to ensure
compliance by the Parent Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-
Corruption Laws and applicable Sanctions, and the Parent Borrower, its Subsidiaries and, to the knowledge of the Parent
Borrower, their respective officers, employees, directors and agents, are in compliance with Anti-Corruption Laws and applicable
Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in
Parent Borrower being designated as a Sanctioned Person. None of (a) the Parent Borrower, any Subsidiary or, to the knowledge
of the Parent Borrower, any of their respective directors, officers or employees, or (b) to the knowledge of the Parent Borrower,
any agent of the Parent Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit
facility established hereby, is a Sanctioned
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Person. No Transactions contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.
SECTION 3.08. Investment Company Status. Neither the Parent Borrower nor any of its Subsidiaries
is required to be registered as an “investment company” as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended.
SECTION 3.09. Taxes. Each of the Parent Borrower and its Subsidiaries has timely filed or caused to be filed
all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Parent Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves to the extent required by GAAP or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. (i) Except as could not reasonably be expected to result in a Material Adverse Effect,
each Plan is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Plans and the
regulations and published interpretations thereunder, and each Foreign Plan is in compliance with applicable non-United States
law and regulations thereunder, and (ii) no ERISA Event or Foreign Plan Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events and Foreign Plan Events for which liability has been imposed or is
reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Accounting Standards
Codification No. 715: Compensation Retirement Benefits) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $10,000,000 the fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Accounting Standards
Codification No. 715: Compensation Retirement Benefits) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $10,000,000 the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. All of the reports, financial statements and certificates furnished by or on behalf of
any Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or hereafter
delivered hereunder or reports filed pursuant to the Securities Exchange Act of 1934, as amended (as modified or supplemented
by other information so furnished prior to the date on which this representation and warranty is made or deemed made) do not
contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information,
the Parent Borrower and the Subsidiary Borrowers represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time. As of the Effective Date, to the best knowledge of the Parent Borrower, the
information included in the Beneficial Ownership Certification provided by a Borrower on or prior to the Effective Date to any
Lender in connection with this Agreement is true and correct in all respects.
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SECTION 3.12. Subsidiary Guarantors. Set forth on Schedule 3.12 is a list of each Subsidiary which, in
accordance with Section 4.01(b), is required to be a Guarantor under the Guarantee Agreement on the Effective Date.
SECTION 3.13. Anti-Corruption Laws and Sanctions. The Borrowers have implemented and maintain in effect
policies and procedures designed to ensure compliance by the Borrowers, their subsidiaries and their respective directors,
officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrowers, their subsidiaries and
their respective officers and directors and to the knowledge of the Borrowers their employees and agents, are in compliance in all
material respects with Anti-Corruption Laws and applicable Sanctions and are not knowingly engaged in any activity that would
reasonably be expected to result in a Borrower being designated as a Sanctioned Person. None of (a) the Borrowers, any
Subsidiary, any of their respective directors or officers or to the knowledge of the Borrowers or such Subsidiary employees, or (b)
to the knowledge of the Borrowers, any agent of a Borrower or any Subsidiary that will act in any capacity in connection with or
benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing, use of proceeds or other transaction
contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions. The foregoing representations in
this Section 3.13 will not apply to any party hereto to which Council Regulation (EC) 2271/96 (the “Blocking Regulation”)
applies, if and to the extent that such representations are or would be unenforceable by or in respect of that party pursuant to, or
would otherwise result in a breach and/or violation of, (i) any provision of the Blocking Regulation (or any law or regulation
implementing the Blocking Regulation in any member state of the European Union) or (ii) any similar blocking or anti-boycott
law in the United Kingdom.
SECTION 3.14. EEA Financial Institutions. No Loan Party is an Affected Financial Institution.
SECTION 3.15. Plan Assets; Prohibited Transactions. None of the Borrowers or any of their subsidiaries is an
entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor
performance of the transactions contemplated under this Agreement, including the making of any Loan hereunder, will give rise
to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
SECTION 3.16. Margin Regulations. The Borrowers are not engaged and will not engage, principally or as one
of their important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of
purchasing or carrying Margin Stock, and no part of the proceeds of any Borrowing hereunder will be used to buy or carry any
Margin Stock. Following the application of the proceeds of each Borrowing, not more than 25% of the value of the assets (either
of the Borrowers only or of the Borrowers and their subsidiaries on a consolidated basis) will be Margin Stock.
SECTION 3.17. Compliance with Swiss Non-Bank Rules. (a) Subject to clause (b) below, each Swiss Borrower
represents that it is at all times in compliance with the Swiss Non-Bank Rules; provided, that, if at any time the aggregate number
of Lenders which are not Swiss Qualifying Banks is less than ten in the aggregate, then for the purposes of determining
compliance with the Swiss 20-Non-Bank Rule pursuant to this Section 3.16, the relevant Swiss
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Borrower shall assume that the aggregate number of not Swiss Qualifying Banks hereunder is 10. (b) A Swiss Borrower shall not
be in breach of its obligations under clause (a) above if a Swiss Non-Bank Rule is breached as a result of one or more Lenders (i)
making a misrepresentation as to its status according to Section 1.07 as a Swiss Qualifying Bank or as (only) one Swiss Permitted
Non-Qualifying Bank or (ii) ceasing to be a Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank after
the time it acceded to this Agreement.
SECTION 3.18. Additional Specified Stimulus Indebtedness. The Parent Borrower hereby represents and warrants
that it and/or its applicable Subsidiaries have determined in good faith in consultation with counsel that it and/or such
Subsidiaries are eligible to participate in all Additional Specified Stimulus Indebtedness programs that the Parent Borrower
and/or such Subsidiaries currently participate in or have applied to participate in, and have taken into consideration in making
such determination the rules, regulations and guidance related to such programs.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become
effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart
of this Agreement signed on behalf of such party or (ii) written evidence reasonably satisfactory to the Administrative
Agent (which may include telecopy or electronic transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received the Guarantee Agreement executed and delivered by each
Domestic Subsidiary, if any, which, as of the Effective Date, is a Significant Subsidiary (as defined in Regulation S-X,
part 210.1-02 of Title 17 of the Code of Federal Regulations).
(c) [Reserved].
(d) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative
Agent and the Lenders and dated the Effective Date) of Kelley Drye & Warren LLP, counsel for the Loan Parties,
substantially in the form of Exhibit B. The Borrowers hereby request Kelley Drye & Warren LLP to deliver the opinion
provided for in the preceding sentence.
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(e) The Administrative Agent shall have received such documents and certificates as the Administrative Agent
or its counsel may reasonably request relating to the organization, existence and good standing of the Loan Parties, the
authorization of the Transactions by the Loan Parties and any other legal matters relating to the Loan Parties, this
Agreement or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its
counsel.
(f) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the
President, a Vice President or a Financial Officer of the Parent Borrower, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 4.02.
(g) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the
Effective Date, including, to the extent invoiced at least one Business Day prior to the Effective Date, reimbursement or
payment of all out‑of‑pocket expenses required to be reimbursed or paid by the Parent Borrower hereunder.
(h) (i) The Administrative Agent shall have received, at least five days prior to the Effective Date, all
documentation and other information regarding the Borrowers requested in connection with applicable “know your
customer” and anti-money laundering rules and regulations, including the Patriot Act, to the extent requested in writing of
the Borrowers at least 10 days prior to the Effective Date and (ii) to the extent a Borrower qualifies as a “legal entity
customer” under the Beneficial Ownership Regulation, at least five days prior to the Effective Date, any Lender that has
requested, in a written notice to such Borrower at least 10 days prior to the Effective Date, a Beneficial Ownership
Certification in relation to such Borrower shall have received such Beneficial Ownership Certification (provided that,
upon the execution and delivery by such Lender of its signature page to this Agreement, the condition set forth in this
clause (ii) shall be deemed to be satisfied; further provided that, the Borrowers shall not be required to provide any
personal data or information with respect to any individual, including without limitation personally identifiable
information, unless such data or information is required to be provided under applicable “know your customer” and anti-
money laundering rules and regulations).
The Administrative Agent shall notify the Parent Borrower and the Lenders of the Effective Date, and such notice shall be
conclusive and binding. On the Effective Date, (i) the Commitments of the Lenders shall be as set forth on Schedule 2.01 and (ii)
each obligation of the Loan Parties hereunder and under each Loan Document shall be deemed to be obligations of the Loan
Parties under the Loan Documents. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 6:00
p.m., New York City time, on the Outside Date (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate).
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SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any
Borrowing, but excluding a conversion of all or a portion of a Borrowing from one Type to the other or a continuation of all or a
portion of a Borrowing of the same Type pursuant to Section 2.06 is subject to the satisfaction of the following conditions:
(a) The representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be
true and correct in all material respects (or, in the case of any representation and warranty qualified by materiality, in all
respects) on and as of the date of such Borrowing (other than such representations as are made as of a specific earlier date,
in which case such representations and warranties shall be true and correct in all material respects as of such earlier date
(or, in the case of any representation and warranty qualified by materiality, in all respects as of such earlier date));
provided, however, that if the proceeds of such Loan are being used to refinance maturing commercial paper issued by the
Parent Borrower, then the representations and warranties in Sections 3.04(b) and 3.06(a) shall not apply.
(b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be
continuing
(c) The Consolidated Cash Balance on such date shall not exceed $1,000,000,000.
Each Borrowing shall be deemed to constitute a representation and warranty by the applicable Borrower on the date thereof as to
the matters specified in paragraphs (a) and (b) of this Section.
SECTION 4.03. Additional Condition to Initial Borrowing by Subsidiary Borrowers. The obligations of the
Lenders to make the initial Loan to a particular Subsidiary Borrower shall not become effective, with respect to such Subsidiary
Borrower, until the date on which the Administrative Agent shall have received a favorable written opinion (addressed to the
Administrative Agent and the Lenders) of non-U.S. counsel for such Subsidiary Borrower in form and substance customary and
typical for such opinion and reasonably satisfactory to the Administrative Agent.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees
payable hereunder shall have been paid in full, the Parent Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements; Ratings Change and Other Information. The Parent Borrower will
furnish to each Lender through the Administrative Agent:
(a) within 90 days after the end of each Fiscal Year, the Parent Borrower’s audited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows as of the end of and for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous Fiscal Year, all reported on by Ernst &
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Young LLP or other independent public accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects the financial condition and results of operations of
the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied; provided, however, that, so long as the Parent Borrower is required to file reports under Section 13 of the
Securities and Exchange Act of 1934, as amended, the requirements of this paragraph shall be deemed satisfied by the
delivery of, the Annual Report of the Parent Borrower on Form 10-K (or any successor form as prescribed by the
Securities and Exchange Commission) for such Fiscal Year, signed by the duly authorized officer or officers of the Parent
Borrower;
(b) within 60 days after the end of each of the first three Fiscal Quarters, the Parent Borrower’s consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such
Fiscal Quarter and the then elapsed portion of the Fiscal Year, setting forth in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year,
all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results
of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided, however, that,
so long as the Parent Borrower is required to file reports under Section 13 of the Securities and Exchange Act of 1934, as
amended, the requirements of this paragraph shall be deemed satisfied by the delivery of the Quarterly Report of the
Parent Borrower on Form 10-Q (or any successor form as prescribed by the Securities and Exchange Commission) for the
relevant Fiscal Quarter, signed by the duly authorized officer or officers of the Parent Borrower.
(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a
Financial Officer of the Parent Borrower (i) stating that he or she has obtained no knowledge that a Default has occurred
(except as set forth in such certificate), (ii) if a Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations demonstrating compliance
with Section 6.07; and (iv) stating whether any change in GAAP or in the application thereof has occurred since the date
of the audited financial statements referred to in Section 3.04 which has had an effect on such financial statements and, if
any such change has occurred, specifying the effect of such change on the financial statements accompanying such
certificate;
(d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting
firm that reported on such financial statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all other periodic and other reports, proxy
statements and other materials filed by the Parent
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Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Parent
Borrower to its shareholders generally, as the case may be;
(f) promptly after the Parent Borrower shall have received notice that Moody’s or S&P has announced a change
in the rating established or deemed to have been established for the Index Debt, written notice of such rating change;
(g) promptly following any request therefor, (x) such other information regarding the business affairs or
financial position of the Parent Borrower or any other Loan Party, or compliance with the terms of this Agreement, as the
Administrative Agent on behalf of any Lender may reasonably request and (y) information and documentation reasonably
requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer”
and anti-money laundering rules and regulations, including the Patriot Act and the Beneficial Ownership Regulation,
provided that the Parent Borrower shall not be required to provide any personal data or information with respect to any
individual, including without limitation personally identifiable information, unless such data or information is required to
be provided under applicable “know your customer” and anti-money laundering rules and regulations; and
(h) promptly after receipt thereof by any Borrower or any Subsidiary, copies of each written notice or other
written correspondence received from the Securities and Exchange Commission (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by the Securities and
Exchange Commission or such other agency regarding financial or other operational results of any Borrower or any
Subsidiary thereof.
SECTION 5.02. Notices of Material Events. The Parent Borrower will furnish to the Lenders through the
Administrative Agent prompt written notice of the following after the Parent Borrower shall have obtained knowledge thereof:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental
Authority against or affecting the Parent Borrower or its Subsidiaries that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event or Foreign Plan Event that, alone or together with any other ERISA
Events or Foreign Plan Events that have occurred, could reasonably be expected to result in liability of any Loan Party or
any of its ERISA Affiliates in an aggregate amount exceeding $10,000,000;
(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse
Effect; and
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(e) any change in the information provided in the Beneficial Ownership Certification delivered to such Lender
that would result in a change to the list of beneficial owners identified in such certification.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of
the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Parent Borrower will, and will cause each of its
Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence
and the rights, licenses, permits, privileges and franchises material to the conduct of its business except, in each case (other than
the case of the foregoing requirements insofar as they relate to the legal existence of the Borrowers and the Guarantors), to the
extent that failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.04.
SECTION 5.04. Payment of Obligations. The Parent Borrower will, and will cause each of its Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, could reasonably be expected to result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good
faith by appropriate proceedings, (b) the Parent Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. Except where the failure to do so could not reasonably
be expected to result in a Material Adverse Effect, the Parent Borrower will, and will cause each of its Subsidiaries to, (a) keep
and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear
excepted and except for surplus and obsolete properties, and (b) maintain, with financially sound and reputable insurance
companies, insurance on such of its property and in such amounts and against such risks as are customarily maintained by
companies engaged in the same or similar businesses operating in the same or similar locations.
SECTION 5.06. Books and Records; Inspection Rights. The Parent Borrower will, and will cause each of its
Subsidiaries to, keep proper books of record and account in which entries in conformity in all material respects with all
applicable laws, rules and regulations of any Governmental Authority are made of all dealings and transactions in relation to its
business and activities. The Parent Borrower will, and will cause each of its Subsidiaries to, on an annual basis at the request of
the Administrative Agent (or at any time after the occurrence and during the continuance of a Default), permit any representatives
designated by the Administrative Agent or any Lender (at such Lender’s expense), upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records (other than materials protected by the attorney-
client privilege and materials which the Parent Borrower or such Subsidiary, as applicable, may not disclose without violation of
a confidentiality obligation binding upon it),
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and to discuss its affairs, finances and condition with its officers and independent accountants, so long as afforded opportunity to
be present, all during reasonable business hours. It is understood that so long as no Event of Default has occurred and is
continuing, such visits and inspections shall be coordinated through the Administrative Agent.
SECTION 5.07. Compliance with Laws. The Parent Borrower will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The
Parent Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Parent
Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and
applicable Sanctions.
SECTION 5.08. Compliance with Swiss Non-Bank Rules. (a) Subject to clause (b) below, each Swiss Borrower
will comply with the Swiss Non-Bank Rules; provided, that, if at any time the aggregate number of Lenders which are not Swiss
Qualifying Banks is less than ten in the aggregate, then for the purposes of determining compliance with the Swiss 20-Non-Bank
Rule pursuant to this Section 5.08, the relevant Swiss Borrower shall assume that the aggregate number of not Swiss Qualifying
Banks hereunder is 10. (b) A Swiss Borrower shall not be in breach of its obligations under clause (a) above if a Swiss Non-Bank
Rule is breached as a result of one or more Lenders (i) making a misrepresentation as to its status according to Section 1.07 as a
Swiss Qualifying Bank or as (only) one Swiss Permitted Non-Qualifying Bank or (ii) ceasing to be a Swiss Qualifying Bank or as
(only) one Swiss Permitted Non-Qualifying Bank after the time it acceded to this Agreement.
SECTION 5.09. Use of Proceeds . The proceeds of the Loans will be used only to finance the working capital
needs, capital expenditures, Permitted Acquisitions, Investments permitted under Section 6.05 and general corporate purposes of
the Parent Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for the
purpose of purchasing or carrying, or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or for
any other purpose that entails a violation of any such regulations.
SECTION 5.10. Guarantee Agreement Supplement. Each Domestic Subsidiary that becomes a Significant
Subsidiary subsequent to the Effective Date shall promptly (and in any event within 60 days of becoming a Significant
Subsidiary) execute and deliver to the Administrative Agent (with a counterpart for each Lender) a supplement to the Guarantee
Agreement pursuant to which such Subsidiary shall become a party thereto as a Guarantor, together with such other documents
and legal opinions with respect thereto as the Administrative Agent shall reasonably request (which documents and opinions shall
be in form and substance reasonably satisfactory to the Administrative Agent).
SECTION 5.11. Additional Specified Stimulus Indebtedness. Before participating in or applying to participate in
any Additional Specified Stimulus Indebtedness relief program, each of the Parent Borrower and/or its applicable Subsidiaries
shall make a determination in good faith in consultation with counsel that it is eligible to participate in such program, and shall
take into consideration in making such determination the rules, regulations and guidance related to
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such program. Further, the applicable borrower incurring such Additional Specified Stimulus Indebtedness shall comply in all
material respects with the laws, rules and regulations (including with respect to use of proceeds) applicable to the relevant credit
or financial support program.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees
payable hereunder have been paid in full, the Parent Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness. The Parent Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness created hereunder and under the other Loan Documents and Indebtedness created under the
Five-Year Credit Agreement;
(b) Indebtedness existing on the Effective Date and set forth in Schedule 6.01 and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or shorten the final
maturity or weighted average life to maturity thereof;
(c) Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any
other Subsidiary; provided that, other than with respect to Cash Pooling Arrangements, the aggregate amount of
Indebtedness incurred by Subsidiaries that are not Loan Parties pursuant to this clause (c) shall not exceed at any one time
outstanding $125,000,000;
(d) Guarantees by the Parent Borrower of Indebtedness of any Subsidiary and by any Subsidiary of
Indebtedness of the Parent Borrower or any other Subsidiary;
(e) Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or
improvement of any real property, fixed or capital assets, including Finance Lease Obligations, and extensions, renewals
and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that
such Indebtedness is incurred no more than 90 days prior to or within 90 days after such acquisition or the completion of
such construction or improvement;
(f) Indebtedness acquired or assumed in Permitted Acquisitions and extensions, renewals and replacements of
any such indebtedness that do not increase the outstanding principal amount thereof or shorten the final maturity or
weighted average life to maturity thereof or have different obligors;
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(g) Priority Indebtedness (excluding any Indebtedness permitted by Sections 6.01(e) and (f)) in an aggregate
principal amount at any one time outstanding not to exceed $15,000,000;
(h) Unsecured Indebtedness (excluding any Indebtedness permitted by Section 6.01(f)), not otherwise permitted
by this Section, of any Borrower or any Subsidiary which is a Guarantor so long as (i) on a pro forma basis after giving
effect to the incurrence of such Indebtedness, the ratio of (x) Adjusted Debt then outstanding to (y) Consolidated
EBITDAR for the then most recently ended period of four consecutive Fiscal Quarters for which financial statements
shall have been delivered to the Lenders pursuant to Section 5.01 is not greater than 3.75 to 1.00;
(i) Indebtedness under Swap Agreements not entered into for speculative purposes;
(j) Any joint and several liability as a result of a fiscal unity (fiscal eenheid) for Dutch tax purposes; and
(k) Additional Specified Stimulus Indebtedness.
For purposes of this subsection 6.01, any Person becoming a Subsidiary of the Parent Borrower after the date of
this Agreement shall be deemed to have incurred all of its then outstanding Indebtedness at the time it becomes a Subsidiary, and
any Indebtedness assumed by the Parent Borrower or any of its Subsidiaries shall be deemed to have been incurred on the date of
assumption.
SECTION 6.02. Liens. The Parent Borrower will not, and will not permit any Subsidiary to, create, incur,
assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) Liens existing on the Effective Date and set forth on Schedule 6.02;
(c) any Lien on any property or asset of the Parent Borrower or any Subsidiary securing Indebtedness permitted
by Section 6.01(e) incurred to acquire, construct or improve such property or asset;
(d) Liens solely constituting the right of any other Person to a share of any licensing royalties (pursuant to a
licensing agreement or other related agreement entered into by the Parent Borrower or any of its Subsidiaries with such
Person in the ordinary course of the Parent Borrower’s or such Subsidiary’s business) otherwise payable to the Parent
Borrower or any of its Subsidiaries, provided that such right shall have been conveyed to such Person for consideration
received by the Parent Borrower or such Subsidiary on an arm’s-length basis;
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(e) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to
Operating Leases entered into by the Parent Borrower or any of its Subsidiaries in the ordinary course of business;
(f) Liens securing Indebtedness described in clause (a) of the definition of Priority Indebtedness;
(g) Liens securing Indebtedness permitted under Section 6.01(c);
(h) Bankers’ liens and rights of setoff with respect to customary depository or other banking arrangements
entered into in the ordinary course of business;
(i) Liens attaching solely to cash earnest money or similar deposits in connection with any letter of intent or
purchase agreement in connection with a Permitted Acquisition;
(j) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to
consignments, provided that such Liens extend solely to the assets subject to such consignments; and
(k) Liens, including any netting or set-off, as a result of a fiscal unity (fiscal eenheid) for Dutch tax purposes.
SECTION 6.03. Sale of Assets. The Parent Borrower will not, nor will it permit any of its Subsidiaries to, sell,
lease, transfer or otherwise dispose of (in one transaction or a series of transactions) all or substantially all of the assets of the
Parent Borrower and its Subsidiaries taken as a whole.
SECTION 6.04. Fundamental Changes. (a) The Parent Borrower will not, and will not permit any Subsidiary
to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate
or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be
continuing, (i) any Subsidiary may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving
corporation, (ii) any Subsidiary (including a Guarantor) may merge into any other Subsidiary in a transaction in which the
surviving entity is a Subsidiary (provided that, in the case of a merger of a Subsidiary that is not a Subsidiary Borrower into a
Subsidiary Borrower in which the surviving Subsidiary is not the Subsidiary Borrower, the surviving Subsidiary shall execute
and deliver to the Administrative Agent an assumption agreement expressly assuming the Subsidiary Obligations of such
Subsidiary Borrower under this Agreement), and (iii) any Subsidiary may liquidate or dissolve if the Parent Borrower determines
in good faith that such liquidation or dissolution is in the best interests of the Parent Borrower and its Subsidiaries and is not
materially disadvantageous to the Lenders and except that the Parent Borrower or any Subsidiary may effect any acquisition
permitted by Section 6.05 by means of a merger of the Person that is the subject of such acquisition with the Parent Borrower or
any of its Subsidiaries (provided that, in the case of a merger with the Parent Borrower, the Parent Borrower is the survivor); and
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(b) The Parent Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in
any business other than a Related Line of Business; provided, that the Parent Borrower and any Subsidiary may engage in any
business or businesses which are not Related Lines of Business, so long as the Investments made by the Parent Borrower and/or
the Subsidiaries in such businesses do not exceed $750,000,000 in the aggregate, which amount shall be included in the aggregate
amount for Investments permitted under Section 6.05(j).
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The Parent Borrower will not,
and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit or the
rights of any licensee under a trademark license to such licensee from the Parent Borrower or any of its Affiliates, except:
(a) Permitted Investments;
(b) investments by the Parent Borrower or a Subsidiary in the capital stock of its Subsidiaries;
(c) loans or advances made by the Parent Borrower to, and Guarantees by the Parent Borrower of obligations
of, any Subsidiary, and loans or advances made by any Subsidiary to, and Guarantees by any Subsidiary of obligations of, the
Parent Borrower or any other Subsidiary;
(d) Guarantees constituting Indebtedness permitted by Section 6.01;
(e) advances or loans made in the ordinary course of business to employees of the Parent Borrower and its
Subsidiaries;
(f) existing Investments not otherwise permitted under this Agreement and described in Schedule 6.05 hereto;
(g) Investments received in connection with the bona fide settlement of any defaulted Indebtedness or other
liability owed to the Parent Borrower or any Subsidiary;
(h) Permitted Acquisitions; provided that if, as a result of a Permitted Acquisition, (i) a new Domestic
Subsidiary shall be created and such Domestic Subsidiary is a “Significant Subsidiary” (as defined in Regulation S-X, part 210.1-
02 of Title 17 of the Code of Federal Regulations) or (ii) any then existing Domestic Subsidiary shall become such a Significant
Subsidiary, such Domestic Subsidiary shall thereafter become party to the Guarantee Agreement as a Guarantor in accordance
with Section 5.10; provided further, that the aggregate amount of Permitted Acquisitions made pursuant to this clause (h), when
taken together with all Investments made pursuant to clause (j), shall not exceed $100,000,000;
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(i) Swap Agreements not entered into for speculative purposes; and
(j) Investments, in addition to Investments permitted under clauses (a) through (h) of this Section 6.05, but
including Investments permitted under Section 6.04(b), made after the date hereof in an aggregate amount not to exceed, when
taken together with all Permitted Acquisitions made pursuant to clause (h), $100,000,000 in any Person or Persons.
SECTION 6.06. Transactions with Affiliates. The Parent Borrower will not, and will not permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, (a) any of its Affiliates, (b) a spouse or any relative (by blood,
adoption or marriage) within the third degree of any such Affiliate or (c) any other Person which is an Affiliate of any such
spouse or relative, except (x) in the ordinary course of business at prices and on terms and conditions, in the aggregate (taking
into account all of the Parent Borrower’s or such Subsidiary’s transactions with, and the benefits to the Parent Borrower and its
Subsidiaries derived from the Parent Borrower’s or such Subsidiary’s Investment in, such Affiliate), not less favorable to the
Parent Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, excluding
customary compensation paid to, and indemnity provided on behalf of, directors, officers and employees of the Parent Borrower
and any Subsidiary and (y) transactions between or among the Parent Borrower and its Subsidiaries not involving any other
Affiliate.
SECTION 6.07. Minimum Liquidity. The Parent Borrower will not permit the aggregate Liquidity of the Parent
Borrower and its Subsidiaries to be less than $750,000,000 at any time.
SECTION 6.08. Anti-Corruption Laws and Sanctions. The Parent Borrower will not request any Borrowing,
and the Parent Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers,
employees and agents shall not use, the proceeds of any Borrowing (A) for the purpose of funding payments to any officer or
employee of a Governmental Authority, or any Person controlled by a Governmental Authority, or any political party, official of a
political party, candidate for political office, or anyone else acting in an official capacity, in furtherance of an offer, payment,
promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any
Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with
any Sanctioned Person, or in any Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions
applicable to any party hereto.
SECTION 6.09. Restricted Payments. The Parent Borrower will not, and will not permit any of its Subsidiaries
to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (a) the Parent Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its common stock, (b)
Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, (c) the Parent Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees
of the Borrower and its Subsidiaries and (d) the Parent Borrower and its Subsidiaries may make any other Restricted Payment in
the form of a dividend so long as (i) no Event of Default has occurred and is continuing prior to
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making such Restricted Payment or would arise after giving effect thereto and (ii) the aggregate amount of Restricted Payments
made pursuant to this Section 6.09(d) do not exceed (x) $60,000,000 in the aggregate in any Fiscal Quarter and (y) $200,000,000
during the Availability Period.
ARTICLE VII
Events of Default
If any of the following events (each, an “Event of Default”) shall occur:
(a) any Borrower shall fail to pay any principal of any Loan when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an
amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due
and payable, and such failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on behalf of the Parent Borrower or any
Subsidiary in or in connection with this Agreement or the Guarantee Agreement or any amendment or modification
hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or the Guarantee Agreement or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect in any material
respect when made or deemed made;
(d) the Parent Borrower shall fail to observe or perform any covenant, condition or agreement contained in
Section 5.03 (with respect to each Borrower’s existence) or 5.09 or in Article VI;
(e) the Parent Borrower shall fail to observe or perform any covenant, condition or agreement contained in this
Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied
for a period of 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be
given at the request of any Lender);
(f) the Parent Borrower or any Subsidiary shall fail to make any payment of principal or interest, regardless of
amount, in respect of any Material Indebtedness, when and as the same shall become due and payable beyond the period
(without giving effect to any extensions, waivers, amendments or other modifications of or to such period) of grace, if
any, provided in the instrument or agreement under which such Material Indebtedness was created, and, prior to any
termination of Commitments or the acceleration of payment of Loans pursuant to this Article VII, such failure is not
waived in writing by the holders of such Material Indebtedness;
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(g) any event or condition occurs (after giving effect to any applicable grace periods and after giving effect to
any extensions, waivers, amendments or other modifications of any applicable provision or agreement) that results in any
Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any
Material Indebtedness or any trustee or agent on its or their behalf to cause, with the giving of an acceleration or similar
notice if required, any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness to the
extent such Indebtedness is paid when due;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking
(i) liquidation, reorganization or other relief in respect of the Parent Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be
entered; provided, however, that the occurrence of any of the events specified in this paragraph (h) with respect to any
Person other than the Parent Borrower shall not be deemed to be an Event of Default unless (x) the net assets of such
Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most recent audited
financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any such event
and/or (y) the aggregate net assets of all Loan Parties and other Subsidiaries in respect of which any of the events
specified in this paragraph (h) and in paragraphs (i) and (j) of this Article VII shall have occurred shall have exceeded
$50,000,000 as of the date of the most recent audited financial statements delivered to the Lenders pursuant to Section
5.01 or on the date of occurrence of any such event;
(i) the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing; provided, however, that the occurrence of any of the events specified in this paragraph (i) with
respect to any Person other than any Borrower shall not be deemed to be an Event of Default unless (x) the net assets of
such Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most recent
audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any such
event and/or
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(y) the aggregate net assets of all Loan Parties and other Subsidiaries in respect of which any of the events specified in
this paragraph (i) and in paragraphs (h) and (j) of this Article VII shall have occurred shall have exceeded $50,000,000 as
of the date of the most recent audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date
of occurrence of any such event;
(j) the Parent Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to
pay its debts as they become due; provided, however, that the occurrence of any of the events specified in this paragraph
(j) with respect to any Person other than any Borrower shall not be deemed to be an Event of Default unless (x) the net
assets of such Person, determined in accordance with GAAP, shall have exceeded $20,000,000 as of the date of the most
recent audited financial statements delivered to the Lenders pursuant to Section 5.01 or on the date of occurrence of any
such event and/or (y) the aggregate net assets of all Loan Parties and other Subsidiaries in respect of which any of the
events specified in this paragraph (j) and in paragraphs (h) and (i) of this Article VII shall have occurred shall have
exceeded $50,000,000 as of the date of the most recent audited financial statements delivered to the Lenders pursuant to
Section 5.01 or on the date of occurrence of any such event;
(k) one or more judgments for the payment of money in an aggregate amount (not paid or covered by insurance)
in excess of $50,000,000 shall be rendered against the Parent Borrower, any Subsidiary or any combination thereof and (i)
the same shall remain undischarged for a period of 60 consecutive days from the entry thereof during which execution
shall not be effectively stayed or bonded, or (ii) any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Parent Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event or Foreign Plan Event shall have occurred that, in the reasonable opinion of the Required
Lenders, when taken together with all other ERISA Events or Foreign Plan Events that have occurred, could reasonably
be expected to result in a Material Adverse Effect;
(m) a Change in Control shall occur; or
(n) the Guarantee Agreement ceases to be in full force and effect;
then, and in every such event (other than an event with respect to any Borrower described in clause (h) or (i) of this Article), and
at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required
Lenders shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder and under any other
Loan Document, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers;
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and in case of any event with respect to any Borrower described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.
ARTICLE VIII
The Administrative Agent
Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower or any
Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby
that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Parent Borrower or any of its Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any
action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross
negligence, bad faith or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by the Parent Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than
to confirm receipt of items expressly required to be delivered to the Administrative Agent.
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The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and
other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any
such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any
one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of
the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for
herein as well as activities as Administrative Agent.
The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders and the Parent
Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Parent Borrower, to
appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably satisfactory to the Parent Borrower
which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the Parent Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower and such
successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.03 shall continue
in effect for the benefit of such retiring Administrative Agent, its sub‑agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related
agreement or any document furnished hereunder or thereunder.
The Syndication Agent and Co-Documentation Agents shall not have any duties or responsibilities under the Loan
Documents in their capacity as such.
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Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y)
covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of, the Administrative Agent, and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any
other Loan Party, that at least one of the following is and will be true:
(i) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or
more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the
Loans, the Commitments, or this Agreement,
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain
transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain
transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions
involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving
bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset
managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance
of the Loans, the Commitments and this Agreement,
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the
meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on
behalf of such Lender to enter into, participate in, administer and perform the Loans, the Commitments and this
Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Commitments and
this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best
knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such
Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this
Agreement, or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative
Agent, in its sole discretion, and such Lender.
In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such
Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately
preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto,
to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender
party hereto, for the benefit of the Administrative Agent, and not, for the avoidance of doubt, to or for the benefit of the
Borrowers or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender
involved in such Lenders’ entrance into, participation in, administration of and performance of the Loans, the Commitments and
this Agreement (including in connection with the reservation or exercise of
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any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
ARTICLE IX
Guarantee
SECTION 9.01. Guarantee (a) The Parent Borrower hereby unconditionally and irrevocably guarantees to the
Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Subsidiary Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Subsidiary Obligations (other than, with respect to any Guarantor, any Excluded Swap
Obligations of such Guarantor). As used in this Article IX, the term “Lenders” includes affiliates of Lenders which are parties to
any Specified Cash Management Agreements or Specified Swap Agreements.
(b) The Parent Borrower agrees that the Subsidiary Obligations may at any time and from time to time exceed
the amount of the liability of the Parent Borrower hereunder that would exist in the absence of this Article IX without impairing
this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender hereunder.
(c) This Guarantee shall remain in full force and effect until all the Subsidiary Obligations shall have been
satisfied by payment in full in immediately available funds and the Commitments shall be terminated, notwithstanding that from
time to time during the term of this Guarantee the Subsidiary Borrowers may be free from any Subsidiary Obligations.
(d) No payment made by any Borrower, any Guarantor, any other guarantor or any other Person or received or
collected by the Administrative Agent or any Lender from any Borrower, any Guarantor, any other guarantor or any other Person
by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction
of or in payment of the Subsidiary Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the
Parent Borrower hereunder which shall, notwithstanding any such payment (other than any payment made by the Parent
Borrower in respect of the Subsidiary Obligations or any payment received or collected from the Parent Borrower in respect of
the Subsidiary Obligations), remain liable for the Subsidiary Obligations until the Subsidiary Obligations are paid in full in
immediately available funds and the Commitments are terminated.
SECTION 9.02. No Subrogation. Notwithstanding any payment made by the Parent Borrower hereunder or any
set-off or application of funds of the Parent Borrower by the Administrative Agent or any Lender, the Parent Borrower shall not
be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Subsidiary Borrowers or
any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Subsidiary Obligations nor shall the Parent Borrower seek or be entitled to seek any contribution or
reimbursement from the Subsidiary Borrowers or any other Guarantor in respect of payments made by the Parent Borrower under
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this Guarantee, until all amounts owing to the Administrative Agent and the Lenders by the Subsidiary Borrowers on account of
the Subsidiary Obligations are paid in full in immediately available funds and the Commitments are terminated. If any amount
shall be paid to the Parent Borrower on account of such subrogation rights at any time when all of the Subsidiary Obligations
shall not have been paid in full in immediately available funds, such amount shall be held by the Parent Borrower for the benefit
of the Administrative Agent and the Lenders, and shall, forthwith upon receipt by the Parent Borrower, be turned over to the
Administrative Agent in the exact form received by the Parent Borrower (duly indorsed by the Parent Borrower to the
Administrative Agent, if required), to be applied against the Subsidiary Obligations whether matured or unmatured, in such order
as the Administrative Agent may determine.
SECTION 9.03. Amendments, etc. with respect to the Subsidiary Obligations. The Parent Borrower shall
remain obligated under this Guarantee notwithstanding that, without any reservation of rights against the Parent Borrower and
without notice to or further assent by the Parent Borrower, any demand for payment of any of the Subsidiary Obligations made
by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender and any of the
Subsidiary Obligations continued, and the Subsidiary Obligations or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part,
be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and this Agreement and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, in accordance with Section 10.02, as the Administrative
Agent (or the Required Lenders or all Lenders, as the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the
Subsidiary Obligations may be sold, exchanged, waived, surrendered or released without affecting the Parent Borrower’s
obligations under this Article IX. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the Subsidiary Obligations or for this Guarantee.
SECTION 9.04. Guarantee Absolute and Unconditional. The Parent Borrower waives any and all notice of the
creation, renewal, extension or accrual of any of the Subsidiary Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Subsidiary Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Article IX; and all dealings between the Parent Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Article IX. The Parent Borrower waives diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon the Subsidiary Borrowers or any of the Guarantors with respect to the Subsidiary
Obligations. The Parent Borrower understands and agrees that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or enforceability of this Agreement, any of the Subsidiary
Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to
time held by the
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Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance)
which may at any time be available to or be asserted by any Subsidiary Borrower or any other Person against the Administrative
Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Borrower or any
Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Subsidiary Borrowers for
the Subsidiary Obligations, or of the Parent Borrower under this Article IX, in bankruptcy or in any other instance. When making
any demand hereunder or otherwise pursuing its rights and remedies hereunder against the Parent Borrower, the Administrative
Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Subsidiary Borrowers, any other Guarantor or any other Person or against any collateral
security or guarantee for the Subsidiary Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any
payments from any Subsidiary Borrower, any other Guarantor or any other Person or to realize upon any such collateral security
or guarantee or to exercise any such right of offset, or any release of any Subsidiary Borrower, any other Guarantor or any other
Person or any such collateral security, guarantee or right of offset, shall not relieve the Parent Borrower of any obligation or
liability under this Article IX, and shall not impair or affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against the Parent Borrower under this Article IX. For the purposes
hereof “demand” shall include the commencement and continuance of any legal proceedings.
SECTION 9.05. Reinstatement. This Article IX shall continue to be effective, or shall be reinstated, as the case
may be, if at any time payment, or any part thereof, of any of the Subsidiary Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
SECTION 9.06. Payments. The Parent Borrower hereby guarantees that payments hereunder will be paid to the
Administrative Agent without set-off or counterclaim in dollars or the applicable Alternative Currency at the office of the
Administrative Agent located at 10 South Dearborn Street, 7th Floor, Chicago, Illinois 60603-2300 and to the following wire
instructions of the Administrative Agent (or such other address or wire instructions of the Administrative Agent that may be
provided from time to time by the Administrative Agent):
Bank: JPMorgan Chase Bank, N.A.
Location: Chicago, Illinois
Account No.: [REDACTED]
ABA No.: 021000021
Beneficiary: Loan Processing D.P.
Reference: Ralph Lauren Corporation
SECTION 9.07. Keepwell. Each Borrower Qualified Keepwell Provider hereby jointly and severally absolutely,
unconditionally, and irrevocably undertakes to provide
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such funds or other support as may be needed from time to time for the Parent Borrower to qualify as an Eligible Contract
Participant during the Swap Guarantee Eligibility Period in respect of any Swap Obligation (provided, however, that each
Borrower Qualified Keepwell Provider shall only be liable under this Section 9.07 for the maximum amount of such liability that
can be hereby incurred without rendering its obligations under this Section 9.07, or otherwise under this Guarantee, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of
each Borrower Qualified Keepwell Provider under this Section 9.07 shall remain in full force and effect until the obligations of
the Borrowers under this Agreement have expired, been discharged or have otherwise been terminated in accordance with the
terms of this Agreement. Each Borrower Qualified Keepwell Provider intends that this Section 9.07 constitute, and this Section
9.07 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of the Parent Borrower for all
purposes of section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be
given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein and in the
Guarantee Agreement shall be in writing and shall be delivered by hand or nationally recognized overnight courier service,
mailed by certified or registered mail, U.S. first class postage prepaid, or sent by telecopy, as follows:
(i) if to any Borrower, to Ralph Lauren Corporation, 650 Madison Avenue, New York, New York 10022,
Attention of Jane Hamilton Nielsen, Executive Vice President, Chief Operating Officer and Chief Financial Officer
(Telecopy No. (212) 318-7232), with a copy to Ralph Lauren Corporation, 650 Madison Avenue, New York, New York
10022, Attention of Robert Alexander, Senior Vice President, Treasurer and Global Tax (Telecopy No. (201) 531-6251);
(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 10 South Dearborn Street, 7th Floor,
Chicago, Illinois 60603-2300, Attention of Carla Evans-Ali (Telecopy No. (844) 490-5663; Emails: carla.evans-
ali@chase.com and jpm.agency.servicing.1@jpmchase.com), with a copy to JPMorgan Chase Bank, N.A., Loan and
Agency Services Group, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2300, Attention of Carla Evans-Ali
(Telecopy No. (844) 490-5663; Emails: carla.evans-ali@chase.com and jpm.agency.servicing.1@jpmchase.com); and
(iii) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative
Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given
when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the
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recipient). Notices delivered through Electronic Systems, to the extent provided in paragraph (b) below, shall be effective as
provided in said paragraph (b).
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by using Electronic
Systems pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent
or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular
notices or communications.
Unless the Administrative Agent otherwise prescribes (i) notices and other communications to a Lender sent to an e-mail
address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the
“return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or
communications to a Lender posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the
intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication
is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or
other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed
to have been sent at the opening of business on the next Business Day for the recipient.
(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder
by notice to the other parties hereto (or, in the case of any Lender, by notice to the Administrative Agent and the Parent
Borrower).
(d) Electronic Systems.
(iv) Each Loan Party and Lender agrees that the Administrative Agent may, but shall not be obligated to,
make Communications (as defined below) available to the Lenders by posting the Communications on Debt Domain,
Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.
(v) Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The
Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability
for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any
warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic
System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have
any liability to any Borrower or the other Loan Parties, any Lender or any other Person or entity for damages of any
kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort,
contract or otherwise) arising out of the any Loan Party’s or the Administrative Agent’s transmission of communications
through an Electronic System, in each case except as found by a final, non-appealable
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judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct
of, or material breach of its obligations under the Loan Documents by, such Agent Party. “Communications” means,
collectively, any notice, demand, communication, information, document or other material provided by or on behalf of
any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the
Administrative Agent or any Lender by means of electronic communications pursuant to this Section, including through
an Electronic System.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders
hereunder and under the Guarantee Agreement are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or the Guarantee Agreement or consent to any departure by any
Borrower or any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default,
regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor the Guarantee Agreement nor any provision hereof or thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers or the Guarantors,
as the case may be, and the Required Lenders or by the Borrowers or the Guarantors, as the case may be, and the Administrative
Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any
Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the
written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each Lender, (v) release all or substantially all of the
Guarantors from their obligations under the Guarantee Agreement, without the written consent of each Lender (except that no
approval of the Lenders shall be required to release a Guarantor in connection with the disposition of all the capital stock of such
Guarantor not prohibited by the Loan Documents) or (vi) change any of the provisions of this Section or the definition of
“Commitment”, the definition of “Required Lenders”, the definition of “Applicable Percentage” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of each Lender; provided, further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent without the prior written
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consent of the Administrative Agent. If the Administrative Agent and the Parent Borrower acting together identify any ambiguity,
omission, mistake, typographical error or other defect in any provision of this Agreement or any other Loan Document, then the
Administrative Agent and the Parent Borrower shall be permitted to amend, modify or supplement such provision to cure such
ambiguity, omission, mistake, typographical error or other defect, and such amendment shall become effective without any
further action or consent of any other party to this Agreement.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Parent Borrower shall pay (i) all reasonable
and documented out‑of‑pocket expenses incurred by the Administrative Agent, the Syndication Agent and the Lead Arrangers,
including the reasonable fees, charges and disbursements of one domestic counsel for the Administrative Agent and the Lead
Arrangers, collectively, in connection with the syndication of the credit facilities provided for herein, the preparation of this
Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof and (ii) all
reasonable and documented out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the reasonable
fees, charges and disbursements of one domestic counsel and one foreign counsel, as necessary, in each applicable jurisdiction for
the Administrative Agent, the Syndication Agent or any Lender, in connection with the enforcement or preservation of its rights
in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with
the Loans made hereunder, including all such reasonable and documented out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.
(b) The Parent Borrower shall indemnify the Administrative Agent, the Syndication Agent, the Co-Documentation
Agents, the Lead Arrangers and each Lender, and each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document, or any agreement or instrument contemplated hereby, the performance by the parties
hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property owned or operated by the Parent Borrower or any of its Subsidiaries, or any Environmental Liability
related in any way to the Parent Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not such claim, litigation, investigation or proceeding is
brought by the Borrower or any other Loan Party or their respective equity holders, Affiliates, creditors or any other third Person
and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related
expenses are found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross
negligence, bad faith or willful misconduct of, or material breach of its obligations under the Loan Documents by, such
Indemnitee or such Indemnitee’s employer or any Affiliate of either thereof or any of their respective officers, directors,
employees, advisors or agents. Paragraph (b) of this Section
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shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax
claim.
(c) To the extent that the Parent Borrower fails to pay any amount required to be paid by it to the Administrative
Agent under paragraph (a) or (b) of this Section, but without affecting the Parent Borrower’s obligations thereunder, each Lender
severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against
the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, no party hereto shall assert, and each such party hereby waives, any
claim against any other party and any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other
Loan Document, or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the
proceeds thereof; provided that, nothing in this clause (d) shall relieve the Borrowers of any obligation they may have to
indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by a third
party.
(e) All amounts due under this Section shall be payable promptly after written demand therefor.
SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) a Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by a Borrower without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the
Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Parent Borrower; provided that no consent of the Parent Borrower shall be required for an
assignment to a Lender, an Affiliate of a Lender (provided that such Affiliate is a Swiss Qualifying Bank or a Swiss
Permitted Non-Qualifying Bank), an Approved Fund (provided that such Approved Fund is a Swiss Permitted Non-
Qualifying Bank) or, if an Event of Default under clause (a), (b), (h) or (i) of Article VII has occurred
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and is continuing, any other assignee; provided, further, that the Parent Borrower shall be deemed to have consented to
any such assignment unless the Parent Borrower shall object thereto by written notice to the Administrative Agent within
ten Business Days after having received written notice thereof; and
(B) the Administrative Agent.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Parent
Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Parent Borrower shall be
required if an Event of Default under clause (a), (b), (h) or (i) of Article VII has occurred and is continuing;
(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500;
(D) the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire;
(E) no assignment (including any assignment to a Lender, an Affiliate of a Lender or an Approved Fund)
shall be permitted if, immediately after giving effect thereto, amounts would become payable by any Borrower under
Section 2.13 or 2.15 (including amounts payable under Section 2.15 in respect of withholding taxes) that are in excess of
those that would be payable under such Section in respect of the amount assigned if such assignment were not made;
(F) no assignment shall be made to a natural person; and
(G) no assignment shall be made to any Borrower or its Affiliates.
(H) For the purposes of this Section 10.04(b), the term “Approved Fund” has the following meaning:
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding
or investing in bank loans and similar extensions of credit in the
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ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or
an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the
effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement
(including, in the case of any Non-U.S. Lender, obligations under Section 2.15(f)), and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14,
2.15 and 10.03); provided, however, that no such assignment or transfer shall be deemed to be a waiver of any rights which any
Borrower, the Administrative Agent or any other Lender shall have against such Lender. Any assignment or transfer by a Lender
of rights or obligations under this Agreement that does not comply with this Section 10.04 shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with, and subject to the
conditions set forth in, paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its
offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from
time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and each Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available
for inspection by any Borrower and (solely with respect to the Revolving Credit Exposure of such Lender) any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an
assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Parent Borrower or the Administrative Agent, sell
participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender's
obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (C) the relevant Participant
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will have no proprietary interest in the benefit of this Agreement or in any monies received by such Lender under or in relation to
this Agreement, (D) the relevant Participant will under no circumstances be subrogated to, or substituted in respect of, such
Lender's claims under this Agreement or have otherwise any contractual relationship with, or rights against, any Borrower under,
or in relation to, this Agreement (except as set forth in the following sentence with regards to benefits that each Participant is
entitled to under Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired an interest by assignment
pursuant to paragraph (b) of this Section) and (E) the Borrowers, the Administrative Agent and the Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in clauses (i), (ii), (iii), (v) and (vi) of the first proviso to Section 10.02(b)
that affects such Participant. Subject to paragraph (c)(ii) of this Section, each Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant shall also be entitled to the
benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.16(c) as though it
were a Lender; provided that, the foregoing sentence shall not apply to Ralph Lauren Europe Sàrl. Each Lender that sells a
participation, acting solely for this purpose as a non-fiduciary agent of the Borrowers, shall maintain a register on which it enters
the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans
or other obligations under this Agreement (the “Participant Register”); provided that no Lender shall have any obligation to
disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information
relating to a Participant’s interest in any Commitments, Loans or its other obligations under any Loan Document) except to the
extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive, and
such Lender, each Loan Party and the Administrative Agent shall treat each Person whose name is recorded in the Participant
Register pursuant to the terms hereof as the owner of such participation for all purposes of this Agreement, notwithstanding
notice to the contrary.
(ii) A Participant shall not be entitled to the benefits of Section 2.13, 2.14 or 2.15 unless such Participant shall
have complied with the requirements of such Section; provided, that in any case in which a Participant is so entitled, any such
Participant shall not be entitled to receive any greater payment under Section 2.13, 2.14 or 2.15 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such
Participant is made with the Parent Borrower's prior written consent, except to the extent such entitlement to receive a greater
payment results from a Change in Law that occurs after the Participant acquired the applicable participation. A Participant that
would be a Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Parent Borrower is
notified of the participation sold to such Participant and such Participant
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agrees, for the benefit of the applicable Borrower, to comply with Section 2.15(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no
such pledge or assignment of a security interest shall (i) release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto (ii) require any payments to be made by any Borrower or grant to any
person any more extensive rights than those required to be made or granted to the relevant Lender under the Loan Documents, or
(iii) upon any enforcement of such pledge or assignment of a security interest, result in any assignment, transfer or sub-
participation of any such rights under the Loan Documents which is in breach of this Clauses (a), (b) or (c) of this Section 10.04.
SECTION 10.05. Survival. All representations and warranties made by the Borrowers herein and the other
Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the making of any Loans, and shall terminate at such time as no
principal of or accrued interest on any Loan or any fee or any other amount payable under this Agreement (other than contingent
indemnification obligations that are not due and payable) is outstanding and unpaid and the Commitments have expired or been
terminated. The provisions of Sections 2.13, 2.14, 2.15, 10.03, 10.13 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Commitments or the termination of this Agreement or any provision hereof.
SECTION 10.06. Counterparts; Integration; Effectiveness. (a) This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Agreement, the Guarantee Agreement and any separate letter agreements with
respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together,
bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
(b) Delivery of an executed counterpart of a signature page of (x) this Agreement, (y) any other Loan Document
and/or (z) any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or
authorization related to this Agreement, any other Loan Document and/or the transactions contemplated hereby and/or thereby
(each an “Ancillary Document”) (which, as applicable, shall be delivered as set forth in Section 10.01) that is an Electronic
Signature transmitted, to the extent permitted by Section 10.01 and this sentence, by telecopy, emailed pdf. or any other
electronic means that reproduces an image
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of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement, such
other Loan Document or such Ancillary Document, as applicable; provided that nothing herein shall require the Administrative
Agent to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures
approved by it; provided, further, without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept
any Electronic Signature, the Administrative Agent and each of the Lenders shall be entitled to rely on such Electronic Signature
purportedly given by or on behalf of the Borrower or any other Loan Party without further verification thereof and without any
obligation to review the appearance or form of any such Electronic signature and (ii) upon the request of the Administrative
Agent, any Borrower, any other Loan Party or any Lender, any such Electronic Signature shall be promptly followed by a
manually executed counterpart. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating
to this Agreement, any other Loan Document and/or any Ancillary Document shall be deemed to include Electronic Signatures,
deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic
means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as
the case may be. Without limiting the generality of the foregoing, the Borrower and each Loan Party hereby, subject to the
provisos in the first sentence of this Section 10.06(b), (i) agrees that, for all purposes, including without limitation, in connection
with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent,
the Lenders, the Borrower and the Loan Parties, Electronic Signatures transmitted (to the extent permitted by Section 10.01 and
the first sentence of this Section 10.06(b)) by telecopy, emailed pdf. or any other electronic means that reproduces an image of an
actual executed signature page and/or any electronic images of this Agreement, any other Loan Document and/or any Ancillary
Document shall have the same legal effect, validity and enforceability as any paper original, (ii) the Administrative Agent, each
of the Lenders, each Borrower and each other Loan Party may, at its option, create one or more copies of this Agreement, any
other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be
deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic
records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper
record), (iii) waives any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any
other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement, such
other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and
(iv) waives any claim against any Lender and its related parties for any losses, claims, damages, liabilities and related expenses
arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or
transmissions (to the extent permitted by Section 10.01 and the first sentence of this Section 10.06(b)) by telecopy, emailed pdf.
or any other electronic means that reproduces an image of an actual executed signature page, including any losses, claims,
damages, liabilities and related expenses arising as a result of the failure of the Borrower and/or any Loan Party to use any
available security measures in connection with the execution, delivery or transmission of any Electronic Signature.
SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to
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the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the
remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender
and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the
obligations of any Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided that,
to the extent prohibited by applicable law as described in the definition of “Excluded Swap Obligation”, no amounts received
from, or set off with respect to, any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor. The rights
of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender
may have.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the
other Loan Documents shall be construed in accordance with and governed by the law of the State of New York without
reference to rules or principles that would require the application of the laws of any other jurisdiction.
(b) Each of the Lenders and the Administrative Agent hereby irrevocably and unconditionally agrees that,
notwithstanding the governing law provisions of any applicable Loan Document, any claims brought against the Administrative
Agent by any Lender relating to this Agreement, any other Loan Document or the consummation or administration of the
transactions contemplated hereby or thereby shall be construed in accordance with and governed by the law of the State of New
York.
(c) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in the Borough of
Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough
of Manhattan), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement
or any other Loan Document or the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may (and any such claims, cross-claims or third party claims brought against the Administrative Agent or any of its
Related Parties may only) be heard and determined in such Federal (to the extent permitted by law) or New York State court.
Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other
Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrowers, any Loan Party or its properties in the courts of any jurisdiction.
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(d) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(e) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in
Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel and other advisors, in each case who have a need
to know such Information in accordance with customary banking practices (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority, such as the
National Association of Insurance Commissioners) (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to any Borrower and its obligations, (g) with the
consent of the Parent Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a
source other than a Borrower which is not subject to a
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confidentiality obligation known to the Administrative Agent and the Lenders with respect to such information. For the purposes
of this Section, “Information” means all information received from any Borrower or any Subsidiary relating to such Borrower,
any Subsidiary or their respective businesses, other than any such information that is available to the Administrative Agent or any
Lender on a nonconfidential basis prior to disclosure by such Borrower or any Subsidiary and other than information pertaining
to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the
lending industry; provided that, in the case of information received from any Borrower or any Subsidiary after the date hereof,
such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality
of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 10.13. Satisfaction in Applicable Currency. (a) If, for the purpose of obtaining judgment in any
court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the
fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal
banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business
Day immediately preceding the day on which final judgment is given.
(b) The obligation of each Borrower hereunder to make payments in a currency (the “Agreement Currency”) shall,
notwithstanding any judgment in a currency (the “Judgment Currency”) other than the Agreement Currency, be discharged only
to the extent that, on the Business Day following receipt by the Administrative Agent and the Lenders of any sum adjudged to be
so due in the Judgment Currency, the Administrative Agent and the Lenders may in accordance with normal banking procedures
in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement
Currency so purchased is less than the sum originally due to the Administrative Agent and the Lenders in the Agreement
Currency, the applicable Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the
Administrative Agent and each Lender (as an alternative or additional cause of action) against such loss (if any) and if the
amount of the Agreement Currency so purchased exceeds the sum originally due to the Administrative Agent and the Lenders in
the Agreement Currency, the Administrative Agent and the Lenders agree to remit such excess to the applicable Borrower. The
obligations of each Borrower contained in this Section 10.13 shall survive the termination of this Agreement and the payment of
all other amounts owing hereunder.
SECTION 10.14. Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding
anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the
extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution
Authority and agrees and consents to, and acknowledges and agrees to be bound by:the application of any Write-Down and
Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by
any party hereto that is an Affected Financial Institution; and
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(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected
Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and
that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such
liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers
of the applicable Resolution Authority.
SECTION 10.15. No Fiduciary Duty. The Administrative Agent, each Lender and their Affiliates (collectively,
solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of each of the
Borrowers, its stockholders and/or its affiliates. Each Borrower agrees that nothing in the Loan Documents or otherwise will be
deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one
hand, and any Borrower, its stockholders or its affiliates, on the other. Each Borrower acknowledges and agrees that (i) the
transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are
arm’s-length commercial transactions between the Lenders, on the one hand, and the Borrowers, on the other, and (ii) in
connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in
favor of any Borrower, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of
rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is
currently advising or will advise any Borrower, its stockholders or its Affiliates on other matters) or any other obligation to any
Borrower except the obligations expressly set forth in the Loan Documents and (y) each Lender is acting solely as principal and
not as the agent or fiduciary of any Borrower, its management, stockholders, creditors or any other Person. Each Borrower
acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it
is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each
Borrower agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary
or similar duty to such Borrower, in connection with such transaction or the process leading thereto.
SECTION 10.16. USA PATRIOT Act. Each Lender and the Administrative Agent hereby notifies the
Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107‑56 (signed into law October
26, 2001)) (the “Patriot Act”), such Lender and Agent is required to obtain, verify and record information that identifies the
Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrowers shall
provide such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order
to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act.
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SECTION 10.17. Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide
support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such
support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with
respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the
“U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below
applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of
the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a
proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit
Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in
property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same
extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit
Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the
United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a
U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC
or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent
than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan
Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it
is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the
rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
[Remainder of Page Intentionally Left Blank;
Signatures Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
RALPH LAUREN CORPORATION
By:
/s/ Jane Nielsen
Name: Jane Nielsen
Title: Chief Financial Officer and Chief Operating
Officer
RL FINANCE B.V.
By:
/s/ Agnieszka Gradek
Name: Agnieszka Gradek
Title: Managing Director
RALPH LAUREN EUROPE SÀRL
By:
/s/ Robert Alexander
Name: Robert Alexander
Title: Managing Officer (Gérant)
RALPH LAUREN ASIA PACIFIC LIMITED
By:
/s/ Shih Jern Liang
Name: Shih Jern Liang
Title: Director
[Signature Page to 364-Day Credit Agreement]
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:
/s/ Devin Roccisano
Name: Devin Roccisano
Title: Executive Director
[Signature Page to 364-Day Credit Agreement]
JPMORGAN CHASE BANK, N.A., as a Lender
By:
/s/ Devin Roccisano
Name: Devin Roccisano
Title: Executive Director
Bank of America, N.A., as a Lender
By:
/s/ Kevin Yuen
Name: Kevin Yuen
Title: Senior Vice President
DEUTSCHE BANK AG NEW YORK BRANCH, as a
Lender
By:
/s/ Ming K. Chu
Name: Ming K. Chu
Title: Director
By:
/s/ Annie Chung
Name: Annie Chung
Title: Director
[Signature Page to 364-Day Credit Agreement]
ING BANK N.V., DUBLIN BRANCH, as a Lender
By:
/s/ Sean Hassett
Name: Sean Hassett
Title: Director
By:
/s/ Cormac Langford
Name: Cormac Langford
Title: Director
SUMITOMO MITSUI BANKING CORPORATION, as a
Lender
By:
/s/ Katie Lee
Name: Katie Lee
Title: Director
HSBC Bank USA, N.A., as a Lender
By:
/s/ Jason Fuqua
Name: Jason Fuqua
Title: Vice President
GOLDMAN SACHS BANKS USA, as a Lender
By:
/s/ Annie Carr
Name: Annie Carr
Title: Authorized Signatory
[Signature Page to 364-Day Credit Facility]
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
EXHIBIT 21.1
Jurisdiction of Formation
Entity Name
Acqui Polo CV
Acqui Polo GP, LLC
PRL Fashions Inc.
PRL International, Inc.
PRL Netherlands Limited, LLC (f/k/a Acqui Polo Limited, LLC)
PRL USA, Inc.
Ralph Lauren Asia Pacific Limited (f/k/a Polo Ralph Lauren Asia Pacific, Limited)
Ralph Lauren Commercial Enterprises ULC
Ralph Lauren Europe Sàrl (f/k/a Polo Ralph Lauren Europe Sàrl)
Ralph Lauren Holding BV (f/k/a Polo Hold BV)
Ralph Lauren International Holdings ULC
Ralph Lauren Retail, Inc. (f/k/a Fashions Outlet of America, Inc.)
RL Acqui Polo Holding GP, Sàrl
RL CV Holding Limited, Sàrl
RL Finance BV (f/k/a Polo Fin BV)
The Polo/Lauren Company LP
Netherlands
Delaware
Delaware
Delaware
Delaware
Delaware
Hong Kong
Ireland
Switzerland
Netherlands
Ireland
Delaware
Luxembourg
Luxembourg
Netherlands
New York
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8 pertaining to the 1997 Long-Term Stock Incentive Plan
(Registration No. 333-46808), Form S-8 pertaining to the 1997 Long-Term Stock Incentive Plan and 1997 Stock Option Plan for Non-Employee Directors
(Registration No. 333-29023), Form S-8 pertaining to the 2010 Long-Term Stock Incentive Plan (Registration No. 333-169619), Form S-8 pertaining to the
Amended and Restated 2010 Long-Term Stock Incentive Plan (Registration No. 333-191338), Form S-8 pertaining to the 2019 Long-Term Stock Incentive
Plan (Registration Nos. 333-213431 and 333-232956), and Form S-3 (Registration No. 333-226636) by Ralph Lauren Corporation, of our reports dated
May 27, 2020, with respect to the consolidated financial statements of Ralph Lauren Corporation and the effectiveness of internal control over financial
reporting of Ralph Lauren Corporation included in this Annual Report (Form 10-K) for the year ended March 28, 2020.
EXHIBIT 23.1
/s/ Ernst & Young LLP
New York, NY
May 27, 2020
EXHIBIT 31.1
I, Patrice Louvet, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ralph Lauren Corporation;
CERTIFICATION
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 27, 2020
/s/ PATRICE LOUVET
Patrice Louvet
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
I, Jane Hamilton Nielsen, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ralph Lauren Corporation;
CERTIFICATION
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
/s/ JANE HAMILTON NIELSEN
Jane Hamilton Nielsen
Chief Operating Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 27, 2020
Certification of Patrice Louvet Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Ralph Lauren Corporation (the "Company") on Form 10-K for the period ended March 28, 2020, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrice Louvet, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
EXHIBIT 32.1
/s/ PATRICE LOUVET
Patrice Louvet
Date: May 27, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ralph Lauren
Corporation and will be retained by Ralph Lauren Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Certification of Jane Hamilton Nielsen Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Ralph Lauren Corporation (the "Company") on Form 10-K for the period ended March 28, 2020, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jane Hamilton Nielsen, Chief Operating Officer and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
EXHIBIT 32.2
/s/ JANE HAMILTON NIELSEN
Jane Hamilton Nielsen
Date: May 27, 2020
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ralph Lauren
Corporation and will be retained by Ralph Lauren Corporation and furnished to the Securities and Exchange Commission or its staff upon request.