0001193125-19-093535.txt : 20190401 0001193125-19-093535.hdr.sgml : 20190401 20190401070006 ACCESSION NUMBER: 0001193125-19-093535 CONFORMED SUBMISSION TYPE: 10-12B PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 20190401 DATE AS OF CHANGE: 20190401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Kontoor Brands, Inc. CENTRAL INDEX KEY: 0001760965 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 832680248 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12B SEC ACT: 1934 Act SEC FILE NUMBER: 001-38854 FILM NUMBER: 19718748 BUSINESS ADDRESS: STREET 1: 400 N. ELM STREET CITY: GREENSBORO STATE: NC ZIP: 27401 BUSINESS PHONE: (336) 332-3400 MAIL ADDRESS: STREET 1: 400 N. ELM STREET CITY: GREENSBORO STATE: NC ZIP: 27401 10-12B 1 d618285d1012b.htm 10-12B 10-12B

As Filed with the Securities and Exchange Commission on April 1, 2019

File No. 001-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

 

Kontoor Brands, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

North Carolina   83-2680248
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)

400 N. Elm Street

Greensboro, North Carolina

  27401
(Address of Principal Executive Offices)   (Zip Code)

336-332-3400

(Registrant’s telephone number, including area code)

 

 

Copies to:

Deanna L. Kirkpatrick

Marc O. Williams

Daniel Brass

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class
to be so registered

 

Name of each exchange on which
each class is to be registered

Common Stock, no par value  

Securities to be registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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        Accelerated filer  
Non-accelerated filer        Smaller reporting company  
       Emerging growth company  

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.  ☐

 

 

 


Kontoor Brands, Inc. (“Kontoor Brands”)

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1 (the “information statement”). None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

 

Item 1.

Business.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “The Separation,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Compensation Discussion and Analysis,” “Management,” “Certain Relationships and Related Party Transactions,” “Where You Can Find More Information” and “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

 

Item 1A.

Risk Factors.

The information required by this item is contained in the sections “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of the information statement. Those sections are incorporated herein by reference.

 

Item 2.

Financial Information.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

 

Item 3.

Properties.

The information required by this item is contained in the section “Business—Properties” of the information statement. That section is incorporated herein by reference.

 

Item 4.

Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained in the section “Ownership of Common Stock by Certain Beneficial Owners and Management” of the information statement. That section is incorporated herein by reference.

 

Item 5.

Directors and Executive Officers.

The information required by this item is contained in the section “Management” of the information statement. That section is incorporated herein by reference.

 

Item 6.

Executive Compensation.

The information required by this item is contained in the sections “Compensation Discussion and Analysis” and “Management” of the information statement. Those sections are incorporated herein by reference.


Item 7.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is contained in the sections “The Separation—Agreements with VF,” “Certain Relationships and Related Party Transactions,” “Management,” “Compensation Discussion and Analysis” and “Ownership of Common Stock by Certain Beneficial Owners and Management” of the information statement. Those sections are incorporated herein by reference.

 

Item 8.

Legal Proceedings.

The information required by this item is contained in the section “Business—Legal Proceedings” of the information statement. That section is incorporated herein by reference.

 

Item 9.

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “The Separation,” “Dividend Policy,” “Capitalization” and “Description of Capital Stock” of the information statement. Those sections are incorporated herein by reference.

 

Item 10.

Recent Sales of Unregistered Securities.

The information required by this item is contained in the section “Description of Capital Stock—Distributions of Securities” of the information statement. That section is incorporated herein by reference.

 

Item 11.

Description of Registrant’s Securities to Be Registered.

The information required by this item is contained in the section “Description of Capital Stock” of the information statement. That section is incorporated herein by reference.

 

Item 12.

Indemnification of Directors and Officers.

The information required by this item is contained in the section “Description of Capital Stock” of the information statement. That section is incorporated herein by reference.

 

Item 13.

Financial Statements and Supplementary Data.

The information required by this item is contained in the sections “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

 

Item 14.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

 

Item 15.

Financial Statements and Exhibits.

(a) Financial Statements

The information required by this item is contained in the sections “Index to Financial Statements” (and the statements referenced therein) of the information statement. That section is incorporated herein by reference.

 

2


(b) Exhibits

The following documents are filed as exhibits hereto:

 

Exhibit
Number

  

Exhibit Title

  2.1    Form of Separation and Distribution Agreement between V.F. Corporation and Kontoor Brands, Inc.
  3.1    Form of Amended and Restated Articles of Incorporation of Kontoor Brands, Inc.
  3.2    Form of Amended and Restated Bylaws of Kontoor Brands, Inc.
10.1    Form of Transition Services Agreement
10.2    Form of Tax Matters Agreement
10.3    Form of Employee Matters Agreement
10.4    Form of VF Intellectual Property License Agreement
10.5    Form of Kontoor Brands Intellectual Property License Agreement
10.6    Form of 2019 Stock Compensation Plan
10.7    Form of Stock Compensation Plan Non-Qualified Stock Option Certificate
10.8    Form of Stock Compensation Plan Non-Qualified Stock Option Certificate for Non-Employee Directors
10.9    Form of Award Certificate for Performance-Based Restricted Stock Units
10.10    Form of Award Certificate for Restricted Stock Units for Non-Employee Directors
10.11    Form of Award Certificate for Restricted Stock Units
10.12    Form of Award Certificate for Restricted Stock
10.13    Form of Executive Deferred Savings Plan
10.14    Form of Executive Deferred Savings Plan II
10.15    Form of Change in Control Agreement
10.16    Form of Management Incentive Compensation Plan
10.17    Form of Deferred Savings Plan for Non-Employee Directors
10.18    Form of Indemnification Agreement for Non-Employee Directors
10.19    Form of Mid-Term Incentive Plan, a subplan under the Stock Compensation Plan
21.1    Subsidiaries of the Registrant
99.1    Preliminary Information Statement dated April 1, 2019
99.2    Form of Notice of Internet Availability of Information Statement Materials*

 

*

To be filed by amendment.

 

3


EXHIBIT INDEX

 

Exhibit
Number

  

Exhibit Title

  2.1    Form of Separation and Distribution Agreement between V.F. Corporation and Kontoor Brands, Inc.
  3.1    Form of Amended and Restated Articles of Incorporation of Kontoor Brands, Inc.
  3.2    Form of Amended and Restated Bylaws of Kontoor Brands, Inc.
10.1    Form of Transition Services Agreement
10.2    Form of Tax Matters Agreement
10.3    Form of Employee Matters Agreement
10.4    Form of VF Intellectual Property License Agreement
10.5    Form of Kontoor Brands Intellectual Property License Agreement
10.6    Form of 2019 Stock Compensation Plan
10.7    Form of Stock Compensation Plan Non-Qualified Stock Option Certificate
10.8    Form of Stock Compensation Plan Non-Qualified Stock Option Certificate for Non-Employee Directors
10.9    Form of Award Certificate for Performance-Based Restricted Stock Units
10.10    Form of Award Certificate for Restricted Stock Units for Non-Employee Directors
10.11    Form of Award Certificate for Restricted Stock Units
10.12    Form of Award Certificate for Restricted Stock
10.13    Form of Executive Deferred Savings Plan
10.14    Form of Executive Deferred Savings Plan II
10.15    Form of Change in Control Agreement
10.16    Form of Management Incentive Compensation Plan
10.17    Form of Deferred Savings Plan for Non-Employee Directors
10.18    Form of Indemnification Agreement for Non-Employee Directors
10.19    Form of Mid-Term Incentive Plan, a subplan under the Stock Compensation Plan
21.1    Subsidiaries of the Registrant
99.1    Preliminary Information Statement dated April 1, 2019
99.2    Form of Notice of Internet Availability of Information Statement Materials*

 

*

To be filed by amendment.


SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

KONTOOR BRANDS, INC.
By:   

/s/ Rustin Welton

  Name:     Rustin Welton
  Title:   Vice President and Chief Financial Officer

Date: April 1, 2019

EX-2.1 2 d618285dex21.htm EX-2.1 EX-2.1

Exhibit 2.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

V.F. CORPORATION

and

KONTOOR BRANDS, INC.

Dated as of [—]


TABLE OF CONTENTS

 

     PAGE  

ARTICLE 1

DEFINITIONS

  

Section 1.01. Definitions

     2  

Section 1.02. Interpretation

     11  

ARTICLE 2

PRIOR TO THE DISTRIBUTION

  

Section 2.01. Information Statement; Listing

     12  

Section 2.02. Restructuring and Other Actions prior to the Distribution Time.

     12  

Section 2.03. Transfers of Certain Other Assets and Liabilities

     12  

Section 2.04. Restructuring Agreements

     13  

Section 2.05. Agreement Relating to Consents Necessary to Transfer Assets and Liabilities

     13  

Section 2.06. Intercompany Accounts

     14  

Section 2.07. Intercompany Agreements

     14  

Section 2.08. Bank Accounts; Cash Balances.

     15  

Section 2.09. Replacement of Guarantees

     15  

Section 2.10. Further Assurances and Consents

     15  

ARTICLE 3

DISTRIBUTION

  

Section 3.01. Conditions Precedent to Distribution

     16  

Section 3.02. The Distribution

     17  

Section 3.03. Fractional Shares

     17  

Section 3.04. NO REPRESENTATIONS OR WARRANTIES

     18  

ARTICLE 4

COVENANTS

  

Section 4.01. Books and Records; Access to Information

     18  

Section 4.02. Litigation Cooperation

     19  

Section 4.03. Reimbursement

     20  

Section 4.04. Ownership of Information

     20  

Section 4.05. Retention of Records

     20  

Section 4.06. Confidentiality

     21  

Section 4.07. Privileged Information

     21  

Section 4.08. Limitation of Liability.

     23  

Section 4.09. Other Agreements Providing for Exchange of Information.

     23  

Section 4.10. Conduct of Incidents Subject to VF Insurance

     23  

Section 4.11. Trademark Phase Out.

     25  

Section 4.12. Data Security Matters.

     25  

Section 4.13. VF Option.

     25  

ARTICLE 5

RELEASE; INDEMNIFICATION

  

Section 5.01. Release of Pre-Distribution Claims.

     27  

Section 5.02. Kontoor Brands Indemnification of the VF Group

     29  

Section 5.03. VF Indemnification of the Kontoor Brands Group

     29  


Section 5.04. Procedures

     30  

Section 5.05. Calculation of Indemnification Amount

     30  

Section 5.06. Contribution

     31  

Section 5.07. Non-Exclusivity of Remedies

     31  

Section 5.08. Survival of Indemnities

     31  

Section 5.09. Ancillary Agreements

     31  

ARTICLE 6

MISCELLANEOUS

  

Section 6.01. Notices

     31  

Section 6.02. Amendments; No Waivers

     32  

Section 6.03. Expenses

     32  

Section 6.04. Successors and Assigns

     33  

Section 6.05. Governing Law

     33  

Section 6.06. Counterparts; Effectiveness; Third-Party Beneficiaries

     33  

Section 6.07. Entire Agreement

     33  

Section 6.08. Tax Matters

     33  

Section 6.09. Jurisdiction

     33  

Section 6.10. WAIVER OF JURY TRIAL

     34  

Section 6.11. Termination

     34  

Section 6.12. Severability

     34  

Section 6.13. Survival

     34  

Section 6.14. Captions

     34  

Section 6.15. Interpretation

     34  

Section 6.16. Specific Performance

     34  

Section 6.17. Performance

     34  

 

SCHEDULES  
Schedule 1.01(a)   Jeanswear Brands
Schedule 1.01(b)   Specified Adjustments
Schedule 1.01(c)   Kontoor Brands Real Property Interests
Schedule 1.01(d)   Kontoor Brands Intellectual Property
Schedule 1.01(e)   Kontoor Brands IT Assets
Schedule 1.01(f)   Kontoor Brands Contracts
Schedule 1.01(g)   Kontoor Brands Cash Amount
Schedule 1.01(h)   Specified Kontoor Brands Assets
Schedule 1.01(i)   Specified Kontoor Brands Former Businesses
Schedule 1.01(j)   Members of the Kontoor Brands Group
Schedule 1.01(k)   Kontoor Brands Environmental Liabilities
Schedule 1.01(l)   Specified Kontoor Brands Liabilities
Schedule 1.01(m)   Post-Distribution Commercial Agreements
Schedule 1.01(n)   Shared Facilities Agreements
Schedule 1.01(o)   Specified VF Assets
Schedule 1.01(p)   Specified VF Former Businesses
Schedule 1.01(q)   Specified VF Liabilities
Schedule 2.07(r)   Intercompany Agreements
Schedule 2.09   Specified Warranty Matters
Schedule 4.02(a)   Kontoor Brands Assumed Actions
Schedule 4.02(b)   VF Assumed Actions
Schedule 4.13(a)   Option Subsidiary Business
Schedule 5.03(b)   VF Information
Schedule 6.03   Allocation of Certain Expenses

 

ii


EXHIBITS   
Exhibit A    Employee Matters Agreement
Exhibit B    Tax Matters Agreement
Exhibit C    Transition Services Agreement
Exhibit D    Amended and Restated Certificate of Incorporation
Exhibit E    Amended and Restated Bylaws
Exhibit F    VF License Agreement
Exhibit G    Kontoor Brands License Agreement
ANNEXES   
Annex A    Restructuring Plan


SEPARATION AND DISTRIBUTION AGREEMENT

SEPARATION AND DISTRIBUTION AGREEMENT dated as of [—] (as the same may be amended from time to time in accordance with its terms and together with the schedules and exhibits hereto, this “Agreement”) between V.F. Corporation, a Pennsylvania corporation (“VF”), and Kontoor Brands, Inc., a North Carolina corporation (“Kontoor Brands”).

W I T N E S S E T H:

WHEREAS, the Board of Directors of VF has determined that it is in the best interests of VF and its stockholders to separate the Jeanswear Business from the VF Business;

WHEREAS, Kontoor Brands is a wholly owned Subsidiary of VF that has been incorporated for the sole purpose of, and has not engaged in activities except in preparation for, the Distribution and the transactions contemplated by this Agreement;

WHEREAS, in furtherance of the foregoing, the Board of Directors of VF has determined that it is in the best interests of VF and its stockholders to distribute to the holders of the issued and outstanding shares of common stock, without par value and stated capital of $0.25 per share, of VF (the “VF Common Stock”) as of the Record Date, by means of a pro rata dividend, 100% of the issued and outstanding shares of common stock, without par value, of Kontoor Brands (the “Kontoor Brands Common Stock”), on the basis of 1 share of Kontoor Brands Common Stock for every [—] then issued and outstanding shares of VF Common Stock (the “Distribution”);

WHEREAS, VF and Kontoor Brands have prepared, and Kontoor Brands has filed with the Commission, the Form 10, which includes the Information Statement, and which sets forth appropriate disclosure concerning Kontoor Brands and the Distribution, and the Form 10 has become effective under the Exchange Act;

WHEREAS, the Distribution will be preceded by, among other things, (a) the Restructuring, pursuant to which, among other things, all of the stock of the Kontoor Brands First-Tier Subsidiaries will be contributed to Kontoor Brands (the “Contribution”), (b) the entry by Kontoor Brands into the Kontoor Brands Financing Arrangements and (c) the Cash Contribution;

WHEREAS, for United States federal and state income tax purposes, it is intended that (i) the Contribution and the Distribution, taken together, will qualify as a “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) the Distribution will qualify as a tax-free transaction under Sections 355(a) and 361(c) of the Code (in each case, qualifying for such treatment under the corresponding provisions of state law), and it is a condition to the Distribution that VF will have obtained the Tax Opinion to such effect as contemplated by Section 3.01(a)(x);

WHEREAS, this Agreement, together with the Ancillary Agreements and other documents implementing the Contribution and Distribution, is intended to be, and is hereby adopted as, a “plan of reorganization” within the meaning of Treas. Reg. Section 1.368-2(g); and

WHEREAS, the parties hereto have determined to set forth the principal actions required to effect the Distribution and to set forth certain agreements that will govern the relationship between those parties following the Distribution.

 

1


ACCORDINGLY, in consideration of the mutual covenants contained in this Agreement, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions. (a) As used in this Agreement, the following terms have the following meanings:

Action” means any demand, claim, suit, action, arbitration, inquiry, investigation or other proceeding by or before any Governmental Authority or any arbitration or mediation tribunal.

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For the purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing. Notwithstanding any provision of this Agreement to the contrary (except where the relevant provision states explicitly to the contrary), no member of the VF Group, on the one hand, and no member of the Kontoor Brands Group, on the other hand, shall be deemed to be an Affiliate of the other.

Ancillary Agreement” means each of the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Restructuring Agreements, the Post-Distribution Commercial Agreements, the Shared Facilities Agreements, the VF License Agreement, the Kontoor Brands License Agreement and any other agreements, instruments, or certificates related thereto or to the transactions contemplated by this Agreement (in each case, together with the schedules, exhibits, annexes and other attachments thereto).

Applicable Law” means, with respect to any Person, any federal, state, local or foreign law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling, directive, guidance, instruction, direction, permission, waiver, notice, condition, limitation, restriction or prohibition or other similar requirement enacted, adopted, promulgated, imposed, issued or applied by a Governmental Authority that is binding upon or applicable to such Person, its properties or assets or its business or operations.

Business” means, with respect to the VF Group, the VF Business and, with respect to the Kontoor Brands Group, the Jeanswear Business.

Business Day” means any day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

Cash and Cash Equivalents” means cash or cash equivalents, certificates of deposit, banker’s acceptances and other investment securities of any form or maturity.

Commercial Data” means any and all data and information relating to an identified or identifiable Person (whether the information is accurate or not), alone or in combination with other information, which Person is or was an actual or prospective customer of, or consumer of products offered by, the Jeanswear Business and/or VF Business, as applicable.

Commission” means the United States Securities and Exchange Commission.

Confidential Information” means, with respect to a Group, (i) any proprietary information that is competitively sensitive, material or otherwise of value to the members of such Group and not generally known to the public, including product planning information, marketing strategies, financial information, information

 

2


regarding operations, consumer and/or customer relationships, consumer and/or customer profiles, sales estimates, business plans and internal performance results relating to the past, present or future business activities of the members of such Group and the consumers, customers, clients and suppliers of the members of such Group, (ii) any proprietary scientific or technical information, design, invention, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords any member of such Group a competitive advantage over its competitors and (iii) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, information, and trade secrets, in the case of each of clauses (i), (ii) and (iii) of this definition, that are related primarily to such Group’s Business; provided that to the extent both the VF Business and the Jeanswear Business use or rely upon any of the information described in any of the foregoing clauses (i), (ii) and/or (iii), subject to Section 4.07, such information shall be deemed the Confidential Information of both the VF Group and the Kontoor Brands Group.

Contract” means any written or oral commitment, contract, subcontract, agreement, lease, sublease, license, understanding, sales order, purchase order, instrument, indenture, note or any other legally binding commitment or undertaking.

Cyber Event” means any actual unauthorized, accidental or unlawful access, use, exfiltration, theft, disablement, destruction, loss, alteration, disclosure, transmission of any IT Assets owned or used by or on behalf of either party or any member of its Group, or any information or data (including any personally identifiable information) stored therein or transmitted thereby.

Distribution Agent” means Computershare Trust Company, N.A.

Distribution Date” means [—], 2019, the date on which the Distribution shall be effected.

Distribution Documents” means this Agreement, the Ancillary Agreements and the Restructuring Agreements.

Distribution Time” means the time at which the Distribution is effective on the Distribution Date, which shall be deemed to be 11:59 p.m., Eastern Daylight Time, on the Distribution Date.

Employee Matters Agreement” means the Employee Matters Agreement dated as of the date hereof between VF and Kontoor Brands substantially in the form of Exhibit A, as such agreement may be amended from time to time in accordance with its terms.

Environmental Law” means any Applicable Law relating to (A) human or occupational health and safety; (B) pollution or protection of the environment (including ambient air, indoor air, water vapor, surface water, groundwater, wetlands, drinking water supply, land surface or subsurface strata, biota and other natural resources); or (C) Hazardous Materials including any Applicable Law relating to exposure to, or use, generation, manufacture, processing, management, treatment, recycling, storage, disposal, emission, discharge, transport, distribution, labeling, presence, possession, handling, Release or threatened Release of, any Hazardous Material and any Applicable Law relating to recordkeeping, notification, disclosure, registration and reporting requirements respecting Hazardous Materials.

Environmental Liabilities” means all Liabilities (including all removal, remediation, reclamation, cleanup or monitoring costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith) relating to, arising out of or resulting from any (a) (i) Environmental Law, (ii) actual or alleged generation, use, storage, manufacture, processing, recycling, labeling, handling, possession, management, treatment, transportation, distribution, emission, discharge or disposal, or arrangement for the transportation or disposal, of any Hazardous Material, or (iii) actual or alleged presence, Release or

 

3


threatened Release of, or exposure to, any Hazardous Material (including to the extent relating to the actual or alleged exposure to Hazardous Material, any claims that arise under, or are covered by, workers’ compensation laws and/or workers’ compensation, disability or other insurance providing medical care and/or compensation to injured workers) or (b) Contract or other consensual arrangement pursuant to which Liability is assumed or imposed with respect to any of the foregoing, in each case including the Liabilities set forth on Schedule 1.01(i), and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

Equity Compensation Registration Statement” means the Registration Statement on Form S-8 or such other form or forms as may be appropriate, as amended and supplemented, including all documents incorporated by reference therein, to effect the registration under the Securities Act of Kontoor Brands Common Stock subject to certain equity awards granted to current and former officers, employees, directors and consultants of the VF Group to be assumed or replaced by Kontoor Brands pursuant to the Employee Matters Agreement.

Escheat Payment” means any payment required to be made to a Governmental Authority pursuant to an abandoned property, escheat or similar law.

Exchange Act” means the Securities Exchange Act of 1934.

Form 10” means the registration statement on Form 10 filed by Kontoor Brands with the Commission to effect the registration of Kontoor Brands Common Stock pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time.

Former Business” means any corporation, partnership, entity, division, business unit, business or set of business operations that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (other than solely in connection with the Restructuring), in whole or in part, or the operations, activities or production of which has been discontinued, abandoned, liquidated, completed or otherwise terminated, in whole or in part, in each case, by either Group prior to the Distribution Time.

Governmental Authority” means any multinational, foreign, federal, state, local or other governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral authority which has any jurisdiction or control over either party (or any of their Affiliates).

Group” means, as the context requires, the Kontoor Brands Group, the VF Group or either or both of them.

Hazardous Material” means (a) any petroleum or petroleum products, radioactive materials, toxic mold, radon, asbestos or asbestos-containing materials in any form, lead-based paint, urea formaldehyde foam insulation, Per- and Polyfluoroalkyl Substances (PFAs) or polychlorinated biphenyls (PCBs); and (b) any chemicals, materials, substances, compounds, mixtures, products or byproducts, biological agents, living or genetically modified materials, pollutants, contaminants or wastes that are now or hereafter become defined or characterized as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “special waste,” “toxic substances,” “pollutants,” “contaminants,” “toxic,” “dangerous,” “corrosive,” “flammable,” “reactive,” “radioactive,” or words of similar import, under any Applicable Law pertaining to the environment.

Indemnitees” means, as the context requires, the VF Indemnitees or the Kontoor Brands Indemnitees.

Information Statement” means the Information Statement to be sent to each holder of VF Common Stock in connection with the Distribution.

Intellectual Property” means any and all intellectual property throughout the world, including any and all U.S. and foreign (i) patents, invention disclosures, and all related continuations, continuations-in-part, divisionals, provisionals, renewals, reissues, re-examinations, additions, extensions (including all supplementary protection certificates), and all applications and registrations therefor (collectively, “Patent Rights”),

 

4


(ii) trademarks, service marks, names, corporate names, trade names, domain names, social media identifiers, logos, slogans, trade dress, design rights, and other similar business identifiers or designations of source or origin and all applications and registrations therefor, together with the goodwill symbolized by any of the foregoing (collectively, “Trademarks”), (iii) copyrights, works of authorship and copyrightable subject matter and all applications and registrations therefor, (iv) trade secrets, know-how, confidential data and information, technical information, including practices, techniques, methods, processes, inventions, developments, specifications, formulations, manufacturing processes, structures, chemical or biological manufacturing control data, analytical and quality control information and procedures, pharmacological, toxicological and clinical test data and results, stability data, studies and procedures and regulatory information, (v) computer software (including source code, object code, firmware, operating systems and specifications), (vi) databases and data collections and (vii) all rights to sue or recover and retain damages and costs and attorneys’ fees for the past, present or future infringement, misappropriation or other violation of any of the foregoing.

IRS” means the Internal Revenue Service.

IT Assets” means computers, software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology assets or other equipment storing or processing information, including all associated documentation related to any of the foregoing.

Jeanswear Business” means the businesses and operations of (i) the VF Jeanswear coalition, which comprises the design, manufacture and sale of denim, apparel, accessories, footwear and related products marketed under the principal brand names listed on Schedule 1.01(a) (the “Jeanswear Brands”), and (ii) the VF Outlet business, which operates the VF Outlet stores located in the United States, in each case as more fully described in the Form 10 and the Information Statement.

Kontoor Brands Assets” means, except as expressly otherwise contemplated in this Agreement or any Ancillary Agreement, the following assets of VF and its Subsidiaries (as determined by VF in its sole discretion) and subject to adjustment in accordance with the terms set forth on Schedule 1.01(b):

(a)    all interests of whatever nature in the real property listed on Schedule 1.01(c), together with all buildings, fixtures and improvements erected thereon (the “Kontoor Brands Facilities”);

(b)     all interests in personal property, fixtures, machinery, furniture, office equipment, automobiles, motor vehicles and other transportation equipment, special and general tools, test devices, prototypes and models, and other tangible personal property (other than any Intellectual Property) located at the Kontoor Brands Facilities;

(c)    all inventories of materials, supplies, goods in transit, customer returns, and work-in-process and finished goods and products, in each case of whatever kind, nature or description, in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(d)     all interests in any capital stock or other equity securities or interests of or in any member of the Kontoor Brands Group;

(e)     all deposits, letters of credit, and performance and surety bonds, in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(f)     all prepaid expenses, trade accounts, and other accounts and notes receivable, in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(g)     the Patent Rights listed on Schedule 1.01(d) and all other Intellectual Property (other than Patent Rights) owned by VF or any of its Subsidiaries solely to the extent primarily used or primarily held for use in connection with the Jeanswear Business (other than any Trademarks that use, contain or include “VF”, either alone or in combination with other words, phrases or logos), including such other Intellectual Property (including software) listed on Schedule 1.01(d);

(h)    the IT Assets set forth on Schedule 1.01(e) and all IT Assets solely to the extent exclusively related to or exclusively used or exclusively held for use in connection with the Jeanswear Business;

 

5


(i)     all Contracts (including Contracts related to Intellectual Property and IT Assets) and any rights thereunder, in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business, including the Contracts set forth on Schedule 1.01(f);

(j)     all claims, causes of action and similar rights, whether accrued or contingent, in each case solely to the extent primarily related to the Jeanswear Business;

(k)    all employee Contracts with any Kontoor Brands Participants, including the right thereunder to restrict any Kontoor Brands Participant from competing in certain respects;

(l)     all Permits primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(m)    Cash and Cash Equivalents to the extent set forth on Schedule 1.01(g) (the “Kontoor Brands Cash Amount”);

(n)    subject to the foregoing clause (m), all bank accounts, lock boxes and other deposit arrangements, and all brokerage accounts, in each case solely to the extent (i) located at the Kontoor Brands Facilities or (ii) primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(o)     all accounting and other legal and business books, records, minute books, corporate documents, ledgers and files and all personnel records, in each case, whether printed, electronic, contained on storage media or written, or in any other form, in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(p)     (x) all Confidential Information, (y) all cost information, sales and pricing data, supplier records, supplier lists, vendor data, correspondence and lists, and (z) all product data and literature, brochures, marketing and sales literature, advertising catalogues, photographs, display materials, media materials, packaging materials, artwork, designs, formulations and specifications, quality records and reports (other than any Intellectual Property in any of the foregoing and excluding any Commercial Data), in each case solely to the extent primarily related to or primarily used or primarily held for use in connection with the Jeanswear Business;

(q)    all Commercial Data to the extent exclusively related to or exclusively used or exclusively held for use in connection with the Jeanswear Business;

(r)    all goodwill associated with the Jeanswear Business or the Kontoor Brands Assets; and

(s)    any other assets, of whatever sort, nature or description, that are exclusively related to or exclusively used or exclusively held for use in connection with the Jeanswear Business, including the assets set forth on Schedule 1.01(h).

Kontoor Brands Credit Facility” means that certain credit agreement to be dated on or around [—] by and among Kontoor Brands, Lee Wrangler International Sagl, a Delaware corporation and a Subsidiary of Kontoor Brands, any other Subsidiary Borrowers (as defined therein) from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto and, as administrative agent.

Kontoor Brands Financing Arrangements” means (i) the Kontoor Brands Credit Facility and (ii) the Loan Documents (as defined in the Kontoor Brands Credit Facility).

Kontoor Brands First-Tier Subsidiaries” means each of HD Lee Company, Wrangler Apparel Corp., VF Jeanswear Sales, Inc., Retail Productivity Management, Inc., VF Outlet, Inc., and R&R Apparel Company, LLC.

Kontoor Brands Former Business” means each Former Business previously owned, in whole or in part, or previously operated, in whole or in part, by VF or any of its Subsidiaries and, as determined by VF and in its sole discretion, primarily related to the Jeanswear Business or that would have comprised part of the Jeanswear

 

6


Business had such Former Business not been terminated, divested or discontinued prior to the Distribution Time, including the Former Businesses set forth on Schedule 1.01(i), but excluding, for the avoidance of doubt, all VF Former Businesses.

Kontoor Brands Group” means Kontoor Brands and its Subsidiaries as set forth on Schedule 1.01(j), including all predecessors and successors to such Persons.

Kontoor Brands Liabilities” means (without duplication) all of the following (as determined by VF in its sole discretion):

(a)    any and all Liabilities to the extent relating to, arising out of or in connection with or resulting from the Jeanswear Business, the business and operation of the Kontoor Brands Assets, as currently or formerly operated (including as conducted or operated by any predecessor of any member of the VF Group or the Kontoor Brands Group), including the following Liabilities:

(i)    all Liabilities relating to, arising out of or in connection with or resulting from the Kontoor Brands Financing Arrangements;

(ii)    any and all Environmental Liabilities to the extent relating to, arising out of or in connection with or resulting from the Kontoor Brands Assets or the Jeanswear Business, as currently or formerly operated (including as conducted or operated by any predecessor of any member of the VF Group or the Kontoor Brands Group), and any currently or formerly owned, leased or operated real property, outlet or retail stores, facilities, factories or manufacturing sites of the foregoing, including the Environmental Liabilities set forth on Schedule 1.01(k);

(iii)    all Liabilities set forth on Schedule 1.01(l);

(b)    all Liabilities of the VF Group and/or the Kontoor Brands Group to the extent relating to, arising out of or in connection with or resulting from any Kontoor Brands Former Business or any disposition thereof; and

(c)     all Liabilities that are expressly contemplated by this Agreement or any other Ancillary Agreement as Liabilities to be retained or assumed by Kontoor Brands or any other member of the Kontoor Brands Group, and all agreements, obligations and other Liabilities of Kontoor Brands or any member of the Kontoor Brands Group under this Agreement or any of the other Ancillary Agreements;

provided that, notwithstanding the foregoing, the Kontoor Brands Liabilities shall not include (i) any Liabilities for Taxes, which shall be governed by the Tax Matters Agreement or (ii) any Liabilities for the employment, employee benefits and employee compensation matters expressly covered by the Employee Matters Agreement, all of which shall be governed by the Employee Matters Agreement.

Kontoor Brands License Agreement” means the Intellectual Property Agreement dated as of the date hereof between Kontoor Brands and [—] substantially in the form of Exhibit G, as such agreement may be amended from time to time in accordance with its terms.

Kontoor Brands Participants” has the meaning set forth in the Employee Matters Agreement.

Liabilities” means any and all Claims, debts, liabilities, damages and/or obligations (including, but not limited to, any Escheat Payment) of any kind, character or description, whether absolute or contingent, matured or not matured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including all costs and expenses (including attorneys’ fees and expenses and associated investigation costs) relating thereto, and including those Claims, debts, liabilities, damages and/or obligations arising under this Agreement, any Applicable Law, any Action or threatened Action, any order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any agreement, commitment or undertaking, including in connection with the enforcement of rights hereunder or thereunder.

NYSE” means The New York Stock Exchange, Inc.

 

7


Permit” means any license, permit, approval, consent, certification, franchise, registration or authorization, including marketing authorizations for any products requiring such to be sold, which have been issued by or obtained from any Governmental Authority.

Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

Post-Distribution Commercial Agreements” means one or more commercial agreements or arrangements entered into between VF and LeeWrangler (or members of their respective Groups) set forth on Schedule 1.01(m), as each such agreement or arrangement may be amended from time to time in accordance with its terms, as more fully described in the Form 10 and the Information Statement.

Record Date” means the close of business on [—], the date determined by the Board of Directors of VF as the record date for the Distribution.

Release” means any release, spill, emission, leaking, dumping, pumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into, onto, within or through the indoor or outdoor environment (including ambient air, surface water, groundwater, land surface or subsurface strata, soil and sediments) or into, through, or within any property, building, structure, fixture or equipment.

Restructuring” means the reorganization of certain businesses, assets and liabilities of the VF Group and the Kontoor Brands Group to be completed before the Distribution Time in accordance with the Restructuring Plan.

Restructuring Plan” means that certain Project Phoenix Global Macro Step Plan, dated as of [—], attached hereto as Annex A.

Securities Act” means the Securities Act of 1933.

Shared Facilities Agreement” means each of the lease, sub-lease or temporary service agreements or arrangements entered into between VF and LeeWrangler (or members of their respective Groups) prior to the date hereof with respect to the occupancy or use by Kontoor Brands (or members of its Group) of certain owned or leased facilities of VF set forth on Schedule 1.01(n), as each such agreement or arrangement may be amended from time to time in accordance with its terms.

Subsidiary” means, with respect to any Person, any other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

Tax” or “Taxes” has the meaning set forth in the Tax Matters Agreement.

Tax Benefit” has the meaning set forth in the Tax Matters Agreement.

Tax Matters Agreement” means the Tax Matters Agreement dated as of the date hereof between VF and Kontoor Brands substantially in the form of Exhibit B, as such agreement may be amended from time to time in accordance with its terms.

Tax Opinion” has the meaning set forth in the Tax Matters Agreement.

Third Party” means any Person that is not a member or an Affiliate of the Kontoor Brands Group or the VF Group.

 

8


Transition Services Agreement” means the Transition Services Agreement dated as of the date hereof between VF and Kontoor Brands substantially in the form of Exhibit C, as such agreement may be amended from time to time in accordance with its terms.

VF Assets” means all assets, of whatever sort, nature or description, of VF or any of its Subsidiaries (including any member of the Kontoor Brands Group) other than the Kontoor Brands Assets, including, for the avoidance of doubt, (i) any Trademarks that use, contain or include “VF”, either alone or in combination with other words, phrases or logos, (ii) all Cash and Cash Equivalents of VF, Kontoor Brands and each of the members of their respective Groups in excess of the Kontoor Brands Cash Amount and (iii) the assets set forth on Schedule 1.01(o).

VF Business means all of the businesses conducted by VF and its Subsidiaries from time to time, whether before, on or after the Distribution, other than the Jeanswear Business and any Kontoor Brands Former Business. For the avoidance of doubt, the Kontoor Brands Assets (and all assets and properties owned, directly or indirectly, by entities forming all or part of such assets) will not be considered part of the VF Business.

VF Former Business” means the Former Businesses previously owned, in whole or in part, or previously operated, in whole or in part, by VF or any of its Subsidiaries and, as determined by VF in its sole discretion, primarily related to the VF Business or that would have comprised part of the VF Business had they not been terminated, divested or discontinued prior to the Distribution Time, including the Former Business set forth on Schedule 1.01(p), but excluding, for the avoidance of doubt, the Kontoor Brands Former Businesses.

VF Group” means VF and its Subsidiaries (other than any member of the Kontoor Brands Group) and, where applicable, the VF Former Businesses, including all predecessors and successors to such Persons (excluding, for the avoidance of doubt, all Kontoor Brands Former Businesses).

VF Liabilities” means (without duplication) all of the following (as determined by VF in its sole discretion):

(a)    all Liabilities solely to the extent relating to, arising out of or in connection with or resulting from the VF Business or the business and operation of the VF Assets, as currently or formerly operated (including as conducted or operated by any predecessor of any member of the VF Group or the Kontoor Brands Group), including those Liabilities set forth on Schedule 1.01(q);

(b)    all Liabilities of the VF Group and/or the Kontoor Brands Group to the extent relating to, arising out of or in connection with or resulting from any VF Former Business or any disposition thereof; and

(c)    all Liabilities that are expressly contemplated by this Agreement or any other Ancillary Agreement as Liabilities to be retained or assumed by VF or any other member of the VF Group, and all agreements, obligations and other Liabilities of VF or any member of the VF Group under this Agreement or any of the other Ancillary Agreements;

provided that, notwithstanding the foregoing, the VF Liabilities shall not include (i) any Liabilities for Taxes, which shall be governed by the Tax Matters Agreement or (ii) any Liabilities for the employment, employee benefits and employee compensation matters expressly covered by the Employee Matters Agreement, all of which shall be governed by the Employee Matters Agreement.

VF License Agreement” means the Intellectual Property Agreement dated as of the date hereof between VF and [—] substantially in the form of Exhibit F, as such agreement may be amended from time to time in accordance with its terms.

VF Names and Marks” means any and all Trademarks of VF or any of its Affiliates (other than any Trademark included in the Kontoor Brands Assets), including, for the avoidance of doubt, any that use, contain or include “VF”, in each case either alone or in combination with other words, phrases or logos, and any and all Trademarks derived therefrom or confusingly similar thereto.

 

9


VF Participants” has the meaning set forth in the Employee Matters Agreement.

(b)    Each of the following terms is defined in the Section set forth opposite such term:

 

Term

  

Section

Agreement

  

Preamble

Amended and Restated Bylaws

  

2.02(c)

Amended and Restated Certificate of Incorporation

  

2.02(c)

Cash Contribution

  

2.02(b)

Claim

  

5.04(a)

Code

  

Recitals

Cyber Insurance Event

  

4.10(c)

Cyber Policies

  

4.10(c)

Disposing Party

  

4.05

Distribution

  

Recitals

Exercise Date

  

4.13(c)

Exercise Notice

  

4.13(c)

Existing VF Inventory

  

4.11(a)

Fair Market Value

  

4.13(f)

Guarantee

  

2.09

Indemnified Party

  

5.04(a)

Indemnifying Party

  

5.04(a)

Intercompany Accounts

  

2.06

Jeanswear Brands

  

1.01

LBI

  

2.02(b)

Kontoor Brands

  

Preamble

Kontoor Brands Assumed Actions

  

4.02(a)

Kontoor Brands Cash Amount

  

1.01

Kontoor Brands Common Stock

  

Recitals

Kontoor Brands Designee

  

2.03(a)

Kontoor Brands Financing Transactions

  

2.02(b)

Kontoor Brands Indemnitees

  

5.03

Option Appraiser

  

4.13(f)

Option Subsidiary

  

4.13(a)

Option Subsidiary Assets

  

4.13(a)

Option Subsidiary Business

  

4.13(a)

Option Subsidiary Stock

  

4.13(a)

Option Subsidiary Transfer Documents

  

4.13(e)

Option Subsidiary Valuation Methodology

  

4.13(f)

Patent Rights

  

1.01

Pre-Distribution Time Communications

  

4.07(e)

Prior Company Counsel

  

4.07(c)

Privilege

  

4.07(a)

Privileged Information

  

4.07(a)

Post-Distribution Insurance Arrangements

  

4.10(a)

Receiving Party

  

4.05

Released Parties

  

5.01(a)

Representatives

  

4.06

Restructuring Agreements

  

2.04

Specified Facility

  

4.13(a)

 

10


Term

  

Section

Specified Facility Lease

  

4.13(a)

Third Party Claim

  

5.04(b)

Trademarks

  

1.01

VF

  

Preamble

VF Assumed Actions

  

4.02(b)

VF Claims-Made Policies

  

4.10(b)

VF Common Stock

  

Recitals

VF Designee

  

2.03(a)

VF Group Privileged Materials

  

4.07(e)

VF Indemnitees

  

5.02(a)

VF Insurance Policies

  

4.10(a)

VF Loss-Discovered Policies

  

4.10(b)

VF Occurrence-Based Policy

  

4.10(b)

VF Option

  

4.13(a)

VF Option Closing

  

4.13(d)

VF Option Closing Date

  

4.13(d)

VF Option Period

  

4.13(c)

VF Shared Policies

  

4.10(b)

Section 1.02. Interpretation. (a) In this Agreement, unless the context clearly indicates otherwise:

(i)    words used in the singular include the plural and words used in the plural include the singular;

(ii)    references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(iii)    except as otherwise clearly indicated, reference to any gender includes the other gender;

(iv)    the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

(v)    reference to any Article, Section, Exhibit or Schedule means such Article or Section of, or such Exhibit or Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(vi)    the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(vii)    reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(viii)    reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(ix)    relative to the determination of any period of time, “from” means “from and including,” “to” means “to and including” and “through” means “through and including”;

(x)    the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement;

(xi)    unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States; and

(xii)    any capitalized term used in an Exhibit or Schedule but not otherwise defined therein shall have the meaning set forth in this Agreement.

 

11


ARTICLE 2

PRIOR TO THE DISTRIBUTION

On or prior to the Distribution Date:

Section 2.01. Information Statement; Listing. VF shall mail (or shall have mailed) the Information Statement to the holders of VF Common Stock as of the Record Date. VF and Kontoor Brands shall take (or shall have taken) all such actions as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States and shall use commercially reasonable efforts to comply with all applicable foreign securities laws in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. Kontoor Brands shall prepare, file and pursue (or shall have prepared, filed and pursued) an application to permit listing of the Kontoor Brands Common Stock on the NYSE.

Section 2.02. Restructuring and Other Actions prior to the Distribution Time.

(a)    Restructuring. The Restructuring shall have been consummated on or prior to the Distribution Time.

(b)    Kontoor Brands Financing Arrangements. In connection with the Restructuring, Kontoor Brands shall enter into (or shall have entered into) the Kontoor Brands Financing Arrangements and related financing transactions described in the Information Statement as occurring prior to the Distribution Date (the “Kontoor Brands Financing Transactions”). Prior to the Distribution Time, (x) Kontoor Brands shall contribute all or a portion of the proceeds of the Kontoor Brands Financing Transactions to Lee Bell, Inc., a Delaware corporation and a wholly owned subsidiary of Kontoor Brands (after giving effect to the preceding transactions contemplated by the Restructuring Plan) (“LBI”), as determined by VF in its sole and absolute discretion, which determination shall be conclusive (the “Cash Contribution”), and (y) Kontoor Brands shall, immediately following the Cash Contribution, distribute to VF all of the outstanding equity securities of LBI.

(c)    Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. (i) VF and Kontoor Brands shall each take (or shall have taken) all necessary action that may be required to provide for the adoption by Kontoor Brands of an amended and restated certificate of incorporation of Kontoor Brands, substantially in the form of Exhibit D (the “Amended and Restated Certificate of Incorporation”), and amended and restated bylaws of Kontoor Brands, substantially in the form of Exhibit E (the “Amended and Restated Bylaws”), and (ii) Kontoor Brands shall file (or shall have filed) the Amended and Restated Certificate of Incorporation of Kontoor Brands with the Secretary of State of the State of North Carolina.

(d)    The Distribution Agent. VF shall enter (or shall have entered) into a distribution agent agreement with the Distribution Agent or otherwise provide instructions to the Distribution Agent regarding the Distribution.

(e)    Satisfying Conditions to the Distribution. VF and Kontoor Brands shall cooperate (or shall have cooperated) to cause the conditions to the Distribution set forth in Section 3.01 to be satisfied (or waived by VF) and to effect the Distribution at the Distribution Time upon such satisfaction (or waiver by VF).

Section 2.03. Transfers of Certain Other Assets and Liabilities. Unless otherwise provided in this Agreement or in any Ancillary Agreement and to the extent not previously effected in accordance with Section 2.02(a), effective as of the Distribution Time:

(a)    VF hereby agrees, and hereby causes the relevant member of the VF Group, to assign, contribute, convey, transfer and deliver (or shall have assigned, contributed, conveyed, transferred and delivered) to Kontoor Brands or any member of the Kontoor Brands Group as of the Distribution Time designated by Kontoor Brands (a “Kontoor Brands Designee”) all of the right, title and interest of VF or such member of the VF Group in and to all of the Kontoor Brands Assets, if any, held by any member of the VF Group, and VF and Kontoor Brands hereby agree, and hereby cause the relevant member of the Kontoor Brands Group, to assign, contribute, convey,

 

12


transfer and deliver to VF or any member of the VF Group as of the Distribution Time designated by VF (a “VF Designee”) all of the right, title and interest of Kontoor Brands or such member of the Kontoor Brands Group in and to all of the VF Assets, if any, held by any member of the Kontoor Brands Group; and

(b)    VF hereby agrees, and hereby causes the relevant member of the VF Group, to assign, contribute, convey, transfer and deliver (or shall have assigned, contributed, conveyed, transferred and delivered) to Kontoor Brands, and Kontoor Brands, on behalf of itself or such Kontoor Brands Designee, hereby accepts, assumes and agrees to perform, discharge and fulfill, all of the Kontoor Brands Liabilities, if any, to the extent such Kontoor Brands Liabilities would otherwise remain obligations of any member of the VF Group, and VF and Kontoor Brands hereby agree, and hereby cause the relevant member of the Kontoor Brands Group, to assign, contribute, convey, transfer and deliver (or shall have assigned, contributed, conveyed, transferred and delivered) to VF, and VF, on behalf of itself or such VF Designee, hereby accepts, assumes and agrees to perform, discharge and fulfill, all of the VF Liabilities, if any, to the extent such VF Liabilities would otherwise remain obligations of any member of the Kontoor Brands Group.

(c)    To the extent any assignment, contribution, conveyance, transfer, delivery or assumption of any asset or Liability of either Group as of the Distribution Time is not effected in accordance with this Section 2.03 as of the Distribution Time for any reason (including as a result of the failure of the parties to identify it as being required to be transferred pursuant to this Section 2.03, but subject to Section 2.04), the relevant party shall use all commercially reasonable efforts to effect such transfer as promptly thereafter as practicable.

Section 2.04. Restructuring Agreements. The transfers of the various entities and the contribution, assignment, transfer, conveyance and delivery of the assets and the acceptance and assumption of the Liabilities contemplated by Section 2.03 and the Restructuring Plan will be effected, in certain cases, pursuant to one or more asset transfer agreements, share transfer agreements, business transfer agreements, certificates of demerger and merger and other agreements and instruments (the “Restructuring Agreements”); provided that, in each case, it is intended that the Restructuring Agreements shall serve purely to effect (x) the legal transfer of the Kontoor Brands Assets or VF Assets to the Kontoor Brands Group or the VF Group, as applicable, in accordance with the Restructuring Plan or as contemplated pursuant to Section 2.03 and (y) the acceptance and assumption of the Kontoor Brands Liabilities or the VF Liabilities by a member of the Kontoor Brands Group or the VF Group, as applicable, in each case, in accordance with the Restructuring Plan or as contemplated pursuant to Section 2.03. In the event of any conflict between any Restructuring Agreement and this Agreement, the terms of such Restructuring Agreement shall control solely with respect to any applicable purchase price adjustment or cash adjustment set forth in any such Restructuring Agreement and this Agreement shall control in all other respects; provided that, notwithstanding anything in any Restructuring Agreement to the contrary, in the event any Restructuring Agreement provides for a purchase price adjustment or cash adjustment, whether based upon a calculation of fair market value or otherwise, or any similar adjustment provision, any purchase price adjustment or cash adjustment determination under such Restructuring Agreement, including as to the amount, if any, of any such adjustment, shall be determined by VF in its sole discretion. Notwithstanding anything in any Restructuring Agreement to the contrary, neither VF nor any member of the VF Group, on the one hand, nor Kontoor Brands nor any member of the Kontoor Brands Group, on the other hand, shall commence, bring or otherwise initiate any Action under any Restructuring Agreement.

Section 2.05. Agreement Relating to Consents Necessary to Transfer Assets and Liabilities. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall not constitute an agreement to transfer or assign any asset (including any Contract) or any claim or right or any benefit arising thereunder or resulting therefrom, or to assume any Liability, if such transfer, assignment, or assumption without the consent of a Third Party or a Governmental Authority, would result in a breach, or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default), under any Contract or would otherwise adversely affect the rights of a member of the VF Group or the Kontoor Brands Group thereunder. VF and Kontoor Brands will use their respective commercially reasonable efforts to obtain the consent of any Third Party (including any Governmental Authority), if any, required in connection with the transfer, assignment or assumption pursuant to Section 2.03 of any such asset or any such claim or right or benefit arising thereunder or

 

13


to the assumption of any Liability; provided that in no event shall any member of a Group have any Liability whatsoever to any member of the other Group for any failure to obtain any such consent. If and when such consent is obtained, such transfer, assignment and/or assumption shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement. During the period in which any transfer, assignment or assumption is delayed pursuant to this Section 2.05 as a result of the absence of a required consent, the party (or relevant member in its Group) retaining such asset, claim or right shall thereafter hold (or shall cause such member in its Group to hold) such asset, claim or right for the use and benefit of the party (or relevant member in its Group) entitled thereto (at the expense of the Person entitled thereto) and the party intended to assume an such Liability shall, or shall cause the applicable member of its Group to, pay, hold harmless or reimburse the party (or the relevant member of its Group) retaining such Liability for all amounts paid, incurred in connection with or arising out of the retention of such Liability. In addition, the party retaining such asset, claim or right, or such Liability (or relevant member of its Group) shall (or shall cause such member in its Group to) treat, insofar as reasonably possible and to the extent permitted by Applicable Law, such asset, claim or right, or such Liability, in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the party to which such asset, claim or right, or such Liability, is to be transferred or assumed in order to place such party, insofar as reasonably possible, in the same position as if such asset, claim or right, or such Liability, had been transferred or assumed on or prior to the Distribution Time as contemplated hereby and so that all the benefits and burdens relating to such asset, claim or right, or such Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such asset, claim or right, or such Liability, are to inure from and after the Distribution Time to the relevant member of the VF Group or the Kontoor Brands Group, as the case may be, entitled to the receipt of such asset, claim or right, or required to assume such Liability.

Section 2.06. Intercompany Accounts. The parties shall use commercially reasonable efforts to settle on or prior to the Distribution Date (to the extent practicable), all intercompany receivables, payables and other balances, in each case, that arise prior to the Distribution Time between members of the VF Group, on the one hand, and members of the Kontoor Brands Group, on the other hand (“Intercompany Accounts”), by way of capitalization and/or one or more cash payments (whether or not on a net basis) in satisfaction of such amounts. From and after the Distribution Time, the parties shall use commercially reasonable efforts to settle any Intercompany Accounts that are not settled as of the Distribution Time within 90 days of the Distribution Date and in the manner set forth in the first sentence of this Section 2.06; provided that any claim by any member of either Group with respect to an Intercompany Account must be made in writing (which writing shall be provided in accordance with Section 6.01 and be reasonably specific as to the applicable Intercompany Account and the amount thereof) to the applicable member of the other Group within 90 days of the Distribution Date.

Section 2.07. Intercompany Agreements. (a) Except as set forth in Section 2.07(b), all Contracts between members of the VF Group, on the one hand, and members of the Kontoor Brands Group, on the other hand, in effect immediately prior to the Distribution are hereby agreed by VF (on behalf of itself and each member of the VF Group) and by Kontoor Brands (on behalf of itself and each member of the Kontoor Brands Group) to be terminated, cancelled and of no further force and effect from and after the Distribution Time (including any provision thereof that purports to survive termination) without any further Liability to any party thereto.

(b)    The provisions of Section 2.07(a) shall not apply to any of the following Contracts: (i) this Agreement and the Ancillary Agreements (and each other Contract expressly contemplated by this Agreement or any Ancillary Agreement (A) to be entered into by any of the parties hereto or any of the members of their respective Groups or (B) to survive the Distribution Date); (ii) any Contract to which any Person, other than solely the parties hereto and the members of their respective Groups is a party; (iii) any Intercompany Accounts to the extent such Intercompany Accounts were not satisfied and/or settled in accordance with the first sentence of Section 2.06 (it being understood that such Intercompany Accounts shall be satisfied or settled in accordance with the second sentence of Section 2.06); and (iv) the Contracts set forth on Schedule 2.07(b).

 

14


Section 2.08. Bank Accounts; Cash Balances.

(a)    VF and Kontoor Brands shall, and shall cause the members of their respective Group to, use commercially reasonable efforts such that, on or prior to the Distribution Time, the VF Group and the Kontoor Brands Group maintain separate bank accounts and separate cash management processes. Without limiting the generality of the foregoing, VF and Kontoor Brands shall use commercially reasonable efforts to, and shall cause the members of their respective Groups to use commercially reasonable efforts to, effective prior to the Distribution Time, (x) remove and replace the signatories of any bank or brokerage account owned by Kontoor Brands or any other member of the Kontoor Brands Group as of the Distribution Time with individuals designated by Kontoor Brands and (y) if requested by VF, remove and replace the signatories of any bank or brokerage account owned by VF or any other member of the VF Group as of the Distribution Time with individuals designated by VF.

(b)    With respect to any outstanding payments initiated by VF, Kontoor Brands, or any of their respective Subsidiaries prior to the Distribution Time, such outstanding payments shall be honored following the Distribution by the Person or Group owning the account from which the payment was initiated.

(c)    As between VF and Kontoor Brands (and the members of their respective Groups) all payments received after the Distribution Date by either party (or member of its Group) that relate to a business, asset or Liability of the other party (or member of its Group), shall be held by such party for the use and benefit and at the expense of the party entitled thereto. Each party shall maintain an accounting of any such payments, and the parties shall have a monthly reconciliation, whereby all such payments received by each party are calculated and the net amount owed to VF or Kontoor Brands, as applicable, shall be paid over with a mutual right of set-off. If at any time the net amount owed to either party exceeds $[—], an interim payment of such net amount owed shall be made to the party entitled thereto within three (3) Business Days of such amount exceeding $[—]. Notwithstanding the foregoing, neither VF nor Kontoor Brands shall act as collection agent for the other party, nor shall either party act as surety or endorser with respect to non-sufficient funds checks or funds to be returned in a bankruptcy or fraudulent conveyance action.

Section 2.09. Replacement of Guarantees. VF and Kontoor Brands shall each use commercially reasonable efforts to, and shall cause the members of their respective Groups to use commercially reasonable efforts to, effective as of the Distribution Time, terminate or cause a member of the Kontoor Brands Group to be substituted in all respects for a member of the VF Group with respect to, and for the members of the VF Group, as applicable, to be otherwise removed or released from, all obligations of any member of the Kontoor Brands Group under any guarantee, surety bond, letter of credit, letter of comfort or similar credit or performance support arrangement (each, a “Guarantee”), given or obtained by any member of the VF Group for the benefit of any member of the Kontoor Brands Group or the Jeanswear Business (including any Guarantee of any Environmental Liability). If VF and Kontoor Brands have been unable to effect any such substitution, removal, release and termination with respect to any such Guarantee as of the Distribution Time, then, following the Distribution Time, subject to any applicable terms of Schedule 2.09, (a) the parties shall cooperate to effect such substitution, removal, release and termination as soon as reasonably practicable after the Distribution Time, (b) Kontoor Brands and the members of the Kontoor Brands Group shall, from and after the Distribution Time, indemnify against, hold harmless and promptly reimburse the members of the VF Group for any payments made by members of the VF Group and for any and all Liabilities of the members of the VF Group arising out of, or in performing, in whole or in part, any obligation under any such Guarantee, and (c) without the prior written consent of VF, no member of the Kontoor Brands Group may renew, extend the term of, increase any obligations under, or transfer to a third Person, any Liability for which any member of the VF Group is or might be liable pursuant to an applicable Guarantee unless such Guarantee, and all applicable obligations of the members of the VF Group with respect thereto, are thereupon terminated pursuant to documentation reasonably acceptable to VF.

Section 2.10. Further Assurances and Consents. In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its commercially reasonable efforts to take, or

 

15


cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under Applicable Laws and agreements or otherwise to consummate and make effective any transfers of assets, assignments and assumptions of Liabilities and any other transactions contemplated hereby (including, for the avoidance of doubt, pursuant to Section 4.13), including using its commercially reasonable efforts to obtain any consents and approvals and to make any filings and applications necessary or desirable in order to consummate the transactions contemplated by this Agreement (including, for the avoidance of doubt, pursuant to Section 4.13); provided that in no event shall any member of a Group have any Liability whatsoever to any member of the other Group for any failure to obtain any such consent or approval.

ARTICLE 3

DISTRIBUTION

Section 3.01. Conditions Precedent to Distribution. (a) In no event shall the Distribution occur unless each of the following conditions shall have been satisfied (or waived by VF in its sole discretion):

(i)    the Restructuring shall have been completed;

(ii)    the Kontoor Brands Financing Transactions shall have been consummated and the Cash Contribution shall have occurred;

(iii)    the Board of Directors of VF shall be satisfied that the Distribution will be made in a manner that does not cause VF to be unable to pay its debts in the usual course of its business or cause the total assets of VF to be less than the sum of its total liabilities plus the amount that would be needed, if VF were to be dissolved as of the Distribution Time, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution, if any, in each case in accordance with Section 1551 of the Corporations and Unincorporated Associations Law of the Commonwealth of Pennsylvania;

(iv)    the Board of Directors of VF shall have approved the Distribution and shall not have abandoned the Distribution or terminated this Agreement at any time prior to the Distribution;

(v)    the Form 10 shall have been filed with the Commission and declared effective by the Commission, no stop order suspending the effectiveness of the Form 10 shall be in effect, no proceedings for such purpose shall be pending before or threatened by the Commission, and the Information Statement shall have been mailed to holders of the VF Common Stock as of the Record Date;

(vi)    all actions and filings necessary or appropriate under applicable federal, state or foreign securities or “blue sky” laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;

(vii)    the Kontoor Brands Common Stock to be delivered in the Distribution shall have been approved for listing on the NYSE, subject to official notice of issuance;

(viii)    the Board of Directors of Kontoor Brands, as named in the Information Statement, shall have been duly elected, and the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, each in substantially the form filed as an exhibit to the Form 10, shall be in effect;

(ix)    each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto;

(x)    VF shall have received the Tax Opinion (which shall not have been revoked or modified in any material respect) that is reasonably satisfactory to VF confirming that (i) the Contribution and the Distribution, taken together, will qualify as a “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and (ii) the Distribution will qualify as a tax-free transaction under Sections 355(a) and 355(c) of the Code;

 

16


(xi)    a nationally recognized valuation advisory firm acceptable to VF shall have delivered one or more opinions to the Board of Directors of VF concerning the solvency and capital adequacy matters relating to each of (A) VF and its Group and (B) Kontoor Brands and its Group after consummation of the Distribution, and such opinions shall be acceptable to the Board of Directors of VF in its sole and absolute discretion and such opinions shall not have been withdrawn or rescinded;

(xii)    no Applicable Law shall have been adopted, promulgated or issued, and be in effect, that prohibits the consummation of the Distribution or any of the other transactions contemplated hereby;

(xiii)    any material governmental approvals and consents and any material permits, registrations and consents from Third Parties, in each case, necessary to effect the Distribution and to permit the operation of the Jeanswear Business after the Distribution Date substantially as it is conducted at the date hereof shall have been obtained; and

(xiv)    no event or development shall have occurred or exist that, in the judgment of the Board of Directors of VF, in its sole discretion, makes it inadvisable to effect the Distribution or the other transactions contemplated hereby.

(b)    Each of the conditions set forth in this Section 3.01(a) is for the sole benefit of VF and shall not give rise to or create any duty on the part of VF or its Board of Directors to waive or not to waive any such condition or to effect the Distribution, or in any way limit VF’s rights of termination as set forth in Section 6.11 or alter the consequences of any termination from those specified in Section 6.11. Any determination made by VF on or prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.01 shall be conclusive and binding on the parties and all other affected Persons.

Section 3.02. The Distribution. (a) VF shall, in its sole discretion, determine the Distribution Date and all terms of the Distribution, including the timing of the consummation of all or part of the Distribution. VF may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution including by accelerating or delaying the timing of the consummation of all or part of the Distribution. For the avoidance of doubt, nothing in this Agreement shall in any way limit VF’s right to terminate this Agreement or the Distribution as set forth in Section 6.11 or alter the consequences of any such termination from those specified in Section 6.11.

(b)    Subject to the terms and conditions set forth in this Agreement, (i) on or prior to the Distribution Date, VF shall take such steps as are reasonably necessary or appropriate to permit the Distribution by the Distribution Agent of validly issued, fully paid and non-assessable shares of Kontoor Brands Common Stock, registered in book-entry form through the registration system, (ii) the Distribution shall be effective at the Distribution Time, and (iii) subject to Section 3.03, VF shall instruct the Distribution Agent to distribute, on or as soon as practicable after the Distribution Date, to each holder of record of VF Common Stock as of the Record Date, by means of a pro rata dividend, 1 share of Kontoor Brands Common Stock for every [—] shares of VF Common Stock so held. Following the Distribution Date, Kontoor Brands agrees to provide all book-entry transfer authorizations for shares of Kontoor Brands Common Stock that VF or the Distribution Agent shall require (after giving effect to Sections 3.03 and 3.04) in order to effect the Distribution.

Section 3.03. Fractional Shares. No fractional shares of Kontoor Brands Common Stock will be distributed in the Distribution. The Distribution Agent will be directed to determine (based on the aggregate number of shares held by each holder) the number of whole shares and the fractional share of Kontoor Brands Common Stock allocable to each holder of VF Common Stock as of the Record Date. Upon the determination by the Distribution Agent of such numbers of whole shares and fractional shares, as soon as practicable on or after the Distribution Date, the Distribution Agent, acting on behalf of the holders thereof, shall aggregate the fractional shares into whole shares and shall sell the whole shares obtained thereby for cash on the open market (with the Distribution Agent, in its sole discretion, determining when, how and through which broker-dealer(s) and at

 

17


which price(s) to make such sales) and shall thereafter promptly distribute to each such holder entitled thereto (pro rata based on the fractional share such holder would have been entitled to receive in the Distribution) the resulting aggregate cash proceeds, after making appropriate deductions of the amounts required to be withheld for United States federal income tax purposes, if any, and after deducting an amount equal to all brokerage fees and commissions, transfer taxes and other costs attributed to the sale of shares pursuant to this Section 3.03. Neither VF nor Kontoor Brands will be required to guarantee any minimum sale price for the fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payments made in lieu of fractional shares.

Section 3.04. NO REPRESENTATIONS OR WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY OTHER DISTRIBUTION DOCUMENT, NO MEMBER OF EITHER GROUP MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, TO ANY MEMBER OF THE OTHER GROUP OR ANY OTHER PERSON WITH RESPECT TO ANY OF THE TRANSACTIONS OR MATTERS CONTEMPLATED HEREBY (INCLUDING WITH RESPECT TO THE BUSINESS, ASSETS, LIABILITIES, CONDITION OR PROSPECTS (FINANCIAL OR OTHERWISE) OF, OR ANY OTHER MATTER INVOLVING, EITHER BUSINESS, OR THE SUFFICIENCY OF ANY ASSETS TRANSFERRED OR LICENSED TO THE APPLICABLE GROUP, OR THE TITLE TO ANY SUCH ASSETS, OR THAT ANY REQUIREMENTS OF APPLICABLE LAW ARE COMPLIED WITH RESPECT TO THE RESTRUCTURING OR THE DISTRIBUTION). EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY OTHER DISTRIBUTION DOCUMENT, EACH MEMBER OF EACH GROUP SHALL TAKE ALL OF THE BUSINESS, ASSETS AND LIABILITIES TRANSFERRED OR LICENSED TO OR ASSUMED BY IT PURSUANT TO THIS AGREEMENT OR ANY DISTRIBUTION DOCUMENT ON AN “AS IS, WHERE IS” BASIS, AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR OTHERWISE ARE HEREBY EXPRESSLY DISCLAIMED.

ARTICLE 4

COVENANTS

Section 4.01. Books and Records; Access to Information. (a) To the extent not previously transferred in accordance with Section 2.02(a) or Section 2.03, from and after the Distribution Date, VF shall, and shall cause the members of the VF Group to, deliver to Kontoor Brands or any Kontoor Brands Designee any books and records that are Kontoor Brands Assets (or copies of relevant portions thereof if such books and records contain information not related to the Jeanswear Business) found to be in the possession of VF or any member of the VF Group in accordance with the applicable terms of the Transition Services Agreement and the applicable schedules thereto; provided that without limiting any express delivery requirements under this Section 4.01(a) and the terms of the Transition Services Agreement, neither VF nor any member of the VF Group shall be required to conduct any general search or investigation of its files for such books and records other than with respect to Commercial Data.

(b)    Without limiting the express delivery requirements of Section 4.01(a) or any Ancillary Agreement, for a period of six years after the Distribution Date, each Group shall afford promptly the other Group and its agents and, to the extent required by Applicable Law, authorized representatives of any Governmental Authority of competent jurisdiction, reasonable access (which shall include, to the extent reasonably requested, the right to make copies) during normal business hours to its books of account, financial and other records (including accountant’s work papers, to the extent any required consents have been obtained), information (excluding any Commercial Data), employees and auditors to the extent necessary or useful for such other Group in connection with any audit, investigation, dispute or litigation, complying with their obligations under this Agreement or any Ancillary Agreement, any regulatory proceeding, any regulatory filings, complying with reporting disclosure requirements or any other requirements imposed by any Governmental Authority or any other reasonable business purpose of the Group requesting such access; provided that (i) any such access shall not unreasonably interfere with the conduct of the business of the Group providing such access and (ii) if any party reasonably

 

18


determines that affording any such access to the other party would be commercially detrimental in any material respect or violate any Applicable Law or agreement to which such party or member of its Group is a party, or waive any legal privilege applicable to such party or any member of its Group, the parties shall use commercially reasonable efforts to permit the compliance with such request in a manner that avoids any such harm or consequence.

(c)    Without limiting the express delivery requirements of Section 4.01(a) or any Ancillary Agreement, until the end of the first full Kontoor Brands fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards as required for each party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each party shall use its commercially reasonable efforts to cooperate with the other party’s information requests (other than with respect to any Commercial Data) to enable (i) the other party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act; and (ii) the other party’s auditors timely to complete their review of the quarterly financial statements and audit of the annual financial statements, including, to the extent applicable to such party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any other Applicable Laws.

Section 4.02. Litigation Cooperation. (a) Effective as of the Distribution Time, the applicable member of the Kontoor Brands Group shall assume and thereafter be responsible for all Liabilities of either Group that may result from the Kontoor Brands Assumed Actions and, subject to Section 5.04(c), all Liabilities and fees and costs relating to the defense of the Kontoor Brands Assumed Actions, including attorneys’, accountants’, consultants’ and other professionals’ fees and expenses that have been incurred prior to the Distribution Time and are unpaid as of the Distribution Time, or, that are incurred on or after the Distribution Time. “Kontoor Brands Assumed Actions” means (x) those Actions primarily relating to the Jeanswear Business, including those in which any member of the VF Group or any Affiliate of a member of the VF Group is a defendant or a party against whom the claim or investigation is directed that are primarily related to the Jeanswear Business and, including, for the avoidance of doubt, those Actions set forth on Schedule 4.02(a) and (y) all Actions that Kontoor Brands has elected to control the defense of as the Indemnifying Party pursuant to Section 5.04(b). If any member of the VF Group has any rights or claims against a Third Party insurer or other Third Party in connection with or relating to any Kontoor Brands Assumed Action, such member shall, subject to Section 2.05, transfer and assign to the applicable member of the Kontoor Brands Group all such rights or claims and cooperate with the Kontoor Brands Group in connection with the enforcement and collection thereof. For the avoidance of doubt, effective as of the Distribution Time, Kontoor Brands shall be entitled to all recovery, rights, claims, credits, causes of action, payments, awards and rights of set-off, in each case, with respect to the Kontoor Brands Assumed Actions. VF hereby agrees to transfer or pay, and to cause any applicable member of the VF Group to transfer or pay, to Kontoor Brands any such recovery, rights, claims, credits, causes of action, payments, awards and rights of set-off as promptly as possible.

(b)    Effective as of the Distribution Time, the applicable member of the VF Group shall assume and thereafter be responsible for all Liabilities of either Group that may result from the VF Assumed Actions and, subject to Section 5.04(c), all fees and costs relating to the defense of the VF Assumed Actions, including attorneys’, accountants’, consultants’ and other professionals’ fees and expenses that have been incurred prior to the Distribution Time and are unpaid as of or after the Distribution Time, or, that are incurred on or after the Distribution Time. “VF Assumed Actions” means (x) those Actions primarily related to the VF Business, including those in which any member of the Kontoor Brands Group or any Affiliate of a member of the Kontoor Brands Group is a defendant or the party against whom the claim or investigation is directed that are primarily related to the VF Business and, including, for the avoidance of doubt, those Actions set forth on Schedule 4.02(b) and (y) all Actions that VF has elected to control the defense of as the Indemnifying Party pursuant to

 

19


Section 5.04(b). If any member of the Kontoor Brands Group has any rights or claims against a Third Party insurer or other Third Party in connection with or relating to any VF Assumed Action, such member shall, subject to Section 2.05, transfer and assign to the applicable member of the VF Group all such rights or claims and cooperate with the VF Group in connection with the enforcement and collection thereof. For the avoidance of doubt, effective as of the Distribution Time, VF shall be entitled to all recovery, rights, claims, credits, causes of action, payments, awards and rights of set-off, in each case, with respect to the VF Assumed Actions. Kontoor Brands hereby agrees to transfer or pay, and to cause any applicable member of the Kontoor Brands Group to transfer or pay, to VF any such recovery, rights, claims, credits, causes of action, payments, awards and rights of set-off as promptly as possible.

(c)    Each party agrees that, at all times from and after the Distribution Time, if an Action relating primarily to its Business is commenced by a Third Party naming a member of each Group as defendants thereto, such action shall be deemed to be a Kontoor Brands Assumed Action (in the case of an Action primarily related to the Jeanswear Business) or a VF Assumed Action (in the case of an Action primarily related to the VF Business) and the party as to which the Action primarily relates shall use its commercially reasonable efforts to cause the other party or member of its Group to be removed from such Action.

(d)    The parties agree, that at all times from and after the Distribution Time, if any Action is commenced by a Third Party naming a member of each Group as a defendant thereto and the parties are not able to reasonably determine whether such Action primarily relates to the Jeanswear Business or the VF Business, then the parties shall cooperate in good faith to determine which party and the members of its Group shall control and be responsible for such Action in accordance with the terms of this Section 4.02, and the parties will consult to the extent necessary or advisable with respect to such Action.

(e)    Each Group shall use commercially reasonable efforts to make available to the other Group and its attorneys, accountants, consultants and other designated representatives, upon written request, its directors, officers, employees and representatives as witnesses, and shall otherwise cooperate with the other Group, to the extent reasonably requested in connection with any Action arising out of either Group’s Business prior to the Distribution Time in which the requesting Group may from time to time be involved.

(f)    Notwithstanding the foregoing, this Section 4.02 shall not require the party to whom any request pursuant to Section 4.02(e) has been made to make available Persons or information if such party determines that doing so would, in the reasonable good faith judgment of such party, reasonably be expected to result in any violation of any Applicable Law or agreement or adversely affect its ability to successfully assert a claim of Privilege under Applicable Law; provided, that the parties shall use commercially reasonable efforts to cooperate in seeking to find a way to permit compliance with such obligations to the extent and in a manner that avoids such consequence.

Section 4.03. Reimbursement. Each Group providing information or witnesses to the other Group or otherwise incurring any out-of-pocket expense in connection with transferring books and records or otherwise cooperating under Section 4.01 or Section 4.02 shall be entitled to receive from the recipient thereof, upon the presentation of invoices therefor, payment for all reasonable and documented out-of-pocket costs and expenses (including attorney’s fees but excluding reimbursement for general overhead, salary and employee benefits) actually incurred in providing such access, information, witnesses or cooperation.

Section 4.04. Ownership of Information. All information owned by one party (or a member of its Group) that is provided to the other party (or a member of its Group) under Section 4.01 or Section 4.02 shall be deemed to remain the property of the providing party. Unless specifically set forth herein or in any Ancillary Agreement, nothing contained in this Agreement shall be construed to grant or confer rights of license or otherwise in any such information.

Section 4.05. Retention of Records. Except as otherwise required by Applicable Law or agreed to in writing, for a period of [—] year[s] following the Distribution Date, each party shall, and shall cause the members of its

 

20


Group to, retain any and all information in its possession or control relating to the other Group’s Business in accordance with the document retention practices of VF as in effect as of the date hereof. Neither party shall destroy, or permit the destruction, or otherwise dispose, or permit the disposal, of any such information, subject to such retention practice, unless, prior to such destruction or disposal, the party proposing (or whose Group member is proposing) such destruction or disposal (the “Disposing Party”) provides not less than 30 days’ prior written notice to the other party (the “Receiving Party”), specifying the information proposed to be destroyed or disposed of and the scheduled date for such destruction or disposal. If the Receiving Party shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to the Receiving Party, the Disposing Party shall promptly arrange for the delivery of such of the information as was requested at the expense of the Receiving Party; provided that, if the Disposing Party reasonably determines that any such provision of information would violate any Applicable Law or agreement to which such party or member of its Group is a party, or waive any legal privilege applicable to such party or any member of its Group, the parties shall use commercially reasonable efforts to permit the prompt compliance with such request in a manner that avoids any such harm or consequence. Any records or documents that were subject to a litigation hold prior to the Distribution Date must be retained by the applicable party until such party or member of its Group is notified by the other party that the litigation hold is no longer in effect.

Section 4.06. Confidentiality. Each party acknowledges that it or a member of its Group may have in its possession, and, in connection with this Agreement and the Ancillary Agreements, may receive, Confidential Information of the other party or any member of its Group (including information in the possession of such other party relating to its clients or customers). Each party shall hold and shall cause its directors, officers, employees, agents, consultants and advisors (“Representatives”) and the members of its Group and their Representatives to hold in strict confidence and not to use, except as permitted by this Agreement, or any Ancillary Agreement all such Confidential Information concerning the other Group unless (a) such party or any of the members of its Group or its or their Representatives is compelled to disclose such Confidential Information by judicial or administrative process or by other requirements of Applicable Law or (b) such Confidential Information can be shown to have been (i) in the public domain through no fault of such party or any of the members of its Group or its or their Representatives, (ii) lawfully acquired after the Distribution Date on a non-confidential basis from other sources not known by such party to be under any legal obligation to keep such information confidential or (iii) developed by such party or any of the members of its Group or its or their Representatives without the use of any Confidential Information of the other Group. Notwithstanding the foregoing, such party or member of its Group or its or their Representatives may disclose such Confidential Information to the members of its Group and its or their Representatives so long as such Persons are informed by such party of the confidential nature of such Confidential Information and are directed by such party to treat such information confidentially. The obligation of each party and the members of its Group and its and their Representatives to hold any such Confidential Information in confidence shall be satisfied if they exercise the same level of care with respect to such Confidential Information as they would with respect to their own proprietary information. If such party or any of a member of its Group or any of its or their Representatives becomes legally compelled to disclose any documents or information subject to this Section 4.06, such party will promptly notify the other party and, upon request, use commercially reasonable efforts to cooperate with the other party’s efforts to seek a protective order or other remedy. If no such protective order or other remedy is obtained or if the other party waives in writing such party’s compliance with this Section 4.06, such party or the member of its Group or its or their Representatives may furnish only that portion of the information which it concludes, after consultation with counsel, is legally required to be disclosed and will exercise its commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information. Each party agrees to be responsible for any breach of this Section 4.06 by it, the members of its Group and its and their Representatives.

Section 4.07. Privileged Information. (a) The parties acknowledge that members of the VF Group, on the one hand, and members of the Kontoor Brands Group, on the other hand, may possess documents or other information regarding the other Group that is or may be subject to the attorney-client privilege, the work product doctrine or common interest privilege (collectively, “Privileges”; and such documents and other information collectively, the “Privileged Information”). Each party agrees to use commercially reasonable efforts to protect

 

21


and maintain, and to cause their respective Affiliates to protect and maintain, any applicable claim to Privilege in order to prevent any of the other Group’s Privileged Information from being disclosed or used in a manner inconsistent with such Privilege without the other party’s consent. Without limiting the generality of the foregoing, a party and its Affiliates shall not, without the other party’s prior written consent, (i) waive any Privilege with respect to any of the other party’s or any member of its Group’s Privileged Information, (ii) fail to defend any Privilege with respect to any such Privileged Information, or (iii) fail to take any other actions reasonably necessary to preserve any Privilege with respect to any such Privileged Information.

(b)    Upon receipt by a party or any member of such party’s Group of any subpoena, discovery or other request that calls for the production or disclosure of Privileged Information of the other party or a member of its Group, such party shall promptly notify the other party of the existence of the request and shall provide the other party a reasonable opportunity to review the information and to assert any rights it or a member of its Group may have under this Section 4.07 or otherwise to prevent the production or disclosure of such Privileged Information. Each party agrees that neither it nor any member of its Group will produce or disclose any information that may be covered by a Privilege of the party or a member of its Group under this Section 4.07 unless (i) the other party has provided its written consent to such production or disclosure (which consent shall not be unreasonably withheld) or (ii) a court of competent jurisdiction has entered an order finding that the information is not entitled to protection under any applicable Privilege or otherwise requires disclosure of such information.

(c)    In the event that any member of the VF Group and any member of the Kontoor Brands Group cooperate in the mutual defense of any Third Party Claim, such cooperation shall not constitute a waiver or qualification of such party’s right to assert and defend any applicable claim to Privilege.

(d)    Each of the VF Group and the Kontoor Brands Group covenants and agrees that, following the Distribution Time, Davis Polk & Wardwell LLP or any other internal or external legal counsel currently representing the Kontoor Brands Group (each a “Prior Company Counsel”) may serve as counsel to the VF Group and its Affiliates in connection with any matters arising under or related to this Agreement or the transactions contemplated by this Agreement or any Ancillary Agreement, including with respect to any litigation, Claim or obligation arising out of or related to this Agreement or any Ancillary Agreement or the transactions contemplated by this Agreement or any Ancillary Agreement, notwithstanding any representation by the Prior Company Counsel prior to the Distribution Time. The VF Group and the Kontoor Brands Group hereby irrevocably (i) waive any Claim they have or may have that a Prior Company Counsel has a conflict of interest or is otherwise prohibited from engaging in such representation and (ii) covenant and agree that, in the event that a dispute arises after the Distribution Time between the Kontoor Brands Group and the VF Group (together with its Affiliates), Prior Company Counsel may represent any member of the VF Group and any Affiliates thereof in such dispute even though the interests of such Person(s) may be directly adverse to the VF Group or the Kontoor Brands Group and even though Prior Company Counsel may have represented the Kontoor Brands Group in a matter substantially related to such dispute.

(e)     All communications between members of the VF Group, on the one hand, and Prior Company Counsel, on the other hand, related to the transactions contemplated by this Agreement or any Ancillary Agreement shall be deemed to be attorney-client confidences that belong solely to such members of the VF Group or the Prior Company Counsel (the “Pre-Distribution Time Communications”). Accordingly, the Kontoor Brands Group shall not have access to any such Pre-Distribution Time Communications or to the files of Prior Company Counsel relating to such engagement related to the transactions contemplated hereby from and after the Distribution Time, and all books, records and other materials of the Kontoor Brands Group in any medium (including electronic copies) containing or reflecting any of the Pre-Distribution Time Communications or the work product of legal counsel with respect thereto, including any related summaries, drafts or analyses, and all rights with respect to any of the foregoing, are hereby assigned and transferred to the VF Group effective as of the Distribution Time (collectively, the “VF Group Privileged Materials”). The VF Group may cause all of the VF Group Privileged Materials to be distributed to the VF Group immediately prior to the Distribution Time with no copies thereof retained by the Kontoor Brands Group or its respective representatives, and all such distributed VF Group Privileged Materials shall be excluded from the transactions contemplated by this

 

22


Agreement and each Ancillary Agreement. From and after the Distribution Time, in the event that any member of the Kontoor Brands Group shall possess any VF Group Privileged Materials, such member of the Kontoor Brands Group shall promptly cause such VF Group Privileged Materials to be distributed to the VF Group in accordance with this Section 4.07(e) or destroyed, at the election of Kontoor Brands. In addition, from and after the Distribution Time, (i) the Kontoor Brands Group and its representatives shall maintain the confidentiality of the VF Group Privileged Materials and (ii) none of the members of the Kontoor Brands Group or their respective representatives shall access or in any way, directly or indirectly, use or rely upon any VF Group Privileged Materials (whether or not distributed to the VF Group prior to the Distribution Time in accordance with this Section 4.07(e)). To the extent that any VF Group Privileged Materials are not delivered to the VF Group, the Kontoor Brands Group agrees not to assert a waiver of any applicable privilege or protection with respect to such materials. Without limiting the generality of the foregoing, from and after the Distribution Time, (a) the VF Group shall be the sole holders of the Privileges with respect to the VF Group Privileged Materials, and no member of the Kontoor Brands Group shall be a holder thereof, (b) to the extent that files of Prior Company Counsel in respect of VF Group Privileged Materials constitute property of the client, only the VF Group shall hold such property rights, (c) Prior Company Counsel shall have no duty whatsoever to reveal or disclose any VF Group Privileged Materials to the Kontoor Brands Group by reason of any attorney-client relationship between Prior Company Counsel and the Kontoor Brands Group and (d) after the Distribution Date, all communications between members of the Kontoor Brands Group, on the one hand, and any attorneys retained by any member of the Kontoor Brands Group, on the other hand, shall be deemed to be attorney-client confidences that belong solely to such members of the Kontoor Brands Group or such attorneys. Each of the Kontoor Brands Group and the VF Group hereby acknowledges and confirms that it has had the opportunity to review and obtain adequate information regarding the significance and risks of the waivers and other terms and conditions of this Section 4.07(e), including the opportunity to discuss with counsel such matters and reasonable alternatives to such terms. This Section Section 4.07(e) is for the benefit of the VF Group and Prior Company Counsel, and the VF Group and Prior Company Counsel are intended third party beneficiaries of this Section 4.07(e). This Section 4.07(e) shall be irrevocable, and no term of this Section 4.07(e) may be amended, waived or modified, without the prior written consent of the VF Group and Prior Company Counsel. The covenants and obligations set forth in this Section 4.07(e) shall survive for ten (10) years following the Distribution Time.

Section 4.08. Limitation of Liability. Except as otherwise provided in this Agreement, no party shall have any liability to any other party in the event that any information, books or records exchanged or provided pursuant to this Agreement is found to be inaccurate or the requested information, books or records is not provided, in the absence of willful misconduct by the party requested to provide such information, books or records. No party shall have any liability to any other party if any information, books or records is destroyed after commercially reasonable efforts by such party to comply with the provisions of Section 4.05.

Section 4.09. Other Agreements Providing for Exchange of Information. The rights and obligations granted under this Article 5 are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention, rights to use, or confidential treatment of Information set forth in any Ancillary Agreement. Notwithstanding anything in this Agreement to the contrary, (i) the Tax Matters Agreement shall govern the retention of Tax related records and the exchange of Tax related information and (ii) the Employee Matters Agreement shall govern the retention of employment and benefits related records.

Section 4.10. Conduct of Incidents Subject to VF Insurance. (a) Kontoor Brands, for itself and the members of its Group, acknowledges that coverage for the Jeanswear Business under the insurance policies of VF and the members of the VF Group (other than insurance policies, insurance contracts and claim administration contracts established in contemplation of the Distribution to cover only the Kontoor Brands Group after the Distribution Time (the “Post-Distribution Insurance Arrangements”)) (the “VF Insurance Policies”) will cease as of the Distribution Time, and that, except as set forth in this Section 4.10, neither VF nor any member of its Group will purchase any “tail” policy or other additional or substitute coverage for the benefit of Kontoor Brands or the members of the Kontoor Brands Group relating to the Jeanswear Business applicable in any period after the Distribution Time.

 

23


(b)    Notwithstanding the foregoing, VF, for itself and the members of its Group, agrees that VF or a member of its Group shall, with respect to (x) any act, circumstance, occurrence or incident arising prior to the Distribution Time that relates to the Jeanswear Business that is potentially covered by an occurrence-based insurance policy of VF or any member of its Group (each, a “VF Occurrence-Based Policy”) in effect prior to the Distribution Time, (y) any act, circumstance, occurrence or incident arising or occurring prior to the Distribution Time that relates to the Jeanswear Business that is potentially covered by an insurance policy of VF or any member of its Group written on a “claims made” basis (“VF Claims-Made Policies”) in effect prior to the Distribution Time, or (z) any act, circumstance, occurrence or incident arising or occurring prior to the Distribution Time that relates to the Jeanswear Business that is potentially covered by an insurance policy of VF or any member of its Group written on a “loss discovered” basis (“VF Loss Discovered-Policies” and together with the VF Occurrence-Based Policies and the VF Claims-Made Policies, the “VF Shared Policies”) (i) not relinquish any of its rights, or take any actions (other than the making of claims under the VF Shared Policies) that could reasonably be expected to reduce or otherwise limit the available coverage for any claim or incident arising prior to the Distribution Time that relates to the Jeanswear Business, under any of the VF Shared Policies, (ii) upon request of Kontoor Brands or any member of its Group, report such claim or incident to the appropriate insurer as promptly as practicable and in accordance with the terms and conditions of the applicable VF Shared Policy and to use commercially reasonable efforts to administer such claims, (iii) include Kontoor Brands and the applicable member of its Group on material correspondence and possible litigation proceedings relating to such claim or incident and (iv) instruct that such proceeds are paid directly to the injured party in settlement of any claims, rather than to VF or the members of its Group, or, if such proceeds are received by VF or any member of its Group, pay such proceeds over to Kontoor Brands or the applicable member of its Group; provided that Kontoor Brands and the applicable members of its Group shall notify VF promptly of any potential claim, shall cooperate in the investigation and pursuit of any claim, shall have the right to effectively associate in the pursuit of any claim, including the ability to withhold its consent to any proposed claim settlement (such consent not to be unreasonably conditioned, withheld or delayed) and shall bear all out-of-pocket expenses incurred by VF or the members of its Group in connection with the foregoing; provided further that VF and the members of its Group shall be obligated to use only commercially reasonable efforts to pursue any claims that are potentially covered by available VF Shared Policies and shall not, for the avoidance of doubt, have any obligation to commence any litigation with respect to any matter potentially covered by any VF Shared Policy unless the costs of such litigation are borne by Kontoor Brands. Kontoor Brands shall bear responsibility for any deductible payments required to be made under the VF Shared Policies in respect of any such claims.

(c)    Notwithstanding the foregoing Section 4.10(a), with respect to the VF Loss Discovered Policies providing cyber and privacy coverage to VF and the member of its Group, on the one hand, and the Post-Distribution Insurance Arrangements providing cyber and privacy coverage to Kontoor Brands and the members of its Group, on the other hand (collectively, the “Cyber Policies”), in the event of any Cyber Event arising or occurring at or following the Distribution Time that affects, impacts or relates to both VF (or any member of its Group) and Kontoor Brands (or any member of its Group) and that is potentially covered by such Cyber Policies (a “Cyber Insurance Event”), including any Cyber Event occurring in connection with services to be provided pursuant to the Transition Services Agreement, then VF and the members of its Group, on the one hand, and Kontoor Brands and the members of its Group, on the other hand, shall cooperate in good faith with respect to the making of any claims with respect to such Cyber Insurance Event with the respective Cyber Policies of the Kontoor Brands Group, on the one hand, and the VF Group, on the other hand; provided that neither VF and the members of its Group, on the one hand, nor Kontoor Brands and the members of its Group, on the other hand, will be covered by, or have any right to make any claim against or otherwise seek coverage under, any of the Cyber Policies of the other Group with respect to any such Cyber Insurance Event.

(d)    If, after the Distribution Time, Kontoor Brands or any of the members of its Group reasonably requires any information regarding claims data for renewal purposes or other information pertaining to a claim or to any occurrence or alleged wrongful acts which occurred prior to the Distribution Time (regardless of when such occurrences or alleged wrongful acts may be reported) that could reasonably be expected to give rise to a claim (including any pre- Distribution claims under any VF Shared Policy) in order to give notice to or make filings

 

24


with insurance carriers or claims adjustors or administrators or to adjust, administer or otherwise manage a claim, then, subject to the provisos in Section 4.10, VF shall cause such information to be supplied to Kontoor Brands or the applicable member of its Group, to the extent such information is in its possession and control or can be reasonably obtained by VF (or the members of its Group), as applicable, reasonably promptly upon a written request therefore. In furtherance of the foregoing, if any Third Party requires the consent of VF or any of the members its Group to the disclosure of claims data or information maintained by an insurance company or other Third Party in respect of any claim (including any pre-Distribution claims under any VF Shared Policy), such consent shall not be unreasonably withheld, conditioned or delayed.

Section 4.11. Trademark Phase Out.

(a)    Except as expressly provided in the VF License Agreement, as soon as reasonably practicable, but in any event within one hundred eighty (180) days, following the Distribution Time (the “Phase Out Period”), Kontoor Brands shall, and shall cause its Subsidiaries to, cease any and all use of the VF Names and Marks and remove, conceal, cover, redact and/or replace the VF Names and Marks from any and all Kontoor Brands Assets and any other assets and materials under their possession or control bearing such VF Names and Marks.

(b)    Kontoor Brands shall use commercially reasonable efforts to cause its Subsidiaries to adopt new corporate names that do not contain or consist of, in whole or in part, the VF Names and Marks (and provide VF with written evidence thereof) as soon as reasonably practicable following the Distribution Time, but in any event no later than eighteen (18) months thereafter.

Section 4.12. [Intentionally Omitted].

Section 4.13. VF Option.

(a)    Grant of the VF Option. Notwithstanding anything in this Agreement or any Ancillary Agreement to the contrary, Kontoor Brands, on behalf of itself and each of the members of the Kontoor Brands Group, hereby grants to VF, for itself and each of the members of the VF Group, the irrevocable right and option to acquire all of the issued and outstanding stock or other ownership interests (the “Option Subsidiary Stock”) of Czech Distribution Services s.r.o., a member of the Kontoor Brands Group formed in connection with the Restructuring and organized pursuant to the laws of the Czech Republic (the “Option Subsidiary”, and the foregoing option being referred to herein as the “VF Option”), which as of the Distribution Date shall own only the properties, assets and other rights listed or described on Schedule 4.13(a) and shall employ the employees or other service providers listed on Schedule 4.13(a) (collectively, the “Option Subsidiary Assets”) for use solely in conducting the supply chain, logistics and distribution operations that exclusively relate or pertain to the operation of the Jeanswear Business as conducted at the distribution center listed on Schedule 4.13(a) (the “Specified Facility”, and such business and operations, the “Option Subsidiary Business”), which Specified Facility shall be subject to a lease between VF, or a member of the VF Group, as landlord, and the Option Subsidiary, as tenant (the “Specified Facility Lease”).

(b)    Conduct of the Option Subsidiary Business. From and after the Distribution Date until the earliest to occur of the VF Option Closing Date or the expiration of the VF Option Period, Kontoor Brands and the members of the Kontoor Brands Group shall cause the Option Subsidiary to (i) maintain its corporate existence and good standing in its jurisdiction of incorporation or organization, (ii) conduct the Option Subsidiary Business in the ordinary course and consistent with the past practices of the VF Group as conducted at the Specified Facility, and (iii) use its best efforts to preserve intact its business organization and relationships with third parties, including suppliers, vendors and employees. Without limiting the generality of the foregoing, from and after the Distribution Date until the earliest to occur of the VF Option Closing Date or the expiration of the VF Option Period Kontoor Brands shall not, and shall cause the members of the Kontoor Brands Group, including the Option Subsidiary, to not, without the prior written consent of VF:

(i)    permit the Option Subsidiary to (A) operate any business other than the Option Subsidiary Business, (B) own, hold or acquire any properties, assets or other businesses other than the Option

 

25


Subsidiary Assets, or become liable for, assume or otherwise become obligated or liable for any Liabilities other than Liabilities that are relating to, arising out of or in connection with or resulting from the Option Subsidiary Business or the Option Subsidiary Assets;

(ii)    sell, lease, assign or transfer, directly or indirectly, or create or incur any lien or encumbrance on, any of the Option Subsidiary Assets or the Option Subsidiary Stock (whether by merger, consolidation, share transfer or otherwise);

(iii)    other than in the ordinary course of business and consistent with the past practices of the VF Group with respect to the Specified Facility, or as required by Applicable Law, (A) hire or otherwise retain the services of, or terminate the employment or services of, any employee, director or officer of the Option Subsidiary, (B) make or grant any bonus or any wage, severance or termination pay, salary or compensation increase to any employee, director or officer of the Option Subsidiary, (C) enter into, make, modify, amend or alter in any way any employee benefit plan, employment agreement or arrangement of the Option Subsidiary, or (D) make or grant any equity or equity-based compensation award to any employee, director or officer of the Option Subsidiary;

(iv)    merge or consolidate the Option Subsidiary with or into any corporation or other entity,

(v)    (A) authorize the issuance, issue or sell or agree or commit to issue or sell (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any equity or debt securities, or other interests in, the Option Subsidiary or (B) amend any term of any class or series of securities of the Option Subsidiary;

(vi)    permit the Option Subsidiary to make any investment in or acquisition of equity or debt securities of any Person, or make loans, advances or capital contributions to, or otherwise acquire any capital stock or business of, any Person;

(vii)    amend or modify the charter, constitution or applicable organizational documents (whether by merger, consolidation or otherwise) of the Option Subsidiary in any way, including taking, agreeing to take or authorizing any action to wind up its affairs or dissolve or change its corporate or other organizational form or amend any terms of its outstanding securities; or

(viii)    make or change any Tax election of the Option Subsidiary or with respect to the Option Subsidiary Business.

(c)    Exercise of the VF Option. VF shall be entitled to exercise the VF Option at any time during the ninety (90)-day period immediately following the date on which the term of the Specified Facility Lease expires in accordance with its terms (the “VF Option Period”) upon written notice to Kontoor Brands of its desire to exercise the VF Option (such notice, the “Exercise Notice” and the date on which such Exercise Notice is sent, the “Exercise Date”).

(d)    Closing. The closing of the sale, transfer and delivery of the Option Subsidiary Stock contemplated by Section 4.13(e) (the “VF Option Closing”) will take place as soon as practicable following the Exercise Date at such place, time and date as may be agreed upon by VF and Kontoor Brands, but in no event later than five (5) Business Days following the Exercise Date (the “VF Option Closing Date”); provided that in the event that the Fair Market Value has not been agreed upon in accordance with Section 4.13(f) as of the expiration of such five (5)-Business Day period, then the VF Option Closing Date shall occur promptly following the date that the Fair Market Value has been finally determined in accordance with the terms of Section 4.13(f), but in no event later than five (5) Business Days following such determination; provided further that, if the VF Option Closing or the transfer and delivery of the Option Subsidiary Stock in accordance with the terms of this Section 4.13 is subject to regulatory approval or the consent of any third party, the VF Option Closing Date shall be delayed until the Business Day following the date on which the last of such regulatory approvals or third party consents is received or waived by VF.

(e)    Sale and Transfer of Option Subsidiary Stock. At the VF Option Closing, Kontoor Brands hereby agrees, on behalf of itself and each of the members of the Kontoor Brands Group, to, or to cause the applicable

 

26


member of the Kontoor Brands Group to, sell, transfer, convey, assign and deliver to VF, or a VF Designee designated by VF in the Exercise Notice, all of the Option Subsidiary Stock. In connection therewith, Kontoor Brands shall, and shall cause the applicable members of its Group to, execute and deliver such purchase and sale agreements, stock powers, certificates of title, deeds and other instruments of transfer (the “Option Subsidiary Transfer Documents”) as and to the extent necessary to evidence the sale, transfer, conveyance and assignment of the Option Subsidiary Stock to the VF Designee, which Option Subsidiary Transfer Documents shall be in form and substance satisfactory to VF and shall contain appropriate representations and warranties of Kontoor Brands and the applicable members of the Kontoor Brands Group as to the ownership of the Option Subsidiary Stock, noncontravention, enforceability, authorization and ability to convey title to the Option Subsidiary Stock, and representations and warranties to the effect that the covenants set forth in Section 4.13(b) shall have been fully performed and complied with in all respects by Kontoor Brands and the members of its Group (including the Option Subsidiary) during the period from the Distribution Date to the VF Option Closing Date.

(f)    VF Option Purchase Price. At the VF Option Closing, VF agrees to pay, or to cause a member of the VF Group to pay, an amount in cash equal to the Fair Market Value of the Option Subsidiary Stock to Kontoor Brands, or a member of the Kontoor Brands Group designated by Kontoor Brands prior to the VF Option Closing Date. For purposes of this Section 4.13, “Fair Market Value” shall mean the value of the Option Subsidiary Stock as calculated using the same criteria and valuation methodologies, consistently applied, used by VF in connection with the sale or transfer of the Option Subsidiary Business to the Option Subsidiary in connection with the Restructuring (the “Option Subsidiary Valuation Methodology”), subject to any adjustments required as a result of any capital contributions made to the Option Subsidiary in connection with the Restructuring or otherwise in accordance with this Agreement, which value shall be mutually agreed by VF and Kontoor Brands. If VF and Kontoor Brands do not reach agreement on the Fair Market Value within thirty (30) days following the Exercise Date, a nationally recognized accounting or corporate valuation firm as mutually agreed upon by VF and Kontoor Brands acting in good faith (the “Option Appraiser”) shall be appointed by VF and Kontoor Brands to review and determine the Fair Market Value of the Option Subsidiary Stock in accordance with the Option Subsidiary Valuation Methodologies and the terms of this Section 4.13(f). The costs and expenses of the Option Appraiser shall be borne equally by VF, on the one hand, and Kontoor Brands, on the other hand.

(g)    Payment of Transfer Taxes. Any transfer, stamp or other similar taxes and duties payable in connection with any sale and transfer of the Option Subsidiary Stock shall be borne equally by VF, on the one hand, and Kontoor Brands, on the other hand.

(h)    Miscellaneous. For the avoidance of doubt, from the Distribution Date until the VF Option Closing Date, the Option Subsidiary shall be a member of the Kontoor Brands Group, the Option Subsidiary Assets shall be Kontoor Brands Assets and all Liabilities relating to, arising out of or in connection with or resulting from the Option Subsidiary Business or the Option Subsidiary Assets shall be Kontoor Brands Liabilities, in each case for all purposes of this Agreement. Notwithstanding the foregoing, from and after the VF Option Closing Date, the Option Subsidiary shall be a member of the VF Group, the Option Subsidiary Assets shall be VF Assets and all Liabilities exclusively relating to, arising exclusively out of or exclusively in connection with or resulting exclusively from the Option Subsidiary Business or the Option Subsidiary Assets shall be VF Liabilities, in each case for all purposes of this Agreement; provided, however that it is understood and agreed that any Liabilities of the Option Subsidiary other than Liabilities exclusively relating to, arising exclusively out of or exclusively in connection with or resulting from exclusively the Option Subsidiary Business or the Option Subsidiary Assets shall at all times be Kontoor Brands Liabilities without regard to the occurrence of the VF Option Closing Date.

ARTICLE 5

RELEASE; INDEMNIFICATION

Section 5.01. Release of Pre-Distribution Claims.

(a)    Except (i) as provided in Section 5.01(b) and (ii) as otherwise expressly provided in this Agreement or any Ancillary Agreement, each party does hereby, on behalf of itself and each member of its Group, and each of

 

27


their successors and assigns, release and forever discharge the other party and the other members of such party’s Group, and their respective successors and assigns, and all Persons who at any time prior to the Distribution Time have been directors, officers, employees or attorneys serving as independent contractors of such other party or any member of its Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns (collectively, the “Released Parties”), from any and all demands, Claims, Actions and Liabilities whatsoever, whether at law or in equity (including any right of contribution or any right pursuant to any Environmental Law whether now or hereinafter in effect), whether arising under any Contract, by operation of law or otherwise (and including for the avoidance of doubt, those arising as a result of the negligence, strict liability or any other liability under any theory of law or equity of, or any violation of law by any Released Party), existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date. In furtherance of the foregoing, each party shall cause each of the members of its respective Group to, effective as of the Distribution Time, release and forever discharge each of the Released Parties of the other Group as and to the same extent as the release and discharge provided by such party pursuant to the foregoing provisions of this Section 5.01(a).

(b)    Nothing contained in Section 5.01(a) shall impair any right of any Person identified in Section 5.01(a) to enforce this Agreement or any Ancillary Agreement. Nothing contained in Section 5.01(a) shall release or discharge any Person from:

(i)    any Liability assumed, transferred, assigned, retained or allocated to that Person in accordance with, or any other Liability of that Person under, this Agreement or any of the Ancillary Agreements;

(ii)    any Liability that is expressly specified in this Agreement (including Section 2.06 and Section 2.07) or any Ancillary Agreement to continue after the Distribution Time, but subject to any limitation set forth in this Agreement (including Section 2.06 and Section 2.07) or any Ancillary Agreement relating specifically to such Liability;

(iii)    any Liability that the parties may have with respect to claims for indemnification, recovery or contribution brought pursuant to this Agreement or any Ancillary Agreement, which Liability shall be governed by the provisions of this Article 5, or, if applicable, the appropriate provisions of the Ancillary Agreements; or

(iv)    any Liability the release of which would result in the release of any Person, other than a member of the VF Group or any related Released Party; provided, however, that the parties hereto agree not to bring or allow their respective Subsidiaries to bring suit against the other party or any related Released Party with respect to any such Liability.

In addition, nothing contained in Section 5.01(a) shall release any party or any member of its Group from honoring its existing obligations to indemnify, or advance expenses to, any Person who was a director, officer or employee of such party or any member of its Group, at or prior to the Distribution Time, to the extent such Person was entitled to such indemnification or advancement of expenses pursuant to then-existing obligations; provided, however, that to the extent applicable, Section 5.02 hereof shall determine whether any party shall be required to indemnify the other or a member of its Group in respect of such Liability.

(c)    No party hereto shall make, nor permit any member of its Group to make, any Claim or demand, or commence any Action asserting any Claim or demand, including any Claim of contribution or indemnification, against the other party, or any related Released Party, with respect to any Liability released pursuant to Section 5.01(a).

(d)    It is the intent of each of the parties by virtue of the provisions of this Section 5.01 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date between members of the VF Group, on the one hand, and

 

28


members of the Kontoor Brands Group, on the other hand, (including any Contract existing or alleged to exist between the parties on or before the Distribution Date), except as expressly set forth in Section 5.01(b) or as expressly provided in this Agreement or any Ancillary Agreement. At any time, at the reasonable request of either VF or Kontoor Brands, the other party hereto shall execute and deliver (and cause its respective Subsidiaries to execute and deliver) releases reflecting the provisions hereof.

Section 5.02. Kontoor Brands Indemnification of the VF Group. (a) Effective as of and after the Distribution Time, Kontoor Brands shall indemnify, defend and hold harmless each member of the VF Group, each Affiliate thereof and each of their respective past, present and future directors, officers, employees and agents and the respective heirs, executors, administrators, successors and assigns of any of the foregoing (the “VF Indemnitees”) from and against any and all Liabilities incurred or suffered by any of the VF Indemnitees arising out of or in connection with (i) any of the Kontoor Brands Liabilities, or the failure of any member of the Kontoor Brands Group to pay, perform or otherwise discharge any of the Kontoor Brands Liabilities, (ii) any breach by Kontoor Brands or any member of the Kontoor Brands Group of this Agreement or any Ancillary Agreement, (iii) the ownership or operation of the Jeanswear Business or the Kontoor Brands Assets, whether prior to, on or after the Distribution Date, (iv) any payments made by VF or any member of the VF Group in respect of any Guarantee given or obtained by any member of the VF Group for the benefit of any member of the Kontoor Brands Group or the Jeanswear Business, or any Liability of any member of the VF Group in respect thereof, and (v) any use of any Licensed VF IP (as defined in the VF License Agreement) or the VF Names and Marks by Kontoor Brands, any member of the Kontoor Brands Group or any permitted sublicensee under the VF License Agreement.

(b)    Except to the extent set forth in Section 5.03(b), effective as of and after the Distribution Time, Kontoor Brands shall indemnify, defend and hold harmless each of the VF Indemnitees and each Person, if any, who controls any VF Indemnitee within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all Liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in the Form 10 or any amendment thereof, the Information Statement (as amended or supplemented if Kontoor Brands shall have furnished any amendments or supplements thereto), the Equity Compensation Registration Statement or any offering or marketing materials prepared in connection with the Kontoor Brands Financing Arrangements or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

Section 5.03. VF Indemnification of the Kontoor Brands Group. (a) Effective as of and after the Distribution Time, VF shall indemnify, defend and hold harmless each member of the Kontoor Brands Group, each Affiliate thereof and each of their respective past, present and future directors, officers, employees and agents and the respective heirs, executors, administrators, successors and assigns of any of the foregoing (the “Kontoor Brands Indemnitees”) from and against any and all Liabilities incurred or suffered by any of the Kontoor Brands Indemnitees and arising out of or in connection with (i) any of the VF Liabilities, or the failure of any member of the VF Group to pay, perform or otherwise discharge any of the VF Liabilities, (ii) the ownership or operation of the VF Business or the VF Assets, whether prior to, on or after the Distribution Date, and (iii) any breach by VF or any member of the VF Group of this Agreement or any Ancillary Agreement.

(b)    Effective as of and after the Distribution Time, VF shall indemnify, defend and hold harmless each of the Kontoor Brands Indemnitees and each Person, if any, who controls any Kontoor Brands Indemnitee within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all Liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in the Form 10 or any amendment thereof, the Information Statement (as amended or supplemented if Kontoor Brands shall have furnished any amendments or supplements thereto), the Equity Compensation Registration Statement or any offering or marketing materials prepared in connection with the Kontoor Brands Financing Arrangements or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such Liabilities are caused by any such untrue statement or omission or alleged untrue

 

29


statement or omission based on information furnished by VF solely in respect of the VF Group and which information is set forth on Schedule 5.03(b).

Section 5.04. Procedures. (a) The party seeking indemnification under Section 5.02 or Section 5.03 (the “Indemnified Party”) agrees to give prompt notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit, action or proceeding (each, a “Claim”) in respect of which indemnity may be sought hereunder and will provide the Indemnifying Party such information with respect thereto that the Indemnifying Party may reasonably request. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have prejudiced the Indemnifying Party.

(b)    The Indemnifying Party shall be entitled to participate in the defense of any Claim asserted by any Third Party (“Third Party Claim”) and, subject to the limitations set forth in this Section 5.04, if it so notifies the Indemnified Party no later than 30 days after receipt of the notice described in Section 5.04(a), shall be entitled to control and appoint lead counsel for such defense, in each case at its expense. If the Indemnifying Party does not so notify the Indemnified Party, the Indemnified Party shall have the right to defend or contest such Third Party Claim through counsel chosen by the Indemnified Party that is reasonably acceptable to the Indemnifying Party, subject to the provisions of this Section 5.04. The Indemnified Party shall provide the Indemnifying Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific).

(c)    If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of Section 5.04(b), (i) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld) before entering into any settlement of such Third Party Claim, if the settlement does not release the Indemnified Party from all Liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party or any of its related Indemnitees or is otherwise materially prejudicial to any such Person and (ii) the Indemnified Party shall be entitled to participate in (but not control) the defense of such Third Party Claim and, at its own expense, to employ separate counsel of its choice for such purpose; provided that in the event of a conflict of interest between the Indemnifying Party and the applicable Indemnified Party, the reasonable and documented fees and expenses of such separate counsel shall be at the Indemnifying Party’s expense.

(d)    Each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

(e)    Each Indemnified Party shall use commercially reasonable efforts to collect any amounts available under insurance coverage, or from any other Person alleged to be responsible, for any Liabilities payable under Section 5.02 or Section 5.03 and the reasonable expenses incurred in connection therewith will be treated as Liabilities subject to indemnification hereunder.

(f)    If any Third Party Claim shall be brought against a member of each Group, then such Action shall be deemed to be a Kontoor Brands Assumed Action or a VF Assumed Action in accordance with Sections 4.02(a) or 4.02(b), to the extent applicable, and Kontoor Brands, in the case of any Kontoor Brands Assumed Action, or VF, in the case of any VF Assumed Action, shall be deemed to be the Indemnifying Party for the purposes of this Article 5. In the event of any Action in which the Indemnifying Party is not also named defendant, at the request of either the Indemnified Party or the Indemnifying Party, the parties will use commercially reasonable efforts to substitute the Indemnifying Party or its applicable Affiliate for the named defendant in the Action.

Section 5.05. Calculation of Indemnification Amount. Any indemnification amount pursuant to Section 5.02 or Section 5.03 shall be paid (i) net of any amounts actually recovered by the Indemnified Party under applicable

 

30


Third Party insurance policies or from any other Third Party alleged to be responsible therefor, and (ii) taking into account any Tax Benefit allowable to the Indemnified Party (using the methodology set forth in Section 11(d) of the Tax Matters Agreement to determine the amount of any such Tax Benefit) and any Tax cost incurred by the Indemnified Party arising from the incurrence or payment of the relevant Liabilities. VF and Kontoor Brands agree that, for United States federal income tax purposes, any payment made pursuant to this Article 5 will be treated as provided under Section 12(b) of the Tax Matters Agreement. If the Indemnified Party receives any amounts under applicable Third Party insurance policies, or from any other Third Party alleged to be responsible for any Liabilities, subsequent to an indemnification payment by the Indemnifying Party in respect thereof, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made by such Indemnifying Party in respect thereof up to the amount received by the Indemnified Party from such Third Party insurance policy or Third Party, as applicable.

Section 5.06. Contribution. If for any reason the indemnification provided for in Section 5.02 or Section 5.03 is unavailable to any Indemnified Party, or insufficient to hold it harmless, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the VF Group, on the one hand, and the Kontoor Brands Group, on the other hand, in connection with the conduct, statement or omission that resulted in such Liabilities. In case of any Liabilities arising out of or related to information contained in the Form 10 or any amendment thereof, the Information Statement (as amended or supplemented if Kontoor Brands shall have furnished any amendments or supplements thereto), the Equity Compensation Registration Statement or any offering or marketing materials prepared in connection with the Kontoor Brands Financing Arrangements, the relative fault of the VF Group, on the one hand, and the Kontoor Brands Group, on the other hand, shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to information supplied by Kontoor Brands or any member of its Group, on the one hand, or VF or any member of its Group (but solely to the extent such information is set forth on Schedule 5.03(b)), on the other hand.

Section 5.07. Non-Exclusivity of Remedies. Subject to Section 5.01, the remedies provided for in this Article 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or in equity; provided that the procedures set forth in Sections 6.04 and 6.05 shall be the exclusive procedures governing any indemnity action brought under this Agreement.

Section 5.08. Survival of Indemnities. The rights and obligations of any Indemnified Party or Indemnifying Party under this Article 5 shall survive the sale or other transfer of any party of any of its assets, business or liabilities.

Section 5.09. Ancillary Agreements. If an indemnification claim is covered by the indemnification provisions of an Ancillary Agreement, the claim shall be made under the Ancillary Agreement to the extent applicable and the provisions thereof shall govern such claim. In no event shall any party be entitled to double recovery from the indemnification provisions of this Agreement and any Ancillary Agreement.

ARTICLE 6

MISCELLANEOUS

Section 6.01. Notices. Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, mail, or e-mail transmission to the following addresses:

If to VF to:

VF Corporation

105 Corporate Center Blvd.

 

31


Greensboro, North Carolina 27408

Attn: [—]

Email: [—]

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn:   Marc O. Williams

            Daniel Brass

Email: marc.williams@davispolk.com

            daniel.brass@davispolk.com

If to Kontoor Brands to:

Kontoor Brands, Inc.

400 N. Elm Street,

Greensboro, North Carolina 27401

Attn: [—]

Email: [—]

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn:   Marc O. Williams

            Daniel Brass

Email: marc.williams@davispolk.com

            daniel.brass@davispolk.com

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other party hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 6.02. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by VF and Kontoor Brands, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b)    No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 6.03. Expenses. VF and Kontoor Brands shall each bear the costs and expenses incurred or paid in connection with the Restructuring, the Distribution and any other related transaction, as applicable, set forth below their respective names on Schedule 6.03. All other third-party fees, costs and expenses paid or incurred in connection with the foregoing (except as specifically allocated pursuant to the terms of this Agreement or any Ancillary Agreement) will be paid by the party incurring such fees or expenses, whether or not the Distribution occurs, or as otherwise agreed by the parties in writing.

 

32


Section 6.04. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto. If any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under the Distribution Documents.

Section 6.05. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state.

Section 6.06. Counterparts; Effectiveness; Third-Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). Except for Section 4.07 and the indemnification and release provisions of Article 5, neither this Agreement nor any provision hereof is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns.

Section 6.07. Entire Agreement. This Agreement and the other Distribution Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein or in the other Distribution Documents has been made or relied upon by any party hereto or any member of their Group with respect to the transactions contemplated by the Distribution Documents. Without limiting Section 5.09 and subject to Section 6.08, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, the Ancillary Agreement shall control with respect to the subject matter thereof, and this Agreement shall control with respect to all other matters; provided, that except as provided for in Section 2.04 to extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Restructuring Agreement, this Agreement shall control with respect to all matters.

Section 6.08. Tax Matters. Except as otherwise expressly provided herein, this Agreement shall not govern Tax matters (including any administrative, procedural and related matters thereto), which shall be exclusively governed by the Tax Matters Agreement and the Employee Matters Agreement. For the avoidance of doubt, to the extent of any inconsistency between this Agreement and either of the Tax Matters Agreement or Employee Matters Agreement, the terms of the Tax Matters Agreement or Employee Matters Agreement, as the case may be, shall govern.

Section 6.09. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from the transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an

 

33


inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or outside of the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6.01 shall be deemed effective service of process on such party.

Section 6.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 6.11. Termination. Notwithstanding any provision of this Agreement to the contrary, the Board of Directors of VF may, in its sole discretion and without the approval of Kontoor Brands or any other Person, at any time prior to the Distribution terminate this Agreement and/or abandon the Distribution, whether or not it has theretofore approved this Agreement and/or the Distribution. In the event this Agreement is terminated pursuant to the preceding sentence, this Agreement shall forthwith become void and neither party nor any of its directors or officers shall have any liability or further obligation to the other party or any other Person by reason of this Agreement.

Section 6.12. Severability. If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a declaration, the parties shall modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

Section 6.13. Survival. All covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date indefinitely, unless a specific survival or other applicable period is expressly set forth herein.

Section 6.14. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

Section 6.15. Interpretation. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of its authorship of any of the provisions of this Agreement.

Section 6.16. Specific Performance. Each party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur. In recognition of this fact, each party agrees that, if there is a breach or threatened breach, in addition to any damages, the other nonbreaching party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching party (i) to perform its obligations under this Agreement or (ii) if the breaching party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including transferring, or granting liens on, the assets of the breaching party to secure the performance by the breaching party of those obligations).

Section 6.17. Performance. Each party shall cause to be performed all actions, agreements and obligations set forth herein to be performed by any member of such party’s Group.

[Remainder of page intentionally left blank]

 

34


IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

V.F. CORPORATION
By:    
 

Name:

Title:

 

KONTOOR BRANDS, INC.

By:    
 

Name:

Title:

 

35

EX-3.1 3 d618285dex31.htm EX-3.1 EX-3.1

Exhibit 3.1

KONTOOR BRANDS, INC.

AMENDED AND RESTATED ARTICLES OF INCORPORATION

(Effective as of [—], 2019)

FIRST: The name of the Corporation is Kontoor Brands, Inc.

SECOND: The name and location of the Corporation’s registered agent in the State of North Carolina is Corporation Service Company, 327 Hillsborough Street, Wake County, Raleigh, North Carolina 27603.

THIRD: The principal office of the Corporation is 400 N. Elm Street, Greensboro, Guilford County, North Carolina.

FOURTH: The purpose for which the Corporation is incorporated is to have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under the North Carolina Business Corporation Act.

FIFTH: The term of the Corporation’s existence is perpetual.

SIXTH: The Corporation is authorized to issue two classes of shares to be designated respectively “Preferred Stock” and “Common Stock”; the total number of shares which the Corporation shall have authority to issue is [—]. The number of shares of Preferred Stock shall be [—], with no par value. The number of shares of Common Stock shall be [—], with no par value. The Board of Directors is authorized, subject to limitations prescribed by law, to provide by resolution for the issuance from time to time of the Preferred Stock in one or more series, any or all of which may have full, limited, multiple, fractional, or no voting rights, and such designations, preferences, qualifications, privileges, limitations, restrictions, options, conversion rights, and other special or relative rights as shall be stated in the resolution or resolutions adopted by the Board of Directors pursuant to the authority hereby expressly vested in such Board of Directors.

No holder of any of the shares of stock of the Corporation shall be entitled as a matter of right to purchase or to subscribe for any unissued stock of any class, or any additional shares of any class, to be issued by reason of any increase of the authorized capital stock of the Corporation of any class, or bonds, certificates of indebtedness, debentures, or other securities convertible into stock of the Corporation or carrying any right to purchase stock of any class, but any such unissued stock, or such additional authorized issue of any class of stock, or of other securities convertible into stock of the Corporation or carrying any right to purchase stock of any class, may be issued and disposed of, pursuant to resolutions of the Board of Directors, to such persons, firms, corporations, or associations and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion.

SEVENTH: (A) The business and affairs of the Corporation shall be managed by the Board of Directors, and all powers of the Corporation, except as otherwise provided by law, by these Articles, or by the Bylaws of the Corporation, shall be exercised by the Board of Directors.

(B) The number of directors of the Corporation shall be not less than six and may consist of such larger number as may be determined from time to time by the Board of Directors. From the effective date of these Articles (the “Effective Date”) until the completion of the fourth annual meeting of shareholders to occur after the Effective Date, the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of an equal number of directors and the allocation (including the initial allocation) of the directors among the three classes shall be determined by the Board of Directors. The term of the initial Class I directors shall terminate on the date of the first annual meeting of shareholders to occur after the Effective Date; the term of the initial Class II directors shall terminate on the date of the second annual meeting of shareholders to occur after the Effective Date; and the term of the initial Class III directors shall terminate on the date of the third annual meeting of shareholders to occur after the Effective Date and, in each


case, until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. Each Class I director elected at the first annual meeting of shareholders to occur after the Effective Date, each Class II director elected at the second annual meeting of shareholders to occur after the Effective Date and each Class III director elected at the third annual meeting of shareholders to occur after the Effective Date shall hold office until the fourth annual meeting of shareholders to occur after the Effective Date and, in each case, until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. Commencing with the fourth annual meeting of shareholders after the Effective Date, the classification of the Board of Directors shall terminate and each director elected shall be elected for a one year term and such director shall hold office until the next annual meeting of shareholders and until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal.

In no case will the manner of election prescribed in this Article SEVENTH, Section (B) shorten the term of any incumbent director.

(C) Except in the case of vacancies, directors shall be elected by the shareholders. Each director shall be elected by the vote of the majority of the votes cast with respect to the director at any meeting of the shareholders called for the purpose of the election of directors at which a quorum is present, provided that if as of a date that is ten (10) days in advance of the date the Corporation files its definitive proxy statement (regardless of whether or not thereafter revised or supplemented) with the Securities and Exchange Commission the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote in the election of directors generally.

For the purposes of Section (C) of this Article SEVENTH, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes “withheld” with respect to that director.

The shareholders of the Corporation shall not have the right to cumulative voting in the election of directors.

(D) From the Effective Date until the completion of the fourth annual meeting of shareholders to occur after the Effective Date, any one or more directors who have been elected may be removed from office by the vote of shareholders entitled to cast 80% of the votes which all shareholders would be entitled to cast at any election of directors only for cause. From and after the completion of the fourth annual meeting of shareholders to occur after the Effective Date, any one or more directors who have been elected may be removed from office with or without cause by the vote of shareholders entitled to cast at least 80% of the votes which all shareholders would be entitled to cast at any election of directors. In case the Board of Directors or any one or more directors shall be so removed, new directors may be elected at the same meeting.

(E) Vacancies in the Board of Directors, whether occurring because of death, resignation, removal, increase in the number of directors, or because of some other reason, may be filled by a majority of the remaining members of the Board of Directors, though less than a quorum. If there remain no directors, then any such vacancy may be filled by the vote of the holders of a majority of the shares cast at a meeting of shareholders at which a quorum shall be present. From the Effective Date until the completion of the fourth annual meeting of shareholders to occur after the Effective Date, a director elected to fill a vacancy resulting from an increase in the number of directors shall hold office for a term that shall coincide with the remaining term of the class of directors to which he or she is elected, and a director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor, in each case subject to such director’s election at the next shareholders’ meeting at which directors are elected. From and after the completion of the fourth annual meeting of shareholders to occur after the Effective Date, any director chosen to fill a vacancy, including a vacancy resulting from an increase in the number of directors, shall hold office until the next election of directors, and until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal.

EIGHTH: (A) The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such time and on such date as the Board of Directors shall determine in accordance with the Bylaws of the Corporation.


(B) Special meetings of shareholders may be called at any time solely by the Chairman of the Board of Directors, or the Board of Directors acting pursuant to a resolution adopted by a majority of the Board of Directors.

(C) Subject to the rights of the holders of any class or series of Preferred Stock then outstanding, as may be set forth in the resolution or resolutions adopted by the Board of Directors pursuant to Article SIXTH of these Articles for such class or series of Preferred Stock, any action required or permitted to be taken at any annual or special meeting of shareholders may be taken only upon the vote of shareholders at an annual or special meeting duly noticed and called in accordance with the North Carolina Business Corporation Act, as amended from time to time, and these Articles and may not be taken by written consent of shareholders without a meeting.

NINTH: (A) Except as otherwise expressly provided in section (B) of this Article NINTH, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), voting together as a single class, shall be required to approve any one or more of the transactions listed in paragraphs (i) through (vii) of this section (A), and the term “Business Combination” as used in this Article NINTH shall mean any transaction referred to in said paragraphs (i) through (vii). Such affirmative vote shall be required, the fact notwithstanding that no vote may be required or that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise. The Business Combination transactions include:

(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) an Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to an Interested Shareholder or an Affiliate of an Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of 5% or more of the total assets of the Corporation and its consolidated Subsidiaries as reflected on the immediately preceding year-end consolidated balance sheet of the Corporation; or

(iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to the Corporation or any Subsidiary of any assets of an Interested Shareholder or an Affiliate of an Interested Shareholder having an aggregate Fair Market Value of 5% or more of the total assets of the Corporation and its consolidated Subsidiaries as reflected on the immediately preceding year-end consolidated balance sheet of the Corporation; or

(iv) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to an Interested Shareholder or an Affiliate of an Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of 5% or more of the total assets of the Corporation and its consolidated Subsidiaries as reflected on the immediately preceding year-end consolidated balance sheet of the Corporation; or

(v) the issuance or transfer by an Interested Shareholder or an Affiliate of an Interested Shareholder (in one transaction or a series of transactions) of any securities to the Corporation or any Subsidiary in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of 5% or more of the total assets of the Corporation and its consolidated Subsidiaries as reflected on the immediately preceding year-end consolidated balance sheet of the Corporation; or

(vi) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation or any Subsidiary proposed by or on behalf of an Interested Shareholder or an Affiliate of an Interested Shareholder; or

(vii) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the


effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by an Interested Shareholder or an Affiliate of an Interested Shareholder.

(B) The provisions of section (A) of this Article NINTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles, if all of the conditions specified in either of the following paragraphs (i) and (ii) are met:

(i) The Business Combination shall have been approved prior to its consummation by a majority of the Disinterested Directors (as hereinafter defined).

(ii) All of the following conditions shall have been met:

(a) The aggregate amount of the cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of each class of outstanding capital stock shall be at least equal to the highest of the following:

(1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of each such class of capital stock acquired by it (a) within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (b) in the transaction in which it became an Interested Shareholder, whichever is higher;

(2) (if applicable) the highest preferential amount per share to which the holders of shares of each such class of capital stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and

(3) the Fair Market Value per share of each such class of capital stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder, whichever is higher.

The provisions of this subparagraph (ii)(a) shall be required to be met with respect to every class and series of outstanding capital stock, whether or not the Interested Shareholder has previously acquired beneficial ownership of any shares of a particular class or series of capital stock.

(b) The price determined in accordance with sub-paragraph (ii)(a) of this section (B) shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event.

(c) The consideration to be received by holders of each class of outstanding capital stock shall be in cash or in the same form as the Interested Shareholder or an Affiliate of the Interested Shareholder has previously paid for shares of such class of capital stock. If the Interested Shareholder or an Affiliate of the Interested Shareholder has paid for shares of any class of capital stock with varying forms of consideration, the form of consideration for each share of such class shall be in cash, to the highest amount per share as was paid in cash to acquire any shares owned by the Interested Shareholder or any Affiliate of the Interested Shareholder, and the balance of the consideration for each such share shall be either in cash or in the form used to acquire the largest number of shares of such class previously acquired by the Interested Shareholder or any Affiliate of the Interested Shareholder.

(d) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination, except as approved by a majority of the Disinterested Directors: (1) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock; (2) there shall have been (a) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), and (b) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number


of outstanding shares of the Common Stock; (3) such Interested Shareholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder; and (4) such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(e) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions corresponding to or replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

(C) For the purposes of this Article NINTH:

(i) A “person” shall mean any individual, firm, corporation or other entity.

(ii) “Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:

(a) is the beneficial owner, directly or indirectly, of 20% or more of the voting power of the outstanding Voting Stock;

(b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 20% or more of the voting power of the then outstanding Voting Stock; or

(c) is the beneficial owner of 5% or more of the shares of any class of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder; provided, however, that the term “Interested Shareholder” shall not include any employee benefit plan of the Corporation or any Subsidiary of the Corporation or any trustee or fiduciary with respect to any such plan when acting in the capacity of a trustee or fiduciary.

(iii) A person shall be a “beneficial owner” of any Voting Stock:

(a) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or

(b) which such person or any of its Affiliates or Associates has (1) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote or to direct the vote pursuant to any agreement, arrangement or understanding, other than pursuant to a public solicitation of proxies; or

(c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock, other than pursuant to a public solicitation of proxies.

(iv) For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph (ii) of this section (C), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of paragraph (iii) of this section (C) but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(v) “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect as of the Effective Date.


(vi) “Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph (ii) of this section (C), the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.

(vii) “Disinterested Director” means any member of the Board of Directors of the Corporation who is unaffiliated with an Interested Shareholder and was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. A member of the Board of Directors who is affiliated with an Interested Shareholder shall nevertheless be considered a Disinterested Director for the purpose of voting upon any matter in which the interests of such Interested Shareholder (or any Affiliate or Associate of such Interested Shareholder) are solely as a holder of shares of capital stock and are undifferentiated from the interests of other holders of the same class of shares of capital stock.

(viii) “Fair Market Value” means: (a) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith.

(ix) In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash to be received” as used in subparagraph (ii)(a) of section (B) of this Article NINTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares.

(D) A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purposes of this Article NINTH and Article TWELFTH, on the basis of information known to them after reasonable inquiry, (i) whether a person is an Interested Shareholder or a Disinterested Director, (ii) the number of shares of each class of capital stock beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another, (iv) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by or to the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of 5% or more of the total assets of the Corporation and its Subsidiaries as reflected on the immediately preceding year-end consolidated balance sheet of the Corporation. A majority of the Disinterested Directors of the Corporation shall have the further power to interpret all of the terms and provisions of this Article NINTH.

(E) Any other provisions of these Articles or the Bylaws of the Corporation to the contrary notwithstanding (and the fact notwithstanding that a lesser percentage may be specified by law, these Articles or the Bylaws of the Corporation), the affirmative vote of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article NINTH.

(F) If any section, sub-section, paragraph, subparagraph, clause, word, combination of words or other portion of this Article NINTH shall be illegal, invalid or unenforceable, then the illegal, invalid or unenforceable portion shall be stricken herefrom only in the circumstances then under adjudication, and the remaining provisions of this Article NINTH shall be considered as if the portion so struck does not form a part hereof.


TENTH: To the fullest extent permitted by law, and unless the Corporation consents in writing to the selection of an alternative forum, the North Carolina Business Court (or another state or federal court located in the State of North Carolina, if a dispute does not qualify for designation to the North Carolina Business Court or the North Carolina Business Court otherwise lacks jurisdiction), shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, shareholder or other agent of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action arising or asserting a claim arising pursuant to any provision of the North Carolina Business Corporation Act or any provision of these Articles or the Corporation’s Bylaws or as to which the North Carolina Business Corporation Act or N.C. Gen. Stat. § 7A-45.4 confers jurisdiction on the North Carolina Business Court or (iv) any action asserting a claim relating to the internal affairs of the Corporation, including, without limitation, any action to interpret, apply, enforce or determine the validity of these Articles or the Corporation’s Bylaws. Any person or entity purchasing or otherwise acquiring any interest in securities of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TENTH. To the fullest extent permitted by applicable law, if any action the subject matter of which is within the scope of these Articles or the Corporation’s Bylaws is filed in a court other than as specified above in the name of any shareholder, such shareholder shall be deemed to have consented to (a) personal jurisdiction before any state or federal court located in the State of North Carolina, as appropriate, in connection with any action brought in any such court to enforce these Articles and (b) having service of process made upon such shareholder in any such action by service upon such shareholder’s counsel in the action as agent for such shareholder.

ELEVENTH: (A) The Corporation shall indemnify to the fullest extent permitted by applicable law any person who was or is a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise or entity, whether or not for profit, whether domestic or foreign, including service with respect to an employee benefit plan, its participants or beneficiaries, against all liability, loss and expense (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by such person in connection with such Proceeding, whether or not the indemnified liability arises or arose from any Proceeding by or in the right of the Corporation.

(B) Subject to Section (A) of this Article ELEVENTH, expenses incurred by a director or officer in defending (or acting as a witness in) a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, subject to the provisions of applicable law, upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under applicable law.

(C) To determine whether any indemnification or advance of expenses under this Article ELEVENTH is permissible, the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such Proceeding may, and on request of any person seeking indemnification or advance of expenses shall, reasonably determine (i) in the case of indemnification, whether the standards under applicable law have been met and (ii) in the case of an advance of expenses prior to a change of control of the Corporation as provided below, whether such advance is appropriate under the circumstance, provided that each such determination shall be made by independent legal counsel if such quorum is not obtainable, or even if obtainable, a majority vote of a quorum of directors who are not parties to the Proceeding so directs; and provided further that, if there has been a change in control of the Corporation between the time of the action or failure to act giving rise to the claim for indemnification or advance of expenses and the time such claim is made, at the option of the person seeking indemnification or an advance of expenses, the permissibility of indemnification shall be determined by independent legal counsel and the advance of expenses shall be obligatory subject to receipt of the undertaking specified in Section (B) of this Article ELEVENTH. The reasonable expenses of any director or officer in prosecuting a successful claim for indemnification, and the fees and expenses of any independent legal counsel engaged to determine permissibility of indemnification or advance of expenses, shall be borne by the Corporation.


(D) The obligations of the Corporation to indemnify a director or officer under this Article ELEVENTH, including, if applicable, the duty to advance expenses, shall be considered a contract between the Corporation and such director or officer, and no modification or repeal of any provision of this Article ELEVENTH shall affect, to the detriment of the director or officer, such obligations of the Corporation in connection with a claim based on any act or failure to act occurring before such modification or repeal.

(E) A director of the Corporation shall not be personally liable for monetary damages as such for breach of any duty or for any action taken, or any failure to take any action, unless (a) the director has breached or failed to perform the duties of his or her office under Section 55-8-30 of the North Carolina Business Corporation Act, as such law may be amended from time to time, (b) the director at the time of such breach, acts or omissions knew or believed that such breach, acts or omissions were clearly in conflict with the best interests of the Corporation, or (c) the director derived an improper personal benefit from such breach, act or omission; provided, however, that the provisions of this Section shall not apply to the responsibility or liability of a director pursuant to any criminal statute or the liability of a director for the payment of taxes pursuant to local, state or federal law.

(F) The rights and authority conferred in this Article ELEVENTH shall not be exclusive of any other right that any person may otherwise have or hereafter acquire.

(G) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise or entity, whether or not for profit, whether domestic or foreign, including service with respect to an employee benefit plan, its participants or beneficiaries, against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the North Carolina Business Corporation Act.

TWELFTH: (A) Except as provided in Article NINTH, Section (E), whenever any corporate action is to be taken by vote of the shareholders adopting, amending or repealing these Articles, the proposed corporate action shall be authorized only upon receiving at least 80% of the votes which all voting shareholders are entitled to cast thereon.

(B) Except as provided by law or in Article NINTH, Section (E), the Bylaws of the Corporation may be amended, altered, or repealed, including with respect to any Bylaw adopted, altered or amended by the shareholders, or new Bylaws may be adopted, either (a) upon receiving at least 80% of the votes which all voting shareholders are entitled to cast on the proposed Bylaw change or adoption at any annual or special meeting of shareholders, or (b) by a vote of a majority of the directors of the Corporation, with or without the vote or assent of the shareholders, at any regular or special meeting of the Board of Directors.

THIRTEENTH: Any or all classes and series of shares, or any part thereof, may be represented by uncertificated shares to the extent determined by the Board of Directors, except that shares represented by a certificate that is issued and outstanding shall continue to be represented thereby until the certificate is surrendered to the Corporation.

FOURTEENTH: The provisions of Article 9 of the North Carolina Business Corporation Act entitled “The North Carolina Shareholder Protection Act” shall not be applicable to the Corporation.

FIFTEENTH: The provisions of Article 9A of the North Carolina Business Corporation Act entitled “The North Carolina Control Share Acquisition Act” shall not be applicable to the Corporation.

EX-3.2 4 d618285dex32.htm EX-3.2 EX-3.2

Exhibit 3.2

BYLAWS

OF

KONTOOR BRANDS, INC.

(A North Carolina Corporation)

ARTICLE I

MEETINGS OF SHAREHOLDERS

Section 1. Place of Meeting. Meetings of shareholders shall be held at such geographic location, within or without the State of North Carolina, as may be fixed from time to time by the Board of Directors or, in the case of a special meeting, the Secretary. If no such geographic location is so fixed by the Board of Directors or the Secretary, as applicable, meetings of the shareholders shall be held at the principal executive office of the Corporation wherever situated.

Section 2. Annual Meeting. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held, commencing with the year 2020, at such time and on such date as the Board of Directors shall determine.

Section 3. Special Meetings. Special meetings of shareholders may be called at any time solely by the Chairman of the Board of Directors or the Board of Directors acting pursuant to a resolution adopted by a majority of the Board of Directors.

Section 4. Adjournment. Adjournment or adjournments of any annual or special meeting may be taken, including one at which directors are to be elected, for such period as the shareholders present and entitled to vote shall direct.

Section 5. Notice of Meetings. Written notice (conforming to the provisions of Section 1 of Article IV of these Bylaws) of every meeting of the shareholders shall be given by the Secretary, in the case of an annual meeting, and by or at the direction of the person or persons authorized to call the meeting, in the case of a special meeting, to each shareholder of record entitled to vote at the meeting, no fewer than 10 nor more than 60 days prior to the day named for the meeting, unless a greater period of notice is by law required in a particular case. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting or the North Carolina Business Corporation Act requires notice of the business to be transacted and such notice has not previously been given. If the Corporation solicits proxies generally with respect to a meeting of its shareholders, it need not give notices of the meeting, or any material that accompanies the notice, to any shareholder not entitled to vote at the meeting.

Section 6. Quorum of Shareholders. A meeting of shareholders duly called shall not be organized for the transaction of business unless a quorum is present. The presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to cast a vote on the particular matter to be acted upon shall constitute a quorum for the purposes of consideration and action on the matter. The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. To the extent a quorum is present with respect to consideration and action on a particular matter or matters but a quorum is not present as to another matter or other matters, consideration and action on the matter or matters for which a quorum is present may occur and, after such consideration and action, the meeting may be adjourned for purposes of the consideration of and action on the matter or matters for which


a quorum is not present. If a meeting cannot be organized because a quorum has not attended, those present may adjourn the meeting to such time and place as they may determine; provided, however, that (i) in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum as fixed in this Section, shall nevertheless constitute a quorum for the purpose of electing directors and (ii) in the case of a meeting that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in the North Carolina Business Corporation Act or in these Bylaws, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter.

Section 7. Shareholders’ List. After a record date is fixed for a meeting, the Secretary of the Corporation shall prepare an alphabetical list of the names of all the Corporation’s shareholders who are entitled to notice of the shareholders’ meeting. Such list shall be arranged by voting group (and within each voting group by class or series of shares) and shall show the address of and number of shares held by each shareholder. The shareholders’ list shall be made available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the Corporation’s principal office or at such other place identified in the meeting notice in the city where the meeting will be held. The Corporation shall make the shareholders’ list available at the meeting, and any shareholder or his agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment.

Section 8. Organization. At every meeting of the shareholders, the Chairman of the Board of Directors, or in his or her absence, the director designated by the vote of the majority of the directors present at such meeting, shall act as chairman of the meeting and the Secretary, or in his or her absence, a person appointed by the Chairman, shall act as secretary of the meeting.

Section 9. Voting.

(a) Voting Rights. Except as otherwise provided in the Articles, or by law, every shareholder of record shall have the right, on each matter submitted to a vote at a meeting of the shareholders, to one vote for every share standing in his or her name on the books of the Corporation. Holders of fractional shares shall not be entitled to any vote in respect thereof. Every shareholder may vote either in person or by proxy.

(b) Proxies. At all meetings of shareholders, shareholders entitled to vote may attend and vote either in person or by proxy. Every proxy appointment form shall be executed or authenticated by the shareholder, or by the shareholder’s duly authorized attorney-in-fact, and shall be filed with, or transmitted to, the Secretary of the Corporation or its designated agent in writing or by electronic transmission. An appointment of a proxy, unless coupled with an interest (as defined in Section 55-7-22 of the North Carolina Business Corporation Act), shall be revocable at will, notwithstanding any other agreement or any provision in the proxy appointment form to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation or its designated agent in writing or by electronic transmission. No unrevoked appointment of proxy shall be valid after 11 months from the date of its execution, authentication or transmission, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation or its designated agent. A shareholder shall not sell his or her vote or execute a proxy to any person for any sum of money or anything of value.

(c) Ballot. No vote by the shareholders need be by ballot, except, in elections of directors, upon demand made by a shareholder entitled to vote at the election before the voting begins.

(d) Required Vote. Except as otherwise specified in the Articles of Incorporation of the Corporation, these Bylaws or provided by law, all matters shall be decided by the vote of the holders of a majority of the shares cast at a meeting at which a quorum shall be present, though such majority be less than a majority of all the

 

2


outstanding shares entitled to vote thereon. The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

(e) Shares Owned by the Corporation. Shares of its own capital stock belonging to the Corporation (other than shares of its own capital stock, if any, held by it in a fiduciary capacity) shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time.

(f) Shares Owned by Other Corporations. Except as otherwise required by law, shares in this Corporation owned by another corporation may be voted by any officer or agent of the latter or by proxy appointed by any such officer or agent, unless some other person, by resolution of its Board of Directors or a provision of its charter or Bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of this Corporation, shall be appointed its general or special proxy, in which case such person shall be entitled to vote such shares.

(g) Shares Jointly Held or Held by Fiduciaries. Shares in this Corporation held by two or more persons jointly or as tenants in common, as fiduciaries or otherwise (including a partnership), may be voted by any one or more of such persons, either in person or by proxy. If the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. If there has been filed with the Secretary of the Corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the latest document so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith.

(h) Telephonic Meetings. Unless otherwise restricted by the Articles of Incorporation of the Corporation or these Bylaws, shareholders may participate in any meeting of shareholders by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence at the meeting.

Section 10. Determination of Shareholders of Record. The Board of Directors may fix a time prior to the date of any meeting of shareholders, or prior to any other date, including, but not limited to, the date fixed for the payment of any dividend or distribution, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting or entitled to receive payment of any such dividend or distribution or as a record date for any other purpose, provided that the record date shall be not more than 70 days prior to the date of the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a meeting of shareholders is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting, or to receive payment of such dividend or distribution, or to such other rights as are involved, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed as aforesaid.

Unless a record date is fixed by the Board of Directors: (1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the tenth day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held, (2) the record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the Board of Directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the Secretary of the Corporation, and (3) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

3


Section 11. Procedure for Notice of Shareholder Nominations and Proposals. Nominations of persons for election to the Board of Directors or the proposal of other business to be transacted by the shareholders at an annual meeting of shareholders may be made only (1) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (2) by or at the direction of the Board of Directors or any committee thereof or (3) as may be provided in the certificate of designations for any class or series of preferred stock or (4) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in Section 10 of this Article I and at the time of the annual meeting, who shall be entitled to vote at the meeting and who complies with the procedures set forth in this Section 11, and, except as otherwise required by law, any failure to comply with these procedures shall result in the nullification of such nomination or proposal.

For nominations or other business to be properly brought before an annual meeting of shareholders by a shareholder pursuant to clause (4) of the preceding paragraph, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation, and any such proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for shareholder action. To be timely, a shareholder’s notice shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of shareholders (or, in the case of the first annual meeting of shareholders, not less than 90 days nor more than 120 days prior to [—], 2020); provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to such anniversary date or delayed more than 70 days after such anniversary date, then to be timely, such notice must be received by the Corporation no earlier than 120 days prior to such annual meeting and no later than the later of 70 days prior to the date of the meeting or the 10th day following the day on which public announcement of the date of the meeting was first made by the Corporation. In no event shall the adjournment or postponement of any meeting, or any announcement thereof, commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above.

A shareholder’s notice to the Secretary shall set forth (1) as to each person whom the shareholder proposes to nominate for election or reelection as a director: (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”)), including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (ii) a reasonably detailed description of any compensatory payment or other financial agreement, arrangement or understanding that such person has with any other person or entity other than the Corporation, including the amount of any payment or payments received or receivable thereunder, in each case in connection with candidacy or service as a director of the Corporation; (2) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the text of the proposed amendment), the reasons for conducting such business and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (3) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made:

 

  (i)

the name and address of such shareholder (as they appear on the Corporation’s books) and any such beneficial owner;

 

  (ii)

for each class or series, the number of shares of capital stock of the Corporation that are held of record or are beneficially owned by such shareholder and by any such beneficial owner;

 

  (iii)

a description of any agreement, arrangement or understanding between or among such shareholder and any such beneficial owner, any of their respective affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such nomination or other business;

  (iv)

a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options,

 

4


  warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into by or on behalf of, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such shareholder or any such beneficial owner or any such nominee with respect to the Corporation’s securities;

 

  (v)

a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting;

 

  (vi)

a representation as to whether such shareholder or any such beneficial owner intends or is part of a group that intends to (a) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the voting power of the Corporation’s outstanding capital stock required to approve or adopt the proposal or to elect each such nominee and/or (b) otherwise to solicit proxies from shareholders in support of such proposal or nomination;

 

  (vii)

any other information relating to such shareholder, beneficial owner, if any, or director nominee or proposed business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of such nominee or proposal pursuant to Section 14 of the Exchange Act; and

 

  (viii)

such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for shareholder action.

ARTICLE II

BOARD OF DIRECTORS

Section 1. Powers and Election.

(a) Powers. The business and affairs of the Corporation shall be managed by the Board of Directors, and all powers of the Corporation, except as otherwise provided by law, by the Articles of Incorporation of the Corporation, or by these Bylaws, shall be exercised by the Board of Directors.

(b) Election. Directors shall be elected by the shareholders in accordance with Article SEVENTH of the Articles of Incorporation of the Corporation.

Section 2. Qualifications. Directors shall be natural persons but need not be residents of the State of North Carolina or shareholders in the Corporation. A director may also be a salaried officer or employee of the Corporation. No person shall be eligible to be elected a director of the Corporation for a period extending beyond the annual meeting of shareholders immediately following his or her attaining the age of 72 years. If any person elected as a director shall, within 30 days after notice of his or her election fail to accept such office, either in writing or by attending a meeting of the Board of Directors, the Board of Directors may declare his or her office vacant. The Board of Directors or a committee of the Board of Directors appointed pursuant to Article III of these Bylaws shall not nominate for election or reelection as a director any candidate who has not agreed to tender, promptly following the meeting at which he or she is elected or reelected as a director, an irrevocable resignation that will be effective upon (a) the failure of such director to receive the number of votes required for reelection at the next annual meeting of shareholders at which he or she stands for reelection, and (b) the acceptance of such director’s resignation by the Board of Directors.

Section 3. Number and Term of Office. The number of directors of the Corporation, and the classes thereof, shall be determined in accordance with Article SEVENTH of the Articles of Incorporation of the Corporation.

 

5


Section 4. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board of Directors, to the Chairman, to the President, or to the Secretary of the Corporation. Such resignation shall take effect when it is communicated unless it specifies in writing a later effective date or subsequent event upon which it will become effective. In the event that a director fails to receive the number of votes required for reelection to the Board of Directors, the Nominating and Governance Committee of the Board of Directors will make a recommendation to the Board of Directors as to whether the Board of Directors should accept the director’s resignation tendered pursuant to Section 2 of this Article II, reject such resignation or take such other action as the Committee may recommend. The Board of Directors will act on the Committee’s recommendation and publicly disclose its decision and the rationale behind such decision within ninety (90) days after certification of the election results.

Section 5. Removal. Directors may be removed solely in accordance with Section (D) of Article SEVENTH of the Articles of Incorporation of the Corporation.

Section 6. Vacancies. Vacancies in the Board of Directors, whether occurring because of death, resignation, removal, increase in the number of directors, or because of some other reason, may be filled solely in accordance with Section (E) of Article SEVENTH of the Articles of Incorporation of the Corporation and this Section. The Board of Directors shall not fill a vacancy on the Board of Directors or a newly created directorship with any candidate who has not agreed to tender, promptly following his or her appointment to the Board of Directors, an irrevocable resignation that will be effective upon the occurrence of the events set forth in both of the following clauses (a) and (b): (a) the failure of such director to receive the number of votes required for reelection at the next annual meeting of shareholders at which he or she stands for reelection, and (b) the acceptance of such director’s resignation by the Board of Directors.

Section 7. Place of Meeting. The meetings of the Board of Directors may be held at such place, within the State of North Carolina or elsewhere, as a majority of the directors may from time to time determine, or as may be designated in the notice calling the meeting.

Section 8. Regular Meetings. Regular meetings of the Board of Directors shall be held on such dates and at such times as shall be designated from time to time by resolution of the Board of Directors and at such geographic location as may be designated in the notice calling the meeting. At such meetings the directors shall transact such business as may properly be brought before the meeting.

Section 9. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, by the President, or by a majority of the directors, and shall be held at such time and place as shall be designated in the notice for the meeting.

Section 10. Notice of Meetings; Adjournment. Notice, in accordance with the provisions of Article IV, Section 1 of these Bylaws, of each special meeting shall be given, by or at the direction of the person authorized to call such meeting, to each director, at least six hours prior to the commencement of the meeting. Notice of regular meetings need not be given. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting, or of the business to be transacted at an adjourned meeting, other than by an announcement at the meeting at which such adjournment is taken.

Section 11. Quorum. A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors.

Section 12. Organization. At every meeting of the Board of Directors, the Chairman of the Board of Directors, or in his or her absence, the director designated by the vote of the majority of the directors present at such meeting, shall preside, and the Secretary, or, in his or her absence, any person appointed by the Chairman or such other designated director, shall act as secretary.

 

6


Section 13. Action By Consent of Directors Without a Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or any Board committee may be taken without a meeting if, prior or subsequent to the action, a consent in writing setting forth the action so taken shall be signed by all of the directors or the members of the committee, as the case may be, and shall be filed with the Secretary of the Corporation. A consent may be given by any means permitted by the North Carolina Business Corporation Act.

Section 14. Participation in Board Meetings By Conference Telephone or Other Electronic Technology. One or more directors may participate in a meeting of the Board of Directors or of any Board committee by means of conference telephone or other electronic technology by means of which all persons participating in the meeting can hear each other, and all directors so participating shall be deemed present in person at the meeting.

Section 15. Compensation of Directors. Each director who is not a salaried officer or employee of the Corporation or its subsidiaries shall be compensated for his or her services as a member of the Board of Directors or any committee thereof in such manner as the Board of Directors by resolution shall from time to time provide. Directors shall also be reimbursed by the Corporation for all reasonable expenses incurred in traveling to and from the place of each meeting of the Board of Directors or any such committee.

ARTICLE III

Committees

Section 1. Executive Committee. The Board of Directors may, by resolution adopted by a majority of the whole Board, delegate the Chairman of the Board, and one or more additional directors to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority of the Board of Directors in the management of the business of the Corporation, except that such Executive Committee shall not have any power or authority as to the following: (i) the authorization or approval of distributions, except according to a formula or method, or within limits, prescribed by the Board of Directors; (ii) the approval of, or the proposal to shareholders of, any action requiring approval of shareholders under the North Carolina Business Corporation Act; (iii) the filling of vacancies in the Board of Directors or any of its committees; (iv) the amendment of the Articles of Incorporation of the Corporation; (v) the adoption, amendment or repeal of the Bylaws; (vi) the amendment or repeal of any resolution of the Board of Directors that by its terms is amendable or repealable only by the Board of Directors; (vii) the approval of a plan of merger not requiring shareholder approval; and (viii) action on matters committed by the Bylaws or resolution of the Board of Directors to another committee of the Board of Directors.

The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board of Directors at each regular meeting.

Section 2. Other Committees. The Board of Directors may, at any time and from time to time, appoint one or more other committees, consisting of one or more directors, to perform such duties and make such investigations and reports as the Board of Directors shall by resolution determine, except that any such committee shall be subject to the same restrictions on power and authority as the Executive Committee set forth in Section 1 of this Article III. Such committees shall determine their own organization and times and places of meeting, unless otherwise directed by such resolution.

Section 3. Term. Each committee of the Board of Directors and the members thereof shall serve at the pleasure of the Board of Directors.

 

7


ARTICLE IV

Notice – Waiver

Section 1. Notice – What Constitutes. Whenever, under the provisions of the North Carolina Business Corporation Act or of the Articles of Incorporation of the Corporation or of these Bylaws or otherwise, written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof by either of the following methods:

 

  (i)

by first class or express mail or courier service, charges prepaid to his or her postal address appearing on the books of the Corporation, or supplied by him or her to the Corporation for the purpose of notice. Notice pursuant to this clause (i) shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with the courier service for delivery to that person; or

 

  (ii)

by facsimile transmission, e-mail or other electronic communication to his or her facsimile number or address for e-mail or other electronic communications supplied by him or her to the Corporation for the purpose of notice. Notice pursuant to this clause (ii) shall be deemed given to the person entitled thereto when sent.

Such notice shall specify the place, day, and hour of the meeting, and, in the case of a special meeting of shareholders, the general nature of the business to be transacted.

Section 2. Waiver in Writing. Whenever, under the provisions of the North Carolina Business Corporation Act or of the Articles of Incorporation of the Corporation or of these Bylaws or otherwise, any written notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to such notice and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of shareholders, neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting.

Section 3. Waiver by Attendance. The presence of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purposes of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

Section 4. Notice Not Required. The giving of notice required under these Bylaws is not required to be given to any shareholder with whom the Corporation has been unable to communicate for more than 24 consecutive months, if such communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address. Whenever the shareholder provides the Corporation with a current address, notice shall be given to that shareholder as required under these Bylaws.

Section 5. Bulk Mail. Notice of any regular or special meeting of the shareholders or any other notice required by the North Carolina Business Corporation Act, the Articles, or these Bylaws to be given to all shareholders or to all holders of a class or a series of shares, may be given by any class of post-paid mail if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice.

ARTICLE V

Officers and Agents

Section 1. Officers. The officers of the Corporation may include a Chairman of the Board of Directors, a President, a Secretary, a Treasurer, and may include one or more Vice Presidents, one or more Assistant

 

8


Secretaries, one or more Assistant Treasurers, a Controller, and such other officers and assistant officers as the Board of Directors may from time to time determine.

Section 2. Qualifications. Any two or more offices may be held by the same person, provided that no person may act in more than one capacity where action of two or more officers is required. It shall not be necessary for the officers to be directors. The Board of Directors may secure the fidelity of any or all of the officers by bond or otherwise, as provided for by this Article V.

Section 3. Election and Term of Office. The officers of the Corporation shall be elected or appointed by the Board of Directors at its annual meeting, but the Board of Directors may elect or appoint officers or fill any vacancies among the officers at any other meeting. Subject to earlier termination of office as herein provided, each officer shall hold office for one year and until his or her successor shall have been duly elected or appointed and qualified.

Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, or to the Chairman, or to the President, or to the Secretary, of the Corporation. Any such resignation shall take effect when it is communicated unless it specifies in writing a later effective time.

Section 5. Removal of Officers. Any officer or agent of the Corporation may be removed with or without cause by the Board of Directors, the appointing officer or any other officer if authorized by these Bylaws or the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the persons so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 6. Vacancies. The Board of Directors shall have the power to fill any vacancies in any office occurring for whatever reason.

Section 7. The Chairman of the Board of Directors. Unless otherwise determined by the Board of Directors, the Chairman of the Board of Directors shall be the chief executive officer of the Corporation and shall have general supervision over the business and operations of the Corporation, subject, however, to the control of the Board of Directors. The Chairman of the Board of Directors shall serve as Chairman of the Executive Committee, subject, however, to the control of the Board of Directors. He or she shall, if present, preside as Chairman at all meetings of the shareholders and of the directors. He or she shall be, ex officio, a member of all standing committees of the Board of Directors except the Audit, Compensation and Corporate Governance and Nominating Committees. The Chairman shall be authorized to sign, execute, and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts, and other instruments authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. He or she shall have such other powers and perform such further duties as may be assigned to him or her by the Board of Directors.

Section 8. The President. Unless the Board of Directors has determined that the President shall serve as the chief executive officer of the Corporation with general supervision over the business and operations of the Corporation (subject, however, to the control of the Board of Directors), the President shall be the chief operating officer of the Corporation and shall be authorized to sign, execute, and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts, and other instruments authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation; and in general, he or she shall perform duties incident to the office of President, and such other duties as from time to time may be assigned to him or her by the Board of Directors or by the Chairman. If the President is serving as a director, then during the absence or disability of the Chairman of the Board, he or she shall preside at all meetings of the shareholders or the Board of Directors.

Section 9. The Vice Presidents. Each Vice President shall have such powers and shall perform such duties as may be assigned to him or her by the senior officers of the Corporation or by the Board of Directors. The Board

 

9


of Directors may designate one or more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents, or make such other designations of Vice Presidents as it may deem appropriate.

Section 10. The Secretary. The Secretary shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the Board of Directors in a book or books to be kept for that purpose; he or she shall see that notices of meetings of the Board of Directors and shareholders are given and that all records and reports are properly kept and filed by the Corporation as required by law; in general, he or she shall perform all duties incident to the office of Secretary, and such other duties as may from time to time be assigned to him or her by the Board of Directors, the Chairman or the President.

Section 11. Assistant Secretaries. In the absence or disability of the Secretary, any Assistant Secretary may perform all the duties of the Secretary, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them respectively by the Board of Directors, the Chairman, the President or the Secretary.

Section 12. The Treasurer. The Treasurer shall perform all duties commonly incident to that office (including, but without limitation, the care and custody of the funds and securities of the Corporation which from time to time may come into his or her hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board of Directors may authorize or direct) and, in addition, such other duties as the Board of Directors from time to time may prescribe.

Section 13. Assistant Treasurers. In the absence or disability of the Treasurer, any Assistant Treasurer may perform all the duties of the Treasurer, and, when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them respectively by the Board of Directors, the Chairman, the President or the Treasurer.

Section 14. Compensation of Officers and Others. The compensation of all officers shall be fixed from time to time by the Board of Directors or a Committee thereof or by the Chairman. No officer shall be precluded from receiving such compensation by reason of the fact that he or she is also a director of the Corporation. Additional compensation, fixed as above provided, may be paid to any officers and/or employees for any year, based on the success of the operations of the Corporation during such year.

Section 15. Agents and Employees. The Chairman, the President or any officer or employee of the Corporation authorized by the Chairman or the President may appoint or employ such agents and employees as shall be requisite for the proper conduct of the business of the Corporation, and may fix their compensation and the terms of their employment.

ARTICLE VI

Borrowing, Deposits, Proxies, Etc.

Section 1. Borrowing, etc. No officer or officers, agent or agents, employee or employees of the Corporation shall have any power or authority to borrow money on its behalf, to pledge its credit, or to mortgage or pledge its real or personal property, except within the scope and to the extent of the authority delegated by resolution of the Board of Directors. Authority may be given by the Board of Directors for any of the above purposes and may be general or limited to specific instances.

Section 2. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositaries, as the Board of Directors may approve or designate, and all such funds shall be withdrawn only upon the authority of such one or more officers or employees as the Board of Directors shall from time to time determine.

 

10


Section 3. Voting of Shares and Proxies. Subject always to the specific directions of the Board of Directors, any share or shares of stock issued by any other corporation and owned or controlled by the Corporation may be voted by any officer of the Corporation at any shareholders’ meeting of such other corporation or by execution of a written consent to action. Unless otherwise ordered by the Board of Directors, any officer of the Corporation may appoint an attorney or attorneys (who may be or include such officer himself), in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose shares or other securities are held by or for the Corporation, at meetings of the holders of the shares or other securities of such other corporation, or, in connection with the ownership of such shares or other securities, to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its seal such written proxies or other instruments as he or she may deem necessary or proper in the circumstances.

Section 4. Execution of Instruments. Except as otherwise authorized by the Board of Directors, any note, mortgage, evidence of indebtedness, contract, or other instrument of writing, or any assignment or endorsement thereof, executed or entered into between the Corporation and any other person, co-partnership, association or corporation, when signed by any one of the Chairman, the President, a Vice President, the Treasurer and the Secretary shall be held to have been properly executed for and on behalf of the Corporation.

ARTICLE VII

Corporate Records – Inspection

Section 1. Records to be Kept. The Corporation shall keep an original or duplicate record of the proceedings of the shareholders and of the directors, and a copy of these Bylaws, including all amendments or alterations thereto, to date, certified by the Secretary of the Corporation. It shall also keep at its registered office, its principal place of business wherever located, any actual place of business of the Corporation, or at the office of the Transfer Agent or Registrar of the Corporation, a share register giving the names of the shareholders, in alphabetical order, and showing their respective addresses, the number and classes of shares held by each. It shall also keep appropriate, complete, and accurate books and records of account, which may be kept at its registered office or at its principal place of business. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time.

Section 2. Inspection. Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose, the share register, books and records of account, and records of the proceedings of the shareholders and directors, and to make copies or make extracts therefrom.

ARTICLE VIII

Share Certificates, Transfer

Section 1. Share Certificates. Unless otherwise determined by the Board of Directors, the shares of the Corporation shall be represented by share certificates. Share certificates shall contain the matters required by law, and shall be signed by any two or more of the Chairman of the Board, the President, a Vice President, the Treasurer and the Secretary. Where such certificate is signed by a Transfer Agent or a Registrar, the signature of any corporate officer upon such certificate, and the corporate seal if one is affixed, may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation, or otherwise, before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the

 

11


date of its issue. Every shareholder of record shall be entitled to a share certificate representing the shares owned by him or her, but a share certificate shall not be issued by the Corporation to any shareholder until the shares represented thereby have been fully paid. The Board of Directors may determine that any or all classes and series of shares, or any part thereof, shall be uncertificated shares, in which case the Corporation shall send to the registered owner thereof a written notice containing such information as is required by law.

Section 2. Transfer of Shares. Transfers of share certificates and the shares represented thereby shall be made only on the books of the Corporation by the owner thereof, or by his or her attorney thereunto authorized, by a power of attorney duly executed and filed with the Secretary or a Transfer Agent of the Corporation, and on surrender of the share certificate or certificates. In the case of uncertificated shares, the transfer of shares shall be made upon receipt of such documentation as the Corporation may require.

Section 3. Transfer Agent and Registrar; Regulations. The Corporation may, if and whenever the Board of Directors may so determine, maintain in the State of North Carolina or any other state, or in both, one or more transfer offices or agencies, each in charge of a Transfer Agent or Agents designated by the Board of Directors, where the shares of the Corporation shall be directly transferable, and also one or more registry offices, each in charge of a Registrar or Registrars designated by the Board of Directors, where such shares shall be so registered, and no certificates for shares of the Corporation in respect of which a Transfer Agent and Registrar shall have been designated shall be valid unless countersigned by such Transfer Agent and registered by such Registrar. The Board of Directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer, and registration of share certificates of the Corporation.

Section 4. Lost, Destroyed, and Mutilated Certificates. The holder of any share certificate of the Corporation shall immediately notify the Corporation of any loss, destruction, or mutilation thereof, and the Board of Directors may, in its discretion, by either special or standing resolution, provide for and cause the issuance to him or her of a new share certificate or certificates, in the case of mutilation upon surrender of the mutilated certificate, or, in case of loss or destruction of the certificate, upon such proof of loss or destruction and such reasonable notice by publication and/or the deposit of a bond in such form and in such sum and with such surety or sureties, as in such resolution the Board of Directors may direct.

ARTICLE IX

Amendments to Bylaws

These Bylaws may be amended, altered, or repealed, or new Bylaws may be adopted, solely pursuant to Article TWELFTH of the Articles of Incorporation of the Corporation.

 

12

EX-10.1 5 d618285dex101.htm EX-10.1 EX-10.1

Exhibit 10.1

TRANSITION SERVICES AGREEMENT

by and between

V.F. CORPORATION

and

KONTOOR BRANDS, INC.

Dated as of [—]


TABLE OF CONTENTS

 

 

 

     PAGE  

ARTICLE I

DEFINITIONS

  

Section 1.01. Certain Definitions

     1  

ARTICLE II

SERVICES

  

Section 2.01. Services

     2  

Section 2.02. Standard for Service

     3  

Section 2.03. Consents

     3  

Section 2.04. Subcontracted Services

     3  

Section 2.05. Management of Services

     4  

Section 2.06. Ownership

     4  

ARTICLE III

SERVICE CHARGES

  

Section 3.01. Service Charges

     4  

Section 3.02. Invoices

     4  

Section 3.03. Payment

     5  

Section 3.04. Invoice Disputes

     5  

Section 3.05. No Set-off Rights

     5  

ARTICLE IV

INTELLECTUAL PROPERTY

  

Section 4.01. Title to Intellectual Property.

     5  

ARTICLE V

TAX

  

Section 5.01. Cooperation for Statutory and Tax Filings

     6  

ARTICLE VI

TERM AND TERMINATION

  

Section 6.01. Transition Period

     6  

Section 6.02. Termination.

     6  

ARTICLE VII

LIMITATION OF LIABILITY; INDEMNITY

  

Section 7.01. Limitation of Liability

     7  

Section 7.02. Indemnification

     7  

Section 7.03. Obligation to Correct

     8  

Section 7.04. Exclusive Remedy

     8  

ARTICLE VIII

ACCESS

  

Section 8.01. Access to Records and Properties

     8  

Section 8.02. Systems

     8  

Section 8.03. Cyber Events

     8  

ARTICLE IX

MISCELLANEOUS

  

Section 9.01. Notice

     9  

Section 9.02. Force Majeure

     10  

 

1


Section 9.03. Confidentiality

     10  

Section 9.04. No Partnership, Joint-Venture Or Agency Created.

     10  

Section 9.05. Successors and Assigns

     10  

Section 9.06. Counterparts; Effectiveness

     11  

Section 9.07. Interpretation; Incorporation of Terms by Reference

     11  

Section 9.08. Governing Law

     11  

Section 9.09. Jurisdictions

     11  

Section 9.10. WAVIER OF JURY TRIAL

     11  

Section 9.11. Specific Performance

     11  

Section 9.12. Performance

     11  

Section 9.13. Amendments; No Waivers

     12  

 

2


TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT dated as of [—] (as the same may be amended from time to time in accordance with its terms and together with the schedules and exhibits hereto, this “Agreement”), by and between V.F. Corporation, a Pennsylvania corporation (“VF”), and Kontoor Brands, Inc., a North Carolina corporation (“Kontoor Brands”).

R E C I T A L S

WHEREAS, on or about the date hereof the parties hereto have entered into that certain Separation and Distribution Agreement (as amended, modified or supplemented from time to time, the “Separation and Distribution Agreement”), pursuant to which VF has agreed to distribute the Jeanswear Business to the holders of the VF Common Stock as of the Record Date;

WHEREAS, pursuant to the Separation and Distribution Agreement and in connection with the transactions contemplated thereby, VF and Kontoor Brands have agreed to enter into this Agreement in order to provide for the provision both (i) from VF and the VF Group to Kontoor Brands and the Kontoor Brands Group and (ii) from Kontoor Brands and the Kontoor Brands Group to VF and the VF Group of certain transitional services in order to facilitate the orderly transition of the Jeanswear Business from VF and the members of the VF Group to Kontoor Brands and the members of the Kontoor Brands Group, upon the terms and subject to the conditions hereinafter set forth; and

WHEREAS, the party, or applicable member of its Group, providing an applicable Service (as defined below) hereunder, as set forth in the Services Schedules (as defined below) is referred to as “Provider” and the party, or an applicable member of its Group, receiving an applicable Service hereunder, as set forth in the Services Schedules, is referred to as “Recipient”.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, conditions, and agreements hereinafter expressed, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01.    Certain Definitions. (a) The following terms, as used herein, have the following meanings; provided that capitalized terms used but not otherwise defined in this Section 1.01 shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement:

Accounting Referee” means a nationally recognized independent accounting firm that is jointly retained by the parties.

Cyber Event” means any actual unauthorized, accidental or unlawful access, use, exfiltration, theft, disablement, destruction, loss, alteration, disclosure, transmission of any Systems or any information or data (including any personally identifiable information) stored therein or transmitted thereby.

Damages” means all liabilities, costs, damages, losses, claims, demands, charges, suits, penalties, Taxes and expense (including reasonable attorneys’ and other professionals’ fees and disbursements) and whether or not pursuant to a Third Party Claim.

Incident Response Management Services” means the Services as described under the heading “Information Security - Incident Response Management” in the Services Schedules.

Prime Rate” shall mean the prime rate published in the eastern edition of The Wall Street Journal or a comparable newspaper if The Wall Street Journal shall cease publishing the prime rate.

 

1


Services” shall mean the services set forth on the Services Schedules to be provided, or caused to be provided, by Provider to Recipient pursuant to this Agreement.

(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term

   Section

Agreement

   Preamble

Force Majeure Event

   9.01

Governance Model

   2.05

Improvements

   4.01

Invoice Objection

   3.04

Kontoor Brands

   Preamble

Other Service Implications

   2.03

Payment Date

   3.03

Provider

   Recitals

Provider Notice

   2.01

Recipient

   Recitals

Responding Party

   8.03

Separation and Distribution Agreement

   Recitals

Service Charge

   3.01

Services Schedules

   2.01

Stub Month

   3.02

Subcontractor

   2.04

Systems

   8.01

Termination Notice

   2.01

Transition Period

   6.01

VF

   Preamble

ARTICLE II

SERVICES

Section 2.01.    Services. During the Transition Period (as defined below) (or, with respect to a particular Service, such shorter period as may be specified in the Services Schedules with respect to any such Service), VF shall provide (or cause to be provided by an Affiliate or a Subcontractor in accordance with Section 2.04) to Kontoor Brands or the applicable member of its Group the services described on Schedule A-1 attached hereto and Kontoor Brands shall provide (or cause to be provided by an Affiliate or a Subcontractor in accordance with Section 2.04) to VF or the applicable member of its Group the services described on Schedule A-2 attached hereto (together with Schedule A-1, the “Services Schedules”). The Services (or any portion thereof) shall be provided for the period of time specified in the Services Schedules; provided that, unless otherwise specified in the Service Schedules, the term of any or all the Services (or any portion thereof) may be earlier terminated by Recipient by providing thirty (30) days prior written notice to Provider (“Termination Notice”); provided further that if it is technically infeasible or commercially impracticable to terminate one Service without terminating one or more other Services, Recipient shall be required to concurrently terminate all such Services for which separate termination would be technically infeasible or commercially impractical. Following receipt of a Termination Notice, Provider will provide Recipient with written notice (“Provider Notice”) that termination of any applicable Service will require the termination or partial termination of, or otherwise affect the performance of any other Services as a result of the technical infeasibility or commercially impracticality to terminate only the Service requested to be terminated (“Other Service Implications”), which notice shall set forth a reasonably detailed overview of any Other Service Implications. Recipient may withdraw its Termination Notice by delivering a withdrawal notice within five (5) Business Days following the receipt of such Provider Notice from Provider. If Recipient does not withdraw the Termination Notice within such period, such Termination Notice will be final and irrevocable (including as to any Other Service Implications) and Recipient

 

2


shall no longer be entitled to receive the Service from Provider. Upon the effective date of termination of any Service pursuant to this Section 2.01, (i) the Provider of the terminated Service will have no further obligation to provide the terminated Service and (ii) the relevant Recipient will have no obligation to pay any future Service Charges relating to any such Service other than (A) the applicable portion of the Service Charge for the remainder of the calendar month in which such termination is effective, (B) Service Charges and any other fees, costs and expenses owed and payable in accordance with the terms of this Agreement in respect of Services provided prior to the effective date of termination and (C) any third party costs and expenses incurred by the Provider or any of its Affiliates in respect of such Services between the time of such termination and the time the provision of such Service would have terminated absent such early termination to the extent Provider cannot avoid the incurrence of such costs or expenses using commercially reasonable efforts, which in each case shall be, from time to time, invoiced and paid as provided in Article III. Upon the effective date of termination of any Service pursuant to this Section 2.01, the relevant Provider shall reduce for the next monthly billing period the amount of the Service Charge for the category of Services in which the terminated Service was included (such reduction to reflect the elimination of all costs incurred in connection with the terminated Service to the extent the same are not required to provide other Services to Recipient), and, upon request of Recipient, Provider shall provide Recipient with documentation and/or information regarding the calculation of the amount of the reduction. In connection with termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination. Upon thirty (30) days’ advance written notice prior to the expiration of any Service, Recipient may request an extension of such Service by submitting to the relevant Provider an extension request in the form attached hereto as Schedule B. Any such extension shall be effective only by the mutual written agreement of Provider and Recipient to the terms applicable to such Service during any such extension period. For the avoidance of doubt, Provider is not obligated to extend any Service and Services shall only be extended on terms mutually agreed to by Provider and Recipient.

Section 2.02.    Standard for Service. (a) Except as otherwise provided in this Agreement or the Services Schedules, Provider agrees to use its commercially reasonable efforts to perform each Service such that the nature, quality, standard of care, skill, level of priority and the service level at which such Service is performed is not materially less than the nature, quality, standard of care, level of priority and service level at which substantially the same service was provided to the Recipient and the members of its Group, as applicable, during the twelve (12) month period immediately prior to the date hereof (or, if not so previously provided, then substantially the same as that applicable to similar services provided by Provider).

(b)    It is understood and agreed that Provider may from time to time modify, change or enhance the manner, nature, quality and/or standard of care of any Service provided to Recipient or the members of its Group to the extent Provider is making a similar change in the performance of services similar to such Services for Provider or the members of its Group or to the extent that such change is in connection with the relocation of Provider’s employees; provided that any such modification, change or enhancement will not reasonably be expected to have a material adverse effect on the provision of such Service in accordance with the standards set forth in Section 2.02(a).

(c)    The Services shall only be made available by the applicable Provider for, and the applicable Recipient shall only be entitled to utilize the Services for, the benefit of the operation of its respective Business.

Section 2.03.    Consents. The parties hereto shall cooperate and use commercially reasonable efforts to obtain any consents, permits or licenses from any third party that may be required in connection with the provision of the Services hereunder; provided that (i) Provider shall not be required to provide any Service hereunder to the extent the provision of such Service is prevented by the failure, after the exercise of commercially reasonable efforts, to obtain any such consent, permit or license and (ii) Provider shall not be required to pay any such third party any amounts to obtain any such consents, permits or licenses.

Section 2.04.    Subcontracted Services. Provider may, directly or through one or more Affiliates, hire or engage one or more subcontractors or other third parties (each, a “Subcontractor”), or cause one or more of its Affiliates, to perform any or all of Provider’s obligations to provide Services under this Agreement; provided,

 

3


that Provider shall remain ultimately responsible for ensuring that the obligations set forth in this Agreement are satisfied with respect to any Service provided by any Subcontractor or Affiliate.

Section 2.05.    Management of Services. Management of, and control over, the provision of the Services provided hereunder (including the determination or designation at any time of the equipment, employees and other resources of Provider, its Affiliates or any Subcontractor engaged in accordance with Section 2.04 to be used in connection with the provision of such Services as set forth herein) shall reside solely with Provider; provided that (i) the Services shall, at all times, be provided in accordance with the standards and requirements set forth herein and in the Services Schedules, and (ii) the Services shall, at all times, be administered by the parties, the members of each of their respective Groups and each of their respective employees, officers, directors and agents in accordance with the governance model set forth on Schedule C (the “Governance Model”). Without limiting the generality of the foregoing, except as provided in the Services Schedules or the Governance Model, all labor matters relating to any employees of Provider, its Affiliates and any Subcontractor shall be within the exclusive control of such entity, and Recipient shall not have any rights with respect to such matters. Except as provided in the Services Schedules or Section 3.01, Provider shall be solely responsible for the payment of all salary and benefits and all applicable Taxes and premiums and remittances with respect to employees of Provider used to provide any Services hereunder. Except as expressly provided in the Services Schedules, Provider shall be an independent contractor in connection with the performance of Services hereunder for any and all purposes (including federal or state tax purposes), and the Persons performing Services in connection herewith shall not be deemed to be employees or agents of Recipient.

Section 2.06.    Ownership. All procedures, methods, systems, strategies, tools, equipment, facilities and other resources owned by Provider, its Affiliates, or any Subcontractor and used by them in connection with the provision of Services (for the avoidance of doubt, excluding any such items being the property of Recipient that are provided by Recipient to Provider to facilitate Provider’s provision of the Services to Recipient) hereunder shall remain the property of Provider, its Affiliates or such Subcontractor and shall at all times be under the sole direction and control of Provider, its Affiliates or such Subcontractor.

Section 2.07.    Local Agreements. With respect to Services delivered in a particular country and to the extent required by applicable Law or local practice, the parties may cause the members of their respective Groups providing such Service to enter into one or more local services agreements for the purpose of implementing this Agreement in that country or with respect to any particular Service to be performed in such country; provided that to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any such agreement, this Agreement shall control with respect to all matters.

ARTICLE III

SERVICE CHARGES

Section 3.01.    Service Charges. Recipient shall pay to Provider in respect of such Services the fee that is set forth on the Services Schedule for such Services (or category of Services, as applicable) (each such fee constituting a “Service Charge”). During the term of this Agreement, the amount of a Service Charge for any Service (or category of Services, as applicable) shall not increase, except (i) to the extent such costs and amounts increase for other business units of Provider using the same service at the same location, (ii) changes in actual compensation and benefits costs or (iii) as reasonably required by VF in order to preserve the Intended Tax Treatment (as defined in the Tax Matters Agreement) of the Distribution in accordance with Applicable Law. For the avoidance of doubt, out-of-pocket costs paid to any third party provider that is providing goods or services used by Provider in providing the Services (e.g., license costs for software) and any Taxes (including any value added, excise, sales, use and similar Taxes) imposed under Applicable Law on or on account of the provision of Services (but not on any income of Provider received in connection with the provision of such Services) will be an incremental cost to Recipient in addition to the Service Charges and will be charged to Recipient at the actual third party cost or amount of Taxes so imposed.

 

4


Section 3.02.    Invoices. In accordance with the Services Schedules, Provider shall deliver invoices to Recipient in the local, functional currency of such Provider and Recipient on a monthly basis on the 15th day of each month with respect to Services provided in the previous month; provided that no invoices shall be delivered pursuant to this Section 3.02 in respect of the period between Distribution Date and the end of the calendar month in which the Distribution Date occurs (the “Stub Month”), and any amounts to be invoiced by an applicable Provider in respect of the Stub Month shall be included in the invoice to be delivered by such Provider in respect of Services provided in the full calendar month immediately following the Distribution Date. Each invoice shall set forth a description of the Services to which it relates and reference to the applicable section of the Services Schedules.

Section 3.03.    Payment. Subject to Section 3.04, Recipient shall pay the amount of an invoice by wire transfer to Provider within thirty (30) days of the date of receipt of such invoice (the “Payment Date”) to the account specified by Provider; provided that in the event for any applicable invoicing period, multiple payments in the same currency are required to be paid or received pursuant to this Section 3.03 between a member of the VF Group (whether as Provider or Recipient), on the one hand, and a member of the Kontoor Brands Group (whether as Provider or Recipient), on the other hand, then for purposes of making such payments pursuant to this Section 3.03, such amounts shall be netted and one payment between such parties will be made on a net basis. If the Recipient fails to pay the undisputed portion of any amount payable (including pursuant to Section 3.04) by the applicable Payment Date, the Provider may require the Recipient to pay to the Provider, in addition to the amount due, interest at an interest rate of the Prime Rate, compounded monthly, accruing from the applicable Payment Date through and including the date of actual payment.

Section 3.04.    Invoice Disputes. If Recipient delivers written notice of a good faith dispute of any invoiced amount provided on an invoice within fifteen (15) days of receipt thereof (the “Invoice Objection”), Recipient and Provider shall attempt in good faith to resolve such dispute within thirty (30) days after the delivery of such Invoice Objection. If Recipient and Provider are able to resolve such dispute within such thirty (30) day period, the Payment Date for the amount Recipient and Provider agreed shall be ten (10) days after such resolution. If Recipient and Provider are unable to resolve all such disputes within such thirty (30) day period, the matters remaining in dispute shall be submitted to the Accounting Referee to resolve any remaining disputed items as soon as practicable, but in no event later than sixty (60) days after its retention. The resolution of disputed items by the Accounting Referee shall be final and binding. The cost of such Accounting Referee’s review and report shall be borne by Provider and Recipient in inverse proportion as they may prevail on the matters resolved by the Accounting Referee, which proportionate allocation shall be calculated on an aggregate basis based on the relevant dollar values of the amounts in dispute and shall be determined by the Accounting Referee at the time the determination of such Accounting Referee is rendered on the merits of the matters submitted. The Payment Date for any amounts the Accounting Referee determines are owed shall be ten (10) days after the Accounting Referee renders its decision.

Section 3.05.    No Set-off Rights. Subject to the foregoing Recipient shall pay the full amount of the Service Charges and shall not set-off, counterclaim or otherwise withhold any amount owed to Provider under this Agreement on account of any obligation owed by Provider to Recipient.

ARTICLE IV

INTELLECTUAL PROPERTY

Section 4.01.    Title to Intellectual Property.

(a)    This Agreement and the performance of the Services hereunder will not affect or result in the transfer of any rights, title and interest in or to, or the ownership of, any Intellectual Property of Provider or any other member of its Group and neither party will gain, by virtue of this Agreement or the provision of Services hereunder, by implication or otherwise, any rights, title, interest, license or ownership in, to or under any Intellectual Property owned by the other party or any other member of such other party’s Group. For the

 

5


avoidance of doubt, to the extent Provider uses any Intellectual Property in connection with providing a Service hereunder, such Intellectual Property, and any derivative works or modifications thereof or improvements thereto (collectively, “Improvements”), shall remain, as between the parties, the sole and exclusive property of Provider. To the extent ownership of any such Intellectual Property and Improvements does not vest in Provider, Recipient hereby assigns to Provider all of its right, title and interest in and to such Intellectual Property and Improvements.

ARTICLE V

TAX

Section 5.01.    Cooperation for Statutory and Tax Filings. Recipient undertakes and agrees to cooperate in accordance with the standard for Services described in Section 2.02 to enable Provider to complete in a timely manner any and all statutory and Tax filings required to be filed by Provider that include any information related to their respective Business, as applicable. Recipient will provide and, as applicable, cause its employees and its Affiliates and their employees to provide, all such reasonable cooperation to Provider, the members of its Group and their respective representatives with respect to such filings as is reasonably requested including preparing or causing to be prepared (to the extent consistent with past practices) and furnishing or causing to be furnished records, information, work papers, reports and other documents as requested by Provider, its Affiliates or their respective representatives and causing Transferred Employees who possess relevant knowledge to make themselves available for consultation with respect to the foregoing; provided, that notwithstanding anything to the contrary in this Section 5.01, Recipient will only be obligated to cause any Person to cooperate with Provider pursuant to this Section 5.01 if and for so long as Recipient is capable of directing the actions of such Person. This Section 5.01 shall not be construed to require VF or any member of its Group to make available any Tax Return (as defined in the Tax Matters Agreement) to Kontoor Brands or any member of its Group unless the provision of such Tax Return is expressly contemplated by the Tax Matters Agreement.

ARTICLE VI

TERM AND TERMINATION

Section 6.01.    Transition Period. The term of this Agreement (the “Transition Period”) shall commence on the date hereof and continue with respect to each of the Services for the term set forth on the Services Schedule, unless earlier terminated pursuant to this Article VI or, with respect to any given Service or Services, pursuant to Section 2.01.

Section 6.02.    Termination.

(a)    Notwithstanding Section 6.01, each party reserves the right to immediately terminate this Agreement by written notice to the other in the event that:

(i)    the other party breaches or is in default of any material obligation under this Agreement and such breach or default remains uncured for thirty (30) days after receipt of written notice from the non-breaching party;

(ii)    the other party shall (A) apply for or consent to the appointment of a receiver, trustee or liquidator, (B) admit in writing a general inability to pay debts as they mature, (C) make a general assignment for the benefit of creditors, or (D) file a voluntary petition or have filed against it a petition (which is not dismissed within sixty (60) days) for an order of relief under the federal bankruptcy code, as the same may be amended, so as to take advantage of any insolvency laws or to file an answer admitting the general obligations of an insolvency petition; or

(iii)    the other party shall have been prevented from exercising normal managerial control over all or any substantial part of its property by reason of the entry of any order, judgment or decree by any court or

 

6


governmental agency of competent jurisdiction approving a petition seeking the reorganization of such party, or appointment of a receiver, trustee, liquidator or the like of such party or a substantial part of its assets.

(b)    This Agreement may be terminated upon the mutual written consent of the parties hereto.

(c)    Upon the effective date of termination of this Agreement pursuant to this Article VI, neither party will have any further obligations to provide Services or pay any future Service Charges relating to any Services; provided that Recipient shall remain obligated to the relevant Provider for the Service Charges and any other fees, costs and expenses owed and payable in accordance with the terms of this Agreement in respect of Services provided prior to the effective date of termination.

(d)    Except as provided for in Section 2.01, any termination of this Agreement with respect to any one or more Services pursuant to Section 2.01 shall not terminate this Agreement with respect to any other Service then being provided pursuant to this Agreement.

(e)    Survival. The parties hereby acknowledge and agree that the obligations of each party set forth in Section 2.01, Section 2.06, Section 5.01, Section 6.02(c), Section 6.02(e), Article VII and Article IX hereof shall survive any termination of this Agreement.

ARTICLE VII

LIMITATION OF LIABILITY; INDEMNITY

Section 7.01.    Limitation of Liability. (a) Provider may rely conclusively on, and will have no liability to Recipient for acting pursuant to and in accordance with, any notice or request which Recipient or those acting on its behalf provides to Provider in connection with the performance of the Services.

(b)    NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO PARTY HERETO SHALL BE LIABLE FOR (I) ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, INDIRECT OR OTHER SIMILAR DAMAGES OR DAMAGES FOR LOST PROFITS OR DIMINUTION IN VALUE) EXCEPT TO THE EXTENT THAT THE OTHER PARTY IS REQUIRED TO PAY ANY SUCH AMOUNTS TO A THIRD PARTY, IN EACH CASE ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT OR ANY OF THE SERVICES PROVIDED HEREUNDER (INCLUDING DELIVERABLES ASSOCIATED THEREWITH), INCLUDING PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, OR (II) THE FURNISHING, PERFORMANCE, OR USE OF ANY GOODS OR SERVICES SOLD OR PERFORMED PURSUANT HERETO, WHETHER BASED UPON AN ACTION OR CLAIM IN CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY), BREACH OF WARRANTY, OR OTHERWISE, IN EACH CASE, EXCEPT IN THE CASE OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF SUCH PARTY. FURTHER, THE LIABILITY OF PROVIDER TO RECIPIENT FOR ANY LOSS OR DAMAGE ARISING IN CONNECTION WITH PROVIDING THE SERVICES HEREUNDER SHALL NOT EXCEED THE TOTAL AMOUNT BILLED OR BILLABLE TO RECIPIENT UNDER THIS AGREEMENT FOR THE SERVICE THAT IS THE SUBJECT OF THE DISPUTE.

(c)    EACH PARTY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, ALL SERVICES ARE PROVIDED ON AN “AS IS, WHERE IS” BASIS AND “WITH ALL FAULTS” AND THAT PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES TO BE PROVIDED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT WHICH ARE SPECIFICALLY DISCLAIMED.

Section 7.02.    Indemnification. (a) Except to the extent otherwise provided in this Agreement, Recipient shall indemnify, defend and hold harmless Provider and its Affiliates and all of their respective directors,

 

7


officers, employees, agents, successors and assigns against, any Damages which any such Person may sustain or incur arising out of, related to or resulting from the performance of the Services by Provider or any of the members of its Group, including by reason of any claim, demand, suit or recovery by any third party, except to the extent such Damages arise out of or result from Provider’s or any of its Affiliates’ or Subcontractors’ gross negligence or intentional misconduct.

(b)    Except to the extent otherwise provided in this Agreement, Provider shall indemnify, defend and hold harmless Recipient and its Affiliates and all of their respective directors, officers, employees, agents, successors and assigns against, any Damages which any such Person may sustain or incur arising out of, related to or resulting from Provider’s or any of its Affiliates’ or Subcontractors’ provision of any Services to Recipient or any of the members of its Group, including by reason of any claim, demand, suit or recovery by any third party, solely to the extent such Damages are caused by the gross negligence or intentional misconduct of Provider of its Affiliates or Subcontractors.

(c)    Section 5.04 of the Separation and Distribution Agreement is hereby incorporated into this Agreement by this reference, mutatis mutandis, in relation to claims of indemnification made by Provider under Section 7.02(a) hereof.

Section 7.03.    Obligation to Correct. In the event of any breach of this Agreement by Provider with respect to any material error or defect in the provision of any individual Service, Provider shall, at Recipient’s request, correct such error or defect or re-perform such Service in a timely manner as promptly as practical after Recipient’s request at the expense of Provider.

Section 7.04.    Exclusive Remedy. The provisions of this Article VII shall be the sole and exclusive remedies of the Provider, Recipient or any of their Affiliates and all of their respective directors, officers, employees, agents, successors and assigns, as applicable, for any Damages, whether arising from statute, principle of strict liability, tort, contract or any other theory of liability at law or in equity under this Agreement.

ARTICLE VIII

ACCESS AND DATA PROTECTION

Section 8.01.    Access to Records and Properties. Recipient shall, during normal business hours and with reasonable prior notice, in such a manner as to not interfere unreasonably with the conduct of the Kontoor Brands Business or the VF Business, as applicable, provide Provider (a) with access to or copies of information (including, if necessary, its books and records) and (b) physical access to computer and communications systems, servers, software and other information technology equipment (“Systems”) in order to maintain or service such system servers, software and equipment, in each case solely for the purposes of Provider’s provision of the Services and solely to the extent necessary for Provider to provide the Services.

Section 8.02.    Systems. The parties will reasonably cooperate to ensure that only those persons who are specifically authorized to have access to the Systems of Provider, Recipient or any of the members of their respective Group gain such access, and such persons shall access such Systems only for the limited purpose of supporting the provision of the Services and shall abide by any and all access policies, procedures, rules and restrictions applicable to such Systems, including with respect to data security and applicable security, privacy and antitrust laws, that are provided to such person in advance of such access or from time to time thereafter. The parties will take all reasonable steps to prevent the unauthorized or unlawful access, use, damage, disablement, destruction, alteration, disruption, impairment or loss of such Systems and any information contained therein.

The parties acknowledge and agree that certain data protection matters resulting from the processing of personal data relating to performance of the Services shall be addressed and governed by a Data Processing Agreement, substantially in the form attached as Exhibit [—] hereto, to be entered into by the parties, in accordance with applicable privacy laws.

 

8


Section 8.03.    Cyber Events. In the event that either party (or any member of its Group) becomes aware of an actual or suspected Cyber Event of any of the Systems used by or on behalf of either party (or any member of either party’s Group) that is reasonably likely to relate to or otherwise affect any Service (including any data processing activities provided as part of any Service), then (a) such party shall immediately notify the other party, (b) to the extent that VF or any member of its Group is providing Incident Response Management Services to the Kontoor Brands Group, VF shall, as promptly as practicable, initiate the response to such Cyber Event in accordance with its applicable incident response policies and procedures and the applicable Services Schedule, and (c) to the extent that VF and the other members of its Group are no longer providing Incident Response Management Services to the Kontoor Brands Group, the representatives of each party shall, as promptly as practicable, meet, confer (including by sharing all relevant information relating to such Cyber Event) and determine which party shall lead the response to such Cyber Event (such party, the “Responding Party”), which response shall be carried out in accordance with the Responding Party’s applicable incident response policies and procedures. The parties acknowledge and agree that, in the event of any such Cyber Event, time shall be of the essence, and accordingly, in the case of the foregoing clause (c), the determination of the Responding Party shall be made by VF in its sole discretion (after considering in good faith any comments from Kontoor Brands with respect thereto).

ARTICLE IX

MISCELLANEOUS

Section 9.01.    Notice. Except with respect to routine communications in accordance with the terms of the Governance Model, any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, mail, or e-mail transmission to the following addresses:

If to VF to:

VF Corporation

105 Corporate Center Blvd.

Greensboro, North Carolina 27408

Attn: [—]

Email: [—]

with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn:     Marc O. Williams

             Daniel Brass

Email: marc.williams@davispolk.com

            daniel.brass@davispolk.com

If to Kontoor Brands to:

Kontoor Brands, Inc.

400 N. Elm Street,

Greensboro, North Carolina 27401

Attn: [—]

Email: [—]

 

9


with a copy to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn:     Marc O. Williams

             Daniel Brass

Email: marc.williams@davispolk.com

            daniel.brass@davispolk.com

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other party hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 9.02.    Force Majeure. Provider shall not (and no Person acting on Provider’s behalf shall) be responsible for a delay in or non-performance with respect to the delivery of any Service if the performance of such Service becomes impossible or impracticable, including, as a result of an act of god or public enemy, war, terrorism, government acts or regulations, fire, flood, embargo, quarantine, epidemic, unusually severe weather or other cause similar to the foregoing (a “Force Majeure Event”); provided, however, that Provider notifies the Recipient as soon as reasonably practicable, in writing, upon learning of the occurrence of the Force Majeure Event. Subject to compliance with this Section 9.02, Provider’s obligations hereunder with respect to such Service shall be postponed for such time as its performance is suspended or delayed on account of the Force Majeure Event, and upon the cessation of the Force Majeure Event, Provider will use its commercially reasonable efforts to resume its performance hereunder.

Section 9.03.    Confidentiality. Each party acknowledges that it or a member of its Group may have in its possession, and, in connection with this Agreement, may receive, Confidential Information of the other party or any member of its Group (including information in the possession of such other party relating to its clients or customers). Each party shall hold and shall cause its Representatives and the members of its Group and their Representatives to hold in strict confidence and not to use, except as permitted by this Agreement all such Confidential Information concerning the other Group unless (a) such party or any of the members of its Group or its or their Representatives is compelled to disclose such Confidential Information by judicial or administrative process or by other requirements of Applicable Law or (b) such Confidential Information can be shown to have been (i) in the public domain through no fault of such party or any of the members of its Group or its or their Representatives, (ii) lawfully acquired after the Distribution Date on a non-confidential basis from other sources not known by such party to be under any legal obligation to keep such information confidential or (iii) developed by such party or any of the members of its Group or its or their Representatives without the use of any Confidential Information of the other Group. Notwithstanding the foregoing, such party or member of its Group or its or their Representatives may disclose such Confidential Information to the members of its Group and its or their Representatives so long as such Persons are informed by such party of the confidential nature of such Confidential Information and are directed by such party to treat such information confidentially. The obligation of each party and the members of its Group and its and their Representatives to hold any such Confidential Information in confidence shall be satisfied if they exercise the same level of care with respect to such Confidential Information as they would with respect to their own proprietary information. If such party or any of a member of its Group or any of its or their Representatives becomes legally compelled to disclose any documents or information subject to this Section 9.03, such party will promptly notify the other party and, upon request, use commercially reasonable efforts to cooperate with the other party’s efforts to seek a protective order or other remedy. If no such protective order or other remedy is obtained or if the other party waives in writing such party’s compliance with this Section 9.03, such party or the member of its Group or its or their Representatives may furnish only that portion of the information which it concludes, after consultation with counsel, is legally required to be disclosed and will exercise its commercially reasonable efforts to

 

10


obtain reliable assurance that confidential treatment will be accorded such information. Each party agrees to be responsible for any breach of this Section 9.03 by it, the members of its Group and its and their Representatives.

Section 9.04.    No Partnership, Joint-Venture Or Agency Created. The relationship of Provider and Recipient shall be that of independent contractors only. Nothing in this Agreement shall be construed as making one party a partner, joint-venturer, agent or legal representative of the other or otherwise as having the power or authority to bind the other in any manner.

Section 9.05.    Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto. If any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under this Agreement.

Section 9.06.    Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 9.07.    Interpretation; Incorporation of Terms by Reference. This Agreement is an “Ancillary Agreement” as such term is defined in the Separation and Distribution Agreement and shall be interpreted in accordance with the terms of the Separation and Distribution Agreement in all respects, provided that in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation and Distribution Agreement in respect of the subject matter of this Agreement, the terms of this Agreement shall control in all respects. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

Section 9.08.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state.

Section 9.09.    Jurisdictions. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from the transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or outside of the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 9.01 shall be deemed effective service of process on such party.

Section 9.10.    WAVIER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING

 

11


ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 9.11.    Specific Performance. Each party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur. In recognition of this fact, each party agrees that, if there is a breach or threatened breach, in addition to any damages, the other nonbreaching party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching party (i) to perform its obligations under this Agreement or (ii) if the breaching party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including, but not limited to, transferring, or granting liens on, the assets of the breaching party to secure the performance by the breaching party of those obligations).

Section 9.12.    Performance. Each party shall cause to be performed all actions, agreements and obligations set forth herein to be performed by any member of such party’s Group.

Section 9.13.    Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by VF and Kontoor Brands, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b)    No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

* * * * *

 

12


IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed as of the day and year first above written.

 

V.F. CORPORATION
By:    
  Name:
  Title:
KONTOOR BRANDS, INC.
By:    
  Name:
  Title:

 

13


Exhibit [—]

Data Processing Agreement

This Data Processing Agreement (“DPA”) is entered into by and between

 

  (i)

LeeWrangler International Sagl, having its principal place of business at Via Vite 3 – 6855 Stabio (Switzerland); in its own interest and also acting as principal entity for the EMEA region, on behalf of all Limited Risk Distributors companies and other affiliate companies belonging to the Kontoor Brands Group in the EMEA region (all together, the “Controller”);

 

  (ii)

VF International Sagl having its principal place of business at Via Laveggio 5 – 6855 Stabio (Switzerland), in its own interest and also acting as principal entity for the EMEA region, on behalf of all Limited Risk Distributors companies and other affiliate companies belonging to the VF Group in the EMEA region (all together, the “Processor”);

(each a “Party” and collectively the “Parties”).

PREAMBLE

 

Whereas,    The Processor parent company VF Corporation, has separated into two independent publicly traded entities in the U.S.A.: VF Corporation and Kontoor Brands, Inc. (the Controllers’ parent company), which will hold VF’s jeans (LEE and WRANGLER brands) business (“the Transaction”). The Controller hereunder is the Kontoor Brands Groups’ principal entity for the EMEA region.
Whereas,    In the context of the Transaction VF Corporation and Kontoor Brands Inc. have entered into a transitional services agreement (“the Services Agreement”) in order to facilitate the orderly transition of the Jeanswear Business from VF and the members of the VF Group to the Kontoor Brands Group.
Whereas,    under the Services Agreement concluded, Processor agreed to provide the Controller with the services as further specified in Appendix 1 of this DPA (the “Services”);
Whereas,    in rendering the Services, the Processor may from time to time be provided with, or have access to, information of the Controller which may qualify as personal data within the meaning of the Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (“GDPR”) and the Swiss Federal Act on Data Protection of June 19, 1992 (“FADP”) as well as other applicable data protection laws and provisions; and
Whereas,    the Parties agree that the sets of data transfers covered by this DPA qualify as commissioned data processing as per Art. 28 of the GDPR with Processor qualifying as processor within the meaning of the GDPR and that they would like to use this DPA as the required contractual processing agreement.


NOW, THEREFORE, in order to adduce adequate safeguards with respect to the protection of privacy and fundamental rights and freedoms of individuals for the transfer by the Controller to the Processor of the Personal Data specified in Appendix 1, the Parties have entered into this DPA as follows:

1.    Definitions

For the purposes of this DPA, the terminology and definitions as used by the GDPR shall apply. In addition, the terms defined throughout the DPA and below shall apply:

 

Data Subject    shall mean the natural or legal person whose data is processed.
Member State    shall be understood as referring to a country that is a member of the European Union (“EU”) or the European Economic Area (“EEA”).
Personal Data    shall mean any information relating to an identified or identifiable natural or legal person (Data Subject, as defined above).
Personality Profile    shall mean a collection of data that permits an assessment of essential characteristics of the personality of a natural person.
Security Breach    shall mean a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, Personal Data transmitted, stored or otherwise processed which affects the Personal Data of the Controller covered by this DPA.
Sub-processor    shall mean any further processor, located within or outside the EU/EEA, that is engaged by Processor as a sub-contractor for the performance of the Services or parts of the Services on behalf of the Controller provided that such Sub-processor has access to the Personal Data of Controller exclusively for purposes of carrying out the subcontracted Services on behalf of the Controller.

2.     General responsibilities of the Parties

2.1    Responsibilities of the Controller

2.1.1    The Controller is responsible to confirm that the processing activities relating to the Personal Data, as specified in the Services Agreement and this DPA, are lawful, fair and transparent in relation to the Data Subjects, as set out in Appendix 1. The Controller is responsible to confirm that Data Subjects are informed of the collection of special categories of personal data or Personality Profiles, whereas Data Subjects must be notified of the Controller, the purpose of the processing and the categories of data recipients (article 14 FADP).

2.1.2    The Controller is responsible to confirm before processing is carried out that the technical and organizational measures of the Processor, as set out in Appendix 2, are appropriate and sufficient to protect the rights of the Data Subject.

2.1.3    The Controller is responsible to comply with any notification and/or registration obligation set forth by the FADP prior to the a transfer of Personal Data.

2.2    Obligations of the Processor

2.2.1    The Processor agrees and warrants that it will process the Personal Data only on behalf of the Controller and in compliance with its instructions and this DPA. If it cannot provide such compliance for whatever reasons, it agrees to inform promptly the Controller of its inability to comply, in which case, the Controller is entitled to suspend the transfer of data and/or terminate the Service Agreement and this DPA.


2.2.3    The Processor is obliged to implement the technical and organizational measures as specified in Appendix 2 before processing the Personal Data on behalf of the Controller. The Processor may amend the technical and organizational measures from time to time provided that the amended technical and organizational measures are not less protective than those set out in Appendix 2.

2.2.4    The Processor agrees and warrants that it will deal promptly and properly with all inquiries from the Controller relating to its processing of the Personal Data subject to the transfer and to abide by the advice of the supervisory authority with regard to the processing of the data transferred.

2.2.5    The Processor shall be obliged to ensure that persons authorized to process the Personal Data on behalf of the Controller, in particular employees of Processor and any Sub-processors, including their employees, process such Personal Data in compliance with the Controller’s instructions.

2.2.6    The Processor is obliged to provide to the Controller the respective information on records of processing activities relating to the services under this DPA, to the extent necessary for the Controller to comply with its obligation to maintain records of processing.

2.2.7     If so required by the Controller, the Processor shall provide required assistance to the Controller in ensuring the Controller’s compliance relating to data protection impact assessments and prior consultation with the supervisory authorities, taking into account the nature of the processing and the information available to the Processor.

2.2.8     Whether the Processor has appointed a DPO (if required by applicable data protection law) and/or a representative (if the Processor is established outside the Union), is obliged to provide the DPO (and/or representative) contact details to the Controller.

2.2.9    The Processor is obliged - at the choice of the Controller - to delete or return to the Controller all Personal Data which are processed by the Processor on behalf of the Controller under this DPA after the end of the provision of the Services, and delete any existing copies. Where the Processor is to delete the Personal Data, it shall certify to the Controller that it has done so, unless EU or Member State law requires the Processor to retain such Personal Data. In that case, the Processor warrants that it will guarantee the confidentiality of the Personal Data transferred and will not actively process the Personal Data transferred anymore.

2.2.10    The Processor shall not disclose or transfer any Personal Data processed on behalf of the Controller to any third party, without previously informing the Controller and obtaining the Controller’s prior written consent, unless it is legally required or permitted to do so under applicable law.

2.2.11    The Processor, and any Sub-processor appointed according to Section 8 of this DPA, cooperates with the Controller and with the Supervisory Authority, upon request, in the provision of documents, in the performance of obligations and/or in any further tasks, when such tasks are requested directly or indirectly by a Supervisory Authority.

2.3    The Parties are required to comply with those obligations under the GDPR, the FADP and under any other applicable data protection laws that apply to the Controller in its role as data controller or to the Processor in its role as data processor.

3.    Instructions

3.1    As required by Section 2.2.1 of this DPA, the Processor is obliged to process the Personal Data only on behalf of the Controller and in accordance with Controller’s instructions and the Services Agreement (including this DPA), including with regard to transfers of Personal Data to a third country or an international organization, unless the Processor is required to do so by EU or EU Member State law to which the Processor is subject. In such a case, the Processor shall inform the Controller of that legal requirement under EU or EU Member State


law before processing the Personal Data beyond the Controller’s instructions, unless that law prohibits such information on important grounds of public interest, in which case the information to Controller shall specify the legal requirement under such EU or EU Member State law.

3.2    The Controller may give specifications to such instructions provided in this DPA and the Services Agreement as well as further instructions. Any further instructions that go beyond the instructions contained in this DPA or the Services Agreement shall be within the subject matter of the Services Agreement and this DPA. Otherwise, the further instruction requires a change request pursuant to the Services Agreement.

3.3    Instructions shall be given in writing, unless the urgency or other specific circumstances require another (e.g. oral, electronic) form. Instructions in another form than in writing or in electronic form shall be documented in appropriate form.

3.4    The Processor shall, in addition to other notification obligations provided in this DPA, notify the Controller, without undue delay, if it holds that an instruction violates applicable data protection laws (“Challenged Instruction”). Upon providing such notification, the Processor is not obliged to follow the Challenged Instruction. If the Controller confirms the Challenged Instruction upon the Processor’s information and acknowledges its liability for the Challenged Instruction, the Processor will implement such Challenged Instruction, unless the Challenged Instruction relates to (i) the implementation of technical and organizational measures, (ii) the rights of the Data Subjects, or (iii) the engagement of Sub-processors. In case of (i) to (iii), the Controller may contact a competent supervisory authority for a legal assessment of the Challenged Instruction. If the supervisory authority declares the Challenged Instruction as lawful, the Processor shall follow the Challenged Instruction.

4.    Monitoring, audits, and inspections by the Controller

4.1    In order to assist the Controller with its legal obligation to diligently choose a service provider, the Processor shall monitor, by appropriate means, its own compliance and the compliance of its employees and Sub-processors with the respective data protection obligations of the Processor laid down in Art. 28 of the GDPR and in this DPA in connection with the services. The Processor is obliged to make available to the Controller any information necessary to demonstrate compliance with such obligations. To document such self-monitoring activities, the Processor will provide to the Controller periodic (at least annual) and, if available, occasion-based reports (also on demand of the Controller) regarding such controls (“Audit Report”). The Audit Reports shall be limited to information and data processing systems that are relevant to the Services but shall at least include confirmation of proper instruction to the employees and Sub-processors, compliance with the technical and organizational measures, confirmation of commitment to data secrecy, any occurred data breaches and/or security incidents, and the required and/or recommended improvements. The Controller shall have the right to request such audit reports at any time in order to control the Processor’s compliance with its data protection obligations.

4.2    Controller may request inspections conducted by the Controller or another auditor mandated by the Controller (“On-Site Audit”). Such On-Site Audit is subject to the following conditions: (i) On-Site Audits are limited to processing facilities and personnel of the Processor involved in the processing activities covered by this DPA; (ii) On-Site Audits occur no more than once annually or as required by applicable data protection law or by a competent supervisory authority or immediately subsequent to a material Security Breach that affected the Personal Data processed by the Processor under this DPA; (iii) may be performed during regular business hours, without substantially disrupting the Processor’s business operations and in accordance with the Processor’s security policies, and after a reasonable prior notice; and (iv) the Controller shall bear any costs arising out of or in connection with the On-Site Audit at the Controller and the Processor, unless such On-Site Audit identified that the Processor is not in compliance with its obligations in Art. 28 of the GDPR, in this DPA or in any applicable data protection law in which case the Processor shall bear any such costs. The Controller may create an audit report summarizing the findings and observations of the On-Site Audit (“On-Site Audit Report”). On-Site Audit Reports as well as Audit Reports are confidential information of the Processor and the


Controller will not disclose them to third parties except for the Controller’s legal counsel and consultants, the Controller’s data protection officer, the Controller’s employees, and the other affiliates of the Controller or if the Controller is required to disclose the information under applicable data protection law or upon a request from a competent supervisory authority or if the Processor consented to the disclosure.

5.    Data secrecy

5.1    The Processor shall be obliged to ensure that persons authorized to process the Personal Data on behalf of the Controller, in particular employees of Processor and any Sub-processors, including their employees, have committed themselves to confidentiality or are under an appropriate statutory obligation of confidentiality relating to the Personal Data and processing activities covered by this DPA. Upon request, Processor will demonstrate compliance with this obligation.

6.    Notification obligation and Security Breach

6.1    In addition to other notification obligations provided in this DPA, the Processor shall notify Controller without undue delay about: (i) any legally binding request for disclosure of the Personal Data by a law enforcement authority, unless otherwise prohibited (such as a prohibition under criminal law to preserve the confidentiality of a law enforcement investigation), or any orders by courts and competent regulators/authorities relating to the processing of Personal Data under this DPA; (ii) any complaints or requests received directly from a Data Subject (e.g., regarding access, rectification, erasure, restriction of processing, data portability, objection to processing of data, automated decision-making) without responding to that request unless the Processor has been otherwise authorized to do so or otherwise required by applicable law; and (iii) any Security Breach as defined herein or by applicable data protection law relating to the Services provided by the Processor.

In any case, the Processor shall communicate to the Controller within max of 4 hours that the Security Breach has occurred. Within the further max 20 hours the Processor shall collect and provide to the Controller the following detailed information:

 

  a)

the type of breach

 

  b)

the nature, sensitivity, and volume of Personal Data impacted

 

  c)

ease of identification of individuals

 

  d)

severity of consequences for individuals (ex. physical harm, psychological distress, humiliation or damage to reputation)

 

  e)

the list of Data Subjects affected by the Security Breach (when available) including the contact information

 

  f)

the categories and approximate number of Data Subjects concerned and the categories and approximate number of Personal Data records concerned

 

  g)

likely consequences for the Controller of the Personal Data breach suffered by the Processor and/or by Sub-processors

 

  h)

measures taken or to be taken to address the Personal Data breach, to mitigate the effects and to minimize any damage resulting from the Security Breach.

The Processor shall assist the Controller with the Controller’s obligation under applicable data protection law to inform the Data Subjects and the supervisory authorities, as applicable, by providing relevant information taking into account the nature of the processing and the information available to the Processor.

6.2    The Processor will indemnify and hold the Controller harmless of any claims, damages, liabilities, assessments, losses, costs, administrative fines and other expenses (including, without limitation, reasonable attorneys’ fees and legal expenses) arising out of or resulting from any claim, allegation, demand, suit, action,


order or any other proceeding by a third party (including supervisory authorities) which the Controller suffers due to a Security Breach caused by the Processor, Processor’s employees, directors, managers, agents or other staff members or by Processor’s Sub-processors.

7.    Response to Data Subject requests

7.1     The Processor shall assist the Controller, especially through appropriate technical and organizational measures, insofar as this is possible, with the fulfilment of the Controller’s obligation to respond to requests for exercising the Data Subject’s rights.

7.2     In addition to the assistance specified above, the Controller may request and require additional assistance from the Processor in order to comply with the rights exercised by the Data Subjects. The Controller is obliged to determine whether or not a Data Subject has a right to exercise any such Data Subject rights and to give specifications to the Processor to what extent the assistance is required.

8.    Sub-processing

8.1    The Processor shall not engage any Sub-processor without previously informing the Controller and obtaining the Controller’s prior written consent. Provided that Processor obtains such prior specific authorization, Processor’s engagement of Sub-processors is subject to the following conditions:

 

(a)

The Processor shall choose such Sub-processor diligently with special attention to its good standing and experience with the provision of the subcontracted Services and the suitability of its technical and organizational measures. The Processor shall enter into a written contract with any Sub-processor and such contract shall (i) impose upon the Sub-processor the same obligations as imposed by this DPA upon the Processor, to the extent applicable to the subcontracted Services, (ii) describe the subcontracted Services, and (iii) describe the technical and organizational measures the Sub-processor has to implement pursuant to Appendix 2 of this DPA, as applicable to the subcontracted Services. The Processor must promptly send the Controller a copy of the contract between the Processor and the Sub-processor.

 

(b)

The Processor shall throughout the term of this DPA, at no charge to the Controller, actively monitor, regularly audit and, where applicable, take steps to enforce the compliance by each Sub-processor with its obligations, report promptly to the Controller any detected or reported non-compliance by the Sub-processor and all actions taken to remedy any non-compliance. If at any time a Sub-processor fails to remedy any non-compliance within a reasonable time after notice requiring remedy, the Controller may revoke the approval for such Sub-processor. Where the Sub-processor fails to fulfil its data protection obligations, the Processor shall remain fully liable to the Controller for the performance of the Sub-processor’s obligations.

 

(c)

The Processor is required to inform the Controller at the latest 30 days before a Sub-processor (who must be engaged in compliance with this DPA) is granted access to the Personal Data covered by this DPA, thereby giving the Controller the opportunity to object to such Sub-processor.

 

(d)

If the Controller has a legitimate reason, the Controller can revoke the approval of any Sub-processor at any time. In this case, Section 8(c) of this DPA shall apply mutatis mutandis.

 

(e)

In case any Sub-processor is located outside the EU/EEA in a country that is not recognized as providing an adequate level of data protection, the Processor will (i) ensure that the Controller and the Sub-processor enter into a direct data processing agreement based on the Standard Contractual Clauses for the Transfer of Personal Data to Processors Established In Third Countries pursuant to Commission Decision 2010/87/EU of 5 February 2010, or (ii) provide the Controller with information on the Sub-processor’s certification under the Privacy Shield program and regularly, at least annually, re-confirm that the Sub-processor’s certification under the Privacy Shield program is still valid, or (iii) provide the Controller with other information and relevant documentation on the mechanism for international data transfers pursuant to Art. 46 of the GDPR that is used to lawfully disclose the Controller’s Personal Data to the Sub-processor.


8.2    The Controller hereby expressly approves the Sub-processors engaged by the Processor for providing the Services before and up to the date of signing of this DPA.

9.     Local law compliance

9.1    The Parties have the right to ask for changes to any part of this DPA to the extent required to satisfy any interpretations, guidance or orders issued by competent Union or Member State authorities, the competent Swiss authorities, national implementation provisions, or other legal developments concerning the GDPR and FADP requirements for the commissioning of data processors in general or other requirements for the commissioning of data processors. The Parties will agree on the necessary changes in good faith effort taking their obligation to carry out this contractual relationship in compliance with applicable data protection law into account.

10.    Effectiveness, term and termination

10.1    This DPA shall be effective from March 31st, 2019 and shall have the same term as the Services Agreement. Save as otherwise agreed herein, termination rights and requirements shall be the same as set forth in the Services Agreement.

11.    Document hierarchy

11.1    In the event of contradictions or inconsistencies between the provisions of this DPA and the Services Agreement and/or other agreements between the Parties, the provisions of this DPA shall prevail with regard to the Parties’ data protection obligations. In case of doubt as to whether clauses in such other agreements relate to the Parties’ data protection obligations, this DPA shall prevail.

12.    Other provisions

12.1    Each Party is liable for its obligations set out in this DPA and in applicable data protection law. Any liability arising out of or in connection with a violation of the obligations of this DPA or under applicable data protection law, shall follow, and be governed by, the liability provisions set forth in, or otherwise applicable to, the Services Agreement, unless otherwise provided within this DPA. If the liability is governed by the liability provisions set forth in, or otherwise applicable to, the Services Agreement, for the purpose of calculating liability caps and/or determining the application of other limitations on liability, the liability occurring under this DPA shall be deemed to occur under the relevant Services Agreement.

12.2    The Processor will defend, indemnify, and hold harmless the Controller and the officers, directors, employees, successors, and agents of the Controller (collectively, “indemnified parties”) from all claims, damages, liabilities, assessments, losses, costs, administrative fines and other expenses (including, without limitation, reasonable attorneys’ fees and legal expenses) arising out of or resulting from any claim, allegation, demand, suit, action, order or any other proceeding by a third party (including supervisory authorities) that arises out of or relates to the violation of the Processor’s obligations under this DPA.

12.3    This DPA shall be governed by the laws of Switzerland, except as otherwise stipulated by applicable data protection law. The place of jurisdiction for all disputes regarding this DPA shall be as determined by the Services Agreement, except as otherwise stipulated by applicable data protection law.

12.4    Should any provision of this DPA be invalid or unenforceable, then the remainder of this DPA shall remain valid and in force. The invalid or unenforceable provision shall be either (i) amended as necessary to ensure its validity and enforceability, while preserving the Parties’ intentions as closely as possible or - should this not be possible - (ii) construed in a manner as if the invalid or unenforceable part had never been contained therein. The foregoing shall also apply if this DPA contains any omission.

[Signatures on next page]


Signature for Controller

Name:

 

 

Title:

 

 

Date:

 

 

Signature:

 

 

Signature for Processor

Name:

 

 

Title:

 

 

Date:

 

 

Signature:

 

 

EX-10.2 6 d618285dex102.htm EX-10.2 EX-10.2

Exhibit 10.2

TAX MATTERS AGREEMENT

between

VF Corporation,

on behalf of itself

and the members

of the VF Group,

and

Kontoor Brands, Inc.,

on behalf of itself

and the members

of the Kontoor Brands Group

Dated as of [—]


TABLE OF CONTENTS

 

 

 

         PAGE  

Section 1.

  Definitions.      1  

Section 2.

  Sole Tax Sharing Agreement.      6  

Section 3.

  Allocation of Taxes.      6  

Section 4.

  Preparation and Filing of Tax Returns.      7  

Section 5.

  Apportionment of Earnings and Profits and Tax Attributes.      9  

Section 6.

  Utilization of Tax Attributes.      9  

Section 7.

  Deductions and Reporting for Certain Awards.      10  

Section 8.

  Tax Benefits.      11  

Section 9.

  Certain Representations and Covenants.      11  

Section 10.

  Tax Receivables Arrangements.      14  

Section 11.

  Indemnities.      14  

Section 12.

  Payments.      15  

Section 13.

  Guarantees      16  

Section 14.

  Communication and Cooperation      16  

Section 15.

  Audits and Contest      17  

Section 16.

  Notices      18  

Section 17.

  Costs and Expenses.      18  

Section 18.

  Effectiveness; Termination and Survival.      18  

Section 19.

  Specific Performance      18  

Section 20.

  Construction.      19  

Section 21.

  Entire Agreement; Amendments and Waivers.      19  

Section 22.

  Governing Law.      20  

Section 23.

  Jurisdiction.      20  

Section 24.

  Waiver of Jury Trial.      21  

Section 25.

  Dispute Resolution.      21  

Section 26.

  Counterparts; Effectiveness; Third-Party Beneficiaries.      21  

Section 27.

  Successors and Assigns.      21  

Section 28.

  Change in Tax Law.      21  

Section 29.

  Performance.      21  

 

i


TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (the “Agreement”) is entered into as of [—], 2019 between VF Corporation (“VF”), a Pennsylvania corporation, on behalf of itself and the members of the VF Group and Kontoor Brands, Inc. (“Kontoor Brands”), a North Carolina corporation, on behalf of itself and the members of the Kontoor Brands Group.

W I T N E S S E T H:

WHEREAS, pursuant to the Tax laws of various jurisdictions, certain members of the Kontoor Brands Group presently file certain Tax Returns on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) with certain members of the VF Group;

WHEREAS, VF and Kontoor Brands have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation Agreement”), pursuant to which the Contribution, the Distribution and other related transactions will be consummated;

WHEREAS, the Restructuring, together with the Contribution and the Distribution, are intended to qualify for the Intended Tax Treatment; and

WHEREAS, VF and Kontoor Brands desire to set forth their agreement on the rights and obligations of VF, Kontoor Brands and the members of the VF Group and the Kontoor Brands Group respectively, with respect to (a) the administration and allocation of federal, state, local and foreign Taxes incurred in Taxable periods beginning prior to the Distribution Date, (b) Taxes resulting from the Distribution and transactions effected in connection with the Distribution and (c) various other Tax matters.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

Section 1. Definitions. (a) As used in this Agreement:

Active Trade or Business” has the meaning ascribed to the Jeanswear Business in the Separation Agreement.

Affiliate” has the meaning set forth in the Separation Agreement.

Agreement” has the meaning set forth in the preamble.

Applicable Law” (or “Applicable Tax Law,” as the case may be) means, with respect to any Person, any federal, state, county, municipal, local, multinational or foreign statute, treaty, law, common law, ordinance, rule, regulation, order, writ, injunction, judicial decision, decree, permit or other legally binding requirement of any Governmental Authority applicable to such Person or any of its respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person).

Business Day” has the meaning set forth in the Separation Agreement.

Closing of the Books Method” means the apportionment of items between portions of a Taxable period based on a closing of the books and records on the close of the Distribution Date (in the event that the Distribution Date is not the last day of the Taxable period, as if the Distribution Date were the last day of the Taxable period), subject to adjustment for items accrued on the Distribution Date that are properly allocable to

 

1


the Taxable period following the Distribution, as determined by VF in accordance with Applicable Law; provided that Taxes not based upon or measured by net or gross income or specific events shall be apportioned between the Pre- and Post-Distribution Periods on a pro rata basis in accordance with the number of days in each Taxable period.

Code” has the meaning set forth in the Separation Agreement.

Combined Group” means any group consisting of at least one member that filed or was required to file (or will file or be required to file) a Tax Return on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) that includes at least one member of the VF Group and at least one member of the Kontoor Brands Group.

Combined Tax Return” means a Tax Return filed in respect of federal, state, local or foreign income Taxes for a Combined Group, or any other affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) Tax Return of a Combined Group.

Company” means VF or Kontoor Brands (or the appropriate member of each of their respective Groups), as appropriate.

Contribution” has the meaning set forth in the Separation Agreement.

Distribution” has the meaning set forth in the Separation Agreement.

Distribution Date” has the meaning set forth in the Separation Agreement.

Distribution Documents” has the meaning set forth in the Separation Agreement.

Distribution Taxes” means any Taxes incurred solely as a result of the failure of the Intended Tax Treatment of the Restructuring, the Contribution or the Distribution.

Distribution Time” has the meaning set forth in the Separation Agreement.

Equity Interests” means any stock or other securities treated as equity for Tax purposes, options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.

Existing GRAs” has the meaning set forth on Schedule D to this Agreement.

Final Determination” means (i) with respect to federal income Taxes, (A) a “determination” as defined in Section 1313(a) of the Code (including, for the avoidance of doubt, an executed IRS Form 906) or (B) the execution of an IRS Form 870-AD (or any successor form thereto), as a final resolution of Tax liability for any Taxable period, except that a Form 870-AD (or successor form thereto) that reserves the right of the taxpayer to file a claim for refund or the right of the IRS to assert a further deficiency shall not constitute a Final Determination with respect to the item or items so reserved; (ii) with respect to Taxes other than federal income Taxes, any final determination of liability in respect of a Tax that, under Applicable Tax Law, is not subject to further appeal, review or modification through proceedings or otherwise; (iii) with respect to any Tax, any final disposition by reason of the expiration of the applicable statute of limitations (giving effect to any extension, waiver or mitigation thereof); or (iv) with respect to any Tax, the payment of such Tax by any member of the VF Group or any member of the Kontoor Brands Group, whichever is responsible for payment of such Tax under Applicable Tax Law, with respect to any item disallowed or adjusted by a Taxing Authority; provided, in the case of this clause (iv), that the provisions of Section 15 hereof have been complied with, or, if such section is inapplicable, that the Company responsible under this Agreement for such Tax is notified by the Company paying such Tax that it has determined that no action should be taken to recoup such disallowed item, and the other Company agrees with such determination.

 

2


Governmental Authority” has the meaning set forth in the Separation Agreement.

Group” has the meaning set forth in the Separation Agreement.

HDL Reorganization” means the contribution of the stock of H.D. Lee Company, Inc. to Kontoor Brands followed by the conversion of H.D. Lee Company, Inc. to a Delaware limited liability company.

Indemnifying Party” means the party from which another party is entitled to seek indemnification pursuant to the provisions of Section 11.

Indemnitee” means the party which is entitled to seek indemnification from another party pursuant to the provisions of Section 11.

Intended Tax Treatment” means the (A) qualification of (i) the HDL Reorganization as a reorganization described in Section 368(a)(1)(F) of the Code, (ii) the Wrangler Reorganization as a reorganization described in Section 368(a)(1)(C) of the Code, (iii) the Contribution, other than the HDL Reorganization and the Wrangler Reorganization, together with the Distribution, as a reorganization described in Section 368(a)(1)(D) of the Code and of each of VF and Kontoor Brands as a “party to the reorganization” within the meaning of Section 368(b) of the Code and (iv) the Distribution, as such, as a distribution of Kontoor Brands Common Stock to VF’s shareholders pursuant to Section 355 of the Code and (B) the intended Tax consequences of the transactions described on Schedule A as set forth therein.

IRS” has the meaning set forth in the Separation Agreement.

Jeanswear Business” has the meaning set forth in the Separation Agreement.

Kontoor Brands Carried Item” shall mean any Tax Attribute of the Kontoor Brands Group that may or must be carried from one Taxable period to another prior Taxable period, or carried from one Taxable period to another subsequent Taxable period, under the Code or other Applicable Tax Law.

Kontoor Brands Common Stock” has the meaning set forth in the Separation Agreement.

Kontoor Brands Compensatory Equity Interests” means any options, stock appreciation rights, restricted stock, stock units or other rights with respect to the capital stock of Kontoor Brands that are granted on or prior to the Distribution Time by any member of the Kontoor Brands Group in connection with employee, independent contractor or director compensation or other employee benefits.

Kontoor Brands Disqualifying Action” means (a) any action (or the failure to take any action) by any member of the Kontoor Brands Group after the Distribution Time (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) after the Distribution Time involving the capital stock of Kontoor Brands or any assets of any member of the Kontoor Brands Group or (c) any breach by any member of the Kontoor Brands Group after the Distribution Time of any representation, warranty or covenant made by them in this Agreement, that, in each case, would affect the Intended Tax Treatment; provided, however, that the term “Kontoor Brands Disqualifying Action” shall not include any action entered into pursuant to any Distribution Document (other than this Agreement) or that is undertaken pursuant to the Restructuring, the Contribution or the Distribution.

Kontoor Brands Group” has the meaning set forth in the Separation Agreement.

Kontoor Brands Separate Tax Return” means any Tax Return that is required to be filed by, or with respect to, any member of the Kontoor Brands Group that is not a Combined Tax Return.

Person” has the meaning set forth in Section 7701(a)(1) of the Code.

 

3


Post-Distribution Period” means any Taxable period (or portion thereof) beginning after the Distribution Date.

Pre-Distribution Period” means any Taxable period (or portion thereof) ending on or before the Distribution Date.

Restructuring” has the meaning set forth in the Separation Agreement.

Separation Agreement” has the meaning set forth in the recitals.

Specified Event” means (i) any failure of the Intended Tax Treatment with respect to (x) the Restructuring (including the HDL Reorganization, the Wrangler Reorganization and the transactions described in Schedule A), (y) the Contribution or (z) the Distribution or (ii) any event that results in (x) a Tax with respect to a Pre-Distribution Period imposed on any member of the VF Group and (y) a Tax Attribute with respect to any member of the Kontoor Brands Group.

Tax” (and the correlative meaning, “Taxes,” “Taxing” and “Taxable”) means (i) any tax, including any net income, gross income, gross receipts, recapture, alternative or add-on minimum, sales, use, business and occupation, value-added, trade, goods and services, ad valorem, franchise, profits, net wealth, license, business royalty, withholding, payroll, employment, capital, excise, transfer, recording, severance, stamp, occupation, premium, property, asset, real estate acquisition, environmental, custom duty, impost, obligation, assessment, levy, tariff or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount imposed by a Taxing Authority; or (ii) any liability of any member of the VF Group or the Kontoor Brands Group for the payment of any amounts described in clause (i) as a result of any express or implied obligation to indemnify any other Person.

Tax Attribute” means a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, unused general business credit, alternative minimum tax credit or any other Tax Item that could reduce a Tax liability.

Tax Benefit means any refund, credit, offset or other reduction in otherwise required Tax payments.

Tax Adviser” means Davis Polk & Wardwell LLP or Ernst & Young LLP (or both of them), as applicable.

Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item that can increase or decrease Taxes paid or payable.

Tax Opinions” shall mean the legal opinions delivered to VF by Tax Advisers with respect to certain U.S. federal income Tax consequences of the Restructuring, the Contribution and the Distribution.

Tax Proceeding” means any Tax audit, dispute, examination, contest, litigation, arbitration, action, suit, claim, cause of action, review, inquiry, assessment, hearing, complaint, demand, investigation or proceeding (whether administrative, judicial or contractual).

Tax-Related Losses” means, with respect to any Taxes imposed pursuant to any settlement, determination, judgment or otherwise, (i) all accounting, legal and other professional fees, and court costs incurred in connection with such Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes and (ii) all damages, costs, and expenses associated with stockholder litigation or controversies and any amount paid by any member of the VF Group or any member of the Kontoor Brands Group in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Taxing Authority, in each case, resulting from the failure of the Intended Tax Treatment of the Restructuring, the Contribution or the Distribution.

 

4


Tax Representation Letters” means the representations provided by Kontoor Brands and VF to Tax Advisers in connection with the rendering by Tax Advisers of the Tax Opinions.

Tax Return” means any Tax return, statement, report, form, election, bill, certificate, claim or surrender (including estimated Tax returns and reports, extension requests and forms, and information returns and reports), or statement or other document or written information filed or required to be filed with any Taxing Authority, including any amendment thereof, appendix, schedule or attachment thereto.

Taxing Authority” means any Governmental Authority (domestic or foreign), including, without limitation, any state, municipality, political subdivision or governmental agency, responsible for the imposition, assessment, administration, collection, enforcement or determination of any Tax.

Transfer Taxes” means all U.S. federal, state, local or foreign sales, use, privilege, transfer, documentary, stamp, duties, real estate transfer, controlling interest transfer, recording and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any member of the VF Group or any member of the Kontoor Brands Group in connection with the Restructuring, the Contribution or the Distribution.

VF” has the meaning ascribed thereto in the preamble.

VF Business” has the meaning set forth in the Separation Agreement.

VF Compensatory Equity Interests” means any options, stock appreciation rights, restricted stock, stock units or other rights with respect to VF stock that are granted on or prior to the Distribution Date by any member of the VF Group in connection with employee, independent contractor or director compensation or other employee benefits (including, for the avoidance of doubt, options, stock appreciation rights, restricted stock, restricted stock units, performance share units or other rights issued in respect of any of the foregoing by reason of the Distribution or any subsequent transaction).

VF Group” has the meaning set forth in the Separation Agreement.

VF Separate Tax Return” means any Tax Return that is required to be filed by, or with respect to, a member of the VF Group that is not a Combined Tax Return.

Wrangler Reorganization” means the contribution of the stock of Wrangler Apparel Corp. to Kontoor Brands followed by the conversion of Wrangler Apparel Corp. to a Delaware limited liability company.

(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term

  

Section

Due Date

   Section 12(a)

Internal Tax-Free Transactions

   Schedule A

Internal Specified Transactions

   Schedule A

Past Practices

   Section 4(f)(i)

Section 336(e) Election

   Section 10(a)

Section 9(b)(iv)(F) Acquisition Transaction

   Section 9(b)(iv)(G)

Tax Arbiter

   Section 25

Tax Benefit Recipient

   Section 8(c)

(c) All capitalized terms used but not defined herein shall have the same meanings as in the Separation Agreement. Any term used in this Agreement which is not defined in this Agreement or the Separation Agreement shall, to the extent the context requires, have the meaning assigned to it in the Code or the applicable Treasury Regulations thereunder (as interpreted in administrative pronouncements and judicial decisions) or in comparable provisions of Applicable Tax Law.

 

5


Section 2. Sole Tax Sharing Agreement. Any and all existing Tax sharing agreements or arrangements, written or unwritten, between any member of the VF Group, on the one hand, and any member of the Kontoor Brands Group, on the other hand, if not previously terminated, shall be terminated as of the Distribution Date without any further action by the parties thereto. Following the Distribution, no member of the Kontoor Brands Group or the VF Group shall have any further rights or liabilities thereunder, and, except for Section 6.08 of the Separation Agreement, Section 5.01 of the Transition Services Agreement, and Section 8.05 of the Employee Matters Agreement, this Agreement shall be the sole Tax sharing agreement between the members of the Kontoor Brands Group on the one hand, and the members of the VF Group, on the other hand.

Section 3. Allocation of Taxes.

(a) General Allocation Principles. Except as provided in Section 3(c), all Taxes shall be allocated as follows:

(i) Allocation of Taxes for Combined Tax Returns. VF shall be allocated all Taxes reported, or required to be reported, on any Combined Tax Return that any member of the VF Group files or is required to file under the Code or other Applicable Tax Law; provided, however, that to the extent any such Combined Tax Return includes any Tax Item attributable to any member of the Kontoor Brands Group in respect of any Post-Distribution Period, Kontoor Brands shall be allocated all Taxes attributable to such Tax Items as determined by VF in its reasonable discretion.

(ii) Allocation of Taxes for Separate Tax Returns.

(A) VF shall be allocated all Taxes reported, or required to be reported, on (x) a VF Separate Tax Return and (y) a Kontoor Brands Separate Tax Return with respect to a Pre-Distribution Period.

(B) Kontoor Brands shall be allocated all Taxes reported, or required to be reported, on a Kontoor Brands Separate Tax Return with respect to a Post-Distribution Period.

(iii) Taxes Not Reported on Tax Returns.

(A) VF shall be allocated any Tax attributable to any member of the VF Group that is not required to be reported on a Tax Return.

(B) Any Tax attributable to any member of the Kontoor Group that is not required to be reported on a Tax Return shall be allocated to, (x) if with respect to a Pre-Distribution Period, VF and, (y) if with respect to a Post-Distribution Period, Kontoor Brands.

(b) Allocation Conventions.

(i) All Taxes allocated pursuant to Section 3(a) shall be allocated in accordance with the Closing of the Books Method; provided, however, that if Applicable Tax Law does not permit a Kontoor Brands Group member to close its Taxable year on the Distribution Date, the Tax attributable to the operations of the members of the Kontoor Brands Group for any Pre-Distribution Period shall be the Tax computed using a hypothetical closing of the books consistent with the Closing of the Books Method (except to the extent otherwise agreed upon by VF and Kontoor Brands); provided further that any and all Taxes under Section 951(a) or Section 951A(a) of the Code attributable to any member of the Kontoor Brands Group (whether included in gross income by a member of the VF Group or the Kontoor Brands Group) (x) with respect to any period beginning on or after April 1, 2019 shall be allocated to Kontoor Brands (y) with respect to the members of the Kontoor Brands Group set forth on Schedule B, shall be allocated as if such member’s Taxable year ended as of [—], 2019 using such conventions as VF determines in its reasonable discretion.

(ii) Any Tax Item of Kontoor Brands or any member of the Kontoor Brands Group arising from a transaction engaged in outside the ordinary course of business on the Distribution Date after the Distribution Time shall be allocable to Kontoor Brands and any such transaction by or with respect to Kontoor Brands or

 

6


any member of the Kontoor Brands Group occurring after the Distribution Time shall be treated for all Tax purposes (to the extent permitted by Applicable Tax Law) as occurring at the beginning of the day following the Distribution Date in accordance with the principles of Treasury Regulations Section 1.1502-76(b) (assuming no election is made under Treasury Regulations Section 1.1502-76(b)(2)(ii) (relating to a ratable allocation of a year’s Tax Items)); provided that the foregoing shall not include any action that is undertaken pursuant to the Restructuring, the Contribution or the Distribution.

(c) Special Allocation Rules. Notwithstanding any other provision in this Section 3, the following Taxes shall be allocated as follows:

(i) Taxes Relating to VF Compensatory Equity Interests. Any Tax liability (including, for the avoidance of doubt, the satisfaction of any withholding Tax obligation) relating to the issuance, exercise, vesting or settlement of any VF Compensatory Equity Interest shall be allocated in a manner consistent with Section 7.

(ii) Distribution Taxes and Tax-Related Losses. Any liability for Distribution Taxes and Tax-Related Losses resulting from a Kontoor Brands Disqualifying Action shall be allocated in a manner consistent with Section 11(a)(iii).

(iii) Section 965 Taxes. Any installment payments required to be made pursuant to the election made by a member of the VF Group or a member of the Kontoor Brands Group (that was a member of such Kontoor Brands Group prior to the Distribution Date) under Section 965(h) of the Code, and any adjustments thereto, shall be allocated to VF.

Section 4. Preparation and Filing of Tax Returns.

(a) VF Group Combined Tax Returns.

(i) VF shall prepare and file, or cause to be prepared and filed, Combined Tax Returns for which a member of the VF Group is required or, as provided in Section 4(f)(iv), elects, to file a Combined Tax Return. Each member of any such Combined Group shall execute and file such consents, elections and other documents as may be required, appropriate or otherwise requested by VF in connection with the filing of such Combined Tax Returns.

(ii) To the extent the Combined Tax Return reflects operations of Kontoor Brands Group for a Taxable period that includes the Distribution Date, VF shall include in such Combined Tax Return the results of such member of the Kontoor Brands Group, as the case may be, on the basis of the Closing of the Books Method to the extent permitted by Applicable Tax Law.

(b) Kontoor Brands Separate Tax Returns.

(i) Tax Returns to Be Prepared by VF. VF shall prepare (or cause to be prepared) and, to the extent permitted by Applicable Law, file (or cause to be filed) all Kontoor Brands Separate Tax Returns for any Taxable period that ends on or before the Distribution Date; provided, however, that with respect to any such Tax Return that is prepared by VF but required to be filed by a member of the Kontoor Brands Group under Applicable Law, VF shall provide such Tax Returns to Kontoor Brands at least thirty (30) days prior to the due date for filing such Tax Returns (taking into account any applicable extension periods) with the amount of any Taxes shown as due thereon, and Kontoor Brands shall, subject to Section 4(d), execute and file (or cause to be executed and filed) the Tax Returns.

(ii) Tax Returns to Be Prepared by Kontoor Brands. Kontoor Brands shall prepare and file (or cause to be prepared and filed) all Kontoor Brands Separate Tax Returns that are not described in Section 4(b)(i).

(c) Provision of Information; Timing. Kontoor Brands shall maintain all necessary information for VF (or any of its Affiliates) to file any Tax Return that VF is required or permitted to file under this Section 4, and shall provide to VF all such necessary information in accordance with the VF Group’s past practice. VF shall maintain

 

7


all necessary information for Kontoor Brands (or any of its Affiliates) to file any Tax Return that Kontoor Brands is required or permitted to file under this Section 4, and shall provide Kontoor Brands with all such necessary information in accordance with the Kontoor Brands Group’s past practice.

(d) Review of Kontoor Brands Separate Tax Returns. The party that is required to prepare a Kontoor Brands Separate Tax Return (other than a Kontoor Brands Separate Tax Return that relates solely to a Post-Distribution Period) that is required to be filed after the Distribution Date shall submit a draft of such Tax Return to the non-preparing party, if requested. The Party responsible for preparing (or causing to be prepared) the relevant Tax Return shall (x) use its reasonable best efforts to make such Tax Return available for review as required under this paragraph sufficiently in advance of the due date for filing of such Tax Return to provide the requesting Party with a meaningful opportunity to analyze and comment on such Tax Return and (y) use reasonable efforts to have such Tax Return modified before filing, taking into account the Person responsible for payment of the Tax (if any) reported on such Tax Return and whether the amount of Tax liability with respect to such Return is material. The Parties shall attempt in good faith to resolve any issues arising out of the review of such Tax Return.

(e) Review of Combined Tax Returns with Kontoor Brands Tax Liability. If requested by Kontoor Brands, VF shall submit to Kontoor Brands a draft of the portions of any Combined Tax Returns that relate solely to any member of the Kontoor Brands Group and that reflect a Tax liability allocated to Kontoor Brands pursuant to Section 3(a)(i). VF shall use (x) its commercially reasonable best efforts to make such portions of a Tax Return available for review as required under this paragraph sufficiently in advance of the due date for filing of such Tax Return to provide Kontoor Brands with a meaningful opportunity to analyze and comment on such portions of such Tax Return and (y) commercially reasonable best efforts to have such Tax Return modified before filing, taking into account the materiality of the Tax liability with respect to such Tax Return.

(f) Special Rules Relating to the Preparation of Tax Returns.

(i) General Rule. Except as provided in this Section 4(f)(i), Kontoor Brands shall prepare (or cause to be prepared) any Tax Return for which it is responsible under this Section 4 in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used by the members of the VF Group prior to the Distribution Date with respect to such Tax Return, and to the extent any items, methods or positions are not covered by Past Practices, as directed by VF; provided, however, it shall not be a violation of this Section 4(f)(i) if Kontoor Brands validly changes its Taxable year to a “52/53” year end under Section 441(f).

(ii) Consistency with Intended Tax Treatment. All Tax Returns that include any member of the VF Group or any member of the Kontoor Brands Group shall be prepared in a manner that is consistent with the Intended Tax Treatment.

(iii) Kontoor Brands Separate Tax Returns. With respect to any Kontoor Brands Separate Tax Return for which Kontoor Brands is responsible pursuant to this Agreement, Kontoor Brands and the other members of the Kontoor Brands Group shall include such Tax Items in such Kontoor Brands Separate Tax Return in a manner that is consistent with the inclusion of such Tax Items in any related Tax Return for which VF is responsible to the extent such Tax Items are allocated in accordance with this Agreement.

(iv) Election to File Combined Tax Returns. VF shall have the sole discretion to file any Combined Tax Return if the filing of such Tax Return is elective under Applicable Tax Law.

(v) Preparation of Transfer Tax Returns. The Company required under Applicable Tax Law to file any Tax Returns in respect of Transfer Taxes shall prepare and file (or cause to be prepared and filed) such Tax Returns. If required by Applicable Tax Law, VF and Kontoor Brands shall, and shall cause their respective Affiliates to, cooperate in preparing and filing, and join the execution of, any such Tax Returns.

(g) Payment of Taxes. VF shall pay (or cause to be paid) to the proper Taxing Authority (or to Kontoor Brands with respect to any Kontoor Brands Separate Tax Return prepared by VF but required to be filed by a

 

8


member of the Kontoor Brands Group under Applicable Tax Law) the Tax shown as due on any Tax Return for which a member of the VF Group is responsible under this Section 4, and Kontoor Brands shall pay (or cause to be paid) to the proper Taxing Authority the Tax shown as due on any Tax Return for which a member of the Kontoor Brands Group is responsible under this Section 4. If any member of the VF Group is required to make a payment to a Taxing Authority for Taxes allocated to Kontoor Brands under Section 3, Kontoor Brands shall pay the amount of such Taxes to VF in accordance with Section 11 and Section 12. If any member of the Kontoor Brands Group is required to make a payment to a Taxing Authority for Taxes allocated to VF under Section 3, VF shall pay the amount of such Taxes to Kontoor Brands in accordance with Section 11 and Section 12.

Section 5. Apportionment of Earnings and Profits and Tax Attributes.

(a) Tax Attributes arising in a Pre-Distribution Period will be allocated to (and the benefits and burdens of such Tax Attributes will inure to) the members of the VF Group and the members of the Kontoor Brands Group in accordance with VF’s historical practice (including historical methodologies for making corporate allocations), the Code, Treasury Regulations, and any applicable state, local and foreign law, as determined by VF in its sole discretion.

(b) VF shall in good faith, based on information reasonably available to it, advise Kontoor Brands no later than May 1, 2020 in writing of VF’s estimate of the portion, if any, of any earnings and profits, previously taxed earnings and profits (within the meaning of Section 959 of the Code (“PTI”)), Tax Attributes, tax basis, overall foreign loss or other consolidated, combined or unitary attribute which VF determines is expected to be allocated or apportioned to the members of the Kontoor Brands Group under Applicable Tax Law. As soon as reasonably practicable after the close of the relevant Taxable period in which the Distribution occurs and in no event later than December 31, 2020, VF shall advise Kontoor Brands in writing of any adjustments to the previously delivered estimates of the portion of earnings and profits, Tax Attributes, tax basis, overall foreign loss or other consolidated, combined or unitary attribute determined by VF. For the avoidance of doubt, VF shall not be liable to any member of the Kontoor Brands Group for any failure of any determination under this Section 5(b) to be accurate under Applicable Tax Law, provided such determination was made in good faith. All members of the Kontoor Brands Group shall prepare all Tax Returns in accordance with the written notices provided by VF to Kontoor Brands pursuant to this Section 5(b).

(c) Except as otherwise provided herein, to the extent that the amount of any earnings and profits, PTI, Tax Attributes, tax basis, overall foreign loss or other consolidated, combined or unitary attribute allocated to members of the VF Group or the Kontoor Brands Group pursuant to Section 5(b) is later reduced or increased by a Taxing Authority or as a result of a Tax Proceeding, such reduction or increase shall be allocated to the Company to which such earnings and profits, Tax Attributes, tax basis, overall foreign loss or other consolidated, combined or unitary attribute was allocated pursuant to this Section 5, as determined by VF in good faith.

Section 6. Utilization of Tax Attributes.

(a) Amended Returns. Any amended Tax Return or claim for a refund with respect to any member of the Kontoor Brands Group may be made only by the party responsible for preparing the original Tax Return with respect to such member of the Kontoor Brands Group pursuant to Section 4.

(b) VF Discretion. Kontoor Brands hereby agrees that VF shall be entitled to determine in its sole discretion whether to (x) file or to cause to be filed any claim for a refund or adjustment of Taxes with respect to any Combined Tax Return in order to claim in any Pre-Distribution Period any Kontoor Brands Carried Item, (y) make or cause to be made any available elections to waive the right to claim in any Pre-Distribution Period, with respect to any Combined Tax Return, any Kontoor Brands Carried Item, and (z) make or cause to be made any affirmative election to claim in any Pre-Distribution Period any Kontoor Brands Carried Item. Subject to Section 6(c), Kontoor Brands shall submit a written request to VF in order to seek VF’s consent with respect to any of the actions described in this Section 6(b).

 

9


(c) Kontoor Brands Carrybacks to Combined Tax Returns.

(i) Each member of the Kontoor Brands Group shall elect, to the extent permitted by Applicable Tax Law, to forgo the right to carry back any Kontoor Brands Carried Item from a Post-Distribution Period to a Combined Tax Return.

(ii) If a member of the Kontoor Brands Group determines that it is required by Applicable Tax Law to carry back any Kontoor Brands Carried Item to a Combined Tax Return, it shall notify VF in writing of such determination at least 90 days prior to filing the Tax Return on which such carryback will be reflected. If VF disagrees with such determination, the parties shall resolve their disagreement pursuant to the procedures set forth in Section 25.

(iii) For the avoidance of doubt, if a Kontoor Brands Carried Item is carried back to a Combined Tax Return for any reason, no member of the VF Group shall be required to make any payment to, or otherwise compensate, any member of the Kontoor Brands Group in respect of such Kontoor Brands Carried Item.

(d) Carryforwards to Separate Tax Returns. If a portion or all of any Tax Attribute is allocated to a member of a Combined Group pursuant to Section 5, and is carried forward or back to a Kontoor Brands Separate Tax Return, any Tax Benefits arising from such carryforward shall be retained by the Kontoor Brands Group. If a portion or all of any Tax Attribute is allocated to a member of a Combined Group pursuant to Section 5, and is carried forward or back to a VF Separate Tax Return, any Tax Benefits arising from such carryforward or carryback shall be retained by the VF Group.

Section 7. Deductions and Reporting for Certain Awards.

(a) Deductions. To the extent permitted by Applicable Tax Law, income Tax deductions with respect to the issuance, exercise, vesting or settlement after the Distribution Date of any VF Compensatory Equity Interests or Kontoor Brands Compensatory Equity Interests shall be claimed (A) in the case of an active officer or employee, solely by the Group that employs such Person at the time of such issuance, exercise, vesting, or settlement, as applicable; (B) in the case of a former officer or employee, solely by the Group that was the last to employ such Person; and (C) in the case of a director or former director (who is not an officer or employee or former officer or employee of a member of either Group), (x) solely by the VF Group if such person was, at any time before or after the Distribution, a director of any member of the VF Group, and (y) in any other case, solely by the Kontoor Brands Group.

(b) If, notwithstanding clause (a), the Kontoor Brands Group actually utilizes any deductions for a Taxable period ending after the Distribution Date with respect to (i) the issuance, exercise, vesting or settlement after the Distribution Date of any VF Compensatory Equity Interests, or (ii) any liability with respect to compensation required to be paid or satisfied by, or otherwise allocated to, any member of the VF Group in accordance with any Distribution Document, Kontoor Brands shall promptly remit an amount equal to the overall net reduction in actual cash Taxes paid by the Kontoor Brands Group (determined on a “with and without” basis) resulting from the event giving rise to such deduction (and any income in respect of such event, subject to Section 12(b)) in the year of such event. If a Taxing Authority subsequently reduces or disallows the use of such a deduction by the Kontoor Brands Group, VF shall return an amount equal to the overall net increase in Tax liability of the Kontoor Brands Group owing to the Taxing Authority to the remitting party.

(c) Withholding and Reporting. For any Taxable period (or portion thereof), except as VF may at any time determine in its reasonable discretion, VF shall satisfy, or shall cause to be satisfied, all applicable withholding and reporting responsibilities (including all income, payroll or other Tax reporting related to income to any current or former employees) with respect to the issuance, exercise, vesting or settlement of such VF Compensatory Equity Interests that settle with or with respect to stock of VF. For any Taxable period (or portion thereof), Kontoor Brands shall satisfy, or shall cause to be satisfied, all applicable withholding and reporting responsibilities (including all income, payroll or other Tax reporting related to income to any current or former

 

10


employees) with respect to the exercise, vesting or settlement of such Kontoor Brands Compensatory Equity Interests that settle with or with respect to stock of Kontoor Brands. VF and Kontoor Brands acknowledge and agree that the parties shall cooperate with each other and with third-party providers to effectuate withholding and remittance of Taxes, as well as required Tax reporting, in a timely manner.

Section 8. Tax Benefits.

(a) VF Tax Benefits. VF shall be entitled to any Tax Benefits (including, in the case of any refund received, any interest thereon actually received) received by any member of the VF Group or any member of the Kontoor Brands Group, other than any Tax Benefits (or any amounts in respect of Tax Benefits) to which Kontoor Brands is entitled pursuant to Section 8(b). Kontoor Brands shall not be entitled to any Tax Benefits received by any member of the VF Group or the Kontoor Brands Group, except as set forth in Section 8(b).

(b) Kontoor Brands Tax Benefits. Kontoor Brands shall be entitled to any Tax Benefits (including, in the case of any refund received, any interest thereon actually received) received by any member of the VF Group or any member of the Kontoor Brands Group after the Distribution Date with respect to any Tax allocated to a member of the Kontoor Brands Group under this Agreement (including, for the avoidance of doubt, any amounts allocated to Kontoor Brands pursuant to Section 3(c)(ii) or Section 3(c)(iii)).

(c) A Company receiving (or realizing) a Tax Benefit to which another Company is entitled hereunder (a “Tax Benefit Recipient”) shall pay over the amount of such Tax Benefit (including interest received from the relevant Taxing Authority, but net of any Taxes imposed with respect to such Tax Benefit and any other reasonable costs associated therewith) within thirty (30) days of receipt thereof (or from the due date for payment of any Tax reduced thereby); provided, however, that the other Company, upon the request of such Tax Benefit Recipient, shall repay the amount paid to the other Company (plus any penalties, interest or other charges imposed by the relevant Taxing Authority) in the event that, as a result of a subsequent Final Determination, a Tax Benefit that gave rise to such payment is subsequently disallowed.

Section 9. Certain Representations and Covenants.

(a) Representations.

(i) Kontoor Brands and each other member of the Kontoor Brands Group represents that, other than the transactions described on Schedule C, as of the date hereof, and covenants that as of the Distribution Date, there is no plan or intention:

(A) to liquidate Kontoor Brands or to merge or consolidate any member of the Kontoor Brands Group with any other Person subsequent to the Distribution;

(B) to sell or otherwise dispose of any material asset of any member of the Kontoor Brands Group, except in the ordinary course of business;

(C) to take or fail to take any action in a manner that is inconsistent with the written information and representations furnished by Kontoor Brands to Tax Advisers in connection with the Tax Representation Letters or Tax Opinions;

(D) to repurchase stock of Kontoor Brands other than in a manner that satisfies the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48) and consistent with any representations made to Tax Advisers in connection with the Tax Representation Letters;

(E) to take or fail to take any action in a manner that management of Kontoor Brands knows, or should know, is reasonably likely to contravene, (i) any Existing GRA or (ii) any agreement with a Taxing Authority entered into prior to the Distribution Date to which any member of the Kontoor Brands Group or the VF Group is a party; or

 

11


(F) to enter into any negotiations, agreements, or arrangements with respect to transactions or events (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the Distribution) that could reasonably be expected to cause the Distribution to be treated as part of a plan (within the meaning of Section 355(e) of the Code) pursuant to which one or more Persons acquire directly or indirectly Kontoor Brands stock representing a 50% or greater interest within the meaning of Section 355(d)(4) of the Code.

(b) Covenants.

(i) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to, take or fail to take any action that constitutes a Kontoor Brands Disqualifying Action.

(ii) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to, take or fail to take any action that is inconsistent with the information and representations furnished by Kontoor Brands to Tax Advisers in connection with the Tax Representation Letters or Tax Opinions.

(iii) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to, take or fail to take any action in a manner that management of Kontoor Brands knows, or should know, is reasonably likely to contravene (x) any Existing GRA or (y) any agreement with a Taxing Authority entered into prior to the Distribution Date to which any member of the Kontoor Brands Group or the VF Group is a party.

(iv) During the two-year period following the Distribution Date:

(A) Kontoor Brands shall (w) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (x) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (y) cause each other member of the Kontoor Brands Group whose Active Trade or Business is relied upon for purposes of qualifying the Distribution for the Intended Tax Treatment to maintain its status as a company engaged in such Active Trade or Business for purposes of Section 355(b)(2) of the Code and any such other Applicable Tax Law, and (z) not engage in any transaction or permit any other member of the Kontoor Brands Group to engage in any transaction that would result in a member of the Kontoor Brands Group described in clause (y) hereof ceasing to be a company engaged in the relevant Active Trade or Business for purposes of Section 355(b)(2) of the Code or such other Applicable Tax Law, taking into account Section 355(b)(3) of the Code for purposes of each of clauses (w) through (z) hereof;

(B) Kontoor Brands shall not take or fail to take any action that would result in the Wrangler Reorganization failing to satisfy the “continuity of business enterprise” requirement within the meaning of Treasury Regulation 1.368-1(d)(1) for purposes of qualifying the Wrangler Reorganization as a reorganization described in Section 368(a);

(C) Kontoor Brands shall not repurchase stock of Kontoor Brands in a manner contrary to the requirements of Section 4.05(1)(b) of IRS Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by IRS Revenue Procedure 2003-48) or inconsistent with any representations made by Kontoor Brands to Tax Advisers in connection with the Tax Representation Letters;

(D) Kontoor Brands shall not, and shall not agree to, merge, consolidate or amalgamate with any other Person;

(E) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to, or to agree to, sell or otherwise issue to any Person, any Equity Interests of Kontoor Brands or of any other member of the Kontoor Brands Group; provided, however, that Kontoor Brands may issue Equity Interests to the extent such issuances satisfy Safe Harbor VIII (relating to acquisitions in

 

12


connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d);

(F) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to (I) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Interests of Kontoor Brands, (II) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Interests of Kontoor Brands or (III) approve or otherwise permit any proposed business combination or any transaction which, in the case of clauses (I) or (II), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Distribution, could result in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in Kontoor Brands (or any successor thereto) (any such transaction, a “Proposed Acquisition Transaction”); provided further that any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in the restrictions in this clause (iv) and the interpretation thereof;

(G) if any member of the Kontoor Brands Group proposes to enter into any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 25% instead of 40% (a “Section 9(b)(iv)(F) Acquisition Transaction”) or, to the extent Kontoor Brands has the right to prohibit any Section 9(b)(iv)(F) Acquisition Transaction, proposes to permit any Section 9(b)(iv)(F) Acquisition Transaction to occur, in each case, Kontoor Brands shall provide VF, no later than 10 Business Days following the signing of any written agreement with respect to the Section 9(b)(iv)(F) Acquisition Transaction, a written description of such transaction (including the type and amount of Equity Interests of Kontoor Brands to be issued in such transaction) and a certificate of the board of directors of Kontoor Brands to the effect that the Section 9(b)(iv)(F) Acquisition Transaction is not a Proposed Acquisition Transaction; and

(H) Kontoor Brands shall not, and shall not permit any other member of the Kontoor Brands Group to, amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of the Equity Interests of Kontoor Brands (including, without limitation, through the conversion of one class of Equity Interests of Kontoor Brands into another class of Equity Interests of Kontoor Brands).

(v) Kontoor Brands shall not take or fail to take, or permit any other member of the Kontoor Brands Group to take or fail to take, any action which prevents or could reasonably be expected to result in Tax treatment that is inconsistent with the Intended Tax Treatment.

(c) Kontoor Brands Covenants Exceptions. Notwithstanding the provisions of Section 9(b), Kontoor Brands and the other members of the Kontoor Brands Group may take any action that would reasonably be expected to be inconsistent with the covenants contained in Section 9(b), if either: (i) Kontoor Brands notifies VF of its proposal to take such action and Kontoor Brands and VF obtain a ruling from the IRS to the effect that such action will not affect the Intended Tax Treatment, provided that Kontoor Brands agrees in writing to bear any expenses associated with obtaining such a ruling and, provided further that the Kontoor Brands Group shall not be relieved of any liability under Section 11(a) of this Agreement by reason of seeking or having obtained such a ruling; or (ii) Kontoor Brands notifies VF of its proposal to take such action and obtains an unqualified opinion of counsel (A) from a Tax advisor recognized as an expert in federal income Tax matters and acceptable to VF in its sole discretion, (B) on which VF may rely and (C) to the effect that such action “will” not affect the Intended Tax Treatment, provided that the Kontoor Brands Group shall not be relieved of any liability under Section 11(a) of this Agreement by reason of having obtained such an opinion.

 

13


Section 10. Tax Receivables Arrangements.

(a) Section 336(e) Election. Pursuant to Treasury Regulations Sections 1.336-2(h)(1)(i) and 1.336-2(j), VF and Kontoor Brands agree that VF may make a timely protective election under Section 336(e) of the Code and the Treasury Regulations issued thereunder and under any comparable provisions of state, local or non-U.S. law for each member of the Kontoor Brands Group that is a domestic corporation for U.S. federal income Tax purposes with respect to the Distribution (a “Section 336(e) Election”). It is intended that a Section 336(e) Election will have no effect unless the Distribution is a “qualified stock disposition,” as defined in Treasury Regulations Section 1.336(e)-1(b)(6), by reason of the application of Treasury Regulations Section 1.336-1(b)(5)(i)(B) or Treasury Regulations Section 1.336-1(b)(5)(ii), or under any comparable provisions of state, local or non-U.S. law in any other jurisdiction.

(b) VF TRA. If any Specified Event results in the imposition of a liability on the part of a member of the VF Group for Taxes (including (x) as a result of any Tax consequence not otherwise taken into account in Schedule A with respect to such Internal Specified Transactions and (y) Taxes attributable to the Section 336(e) Election) that are not allocated to Kontoor Brands pursuant to Section 3, (i) VF shall be entitled to periodic payments from Kontoor Brands equal to the product of (x) 85% of the Tax Attributes arising from such Specified Event and (y) the percentage of Taxes arising from such Specified Event that are not allocated to Kontoor Brands pursuant to Section 3, and (ii) the Parties shall negotiate in good faith the terms of a tax receivable agreement to govern the calculation of such payments; provided that any such tax savings in clause (i) shall be determined using a “with and without” methodology (treating any Tax Attribute arising from any Specified Event as the last items claimed for any Taxable year, including after the utilization of any carryforwards). Notwithstanding the foregoing, VF may, at its sole discretion, waive its right to receive any and all payments pursuant to this Section 10(b).

Section 11. Indemnities.

(a) Kontoor Brands Indemnity to VF. Kontoor Brands and each other member of the Kontoor Brands Group shall jointly and severally indemnify VF and the other members of the VF Group against, and hold them harmless, without duplication, from:

(i) any Tax liability allocated to Kontoor Brands pursuant to Section 3;

(ii) any Tax liability and Tax-Related Losses attributable to a breach, after the Distribution Time, by Kontoor Brands or any other member of the Kontoor Brands Group of any representation or covenant contained in this Agreement;

(iii) any Distribution Taxes and Tax-Related Losses attributable to a Kontoor Brands Disqualifying Action (including, for the avoidance of doubt, any Taxes and Tax-Related Losses resulting from any action for which the conditions set forth in Section 9(c) are satisfied); and

(iv) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax liability or damage described in (i), (ii) or (iii), including those incurred in the contest in good faith in appropriate proceedings relating to the imposition, assessment or assertion of any such Tax, liability or damage.

provided, however Kontoor Brands and each member of the Kontoor Brands Group shall not have any obligation or liability for indemnification or other payments, however characterized, under Section 11(a) for any individual indemnity claim against Kontoor Brands or any member of the Kontoor Brands Group to the extent VF and Kontoor Brands agree in writing that the aggregate amount of such individual indemnity claim is de minimis.

 

14


(b) VF Indemnity to Kontoor Brands. Except in the case of any liabilities described in Section 11(a), VF and each other member of the VF Group will jointly and severally indemnify Kontoor Brands and the other members of the Kontoor Brands Group against, and hold them harmless, without duplication, from:

(i) any Tax liability allocated to VF pursuant to Section 3;

(ii) any Taxes imposed on any member of the Kontoor Brands Group under Treasury Regulations Section 1.1502-6 (or similar or analogous provision of state, local or foreign law) solely as a result of any such member being or having been a member of a Combined Group; and

(iii) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any Tax liability or damage described in (i) or (ii), including those incurred in the contest in good faith in appropriate proceedings relating to the imposition, assessment or assertion of any such Tax, liability or damage;

provided, however VF and each member of the VF Group shall not have any obligation or liability for indemnification or other payments, however characterized, under Section 11(b) for any individual indemnity claim against VF or any member of the VF Group to the extent VF and Kontoor Brands agree in writing that the aggregate amount of such individual indemnity claim is de minimis.

(c) Discharge of Indemnity. Kontoor Brands, VF and the members of their respective Groups shall discharge their obligations under Section 11(a) or Section 11(a)(iv) hereof, respectively, by paying the relevant amount in accordance with Section 12, within 30 Business Days of demand therefor or, to the extent such amount is required to be paid to a Taxing Authority prior to the expiration of such 30 Business Days, at least 10 Business Days prior to the date by which the demanding party is required to pay the related Tax liability. Any such demand shall include a statement showing the amount due under Section 11(a) or Section 11(a)(iv), as the case may be. Notwithstanding the foregoing, if any member of the Kontoor Brands Group or any member of the VF Group disputes in good faith the fact or the amount of its obligation under Section 11(a) or Section 11(b), then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Section 25 hereof; provided, however, that any amount not paid within 30 Business Days of demand therefor shall bear interest as provided in Section 12.

(d) Tax Benefits. If an indemnification obligation of any Indemnifying Party under this Section 11 arises in respect of an adjustment that makes allowable to an Indemnitee any Tax Benefit which would not, but for such adjustment, be allowable, then any such indemnification obligation shall be an amount equal to (i) the amount otherwise due but for this Section 11(d), minus (ii) the reduction in actual cash Taxes payable by the Indemnitee in the Taxable year such indemnification obligation arises and the two Taxable years following such year, determined on a “with and without” basis.

Section 12. Payments.

(a) Timing. All payments to be made under this Agreement (excluding, for the avoidance of doubt, any payments to a Taxing Authority described herein) shall be made in immediately available funds. Except as otherwise provided, all such payments will be due 30 Business Days after the receipt of notice of such payment or, where no notice is required, 30 Business Days after the fixing of liability or the resolution of a dispute (the “Due Date”). Payments shall be deemed made when received. Any payment that is not made on or before the Due Date shall bear interest at the rate equal to the “prime” rate as published on such Due Date in the Wall Street Journal, Eastern Edition, for the period from and including the date immediately following the Due Date through and including the date of payment. With respect to any payment required to be made under this Agreement, VF has the right to designate, by written notice to Kontoor Brands, which member of the VF Group will make or receive such payment.

(b) Treatment of Payments. To the extent permitted by Applicable Tax Law, any payment made by VF or any member of the VF Group to Kontoor Brands or any member of the Kontoor Brands Group, or by Kontoor

 

15


Brands or any member of the Kontoor Brands Group to VF or any member of the VF Group, pursuant to this Agreement, the Separation Agreement or any other Distribution Document that relates to Taxable periods (or portions thereof) ending on or before the Distribution Date shall be treated by the parties hereto for all Tax purposes as a distribution by Kontoor Brands to VF, or a capital contribution from VF to Kontoor Brands, as the case may be; provided, however, that any payment made pursuant to Section 2.03(c) of the Separation Agreement shall instead be treated as if the party required to make a payment of received amounts had received such amounts as agent for the other party; provided further that any payment made pursuant to Section 3 of the Transition Services Agreement shall instead be treated as a payment for services. In the event that a Taxing Authority asserts that a party’s treatment of a payment described in this Section 12(b) should be other than as required herein, such party shall use its reasonable best efforts to contest such assertion in a manner consistent with Section 15 of this Agreement.

(c) No Duplicative Payment. It is intended that the provisions of this Agreement shall not result in a duplicative payment of any amount required to be paid under the Separation Agreement or any other Distribution Document, and this Agreement shall be construed accordingly.

Section 13. Guarantees. VF and Kontoor Brands, as the case may be, each hereby guarantees and agrees to otherwise perform the obligations of each other member of the VF Group or the Kontoor Brands Group, respectively, under this Agreement.

Section 14. Communication and Cooperation.

(a) Consult and Cooperate. VF and Kontoor Brands shall consult and cooperate (and shall cause each other member of their respective Groups to consult and cooperate) fully at such time and to the extent reasonably requested by the other party in connection with all matters subject to this Agreement. Such cooperation shall include, without limitation:

(i) the retention, and provision on reasonable request, of any and all information including all books, records, documentation or other information pertaining to Tax matters relating to the Kontoor Brands Group (or, in the case of any Tax Return of the VF Group, the portion of such return that relates to Taxes for which the Kontoor Brands Group may be liable pursuant to this Agreement), any necessary explanations of information, and access to personnel, until one year after the expiration of the applicable statute of limitation (giving effect to any extension, waiver or mitigation thereof);

(ii) the execution of any document that may be necessary (including to give effect to Section 15) or helpful in connection with any required Tax Return or in connection with any audit, proceeding, suit or action; and

(iii) the use of the parties’ commercially reasonable efforts to obtain any documentation from a Governmental Authority or a third party that may be necessary or helpful in connection with the foregoing.

(b) Provide Information. Except as set forth in Section 15, VF and Kontoor Brands shall keep each other reasonably informed with respect to any material development relating to the matters subject to this Agreement.

(c) Tax Attribute Matters. VF and Kontoor Brands shall promptly advise each other with respect to any proposed Tax adjustments that are the subject of an audit or investigation, or are the subject of any proceeding or litigation, and that may affect any Tax liability or any Tax Attribute (including, but not limited to, basis in an asset or the amount of earnings and profits) of any member of the Kontoor Brands Group or any member of the VF Group, respectively.

(d) Confidentiality and Privileged Information. Any information or documents provided under this Agreement shall be kept confidential by the party receiving the information or documents, except as may otherwise be necessary in connection with the filing of required Tax Returns or in connection with any audit, proceeding, suit or action. Without limiting the foregoing (and notwithstanding any other provision of this

 

16


Agreement or any other agreement), (i) no member of the VF Group or Kontoor Brands Group, respectively, shall be required to provide any member of the Kontoor Brands Group or VF Group, respectively, or any other Person access to or copies of any information or procedures other than information or procedures that relate solely to Kontoor Brands, the business or assets of any member of the Kontoor Brands Group, or matters for which Kontoor Brands or VF Group, respectively, has an obligation to indemnify under this Agreement, and (ii) in no event shall any member of the VF Group or the Kontoor Brands Group, respectively, be required to provide any member of the Kontoor Brands Group or VF Group, respectively, or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any privilege. Notwithstanding the foregoing, in the event that VF or Kontoor Brands, respectively, determines that the provision of any information to any member of the Kontoor Brands Group or VF Group, respectively, could be commercially detrimental or violate any law or agreement to which VF or Kontoor Brands, respectively, is bound, VF or Kontoor Brands, respectively, shall not be required to comply with the foregoing terms of this Section 14(d) except to the extent that it is able, using commercially reasonable efforts, to do so while avoiding such harm or consequence (and shall promptly provide notice to VF or Kontoor Brands, to the extent such access to or copies of any information is provided to a Person other than a member of the VF Group or Kontoor Brands Group (as applicable)).

Section 15. Audits and Contest.

(a) Notice. Each of VF or Kontoor Brands shall promptly notify the other in writing upon the receipt of any notice of Tax Proceeding from the relevant Taxing Authority that may affect the liability of any member of the Kontoor Brands Group or the VF Group, respectively, for Taxes under Applicable Law or this Agreement; provided, that a party’s right to indemnification under this Agreement shall not be limited in any way by a failure to so notify, except to the extent that the indemnifying party is prejudiced by such failure.

(b) VF Control. Notwithstanding anything in this Agreement to the contrary but subject to Section 15(d), VF shall have the right to control all matters relating to any Tax Return, or any Tax Proceeding, with respect to any Tax matters of (x) a Combined Group or any member of a Combined Group (as such), and (y) any member of the Kontoor Brands Group with respect to any Pre-Distribution Period. VF shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any Tax matter described in the preceding sentence; provided, however, that to the extent that VF has the right to control any Tax Proceeding that relates to a Kontoor Brands Separate Tax Return or a member of the Kontoor Brands Group, VF shall keep Kontoor Brands reasonably informed of all material developments and events relating to any such Tax Proceeding described in this proviso; provided, further, that to the extent that any Tax Proceeding relating to such a Tax matter is reasonably likely to give rise to an indemnity obligation of Kontoor Brands under Section 11 hereof, (i) VF shall keep Kontoor Brands informed of all material developments and events relating to any such Tax Proceeding described in this proviso and (ii) at its own cost and expense, Kontoor Brands shall have the right to participate in (but not to control) the defense of any such Tax Proceeding.

(c) Kontoor Brands Assumption of Control; Non-Distribution Taxes. If VF determines that the resolution of any matter pursuant to a Tax Proceeding (other than a Tax Proceeding relating to Distribution Taxes) is reasonably likely to have an adverse effect on the Kontoor Brands Group with respect to any Post-Distribution Period, VF, in its sole discretion, may permit Kontoor Brands to elect to assume control over disposition of such matter at Kontoor Brands’ sole cost and expense; provided, however, that if Kontoor Brands so elects, it will (i) be responsible for the payment of any liability arising from the disposition of such matter notwithstanding any other provision of this Agreement to the contrary and (ii) indemnify the VF Group for any increase in a liability and any reduction of a Tax asset of the VF Group arising from such matter.

(d) Kontoor Brands Participation; Distribution Taxes. VF shall have the right to control any Tax Proceeding relating to Distribution Taxes, provided that VF shall keep Kontoor Brands fully informed of all material developments and shall permit Kontoor Brands a reasonable opportunity to participate in the defense of the matter.

 

17


Section 16. Notices. Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, email transmission, or mail, to the following addresses:

if to VF or the VF Group, to:

VF Corporation

105 Corporate Center Blvd.

Greensboro, North Carolina 27408

Attention: [—]

Email: [—]

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:  Neil Barr

Email:        neil.barr@davispolk.com

if to Kontoor Brands or the Kontoor Brands Group, to:

Kontoor Brands

400 N. Elm Street,

Greensboro, North Carolina 27401

Attention:  [—]

Email:        [—]

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other party hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 17. Costs and Expenses. Except as expressly set forth in this Agreement or the Separation Agreement, each party shall bear its own costs and expenses incurred pursuant to this Agreement. For purposes of this Agreement, costs and expenses shall include, but not be limited to, reasonable attorneys’ fees, accountants’ fees and other related professional fees and disbursements. For the avoidance of doubt, unless otherwise specifically provided in the Distribution Documents, all liabilities, costs and expenses incurred in connection with this Agreement by or on behalf of Kontoor Brands or any member of the Kontoor Brands Group in any Pre-Distribution Period shall be the responsibility of VF and shall be assumed in full by VF.

Section 18. Effectiveness; Termination and Survival. Except as expressly set forth in this Agreement, as between VF and Kontoor Brands, this Agreement shall become effective upon the consummation of the Distribution. All rights and obligations arising hereunder shall survive until they are fully effectuated or performed; provided that, notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for one year after the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) and, with respect to any claim hereunder initiated prior to the end of such period, until such claim has been satisfied or otherwise resolved. This agreement shall terminate without any further action at any time before the Distribution upon termination of the Separation Agreement.

Section 19. Specific Performance. Each party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur. In recognition of this fact, each party agrees that, if there is a breach or threatened breach, in

 

18


addition to any damages, the other nonbreaching party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching party (i) to perform its obligations under this Agreement or (ii) if the breaching party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including transferring, or granting liens on, the assets of the breaching party to secure the performance by the breaching party of those obligations).

Section 20. Construction. In this Agreement, unless the context clearly indicates otherwise:

(a) words used in the singular include the plural and words used in the plural include the singular;

(b) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(c) except as otherwise clearly indicated, reference to any gender includes the other gender;

(d) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

(e) reference to any Article, Section, Exhibit or Schedule means such Article or Section of, or such Exhibit or Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(f) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(g) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(h) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(i) relative to the determination of any period of time, “from” means “from and including,” “to” means “to and including” and “through” means “through and including”;

(j) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement;

(k) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States; and

(l) any capitalized term used in an Exhibit or Schedule but not otherwise defined therein shall have the meaning set forth in this Agreement.

Section 21. Entire Agreement; Amendments and Waivers.

(a) Entire Agreement.

(i) This Agreement and the other Distribution Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements,

 

19


understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein or in the other Distribution Documents has been made or relied upon by any party hereto or any member of their Group with respect to the transactions contemplated by the Distribution Documents. This Agreement is an “Ancillary Agreement” as such term is defined in the Separation Agreement and shall be interpreted in accordance with the terms of the Separation Agreement in all respects, provided that in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation Agreement, the terms of this Agreement shall control in all respects.

(ii) THE PARTIES ACKNOWLEDGE AND AGREE THAT NO REPRESENTATION, WARRANTY, PROMISE, INDUCEMENT, UNDERSTANDING, COVENANT OR AGREEMENT HAS BEEN MADE OR RELIED UPON BY ANY PARTY OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN THE OTHER DISTRIBUTION DOCUMENTS. WITHOUT LIMITING THE GENERALITY OF THE DISCLAIMER SET FORTH IN THE PRECEDING SENTENCE, NEITHER VF NOR ANY OF ITS AFFILIATES HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES IN ANY PRESENTATION OR WRITTEN INFORMATION RELATING TO THE JEANSWEAR BUSINESS GIVEN OR TO BE GIVEN IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS OR IN ANY FILING MADE OR TO BE MADE BY OR ON BEHALF OF VF OR ANY OF ITS AFFILIATES WITH ANY GOVERNMENTAL AUTHORITY, AND NO STATEMENT MADE IN ANY SUCH PRESENTATION OR WRITTEN MATERIALS, MADE IN ANY SUCH FILING OR CONTAINED IN ANY SUCH OTHER INFORMATION SHALL BE DEEMED A REPRESENTATION OR WARRANTY HEREUNDER OR OTHERWISE. KONTOOR BRANDS ACKNOWLEDGES THAT VF HAS INFORMED IT THAT NO PERSON HAS BEEN AUTHORIZED BY VF OR ANY OF ITS AFFILIATES TO MAKE ANY REPRESENTATION OR WARRANTY IN RESPECT OF THE JEANSWEAR BUSINESS OR IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS, UNLESS IN WRITING AND CONTAINED IN THIS AGREEMENT OR IN ANY OF THE OTHER DISTRIBUTION DOCUMENTS TO WHICH THEY ARE A PARTY.

(b) Amendments and Waivers.

(i) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by VF and Kontoor Brands, or in the case of a waiver, by the party against whom the waiver is to be effective.

(ii) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 22. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state.

Section 23. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or in any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from the transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the

 

20


world, whether within or outside of the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 16 shall be deemed effective service of process on such party.

Section 24. WAVIER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 25. Dispute Resolution. In the event of any dispute relating to this Agreement, the parties shall work together in good faith to resolve such dispute within thirty (30) days. In the event that such dispute is not resolved, upon written notice by a party after such thirty (30)-day period, the matter shall be referred to a U.S. Tax counsel or other Tax advisor of recognized national standing (the “Tax Arbiter”) that will be jointly chosen by the VF and Kontoor Brands; provided, however, that, if the VF and Kontoor Brands do not agree on the selection of the Tax Arbiter after five (5) days of good faith negotiation, the Tax Arbiter shall consist of a panel of three U.S. Tax counsel or other Tax advisor of recognized national standing with one member chosen by the VF, one member chosen by Kontoor Brands, and a third member chosen by mutual agreement of the other members within the following ten (10)-day period. Each decision of a panel Tax Arbiter shall be made by majority vote of the members. The Tax Arbiter may, in its discretion, obtain the services of any third party necessary to assist it in resolving the dispute. The Tax Arbiter shall furnish written notice to the parties to the dispute of its resolution of the dispute as soon as practicable, but in any event no later than ninety (90) days after acceptance of the matter for resolution. Any such resolution by the Tax Arbiter shall be binding on the parties, and the parties shall take, or cause to be taken, any action necessary to implement such resolution. All fees and expenses of the Tax Arbiter shall be shared equally by the parties to the dispute.

Section 26. Counterparts; Effectiveness; Third-Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). Except for Section 14(d) and the indemnification and release provisions of Section 11, neither this Agreement nor any provision hereof is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns.

Section 27. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto. If any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under the Distribution Documents.

Section 28. Change in Tax Law. Any reference to a provision of the Code, Treasury Regulations or any other Applicable Tax Law shall include a reference to any applicable successor provision of the Code, Treasury Regulations or other Applicable Tax Law.

Section 29. Performance. Each party shall cause to be performed all actions, agreements and obligations set forth herein to be performed by any member of such party’s Group.

[SIGNATURE PAGE FOLLOWS]

 

21


IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first written above.

 

VF on its own behalf and on behalf of the
members of the VF Group
By:  

 

  Name:
  Title:

 

Kontoor Brands on its own behalf and on behalf
of the members of the Kontoor Brands Group
By:  

 

  Name:
  Title:

 

22

EX-10.3 7 d618285dex103.htm EX-10.3 EX-10.3
Table of Contents

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

by and between

V.F. CORPORATION

and

KONTOOR BRANDS, INC.

Dated as of May [], 2019


Table of Contents

TABLE OF CONTENTS

 

     PAGE  

ARTICLE 1

DEFINITIONS

  

Section 1.01. Definitions

     1  

ARTICLE 2

GENERAL ALLOCATION OF LIABILITIES; INDEMNIFICATION

  

Section 2.01. Allocation of Employee-Related Liabilities

     7  

Section 2.02. Indemnification

     8  

ARTICLE 3

EMPLOYEES AND CONTRACTORS; EMPLOYMENT AND COLLECTIVE BARGAINING AGREEMENTS

  

Section 3.01. Transfers of Employment

     8  

Section 3.02. Contractors

     10  

Section  3.03. Assumption of Collective Bargaining Agreements; Labor Relations

     10  

Section  3.04. Assumption of Individual Kontoor Brands Employee Agreements and Kontoor Brands Contractor Agreements

     10  

Section 3.05. Assignment of Specified Rights

     10  

ARTICLE 4

PLANS

  

Section 4.01. Plan Participation

     11  

Section 4.02. Service Credit

     11  

ARTICLE 5

RETIREMENT PLANS

  

Section 5.01. 401(k) Plan

     11  

Section  5.02. Non-U.S. Defined Contribution Plans

     12  

Section 5.03. VF U.S. Qualified Pension Plan

     12  

Section  5.04. Non-U.S. Pension Plans

     12  

Section 5.05. VF NQ Savings Plans

     12  

Section 5.06. VF DCP

     13  

Section 5.07. VF SERP

     13  

Section 5.08. VF Directors Savings Plan

     13  

Section 5.09. Section 409A

     14  

ARTICLE 6

HEALTH AND WELFARE PLANS; PAID TIME OFF AND VACATION

  

Section  6.01. Cessation of Participation in VF H&W Plans; Participation in Kontoor Brands H&W Plans

     14  

Section  6.02. Assumption of Health and Welfare Plan Liabilities

     14  

Section 6.03. Retiree Health and Welfare Benefits

     15  

Section 6.04. Flexible Spending Account Plan Treatment

     15  

Section 6.05. Workers’ Compensation Liabilities

     15  

 

i


Table of Contents
     PAGE  

Section 6.06. Vacation and Paid Time Off

     15  

Section 6.07. COBRA

     16  

ARTICLE 7

INCENTIVE COMPENSATION

  

Section 7.01. VF Cash Incentive and Cash Bonus Plans

     16  

Section  7.02. Kontoor Brands Cash Incentive and Cash Bonus Plans

     16  

ARTICLE 8

TREATMENT OF OUTSTANDING EQUITY AWARDS

  

Section 8.01. RSUs

     16  

Section 8.02. PSUs

     17  

Section 8.03. Stock Options

     18  

Section 8.04. Special Awards

     19  

Section  8.05. Miscellaneous Terms and Actions; Tax Reporting and Withholding

     19  

ARTICLE 9

PERSONNEL RECORDS; PAYROLL AND TAX WITHHOLDING

  

Section 9.01. Personnel Records

     21  

Section 9.02. Payroll; Tax Reporting and Withholding

     22  

ARTICLE 10

NON-U.S. EMPLOYEES AND EMPLOYEE PLANS

  

Section  10.01. Special Provisions for Employees and Employee Plans Outside of the United States

     22  

ARTICLE 11

GENERAL AND ADMINISTRATIVE

  

Section 11.01. Sharing of Participant Information

     22  

Section 11.02. Cooperation

     23  

Section 11.03. Notices of Certain Events

     23  

Section 11.04. No Third-Party Beneficiaries

     23  

Section 11.05. Fiduciary Matters

     23  

Section 11.06. Consent of Third Parties

     24  

Section 11.07. Sponsored Employees

     24  

Section 11.08. No-Hire/Non-Solicitation of Employees

     24  

ARTICLE 12

MISCELLANEOUS

  

Section 12.01. General

     25  

 

ii


Table of Contents

EMPLOYEE MATTERS AGREEMENT

EMPLOYEE MATTERS AGREEMENT (the “Agreement”) dated as of May [—], 2019, between V.F. Corporation, a Pennsylvania corporation (“VF”), and Kontoor Brands, Inc., a North Carolina corporation (“Kontoor Brands”).

W I T N E S S E T H :

WHEREAS, the Board of Directors of VF has determined that it is in the best interests of VF and its stockholders to separate the Jeanswear Business from the VF Business;

WHEREAS, Kontoor Brands is a wholly owned Subsidiary of VF that has been incorporated for the sole purpose of, and has not engaged in activities except in preparation for, the Distribution (as defined below) and the transactions contemplated by this Agreement;

WHEREAS, in furtherance of the foregoing, the Board of Directors of VF (the “VF Board”) has determined that it is in the best interests of VF and its stockholders to distribute to the holders of the issued and outstanding shares of common stock, without par value and stated capital of $0.25 per share, of VF (the “VF Common Stock”) as of the Record Date, by means of a pro rata dividend, 100% of the issued and outstanding shares of common stock, without par value, of Kontoor Brands (such shares of common stock, the “Kontoor Brands Common Stock” and such distribution, the “Distribution”); and

WHEREAS, pursuant to the Separation and Distribution Agreement, VF and Kontoor Brands have agreed to enter into this Agreement for the purpose of allocating between them assets, liabilities and responsibilities with respect to certain employee matters, including employee compensation and benefit plans and programs.

NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Separation and Distribution Agreement, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions. (a) For purposes of this Agreement, the following terms shall have the following meanings; provided, that capitalized terms used but not otherwise defined in this Section 1.01 shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement:

Action” means any demand, claim, suit, action, arbitration, inquiry, investigation or other proceeding by or before any Governmental Authority or any arbitration or mediation tribunal.

Adjusted VF Awards” means, collectively, the Adjusted VF Options, the Adjusted VF PSUs, the Adjusted VF RSUs and the Adjusted VF Special Awards.

Adjusted VF Option” means any VF Option adjusted pursuant to Section 8.03(a) or Section 8.03(c) hereto.

Adjusted VF PSU” means any VF PSU adjusted pursuant to Section 8.02(b)(ii) or Section 8.02(c)(ii) hereto.

Adjusted VF RSU” means any VF RSU adjusted pursuant to Section 8.01(b) hereto.

Adjusted VF Special Awards” means any VF Special Award adjusted pursuant to Section 8.04(b) hereto.

 

1


Table of Contents

Agreement” means this Employee Matters Agreement, including all of the schedules and exhibits hereto.

Applicable Law” has the meaning set forth in the Separation and Distribution Agreement.

COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as codified in Section 4980B of the Code and Sections 601 through 608 of ERISA.

Code” means the Internal Revenue Code of 1986, as amended from time to time.

Collective Bargaining Agreement” means any and all agreements, memoranda of understanding, contracts, letters, side letters and contractual obligations of any kind, nature and description, oral or written, that have been entered into between or that involve or apply to any employer and any labor organization, union, employee association, agency or employee committee or plan.

Delayed Transfer Employee” means any Kontoor Brands Inactive Employee, Transferred Kontoor Brands Employee or Sponsored Employee (to the extent applicable).

Distribution Date” has the meaning set forth in the Separation and Distribution Agreement.

Distribution Ratio” means the number of shares of Kontoor Brands Common Stock distributed in the Distribution in respect of one share of VF Common Stock.

Employee Plan” means any (a) “employee benefit plan” as defined in Section 3(3) of ERISA, (b) compensation, employment, consulting, severance, termination protection, change in control, transaction bonus, retention or similar plan, agreement, arrangement, program or policy or (c) other plan, agreement, arrangement, program or policy providing for compensation, bonuses, profit-sharing, equity or equity-based compensation or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangement), medical, dental, vision, prescription or fringe benefits, life insurance, relocation or expatriate benefits, perquisites, disability or sick leave benefits, employee assistance program, supplemental unemployment benefits or post-employment or retirement benefits (including compensation, pension, health, medical or insurance benefits), in each case whether or not written.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended, together with the rules and regulations promulgated thereunder.

Exchange Act” means the Securities Exchange Act of 1934.

Former Kontoor Brands Employee” means each individual who, as of immediately prior to the Distribution Date, is a former employee who was last actively employed primarily with respect to the Jeanswear Business by any member of the VF Group or the Kontoor Brands Group.

Former VF Employee” means each individual who, as of immediately prior to the Distribution Date, is a former employee of any member of the VF Group.

Governmental Authority” means any multinational, foreign, federal, state, local or other governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral authority which has any jurisdiction or control over either party (or any of their Affiliates).

H&W Plan” means any VF H&W Plan or Kontoor Brands H&W Plan.

Jeanswear Business” has the meaning set forth in the Separation and Distribution Agreement.

 

2


Table of Contents

Kontoor Brands 401(k) Plan” means any Kontoor Brands Plan that is a defined contribution plan intended to qualify under Section 401(a) of the Code.

Kontoor Brands Active Employee” means any individual actively employed primarily with respect to the Jeanswear Business by any member of Kontoor Brands or the Kontoor Brands Group.

Kontoor Brands Assets” has the meaning set forth in the Separation and Distribution Agreement.

Kontoor Brands Awards” means, collectively, the Kontoor Brands Options, the Kontoor Brands PSUs, the Kontoor Brands RSUs and the Kontoor Brands Special Awards.

Kontoor Brands Board” means the Board of Directors for Kontoor Brands.

Kontoor Brands CBA” means any Collective Bargaining Agreement covering Kontoor Brands Employees or Kontoor Brands Contractors, as applicable, a complete and accurate list of which has been provided by VF to Kontoor Brands prior to the Distribution.

Kontoor Brands Compensation Committee” means the Talent and Compensation Committee of the Kontoor Brands Board.

Kontoor Brands Contractor” means each individual independent contractor or consultant who, as of the Distribution Date, primarily provides or provided services with respect to the Jeanswear Business.

Kontoor Brands Director” means a member of the Kontoor Brands Board.

Kontoor Brands Employee” means each (a) individual who, as of the Distribution Date, is (i) a Kontoor Brands Active Employee or (ii) an inactive employee (excluding any Kontoor Brands Inactive Employee) primarily employed with respect to the Jeanswear Business by any member of Kontoor Brands or the Kontoor Brands Group, (b) a VF Employee who has contractually agreed to transfer to Kontoor Brands or the Kontoor Brands Group on or after the Distribution Date, (c) a Transferred Kontoor Brands Employee or (d) a New Kontoor Brands Employee.

Kontoor Brands Group” has the meaning set forth in the Separation and Distribution Agreement.

Kontoor Brands H&W Plan” means any Kontoor Brands Plan that is (a) an “employee welfare benefit plan” or “welfare plan” (as defined under Section 3(1) of ERISA) or (b) a similar plan that is sponsored, maintained, administered, contributed to or entered into outside of the United States. For the avoidance of doubt, Kontoor Brands FSAs are Kontoor Brands H&W Plans.

Kontoor Brands Participant” means any individual who is a Kontoor Brands Employee or Kontoor Brands Contractor, and any beneficiary, dependent, or alternate payee of such individual, as the context requires.

Kontoor Brands Plan” means any Employee Plan (a) that is or was sponsored, maintained, administered, contributed to or entered into by any member of the Kontoor Brands Group, whether before, as of or after the Distribution Date or (b) for which Liabilities transfer to any member of the Kontoor Brands Group under this Agreement or pursuant to Applicable Law as a result of the Distribution.

Kontoor Brands Specified Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants, including covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or Intellectual Property, applicable or related, in whole or in part, to the Jeanswear Business pursuant to any Employee Plan covering or with any Kontoor Brands Employee or Kontoor Brands Contractor and to which any member of the Kontoor Brands Group or VF Group is a party; provided, that, with respect to

 

3


Table of Contents

any Intellectual Property existing, conceived, created, developed or reduced to practice prior to the Distribution Date, the foregoing rights to enjoy, benefit from or enforce any restrictive covenants related to Intellectual Property is limited to those restrictive covenants related to Intellectual Property included in the Kontoor Brands Assets.

Kontoor Brands Stock Value” means the value of Kontoor Brands Common Stock determined based on the methodology specified by the VF Compensation Committee and the Kontoor Brands Compensation Committee.

Liabilities” has the meaning set forth in the Separation and Distribution Agreement.

New Kontoor Brands Employee” means any individual who is hired following the Distribution Date to primarily provide services to the Jeanswear Business.

Non-U.S. Defined Contribution Plan” means any Employee Plan that is a defined contribution plan that provides benefits on retirement, and such other benefits as are provided for under the plan, to Non-U.S. Kontoor Brands Participants whether (i) exclusively or together with other participants and (ii) such plan is sponsored or maintained by a member of the Kontoor Brands Group or by a member of the VF Group or by any other Person.

Non-U.S. Kontoor Brands Participant” means any Kontoor Brands Participant who is not a U.S. Kontoor Brands Participant.

Non-U.S. Pension Plan” means any Employee Plan that is a defined benefit pension plan that provides benefits on retirement, and such other benefits as are provided for under the plan, to Non-U.S. Kontoor Brands Participants whether (i) exclusively or together with other participants and (ii) such plan is sponsored or maintained by a member of the Kontoor Brands Group or by a member of the VF Group or by any other Person.

Record Date” has the meaning set forth in the Separation and Distribution Agreement.

Retirement Eligible Employee” means a VF Employee or a Kontoor Brands Employee who, as of the Distribution Date, is age 55 or older and has worked for VF or Kontoor Brands for 10 years or more.

Separation and Distribution Agreement” means the Separation and Distribution Agreement dated as of May [—], 2019, by and between VF and Kontoor Brands, to which this Agreement is Exhibit [A].

Sponsored Employee” means any Kontoor Brands Employee working on a visa or work permit sponsored by VF or a VF Group member as of immediately prior to the Distribution Date.

Stub Period” means the period during which VF adjusted its fiscal year. For the avoidance of doubt, the Stub Period began on January 1, 2018 and concluded on March 31, 2018.

Transferred Kontoor Brands Employee” means any individual who VF and Kontoor Brands mutually agree following the Distribution Date should have his or her employment transferred from the VF Group to the Kontoor Brands Group.

U.S. Kontoor Brands Employee” means any Kontoor Brands Employee who is employed (or, in the case of former employees, was last actively employed) in the United States.

U.S. Kontoor Brands Participant” means any Kontoor Brands Participant employed or engaged (or, in the case of former employees, individual independent contractors or consultants, was last actively employed or engaged, as applicable) in the United States.

 

4


Table of Contents

VF 401(k) Plan” means any VF Plan that is a defined contribution plan intended to qualify under Section 401(a) of the Code.

VF Awards” means, collectively, the VF Options, the VF PSUs, the VF RSUs and the VF Special Awards.

VF Bonus Plan” means any VF Plan that is a cash bonus or cash incentive plan. For the avoidance of doubt, the V.F. Corporation Management Incentive Compensation Plan is a VF Bonus Plan.

VF CBA” means any Collective Bargaining Agreement covering VF Employees or VF Contractors, as applicable.

VF Compensation Committee” means the Talent and Compensation Committee of the VF Board.

VF Contractor” means each individual independent contractor or consultant (other than a Kontoor Brands Contractor) of any member of the VF Group, or solely for purposes of Article 8, any non-employee director of the VF Board.

VF DCP” means the V.F. Corporation Deferred Compensation Plan.

VF Director” means a member of the VF Board.

VF Directors Savings Plan” means the V.F. Corporation Amended and Restated Deferred Savings Plan for Non-Employee Directors.

VF EDSP” means the V.F. Corporation Executive Deferred Savings Plan.

VF EDSP II” means the V.F. Corporation Executive Deferred Savings Plan II.

VF Employee” means each individual who, as of the Distribution Date, is (a) not a Kontoor Brands Employee and (b) either (i) actively employed by any member of the VF Group or (ii) (x) an inactive employee (including any employee on short- or long-term disability leave or other authorized leave of absence) or (y) a former employee, in each case, of any member of the VF Group, including those former employees of the Jeanswear Business who become a former employee prior to the Distribution Date.

VF Equity Plan” means the V.F. Corporation 1996 Stock Compensation Plan.

VF FSA” means any VF Plan that is a flexible spending account for health and dependent care expenses.

VF Group” has the meaning set forth in the Separation and Distribution Agreement.

VF H&W Plan” means any VF Plan that is (a) an “employee welfare benefit plan” or “welfare plan” (as defined under Section 3(1) of ERISA) or (b) a similar plan that is sponsored, maintained, administered, contributed to or entered into outside of the United States. For the avoidance of doubt, VF FSAs are VF H&W Plans.

VF NQ Savings Plans” means the VF EDSP and the VF EDSP II.

VF Option” means each option to acquire VF Common Stock granted under the VF Equity Plan.

VF Participant” means any individual who is a VF Employee or VF Contractor, and any beneficiary, dependent or alternate payee of such individual, as the context requires.

 

5


Table of Contents

VF Plan” means any Employee Plan (other than a Kontoor Brands Plan) sponsored, maintained, administered, contributed to or entered into by any member of the VF Group. For the avoidance of doubt, no Kontoor Brands Plan is a VF Plan.

VF Post-Distribution Stock Value” means the value of VF Common Stock immediately following the Distribution Date, determined, for VF Employees, based on the methodology specified by the VF Compensation Committee and, for Kontoor Brands Employees, based on the methodology specified by the VF Compensation Committee and the Kontoor Brands Compensation Committee.

VF Pre-Distribution Stock Value” means the value of VF Common Stock immediately prior to the Distribution Date, determined, for VF Employees, based on the methodology specified by the VF Compensation Committee and, for Kontoor Brands Employees, based on the methodology specified by the VF Compensation Committee and the Kontoor Brands Compensation Committee.

VF PSU” means each award of restricted share units with respect to VF Common Stock granted under the VF Equity Plan subject to performance-based vesting conditions.

VF Retiree H&W Plan” means any VF H&W Plan that provides or promises any post-retirement health, medical or life insurance or similar benefits (whether insured or self-insured).

VF RSU” means each award of restricted share units with respect to VF Common Stock granted under the VF Equity Plan (other than VF PSUs).

VF SERP” means the V.F. Corporation Amended and Restated Supplemental Executive Retirement Plan.

VF Special Awards” means any restricted stock or restricted stock unit designated as a special award by VF.

VF Specified Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants, including covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or Intellectual Property, pursuant to any Employee Plan covering or with any Kontoor Brands Employee, Kontoor Brands Contractor, VF Employee or VF Contractor and to which any member of the Kontoor Brands Group or VF Group is a party (other than Kontoor Brands Specified Rights).

VF U.S. Qualified Pension Plan” means the V.F. Corporation Pension Plan.

(b)    Each of the following terms is defined in the Section set forth opposite such term:

 

Term

  

Section

2019 Kontoor Brands Cash Bonuses

  

Section 7.02

2019 VF Cash Bonuses

  

Section 7.01

Delayed Transfer Period

  

Section 3.01(b)

Distribution

  

Preamble

Kontoor Brands

  

Preamble

Kontoor Brands Assumed Employee Liabilities

  

Section 2.01(b)

Kontoor Brands Bonus Plan

  

Section 7.02

Kontoor Brands Change in Control

  

Section 8.05(c)

Kontoor Brands Common Stock

  

Preamble

Kontoor Brands Directors Savings Plan

  

Section 5.08(a)

Kontoor Brands Equity Plan

  

Section 8.05(a)

Kontoor Brands FSAs

  

Section 6.04

Kontoor Brands Inactive Employee

  

Section 3.01(b)

Kontoor Brands NQ Savings Plan

  

Section 5.05(a)

 

6


Table of Contents

Term

  

Section

Kontoor Brands Option

  

Section 8.03(b)

Kontoor Brands PSU

  

Section 8.02(c)(i)(B)

Kontoor Brands Rabbi Trust

  

Section 5.05(f)

Kontoor Brands RSU

  

Section 8.01(a)

Kontoor Brands Special Awards

  

Section 8.04(a)

Personnel Records

  

Section 9.01

Restricted Period

  

Section 11.08(a)

VF

  

Preamble

VF Board

  

Preamble

VF Change in Control

  

Section 8.05(c)

VF Common Stock

  

Preamble

VF Rabbi Trust

  

Section 5.05(f)

VF Retained Employee Liabilities

  

Section 2.01(a)

ARTICLE 2

GENERAL ALLOCATION OF LIABILITIES; INDEMNIFICATION

Section 2.01. Allocation of Employee-Related Liabilities.

(a)    Subject to the terms and conditions of this Agreement, effective as of the Distribution Date, VF shall, or shall cause the applicable member of the VF Group to, assume and retain, and no member of the Kontoor Brands Group shall have any further obligation with respect to, any and all Liabilities (i) relating to, arising out of or in respect of any VF Participant or any VF Plan, in each case, other than any Kontoor Brands Assumed Employee Liabilities (as defined below), or (ii) attributable to actions expressly specified to be taken by any member of the VF Group under this Agreement, in each case, (x) whether arising before, on or after the Distribution Date, (y) whether based on facts occurring before, on or after the Distribution Date and (z) irrespective of which Person such Liabilities are asserted against or which Person such Liabilities attached to as a matter of Applicable Law or contract or (iii) expressly assumed or retained, as applicable, by any member of the VF Group pursuant to this Agreement (collectively, “VF Retained Employee Liabilities”). For the avoidance of doubt, all VF Retained Employee Liabilities are VF Liabilities for purposes of the Separation and Distribution Agreement.

(b)    Subject to the terms and conditions of this Agreement, effective as of the Distribution Date, Kontoor Brands shall, or shall cause the applicable member of the Kontoor Brands Group to, assume, and no member of the VF Group shall have any further obligation with respect to, any and all Liabilities (i) relating to, arising out of or in respect of any Kontoor Brands Participant or any Kontoor Brands Plan or (ii) attributable to actions expressly specified to be taken by any member of the Kontoor Brands Group under this Agreement, in each case, (x) whether arising before, on or after the Distribution Date, (y) whether based on facts occurring before, on or after the Distribution Date and (z) irrespective of which Person such Liabilities are asserted against or which Person such Liabilities attached to as a matter of Applicable Law or contract (collectively, “Kontoor Brands Assumed Employee Liabilities”), including without limitation:

(i)    employment, separation or retirement agreements or arrangements to the extent applicable to any Kontoor Brands Participant;

(ii)    wages, salaries, incentive compensation, commissions, bonuses and other compensation payable to any Kontoor Brands Participants, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses and other compensation are or may have been earned;

(iii)    severance or similar termination-related pay or benefits applicable to any Kontoor Brands Participant relating to the termination or alleged termination of any Kontoor Brands Participant’s employment or service with the Kontoor Brands Group or VF Group that occurs prior to, at or after the Distribution;

 

7


Table of Contents

(iv)    claims made by or with respect to any Kontoor Brands Participant in connection with any employee benefit plan, program or policy, without regard to when such claim is in respect of;

(v)    workers’ compensation and unemployment compensation benefits for all Kontoor Brands Participants;

(vi)    change in control, transaction bonus, retention and stay bonuses payable to any Kontoor Brands Participants;

(vii)    the Kontoor Brands CBAs;

(viii)    any Applicable Law (including ERISA and the Code) to the extent related to participation by any Kontoor Brands Participant in any Employee Plan;

(ix)    any Actions, allegations, demands, assessments, settlements or judgments relating to or involving any Kontoor Brands Participant (including, without limitation, those relating to labor and employment, wages, hours, overtime, employee classification, hostile workplace, civil rights, discrimination, harassment, affirmative action, work authorization, immigration, safety and health, information privacy and security, workers’ compensation, continuation coverage under group health plans, wage payment, hiring practice and the payment and withholding of Taxes);

(x)    any costs or expenses incurred in designing, establishing and administering any Kontoor Brands Plans or payroll or benefits administration for Kontoor Brands Participants;

(xi)    the employer portion of any employment, payroll or similar Taxes relating to any of the foregoing or any Kontoor Brands Participant; and

(xii)    any Liabilities expressly assumed or retained, as applicable, by any member of the Kontoor Brands Group pursuant to this Agreement.

For the avoidance of doubt, all Kontoor Brands Assumed Employee Liabilities are Kontoor Brands Liabilities for purposes of the Separation and Distribution Agreement.

Section 2.02. Indemnification. For the avoidance of doubt, the provisions of Article 5 of the Separation and Distribution Agreement shall apply to and govern the indemnification rights and obligations of the parties with respect to the matters addressed by this Agreement.

ARTICLE 3

EMPLOYEES AND CONTRACTORS; EMPLOYMENT AND

COLLECTIVE BARGAINING AGREEMENTS

Section 3.01. Transfers of Employment.

(a)    Except as provided for in this Section 3.01, effective as of or prior to the Distribution Date, (i) the employment of each Kontoor Brands Employee, to the extent employed at such time, will be transferred to or continued by, as applicable, a member of the Kontoor Brands Group and (ii) the employment of each VF Employee, to the extent employed at such time, each Kontoor Brands Inactive Employee and each Former Kontoor Brands Employee will be continued by a member of the VF Group. Before the Distribution Date, VF and Kontoor Brands shall cooperate in good faith to transfer the employment of each Kontoor Brands Employee from the VF Group to the Kontoor Brands Group, and the parties shall use their reasonable best efforts to cause all such transfers of employment to occur no later than the Distribution Date; provided, however, that the parties agree to mutually cooperate to transfer the employment of any Transferred Kontoor Brands Employees to the Kontoor Brands Group as soon as possible following the Distribution Date and, unless as otherwise contemplated in connection with the Transition Services Agreement, in no event later than the expiration of the Delayed Transfer Period. For the avoidance of doubt, each Transferred Kontoor Brands Employee shall be deemed to be a Kontoor Brands Employee for all purposes of the Agreement following the applicable date of transfer of his or her employment from the VF Group to the Kontoor Brands Group.

 

8


Table of Contents

(b)    Notwithstanding anything to the contrary in this Agreement, each Kontoor Brands Employee who, except for any Kontoor Brands Employee who is eligible to receive awards under the VF Equity Plan, as of the Distribution Date, is on a leave of absence protected under the Family Medical Leave Act and/or receiving long-term or short-term disability benefits under a VF H&W Plan (each, a “Kontoor Brands Inactive Employee”) will continue to be employed by a member of the VF Group until such individual returns to active service. In the event that such Kontoor Brands Inactive Employee returns to active service on or before the six (6) month anniversary of the Distribution Date (the “Delayed Transfer Period”), Kontoor Brands will make an offer of employment to such Kontoor Brands Inactive Employee on terms and conditions of employment consistent with (A) this Agreement and (B) the terms and conditions of employment applicable to such Kontoor Brands Inactive Employee at such time). For the avoidance of doubt, (x) effective on or before the Distribution Date, the employment of each Kontoor Brands Employee who is eligible to receive awards under the VF Equity Plan and/or on an approved leave of absence (other than any Kontoor Brands Inactive Employee) will continue with or be transferred to, as applicable, the Kontoor Brands Group in accordance with Section 3.01(a), (y) all costs relating to any compensation, benefits, severance or other employment-related costs in respect of Kontoor Brands Inactive Employees will constitute Kontoor Brands Assumed Employee Liabilities and (z) any VF Employee that was to be a Kontoor Brands Inactive Employee but for the employee’s failure to return to active service on or before the six (6) month anniversary of the Distribution Date will not be considered a Kontoor Brands Inactive Employee, and the parties shall mutually cooperate in good faith to determine the status of such VF Employee. Any New Kontoor Brands Employees will be hired by a member of the Kontoor Brands Group, and will be deemed to be a Kontoor Brands Employee for all purposes of this Agreement from and after the applicable date of hire. For the avoidance of doubt, any New Kontoor Brands Employee will be deemed to be a Kontoor Brands Employee for all purposes of this Agreement following his or her applicable hire date (regardless of whether hired by a member of the Kontoor Brands Group or a member of the VF Group).

(c)    When required, each of the parties hereto agrees to execute, and to use his or her reasonable best efforts to have the applicable employees execute, any such documentation or consents as may be necessary or desirable to reflect or effectuate any such assignments or transfers contemplated by this Section 3.01.

(d)    Effective as of the Distribution Date, (i) Kontoor Brands shall adopt or maintain, and shall cause each member of the Kontoor Brands Group to adopt or maintain, leave of absence programs and (ii) Kontoor Brands shall honor, and shall cause each member of the Kontoor Brands Group to honor, all terms and conditions of authorized leaves of absence which have been granted to any Kontoor Brands Participant before the Distribution Date, including such leaves that are to commence on or after the Distribution Date.

(e)    In the event that the parties reasonably determine following the Distribution Date that (i) any individual employed outside the United States who is not a Kontoor Brands Employee has inadvertently become employed by a member of the Kontoor Brands Group (due to the operation of transfer of undertakings or similar Applicable Law), the parties shall cooperate and take such actions as may be reasonably necessary in order to cause the employment of such individual to be promptly transferred to a member of the VF Group, and VF shall reimburse the applicable members of the Kontoor Brands Group for all compensation, benefits and other employment-related costs incurred by the Kontoor Brands Group members in employing and transferring such individuals or (ii) any individual employed outside the United States who was intended to transfer to, and become employed by, a member of the Kontoor Brands Group pursuant to the operation of transfer of undertakings or similar Applicable Law instead continues to be employed by the VF Group, the parties shall cooperate and take such actions as may be reasonably necessary in order to cause the employment of such individual to be promptly transferred to a member of the Kontoor Brands Group, and Kontoor Brands shall reimburse the applicable members of the VF Group for all compensation, benefits and other employment-related costs incurred by VF Group members in employing and transferring such individuals.

(f)    With respect to any employment agreements or restrictive covenant agreements with Kontoor Brands Employees or VF Employees to which a member of the Kontoor Brands Group or a member of the VF Group, respectively, is not a party, or which do not otherwise transfer to a Kontoor Brands Group member or a VF

 

9


Table of Contents

Group member, respectively, by operation of Applicable Law, the parties shall use reasonable best efforts to assign the applicable employment agreement or restrictive covenant agreement to a member of the Kontoor Brands Group or a member of the VF Group, as applicable, in the applicable jurisdiction, and Kontoor Brands or VF, as applicable, shall, or shall cause a member of the Kontoor Brands Group or a member of the VF Group, respectively, to assume and perform such employment agreements or restrictive covenant agreements in accordance with their terms; provided, however, that this Section 3.01(f) shall not apply to any employment agreements or restrictive covenant agreements with any Kontoor Brands Participants who are employed in a jurisdiction outside of the United States in which the parties do not intend for such agreements to be transferred to the Kontoor Brands Group.

Except as provided in Section 8.05(k), with respect to any Delayed Transfer Employee, references to the “Distribution Date” in this Agreement, as applicable, shall in each case be deemed to refer to the date such Delayed Transfer Employee commences employment with the Kontoor Brands Group, mutatis mutandis, if later.

Section 3.02. Contractors. With respect to any independent contractor or consulting agreements with Kontoor Brands Contractors or VF Contractors to which a Kontoor Brands Group member or a VF Group member, respectively, is not a party, or which do not otherwise transfer to a Kontoor Brands Group member or a VF Group member, respectively, by operation of Applicable Law, the parties shall use reasonable best efforts to assign the applicable agreements to a member of the Kontoor Brands Group or a member of the VF Group, as applicable, in the applicable jurisdiction, and Kontoor Brands or VF, as applicable, shall, or shall cause a member of the Kontoor Brands Group or a member of the VF Group, respectively, to assume and perform any obligations under such independent contractor and consulting agreements.

Section 3.03. Assumption of Collective Bargaining Agreements; Labor Relations.

(a)    From and after the Distribution Date, Kontoor Brands hereby agrees to comply with and honor the Kontoor Brands CBAs and become, and fulfill its obligations as, a successor employer to the applicable VF Group member for all purposes under the Kontoor Brands CBAs with respect to any Kontoor Brands Employee or Kontoor Brands Contractor, and Kontoor Brands assumes responsibility for, and VF or the relevant member of the VF Group hereby ceases to be responsible for or to otherwise have any Liability in respect of, the Kontoor Brands CBAs to the extent that they pertain to any Kontoor Brands Employee or Kontoor Brands Contractor. To the extent that any Kontoor Brands CBA is maintained outside of the United States, Kontoor Brands agrees to assume and honor any obligations under such Kontoor Brands CBA, as such obligations relate to any Kontoor Brands Employee or Kontoor Brands Contractor, in accordance with industry and regulatory standards.

(b)    To the extent required by Applicable Law, any Kontoor Brands CBA, any VF CBA or any other Collective Bargaining Agreement, the parties shall cooperate and consult in good faith to provide notice, engage in consultation, and take any similar action that may be required on their part in connection with the Distribution.

Section 3.04. Assumption of Individual Kontoor Brands Employee Agreements and Kontoor Brands Contractor Agreements. From and after the Distribution Date, Kontoor Brands hereby agrees to comply with and honor any employment or services agreement between any member of the VF Group or the Kontoor Brands Group, as the case may be, on the one hand, and any Kontoor Brands Employee or Kontoor Brands Contractor, on the other hand, and assumes responsibility for, and, to the extent applicable, VF or the relevant member of the VF Group hereby ceases to be responsible for or to otherwise have any Liability in respect of, such agreements.

Section 3.05. Assignment of Specified Rights. To the extent permitted by Applicable Law and the applicable agreement, if any, effective as of the Distribution Date, (i) VF hereby assigns, to the maximum extent possible, on behalf of itself and the VF Group, the Kontoor Brands Specified Rights, to Kontoor Brands and (ii) Kontoor Brands hereby assigns, to the maximum extent possible, on behalf of itself and the Kontoor Brands Group, the VF Specified Rights, to VF.

 

10


Table of Contents

ARTICLE 4

PLANS

Section 4.01. Plan Participation. Except as otherwise expressly provided in this Agreement, effective as of immediately prior to the Distribution Date, (a) (i) all Kontoor Brands Participants shall cease any participation in, and benefit accrual under, the VF Plans and (ii) all members of the Kontoor Brands Group shall cease to be participating employers under the VF Plans and (b) to the extent applicable, (i) all VF Participants shall cease any participation in, and benefit accrual under, the Kontoor Brands Plans and (ii) all members of the VF Group shall cease to be participating employers under the Kontoor Brands Plans. Prior to the Distribution Date, VF and Kontoor Brands shall take all actions necessary to effectuate the actions contemplated by this Section 4.01 and to cause (A) the applicable Kontoor Brands Group member to have in effect such corresponding Kontoor Brands Plan as of the Distribution Date except as otherwise set forth in this Agreement, (B) the applicable Kontoor Brands Group Member to assume or retain all Liabilities with respect to each Kontoor Brands Plan and the applicable VF Group member to assume or retain all Liabilities with respect to each VF Plan, in each case, effective as of the Distribution Date and (C) all assets of any Kontoor Brands Plan to be transferred to or retained by the applicable Kontoor Brands Group member in the applicable jurisdiction and all assets of any VF Plan to be transferred to or retained by the applicable VF Group member in the applicable jurisdiction, in each case, effective as of the Distribution Date. Effective as of the Distribution Date, VF shall not be considered a fiduciary for any Kontoor Brands Plans.

Section 4.02. Service Credit. From and after the Distribution Date, for purposes of determining eligibility to participate, vesting and benefit accrual under any Kontoor Brands Plan in which a Kontoor Brands Employee is eligible to participate on and following the Distribution Date, such Kontoor Brands Employee’s service with any member of the VF Group or the Kontoor Brands Group, as the case may be, prior to the Distribution Date shall be treated as service with the Kontoor Brands Group, to the extent recognized by the VF Group or the Kontoor Brands Group, as applicable, under an analogous VF Plan or Kontoor Brands Plan, as applicable, prior to the Distribution Date; provided, however, that such service shall not be recognized to the extent that such recognition would result in any duplication of benefits.

ARTICLE 5

RETIREMENT PLANS

Section 5.01. 401(k) Plan.

(a)    Effective as of the Distribution Date, each Kontoor Brands Participant who participates in the VF 401(k) Plan immediately prior to the Distribution Date will (i) cease active participation in the VF 401(k) Plan and (ii) become eligible to participate in the Kontoor Brands 401(k) Plan. For the avoidance of doubt, all employee pre-tax deferrals and employer contributions with respect to the Kontoor Brands Participants will be made to the Kontoor Brands 401(k) Plan on and following the Distribution Date.

(b)    Effective as of the Distribution Date, the account balances, and any related participant loans, of all Kontoor Brands Participants that are active participants in the VF 401(k) Plan will be transferred from the VF 401(k) Plan to the Kontoor Brands 401(k) Plan via a trust-to-trust transfer, including all account balances and employee loans, as well as any residual liability, under the VF 401(k) Plan with respect to Kontoor Brands Participants in accordance with all Applicable Laws, including the Code; provided, however, that in the case of any Delayed Transferred Employees, such Kontoor Brands Participants’ account balances, including any related participant loans, will be transferred at the time each such Delayed Transferred Employee commences employment with a member of the Kontoor Brands Group. Following the time in which the trust-to-trust transfer is complete, Kontoor Brands and/or the Kontoor Brands 401(k) Plan shall assume all Liabilities of VF under the VF 401(k) Plan with respect to all participants in the VF 401(k) Plan whose balances and loans were transferred to the Kontoor Brands 401(k) Plan pursuant to this Section 5.01 and VF and the VF 401(k) Plan shall have no Liabilities to provide such participants with benefits under the VF 401(k) Plan following such transfer.

 

11


Table of Contents

(c)    From and after the Distribution Date, the applicable member of the Kontoor Brands Group shall be responsible for the administration of the Kontoor Brands 401(k) Plan, and no member of the VF Group shall have any Liability or obligation (including any administration obligation) with respect to the Kontoor Brands 401(k) Plan or any member of the Kontoor Brands Group with respect to the Kontoor Brands 401(k) Plan.

Section 5.02. Non-U.S. Defined Contribution Plans. As set forth in Article 10, and except as provided in this Section 5.02, the parties shall reasonably cooperate in good faith to effect the provisions of this Agreement with respect to any Non-U.S. Defined Contribution Plans, which in all cases shall be consistent with the general approach and philosophy regarding the allocation of assets and Liabilities (as expressly set forth in the recitals to this Agreement).

Section 5.03. VF U.S. Qualified Pension Plan.

(a)    Effective as of the Distribution Date, each Kontoor Brands Participant who participates in the VF U.S. Qualified Pension Plan will cease active participation in the VF U.S. Qualified Pension Plan. VF shall retain sponsorship of the VF U.S. Qualified Pension Plan and all assets and Liabilities relating to Kontoor Brands Participants under the VF U.S. Qualified Pension Plan, including any additional benefits accrued under the VF U.S. Qualified Pension Plan on or before December 31, 2018 (to the extent not yet contributed).

(b)    On or before June 30, 2019, VF shall credit to each Kontoor Brands Participant who participated in the VF U.S. Qualified Pension Plan on or before the Distribution Date, amounts provided under any VF Bonus Plan to the extent such amounts would be otherwise accrued under the VF U.S. Qualified Pension Plan.

Section 5.04. Non-U.S. Pension Plans. As set forth in Article 10, and except as provided in this Section 5.04, the parties shall reasonably cooperate in good faith to effect the provisions of this Agreement with respect to any Non-U.S. Pension Plans, which in all cases shall be consistent with the general approach and philosophy regarding the allocation of assets and Liabilities (as expressly set forth in the recitals to this Agreement).

Section 5.05. VF NQ Savings Plans.

(a)    Effective as of the Distribution Date, each Kontoor Brands Participant who participates in the VF NQ Savings Plans as of immediately prior to the Distribution Date (i) will cease active participation in the VF NQ Savings Plan and (ii) will become eligible to participate in a corresponding Kontoor Brands non-qualified savings and investment plan (the “Kontoor Brands NQ Savings Plans”). For the avoidance of doubt, from and after the Distribution Date, each Kontoor Brands Participant shall not actively participate in or accrue any additional benefits under the VF NQ Savings Plans.

(b)    On or before the Distribution Date, any and all costs, expenses or Liabilities relating to participation by Kontoor Brands Participants in the VF NQ Savings Plans shall be assumed by the Kontoor Brands Group and constitute Kontoor Brands Assumed Employee Liabilities. Effective as of the Distribution Date, (i) Kontoor Brands shall, and shall cause the Kontoor Brands NQ Savings Plans to, accept all assets and assume all Liabilities under the VF NQ Savings Plan with respect to Kontoor Brands Participants, (ii) VF shall, and shall cause the VF NQ Savings Plans to, transfer all such assets and Liabilities to the Kontoor Brands NQ Savings Plans and (iii) the VF NQ Savings Plans and the VF Group shall have no further Liability or obligation (including any administration obligation) with respect thereto. The VF NQ Savings Plans shall continue to be responsible for Liabilities in respect of VF Participants.

(c)    On and following the Distribution Date, any effective deferral elections made by a Kontoor Brands Participant with respect to amounts deferred by such Kontoor Brands Participant under, and in accordance with the terms of, the VF NQ Savings Plans prior to the Distribution Date, shall remain in effect with respect to such amounts in accordance with their terms.

 

12


Table of Contents

(d)    Kontoor Brands Participants shall receive credit under the Kontoor Brands NQ Savings Plans for vesting, eligibility and benefit service for all service credited for those purposes under the VF NQ Savings Plans as of the Distribution Date as if that service had been rendered to the Kontoor Brands Group.

(e)     To the maximum extent permitted by Section 409A of the Code, a Kontoor Brands Participant shall not be considered to have undergone a “separation from service” for purposes of Section 409A of the Code and the VF NQ Savings Plan solely by reason of the Distribution, and, following the Distribution Date, the determination of whether a Kontoor Brands Participant has incurred a separation from service with respect to his or her benefit in the Kontoor Brands NQ Savings Plan shall be based solely upon his or her performance of services for the Kontoor Brands Group.

(f)    On or before the Distribution Date, the Kontoor Brands Group shall adopt a rabbi trust (the “Kontoor Brands Rabbi Trust”), the terms of which shall be substantially similar to those of the trust governed by the Trust Agreement Between VF Corporation and Fidelity Management Trust Company, dated April 1, 2016 (“VF Rabbi Trust”). In connection with the assumption by the Kontoor Brands Group and the Kontoor Brands NQ Savings Plans of the Liabilities relating to participation by Kontoor Brands Participants in the VF NQ Savings Plans, on or as soon as reasonably practicable following the Distribution Date, VF shall, or shall cause the VF Rabbi Trust to, transfer in kind to the Kontoor Brands Rabbi Trust a percentage of the assets held by the VF Rabbi Trust (if any) equal to the percentage represented by a fraction, the numerator of which is the aggregate value of the account balances and accrued benefits of Kontoor Brands Participants under the VF NQ Savings Plans covered by the VF Rabbi Trust as of immediately prior to the Distribution Date and the denominator of which is the aggregate value of all account balances and accrued benefits of all participants under such plans as of immediately prior to the Distribution Date. VF Corporation shall also make an additional contribution to the Kontoor Brands Rabbi Trust equal to the Kontoor Brands Participants’ pro rata portion of certain corporate-owned life insurance used to pay VF NQ Savings Plan benefits.

Section 5.06. VF DCP. Effective as of the Distribution Date, VF shall retain sponsorship of the VF DCP but shall terminate and liquidate the VF DCP effective December 31, 2019, with distributions to affected VF Participants and Kontoor Brands Participants to occur in calendar year 2020.

Section 5.07. VF SERP.

(a)    Effective as of the Distribution Date, each Kontoor Brands Participant who participates in the VF SERP will cease active participation in the VF SERP. VF shall retain sponsorship of the VF SERP and all assets and Liabilities relating to Kontoor Brands Participants under the VF SERP, including any additional benefits accrued under the VF SERP on or before December 31, 2018 (to the extent not yet contributed).

(b)    On or before June 30, 2019, VF shall credit to each Kontoor Brands Participant who participated in the VF SERP on or before the Distribution Date, amounts provided under the VF Bonus Plan to the extent such amounts would be otherwise accrued under the VF SERP.

(c)    To the maximum extent permitted by Section 409A of the Code, a Kontoor Brands Participant shall not be considered to have undergone a “separation from service” for purposes of Section 409A of the Code and the VF SERP solely by reason of the Distribution.

Section 5.08. VF Directors Savings Plan.

(a)    Effective as of the Distribution Date, each Kontoor Brands Director will become eligible to participate in a Kontoor Brands non-qualified savings and investment plan similar to the VF Directors Savings Plan (the “Kontoor Brands Directors Savings Plan”). All directors of Kontoor Brands shall be eligible for the Kontoor Brands Directors Savings Plan. For the avoidance of doubt, each Kontoor Brands Director who also serves as a VF Director may participate in both the VF Directors Savings Plan and the Kontoor Brands Directors Savings Plan, pursuant to the terms set forth in each plan.

 

13


Table of Contents

(b)    On and following the Distribution Date, any effective deferral elections made by a Kontoor Brands Director under, and in accordance with the terms of, the VF Directors Savings Plan prior to the Distribution Date, shall remain in effect with respect to such amounts in accordance with their terms.

Section 5.09. Section 409A. The parties shall cooperate in good faith so that the transactions contemplated by this Agreement and the Separation Agreement will not result in adverse tax consequences under Section 409A of the Code to any Kontoor Brands Participant, in respect of their benefits under any Employee Plan. In the event that Kontoor Brands does not comply with its notification obligation pursuant to Section 11.01, Kontoor Brands shall indemnify, defend and hold the VF Group harmless from and against any Actions and any Liabilities related thereto.

ARTICLE 6

HEALTH AND WELFARE PLANS; PAID TIME OFF AND VACATION

Section 6.01. Cessation of Participation in VF H&W Plans; Participation in Kontoor Brands H&W Plans.

(a)    Without limiting the generality of Section 4.01, effective as of the Distribution Date, Kontoor Brands Participants shall cease to participate in the VF H&W Plans.

(b)    Effective as of the Distribution Date, Kontoor Brands shall cause Kontoor Brands Participants who participate in a VF H&W Plan immediately prior to the Distribution Date to be automatically enrolled in a corresponding Kontoor Brands H&W Plan.

(c)    To the extent applicable, Kontoor Brands shall use commercially reasonable efforts to cause Kontoor Brands H&W Plans to recognize and maintain all coverage and contribution elections made by Kontoor Brands Participants under the corresponding VF H&W Plans as of the Distribution Date and apply such elections under the applicable Kontoor Brands H&W Plan for the remainder of the period or periods for which such elections are by their terms applicable.

(d)    Neither the transfer nor other movement of employment or service from any member of the VF Group to any member of the Kontoor Brands Group at any time before the Distribution Date shall constitute or be treated as a “status change” under the VF H&W Plans or the Kontoor Brands H&W Plans.

(e)    Subject to the terms of the applicable Kontoor Brands H&W Plan and Applicable Law, Kontoor Brands shall use its reasonable best efforts to waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to Kontoor Brands Participants under any Kontoor Brands H&W Plan in which any such Kontoor Brands Participant may be eligible to participate on or after the Distribution Date to the extent that such conditions, exclusions and waiting periods are not applicable to or had been previously satisfied by any such Kontoor Brands Participant under the corresponding VF H&W Plans.

Section 6.02. Assumption of Health and Welfare Plan Liabilities. Subject to Section 6.03, effective as of the Distribution Date, all Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred prior to the Distribution Date by each Kontoor Brands Participant under the VF H&W Plans shall remain Liabilities of the VF Group and shall be deemed to be VF Retained Employee Liabilities; all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred on or after the Distribution Date by each Kontoor Brands Participant shall be retained under the respective Kontoor Brands H&W Plans, and no portion of the Liability shall be treated as a VF Retained Employee Liability. Without limiting the generality of the foregoing, subject to Section 6.03, any and all costs, expenses or Liabilities relating to participation by Kontoor Brands Participants in the VF H&W Plans during the Delayed Transfer Period shall be reimbursed by Kontoor Brands to the VF Group in accordance with the terms of the Transition Services

 

14


Table of Contents

Agreement. For the avoidance of doubt, subject to Section 6.03, (a) all Liabilities arising under any Kontoor Brands H&W Plan and (b) all Liabilities arising out of, relating to or resulting from the cessation of a Kontoor Brands Participant’s participation in any VF H&W Plan (other than a VF Retiree H&W Plan) and transfer to a Kontoor Brands H&W Plan as set forth herein (including any Actions or claims by any Kontoor Brands Participants related thereto) shall, in each case, be Kontoor Brands Assumed Employee Liabilities.

Section 6.03. Retiree Health and Welfare Benefits. Notwithstanding anything to the contrary in Section 6.01 or Section 6.02, (a) effective as of the Distribution Date, all Kontoor Brands Participants shall cease to participate in, and earn benefit service under, any VF Retiree H&W Plan (provided, that any Kontoor Brands Participant who has elected to receive benefits under any applicable VF Retiree H&W Plan in accordance with the terms of such plan prior to the Distribution Date shall continue to participate in, and receive benefits under, such VF Retiree H&W Plan in accordance with the terms of such plan) and (b) all Liabilities under the VF Retiree H&W Plans (whether relating to VF Participants or Kontoor Brands Participants) will be retained by VF and will constitute VF Retained Employee Liabilities.

Section 6.04. Flexible Spending Account Plan Treatment. Effective as of the Distribution Date, Kontoor Brands shall establish or designate flexible spending accounts for health and dependent care expenses (the “Kontoor Brands FSAs”). To the extent applicable, the parties shall take all actions reasonably necessary or appropriate so that the account balances (positive or negative) under the VF FSAs of each Kontoor Brands Participant who has elected to participate therein in the year in which the Distribution Date occurs shall be transferred, effective as of the Distribution Date, from the VF FSAs to the corresponding Kontoor Brands FSAs. The Kontoor Brands FSAs shall assume responsibility as of the Distribution Date for all outstanding dependent care and health care claims under the VF FSAs of each Kontoor Brands Participant for the year in which the Distribution Date occurs and shall assume the rights of and agree to perform the obligations of the analogous VF FSA from and after the Distribution Date. The parties shall cooperate in good faith to provide that the contribution elections of each such Kontoor Brands Participant as in effect immediately before the Distribution Date remain in effect under the Kontoor Brands FSAs from and after the Distribution Date.

Section 6.05. Workers Compensation Liabilities. Unless as otherwise expressly provided in the Separation and Distribution Agreement, effective as of the Distribution Date, all workers’ compensation Liabilities relating to, arising out of or resulting from any claim by any Kontoor Brands Participant that result from an accident or from an occupational disease, if incurred before the Distribution Date, shall be retained by VF and shall constitute VF Retained Employee Liabilities. All workers’ compensation Liabilities relating to, arising out of or resulting from any claim by any Kontoor Brands Participant that result from an accident or from an occupational disease, if incurred on or after the Distribution Date, shall be assumed by Kontoor Brands and shall constitute Kontoor Brands Assumed Employee Liabilities. The parties shall cooperate with respect to any notification to appropriate governmental agencies of the disposition and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and contracts governing the handling of claims.

Section 6.06. Vacation and Paid Time Off. Effective as of the Distribution Date, the applicable Kontoor Brands Group member shall recognize and assume all Liabilities with respect to vacation, holiday, sick leave, paid time off, floating holidays, personal days and other paid time off with respect to Kontoor Brands Participants accrued on or prior to the Distribution Date, and Kontoor Brands shall credit each such Kontoor Brands Participant with such accrual; provided, that if any such vacation or paid time off is required under Applicable Law to be paid out to the applicable Kontoor Brands Participant in connection with the Distribution, such payment will be made by Kontoor Brands as of the Distribution Date, and Kontoor Brands will credit such Kontoor Brands Participant with unpaid vacation time or paid time off in respect thereof; it being understood that any amount of vacation or paid time off required to be paid out in connection with the Distribution shall constitute Kontoor Brands Assumed Employee Liabilities.

 

15


Table of Contents

Section 6.07. COBRA.

(a)    The VF Group shall administer the VF Group’s compliance with the health care continuation coverage requirements of COBRA and the corresponding provisions of the VF H&W Plans with respect to Kontoor Brands Participants who incur a COBRA “qualifying event” occurring on or before the Distribution Date; provided, that, for the avoidance of doubt, any Liabilities related thereto shall constitute VF Retained Employee Liabilities.

(b)    Kontoor Brands shall be solely responsible for all Liabilities incurred pursuant to COBRA and for administering, at Kontoor Brands’ expense, compliance with the health care continuation coverage requirements of COBRA and the corresponding provisions of the Kontoor Brands H&W Plans with respect to Kontoor Brands Participants who incur a COBRA “qualifying event” that occurs at any time after the Distribution Date.

(c)    The parties agree that neither the Distribution nor any assignment or transfer of the employment or services of any employee or individual independent contractor as contemplated under this Agreement shall constitute a COBRA “qualifying event” for any purpose of COBRA.

ARTICLE 7

INCENTIVE COMPENSATION

Section 7.01. VF Cash Incentive and Cash Bonus Plans. Each Kontoor Brands Participant participating in any VF Bonus Plan with respect to the Stub Period and/or the VF 2019 fiscal year will remain eligible to receive a cash bonus in respect of the Stub Period and/or the VF 2019 fiscal year (the “2019 VF Cash Bonuses”) in accordance with the terms of such applicable VF Bonus Plan. Any 2019 VF Cash Bonuses payable to Kontoor Brands Participants under such VF Bonus Plans will be paid by Kontoor Brands on behalf of VF in accordance with the terms of the applicable VF Bonus Plan (including terms relating to the timing of payment), which such amounts shall constitute Kontoor Brands Assumed Employee Liabilities; provided, that VF will reimburse Kontoor Brands for the portion of the 2019 VF Cash Bonuses paid by Kontoor Brands to Kontoor Brands Participants that relates to the portion of the VF 2019 fiscal year that elapsed prior to the Distribution Date, which such amount to be reimbursed by VF will constitute a VF Retained Employee Liability.

Section 7.02. Kontoor Brands Cash Incentive and Cash Bonus Plans. Each Kontoor Brands Participant participating in any Kontoor Brands Plan that is a cash bonus or cash incentive plan (each, a “Kontoor Brands Bonus Plan”) with respect to the Kontoor 2019 fiscal year (the “2019 Kontoor Brands Cash Bonuses”) shall accrue service credit for any time the Kontoor Brands Participant continues to work for VF or the VF Group between April 1, 2019 and the Distribution Date. Any 2019 Kontoor Brands Cash Bonuses payable to Kontoor Brands Participants under such Kontoor Brands Bonus Plans will be paid by Kontoor Brands in accordance with the terms of the applicable Kontoor Brands Bonus Plan (including terms relating to the timing of payment), which such amounts shall constitute Kontoor Brands Assumed Employee Liabilities.

ARTICLE 8

TREATMENT OF OUTSTANDING EQUITY AWARDS

Section 8.01. RSUs.

(a)    Kontoor Brands Participants. Effective as of the Distribution Date, each VF RSU that is outstanding immediately prior to the Distribution Date and held by a Kontoor Brands Participant shall be converted into a restricted share unit with respect to Kontoor Brands Common Stock (each, a “Kontoor Brands RSU”). The number of shares of Kontoor Brands Common Stock subject to such Kontoor Brands RSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF RSU, as applicable, by taking into account the relative values of the VF Pre-Distribution Stock Value, the VF Post-

 

16


Table of Contents

Distribution Stock Value and the Kontoor Brands Stock Value. Each such Kontoor Brands RSU shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF RSU as of immediately prior to the Distribution Date.

(b)    VF Participants. Effective as of the Distribution Date, each VF RSU that is outstanding immediately prior to the Distribution Date and held by a VF Participant shall be adjusted to reflect the Distribution and become an Adjusted VF RSU. The number of shares of VF Common Stock subject to such Adjusted VF RSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF RSU by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF RSU shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF RSU as of immediately prior to the Distribution Date.

Section 8.02. PSUs.

(a)    PSUs Granted in 2016. The performance period for PSUs granted in 2016 shall conclude prior to the Distribution Date. Effective as of the Distribution Date, each VF PSU that was granted in 2016, regardless of whether it is held by a VF Participant or a Kontoor Brands Participant, and is outstanding immediately prior to the Distribution Date shall be adjusted to reflect the Distribution and become an Adjusted VF PSU. The number of shares of VF Common Stock subject to such Adjusted VF PSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF PSU by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF PSU shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU as of immediately prior to the Distribution Date.

(b)    PSUs Granted in 2017.

(i)    Kontoor Brands Participants. Effective as of the Distribution Date:

(A)    For each Kontoor Brands Participant, [—]% of the target amount of the Kontoor Brands Participant’s VF PSUs that were granted in 2017 and are outstanding immediately prior to the Distribution Date shall be adjusted in the manner set forth in Section 8.02(b)(ii) for VF Participants and settled as soon as administratively practicable following the date on which the VF Compensation Committee certifies the achievement of the underlying performance metrics based on VF’s actual performance relative to the applicable target performance goal.

(B)    For each Kontoor Brands Participant, the remaining [20]% of the target amount of the Kontoor Brands Participant’s VF PSUs that were granted in 2017 and are outstanding immediately prior to the Distribution Date shall be converted into Kontoor Brands RSUs, which shall vest subject only to continued employment with a member of the Kontoor Brands Group on December 31, 2019; provided, that for any Retirement Eligible Employee, such Kontoor Brands RSUs shall vest on December 31, 2019 in any case and shall not be subject to the Retirement Eligible Employee’s continued employment. The number of shares of Kontoor Brands Common Stock subject to such Kontoor Brands RSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF PSU, as applicable, by taking into account the relative values of the VF Pre-Distribution Stock Value, the VF Post-Distribution Stock Value and the Kontoor Brands Stock Value.

(ii)    VF Participants. Effective as of the Distribution Date, each VF PSU that was granted in 2017 and is outstanding immediately prior to the Distribution Date shall be adjusted to reflect the Distribution and become an Adjusted VF PSU. The number of shares of VF Common Stock subject to such Adjusted VF PSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF PSU by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF PSU shall be subject to the

 

17


Table of Contents

same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU as of immediately prior to the Distribution Date.

(c)    PSUs Granted in 2018.

(i)    Kontoor Brands Participants. Effective as of the Distribution Date:

(A)    For each Kontoor Brands Participant, [38]% of the target amount of the Kontoor Brands Participant’s VF PSUs that were granted in 2018 and are outstanding immediately prior to the Distribution Date shall be adjusted in the manner set forth in Section 8.02(c)(ii) for VF Participants and settled as of the date on which the VF Compensation Committee certifies the achievement of the underlying performance metrics based on VF’s actual performance relative to the performance criteria established for such VF PSUs.

(B)    For each Kontoor Brands Participant, the remaining [62]% of the target amount of the Kontoor Brands Participant’s VF PSUs that were granted in 2018 and are outstanding immediately prior to the Distribution Date shall be converted into a restricted share unit with respect to Kontoor Brands Common Stock subject to performance-based vesting conditions (each, a “Kontoor Brands PSU”). The number of shares of Kontoor Brands Common Stock subject to such Kontoor Brands PSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the target value of such VF PSU by taking into account the relative values of the VF Pre-Distribution Stock Value, the VF Post-Distribution Stock Value and the Kontoor Brands Stock Value. Each such Kontoor Brands PSU shall be subject to the same terms and conditions as applicable to the corresponding VF PSU as of immediately prior to the Distribution Date; provided, that each such Kontoor Brands PSU shall be subject to new performance-based metrics as determined by the VF Compensation Committee on or before the Distribution Date and with the performance thresholds and performance periods determined by the Kontoor Brands Compensation Committee following the Distribution Date; provided further, that for any Retirement Eligible Employee, such Kontoor Brands PSUs shall vest on December 31, 2020, subject to the achievement of the new performance-based metrics, thresholds and periods, and shall not be conditioned on the Retirement Eligible Employee’s continued employment.

(ii)    VF Participants. Effective as of the Distribution Date, each VF PSU that was granted in 2018 and is outstanding immediately prior to the Distribution Date, and held by a VF Participant, shall be adjusted to reflect the Distribution and become an Adjusted VF PSU. The number of shares of VF Common Stock subject to such Adjusted VF PSU shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF PSU by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF PSU shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU as of immediately prior to the Distribution Date.

Section 8.03. Stock Options.

(a)    Retirement Eligible Employees. Effective as of the Distribution Date, each VF Option that is outstanding immediately prior to the Distribution Date and held by a Retirement Eligible Employee, whether a Kontoor Brands Participant or a VF Participant, shall be adjusted to reflect the Distribution and become an Adjusted VF Option. The number of shares of VF Common Stock subject to, and the exercise price per share of, such Adjusted VF Option shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF Option by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value, and adjusted in a manner consistent with Section 409A of the Code. Each such Adjusted VF Option shall be subject to the same terms and conditions (including vesting) as applicable to the corresponding VF Option as of immediately prior to the Distribution Date.

 

18


Table of Contents

(b)    Kontoor Brands Participants. Effective as of the Distribution Date, each VF Option that is outstanding as of immediately prior to the Distribution Date and held by a Kontoor Brands Participant who is not a Retirement Eligible Employee shall be converted into an option to acquire Kontoor Brands Common Stock (each, a “Kontoor Brands Option”) and shall be subject to the same terms and conditions (including vesting) as applicable to the corresponding VF Option as of immediately prior to the Distribution Date; provided, that from and after the Distribution Date, the number of shares of Kontoor Brands Common Stock subject to, and the exercise price per share of, such Kontoor Brands Option shall be determined by the VF Compensation Committee in a manner consistent with Section 409A of the Code and intended to preserve without enlarging the value of such VF Option by taking into account (i) the exercise price per share of such VF Option and (ii) the relative values of the VF Pre-Distribution Stock Value, the VF Post-Distribution Stock Value and the Kontoor Brands Stock Value.

(c)    VF Participants. Effective as of the Distribution Date, each VF Option that is outstanding immediately prior to the Distribution Date and held by a VF Participant who is not a Retirement Eligible Employee shall be adjusted to reflect the Distribution and become an Adjusted VF Option. The number of shares of VF Common Stock subject to, and the exercise price per share of, such Adjusted VF Option shall be determined by the VF Compensation Committee in a manner consistent with Section 409A of the Code and intended to preserve without enlarging the value of such VF Option by taking into account (i) the exercise price per share of such VF Option and (ii) the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF Option shall be subject to the same terms and conditions (including vesting) as applicable to the corresponding VF Option as of immediately prior to the Distribution Date.

Notwithstanding anything to the contrary in this Section 8.03, the exercise price, the number of shares of VF Common Stock or Kontoor Brands Common Stock, as applicable, and the terms and conditions of exercise applicable to any Adjusted VF Option or Kontoor Brands Option, as the case may be, shall be determined in a manner consistent with the requirements of Section 409A of the Code.

Section 8.04. Special Awards.

(a)    Kontoor Brands Participants. Effective as of the Distribution Date, all VF Special Awards that are outstanding immediately prior to the Distribution Date and held by a Kontoor Brands Participant shall be converted into restricted stock and restricted stock units, as applicable, with respect to Kontoor Brands Common Stock (each, a “Kontoor Brands Special Award”). The number of shares of Kontoor Brands Common Stock subject to such Kontoor Brands Special Award shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF Special Award, as applicable, by taking into account the relative values of the VF Pre-Distribution Stock Value, the VF Post-Distribution Stock Value and the Kontoor Brands Stock Value. Each such Kontoor Brands Special Award shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF Special Award as of immediately prior to the Distribution Date.

(b)    VF Participants. Effective as of the Distribution Date, all VF Special Awards that are outstanding immediately prior to the Distribution Date and held by a VF Participant shall be adjusted to reflect the Distribution and become an Adjusted VF Special Award. The number of shares of VF Common Stock subject to such Adjusted VF Special Award shall be determined by the VF Compensation Committee in a manner intended to preserve without enlarging the value of such VF Special Award by taking into account the relative values of the VF Pre-Distribution Stock Value and the VF Post-Distribution Stock Value. Each such Adjusted VF Special Award shall be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF Special Award as of immediately prior to the Distribution Date.

Section 8.05. Miscellaneous Terms and Actions; Tax Reporting and Withholding.

(a)    Effective as of the Distribution Date, Kontoor Brands shall adopt an equity incentive compensation plan for the benefit of eligible participants (the “Kontoor Brands Equity Plan”). Prior to the Distribution Date,

 

19


Table of Contents

each of VF and Kontoor Brands shall take any actions necessary to give effect to the transactions contemplated by this Article 8, including, in the case of Kontoor Brands, the reservation, issuance and listing of shares of Kontoor Brands Common Stock as is necessary to effectuate the transactions contemplated by this Article 8. From and after the Distribution Date, (i) Kontoor Brands shall retain the Kontoor Brands Equity Plan, and all Liabilities thereunder shall constitute Kontoor Brands Assumed Employee Liabilities, and (ii) VF shall retain the VF Equity Plan, and all Liabilities thereunder shall constitute VF Retained Employee Liabilities. From and after the Distribution Date, all Adjusted VF Awards, regardless of by whom held, shall be granted under and subject to the terms of the VF Equity Plan and shall be settled by VF, and all Kontoor Brands Awards, regardless of by whom held, shall be granted under and subject to the terms of the Kontoor Brands Equity Plan and shall be settled by Kontoor Brands.

(b)    From and after the Distribution Date, for purposes of the VF Awards converted into Kontoor Brands Awards or Adjusted VF Awards pursuant to this Article 8, (i) a Kontoor Brands Participant’s employment with or service to any member of the Kontoor Brands Group and/or VF Group, as applicable, shall be treated as employment with and service to the Kontoor Brands Group and/or the VF Group, as applicable, (ii) any reference to “cause,” “good reason,” “disability,” “willful” or other similar terms applicable to such Adjusted VF Awards shall be deemed to refer to the definitions of “cause,” “good reason,” “disability,” “willful” or other similar terms set forth in the VF Equity Plan and (iii) any reference to “cause,” “good reason,” “disability,” “willful” or other similar terms applicable to such Kontoor Brands Awards shall be deemed to refer to the definitions of “cause,” “good reason,” “disability,” “willful” or other similar terms set forth in the Kontoor Brands Equity Plan.

(c)    From and after the Distribution Date, (i) any reference to a “change in control,” “change of control” or similar term applicable to any Adjusted VF Award contained in any applicable award agreement, employment or services agreement or the VF Equity Plan shall be deemed to refer to a “change in control,” “change of control” or similar term as defined in such award agreement, employment or services agreement or the VF Equity Plan (a “VF Change in Control”) and (ii) any reference to a “change in control,” “change of control” or similar term applicable to any Kontoor Brands Award contained in any applicable award agreement, employment or services agreement or the Kontoor Brands Equity Plan shall be deemed to refer to a “change in control,” “change of control” or similar term as defined in the Kontoor Brands Equity Plan (a “Kontoor Brands Change in Control”).

(d)    For the avoidance of doubt, neither the Distribution nor any assignment, transfer or continuation of the employment of employees as contemplated by Article 3 shall be deemed a termination of employment or service of any Kontoor Brands Participant or VF Participant. The Distribution shall not be treated as a VF Change in Control or Kontoor Brands Change in Control for purposes of the VF Equity Plan or the Kontoor Brands Equity Plan, respectively, any applicable award agreements for a VF Award, Adjusted VF Award or Kontoor Brands Award outstanding thereunder, or any other applicable employment- or service-related agreement. Without limiting the generality of the foregoing, to the extent VF determines it necessary or desirable, each award agreement for a VF RSU, VF PSU, VF Option or VF Special Award, as the case may be, shall be amended to expressly clarify the same.

(e)    In the event a Kontoor Brands Employee retires, Kontoor Brands shall notify VF in accordance with the procedures outlined in Section 11.01.

(f)    Unless otherwise required by Applicable Law, (i) the applicable member of the Kontoor Brands Group shall be responsible for all applicable income, payroll, employment and other similar tax withholding, remittance and reporting obligations in respect of Kontoor Brands Participants relating to any Kontoor Brands Awards and (ii) the applicable member of the VF Group shall be responsible for all applicable income, payroll, employment and other similar tax withholding, remittance and reporting obligations in respect of VF Participants relating to any Adjusted VF Awards or Kontoor Brands Awards. The parties shall facilitate performance by the other party of its obligations hereunder by promptly remitting amounts withheld in respect of any Adjusted VF Awards or Kontoor Brands Awards, as applicable, directly to the applicable Governmental Authority on such other party’s

 

20


Table of Contents

behalf or to the other Party for remittance to such Governmental Authority. The parties will cooperate and communicate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient and appropriate manner.

(g)    Kontoor Brands shall be responsible for the settlement of cash dividend equivalents on any Kontoor Brands Awards held by a Kontoor Brands Participant, and VF shall be responsible for the settlement of cash dividend equivalents on any Adjusted VF Awards held by a VF Participant, Former VF Employee or Former Kontoor Brands Employee.

(h)    Kontoor Brands shall prepare and file with the SEC a registration statement on an appropriate form with respect to the shares of Kontoor Brands Common Stock subject to the Adjusted VF Awards converted into Kontoor Brands Awards pursuant to this Article 8 and shall use its reasonable best efforts to have such registration statement declared effective as soon as practicable following the Distribution Date and to maintain the effectiveness of such registration statement covering such Kontoor Brands Awards (and to maintain the current status of the prospectus contained therein) for so long as any Kontoor Brands Awards remain outstanding.

(i)    Prior to the Distribution Date, each party shall take all such steps as may be required to cause any dispositions of VF Common Stock (including Adjusted VF Awards or any other derivative securities with respect to VF Common Stock) or acquisitions of Kontoor Brands Common Stock (including Kontoor Brands Awards or any other derivative securities with respect to Kontoor Brands Common Stock) resulting from the Distribution or the transactions contemplated by this Agreement or the Separation and Distribution Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to VF or who are or will become subject to such reporting requirements with respect to Kontoor Brands to be exempt under Rule 16b-3 promulgated under the Exchange Act. With respect to those individuals, if any, who, subsequent to the Distribution Date, are or become subject to the reporting requirements under Section 16(a) of the Exchange Act, as applicable, Kontoor Brands shall administer any Adjusted VF Award converted into a Kontoor Brands Award pursuant to this Article 8 in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to the extent such converted Adjusted VF Award complied with such rule prior to the Distribution Date.

(j)    From and after the Distribution Date, each of VF and Kontoor Brands shall cooperate in good faith to facilitate the orderly administration of the VF Awards held by Kontoor Brands Participants, including, without limitation, the sharing of information relating to a VF Participant’s employment or service status with the VF Group, as well as other information relating to the vesting and forfeiture of Kontoor Brands Awards, tax withholding and reporting and compliance with Applicable Law.

(k)    Notwithstanding anything to the contrary herein, with respect to any Delayed Transferred Employees whose employment is not transferred to the Kontoor Brands Group on or prior to the Distribution Date, any Adjusted VF Awards held by such Delayed Transferred Employees shall be adjusted as of the Distribution Date in the manner set forth in Section 8.04 (and not in accordance with Section 8.01, Section 8.02 or Section 8.03), and such awards shall not be further adjusted upon the date such Delayed Transferred Employee’s employment is transferred to the Kontoor Brands Group.

ARTICLE 9

PERSONNEL RECORDS; PAYROLL AND TAX WITHHOLDING

Section 9.01. Personnel Records. To the extent permitted by Applicable Law, each of the Kontoor Brands Group and the VF Group shall be permitted by the other to access and retain copies of such records, data and other personnel-related information in any form (“Personnel Records”) as may be necessary or appropriate to carry out their respective obligations under Applicable Law, the Separation and Distribution Agreement or any of the Ancillary Agreements, and for the purposes of administering their respective employee benefit plans and

 

21


Table of Contents

policies. All Personnel Records shall be accessed, retained, held, used, copied and transmitted in accordance with all Applicable Laws, policies and agreements between the parties hereto.

Section 9.02. Payroll; Tax Reporting and Withholding.

(a)    [Subject to the obligations of the parties as set forth in the Transition Services Agreement, effective as of no later than the Distribution Date, (i) the members of the Kontoor Brands Group shall be solely responsible for providing payroll services (including for any payroll period already in progress) to the Kontoor Brands Employees and for any Liabilities with respect to garnishments of the salary and wages thereof and (ii) the members of the VF Group shall be solely responsible for providing payroll services (including for any payroll period already in progress) to the VF Employees and for any Liabilities with respect to garnishments of the salary and wages thereof.

(b)    To the extent consistent with the terms of the Tax Matters Agreement, the party that is responsible for making a payment hereunder shall be responsible for (i) making the appropriate withholdings, if any, attributable to such payments and (ii) preparing and filing all related required forms and returns with the appropriate Governmental Authority.

(c)    With respect to Kontoor Brands Employees, the parties shall (i) treat Kontoor Brands (or the applicable member of the Kontoor Brands Group) as a “successor employer” and VF (or the applicable member of the VF Group) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, for purposes of taxes imposed under the U.S. Federal Unemployment Tax Act or the U.S. Federal Insurance Contributions Act, and (ii) cooperate and use reasonable best efforts to implement the alternate procedure described in Section 5 of Revenue Procedure 2004-53.]

ARTICLE 10

NON-U.S. EMPLOYEES AND EMPLOYEE PLANS

Section 10.01. Special Provisions for Employees and Employee Plans Outside of the United States.

(a)    From and after the date hereof, to the extent not addressed in this Agreement, the parties shall reasonably cooperate in good faith to effect the provisions of this Agreement with respect to employees and employee-, compensation- and benefits-related matters outside of the United States (including Employee Plans covering non-U.S. VF Participants and Non-U.S. Kontoor Brands Participants), which in all cases shall be consistent with the general approach and philosophy regarding the allocation of assets and Liabilities (as expressly set forth in the recitals to this Agreement).

(b)    Without limiting the generality of Section 3.03(a), to the extent required by Applicable Law or the terms of any Kontoor Brands CBA or similar employee representative agreement, Kontoor Brands or a member of the Kontoor Brands Group, as applicable, shall become a party to the applicable collective bargaining, works council, or similar arrangements with respect to Kontoor Brands Employees or Kontoor Brands Contractors located outside of the United States and shall comply with all obligations thereunder from and after the Distribution Date.

ARTICLE 11

GENERAL AND ADMINISTRATIVE

Section 11.01. Sharing of Participant Information. To the maximum extent permitted under Applicable Law, VF and Kontoor Brands shall, and shall cause each member of its respective Group to reasonably cooperate with the other party hereto to, (i) share with each other and their respective agents and vendors all participant

 

22


Table of Contents

information reasonably necessary for the efficient and accurate administration of each of the VF Plans and the Kontoor Brands Plans, (ii) provide prompt written notification regarding the termination of employment or service of any Kontoor Brands Participant or VF Participant to the extent relevant to the administration of a VF Plan or Kontoor Brands Plan, but in no event later than [30] days following such termination of employment or service, (iii) facilitate the transactions and activities contemplated by this Agreement and (iv) resolve any and all employment-related claims regarding Kontoor Brands Participants. Kontoor Brands and its respective authorized agents shall, subject to Applicable Laws, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the VF Group, to the extent reasonably necessary for such administration. VF Group members shall be entitled to retain copies of all Kontoor Brands’ books and records relating to the subjects of this Agreement in the custody of the VF Group, subject to the terms of the Separation and Distribution Agreement and Applicable Law.

Section 11.02. Cooperation. Following the date of this Agreement, the parties shall, and shall cause their respective Subsidiaries to, cooperate in good faith with respect to any employee compensation or benefits matters that either party reasonably determines require the cooperation of the other party in order to accomplish the objectives of this Agreement (including, without limitation, relating to any audits by any Governmental Authorities).

Section 11.03. Notices of Certain Events. Each of Kontoor Brands and VF shall promptly notify and provide copies to the other of (a) written notice from any Person alleging that the approval or consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, (b) any written notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement or the Separation and Distribution Agreement and (c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Kontoor Brands Group or the VF Group, as the case may be, that relate to the consummation of the transactions contemplated by this Agreement or the Separation and Distribution Agreement; provided, that the delivery of any notice pursuant to this Section 11.03 shall not affect the remedies available hereunder to the party receiving such notice.

Section 11.04. No Third-Party Beneficiaries. Notwithstanding anything to the contrary herein, nothing in this Agreement shall (a) create any obligation on the part of any member of the Kontoor Brands Group or any member of the VF Group to retain the employment or services of any current or former employee, director, independent contractor or other service provider, (b) be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any future, present, or former employee or service provider of any member of the VF Group or the Kontoor Brands Group (or any beneficiary or dependent thereof) under this Agreement, the Separation and Distribution Agreement, any VF Plan or Kontoor Brands Plan or otherwise, (c) preclude Kontoor Brands or any Kontoor Brands Group member (or, in each case, any successor thereto), at any time after the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing or otherwise altering in any respect any Kontoor Brands Plan, any benefit under any Kontoor Brands Plan or any trust, insurance policy or funding vehicle related to any Kontoor Brands Plan (in each case in accordance with the terms of the applicable arrangement), (d) preclude VF or any VF Group member (or, in each case, any successor thereto), at any time after the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any VF Plan, any benefit under any VF Plan or any trust, insurance policy, or funding vehicle related to any VF Plan (in each case in accordance with the terms of the applicable arrangement) or (e) except as otherwise expressly provided in Section 8.05(a), confer any rights or remedies (including any third-party beneficiary rights) on any current or former employee or service provider of any member of the VF Group or the Kontoor Brands Group or any beneficiary or dependent thereof or any other Person.

Section 11.05. Fiduciary Matters. VF and Kontoor Brands each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other Applicable Law, and no party shall be deemed to be in violation of this Agreement if it fails to comply with

 

23


Table of Contents

any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other party for any Liabilities caused by the failure to satisfy any such responsibility.

Section 11.06. Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or Governmental Authority), the parties shall cooperate in good faith and use reasonable best efforts to obtain such consent, and, if such consent is not obtained, to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the parties shall negotiate in good faith to implement the provision in a mutually satisfactory manner. A party’s obligation to use its “reasonable best efforts” shall not require such party to take any action to the extent it would reasonably be expected to (i) jeopardize, or result in the loss or waiver of, any attorney-client or other legal privilege, (ii) contravene any Applicable Law or fiduciary duty, (iii) result in the loss of protection of any Intellectual Property or other proprietary information or (iv) incur any non-routine or unreasonable cost or expense.

Section 11.07. Sponsored Employees. The parties shall, and shall cause their respective Group members to, cooperate in good faith with each other and the applicable Governmental Authorities with respect to the process of obtaining work authorization for each Sponsored Employee to work with Kontoor Brands or a Kontoor Brands Group member, including but not limited to, petitioning the applicable Governmental Authorities for the transfer of each Sponsored Employee’s (as well as any spouse or dependent thereof, as applicable) visa or work permit, or the grant of a new visa or work permit, to any Kontoor Brands Group member. Any costs or expenses incurred with the foregoing shall constitute Kontoor Brands Assumed Employee Liabilities. In the event that it is not legally permissible for a Sponsored Employee to continue work with the Kontoor Brands Group from and after the Distribution Date, the parties shall reasonably cooperate to provide for the services of such Sponsored Employee to be made available exclusively to the Kontoor Brands Group under an employee secondment or similar arrangement, which such costs incurred by the VF Group (including those relating to compensation and benefits in respect of such Sponsored Employee) shall constitute Kontoor Brands Assumed Employee Liabilities.

Section 11.08. No-Hire/Non-Solicitation of Employees.

(a)    During the twenty-four (24) month period following the Distribution Date (the “Restricted Period”), Kontoor Brands shall not, and shall not cause any member of the Kontoor Brands Group to, solicit or induce or attempt to solicit or induce any VF Employee, VF Contractor or VF Director to terminate his or her relationship with any member of the VF Group, nor shall Kontoor Brands or any member of the Kontoor Brands Group hire any VF Employee who was employed by a member of the VF Group on the Distribution Date (other than a Kontoor Brands Employee) or on any date during the Restricted Period; provided, in the discretion of VF’s Chief Executive Officer or VF’s Chief Human Resources Officer, the limitations provided for in this Section 11.08(a) may be waived at the request of Kontoor Brands or any member of the Kontoor Brands Group. Notwithstanding the limitations in this Section 11.08(a), such limitations shall not prohibit Kontoor Brands or a member of the Kontoor Brands Group from placing public advertisements or conducting any other form of general solicitation that is not specifically targeted toward a VF Employee, VF Contractor or VF Director.

(b)    During the Restricted Period, VF shall not, and shall not cause any member of the VF Group to, solicit or induce or attempt to solicit or induce any Kontoor Brands Employee, Kontoor Brands Contractor or Kontoor Brands Director to terminate his or her relationship with any member of the Kontoor Brands Group, nor shall VF or any member of the VF Group hire any Kontoor Brands Employee who was employed by a member of the Kontoor Brands Group on the Distribution Date or on any date during the Restricted Period; provided, in the discretion of Kontoor Brands’ Chief Executive Officer or Kontoor Brands’ Chief Human Resources Officer, the limitations provided for in this Section 11.08(b) may be waived at the request of VF or any member of the VF Group. Notwithstanding the limitations in this Section 11.08(b), such limitations shall not prohibit VF or a

 

24


Table of Contents

member of the VF Group from placing public advertisements or conducting any other form of general solicitation that is not specifically targeted towards a Kontoor Brands Employee, Kontoor Brands Contractor or Kontoor Brands Director.

ARTICLE 12

MISCELLANEOUS

Section 12.01. General. The provisions of Article 6 of the Separation and Distribution Agreement (other than Section 6.06 as it relates to Third-Party Beneficiaries of the Separation and Distribution Agreement) are hereby incorporated by reference into and deemed part of this Agreement and shall apply, mutatis mutandis, as if fully set forth in this Agreement.

[Signature Page Follows]

 

25


Table of Contents

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

 

V.F. CORPORATION
By:    
 

Name:

Title:

 

KONTOOR BRANDS, INC.
By:    
 

Name:

Title:

 

[Signature Page to Employee Matters Agreement]

EX-10.4 8 d618285dex104.htm EX-10.4 EX-10.4

Exhibit 10.4

INTELLECTUAL PROPERTY LICENSE AGREEMENT

by and between

V.F. CORPORATION

and

[—]

Dated as of [—]


INTELLECTUAL PROPERTY LICENSE AGREEMENT

This INTELLECTUAL PROPERTY LICENSE AGREEMENT (this “Agreement”), dated as of [—], 2019 (the “Effective Date”), is made by and between V.F. Corporation, a Pennsylvania corporation (“VF”) and [—], a [—] (“Licensee”).

WHEREAS, pursuant to the Separation and Distribution Agreement between VF and Kontoor Brands, Inc. (“Kontoor Brands”) of even date herewith (the “Separation and Distribution Agreement”), VF has contributed, transferred and conveyed to Kontoor Brands certain of VF’s assets, and Kontoor Brands has assumed certain of VF’s liabilities, in each case, related to the Jeanswear Business, and as a result of such transactions, Kontoor Brands will operate separately from VF after the date hereof.

WHEREAS, as a result of the transactions contemplated by the Separation and Distribution Agreement, Licensee will be a Subsidiary of Kontoor Brands and a member of the Kontoor Brands Group;

WHEREAS, Licensee, on behalf of itself and the other members of the Kontoor Brands Group, desires to obtain, and VF, on behalf of itself and the other members of its Group, is willing to grant, certain rights and licenses to use the Licensed VF IP (as defined below) and the VF Names and Marks in connection with the Jeanswear Business solely as set forth in this Agreement; and

WHEREAS, the Separation and Distribution Agreement requires the execution and delivery of this Agreement;

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Certain Definitions. For the purposes of this Agreement the following terms shall have the following meanings; provided that capitalized terms used but not otherwise defined in this Section 1.01 shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement:

“Advertising Materials” means any and all advertising, marketing, and promotional images created primarily to advertise, market, or promote any denim, apparel, accessories, footwear or related products in connection with the operation of the Jeanswear Business.

Agreement” has the meaning set forth in the preamble.

Effective Date” has the meaning set forth in the preamble.

Kontoor Brands” has the meaning set forth in the preamble.

Licensee” has the meaning set forth in the preamble.

Licensed Jeanswear Business” has the meaning set forth in Section 2.01.

Licensed VF IP” has the meaning set forth in Section 2.01.

Separation and Distribution Agreement has the meaning set forth in the recitals.

VF” has the meaning set forth in the preamble.

VF License” has the meaning set forth in Section 2.01.


Section 1.02. Other Definitional and Interpretative Provisions. (a) In this Agreement, unless the context clearly indicates otherwise:

(i) words used in the singular include the plural and words used in the plural include the singular;

(ii) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(iii) except as otherwise clearly indicated, reference to any gender includes the other gender;

(iv) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

(v) reference to any Article or Section means such Article or Section of this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(vi) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(vii) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(viii) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(ix) relative to the determination of any period of time, “from” means “from and including,” “to” means “to and including” and “through” means “through and including”;

(x) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and

(xi) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.

ARTICLE 2

GRANT OF LICENSE

Section 2.01. VF License. Effective as of immediately prior to the Contribution, VF (on behalf of itself and the other members of the VF Group) hereby grants to Licensee and the other members of the Kontoor Brands Group a non-exclusive, worldwide, fully paid-up, royalty-free, non-transferable (except as set forth herein), non-sublicensable (except as set forth herein) license (the “VF License”) under the Intellectual Property owned by the VF Group and included in the VF Assets (excluding any Trademarks), but only to the extent such Intellectual Property is used or held for use in the Jeanswear Business as of the Distribution Time (collectively, the “Licensed VF IP”) to use, reproduce, create derivative works of, modify, distribute, make, have made, sell, offer for sale or import products and services solely in connection with the operation of the Jeanswear Business as conducted as of the Distribution Time and the natural extensions and evolutions thereof (the “Licensed Jeanswear Business”).

Section 2.02. Sublicensing. The VF License includes the right for Licensee to grant a sublicense to manufacturers, suppliers, distributors, contractors or consultants of the Licensed Jeanswear Business solely for the purpose of providing products and services to, or otherwise acting on behalf of and at the direction of, Licensee; provided that (i) each permitted sublicensee under this Section 2.02 shall be bound by all obligations of

 

2


Licensee under this Agreement relating to the VF License; (ii) Licensee shall be liable for any breach of the terms and conditions of this Agreement with respect to the VF License by any such sublicensee and (iii) any sublicense granted hereunder shall terminate upon the termination of the VF License.

Section 2.03. Assistance. Notwithstanding anything in this Agreement to the contrary, with respect to the Licensed VF IP, neither VF nor any other member of its Group shall be obligated to provide any materials or embodiments of or related to such Licensed VF IP or any documentation, assistance, training, guidance, maintenance, support or any other service of any kind whatsoever to the Licensee, any other member of the Kontoor Brands Group, or any of Licensee’s permitted sublicensees with respect to its or their use, installation or maintenance of such Licensed VF IP.

Section 2.04. Trademark Phase Out.

(a) Effective as of immediately prior to the Contribution, subject to the terms and conditions of this Section 2.04, VF, on behalf of itself and its Affiliates, hereby grants to Licensee and the other members of the Kontoor Brands Group a limited, non-exclusive, royalty-free, fully paid-up, non-transferable, non-sublicensable license to use the VF Names and Marks (i) for a period of twenty-four (24) months (the “VF Outlets License Period”), but solely on the signage for the VF outlets business which bear such VF Names and Marks as of the Distribution Time, (ii) for a period of thirty-six (36) months (the “Inventory License Period”), but solely to sell off any inventory existing as of the Distribution Time or manufactured during the Phase Out Period to the extent bearing such VF Names and Marks (“Existing VF Inventory”) and (iii) unless and until terminated pursuant to Section 2.04(e), solely in connection with (A) the continued public display, use and other exploitation of Advertising Materials to the extent included in the Kontoor Brands Asset and containing products bearing any such VF Names and Marks as of the Distribution Time and (b) the creation, modification, public display, use and other exploitation of new Advertising Materials incorporating products bearing any such VF Names and Marks following the Distribution Time (the license granted pursuant to this Section 2.04(c)(iii), the “Advertising Materials License” and (collectively, the licenses granted pursuant to this Section 2.05(a), the “Transitional Licenses”).

(b) Any use of the VF Names and Marks by Licensee and the other members of the Kontoor Brands Group pursuant to this Section 2.04 shall be (i) in a manner substantially similar to the use of such VF Names and Marks as of immediately prior to the Distribution Time, (ii) subject to any style or other usage guidelines in effect as of the Distribution Time or as VF may provide to Licensee from time to time and (iii) to the extent that such VF Names and Marks were used by VF and its Affiliates (including, for the avoidance of doubt, Licensee and the other members of the Kontoor Brands Group) as of immediately prior to the Distribution Time in connection with products (including Existing VF Inventory), services and other materials, used in connection with such products, services and other materials of at least the same or higher quality with respect thereto.

(c) During the VF Outlets License Period, any VF outlet stores bearing the VF Names and Marks shall be managed and maintained in a manner consistent with such practices as of immediately prior to the Distribution Time (including by offering a comparable quality and mix of products at comparable prices as offered immediately prior to the Distribution Time). If Licensee or any other member of the Kontoor Brands Group desires to use the VF Names and Marks on the signage for the VF outlets business beyond the VF Outlets License Period, Licensee or such member of the Kontoor Brands Group shall provide VF with written notice no later than six (6) months prior to the expiration of the VF Outlets License Period (it being understood that after the receipt of such notice, VF and Licensee or the applicable member of the Kontoor Brands Group shall negotiate in good faith an arms-length, non-exclusive, royalty-bearing trademark license agreement, not to exceed an additional eighteen (18) months beyond the expiration of the VF Outlets License Period). Pursuant to such trademark license agreement, Licensee or the applicable member of the Kontoor Brands Group shall pay VF a royalty of two percent (2%) of the net sales of any VF outlets stores bearing the VF Names and Marks. The trademark license agreement shall also contain such other terms as are customary to an arms-length commercial agreement of its nature, including with respect to VF’s quality control, auditing and approval rights, termination

 

3


provisions and Licensee’s (or the applicable member of the Kontoor Brands Group’s) recordkeeping and indemnification obligations.

(d) Notwithstanding anything herein to the contrary, Licensee and the other members of the Kontoor Brands Group shall use commercially reasonable efforts to sell off any Existing VF Inventory as promptly as practicable following the Distribution Time, and in any prior to the expiration of the Inventory License Period. Every six (6) months during the Inventory License Period, Licensee shall provide VF with a written report setting forth in detail (i) the amount of Existing VF Inventory sold during the previous six (6) months and (ii) the amount of Existing VF Inventory remaining in stock (it being understood that, so long as VF is reasonably satisfied that Licensee and the other members of the Kontoor Brands Group are exercising commercially reasonable efforts to sell off any such Existing VF Inventory during the initial Inventory License Period, in the event that the Existing VF Inventory has not been exhausted by end of such Inventory License Period, if requested in writing by Licensee, the Inventory License Period may be extended by up to an additional two (2) years upon VF’s prior written consent, which shall not be unreasonably withheld).

(e) Notwithstanding anything herein to the contrary, VF may terminate the Advertising Materials License in its sole discretion upon (30) days’ prior written notice to Licensee. Upon any such termination of the Advertising Materials License, Licensee shall, and shall cause the other members of the Kontoor Brands Group to, cease any and all uses of the VF Names and Mark in connection with Advertising Materials as promptly as reasonably practicable, and in any event within thirty (30) days of receiving such written notice; provided that, for the avoidance of doubt, Licensee and the other members of the Kontoor Brands Group may continue to use any Advertising Materials existing at the time of such termination so long as that any and all VF Names and Marks used in connection with such Advertising Materials are relabeled, covered, struck over, or otherwise removed therefrom so as not to be visible, displayed or otherwise used on such Advertising Materials.

(f) VF shall have the right to inspect the use of the VF Names and Marks by Licensee and the other members of the Kontoor Brands Group pursuant to the Transitional Licenses to ensure compliance with the requirements of this Section 2.04. In the event that VF finds, in its sole discretion, that any such use deviates from such requirements, Licensee or the applicable member of the Kontoor Brands Group shall, as promptly as practicable, take all necessary steps to correct such non-conforming use of the VF Names and Marks. Upon termination of the VF Outlets License Period or the Inventory License Period, as applicable, all corresponding rights of Licensee and the other members of the Kontoor Brands Group to use the VF Names and Marks shall automatically terminate, and Licensee and the other members of the Kontoor Brands Group shall immediately cease such use of the VF Names and Marks.

(g) Licensee, on behalf of itself and the other members of the Kontoor Brands Group, acknowledges and agrees that neither Licensee nor any other member of the Kontoor Brands Group shall (i) except as expressly set forth in this Section 2.04, have any rights in or to any of the VF Names and Marks or (ii) contest the validity of any of the VF Names and Marks or VF’s or its Affiliates’ ownership rights therein or thereto. Any and all goodwill generated by the use of the VF Names and Marks under this Section 2.04 shall inure solely to the benefit of VF and its Affiliates. Neither Licensee nor any other member of the Kontoor Brands Group shall use the VF Names and Marks in any manner that may harm, damage, disparage, challenge, bring into disrepute, impair or tarnish the reputation or goodwill associated with VF or any of its Affiliates, or any of the VF Names and Marks.

Section 2.05. CHEM-IQ. For the avoidance of doubt, notwithstanding anything in this Agreement, the Separation and Distribution Agreement or any of the other Ancillary Agreements to the contrary, following the Distribution Time, Licensee and the other members of the Kontoor Brands Group may exploit the CHEM-IQ mark and any of the related materials in accordance with VF’s practice of making such materials generally available to third parties on its website free of charge, subject to any terms and conditions associated with such use. Licensee, on behalf of itself and the other members of the Kontoor Brands Group, acknowledges and agrees that nothing herein shall be construed as making any representation or warranty of any kind with respect to the CHEM-IQ mark and any of the related materials.

 

4


Section 2.06. Retention of Rights. Licensee (on behalf of itself and the other members of the Kontoor Brands Group) acknowledges and agrees that, with respect to the Licensed VF IP and the VF Names and Marks, (i) as between the Kontoor Brands Group and the VF Group, VF and the other members of its Group are the sole and exclusive owners of all right, title and interest in and to such Licensed VF IP and VF Names and Marks and (ii) the VF License (including any sublicensing rights granted in ýSection 2.02) and Transitional Licenses are subject to, and limited by, any and all licenses, rights, limitations and restrictions with respect thereto previously granted to or otherwise obtained by any third party that are in effect as of the date hereof. All rights not expressly granted by VF (on behalf of itself and the other members of its Group) herein are hereby retained by the VF Group.

ARTICLE 3. DISCLAIMER.

Section 3.01. THE TRANSITIONAL LICENSES AND VF LICENSE AND ALL OTHER RIGHTS GRANTED HEREUNDER ARE MADE ON AN “AS IS, WHERE IS” BASIS, AND VF HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF ANY KIND, INCLUDING WITHOUT LIMITATION, THOSE REGARDING MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR OF NON-INFRINGEMENT. TO THE EXTENT PERMITTED BY APPLICABLE LAW, VF SHALL NOT BE LIABLE UNDER ANY LEGAL OR EQUITABLE THEORY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND EVEN IF VF HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE 4

GENERAL

Section 4.01. Assignment. The provisions of this Agreement (including the VF License and Transitional Licenses) shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement (including the VF License and Transitional Licenses) without the consent of the other party hereto. Subject to the foregoing, if any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under this Agreement.

Section 4.02. Interpretation; Incorporation of Terms by Reference. This Agreement is an “Ancillary Agreement” as such term is defined in the Separation and Distribution Agreement and shall be interpreted in accordance with the terms of the Separation and Distribution Agreement in all respects; provided that in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation and Distribution Agreement in respect of the subject matter of this Agreement, the terms of this Agreement shall control in all respects. Article 6 (other than Section 6.03 and 6.04) of the Separation and Distribution Agreement shall each be incorporated herein by reference, mutatis mutandis, as if set forth in full herein; provided that any such provisions therein binding with respect to Kontoor Brands shall, for the purposes of this Agreement, be binding on Licensee.

[The remainder of this page has been intentionally left blank; the next page is the signature page.]

 

5


IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

V.F. Corporation
By:  

                     

  Name:
  Title:

 

[—]
By:  

             

  Name:
  Title:

 

6

EX-10.5 9 d618285dex105.htm EX-10.5 EX-10.5

Exhibit 10.5

INTELLECTUAL PROPERTY LICENSE AGREEMENT

by and between

KONTOOR BRANDS, INC.

and

[—]

Dated as of [—]


INTELLECTUAL PROPERTY LICENSE AGREEMENT

This INTELLECTUAL PROPERTY LICENSE AGREEMENT (this “Agreement”), dated as of [—], 2019 (the “Effective Date”), is made by and between Kontoor Brands, Inc., a North Carolina corporation (“Kontoor Brands”) and [—], a [—] (“Licensee”).

WHEREAS, pursuant to the Separation and Distribution Agreement between V.F. Corporation (“VF”) and Kontoor Brands of even date herewith (the “Separation and Distribution Agreement”), VF has contributed, transferred and conveyed to Kontoor Brands certain of VF’s assets, and Kontoor Brands has assumed certain of VF’s liabilities, in each case, related to the Jeanswear Business, and as a result of such transactions, Kontoor Brands will operate separately from VF after the date hereof;

WHEREAS, as a result of the transactions contemplated by the Separation and Distribution Agreement, Licensee will be a Subsidiary of VF and a member of the VF Group;

WHEREAS, Licensee, on behalf of itself and the other members of the VF Group, desires to obtain, and Kontoor Brands, on behalf of itself and the other members of its Group, is willing to grant, certain rights and licenses to use the Licensed Kontoor Brands IP (as defined below) in connection with the VF Business solely as set forth in this Agreement; and

WHEREAS, the Separation and Distribution Agreement requires the execution and delivery of this Agreement;

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Certain Definitions. For the purposes of this Agreement the following terms shall have the following meanings; provided that capitalized terms used but not otherwise defined in this Section 1.01 shall have the respective meanings ascribed to such terms in the Separation and Distribution Agreement:

Agreement” has the meaning set forth in the preamble.

Effective Date” has the meaning set forth in the preamble.

Kontoor Brands” has the meaning set forth in the preamble.

Licensee” has the meaning set forth in the preamble.

Licensed VF Business” has the meaning set forth in Section 2.01.

Licensed Kontoor Brands IP” has the meaning set forth in Section 2.01.

Separation and Distribution Agreement has the meaning set forth in the recitals.

VF” has the meaning set forth in the preamble.

Kontoor Brands License” has the meaning set forth in Section 2.01.

Section 1.02. Other Definitional and Interpretative Provisions. (a) In this Agreement, unless the context clearly indicates otherwise:

(i) words used in the singular include the plural and words used in the plural include the singular;


(ii) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(iii) except as otherwise clearly indicated, reference to any gender includes the other gender;

(iv) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

(v) reference to any Article or Section means such Article or Section of this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(vi) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(vii) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(viii) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(ix) relative to the determination of any period of time, “from” means “from and including,” “to” means “to and including” and “through” means “through and including”;

(x) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and

(xi) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.

ARTICLE 2

GRANT OF LICENSE

Section 2.01. Kontoor Brands License. Effective as of immediately prior to the contribution of the VF Assets and VF Liabilities to LBI, Kontoor Brands (on behalf of itself and the other members of its Group) hereby grants to Licensee and the other members of the VF Group a non-exclusive, worldwide, fully paid-up, royalty-free, non-transferable (except as set forth herein), non-sublicensable (except as set forth herein) license (the “Kontoor Brands License”) under the Intellectual Property included in the Kontoor Brands Assets (excluding any Trademarks) (collectively, the “Licensed Kontoor Brands IP”) to use, reproduce, create derivative works of, modify, distribute, make, have made, sell, offer for sale or import products and services solely in connection with the operation of the VF Business as conducted as of the Distribution Time and the natural extensions and evolutions thereof (the “Licensed VF Business”).

Section 2.02. Sublicensing. The Kontoor Brands License includes the right for Licensee to grant a sublicense to manufacturers, suppliers, distributors, contractors or consultants of the Licensed VF Business solely for the purpose of providing products and services to, or otherwise acting on behalf of and at the direction of, Licensee; provided that (i) each permitted sublicensee under this Section 2.02 shall be bound by all obligations of Licensee under this Agreement relating to the Kontoor Brands License; (ii) Licensee shall be liable for any breach of the terms and conditions of this Agreement with respect to the Kontoor Brands License by any such sublicensee and (iii) any sublicense granted hereunder shall terminate upon the termination of the Kontoor Brands License.

Section 2.03. Retention of Rights. Licensee (on behalf of itself and the other members of the VF Group) acknowledges and agrees that, with respect to the Licensed Kontoor Brands IP, (i) as between the VF Group and

 

2


the Kontoor Bands Group, Kontoor Brands and the other members of its Group are the sole and exclusive owners of all right, title and interest in and to such Licensed Kontoor Brands IP and (ii) the Kontoor Brands License (including any sublicensing rights granted in Section 2.02) is subject to, and limited by, any and all licenses, rights, limitations and restrictions with respect to the Licensed Kontoor Brands IP previously granted to or otherwise obtained by any third party that are in effect as of the date hereof. All rights not expressly granted by Kontoor Brands (on behalf of itself and the other members of its Group) herein are hereby retained by the Kontoor Brands Group.

Section 2.04. Assistance. Notwithstanding anything in this Agreement to the contrary, with respect to the Licensed Kontoor Brands IP, neither Kontoor Brands nor any other member of its Group shall be obligated to provide any materials or embodiments of or related to such Licensed Kontoor Brands IP or any documentation, assistance, training, guidance, maintenance, support or any other service of any kind whatsoever to the Licensee, any other member of the VF Group, or any of Licensee’s permitted sublicensees with respect to its or their use, installation or maintenance of such Licensed Kontoor Brands IP; provided that, for the avoidance of doubt, the VF Group shall be permitted to retain copies of the software set forth on Schedule 1.01(c) to the Separation and Distribution Agreement, in both object and source code format.

Section 2.05. Fair Use. Nothing herein shall prevent, restrict or otherwise limit Licensee and the other members of the VF Group from (i) stating the historical relationship between the Jeanswear Business and VF for informational purposes and, to the extent feasible, with reasonable notices, indications or legends indicating that VF and its Group are no longer affiliated with the Jeanswear Business or (ii) making any use of the Trademarks included in the Kontoor Brands Assets that would constitute “fair use” or otherwise not be prohibited under Applicable Law if such use were made by a third party, or otherwise is required under Applicable Law.

ARTICLE 3

GENERAL

Section 3.01. Assignment. The provisions of this Agreement (including the Kontoor Brands License) shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement (including the Kontoor Brands License) without the consent of the other party hereto. Subject to the foregoing, if any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under this Agreement.

Section 3.02. Interpretation; Incorporation of Terms by Reference. This Agreement is an “Ancillary Agreement” as such term is defined in the Separation and Distribution Agreement and shall be interpreted in accordance with the terms of the Separation and Distribution Agreement in all respects; provided that in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Separation and Distribution Agreement in respect of the subject matter of this Agreement, the terms of this Agreement shall control in all respects. Article 6 (other than Section 6.03 and 6.04) of the Separation and Distribution Agreement shall each be incorporated herein by reference, mutatis mutandis, as if set forth in full herein; provided that any such provisions therein binding with respect to VF shall, for the purposes of this Agreement, be binding on Licensee.

[The remainder of this page has been intentionally left blank; the next page is the signature page.]

 

3


IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

Kontoor Brands, Inc.
By:  

             

  Name:
  Title:

 

[—]
By:  

             

  Name:
  Title:

 

4

EX-10.6 10 d618285dex106.htm EX-10.6 EX-10.6

Exhibit 10.6

2019 STOCK COMPENSATION PLAN

ARTICLE I

PURPOSE

1.1 Purpose. The purpose of the Kontoor Brands, Inc. 2019 Stock Compensation Plan (as may be amended from time to time, the “Plan”) is to strengthen the ability of Kontoor Brands, Inc. (the “Company”) to attract, motivate, and retain employees and directors of superior ability, to more closely align the interests of such persons with those of the Company’s shareholders and to promote the success of the Company’s business.

ARTICLE II

GENERAL DEFINITIONS

In addition to terms defined in other Articles of the Plan, the following are defined terms for purposes of the Plan:

2.1 “Agreement” The written instrument (which may be in electronic form) evidencing the grant to a Participant of an Award. Each Participant may be issued one or more Agreements from time to time, evidencing one or more Awards.

2.2 “Award” Any award granted under this Plan.

2.3 “Board” The Board of Directors of the Company.

2.4 “Change in Control” A change in control shall be deemed to have occurred if, after the date of grant of a given Award, (i) any “Person” (as such term is used in §13(d) and §14(d) of the Exchange Act), except for (A) those certain trustees under Deeds of Trust dated August 21, 1951 and under the Will of John E. Barbey, deceased (a “Trust” or the “Trustee”), and (B) any employee benefit plan of the Company or any Subsidiary, or any entity holding voting securities of the Company for or pursuant to the terms of any such plan (a “Benefit Plan” or the “Benefit Plans”), acquires beneficial ownership of Company voting securities and thereupon is the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities; (ii) there occurs a contested proxy solicitation of the Company’s shareholders that results in the contesting party obtaining the ability to vote securities representing 30% or more of the combined voting power of the Company’s then outstanding securities; (iii) there is consummated a sale, exchange, transfer or other disposition of substantially all of the assets of the Company to another entity, except to an entity controlled directly or indirectly by the Company, or a merger, consolidation or other reorganization of the Company in which the voting securities of the Company outstanding immediately prior to such event do not represent (either by remaining outstanding or by being converted into voting securities of a surviving or parent entity) at least 50% or more of the combined voting power of the outstanding voting securities of the Company or such surviving or parent entity (without a concentration of beneficial ownership that would trigger a change in control under clause (i) applying that provision to any surviving or parent entity), or a plan of liquidation or dissolution of the Company other than pursuant to bankruptcy or insolvency laws is adopted and implementation of such plan has commenced; or (iv) during any period of two consecutive years or less (commencing on or after the date of grant of a given Award), individuals who at the beginning of such period constituted the Board, together with all new directors whose election or nomination during such period (other than any new director whose initial assumption of office during such period followed an actual or threatened election contest in which such new director challenged an incumbent or Board-approved nominee) was approved by a vote of at least two-thirds of the directors then still in office who were directors either at the beginning of the period or previously so approved (together, the “Continuing Directors”), cease for any reason to constitute at least a majority of the Board.


Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred for purposes of this Plan (x) in the event of a sale, exchange, transfer or other disposition of substantially all of the assets of the Company to, or a merger, consolidation or other reorganization involving the Company and, an entity controlled by one or more officers of the Company (separately from their role as Company officers) or in which such officers have, directly or indirectly, at least a 5% equity or ownership interest unrelated to any interest in the Company, or (y) in a transaction otherwise commonly referred to as a “management leveraged buyout.”

Notwithstanding the foregoing, the Board may, by resolution adopted by a majority of the Board and by at least two-thirds of the Continuing Directors who were in office at the date a Change in Control occurred, declare that a Change in Control [either under Item 6(e) of Schedule 14A or] in clause (i) or (ii) has become ineffective for purposes of this Plan if the following conditions then exist: (x) the declaration is made within 120 days of the Change in Control; and (y) no person, except for (A) the Trusts, and (B) the Benefit Plans, either is the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s outstanding securities or has the ability or power to vote securities representing 10% or more of the combined voting power of the Company’s then outstanding securities. If such a declaration shall be properly made, the Change in Control shall be ineffective ab initio.

2.5 “Code” The Internal Revenue Code of 1986, as amended, and applicable regulations and rulings and guidance issued thereunder.

2.6 “Committee” The Talent and Compensation Committee of the Board (or a designated successor to such committee), the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Board and subject to other corporate governance documents of the Company. No action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet any qualification standard set forth in the Committee Charter or this Plan.

2.7 “Common Stock” The common stock of the Company as described in the Company’s Articles of Incorporation, or such other stock as shall be substituted therefor.

2.8 “Company” Kontoor Brands, Inc., a [North Carolina corporation], or any successor to the Company.

2.9 “Date of Grant” The date on which the granting of an Award is authorized by the Committee, or such later date as is specified by the Committee or by a provision in this Plan applicable to the Award.

2.10 “Director” A member of the Board who is not an Employee.

2.11 “Disposition” Any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition of an Award, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and whether during the Participant’s lifetime or upon or after his or her death, including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment. A transfer or forfeiture of an Award to the Company is not a Disposition.

2.12 “Employee” Any employee of the Company or a Subsidiary.

2.13 “Exchange Act” The Securities Exchange Act of 1934, as amended, and applicable regulations and rulings issued thereunder.

2.14 “Fair Market Value” Unless otherwise determined in good faith by the Committee or under procedures established by the Committee, the average of the reported high and low sales price of the Common Stock on the date on which Fair Market Value is to be determined (or if there was no reported sale on such date, the next preceding date on which any reported sale occurred) on the principal exchange or in such other principal market on which the Common Stock is trading.

2.15 “Full-Value Award” An Award relating to shares other than (i) Stock Options that are treated as exercisable for shares under applicable accounting rules and (ii) Awards for which the Participant pays the grant-


date Fair Market Value of the shares covered by the Award directly or by electively giving up a right to receive a cash payment from the Company or a Subsidiary of an amount equal to the grant-date Fair Market Value of such shares.

2.16 “Incentive Award” An Award granted under Article IX denominated in cash and earnable based on performance measured over a specified performance period.

2.17 “Incentive Stock Option” A Stock Option intended to satisfy the requirements of Section 422(b) of the Code.

2.18 “Non-qualified Stock Option” A Stock Option other than an Incentive Stock Option.

2.19 “Participant” An Employee or Director selected by the Committee to receive an Award; such person remains a Participant until all obligations of the Company and of such person or his or her beneficiaries relating to the Award have been fulfilled or otherwise ended.

2.20 “Replacement Plan” The Kontoor Brands, Inc. 1996 Stock Compensation Plan (a VF Corporation Plan Assumed by Kontoor Brands, Inc. Relating to Kontoor Employee Awards), under which equity awards have been granted by the Company in replacement of certain awards granted by VF Corporation prior to the spinoff by VF Corporation of the Company completed on                     , 2019. The Replacement Plan, which is attached to this Plan as Appendix B, constitutes a sub-plan under this Plan.

2.21 “Restricted Awards” Restricted Stock and Restricted Stock Units.

2.22 “Restricted Stock” Common Stock that is subject to restrictions and awarded to Participants under Article VIII of this Plan and any Common Stock purchased with or issued in respect of dividends and distributions on the Restricted Stock.

2.23 “Restricted Stock Units” Stock Units that may be subject to a risk of forfeiture or other restrictions and awarded to Participants under Article VIII of this Plan, including Stock Units resulting from deemed reinvestment of dividend equivalents on Restricted Stock Units.

2.24 “Retirement” Unless otherwise specified in [a Participant’s Award documents], employment separation from the Company or any of its Subsidiaries after attaining age 55 and at least 10 years of service with the Company and/or any of its Subsidiaries, provided that an employment separation at a time there exists grounds for the Company to terminate the Employee for cause (as defined by the Committee) will not constitute a Retirement. Unless otherwise determined by the Committee, service with a predecessor company (i.e., VF Corporation (prior to the spinoff of the Company) or a company acquired by the Company or a Subsidiary) shall be counted towards the calculation of an employee’s years of service with the Company and/or its Subsidiaries for purposes of this Plan. With respect to any Director Award, “Retirement” means termination of service to the Company as a Director.

2.25 “Rule 16b-3” Rule 16b-3 under the Exchange Act or any successor thereto.

2.26 “Securities Act” The Securities Act of 1933, as amended, and applicable regulations and rulings issued thereunder.

2.27 “Service Provider” A person providing services to the Company or a subsidiary in a capacity other than as an Employee or Director (for example, a consultant or advisor), provided that Awards other than those under Article IX may be granted only to a natural person who qualifies as an “employee” within the meaning of General Instruction A.1(a)(1) to Form S-8 (or a successor provision) under the Securities Act.

2.28 “Stock Appreciation Right” An Award granted under Section 7.5.


2.29 “Stock Option” An award of a right to acquire Common Stock pursuant to Article VII.

2.30 “Stock Units” An unfunded obligation of the Company, the terms of which are set forth in Section 8.6.

2.31 “Subsidiary” Any majority-owned business organization of the Company or its direct or indirect subsidiaries, including but not limited to corporations, limited liability companies, partnerships and any “subsidiary corporation” as defined in Section 424(f) of the Code that is a subsidiary of the Company.

2.32 “Substitute Award” An Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a Subsidiary or affiliate or with which the Company or a Subsidiary or affiliate combines.

ARTICLE III

SHARES OF COMMON STOCK SUBJECT TO THE PLAN

3.1 Common Stock Authorized. Subject to the provisions of this Article and Article XI, the total aggregate number of shares of Common Stock that may be delivered pursuant to Awards shall not exceed              million shares plus shares that are reserved and available for awards assumed by the Company under the Replacement Plan. Each share delivered in connection with a Full-Value Award, and each share delivered or deemed to be delivered in connection with Stock Options or other non-Full-Value Awards, shall be counted against this limit as one share in accordance with Section 3.2.

3.2 Share Counting Rules. For purposes of the limitations specified in Section 3.1, the Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments in accordance with this Section 3.2. Shares shall be counted against those reserved to the extent that such shares have been delivered and are no longer subject to a risk of forfeiture, except that shares withheld to pay the exercise price or taxes upon exercise of a Stock Option (including a Stock Appreciation Right) or upon the vesting or settlement of any Award shall be deemed to be delivered for purposes of the limit set forth in Section 3.1. Accordingly, to the extent that an Award under the Plan (including the Replacement Plan) is canceled, expired, forfeited, or otherwise terminated without delivery of shares to the Participant (and without delivery of cash in the case of an Award that was settleable potentially in shares or cash), the shares retained by or returned to the Company will not be deemed to have been delivered under the Plan. An Award that can be settled only in cash shall not count against the shares reserved under the Plan. The Committee may determine that Awards may be outstanding that relate to more shares than the aggregate remaining available under the Plan so long as Awards will not in fact result in delivery (or deemed delivery) and vesting of shares in excess of the number then available under the Plan. In addition, in the case of any Substitute Award, shares delivered or deliverable in connection with such Substitute Award shall not be counted against the number of shares reserved under the Plan.

3.3 Shares Available. The shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock.

ARTICLE IV

ADMINISTRATION OF THE PLAN

4.1 Committee. The Plan generally shall be administered by the Committee, subject to this Article IV. The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 under the Exchange Act, in which case the subcommittee shall be subject to and have authority under the charter applicable to the Committee, and the acts of the subcommittee shall be deemed to be acts of the Committee hereunder. The foregoing notwithstanding, the Board may perform any function of the Committee under the Plan, including for purposes of approving grants of Awards to Directors. In any case in which the Board is performing a function of the Committee under the Plan, each reference to the Committee herein shall be deemed


to refer to the Board, except where the context otherwise requires. The Committee may otherwise act through with members of the Committee abstaining or recusing themselves to ensure compliance with regulatory requirements or to promote effective governance, as determined by the Committee.

4.2 Powers. The Committee has discretionary authority to determine the Employees and Directors to whom, and the time or times at which, Awards shall be granted. The Committee also has authority to determine the amount of shares of Common Stock that shall be subject to each Award and the terms, conditions, and limitations of each Award, subject to the express provisions of this Plan. The Committee shall have the discretion to interpret this Plan and to make all other determinations necessary for Plan administration. The Committee has authority to prescribe, amend and rescind any rules and regulations relating to this Plan, subject to the express provisions of this Plan. All Committee interpretations, determinations, and actions shall be in the sole discretion of the Committee and shall be binding on all parties, including beneficiaries. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Agreement in the manner and to the extent it shall deem expedient to carry it into effect, and it shall be the sole and final judge of such expediency. The Committee may specify that any Award will be settled in cash rather than by delivery of shares. To the fullest extent authorized under applicable provisions of the North Carolina Business Act, the Committee may delegate to officers or managers of the Company or any subsidiary or affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent that such delegation (i) will not result in the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company, (ii) will not result in a related-person transaction with an executive officer required to be disclosed under Item 404(a) of Regulation S-K (in accordance with Instruction 5.a.ii thereunder) under the Exchange Act, and (iii) is permitted under other applicable laws and regulations.

4.3 Agreements. Awards shall be evidenced by an Agreement and may include any terms and conditions not inconsistent with this Plan, as the Committee may determine.

4.4 No Liability. The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, any Award or any Agreement, and any such person shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

ARTICLE V

ELIGIBILITY

5.1 Participation. Participants shall be selected by the Committee from the Employees, Directors and Service Providers. Such designation may be by individual or by class.

5.2 Incentive Stock Option Eligibility. A Director shall not be eligible for the grant of an Incentive Stock Option. In addition, no Employee shall be eligible for the grant of an Incentive Stock Option who owns (within the meaning of Section 422(b) of the Code), or would own immediately before the grant of such Incentive Stock Option, directly or indirectly, stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any Subsidiary.


ARTICLE VI

TYPES OF AWARDS; MINIMUM VESTING

6.1 Award Types. The types of Awards under this Plan are Stock Options as described in Article VII, Restricted Awards (Restricted Stock and Restricted Stock Units) as described in Article VIII, and Incentive Awards as described in Article IX. The Committee may, in its discretion, permit holders of Awards under this Plan to surrender outstanding Awards in order to exercise or realize the rights under other Awards subject to the restriction on repricing set forth in Section 13.2.

[6.2 Minimum Vesting Requirements. Other provisions of the Plan notwithstanding, Awards (other than Awards that can be settled only in cash) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, however, that the following Awards shall not be subject to this minimum vesting requirement: any (i) Substitute Award; (ii) shares of Common Stock delivered in lieu of fully vested cash awards at the election of the Participant; (iii) Awards to non-employee Directors that vest at or after the earlier of the one-year anniversary of the date of grant or the next annual meeting of stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting; and (iv) any other Awards as designated by the Committee relating to not more than five percent (5%) of the aggregate shares reserved for grant under Section 3.1 (as adjusted under Section 11.1)[; and provided further that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award in cases of death, disability or a Change in Control, in the terms of the Award Agreement or otherwise.] In the case of Awards subject to the minimum vesting requirement and having proportionate vesting over a specified period, the proportionate vesting shall not apply during the initial year (so, for example, monthly vesting in the first year is not permitted for such Awards under the Plan).]

ARTICLE VII

STOCK OPTIONS

7.1 Exercise Price. The exercise price of Common Stock under each Stock Option shall be not less than 100 percent of the Fair Market Value of the Common Stock on the Date of Grant, other than Stock Options issued as Substitute Awards.

7.2 Term. Stock Options may be exercised as determined by the Committee, provided that Stock Options may in no event be exercised later than ten years from the Date of Grant. During the Participant’s lifetime, only the Participant may exercise an Incentive Stock Option. The Committee may amend the terms of an Incentive Stock Option at any time to include provisions that have the effect of changing such Incentive Stock Option to a Non-qualified Stock Option, or vice versa (to the extent any such change is permitted by applicable law, and subject to Section 13.1 except that the change in tax treatment of the Stock Option shall not be deemed to be materially adverse to the Participant for purposes of Section 13.1).

7.3 Method of Exercise. Upon the exercise of a Stock Option, the exercise price shall be payable in full in cash or an equivalent acceptable to the Committee. No fractional shares shall be issued pursuant to the exercise of a Stock Option, and no payment shall be made in lieu of fractional shares. At the discretion of the Committee and provided such payment can be effected without causing the Participant to incur liability under Section 16(b) of the Exchange Act or causing the Company to incur additional expense under applicable accounting rules, the Committee may permit the exercise price to be paid by assigning and delivering to the Company shares of Common Stock previously acquired by the Participant or may require that, or permit the Participant to direct that, the Company withhold shares from the Stock Option shares having a value equal to the exercise price (or portion thereof to be paid through such share withholding). Any shares so assigned and delivered to the Company or withheld by the Company in payment or partial payment of the exercise price shall be valued at the Fair Market Value of the Common Stock on the exercise date. In addition, at the request of the Participant and to the extent permitted by applicable law, the Company in its discretion may approve arrangements with a brokerage firm under which such brokerage firm, on behalf of the Participant, shall pay to the Company the exercise price of the Stock Options being exercised, and the Company, pursuant to an irrevocable notice from the Participant, shall promptly deliver the shares being purchased to such firm.


7.4 Other Stock Option Terms. No dividend equivalent rights may be granted with respect to a Stock Option entitling the Participant to the economic benefit of dividends paid prior to the exercise of the Stock Option on the Common Stock underlying the Stock Option. With respect to Incentive Stock Options, the aggregate Fair Market Value (determined at the Date of Grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all stock option plans of the Company and its Subsidiaries) shall not exceed $100,000, or such other amount as may be prescribed under the Code. If any Stock Option intended to be an Incentive Stock Option fails to so qualify, including under the requirement set forth in this Section 7.4, such Stock Option (or the affected portion of the Stock Option) shall be deemed to be a Non-qualified Stock Option and shall be exercisable in accordance with the Plan and the Stock Option’s terms.

7.5 Stock Appreciation Rights. A Stock Option may be granted with terms requiring the exercise price to be paid by means of the Company withholding shares subject to the Stock Option upon exercise, in which case such Award may be designated as a “Stock Appreciation Right.” The Committee may, at the time of grant, specify that the Fair Market Value of the Stock Option shares deliverable upon exercise of such Award will be paid in cash in lieu of delivery of shares, such that the Award is a cash-settled Stock Appreciation Right.

ARTICLE VIII

RESTRICTED AWARDS

8.1 Types of Award. The Committee, in its discretion, is authorized to grant Restricted Awards either as Service Awards or Performance Awards. As used herein, the term “Service Award” refers to any Restricted Award described in Section 8.2 and the term “Performance Award” refers to any Restricted Award described in Section 8.3. Restricted Stock shall be nontransferable until such time as all of the restrictions underlying the Award have been satisfied, except to the extent permitted under Section 12.5.

8.2 Service Award. The Committee may grant shares of Restricted Stock or Restricted Stock Units to a Participant subject to forfeiture upon an interruption in the Participant’s continuous service with the Company or a Subsidiary within a period specified by the Committee. The period during which Restricted Stock Units are subject to a risk of forfeiture may be shorter than the period during which settlement of the Restricted Stock Units is deferred. The foregoing notwithstanding, Stock Units granted with no minimum vesting period, as permitted on a limited basis under Section 6.2, shall be deemed to be Service Awards.

8.3 Performance Award. The Committee may grant Restricted Stock or Restricted Stock Units to a Participant subject to or upon the attainment of a performance objective based on such measure or measures of performance as the Committee may specify. In establishing the level of performance objective to be attained, the Committee may disregard or offset the effect of such items of income or expense and other factors as determined by the Committee. Notwithstanding attainment of the applicable performance objective or any provisions of this Plan to the contrary, the Committee shall have the power (which it may retain or may relinquish in the Agreement or other document), in its sole discretion, to impose service requirements required to be fulfilled by the Participant during the performance period or subsequent to the attainment of the performance objective.

8.4 Delivery. If a Participant, with respect to a Service Award, continuously remains in the employ of the Company or a Subsidiary for the period specified by the Committee, or, with respect to a Performance Award, if and to the extent that the Participant fulfills the requirements of the performance objective and any service requirements as may be imposed by the Committee, the related risk of forfeiture of shares awarded to such Participant as Restricted Stock shall lapse and any retained share certificates or other evidence of ownership shall be delivered to such Participant without any restrictions promptly after the applicable event, and the related risk of forfeiture applicable to Restricted Stock Units shall end and such Restricted Stock Units shall then and thereafter be settled in accordance with the terms of such Restricted Stock Units (including any elective deferral of settlement permitted by the Committee). The foregoing notwithstanding, the Committee may determine that any restrictions (and/or deferral period, to the extent permitted under Section 12.10) applicable to a Restricted Award shall be deemed to end or have ended on an accelerated basis at the time of the Participant’s death while


employed or serving as a Director or upon the Participant’s termination of employment or service due to disability or Retirement or following a Change in Control, subject to Section 6.2.

8.5 Shareholder Rights. Except as otherwise provided in this Plan, each Participant shall have, with respect to all shares of Restricted Stock, all the rights of a shareholder of the Company, including the right to vote the Restricted Stock; provided, however, that, unless the Committee has provided for a different equitable treatment of dividends and distributions payable with respect to the Restricted Stock, all such dividends and distributions shall be retained by the Company and reinvested in additional shares of Common Stock to be issued in the name of the Participant. Any shares of Common Stock acquired as a result of reinvestment of such dividends or distributions shall also be Restricted Stock subject to the terms and conditions of this Plan (and if any other treatment of dividends and distributions is approved by the Committee, the amounts to be paid or credited to the Participant shall be subject to the same vesting terms and risk of forfeiture, including any performance conditions, as applied to the original Award; this requirement may not be altered by the Committee). A Participant shall have no rights of a shareholder relating to Restricted Stock Units or Stock Units until such time as shares are issued or delivered in settlement of such Restricted Stock Units or Stock Units.

8.6 Stock Units; Deferral of Receipt of Restricted Stock. A Stock Unit, whether or not restricted, shall represent the conditional right of the Participant to receive delivery of one share of Common Stock at a specified future date, subject to the terms of the Plan and the applicable Agreement. Until settled, a Stock Unit shall represent an unfunded and unsecured obligation of the Company with respect to which a Participant has rights no greater than those of a general creditor of the Company. Unless otherwise specified by the Committee, each Stock Unit will carry with it the right to crediting of an amount equal to dividends and distributions paid on a share of Common Stock (“dividend equivalents”), which amounts will be deemed reinvested in additional Stock Units, at the Fair Market Value of Common Stock at the dividend payment date. Such additional Stock Units (or any alternative form of crediting dividend equivalents) will be subject to the same risk of forfeiture (this requirement may not be altered by the Committee), other restrictions, and deferral of settlement as applied to the original Stock Units. Unless the Committee determines to settle Stock Units in cash, Stock Units shall be settled solely by issuance or delivery of shares of Common Stock. The Committee may, in its sole discretion and subject to compliance with Code Section 409A, permit Participants to convert their Restricted Stock into an equivalent number of stock units as of the date on which all applicable restrictions pertaining to the Restricted Stock would either lapse or be deemed satisfied (the “Vesting Date”), or by means of an exchange of the Restricted Stock for Restricted Stock Units before the Vesting Date. Any such request for conversion must (a) be made by the Participant at a time a valid deferral may be elected under Code Section 409A and (b) specify a distribution date that is valid under Code Section 409A and in any case is no earlier than the earlier of (i) the Participant’s termination of employment or (ii) the first anniversary of the Vesting Date.

ARTICLE IX

INCENTIVE AWARDS

The Committee, in its discretion, is authorized to grant Incentive Awards, which shall be Awards denominated as a cash amount and earnable based on achievement of a Performance Objective. The Committee may specify that an Incentive Award shall be settled in cash or in shares of Common Stock.

ARTICLE X

FORFEITURE AND EXPIRATION OF AWARDS

10.1 Termination of Employment or Service. Subject to the express provisions of this Plan (including Section 6.2) and the terms of any applicable Agreement, the Committee, in its discretion, may provide for the forfeiture or continuation of any Award for such period and upon such terms and conditions as are determined by the Committee in the event that a Participant ceases to be an Employee or Director. In the absence of Committee action or except as otherwise provided in an Agreement, the following rules shall apply:

(a) With respect to Stock Options granted to Employees, Stock Options shall be exercisable only so long as the Participant is an employee of the Company or a Subsidiary, except that (1) in the event of Retirement, the


Stock Options shall continue to vest according to the original schedule, but no Stock Options may be exercised after the expiration of the earlier of the remaining term of such Stock Options or 36 months following the date of Retirement (in such case, Incentive Stock Options will become Non-Qualified Stock Options three months following Retirement); (2) in the event of permanent and total disability, the Stock Options shall continue to vest according to the original schedule, but no Stock Options may be exercised after the expiration of the earlier of the remaining term of such Stock Option or 36 months following the date of permanent and total disability; (3) in the event of death while an Employee, Stock Options held at the time of death by the Participant shall vest and become immediately exercisable and may be exercised by the estate or beneficiary of such Participant until the expiration of the earlier of the remaining term of such Stock Options or 36 months following the date of death; (4) in the event of the Participant’s voluntary separation of employment (other than a Retirement) or involuntary separation of employment by the Company for cause (as defined by the Committee), the Stock Options shall terminate and be forfeited as of the date of separation of employment; (5) in the event of the Participant’s involuntary separation of employment not for cause (as defined by the Committee) with severance pay (other than severance pay paid in a lump sum), the Stock Option shall continue to vest according to the original schedule, but no Stock Options may be exercised after the earlier of the remaining term of the Option or the end of the period of the Participant’s receipt of severance pay, if any, from the Company; and (6) in the event of an involuntary separation of employment without severance pay or if severance pay is paid in a lump sum, the Stock Option shall not be exercisable after the date of separation of employment; any portion of a Stock Option that is not vested at the time of permanent and total disability or any separation of employment and that would not vest and become exercisable during the period the Stock Option will remain outstanding under this Section 10.1(a) shall terminate and be forfeited as of the time of permanent and total disability or separation of employment, unless otherwise determined by the Committee within 45 days after such event; and

(b) With respect to Restricted Awards granted to Employees, in the event of a Participant’s voluntary or involuntary separation before the expiration of the employment period specified by the Committee with respect to Service Awards, or before the fulfillment of the performance objective and any other restriction imposed by the Committee with respect to Performance Awards, any shares of Restricted Stock shall be returned to the Company and any Restricted Award shall be deemed to have been forfeited by the Participant as of the date of such separation.

10.2 Leave of Absence. With respect to an Award, the Committee may, in its sole discretion, determine that any Participant who is on leave of absence for any reason shall be considered to still be in the employ of the Company, provided that the Committee may, in its sole discretion, also determine that rights to such Award during a leave of absence shall be limited to the extent to which such rights were earned or vested when such leave of absence began or that vesting will be tolled during such leave of absence.

10.3 Additional Forfeiture Provisions. The Committee may condition a Participant’s right to receive a grant of an Award, to exercise the Award, to receive a settlement or distribution with respect to the Award, to retain cash, Stock, other Awards, or other property acquired in connection with an Award, or to retain the profit or gain realized by a Participant in connection with an Award, upon compliance by the Participant with specified conditions that protect the business interests of the Company and its subsidiaries and affiliates from harmful actions of the Participant or otherwise conform to high standards of corporate governance, including but not limited to (i) conditions providing for such forfeitures in the event that Company financial statements are restated due to misconduct if the Participant bears substantial responsibility for such misconduct or if the restated financial information would have adversely affected the level of achievement of performance measures upon which the earning or value of the Participant’s Award was based; and (ii) conditions relating to non-competition, confidentiality of information relating to or possessed by the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its subsidiaries and affiliates and the officers, directors and affiliates of the Company and its subsidiaries and affiliates, and other restrictions upon or covenants of the Participant, including during specified periods following termination of employment or service to the Company. Accordingly, an Award may include terms providing for a recoupment, “clawback” or forfeiture from the Participant of the profit or gain realized by a Participant in connection with an Award, including cash or other proceeds received upon sale of Stock acquired in connection with an Award. References in the Plan or an Agreement to lapse of restrictions or risk of forfeiture do not apply to the additional


forfeiture provisions authorized under this Section 10.3, unless the lapse of the forfeiture provisions under this Section 10.3 is specifically stated.

ARTICLE XI

ADJUSTMENT PROVISIONS

11.1 Share Adjustments. If the number of outstanding shares of Common Stock is increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional, new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spinoff or other distribution with respect to such shares of Common Stock or other securities, an appropriate adjustment in order to preserve the benefits or potential benefits intended to be made available to the Participants may be made, in the discretion of the Committee, in all or any of the following (i) the maximum number and kind of shares provided in Section 3.1; (ii) the number and kind of shares or other securities subject to then outstanding Awards; (iii) the price for each share or other unit of any other securities subject to then outstanding Awards; and (iv) the terms of performance goals based on per share metrics or otherwise affected by such events. The Committee may also make any other adjustments, or take such action as the Committee, in its discretion, deems appropriate in order to preserve the benefits or potential benefits intended to be made available to the Participants. In furtherance of the foregoing, in the event of an equity restructuring, as defined in FASB ASC Topic 718, that affects the Common Stock, a Participant shall have a legal right to an adjustment to the Participant’s Award that will preserve without enlarging the value of the Award, with the manner of such adjustment to be determined by the Committee in its discretion, and subject to any limitation on this right set forth in the applicable Award Agreement. Any fractional share resulting from such adjustment may be eliminated. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including performance criteria) in recognition of unusual or nonrecurring events (including events described in this Section 11.1) affecting the Company, any Subsidiary or any business unit, or the financial statements of the Company or any Subsidiary, or in response to changes in applicable laws, regulations, accounting principles, tax rates or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Subsidiary or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant, subject to the limitation in Section 12.15. If, in a transaction triggering an adjustment hereunder, public shareholders of the Company receive cash for their equity interest in the Company, an adjustment providing for cancellation of an Award in exchange for a cash payment based solely on the then intrinsic value of the Award shall be deemed to meet the requirements of this Section 11.1. Adjustments determined by the Committee shall be final, binding and conclusive.

11.2 Corporate Changes. Subject to Article XIII, upon (i) the dissolution or liquidation of the Company; (ii) a reorganization, merger or consolidation (other than a merger or consolidation effecting a reincorporation of the Company in another state or any other merger or consolidation in which the shareholders of the surviving Company and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation) of the Company with one or more corporations, following which the Company is not the surviving Company (or survives only as a subsidiary of another Company in a transaction in which the shareholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the transaction); (iii) the sale of all or substantially all of the assets of the Company; or (iv) the occurrence of a Change in Control, subject to the terms of any applicable Agreement, the Committee serving prior to the date of the applicable event may, to the extent permitted in Section 3.1 of this Plan (and subject to any applicable restriction on repricing under Section 13.2), in its discretion and without obtaining shareholder approval, take any one or more of the following actions with respect to any Participant:

(a) accelerate the vesting and exercise dates of any or all outstanding Awards;

(b) eliminate any and all restrictions with respect to outstanding Restricted Awards;


(c) determine the level of achieved performance, projected full-performance period performance, or other specified level of performance to be deemed to be the level of achievement of the performance objective for any Performance Award;

(d) pay cash to any or all holders of Stock Options in exchange for the cancellation of their outstanding Stock Options and cash out all outstanding Stock Units or Restricted Awards, provided that payment of consideration equivalent to the consideration received by shareholders, net of any exercise price payable with respect to the Award, shall be sufficient payment for the cash-out of an Award (for clarity, if a Stock Option had an exercise price in excess of such consideration, the Stock Option could be cancelled with no payment to the Participant);

(e) modify the vesting terms of continuing, assumed or replaced awards to provide for vesting upon a Participant’s subsequent termination not for cause or voluntary termination for good reason;

(f) grant new Awards to any Participants; or

(g) make any other adjustments or amendments to outstanding Awards or determine that there shall be substitution of replacement or new awards by such successor employer Company or a parent or subsidiary company thereof, with appropriate adjustments as to the number and kind of shares or units subject to such awards and prices.

11.3 Binding Determination. Adjustments under Sections 11.1 and 11.2 shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding and conclusive.

ARTICLE XII

GENERAL PROVISIONS

12.1 No Right to Employment. Nothing in this Plan or in any Agreement or instrument executed pursuant to this Plan shall confer upon any Participant (i) any right to continue in the employ of the Company or a Subsidiary or affect the Company’s or a Subsidiary’s right to terminate the employment of any Participant at any time with or without cause, or (ii) any right to continue to serve as a Director of the Company or affect any party’s right to remove such Participant as a Director.

12.2 Securities Requirements. The Company shall not be obligated to issue or transfer shares of Common Stock pursuant to an Award unless all applicable requirements imposed by federal and state laws, regulatory agencies, and securities exchanges upon which the Common Stock may be listed have been fully complied with. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements.

12.3 No Right to Stock. No Participant and no beneficiary or other person claiming under or through such Participant shall have any right, title or interest in any shares of Common Stock allocated or reserved under this Plan or subject to any Award except as to such shares of Common Stock, if any, that have been issued or transferred to such Participant or other person entitled to receive such Common Stock under the terms of the Award.

12.4 Withholding. The Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards paid in cash any federal, state, or local taxes as required by law to be withheld with respect to such cash payments. In the case of Awards paid or payable in Common Stock, the Participant or other person receiving such Common Stock may be required to pay to the Company or a Subsidiary, as appropriate, the amount of any such taxes which the Company or Subsidiary is required to withhold with respect to such Common Stock. Also, at the discretion of the Committee and provided such withholding can be effected without causing the Participant to incur liability under Section 16(b) of the Exchange Act, the Committee may require or permit the Participant


to elect (i) to have the Company or Subsidiary withhold from the shares of Common Stock to be issued or transferred to the Participant the number of shares necessary to satisfy the Company’s or Subsidiary’s obligation to withhold taxes, such determination to be based on the shares’ fair market value as of the date the Participant becomes subject to income taxation with respect to the Award, (ii) deliver sufficient shares of Common Stock (based upon the fair market value at the date of withholding) to satisfy the withholding obligations, or (iii) deliver sufficient cash to satisfy the withholding obligations. Participants who elect to use such a stock withholding feature must make the election at the time and in the manner prescribed by the Committee.

12.5 No Disposition. No Award under this Plan may be the subject of any Disposition (excluding shares of Common Stock with respect to which all restrictions have lapsed), other than by will or the laws of descent or distribution or, if permitted by the Company, pursuant to a valid beneficiary designation. Any attempted Disposition in violation of this provision shall be void and ineffective for all purposes. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit a Participant to transfer an Award other than an Incentive Stock Option, for estate-planning purposes, to (a) a member or members of the Participant’s immediate family, (b) a trust, the beneficiaries of which consist exclusively of members of the Participant’s immediate family, (c) a partnership, the partners of which consist exclusively of members of the Participant’s immediate family, or (d) any similar entity created for exclusive benefit of members of the Participant’s immediate family; provided, however, that (i) such Disposition must be not for value, and (ii) no such transfer is authorized for an Award if and to the extent that such authorization would trigger tax penalties or taxation of the Award earlier than the delivery of cash or non-forfeitable shares to the Participant (or, if later, the lapse of the substantial risk of forfeiture of delivered shares).

12.6 Severability; Construction. If any provision of this Plan is held to be illegal or invalid for any reason, then the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein. Headings and subheadings are for convenience only and not to be conclusive with respect to construction of this Plan.

12.7 Governing Law. All questions arising with respect to the provisions of this Plan shall be determined by application of the laws of the State of North Carolina, except as may be required by applicable federal law.

12.8 Other Deferrals. Subject to Section 12.10, the Committee may permit selected Participants to elect to defer payment of Awards in accordance with procedures established by the Committee including, without limitation, procedures intended to defer taxation on such deferrals until receipt (including procedures designed to avoid incurrence of liability under Section 16(b) of the Exchange Act). Any deferred payment, whether elected by the Participant or specified by an Agreement or by the Committee, may require forfeiture in accordance with stated events, as determined by the Committee.

12.9 Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. The Committee is authorized to adopt subplans to achieve the purposes of this Section 12.9. An Award may have terms under this Section 12.9 that are inconsistent with the express terms of the Plan, including authorizing cash payments in lieu of issuance or delivery of shares, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) for the Participant whose Award is granted with or modified to provide such terms.

12.10 Compliance with Code Section 409A. Other provisions of the Plan notwithstanding, the terms of any Award that is deemed to be a deferral for purposes of Code Section 409A and that is held by an employee subject to United States federal income taxation (a “409A Award”), including any authority of the Company and rights


of the Participant with respect to the 409A Award, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A. Terms of Awards shall be interpreted in a manner that, according to the character of the Award, results in an exemption from Code Section 409A or compliance with Code Section 409A. 409A Awards and Non-409A Awards will be subject to the Company’s “Compliance Rules Under Code Section 409A,” attached to this Plan as Appendix A.

12.11 No Loans to Participants; No Reload Awards. No credit shall be extended to Participants in the form of personal loans in connection with Awards, whether for purposes of paying the exercise price or withholding taxes or otherwise. Any amount due and payable to the Company by a Participant shall be immediately due and shall be paid as promptly as practicable. No term of an Award shall provide for automatic “reload” grants of additional Awards upon exercise of an Stock Option or otherwise as a term of an Award.

12.12 Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, and such other arrangements may be either applicable generally or only in specific cases.

12.13 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation (excluding awards of Restricted Stock). With respect to any payments not yet made to a Participant or obligations to deliver shares pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, share, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.

12.14 Approval of Section 83(b) Election; Participant to Give Notice of Disqualifying Disposition. No election by a Participant under Section 83(b) of the Code (to include in gross income in the year of grant the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award document or by action of the Committee in writing prior to the effectiveness of such election. If any Participant shall make any disposition of shares delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), the Participant shall notify the Company of such disposition within ten days thereof.

12.15 Certain Limitations Relating to Accounting Treatment of Awards. Other provisions of the Plan notwithstanding, the Committee’s authority under the Plan is limited to the extent necessary to ensure that any Award of a type that the Committee has intended to be “share-based equity” (and not a “share-based liability”) subject to fixed accounting with a measurement date at the time the award is initiated under FASB ASC Topic 718 shall not be deemed a share-based liability (subject to “variable” accounting) or subject to a measurement date later than the time the Award is initiated solely due to the existence of such authority, unless the Committee specifies otherwise in the Award Agreement or makes a decision during the life of the Award with explicit acknowledgment that the default accounting treatment under this Section 12.15 will be changed.

ARTICLE XIII

AMENDMENT AND TERMINATION

13.1 Amendments; Suspension; Termination. The Board may at any time amend, suspend (and if suspended, may reinstate) or terminate this Plan; provided, however, that the Board may not, without approval of the shareholders of the Company, amend this Plan so as to (a) increase the number of shares of Common Stock subject to this Plan except as permitted in Article XI or (b) reduce the exercise price for shares of Common Stock covered by Stock Options granted hereunder below the applicable price specified in Article VII of this Plan or


(c) make a material revision to the Plan within the meaning of [Section 303A.08 of the Listed Company Manual of the New York Stock Exchange] as then in effect. The Committee is authorized to amend the Plan to the extent such action is within the scope of the Committee’s authority under its Charter, and subject to all other requirements that would apply if the Plan were being amended by action of the Board. The Committee is authorized to amend outstanding Awards, except as limited by the Plan. The foregoing notwithstanding, no amendment to the Plan or an Award Agreement or other action that materially and adversely affects a the rights of a Participant under an outstanding Award may be made or taken without the consent of such Participant. The authority of the Committee to waive or modify an Award term after the Award has been granted does not permit waiver or modification of a term that would be mandatory under the Plan for any Award newly granted at the date of the waiver or modification. Unless earlier terminated by action of the Board of Directors, the authority of the Committee to make grants under the Plan will terminate on the date that is ten years after the latest date upon which shareholders of the Company have approved the Plan (including approval of the Plan as amended and restated).

13.2 Restriction on Repricing. Without the approval of shareholders, the Committee will not amend or replace previously granted Stock Options (including Stock Appreciation Rights) in a transaction that constitutes a “repricing,” which for this purpose means any of the following or any other action that has the same effect:

 

   

Lowering the exercise price of a Stock Option after it is granted;

 

   

Any other action that is treated as a repricing under generally accepted accounting principles;

 

   

Canceling a Stock Option at a time when its exercise price exceeds the fair market value of the underlying Stock, in exchange for another Stock Option, a Restricted Award, other equity or other cash or property (such an action will be considered a repricing regardless of whether a replacement Award is delivered simultaneously with the cancellation, regardless of whether it is treated as a repricing under generally accepted accounting principles, and regardless of whether it is voluntary on the part of the Participant);

provided, however, that the foregoing transactions shall not be deemed a repricing if pursuant to an adjustment authorized under Section 11.1.

ARTICLE XIV

DATE OF PLAN ADOPTION; EFFECTIVENESS; PLAN TERMINATION

14.1 Date of Plan Adoption. This Plan was adopted by the Board on                     , 2019 and approved by the Company’s shareholder on                     , 2019. This Plan shall become effective upon completion of the spinoff of the Company by VF Corporation, and thereafter shall continue in effect with respect to Awards granted before termination of the Committee’s authority to grant new Awards under Section 13.1 (including authority to modify Awards to the fullest extent permitted under the Plan) until all outstanding Awards have been settled, terminated or forfeited and the Company and Participants have no further obligations or rights with respect to such Awards.


Appendix A

Compliance Rules Under Code Section 409A

 

1.

General Rules for Section 409A Compliance.

The following rules will apply to the 2019 Stock Compensation Plan (the “Plan”). Capitalized terms used herein have the definitions as set forth in the Plan. If so designated by the Committee, these Compliance Rules may be applied to any other specified, agreement or arrangement.

(a) 409A Awards and Deferrals. Other provisions of the Plan notwithstanding, the terms of any 409A Award, including any authority of the Company and rights of the Participant with respect to the 409A Award, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A but only to the extent that such modification or limitation is permitted under Code Section 409A and the regulations and guidance issued thereunder. The following rules will apply to Awards:

(i) Elections. If a Participant is permitted to elect to defer compensation and in lieu thereof receive an Award, or is permitted to elect to defer any payment under an Award, such election will be permitted only at times and otherwise in compliance with Section 409A.

(ii) Changes in Distribution Terms. The Committee may, in its discretion, require or permit on an elective basis a change in the distribution terms applicable to 409A Awards (and Non-409A Awards that qualify for the short-term deferral exemption under Section 409A) in accordance with, and to the fullest extent permitted by, applicable guidance of the Internal Revenue Service under Code Section 409A.

(iii) Exercise and Distribution. Except as provided in Section 1(a)(iv) hereof, no 409A Award shall be exercisable (if the exercise would result in a distribution) or otherwise distributable to a Participant (or his or her beneficiary) except upon the occurrence of one or more of the following (or a date related to the occurrence of one of the following), which must be specified in a written document governing such 409A Award and otherwise meet the requirements of Treasury Regulation § 1.409A-3.

 

  (A)

Specified Time. A specified time or a fixed schedule;

 

  (B)

Separation from Service. The Participant’s separation from service (within the meaning of Treasury Regulation § 1.409A-1(h) and other applicable rules under Code Section 409A); provided, however, that if the Participant is a “specified employee” under Treasury Regulation § 1.409A-1(i), settlement under this Section 1(a)(iii)(B) that otherwise would occur within six months after a separation from service shall instead occur at the expiration of the six-month period following separation from service under Section 409A(a)(2)(B)(i). During such six-month delay period, no acceleration of settlement may occur, except (1) acceleration may occur in the event of death of the Participant, (2), if the distribution date was specified as the earlier of separation from service or a fixed date and the fixed date falls within the delay period, the distribution shall be triggered by the fixed date, and (3) acceleration may be permitted otherwise if and to the extent permitted under Section 409A. In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the six-month delay period. With respect to any 409A Award, a reference in any agreement or other governing document to a “termination of employment” that triggers a distribution shall be deemed to mean a “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h);

 

  (C)

Death. The death of the Participant. Unless a specific time otherwise is stated for payment of a 409A Award upon death, such payment shall occur at a time compliant with Code Section 409A;

 

  (D)

Disability. The date the Participant has experienced a 409A Disability (as defined below); and

 

  (E)

409A Change in Control. The occurrence of a 409A Change in Control (as defined below).


(iv) No Acceleration. The exercise or distribution of a 409A Award may not be accelerated prior to the time specified in accordance with Section 1(a)(iii) hereof, except in the case of one of the following events:

 

  (A)

Unforeseeable Emergency. The occurrence of an Unforeseeable Emergency, as defined below, but only if the net amount payable upon such settlement does not exceed the amounts necessary to relieve such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the settlement, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise or by liquidation of the Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of deferrals under the Plan. Upon a finding that an Unforeseeable Emergency has occurred with respect to a Participant, any election of the Participant to defer compensation that will be earned in whole or part by services in the year in which the emergency occurred or is found to continue will be immediately cancelled;

 

  (B)

Domestic Relations Order. The 409A Award may permit the acceleration of the exercise or distribution time or schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code);

 

  (C)

Conflicts of Interest. Such 409A Award may permit the acceleration of the settlement time or schedule as may be necessary to comply with an ethics agreement with the Federal government or to comply with a Federal, state, local or foreign ethics law or conflict of interest law in compliance with Treasury Regulation § 1.409A-3(j)(4)(iii); and

 

  (D)

Change. The Committee may exercise the discretionary right to terminate the Plan upon or within 12 months after a 409A Change in Control or otherwise to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(ix), or accelerate settlement of such 409A Award in any other circumstance permitted under Treasury Regulation § 1.409A-3.

(v) Definitions. For purposes of this Section 1, the following terms shall be defined as set forth below:

 

  (A)

“409A Change in Control” shall be deemed to have occurred if, in connection with any event defined as a change in control relating to a 409A Award under any applicable Company document, there occurs a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, as defined in Treasury Regulation § 1.409A-3(i)(5).

 

  (B)

“409A Disability” means an event which results in the Participant being (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii), by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its subsidiaries.

 

  (C)

“Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)) of the Participant, loss of the Participant’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, and otherwise meeting the definition set forth in Treasury Regulation § 1.409A-3(i)(3).

(vi) Time of Distribution. In the case of any distribution of a 409A Award, if the timing of such distribution is not otherwise specified in the Plan or an Award agreement or other governing document, the distribution shall be made within 60 days after the date at which the settlement of the Award is specified to


occur. In the case of any distribution of a 409A Award during a specified period following a settlement date, the maximum period shall be 90 days, and the Participant shall have no influence (other than deferral elections permitted under Section 409A) on any determination as to the tax year in which the distribution will be made during any period in which a distribution may be made.

(vii) Determination of “Specified Employee”. For purposes of a distribution under Section 1(a)(iii)(B), status of a Participant as a “specified employee” shall be determined annually under the Company’s administrative procedure for such determination for purposes of all plans subject to Code Section 409A.

(viii) Non-Transferability. The provisions of the Plan notwithstanding, no 409A Award or right relating thereto shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant’s beneficiary.

(ix) Limitation on Setoffs. If the Company has a right of setoff that could apply to a 409A Award, such right may only be exercised at the time the 409A Award would have been distributed to the Participant or his or her beneficiary, and may be exercised only as a setoff against an obligation that arose not more than 30 days before and within the same year as the distribution date if application of such setoff right against an earlier obligation would not be permitted under Code Section 409A.

(x) 409A Rules Do Not Constitute Waiver of Other Restrictions. The rules applicable to 409A Awards under this Section 1(a) constitute further restrictions on terms of Awards set forth elsewhere in this Plan.

(b) Separate Payments. Unless otherwise specified in the applicable Award agreement, each vesting tranche of an Award shall be deemed to be a separate payment for purposes of Code Section 409A, and any portion of a vesting tranche that would vest on a pro rata basis in the event of a separation from service for the period from the date of separation in a given fiscal year to December 31 of that year and the portion that would vest pro rata for the period from the beginning of a calendar year to the end of the Company’s fiscal year, and any remaining portion of such vesting tranche that would not so vest, each shall be deemed to be a separate payment for purposes of Code Section 409A.

(c) Distributions Upon Vesting. In the case of any Non-409A Award providing for a distribution upon the lapse of a substantial risk of forfeiture, if the timing of such distribution is not otherwise specified in the Plan or an Award agreement or other governing document, the distribution shall be made not later than the 15th day of the third month after the end of the fiscal year in which the substantial risk of forfeiture lapsed, and if a determination is to be made promptly following the end of a performance year (as in the case of performance shares) then the determination of the level of achievement of performance and the distribution shall be made between the start of the subsequent fiscal year and the 15th day of the third month of such subsequent fiscal year. In all cases, the Participant shall have no influence (aside from any deferral election permitted under Section 409A) on any determination as to the tax year in which the distribution will be made.

(d) Limitation on Adjustments. Any adjustment under the Plan shall be implemented in a way that complies with applicable requirements under Section 409A so that Non-409A Awards do not, due to the adjustment, become 409A Awards, and otherwise so that no adverse consequences under Section 409A result to Participants.

(e) Release or Other Termination Agreement. If the Company requires a Participant to execute a release, non-competition, or other agreement as a condition to receipt of a payment upon or following a termination of employment, the Company will supply to the Participant a form of such release or other document not later than the date of the Participant’s termination of employment (if not date for such action otherwise is specified in documents relating thereto), which must be returned within the minimum time period required by law (or 21 days if no minimum period is so prescribed) and must not be revoked by the Participant within the applicable time period for revocation (if any) in order for the Participant to satisfy any such condition. If any amount constituting a deferral of compensation under Section 409A payable during a fixed period following termination of employment is subject to such a requirement and the fixed period would begin in one Participant tax year and end in the next tax year, the Company, in determining the time of payment of any such amount, will not be influenced by the timing of any action of the Participant including execution of such a release or other document and expiration of any revocation period. In such cases, the Company will pay any such amount in the subsequent tax year within the fixed period.


(f) Special Disability Provision. Unless otherwise provided in an applicable Award agreement or other governing document, in case of a disability of a Participant, (i) for any Award or portion thereof that constitutes a short-term deferral for purposes of Section 409A, the Company shall determine whether the Participant’s circumstances are such that the Participant will not return to service, in which case such disability will be treated as a termination of employment for purposes of determining the time of payment of such Award or portion thereof then subject only to service-based vesting, and (ii) for any Award or portion thereof that constitutes a 409A Award, the Company shall determine whether there has occurred a “separation from service” as defined under Treasury Regulation § 1.409A-1(h) based on Participant’s circumstances, in which case such disability will be treated as a separation from service for purposes of determining the time of payment of such Award or portion thereof then subject only to service-based vesting. In each case, the Participant shall be accorded the benefit of vesting that would result in the case of disability in the absence of this provision, so that the operation of this provision, intended to comply with Section 409A, will not disadvantage the Participant. The Company’s determinations hereunder will be made within 30 days after the disability arises or there occurs a material change in the Participant’s condition that constitutes the disability. In the case of any short-term deferral, if (i) circumstances arise constituting a disability but not constituting a termination of employment, (ii) the Award would provide for vesting upon a termination due to disability, and (iii) the Award would not qualify as a short-term deferral if the Participant were then permitted to elect the time at which to terminate employment due to the disability, then only the Company will be entitled to act to terminate Participant’s employment due to disability.

(g) Limit on Authority to Amend. The authority to adopt amendments under Section 10(e) does not include authority to take action by amendment that would have the effect of causing Awards to fail to meet applicable requirements of Section 409A.

(h) Scope and Application of this Provision. For purposes of the Plan and this Appendix, references to a term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean that the term or event will not cause the Participant to be deemed to be in constructive receipt of compensation relating to the Award prior to the distribution of cash, shares or other property (and the lapse of any applicable substantial risk of forfeiture) or to be liable for payment of interest or a tax penalty under Section 409A.

 

2.

Deferral Election Rules.

If a participant in the Plan or any other plan, program or other compensatory arrangement (a “plan”) of the Company is permitted to elect to defer awards or other compensation, any such election relating to compensation deferred under the applicable plan must be received by the Company prior to the date specified by or at the direction of the administrator of such plan (the “Administrator,” which in most instances will be the head of Human Resources for the Company). If the deferral constitutes a deferral of compensation for purposes of Code Section 409A, any such election to defer shall be subject to the rules set forth below, subject to any additional restrictions as may be specified by the Administrator. Under no circumstances may a Participant elect to defer compensation to which he or she has attained, at the time of deferral, a legally enforceable right to current receipt of such compensation.

(a) Initial Deferral Elections. Any initial election to defer compensation (including the election as to the type and amount of compensation to be deferred and the time and manner of settlement of the deferral) must be made (and shall be irrevocable) no later than December 31 of the year before the participant’s services are performed that will result in the earning of the compensation, except for initial deferral elections otherwise permitted under Treasury Regulation § 1.409A-2(a).

(b) Further Deferral Elections. In the case of any election to further defer an amount that is deemed to be a deferral of compensation subject to Code Section 409A (to the extent permitted under Company plans, programs and arrangements), such further deferral election shall comply with Treasury Regulation § 1.409A-2(b).


Appendix B

Kontoor Brands, Inc.

1996 Stock Compensation Plan

(A VF Corporation Plan Assumed by Kontoor Brands, Inc.

Relating to Kontoor Employee Awards)

                     , 2019

Kontoor Brands, Inc. (“Kontoor”) has assumed certain rights and obligations of VF Corporation (“VF”) with regards to equity awards that were outstanding under VF’s 1996 Stock Compensation Plan (the “VF Plan”) at                  , 2019, the date of consummation of VF’s spinoff transaction by which Kontoor became separated from VF (the “Spinoff”).

This document constitutes an amendment to the VF 1996 Stock Compensation Plan insofar as it relates to such rights and obligations assumed by Kontoor. As used herein, the term “Plan” refers to the Plan as assumed by Kontoor and amended hereby, while “VF Plan” refers to the VF 1996 Stock Compensation Plan as in effect prior to the Spinoff. Effective at the time of the Spinoff, Kontoor assumed rights and obligations under the VF Plan relating to equity awards held by persons who, immediately after the Spinoff, continued as employees of Kontoor and its subsidiaries. However, for clarity, Kontoor did not assume rights and obligations relating to equity awards held by persons (i) who immediately after the Spinoff continued as employees of VF and its post-Spinoff subsidiaries, (ii) who had, prior to the Spinoff, ceased to be employees or directors of VF and its then subsidiaries (including Kontoor), and (iii) whose equity awards under the VF Plan resulted from service as non-employee directors of VF, Kontoor or other VF subsidiaries.

 

  (1)

Name of Plan: Kontoor Brands, Inc. 1996 Stock Compensation Plan (a VF Corporation Plan Assumed by Kontoor Brands, Inc. Relating to Kontoor Employee Awards).

 

  (2)

References in Plan: The following specifies the meaning of certain references in Plan provisions. However, in all cases, if the context otherwise requires, the provision will be interpreted so as to preserve the substantive rights of all parties (Kontoor, VF and participants) to the fullest extent possible.

 

  (a)

References to “VF Corporation,” “VF” or the “Company” refer to Kontoor, except that, in the case of Plan-related events prior to the Spinoff, such references are to VF. Kontoor constituted a subsidiary of VF prior to the Spinoff.

 

  (b)

Accordingly, definitions of “Directors” in Plan Section 2.10 and “Employees” in Plan Section 2.12 mean Directors of Kontoor and Employees of Kontoor and its subsidiaries, except references to events relating to such a person prior to the Spinoff include events occurring at a time the person was serving as a Director or Employee of VF or its subsidiaries.

 

  (c)

References to the “Committee” are to the Kontoor Talent and Compensation Committee (and any successor committee) at times from and after the Spinoff, and to the VF Talent and Compensation Committee (and any predecessor committee) at times prior to the Spinoff.

 

  (3)

Other Affected Plan Provisions:

 

  (a)

Articles III – IX and related provisions: Kontoor has no authority to make new grants under the Plan, other than the replacement of awards outstanding at the time of the Spinoff through the assumption and conversion of those awards. However, Kontoor retains full authority to modify outstanding awards under the Plan.

 

  (b)

Section 3.1: A total of              shares of Kontoor Common Stock are reserved under the Plan, representing only the shares subject to equity awards outstanding at the time of the Spinoff that have been assumed by Kontoor and converted into equity awards relating to Kontoor Common Stock, together with such number of additional shares deliverable in connection with dividend equivalent rights under such Plan awards. For clarity, such number of shares represents one share


  reserved and available for each share subject to an assumed and converted Stock Option or Full-Value Award. (Note: The counting of Full-Value Awards as three shares against the Plan reserve under Plan Section 3.1 is discontinued, because no new equity awards will be granted under the Plan; shares will be recaptured from Plan Awards based on provisions of the 2019 Stock Award and Incentive Plan on a one-share-for-one-share basis).

 

  (c)

Section 5.3: Annual award limits are adjusted to              shares of Kontoor Common Stock for Stock Options (previously under the VF Plan this limit was 2 million Stock Options) and              shares of Kontoor Common Stock for Full-Value Awards (previously under the VF Plan this limit was 800,000 Restricted Awards).

 

  (d)

Section 2.4 (Definition of “Change in Control”): The Spinoff and events relating thereto do not constitute a Change in Control for purposes of any award assumed under the Plan. Only events relating to Kontoor from and after the Spinoff potentially will give rise to a Change in Control.

 

  (e)

Section 2.24 (Definition of “Retirement”): Service with VF and its subsidiaries other than Kontoor prior to the Spinoff will be treated as service with a predecessor company.

 

Attachment:   The VF 1996 Stock Compensation Plan, as amended and restated and in effect at the date of the Spinoff
EX-10.7 11 d618285dex107.htm EX-10.7 EX-10.7

Exhibit 10.7

KONTOOR BRANDS, INC. 2019 STOCK AWARD AND INCENTIVE PLAN NON-QUALIFIED STOCK OPTION CERTIFICATE

Optionee:            

Date of Grant:            

Number of Shares:            

Option Price Per Share:            

THIS IS TO CERTIFY that on the above Date of Grant, Kontoor Brands, Inc., a North Carolina corporation (the “Corporation”), granted to the named Optionee a Non-Qualified Stock Option, subject to the terms and conditions of the 2019 Stock Compensation Plan (the “Plan”), which is incorporated herein by reference. Capitalized terms herein have the meanings as defined in the Plan. This Option shall not be treated as an Incentive Stock Option. The Optionee may purchase from the Corporation the Number of Shares of its Common Stock at the Option Price Per Share identified above, subject, however, to the following terms and conditions.

1. Subject to paragraph 2 below:

 

  (a)

Unless the exercise date of this Option is accelerated in accordance with Article X of the Plan, this Option shall vest and be exercisable as follows:

 

   

one-third (1/3) of the shares of this Option (rounded up to the nearest whole share) shall only be exercisable for a period of nine (9) years, commencing on the first anniversary of the Date of Grant;

 

   

one-third (1/3) of the shares of this Option (rounded to the nearest whole share) shall only be exercisable for a period of eight (8) years, commencing on the second anniversary of the Date of Grant; and

 

   

one-third (1/3) of the shares of this Option (rounded down to the nearest whole share) shall only be exercisable for a period of seven (7) years, commencing on the third anniversary of the Date of Grant; and all rights to exercise all or any part of this Option will end upon the expiration of ten years from the Date of Grant;

 

  (b)

This Option shall only be exercisable so long as the Optionee remains an employee of the Corporation or a Subsidiary (as defined in the Plan); and

 

  (c)

In the event that the Optionee’s employment is terminated at any time prior to the exercise of this Option for any reason, all of the Optionee’s rights, if any then remain, under this Option shall be forfeited and this Option shall terminate immediately.

2. The provisions of paragraph 1 of this Certificate to the contrary notwithstanding, upon the termination of the Optionee’s employment with the Corporation (including its Subsidiaries) at any time prior to the expiration of ten years from the Date of Grant of this Option by reason of Retirement (as defined in the Plan), permanent and total disability, death, or involuntary separation of employment with the Optionee receiving severance pay in installments, the Optionee or his estate may exercise the Option to the extent specified in this Section 2 during the applicable period: (a) the 36 month period following the date of Retirement, permanent and total disability, or the Optionee’s death, or (b) until the end of the period of the Optionee’s receipt of installments of severance pay in the event of involuntary separation of employment. If an Optionee dies during the 36 month period following such termination of employment by reason of Retirement or permanent and total disability, then the Optionee’s estate may exercise any outstanding options during the balance of the 36 month period; and if an Optionee dies during the period of such receipt of installments of severance pay following an involuntary separation of employment, then the Optionee’s estate may exercise any outstanding options during the balance of the period of receipt of installments of severance pay. If an Optionee retires (in accordance with the definition of Retirement in

 

1


the Plan) prior to the payment of the final installment of severance pay following an involuntary separation of employment, the Optionee may exercise any outstanding options for the 36 month period beginning on the date of such involuntary separation of employment. Upon the termination of the Optionee’s employment with the Corporation due to death or permanent and total disability, any unvested portion of the Option will vest and become immediately exercisable in full and will remain exercisable as described in the preceding sentence. Upon termination of the Optionee’s employment with the Corporation due to Retirement or involuntary separation of employment with the Optionee receiving severance pay in installments, the Option shall be or become exercisable during the post-termination exercise period only at such times as it would have been exercisable under Section 1(a) had Optionee’s employment not terminated (thus, (a) in the case of Retirement, any portion of the Option that would not have vested before the expiration of the 36-month period following termination will be forfeited and (b) in the case of involuntary separation of employment, any portion of the Option that would not have vested before expiration of the period of the Optionee’s receipt of installments of severance pay will be forfeited). Notwithstanding anything in this Certificate to the contrary, in no event, however, shall this Option be exercisable after 11:59 PM Eastern Time on the day before the tenth anniversary of the Date of Grant. In addition, and notwithstanding anything in this Certificate to the contrary, this Option shall be forfeited and shall terminate immediately on the Optionee’s date of termination of employment for any reason (the date of termination of employment will be determined without giving effect to any period during which severance payments may be made to an Optionee) prior to the first anniversary of the Date of Grant.

3. During the life of the Optionee, this Option may only be exercised by the Optionee, except as otherwise provided in the Plan. The Optionee is responsible for all applicable taxes. The exercise of this Option is subject to the Corporation’s policies regulating trading by employees in securities of the Corporation, including any applicable “blackout” periods when trading is not permitted. If, at the date on which the Option (or any portion thereof) is to expire or terminate, the Fair Market Value of a Share exceeds the Option Price and if the Option (or portion thereof) that will expire or terminate is otherwise vested and exercisable, the Option (or such portion thereof) will be automatically exercised by the withholding of Option Shares to pay the exercise price and applicable withholding taxes. The Option may not be transferred or subject to a Disposition, as provided in Section 12.5 of the Plan.

4. This Option shall be exercised by written notice to the Corporation stating the number of shares with respect to which it is being exercised and accompanied by payment of the full amount of the Option Price for the number of shares desired by a check payable to the order of the Corporation, or, if acceptable to the Committee, by delivery of a cash equivalent or surrender or delivery to the Corporation of shares of its Common Stock or by a combination of a check and shares of Common Stock. The exercise date of this Option shall be the date upon which the notice of exercise is received by the Corporation with full payment of the Option Price. In addition, this Option may be exercised on behalf of the Optionee by a designated brokerage firm in accordance with the terms of the Plan and the rules of the Committee.

5. This Option may only be exercised if all personal income tax and applicable social security tax liabilities are borne by the Optionee. This includes the satisfaction of any applicable tax that the Corporation and/or the Subsidiary employing such Optionee may in its judgment be required to withhold. To enable the withholding of such tax, the Corporation or the Subsidiary employing the Optionee may receive and retain the Option exercise proceeds (in the form of shares, remitting the fair market value of such shares to the appropriate taxing authorities) or the proceeds of any sale of Option shares (in the form of cash) on behalf of the Optionee. In the event that no tax is withheld or the tax withheld is not sufficient to cover the Optionee’s total tax liability arising directly or indirectly from the grant of the Option, the Optionee accepts full responsibility for such tax liability.

6. The grant of this Option:

 

  (a)

is made at the discretion of the Corporation, which retains certain rights pursuant to the Plan to amend the terms of the Option or the Plan;

 

  (b)

shall not be construed as entitling the Optionee to future option grants or other future compensation and/or to continued employment with the Corporation (including its Subsidiaries); and

 

2


  (c)

shall not be considered as part of the Optionee’s salary for purposes of calculating severance in the event of the Optionee’s voluntary or involuntary termination of employment.

7. This Option is subject to the Corporation’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the date of this Option. Such Policy imposes conditions that may result in forfeiture of the Option or the proceeds to you resulting from the Option (a so-called “clawback”) in certain circumstances if the Corporation’s financial statements are required to be restated as a result of misconduct.

8. The Corporation (including the Subsidiary employing the Optionee) is hereby authorized to transmit any personal information that it deems necessary to facilitate the administration of the Option grant.

9. This Certificate, including the rights and obligations of the Optionee and the Corporation hereunder, is subject in all respects to the Plan, which shall be controlling in the event of any inconsistency with or omission from this Certificate.

10. This Agreement shall be binding upon the parties and any successors, heirs, executors, or administrators of the parties. This Agreement constitutes the entire agreement between the parties with respect to the Option, and supersedes any prior agreements or documents with respect to the Option. No amendment or alteration of this Agreement that may impose any additional obligation upon the Corporation shall be valid unless expressed in a written instrument duly executed in the name of the Corporation, and no amendment, alteration, suspension or termination of this Agreement that materially impairs the rights of the Optionee with respect to the Option shall be valid unless expressed in a written instrument executed by Optionee.

By accepting the grant of this Option, the Optionee acknowledges that he or she understands and agrees to its terms.

 

KONTOOR BRANDS, INC.

By:  

 

  [Name]
  [Title]

 

3

EX-10.8 12 d618285dex108.htm EX-10.8 EX-10.8

Exhibit 10.8

KONTOOR BRANDS, INC.NON-QUALIFIED STOCK OPTION CERTIFICATE

FOR NON-EMPLOYEE DIRECTORS

(Nine Years Exercise)

Optionee:             

Date of Grant:             

Number of Shares:             

Option Price Per Share: $            

THIS IS TO CERTIFY that on the above Date of Grant, KONTOOR BRANDS, INC., a North Carolina corporation (the “Corporation”), granted to the named Optionee a Non-Qualified Stock Option, subject to the terms and conditions of the 2019 Stock Compensation Plan (the “Plan”), which is incorporated herein by reference. Capitalized terms herein have the meanings as defined in the Plan. This Option shall not be treated as an Incentive Stock Option. The Optionee may purchase from the Corporation the Number of Shares of its Common Stock at the Option Price Per Share identified above, subject, however, to the following terms and conditions.

1. Subject to paragraph 2 below:

 

  (a)

Unless the exercise date of this Option is accelerated in accordance with Article X of the Plan, this Option shall only be exercisable for a period of nine years, commencing on the earlier of the first anniversary of the Date of Grant or the next annual meeting of stockholders that is at least 50 weeks after the Date of Grant and ending upon the expiration of ten years from the Date of Grant;

 

  (b)

This Option shall only be exercisable so long as the Optionee remains a director of the Corporation; and

 

  (c)

In the event that the Optionee’s service as a director of the Corporation ceases at any time prior to the exercise of this Option for any reason, all of the Optionee’s rights, if any then remain, under this Option shall be forfeited and this Option shall terminate immediately.

2. The provisions of paragraph 1 of this Certificate to the contrary notwithstanding, upon the termination of the Optionee’s service as a director of the Corporation at any time prior to the expiration of ten years from the Date of Grant of this Option by reason of retirement (after attaining age 65), permanent and total disability, death, or under mutually satisfactory conditions, this Option may be exercised during the following periods: (a) the 36-month period following the date of retirement or permanent and total disability, (b) the 36-month period following the date of the Optionee’s death or termination under mutually satisfactory conditions, and (c) the 36-month period following the date of the Optionee’s death during a period specified in (a) or (b) above after terminating service as a director for a reason specified in such (a) or (b). Upon the termination of the Optionee’s service as a director of the Corporation due to death or permanent and total disability, any unvested portion of the Option will vest and become immediately exercisable in full and will remain exercisable as described in the preceding sentence. In no event, however, shall this Option be exercisable after 11:59 PM Eastern Time on the day before the tenth anniversary of the Date of Grant. [In addition, and notwithstanding anything in this Certificate to the contrary, this Option shall be forfeited and shall terminate immediately at such time as the Optionee ceases to serve as a Director before the Option has become initially exercisable under paragraph 1(a) above.]

3. During the life of the Optionee, this Option may only be exercised by the Optionee, except as otherwise provided in the Plan. The Optionee is responsible for all applicable taxes. The exercise of this Option is subject to the Corporation’s policies regulating trading by directors, including any applicable “blackout” periods when trading is not permitted. If, at the date on which the Option (or any portion thereof) is to expire or terminate, the

 

1


Fair Market Value of a Share exceeds the Option Price and if the Option (or portion thereof) that will expire or terminate is otherwise vested and exercisable, the Option (or such portion thereof) will be automatically exercised by the withholding of Option Shares to pay the exercise price and applicable withholding taxes. The Option may not be transferred or subject to a Disposition, as provided in Section 12.5 of the Plan.

4. This Option shall be exercised by written notice to the Corporation stating the number of shares with respect to which it is being exercised and, accompanied by payment of the full amount of the Option Price for the number of shares desired by a check payable to the order of the Corporation, or, if acceptable to the Committee, by delivery of a cash equivalent or surrender or delivery to the Corporation of shares of its Common Stock or by a combination of a check and shares of Common Stock. The exercise date of this Option shall be the date upon which the notice of exercise is received by the Corporation with full payment of the Option Price. In addition, this Option may be exercised on behalf of the Optionee by a designated brokerage firm in accordance with the terms of the Plan and the rules of the Committee.

5. This Option is subject to the Corporation’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the date of this Option. Such Policy imposes conditions that may result in forfeiture of the Option or the proceeds to you resulting from the Option (a so-called “clawback”) in certain circumstances if the Corporation’s financial statements are required to be restated as a result of misconduct.

6. This Certificate, including the rights and obligations of the Optionee and the Corporation hereunder, is subject in all respects to the Plan, which shall be controlling in the event of any inconsistency with or omission from this Certificate.

7. This Agreement shall be binding upon the parties and any successors, heirs, executors, or administrators of the parties. This Agreement constitutes the entire agreement between the parties with respect to the Option, and supersedes any prior agreements or documents with respect to the Option. No amendment or alteration of this Agreement that may impose any additional obligation upon the Corporation shall be valid unless expressed in a written instrument duly executed in the name of the Corporation, and no amendment, alteration, suspension or termination of this Agreement that materially impairs the rights of the Optionee with respect to the Option shall be valid unless expressed in a written instrument executed by Optionee.

 

KONTOOR BRANDS, INC.

By:  

 

  [Name][Title]

 

2

EX-10.9 13 d618285dex109.htm EX-10.9 EX-10.9

Exhibit 10.9

KONTOOR BRANDS, INC.

AWARD CERTIFICATE

Performance-Based Restricted Stock Units (“PRSUs”) for

Three-Year Performance Cycle Fiscal Years 20    -20     under the

Mid-Term Incentive Plan

Target PRSUs Awarded: ______________

To: _____________________ (“Participant”)

I am pleased to advise you that you have been awarded the opportunity to earn from 0% to 225% of the number of Performance-Based Restricted Stock Units set forth above under the Mid-Term Incentive Plan of Kontoor Brands, Inc. (the “Company”) for the Performance Cycle commencing at the beginning of fiscal 20     and ending on the final day of fiscal 20    under the terms and conditions set forth in the attached Appendix. The actual number of shares of the Company’s Stock that you may receive at the end of the Performance Cycle will depend, among other things as described in the Appendix, on the level of achievement over the Performance Cycle of specified performance goals set by the Compensation Committee of the Company’s Board of Directors.

 

KONTOOR BRANDS, INC.
By:  

 

  [Name]
  [Title]

Dated:                     , 201    


KONTOOR BRANDS, INC.

APPENDIX TO

PRSUs AWARD CERTIFICATE

Terms and Conditions Relating to

Performance-Based Restricted Stock Units (“PRSUs”)

 

1.

Opportunity to Earn PRSUs.

Participant has been designated as having the opportunity to earn Performance-Based Restricted Stock Units (“PRSUs”) under Kontoor Brands, Inc.’s (the “Company”) Mid-Term Incentive Plan, as amended (the “Mid-Term Plan”) for the three-fiscal-year Performance Cycle specified in the Award Certificate (the “Performance Cycle”). Subject to the terms and conditions of the Mid-Term Plan and this Agreement, Participant will have the opportunity to earn from 0% to 225% of the targeted number of PRSUs (the “Target PRSUs”) for the Performance Cycle. The number of Target PRSUs shall be the number set forth on the Award Certificate plus additional cash or PRSUs resulting from Dividend Equivalents and adjustments, as specified in Section 3(c).

 

2.

Incorporation of Plans by Reference; Certain Restrictions.

(a) PRSUs that may be earned by the Participant represent Stock Units under the Company’s Mid-Term Plan and 2019 Stock Award and Incentive Plan (the “2019 Plan”), copies of which have been made available to Participant. All of the terms, conditions, and other provisions of the Mid-Term Plan and the 2019 Plan (together, the “Plans”) are hereby incorporated by reference into this document. Capitalized terms used in this document but not defined herein shall have the same meanings as in the Mid-Term Plan. If there is any conflict between the provisions of this document and the provisions of the Plans, the provisions of the Plans shall govern.

(b) Until PRSUs have become earned in accordance with Section 4, PRSUs shall be subject to a risk of forfeiture as provided in the Plans and this document. Until such time as the PRSUs have become settled by delivery of shares in accordance with Section 6, PRSUs will be nontransferable, as provided in the Plans and Section 3(d). Participant is subject to the Company’s Code of Business Conduct and related policies on insider trading restricting Participant’s ability to sell shares of the Company’s Common Stock received in settlement of PRSUs, which may include “blackout” periods during which Participant may not engage in such sales.

 

3.

General Terms of PRSUs.

(a) Each PRSU represents a conditional right of the Participant to receive, and a conditional obligation of the Company to deliver, one share of the Company’s Common Stock, at the times specified hereunder and subject to the terms and conditions of the Mid-Term Plan and this document.

(b) Not later than the Determination Date specified in Section 6(c) of the Mid-Term Plan following the end of a given Performance Cycle, the Committee will make a final determination of the extent to which the performance goals for that Performance Cycle were achieved and the number of PRSUs earned for that Performance Cycle.

(c) An account will be maintained for Participant for purposes of the Mid-Term Plan, to which the initial number of Target PRSUs for each Performance Cycle initially shall be credited. Dividend Equivalents will be credited on the PRSUs in accordance with Section 7(b) of the Mid-Term Plan. The Committee may vary the manner and terms of crediting Dividend Equivalents during or following the end of the Performance Cycle, for administrative convenience or any other reason, provided that the Committee determines that any alternative manner and terms result in equitable treatment of Participant. The number of Target PRSUs and the terms of

 

Page 1 of 3


PRSUs will be subject to adjustment upon the occurrence of certain extraordinary corporate events specified in Section 7(b) of the Mid-Term Plan and otherwise in accordance with Section 6(b) of the Mid-Term Plan, such adjustments to be made by the Committee in order to prevent dilution or enlargement of Participant’s opportunity to earn incentive compensation under this Agreement. Thus, the percentage of Target PRSUs earned under Section 4 will include the additional cash or PRSUs resulting from the crediting of Dividend Equivalents.

(d) PRSUs are non-transferable to the extent specified in Section 9(h) of the Mid-Term Plan.

 

4.

Earning of PRSUs.

(a) PRSUs for the Performance Cycle will be earned in accordance with Sections 6(a) and 6(c) of the Mid-Term Plan as follows:

The Performance Goal set forth herein must be achieved at the levels specified by the Committee in order for PRSUs to be earned for the Performance Cycle. Performance shall be based on the Company’s ability to achieve the three-year growth targets for [Earnings Per Share (“EPS”), Revenue and Gross Margin], as set by the Committee, by the end of the Performance Cycle. For this purpose, the designation of target performance, the achievement of which is required for the earning of the Target PRSUs, and threshold and maximum performance and the corresponding number of PRSUs deemed earned (with the maximum level of performance corresponding to the earning of 200% of the target number of PRSUs), have been [or will be] specified by the Committee for the fiscal years in the Performance Cycle; provided, however, that the payout for the Participant shall be increased or decreased as follows:

 

   

if the total shareholder return (share price appreciation plus deemed reinvestment of dividends) (TSR) of the Company over the period from [the beginning] [specified date] through the end of the Performance Cycle (the “Measurement Period”) falls at or above the 75th percentile of TSR of the [S&P 500 Consumer Discretionary Companies] [other specified index] over the Measurement Period, the payout for the Participant shall be increased by 25% of the Participant’s Target Award;

 

   

if the TSR of the Company over the Measurement Period falls between the 75th and the 25th percentile of TSR of the [S&P 500 Consumer Discretionary Companies] [other specified index] over the Measurement Period, there shall be no change in the payout; and

 

   

if the TSR of the Company over the Measurement Period falls at or below the 25th percentile of TSR of the [S&P 500 Consumer Discretionary Companies] [other specified index] over the Measurement Period, the payout for each Participant shall be decreased by 25% of the Participant’s Target Award but not below zero.

For purposes of calculating the TSR of the [S&P 500 Consumer Discretionary Companies] [other specified index] over the Measurement Period, the companies included in the calculation shall be only those companies that are included in the [S&P 500 Consumer Discretionary Index] [other specified index] both at the beginning and the end of the Measurement Period, and the share price of each such company at the beginning of the period shall be the average price over the trading days from [15 calendar days before the beginning of the Measurement Period to the 15th calendar day of the Measurement Period and the share price of each such company at the end of the period shall be the average price over the trading days from [15 calendar days before the end of the Measurement Period to the 15th calendar day after the end of the Measurement Period].

Performance and the percentage of Target PRSUs earned will be interpolated, if the performance achieved is between threshold and target or between target and maximum. The Committee retains complete discretion in setting the financial goals and related terms that are incorporated into this Performance Goal.

 

Page 2 of 3


(b) At the Determination Date, at which time the Committee will have determined whether and the extent to which the Performance Goals designated by the Committee in accordance with this Section 4 have been achieved and made other determinations authorized hereunder, any PRSUs that are determined to have not been earned shall cease to be earnable and shall be cancelled.

 

5.

Effect of Termination of Employment.

Upon Participant’s Termination of Employment prior to the end of a given Performance Cycle, the Participant’s unearned PRSUs relating to that Performance Cycle shall cease to be earnable and shall be cancelled, except to the extent provided in Section 8 of the Mid-Term Plan (which provides for settlement of a specified portion of the PRSUs in certain cases of death, disability, Retirement, termination by the Company not for Cause, and certain other circumstances, including certain terminations following a Change in Control).

 

6.

Settlement of PRSUs.

(a) PRSUs that are earned will be settled by delivery of one share of Common Stock for each PRSU. Such settlement will occur in accordance with Section 9 of the Mid-Term Plan. Participant may not elect to defer receipt of Common Stock issuable in settlement of PRSUs.

(b) Whenever Common Stock is to be delivered hereunder, the Company shall deliver to the Participant or the Participant’s Beneficiary one or more certificates representing the shares of Common Stock, registered in the name of the Participant, the Beneficiary, or in such other form of registration as instructed by the Participant, except that the Committee may provide for alternative methods of delivery for administrative convenience. The obligation of the Company to deliver Common Stock hereunder is conditioned upon compliance by the Participant and by the Company with all applicable Federal and state securities and other laws and regulations.

 

7.

Tax Withholding.

In furtherance of the tax withholding obligations imposed under Section 9(g) of the Mid-Term Plan, the Company will withhold from cash payable as Dividend Equivalents and from the shares deliverable in settlement of PRSUs cash plus the number of shares having an aggregate Fair Market Value the sum of which shall equal applicable governmental tax withholding requirements, but with share withholding rounded to the nearest whole share, unless Participant has made other arrangements approved by the Human Resources Department in advance of settlement to make payment of such withholding amounts.

 

8.

Binding Effect; Integration.

The terms and conditions set forth in this document shall be binding upon the heirs, executors, administrators and successors of the parties. The Award Certificate, this document, and the Mid-Term Plan constitute the entire agreement between the parties with respect to the PRSUs and supersedes any prior agreements or documents with respect thereto. No amendment, alteration, suspension, discontinuation or termination of this document that may impose any additional obligation upon the Company or materially impair the rights of the Participant with respect to the PRSUs shall be valid unless in each instance such amendment, alteration, suspension, discontinuation or termination is expressed in a written instrument duly executed in the name and on behalf of the Company and, if Participant’s rights are materially impaired thereby, by Participant.

 

9.

PRSUs subject to Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results.

The PRSUs subject to this Award Certificate are subject to the Company’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the date of this Award Certificate. Such Policy imposes conditions that may result in forfeiture of such PRSUs or the proceeds to you resulting from such PRSUs (a so-called “clawback”) in certain circumstances if the Company’s financial statements are required to be restated as a result of misconduct.

 

Page 3 of 3

EX-10.10 14 d618285dex1010.htm EX-10.10 EX-10.10

Exhibit 10.10

KONTOOR BRANDS, INC.

DIRECTOR AWARD CERTIFICATE

Restricted Stock Units

Number of RSUs Awarded:            

To:                              (“Participant”)

I am pleased to advise you that you have been awarded the number of Restricted Stock Units (“RSUs”) set forth above under Kontoor Brands, Inc.’s 2019 Stock Compensation Plan (the “2019 Plan”), subject to the terms and conditions set forth in the 2019 Plan and the attached Appendix.

 

KONTOOR BRANDS, INC.
By:  

 

  [Name]
  [Title]

 

Dated:  

    (“Grant Date”)


KONTOOR BRANDS, INC.

APPENDIX TO

DIRECTOR AWARD CERTIFICATE

Terms and Conditions Relating to

Restricted Stock Units

 

1.

Grant of RSUs.

(a) Grant of RSUs Under 2019 Plan. Participant has been granted the Restricted Stock Units (“RSUs”) specified in the Award Certificate under Kontoor Brands, Inc.’s (the “Company”) 2019 Plan, copies of which have been provided to Participant. All of the terms, conditions, and other provisions of the 2019 Plan are hereby incorporated by reference into this document. Capitalized terms used in this document but not defined herein shall have the same meanings as in the 2019 Plan. If there is any conflict between the provisions of this document and the mandatory provisions of the 2019 Plan, the provisions of the 2019 Plan shall govern. By accepting the grant of the RSUs, Participant agrees to be bound by all of the terms and provisions of the 2019 Plan (as presently in effect or later amended), the rules and regulations under the 2019 Plan adopted from time to time, and the decisions and determinations of the Committee made from time to time.

(b) Certain Restrictions. RSU granted to Participant hereunder are [fully vested on the Grant Date] [subject to forfeiture in the event that your service as a Director ceases prior to the earlier of the one-year anniversary of the Grant Date or the next annual meeting of stockholders that is at least 50 weeks after the Grant Date]. Until such time as each RSU has become settled by delivery of a share in accordance with Section 3, such RSU will be nontransferable, as provided in the 2019 Plan and Section 2(d). Participant is subject to the Company’s Code of Business Conduct and related policies on insider trading restricting Participant’s ability to sell shares of the Company’s Common Stock received in settlement of RSUs, which may include “blackout” periods during which Participant may not engage in such sales.

 

2.

General Terms of RSUs.

(a) Nature of RSUs. Each RSU represents a conditional right of Participant to receive, and a conditional obligation of the Company to deliver, one share of the Company’s Common Stock at the times specified hereunder and subject to the terms and conditions of the 2019 Plan and this document. Each RSU constitutes an award under Article VIII of the 2019 Plan (including Section 8.6 thereof), representing a bookkeeping unit that is an arbitrary accounting measure created and used solely for purposes of the 2019 Plan and this Agreement. RSUs do not represent ownership rights in the Company, shares of Common Stock, or any asset of the Company.

(b) Account. An account will be maintained for Participant for purposes of this Award, to which the total number of RSUs granted and any RSUs resulting under Section 2(c) shall be credited. An individual statement relating to Participant’s Account will be issued not less frequently than annually. Such statement shall report the amount of RSUs credited to Participant’s Account (i.e., not yet settled), transactions in the Account during the period covered by the statement, and other information deemed relevant by the Company. Such statement may be combined with or include information regarding other plans and compensatory arrangements affecting Participant. A Participant’s statements may evidence the Company’s obligations in respect of RSUs without the need for the Company to enter into a separate agreement relating to such obligations; provided, however, that any statement containing an error shall not represent a binding obligation to the extent of such error.

 

Page 1 of 4


(c) Dividend Equivalents and Adjustments. Dividend equivalents shall be paid or credited on RSUs as follows; provided, however, that the Committee may vary the manner and terms of crediting dividend equivalents, for administrative convenience or any other reason, provided that the Committee determines that any alternative manner and terms result in equitable treatment of Participant:

 

  (i)

Regular Cash Dividends. At the time of settlement of RSUs under Section 3(a), the Company shall determine the aggregate amount of regular cash dividends that would have been payable to Participant, based on record dates for dividends since the Grant Date, if the vested RSUs then to be settled had been outstanding shares of Common Stock at such record dates (without compounding of dividends but adjusted to account for splits and other extraordinary corporate transactions). Such aggregate cash amount will be converted to a number of shares by dividing the amount by the Fair Market Value of a share of Common Stock at the settlement date.

 

  (ii)

Common Stock Dividends and Splits. If the Company declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then the number of RSUs credited to Participant’s Account as of the payment date for such dividend or distribution or forward split shall be automatically adjusted by multiplying the number of RSUs credited to the Account as of the record date for such dividend or distribution or split by the number of additional shares of Common Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Common Stock.

 

  (iii)

Adjustments. If the Company declares and pays a dividend or distribution on Common Stock that is not a regular cash dividend and not in the form of additional shares of Common Stock, or if there occurs any other event referred to in Article XI of the 2019 Plan, the Committee shall adjust the number of RSUs credited to Participant’s Account in a manner that will prevent dilution or enlargement of Participant’s rights with respect to RSUs, in an equitable manner determined by the Committee.

 

  (iv)

Settlement of RSUs Resulting from Dividend Equivalents and Adjustments. RSUs that directly or indirectly result from dividend equivalents on or adjustments to an RSU will be settled at the same time as the granted RSU.

(d) Non-Transferability. Unless otherwise determined by the Committee and subject to Section 12.5 of the 2019 Plan, neither Participant nor any beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate, or encumber (except by reason of death) any RSU, Account or Account balance, or other right hereunder, nor shall any such RSU, Account or Account balance, or other right be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of Participant or any beneficiary, or to the debts, contracts, liabilities, engagements, or torts of Participant or any beneficiary or transfer by operation of law in the event of bankruptcy or insolvency of Participant or any beneficiary, or any legal process.

 

3.

Settlement of RSUs.

(a) Settlement Date. RSUs[, to the extent vested and non-forfeitable,] will be settled by delivery of one share of Common Stock for each RSU, including RSUs resulting from dividend equivalents under Section 2(c). Such settlement will occur as of the one-year anniversary of the Grant Date (the “Stated Settlement Date”). Delivery of shares in settlement of RSUs will take place within 15 days after the Stated Settlement Date.

(b) Certain Limitations to Ensure Compliance with Code Section 409A. For purposes of this Agreement, references to a term or event (including any authority or right of the Company or Participant) being “permitted” under Code Section 409A mean that the term or event will not cause Participant to be liable for payment of interest or a tax penalty under Section 409A. The provisions of the 2019 Plan and other provisions of this Agreement notwithstanding, the terms of the RSUs, including any authority of the Company and rights of Participant, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A.

 

Page 2 of 4


For this purpose, the Company shall have no authority to accelerate distributions relating to RSUs in excess of the authority permitted under Section 409A, and, if the timing of any distribution in settlement of RSUs would result in Participant’s constructive receipt of income relating to the RSUs prior to such distribution, the date of distribution will be the earliest date after the specified date of distribution that distribution can be effected without resulting in such constructive receipt (thus, for example, any distribution in settlement of RSUs subject to Section 409A(a)(2)(A)(i) (separation from service) shall not occur earlier than the earliest time permitted under Section 409A(a)(2)(B)(i) and other applicable provisions of Section 409A).

(c) Delivery of Common Stock. Whenever Common Stock is to be delivered hereunder, the Company shall deliver to Participant or Participant’s Beneficiary one or more certificates representing the shares of Common Stock, registered in the name of Participant, the Beneficiary or in such other form of registration as instructed by Participant, except that the Company may provide for alternative methods of delivery for administrative convenience. The obligation of the Company to deliver Common Stock hereunder is conditioned upon compliance by Participant and by the Company with all applicable federal and state securities and other laws and regulations. The Company may determine the manner in which fractional shares of Common Stock shall be dealt with upon settlement of RSUs; provided, however, that no certificate shall be issued representing a fractional share. If there occurs any delay between the Stated Settlement Date and the date shares are issued or delivered to Participant, a cash amount equal to any dividends or distributions the record date for which fell between the Stated Settlement Date and the date of issuance or delivery of the shares shall be paid to Participant together with the delivery of the shares.

 

4.

Miscellaneous.

(a) Binding Effect; Written Amendments. The terms and conditions set forth in this document shall be binding upon the heirs, executors, administrators and successors of the parties. The Award Certificate and this document constitute the entire agreement between the parties with respect to the RSUs and supersedes any prior agreements or documents with respect thereto. No amendment, alteration, suspension, discontinuation or termination of this document which may impose any additional obligation upon the Company or materially impair the rights of Participant with respect to the RSUs shall be valid unless in each instance such amendment, alteration, suspension, discontinuation or termination is expressed in a written instrument duly executed in the name and on behalf of the Company and, if Participant’s rights are materially impaired thereby, by Participant.

(b) No Promise of Continuation of Service. The RSUs and the granting thereof shall not constitute or be evidence of any agreement or understanding, express or implied, that Participant has a right to continue as a director of the Company for any period of time, or at any particular rate of compensation.

(c) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws (but not the law of conflicts of laws) of the Commonwealth of Pennsylvania and applicable federal law.

(d) Unfunded Obligations. The grant of the RSUs and any provision for distribution in settlement of Participant’s Account hereunder shall be by means of bookkeeping entries on the books of the Company and shall not create in Participant any right to, or claim against any, specific assets of the Company, nor result in the creation of any trust or escrow account for Participant. With respect to Participant’s entitlement to any distribution hereunder, Participant shall be a general creditor of the Company.

(e) Notices. Any notice to be given the Company under this Agreement shall be addressed to the Company at its principal executive offices, in care of the Vice President–Human Resources, and any notice to Participant shall be addressed to Participant at Participant’s address as then appearing in the records of the Company.

(f) Shareholder Rights. Participant and any beneficiary shall not have any rights with respect to shares (including voting rights) covered by this Agreement prior to the settlement and distribution of the shares as specified herein.

 

Page 3 of 4


(g) Taxes. Participant shall be responsible for payment of any federal, state or local taxes of any kind required to be paid with respect to the grant or settlement of the RSUs or otherwise in connection with the RSUs.

(h) Clawback. The RSUs are subject to the Corporation’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the date of this award. Such Policy imposes conditions that may result in forfeiture of the RSUs or the proceeds to you resulting from such RSUs (a so-called “clawback”) in certain circumstances if the Corporation’s financial statements are required to be restated as a result of misconduct.

 

Page 4 of 4

EX-10.11 15 d618285dex1011.htm EX-10.11 EX-10.11

Exhibit 10.11

KONTOOR BRANDS, INC.

AWARD CERTIFICATE

Restricted Stock Units

Number of RSUs Awarded:         

To:                              (“Participant”)

I am pleased to advise you that you have been awarded the number of Restricted Stock Units (“RSUs”) set forth above under Kontoor Brands, Inc.’s 2019 Stock Compensation Plan (the “2019 Plan”), subject to the terms and conditions set forth in the 2019 Plan and the attached Appendix.

 

KONTOOR BRANDS, INC.
By:  

 

  [Name]
  [Title]

 

Dated:  

                     (“Grant Date”)

 

1


KONTOOR BRANDS, INC.

APPENDIX TO

AWARD CERTIFICATE

Terms and Conditions Relating to

Restricted Stock Units

 

1.

Grant of RSUs.

(a) Grant of RSUs Under 2019 Plan. Participant has been granted the Restricted Stock Units (“RSUs”) specified in the Award Certificate under Kontoor Brands, Inc.’s (the “Company”) 2019 Plan, copies of which have been provided to Participant. All of the terms, conditions, and other provisions of the 2019 Plan are hereby incorporated by reference into this document. Capitalized terms used in this document but not defined herein shall have the same meanings as in the 2019 Plan. If there is any conflict between the provisions of this document and the mandatory provisions of the 2019 Plan, the provisions of the 2019 Plan shall govern. By accepting the grant of the RSUs, Participant agrees to be bound by all of the terms and provisions of the 2019 Plan (as presently in effect or later amended), the rules and regulations under the 2019 Plan adopted from time to time, and the decisions and determinations of the Committee made from time to time.

(b) Certain Restrictions. Until RSUs have become vested in accordance with Section 2(e), RSUs shall be subject to a risk of forfeiture as provided in the 2019 Plan and this document. Until such time as each RSU has become settled by delivery of a share in accordance with Section 3, such RSU will be nontransferable, as provided in the 2019 Plan and Section 2(d). Participant is subject to the Company’s Code of Business Conduct and related policies on insider trading restricting Participant’s ability to sell shares of the Company’s Common Stock received in settlement of RSUs, which may include “blackout” periods during which Participant may not engage in such sales.

 

2.

General Terms of RSUs.

(a) Nature of RSUs. Each RSU represents a conditional right of Participant to receive, and a conditional obligation of the Company to deliver, one share of the Company’s Common Stock at the times specified hereunder and subject to the terms and conditions of the 2019 Plan and this document. Each RSU constitutes an award under Article VIII of the 2019 Plan (including Section 8.6 thereof), representing a bookkeeping unit which is an arbitrary accounting measure created and used solely for purposes of the 2019 Plan and this Agreement. RSUs do not represent ownership rights in the Company, shares of Common Stock, or any asset of the Company.

(b) Account. An account will be maintained for Participant for purposes of this Award, to which the total number of RSUs granted and any RSUs resulting under Section 2(c) shall be credited.

(c) Dividend Equivalents and Adjustments. Dividend equivalents shall be paid or credited on RSUs as follows; provided, however, that the Committee may vary the manner and terms of crediting dividend equivalents, for administrative convenience or any other reason, provided that the Committee determines that any alternative manner and terms result in equitable treatment of Participant:

 

  (i)

Regular Cash Dividends. [Each Stock Unit will carry with it the right to crediting of an amount equal to dividends and distributions paid on a share of Common Stock (“dividend equivalents”), which amounts will be [deemed reinvested in additional Stock Units, at the Fair Market Value of Common Stock at the dividend payment date.] [At the time of settlement of Stock Units under Section 3, the Company will determine the aggregate amount of regular cash dividends that would have been payable to the Participant, based on record dates for dividends since the Grant Date, if

 

2


  the earned Stock Units then to be settled had been outstanding shares of Common Stock at such record date (without compounding of dividends but adjusted to account for splits and other extraordinary corporate transactions). Such aggregate cash amount will be withheld to cover withholding taxes applicable at the settlement date, with any amount in excess of such tax withholding amount converted to a number of shares by dividing such excess amount by the Fair Market Value of a share of Common Stock at the settlement date.]

 

  (ii)

Common Stock Dividends and Splits. If the Company declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then the number of RSUs credited to Participant’s Account as of the payment date for such dividend or distribution or forward split shall be automatically adjusted by multiplying the number of RSUs credited to the Account as of the record date for such dividend or distribution or split by the number of additional shares of Common Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Common Stock.

 

  (iii)

Adjustments. If the Company declares and pays a dividend or distribution on Common Stock that is not a regular cash dividend and not in the form of additional shares of Common Stock, or if there occurs any other event referred to in Article XI of the 2019 Plan, the Committee shall adjust the number of RSUs credited to Participant’s Account in a manner that will prevent dilution or enlargement of Participant’s rights with respect to RSUs, in an equitable manner determined by the Committee. In addition, the Committee may vary the manner and terms of crediting dividend equivalents during or following the end of the Performance Cycle, for administrative convenience or any other reason, provided that the Committee determines that any alternative manner and terms result in equitable treatment of Participant.

 

  (iv)

Risk of Forfeiture and Settlement of Dividend Equivalents and RSUs Resulting from Dividend Equivalents and Adjustments. Rights to dividend equivalents and RSUs which directly or indirectly result from dividend equivalents on or adjustments to an RSU shall be subject to the same risk of forfeiture as applies to the granted RSU and will be settled at the same time as the granted RSU.

(d) Non-Transferability. Unless otherwise determined by the Committee, neither Participant nor any beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate, or encumber (except by reason of death) any RSU, Account or Account balance, or other right hereunder, nor shall any such RSU, Account or Account balance, or other right be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of Participant or any beneficiary, or to the debts, contracts, liabilities, engagements, or torts of Participant or any beneficiary or transfer by operation of law in the event of bankruptcy or insolvency of Participant or any beneficiary, or any legal process.

(e) Vesting and Forfeiture. The “Stated Vesting Date” of the RSUs will be as follows: 50% of the RSUs (rounded up to the nearest whole unit) will have a Stated Vesting Date of                     , 20    and 50% of the RSUs (rounded down to the nearest whole unit) will have a Stated Vesting Date of                     , 20    , except as otherwise provided herein, if the Participant continues to be an employee of the Company or any of its subsidiaries or affiliates through the applicable Stated Vesting Date.

Except to the extent set forth herein, upon a Participant’s Termination of Employment prior to the vesting of RSUs at an applicable Stated Vesting Date, all unvested RSUs shall be canceled and forfeited and Participant shall have no further rights hereunder.

 

  (i)

If Termination of Employment is an involuntary separation by the Company not for Cause, a Pro Rata Portion (as defined below) of the RSUs shall vest at the next Stated Vesting Date, with any unvested RSUs in excess of such Pro Rata Portion canceled and forfeited.

 

3


  (ii)

If Termination of Employment is due to Participant’s Retirement, the RSUs shall vest at the Stated Vesting Date(s) in full, without proration.

 

  (iii)

If Termination of Employment is due to Participant’s death or Disability (as defined below), the RSUs shall immediately vest in full, without proration.

In addition, and notwithstanding anything in this Certificate to the contrary, the RSUs shall be forfeited and shall terminate immediately on the Participant’s date of Termination of Employment for any reason (the date of Termination of Employment will be determined without giving effect to any period during which severance payments may be made to a Participant) prior to the first anniversary of the Grant Date.

(f) Clawback. The RSUs are subject to the Corporation’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the Grant Date. Such Policy imposes conditions that may result in forfeiture of the RSUs or the proceeds to you resulting from the RSUs (a so-called “clawback”) in certain circumstances if the Corporation’s financial statements are required to be restated as a result of misconduct.

(g) Certain Definitions. The following definitions apply for purposes of this Agreement:

 

  (i)

“Cause” means (i), if the Participant has an Employment Agreement defining “Cause,” the definition under such Employment Agreement, or (ii), if the Participant has no Employment Agreement defining “Cause,” the Participant’s gross misconduct, meaning (A) the Participant’s willful and continued refusal substantially to perform his or her duties with the Company (other than any such refusal resulting from his or her incapacity due to physical or mental illness), after a demand for substantial performance is delivered to the Participant by the Board of Directors which specifically identifies the manner in which the Board believes that the Participant has refused to perform his or her duties, or (B) the willful engaging by the Participant in gross misconduct materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.

 

  (ii)

“Disability” means (A), if Participant has an Employment Agreement defining “Disability,” the definition under such Employment Agreement, or (B), if Participant has no Employment Agreement defining “Disability,” Participant’s incapacity due to physical or mental illness resulting in Participant’s absence from his or her duties with the Company or any of its subsidiaries or affiliates on a full-time basis for 26 consecutive weeks, and, within 30 days after written notice of termination has been given by the Company, Participant has not returned to the full-time performance of his or her duties.

 

  (iii)

“Pro Rata Portion” means a fraction the numerator of which is the number of days that have elapsed from the Grant Date to the date of Participant’s Termination of Employment (or in the case of an involuntary separation by the Company not for Cause, the payment of the final installment of severance pay, if any) and the denominator of which is the number of days from the Grant Date to the applicable Stated Vesting Date; provided, however, that the Pro Rata Portion may not exceed 100%.

 

  (iv)

“Termination of Employment” means Participant’s termination of employment with the Company or any of its subsidiaries or affiliates in circumstances in which, immediately thereafter, Participant is not employed by the Company or any of its subsidiaries or affiliates. Service as a non-employee director shall not be treated as employment for purposes of this Agreement.

 

3.

Settlement of RSUs.

(a) Settlement Date. Vested RSUs will be settled by delivery of one share of Common Stock for each RSU, together with dividend equivalent amounts payable under Section 2(c). Such settlement will occur within

 

4


15 business days after the date on which the RSUs become vested (including vesting at a Stated Vesting Date following termination, as provided in Section 2(e)). Delivery of shares in settlement of RSUs will take place as promptly as practicable after the settlement date (but not later than 15 business days after the designated settlement date). In the event of Participant’s death or Disability, the certificates representing shares of vested RSUs shall be delivered on or before the 60th day following the Termination of Employment due to death or Disability (subject to Section 3(b), which may require a six-month delay in the event of Termination of Employment due to Disability).

(b) Certain Limitations to Ensure Compliance with Code Section 409A. For purposes of this Agreement, references to a term or event (including any authority or right of the Company or Participant) being “permitted” under Section 409A of the Internal Revenue Code (the “Code”) mean that the term or event will not cause Participant to be liable for payment of interest or a tax penalty under Section 409A. The provisions of the 2019 Plan and other provisions of this Agreement notwithstanding, the terms of the RSUs, including any authority of the Company and rights of Participant, shall be limited to those terms permitted under Section 409A, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A. For this purpose, the Company shall have no authority to accelerate distributions relating to RSUs in excess of the authority permitted under Section 409A, and, if the timing of any distribution in settlement of RSUs would result in Participant’s constructive receipt of income relating to the RSUs prior to such distribution, the date of distribution will be the earliest date after the specified date of distribution that distribution can be effected without resulting in such constructive receipt (thus, for example, if RSUs were deemed to be a deferral of compensation under Code Section 409A, any distribution in settlement of RSUs subject to Section 409A(a)(2)(A)(i) (separation from service) would be triggered only by a “separation from service” under Treasury Regulation Section 1.409A-1(h) and, if the Participant were a “specified employee” under Treasury Regulation Section 1.409A-1(i), such distribution would be delayed until six months after such separation from service other than due to death).

(c) Delivery of Common Stock. Whenever Common Stock is to be delivered hereunder, the Company shall deliver to Participant or Participant’s Beneficiary one or more certificates representing the shares of Common Stock, registered in the name of Participant, the Beneficiary, or in such other form of registration as instructed by Participant, except that the Company may provide for alternative methods of delivery for administrative convenience. The obligation of the Company to deliver Common Stock hereunder is conditioned upon compliance by Participant and by the Company with all applicable federal and state securities and other laws and regulations. The Company may determine the manner in which fractional shares of Common Stock shall be dealt with upon settlement of RSUs; provided, however, that no certificate shall be issued representing a fractional share. If there occurs any delay between the settlement date and the date shares are issued or delivered to Participant, a cash amount equal to any dividends or distributions the record date for which fell between the settlement date and the date of issuance or delivery of the shares shall be paid to Participant together with the delivery of the shares.

 

4.

Tax Withholding.

If withholding is required by applicable law, the Company shall withhold from the cash and shares deliverable in settlement of RSUs (including a deferred settlement) [such cash amount together with] the number of shares having an aggregate Fair Market Value equal to the mandatory withholding requirements, but rounded to the nearest whole share, unless at least 90 days prior to an applicable settlement date Participant has made other arrangements approved by the Human Resources Department to make payment of such withholding amounts. Unless otherwise determined by the Company, if settlement of the RSUs does not also take place at or shortly following the date when the award is no longer subject to substantial risk of forfeiture, then no such share withholding will take place to satisfy any FICA requirements applicable at that date and Participant will be required to pay any such applicable FICA withholding in cash.

 

5


5.

Miscellaneous.

(a) Binding Effect; Written Amendments. The terms and conditions set forth in this document shall be binding upon the heirs, executors, administrators and successors of the parties. The Award Certificate and this document constitute the entire agreement between the parties with respect to the RSUs and supersede any prior agreements or documents with respect thereto. No amendment, alteration, suspension, discontinuation or termination of this document which may impose any additional obligation upon the Company or materially impair the rights of Participant with respect to the RSUs shall be valid unless in each instance such amendment, alteration, suspension, discontinuation or termination is expressed in a written instrument duly executed in the name and on behalf of the Company and, if Participant’s rights are materially impaired thereby, by Participant.

(b) No Promise of Employment. The RSUs and the granting thereof shall not constitute or be evidence of any agreement or understanding, express or implied, that Participant has a right to continue as an officer, employee or director of the Company or its subsidiaries for any period of time, or at any particular rate of compensation.

(c) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws (but not the law of conflicts of laws) of the State of North Carolina and applicable federal law.

(d) Unfunded Obligations. The grant of the RSUs and any provision for distribution in settlement of Participant’s Account hereunder shall be by means of bookkeeping entries on the books of the Company and shall not create in Participant any right to, or claim against any, specific assets of the Company, nor result in the creation of any trust or escrow account for Participant. With respect to Participant’s entitlement to any distribution hereunder, Participant shall be a general creditor of the Company.

(e) Notices. Any notice to be given the Company under this Agreement shall be addressed to the Company at its principal executive offices, in care of the Vice President — Human Resources, and any notice to Participant shall be addressed to Participant at Participant’s address as then appearing in the records of the Company.

(f) Shareholder Rights. Participant and any beneficiary shall not have any rights with respect to shares (including voting rights) covered by this Agreement prior to the settlement and distribution of the shares as specified herein.

(g) Voluntary Participation. Participant’s participation in the Plan is voluntary. The value of the RSUs is an extraordinary item of compensation. As such, the RSUs are not part of normal or expected compensation for purposes of calculating any severance, change in control payments, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

6

EX-10.12 16 d618285dex1012.htm EX-10.12 EX-10.12

Exhibit 10.12

KONTOOR BRANDS, INC.

AWARD CERTIFICATE

Restricted Stock

Number of Shares of Restricted Stock Awarded:             

To:                              (“Participant”)

I am pleased to advise you that you have been awarded the number of shares of Restricted Stock set forth above under Kontoor Brands, Inc. 2019 Stock Compensation Plan (the “2019 Plan”), subject to the terms and conditions set forth in the 2019 Plan and the attached Appendix.

 

KONTOOR BRANDS, INC.
By:  

 

  [Name]
  [Title]

Dated:     (“Grant Date”)

 

1


KONTOOR BRANDS, INC.

APPENDIX TO

AWARD CERTIFICATE

Terms and Conditions Relating to

Restricted Stock

 

1.

Grant of Restricted Stock.

(a) Grant of Restricted Stock under 2019 Plan. Participant has been granted the shares of restricted common stock (the “Restricted Stock”) specified in the Award Certificate under Kontoor Brands, Inc.’s (the “Company”) 2019 Plan, copies of which have been provided to Participant. All of the terms, conditions, and other provisions of the 2019 Plan are hereby incorporated by reference into this document. Capitalized terms used in this document but not defined herein shall have the same meanings as in the 2019 Plan. If there is any conflict between the provisions of this document and the mandatory provisions of the 2019 Plan, the provisions of the 2019 Plan shall govern. By accepting the grant of the Restricted Stock, Participant agrees to be bound by all of the terms and provisions of the 2019 Plan (as presently in effect or later amended), the rules and regulations under the 2019 Plan adopted from time to time, and the decisions and determinations of the Committee made from time to time. The Restricted Stock shall be issued promptly hereafter in Participant’s name (and in any event within 30 days after the date of grant) but shall be subject to all provisions of this Award Certificate.

(b) Certain Restrictions. One or more stock certificates evidencing the Restricted Stock shall be issued in the name of Participant but shall be held and retained by the Company until the restrictions set forth herein shall have lapsed. All such stock certificates shall bear the following legend:

“The shares of Common Stock evidenced by this Certificate are subject to the terms and conditions of a Restricted Stock Award Certificate between the registered owner and Kontoor Brands, Inc.; such shares are subject to forfeiture under the terms of said Award Certificate; and such shares shall not be sold, transferred, assigned, pledged, encumbered or otherwise alienated or hypothecated except pursuant to the provisions of said Agreement, a copy of which is available from Kontoor Brands, Inc. upon request.”

Until the shares of Restricted Stock have become vested in accordance with Paragraph 1(e), the Restricted Stock shall be subject to a risk of forfeiture as provided in the 2019 Plan and this document. Until vested, such Restricted Stock will be nontransferable, as provided in the 2019 Plan and Paragraph 1(d), and Participant agrees that, upon request of the Company, he or she will deliver to the Company stock powers or other instruments of transfer or assignment, duly endorsed in blank with signature guaranteed, corresponding to each certificate for Restricted Stock or distributions thereon. If Participant shall fail to provide the Company with any such stock power or other instrument of transfer or assignment, Participant hereby irrevocably appoints the Secretary of the Company as his or her attorney-in-fact to execute and deliver any such power or other instrument which may be necessary to effectuate the transfer of the Restricted Stock (or assignment of distributions thereon) on the books and records of the Company. Participant is subject to the Company’s Code of Business Conduct and related policies on insider trading.

(c) Dividends and Adjustments. Participant shall be entitled to receive with respect to the Restricted Stock all dividends and distributions payable on Common Stock (including for this purpose any forward stock split) if and to the extent that he is the record owner of such Restricted Stock on any record date for such a dividend or distribution and he has not forfeited such Restricted Stock on or before the payment date for such dividend or distribution, subject to the following terms and conditions:

 

  (i)

Regular Cash Dividends. All cash dividends and distributions payable with respect to the Restricted Stock shall be retained by the Company and reinvested in additional shares of Common

 

2


  Stock to be issued in the name of Participant. Such reinvestment shall occur on the dividend payment date or under a procedure that matches reinvestment of dividends under a dividend reinvestment plan maintained by the Company and open to the participation of shareholders generally.

 

  (ii)

Common Stock Dividends and Splits. If the Company declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then the Common Stock issued or delivered as such dividend or distribution or resulting from such stock split will be deemed to be additional Restricted Stock.

 

  (iii)

Adjustments. If the Company declares and pays a dividend or distribution on Common Stock that is not a regular cash dividend and not in the form of additional shares of Common Stock, or if there occurs any other event referred to in Article XI of the 2019 Plan, the Company shall retain any such dividend or distribution and the Committee shall adjust the number of shares of Restricted Stock in a manner that will prevent dilution or enlargement of Participant’s rights with respect to the Restricted Stock, in an equitable manner determined by the Committee. In addition, the Committee may vary the treatment of any dividend or distribution as specified under Section 1(c) (i), (ii) or (iii), in its discretion.

 

  (iv)

Risk of Forfeiture of Restricted Stock Resulting from Dividends and Adjustments. Shares of Restricted Stock or other property that directly or indirectly result from dividends or distributions on or adjustments to a share of Restricted Stock shall be subject to the same risk of forfeiture as applies to the granted Restricted Stock.

 

  (v)

Fractional Shares. No fractional shares shall be issued under this Agreement. The Company will determine how to treat any fractional share or amounts that would be deemed invested in a fractional share hereunder.

(d) Non-Transferability. Until the Restricted Stock has become vested, neither Participant nor any beneficiary shall have the right to, directly or indirectly, donate, sell, alienate, assign, transfer, pledge, anticipate, or encumber (except by reason of death) any shares of Restricted Stock, nor shall any such shares of Restricted Stock be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of Participant or any beneficiary, or to the debts, contracts, liabilities, engagements, or torts of Participant or any beneficiary or transfer by operation of law in the event of bankruptcy or insolvency of Participant or any beneficiary, or any legal process.

(e) Vesting and Forfeiture. The Restricted Stock will vest as follows: 50% of the Restricted Stock will vest on                    , 20    and 50% of the Restricted Stock will vest on                    , 20    (each such vesting date being a “Stated Vesting Date”), except as otherwise provided herein, if the Participant continues to be an employee of the Company or any of its subsidiaries or affiliates through the applicable Stated Vesting Date. If the foregoing condition is met and shares of Restricted Stock become vested, all restrictions on such vested Restricted Stock shall lapse and all shares of Common Stock representing the vested Restricted Stock shall be delivered to Participant free of restrictions. Except to the extent set forth in this Paragraph 1(e), upon Participant’s Termination of Employment prior to an applicable Stated Vesting Date, all unvested Restricted Stock shall be canceled and forfeited and Participant shall have no further rights hereunder.

 

  (i)

If Termination of Employment is an involuntary separation by the Company not for Cause, a Pro Rata Portion (as defined below) of the Restricted Stock shall vest at the next Stated Vesting Date (but will not include any time during which Participant receives Severance Pay), with any unvested Restricted Stock in excess of such Pro Rata Portion canceled and forfeited.

 

  (ii)

If Termination of Employment is due to a Participant’s death or Disability (as defined below), a Pro Rata Portion (as defined below) of Participant’s Restricted Stock shall vest immediately, with any shares of unvested Restricted Stock in excess of such Pro Rata Portion canceled and forfeited.

 

3


In addition, and notwithstanding anything in this Certificate to the contrary, the Restricted Stock shall be forfeited and shall terminate immediately on the Participant’s date of Termination of Employment for any reason (the date of termination of employment will be determined without giving effect to any period during which severance payments may be made to a Participant) prior to the first anniversary of the Date of Grant.

 

  (f)

Certain Definitions. The following definitions apply for purposes of this Agreement:

 

  (i)

“Cause” means (i), if the Participant has an Employment Agreement defining “Cause,” the definition under such Employment Agreement, or (ii), if the Participant has no Employment Agreement defining “Cause,” the Participant’s gross misconduct, meaning (A) the Participant’s willful and continued refusal substantially to perform his or her duties with the Company (other than any such refusal resulting from his or her incapacity due to physical or mental illness), after a demand for substantial performance is delivered to the Participant by the Board of Directors which specifically identifies the manner in which the Board believes that the Participant has refused to perform his or her duties, or (B) the willful engaging by the Participant in gross misconduct materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.

 

  (ii)

“Disability” means (A), if Participant has an Employment Agreement defining “Disability,” the definition under such Employment Agreement, or (B), if Participant has no Employment Agreement defining “Disability,” Participant’s incapacity due to physical or mental illness resulting in Participant’s absence from his or her duties with the Company on a full-time basis for 26 consecutive weeks, and, within 30 days after written notice of termination has been given by the Company, Participant has not returned to the full-time performance of his or her duties.

 

  (iii)

“Pro Rata Portion” means a fraction the numerator of which is the number of days that have elapsed from the Grant Date to the date of Participant’s Termination of Employment (including the case of an involuntary separation by the Company not for cause, irregardless of any severance pay) and the denominator of which is the number of days from the Grant Date to the Stated Vesting Date.

 

  (iii)

“Termination of Employment” means termination of Participant’s employment with the Company or any of its subsidiaries or affiliates in circumstances in which, immediately thereafter, Participant is not employed by the Company or any of its subsidiaries or affiliates. Service as a non-employee director shall not be treated as employment for purposes of this Agreement.

(g) Compliance with Code Section 409A. The Restricted Stock is intended to be exempt from Section 409A of the Internal Revenue Code. The Participant will be subject to federal income taxation no later than the Stated Vesting Date, regardless of any delay in delivery of the share certificate thereafter.

 

2.

Taxes.

(a) If Participant properly elects, within 30 days after the Grant Date, to include in gross income for federal income tax purposes an amount equal to the fair market value (as of the Grant Date) of the Restricted Stock, Participant shall make arrangements at the time of such election satisfactory to the Committee to pay to the Company on a timely basis any federal, state or local income taxes required to be withheld with respect to such shares. If Participant shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

(b) If Participant does not make the election described in Paragraph 2(a) above, Participant shall, no later than the date as of which the restrictions referred to in Paragraph 1(e) hereof shall lapse, pay to the Company, or

 

4


make arrangements satisfactory to the Company for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock, and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to Participant any federal, state, or local taxes of any kind required by law to be withheld with respect to the Restricted Stock. Unless, at least 90 days before the applicable Stated Vesting Date or any earlier applicable vesting date, Participant has made separate arrangements satisfactory to the Company for the payment of such mandatory withholding taxes, the Company will withhold from the shares to be delivered upon vesting the number of whole shares having a Fair Market Value equal to the amount of such mandatory withholding taxes, rounded to the nearest whole share.

 

3.

Miscellaneous.

(a) Binding Effect; Written Amendments. The terms and conditions set forth in this document shall be binding upon the heirs, executors, administrators and successors of the parties. The Award Certificate and this document constitute the entire agreement between the parties with respect to the Restricted Stock and supersede any prior agreements or documents with respect thereto. No amendment, alteration, suspension, discontinuation or termination of this document which may impose any additional obligation upon the Company or materially impair the rights of Participant with respect to the Restricted Stock shall be valid unless in each instance such amendment, alteration, suspension, discontinuation or termination is expressed in a written instrument duly executed in the name and on behalf of the Company and, if Participant’s rights are materially impaired thereby, by Participant.

(b) No Promise of Employment. The Restricted Stock and the granting thereof shall not constitute or be evidence of any agreement or understanding, express or implied, that Participant has a right to continue as an officer, employee or director of the Company or its subsidiaries for any period of time, or at any particular rate of compensation.

(c) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws (but not the law of conflicts of laws) of the State of North Carolina, and applicable federal law.

(d) Notices. Any notice to be given the Company under this Agreement shall be addressed to the Company at its principal executive offices, in care of the Vice President — Human Resources, and any notice to Participant shall be addressed to Participant at Participant’s address as then appearing in the records of the Company.

(e) Shareholder Rights. Except as otherwise provided in this Agreement, Participant shall have, with respect to all shares of Restricted Stock, all the rights of a shareholder of the Company, including the right to vote the Restricted Stock.

(f) Voluntary Participation. Participant’s participation in the Plan is voluntary. The value of the Restricted Stock is an extraordinary item of compensation. As such, the Restricted Stock is not part of normal or expected compensation for purposes of calculating any severance, change in control payments, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

4.

Restricted Stock subject to Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results.

The Restricted Stock subject to this Award Certificate is subject to the Company’s Forfeiture Policy for Equity and Incentive Awards in the Event of Restatement of Financial Results as in effect at the date of this Award Certificate. Such Policy imposes conditions that may result in forfeiture of such Restricted Stock or the proceeds to you resulting from such Restricted Stock (a so-called “clawback”) in certain circumstances if the Company’s financial statements are required to be restated as a result of misconduct.

 

5

EX-10.13 17 d618285dex1013.htm EX-10.13 EX-10.13

Exhibit 10.13

KONTOOR BRANDS EXECUTIVE DEFERRED SAVINGS PLAN

VF Corporation has maintained the VF Executive Deferred Savings Plan (the “VF EDSP”) for the benefit of eligible senior executive employees of VF Corporation and its affiliated employers. VF Corporation has determined to separate its jeanswear business into one or more newly formed legal entities (the “Jeanswear Group”), and in connection therewith, VF Corporation intends to distribute to its shareholders all of the stock of a newly formed company (“Kontoor Brands, Inc.”) that will be the parent holding company for the Jeanswear Group (the “Distribution”). In connection with the Distribution, Kontoor Brands, Inc. shall adopt this Kontoor Brands Executive Deferred Savings Plan (the “Plan”) to provide benefits for the eligible senior executive employees of Kontoor Brands, Inc. and its affiliated employers, and to accept a spin-off of the accounts of such eligible senior executive employees and their respective beneficiaries under the VF EDSP. This Plan shall be effective at and as of the date of consummation of the Distribution (the “Distribution Date”). In the event that the Distribution does not occur, this Plan shall be void and of no force and effect.

The Plan previously allowed senior executive personnel of VF Corporation and its affiliated employers who were among a select group of management or highly-compensated employees to defer their compensation. Effective as of the close of business on December 31, 2004, all participation in the Plan ceased, such that no Basic or Matching Deferrals are permitted with respect to Earnings paid on or after December 31, 2004 and no employee shall become a Participant after December 31, 2004.

The intention of Kontoor Brands, Inc. is that the Plan be at all times maintained on an unfunded basis for federal income tax purposes under the Internal Revenue Code of 1986, as amended (“Code”), and administered as a “top hat” plan, exempt from the substantive requirements of the Employee Retirement Income Security Act of 1974, as amended.

SECTION I

DEFINITIONS

Unless otherwise required by the context, the terms used herein shall have the meanings as set forth below:

1. “ACCRUED BENEFIT” means the sum of a Participant’s Basic Deferrals (and any gains and losses credited thereon) and the vested portion of the Participating Employer’s Matching Deferrals (and any gains and losses credited thereon). Notwithstanding the foregoing, any Matching Deferrals that were not vested as of December 31, 2004 (and any gains and losses credited thereon) are not part of the Participant’s Accrued Benefit under this Plan and instead, effective January 1, 2005, were credited to the Participant’s Accrued Benefit under, and vested in accordance with, the VF EDSP II.

2. “BASIC DEFERRAL” means that portion of a Participant’s Earnings elected to be deferred under the terms of this Plan.

3. “BENEFICIARY” means the individual or entity named pursuant to the Plan to receive benefit payments hereunder in the event of the death of the Participant. Each Beneficiary designation by a Participant in effect under the VF EDSP I on the Distribution Date will be recognized and maintained immediately after the transfer of his or her account from the VF EDSP I to the Plan and shall remain until a new designation is made by the Participant and becomes effective.

4. “CHANGE OF CONTROL” of the Company means the same under this Plan as it does in the then-current Form of Change in Control Agreement with senior management of the Company.

 

1


5. “COMMITTEE” means the Kontoor Brands Retirement Plans Committee, as appointed from time to time by the Vice President – Chief Human Resources Officer of the Company.

6. “COMPANY” means Kontoor Brands, Inc., a North Carolina corporation.

7. “EARNINGS” means the Participant’s total salary, including any cash bonus payments made to a Participant by a Participating Employer in a Plan Year under a Participating Employer’s performance-based incentive compensation plans. For purposes of the Plan, Earnings shall be determined without regard to any other salary or bonus deferrals or reductions which may be made by a Participant to any other plan or program maintained by a Participating Employer. However, Earnings shall not include any reimbursement for expenses paid to a Participant by a Participating Employer nor shall it include any payments or contributions made by a Participating Employer to a plan or arrangement, on behalf of a Participant, which results in imputed income to the Participant for federal income tax purposes.

8. “MATCHING DEFERRAL” means the additional deferral amount credited to a Participant by a Participating Employer under the terms of this Plan.

9. “PARTICIPANT” means an eligible employee who voluntarily agrees to participate in this Plan in accordance with its provisions.

10. “PARTICIPATING EMPLOYER” means the Company and each related company or business the eligible employees of which are designated by the Committee or its designee to participate in this Plan and which, by appropriate action, has agreed to participate in the Plan.

11. “PLAN” means the Kontoor Brands Executive Deferred Savings Plan, effective as of the Distribution Date and as it may be amended subsequently from time to time.

12. “PLAN YEAR” means the calendar year.

13. “SERVICE” means the sum of (i) the vesting service, if any, the Participant accrued, or such service as is recognized for the Participant, under the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees as of the date the Participant commences participation in this Plan, and (ii) service while eligible to participate under this Plan or the VF EDSP II. An employee shall be credited with Service under (ii) hereof for each calendar month during which he or she performs services while eligible to participate in this Plan or the VF EDSP II, determined, for these purposes, without regard to any period of suspension attributable to an early withdrawal under Section VIII. Service shall also include the following periods:

(a) Any leave of absence from employment which is authorized by the Participating Employer;

(b) Any period of military service in the Armed Forces of the United States required to be credited by law; provided, however, that the Participant returns to the employment of a Participating Employer within the period his or her re-employment rights are protected by law; and

(c) Service with any related Kontoor Brands company or enterprise if, and to the extent that, the Committee determines that such service should be counted.

14. “SEVERANCE FROM SERVICE” means the date on which a Participant’s employment with a Participating Employer is terminated for any reason other than death or Total Disability. A Severance from Service does not occur if a Participant is transferred to another Participating Employer. If the Committee, in its discretion, revokes a related company or business’s status as a Participating Employer or if a Participating Employer ceases to be a related company or business of the Company, either through sale, merger or other transaction, then all Participants employed by such Participating Employer shall be deemed to have incurred a Severance from Service effective as of the date of such revocation or such transaction, as applicable, unless and to the extent that the Committee determines otherwise. The Committee may also determine, in selected cases, that a Participant’s Severance from Service occurs at a date subsequent to his or her actual termination date.

 

2


15. “SOCIAL SECURITY WAGE BASE” means the applicable dollar amount, for the Plan Year, of the contribution and benefit base as determined under section 230 of the Social Security Act.

16. “SPOUSE” means the person to whom the Participant is legally married at the time relevant to any determination under the Plan.

17. “TOTAL DISABILITY” means a physical or mental impairment that qualifies a Participant for disability benefits under a long-term disability benefits plan maintained by a Participant’s Participating Employer and/or eligibility for disability benefits under the Social Security Act. All determinations of Total Disability for purposes of this Plan shall be based on the fact that the Participant is in receipt of disability payments under either or both of the above-referenced disability benefits plans.

SECTION II

ELIGIBILITY

1. REQUIREMENTS. An individual shall be eligible to participate in this Plan if he or she is working for a Participating Employer in a capacity classified by the Participating Employer as that of an employee and, for compensation purposes, is classified by the Participating Employer as grade 20 (or its equivalent) or above.

2. VOLUNTARY. Participation in this Plan by an eligible employee is voluntary.

3. TERMINATION OF PARTICIPATION. In the event that an individual ceases to be an eligible employee because he or she is no longer classified by a Participating Employer as grade 20 (or its equivalent) or above, then his or her Basic Deferral election shall remain in effect through the end of the Plan Year in which he or she ceased to be an eligible employee. Thereafter, he or she shall make no further Basic Deferrals unless and until he or she shall again become an eligible employee. In the event that an individual ceases to be an eligible employee as a result of a suspension attributable to making an early withdrawal under Section VIII, then he or she shall make no further Basic Deferrals until after the expiration of such suspension period if he or she then satisfies the requirements in Subsection 1 above.

SECTION III

DEFERRALS

1. BASIC DEFERRALS.

(a) ELECTION. A Participant may elect to defer any portion of his or her Earnings (“Basic Deferral”) by directing his or her Participating Employer to reduce his or her Earnings by a whole percentage or amount authorized by a written election form executed by the Participant and approved by the Committee provided, however, that (1) for Plan Years beginning before January 1, 2003, a Participant may not reduce his or her annual salary below the Social Security Wage Base, and (2) for Plan Years beginning on or after January 1, 2003, a Participant may not elect to defer an amount under this Plan that, when aggregated with any similar amount deferred under any other nonqualified deferred compensation plan maintained by the Company would either (A) with regard to annual salary, result in a reduction of his or her annual salary below the lesser of: (1) the Social Security Wage Base, or (2) fifty percent (50%) of annual salary or (B) with regard to bonuses, exceed one hundred percent (100%) of any cash bonus payment that qualifies as Earnings. A Participant’s Basic Deferral election shall be made during the December immediately prior to the Plan to which the election relates, or at such other time or times as the Committee may determine. A Participant who incurs a Total Disability, or who is on a leave of absence with the Participating Employer’s consent, or in military service in conformity with the Participating Employer’s policies, may continue to elect Basic Deferrals if Earnings are being continued by the Participating Employer.

 

3


(b) VESTING. A Participant shall have a nonforfeitable right to his or her Basic Deferrals and any credited gains or losses attributable thereto.

(c) CHANGE OF ELECTION. The percentage or amount of Earnings designated by the Participant as a Basic Deferral shall continue in effect, notwithstanding any change in Earnings, unless and until the Participant requests a change of such percentage or amount (increase, decrease or suspension) and obtains the consent of the Committee. A Participant, by submitting a written election form to the Committee prior to the first day of the calendar quarter for which the election is to become effective, may request a change of the percentage or amount of Basic Deferral. If the Committee consents, such change shall become effective as of the first day of the calendar quarter to which the election relates.

(d) PARTICIPATION IN MORE THAN ONE PLAN. In the event that a Participant in this Plan also participates in another nonqualified deferred compensation plan sponsored by VF Corporation and such Participant is suspended from deferring compensation under the other plan as a result of taking an early withdrawal, such individual shall not be permitted to increase the amount subject to any Basic Deferral election already in effect under this Plan without the consent of the Committee.

2. MATCHING DEFERRALS.

(a) AMOUNT. The Participating Employer shall credit an additional deferral amount (“Matching Deferral”) equal to 50% of a Participant’s Basic Deferral; provided, however, that such Matching Deferral shall not exceed $12,500 for any given Plan Year or such other amount as the Committee shall approve from time to time.

(b) VESTING. A Participant shall become vested in his or her Matching Deferrals and any credited gains or losses attributable thereto at the rate of one-sixtieth (1/60th) per month of Service. Notwithstanding the foregoing, a Participant shall become 100% vested in his or her Matching Deferrals and any credited gains or losses attributable thereto if, prior to his or her Severance from Service (i) the Participant attains age sixty-five (65), incurs a Total Disability or dies, or (ii) a Change of Control occurs.

(c) FORFEITURES. A Participant shall forfeit, upon his or her (i) Severance from Service prior to the attainment of age sixty-five (65) or (ii) complete early withdrawal of his or her Accrued Benefit in accordance with Subsection 2(b) of Article VIII, any right to Matching Deferrals (including credited gains or losses attributable thereto) in which he or she is not vested.

SECTION IV

INVESTMENT

1. INVESTMENT ELECTION. A Participant may elect, pursuant to procedures established by the Committee and subject to applicable limitations herein, that his or her Basic and Matching Deferrals be credited with gains and losses as if such Deferrals had been invested (in increments of at least one percent (1%)) in one or more of the investment funds offered under the Plan, as may be determined by the Committee from time to time. Each investment direction by a Participant in effect under the VF EDSP I on the Distribution Date will be recognized and maintained immediately after the transfer of his or her account from the VF EDSP I to the Plan and shall remain until a new direction is made by the Participant and becomes effective.

2. CHANGE OF INVESTMENT ELECTION. A Participant may elect, pursuant to procedures established by the Committee and subject to applicable limitations herein, a change with respect to his or her previously-made investment election.

SECTION V

RECORDS

The Committee shall create and maintain adequate records, in book entry form, for each Participant of Basic and Matching Deferrals and gains or losses credited thereto. Each Participant shall have electronic access to the

 

4


status of his or her Accrued Benefit and vested percentage. A Participant may request a written statement reflecting the status of his or her Accrued Benefit and vested percentage at any time by filing a written request with the Committee.

SECTION VI

PLAN BENEFITS

1. SEVERANCE FROM SERVICE. Upon a Participant’s Severance from Service, he or she shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

2. DEATH. In the event of the death of a Participant prior to Severance from Service, the Participant’s Beneficiary shall be entitled to a benefit equal to the Participant’s Accrued Benefit payable in accordance with Section VII. In the event of the death of a Participant after a Severance from Service, the Participant’s Beneficiary shall be entitled to that part, if any, of the Participant’s Accrued Benefit which has not yet been paid to the Participant payable in accordance with Section VII.

3. TOTAL DISABILITY. In the event a Participant incurs a Total Disability prior to Severance from Service, the Participant shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

4. BENEFICIARY. Each Participant may designate a Beneficiary (along with alternate beneficiaries) to whom, in the event of the Participant’s death, any benefit is payable hereunder. Each Participant has the right to change any designation of Beneficiary and such change automatically revokes any prior designation. A designation or change of Beneficiary must be in writing on forms supplied by the Committee and any change of Beneficiary shall not become effective until filed with the Committee; provided, however, that the Committee shall not recognize the validity of any designation received after the death of the Participant. The interest of any Beneficiary who dies before the Participant shall terminate unless otherwise provided. If a Beneficiary is not validly designated, or is not living or cannot be found at the date of payment, any amount payable pursuant to this Plan shall be paid to the Spouse of the Participant if living at the time of payment, otherwise in equal shares to such of the children of the Participant as may be living at the time of payment; provided, however, that if there is no surviving Spouse or child at the time of payment, such payment shall be made to the estate of the Participant.

SECTION VII

PAYMENT OF BENEFITS

1. NORMAL FORM. The normal form for the payment of a Participant’s Accrued Benefit shall be a lump-sum payment in cash and shall not be payable to the Participant prior to the ninetieth (90th) day following the event giving rise to the distribution.

2. INSTALLMENTS.

(a) Notwithstanding the foregoing, a Participant may request, by filing an application in writing to the Committee, that payment be made in annual installments over a period of not more than ten (10) years. Such written application must be made to the Committee at least sixty (60) days prior to the payment date, and the decision to permit the requested form of payment shall be made at the sole discretion of the Committee taking into account the interests of the Participant and the Company. A Participant’s installment payment elections in effect under the VF EDSP I shall continue to apply with respect to the portions of his account under the Plan attributable to deferred compensation under the VF EDSP I corresponding to those elections.

(b) If a Participant dies prior to a Severance from Service and prior to filing a written application to the Committee for an installment payment, his or her Beneficiary shall have the right to file a similar

 

5


application; provided, however, that in such circumstances, the Accrued Benefit shall not be payable to the Beneficiary (in whole or in part) prior to the ninetieth (90th) day following the Participant’s death (unless the Committee determines otherwise) and the Beneficiary must file the written application with the Committee at least sixty (60) days prior to such payment date and the decision to permit the requested form of payment shall be made at the sole discretion of the Committee taking into account the interests of the Beneficiary and the Company.

(c) If a Participant dies after a Severance from Service and the commencement of installment payments or at a time when installment payments are scheduled to commence, his or her Beneficiary shall have the right to file a written application to the Committee to receive any unpaid installments either in lump sum or in accordance with the schedule previously requested by the Participant and approved by the Committee; provided, however, that in such circumstances, the Accrued Benefit shall not be payable to the Beneficiary (in whole or in part) prior to the ninetieth (90th) day following the Participant’s death (unless the Committee determines otherwise) and the Beneficiary must file a written application with the Committee at least sixty (60) days prior to such payment date. The decision to permit the requested form of payment shall be in the sole discretion of the Committee taking into account the interests of the Beneficiary and the Company.

SECTION VIII

WITHDRAWALS

1. HARDSHIP WITHDRAWAL. Distribution may be made to a Participant of some or all of his or her Accrued Benefit in the event of an unforeseeable emergency. The Participant shall file a written request with the Committee, and the Committee shall determine in its sole discretion, if an unforeseeable emergency exists, based on the facts of each case. For this purpose, “unforeseeable emergency” means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident involving the Participant, his or her Spouse or member of immediate family, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant; provided, however, that distribution shall not be made to the extent such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent such liquidation would not itself cause severe financial hardship), or by cessation of a Participant’s Basic Deferrals. The Committee may, in its discretion, consider making similar distributions to a Beneficiary following the death of a Participant and the Beneficiary’s incurring an unforeseeable emergency.

2. EARLY WITHDRAWAL. Subject to the terms and conditions described in this Section, a distribution shall be made to a Participant of his or her Accrued Benefit in the form of a partial or complete early withdrawal; provided, however, that a Participant who has had a Severance from Service or has incurred a Total Disability shall not be permitted to take a partial early withdrawal.

To elect a partial or complete early withdrawal, a Participant shall file a written election with the Committee in advance of the proposed early withdrawal date. The election shall be made on a form supplied by the Committee, which at minimum shall require that the Participant specify the amount of the early withdrawal. A pro rata amount shall be withdrawn from each of the investment funds in which the Participant’s account is invested, subject to the limitations in Section IV of the Plan. A Participant may elect no more than two early withdrawals during any continuous eighteen-month period.

(a) PARTIAL EARLY WITHDRAWAL. A Participant may elect a partial early withdrawal in an amount no less than $25,000 and no more than seventy-five percent (75%) of the Participant’s total account balance (including, solely for purposes of determining the amount available, the Participant’s nonvested Matching Deferrals, if any). Such minimum and maximum amounts shall be determined without regard to the forfeited amount described herein. Notwithstanding any provision herein to the contrary, any Participant who receives a partial early withdrawal shall (i) forfeit from the amount withdrawn an amount equal to six percent (6%) of the amount withdrawn (provided, however, that the amount forfeited shall not exceed

 

6


$50,000), and (ii) be suspended from making Basic Deferrals for a period of at least six (6) months commencing with the date of withdrawal as follows:

(A) if the Participant withdraws $833,000 or less, the Participant shall be suspended from making Basic Deferrals for a period of six (6) months, and

(B) if the Participant withdraws more than $833,000, the six (6) month suspension period described in Subsection (A) above shall be extended for an additional period of months equal to the product of (x) the percentage of the Participant’s total account balance (as determined under Subsection (a) above) that was withdrawn hereunder in excess of $833,000, times (y) six (6) (with fractional months rounded up to the next whole month).

(b) COMPLETE EARLY WITHDRAWAL. A Participant may elect a complete early withdrawal of his or her Accrued Benefit. Notwithstanding any provision herein to the contrary, any Participant who receives a complete early withdrawal shall (i) forfeit from the amount withdrawn an amount equal to six percent (6%) of the amount withdrawn plus any unvested Matching Deferrals (provided, however, that (x) the amount forfeited from the amount withdrawn shall not exceed $50,000 and (y) the forfeited amount shall be offset by the amount, if any, of the forfeited Matching Deferrals), and (ii) the Participant shall be suspended from making Basic Deferrals for a period of twelve (12) months, commencing with the date of withdrawal. A Beneficiary of a deceased Participant also shall be permitted to elect a complete early withdrawal and in such circumstance shall forfeit the amount described in (i) herein.

SECTION IX

FUNDING STATUS

This Plan is unfunded. All obligations hereunder shall constitute an unsecured promise of the Company to pay a Participant’s benefit out of the general assets of the Company, subject to all of the terms and conditions of the Plan, as amended from time to time, and applicable law. A Participant shall have no greater right to benefits provided hereunder than that of any unsecured general creditor of the Company.

SECTION X

ADMINISTRATION

1. POWERS AND RESPONSIBILITIES. The Plan shall be administered by the Committee which shall have the following powers and responsibilities.

(a) to construe the Plan, make factual determinations, consider requests made by Participants, correct defects, and take any and all similar actions considered by the Committee to be necessary to administer the Plan, with any instructions or interpretations of the Plan made in good faith by the Committee to be final and conclusive for all purposes;

(b) determine the investment options which may be utilized under the Plan, including any default option to be utilized if a Participant makes no investment request;

(c) to designate a related company or business as a Participating Employer and to revoke such status if, in the Committee’s discretion, such action is in the best interest of the Company; and

(d) to take all other actions and do all other things which are considered by the Committee to be necessary to the administration of the Plan.

2. ACTIONS CONCLUSIVE. The Committee shall have complete discretion in carrying out its powers and responsibilities under the Plan, and its exercise of discretion hereunder shall be final and conclusive.

3. DELEGATION. The Committee may, in writing, delegate some or all of its powers and responsibilities to any other person or entity.

 

7


4. MEETINGS. The Committee may hold meetings upon such notice, at such time or times, and at such place or places as it may determine. The majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business at all meetings and a majority vote of those present and constituting a quorum at any meeting shall be required for action. The Committee may also act by written consent of a majority of its members.

5. RULES OF ADMINISTRATION. The Committee may adopt such rules for administration of the Plan as is considered desirable, provided they do not conflict with the Plan.

6. AGENTS. The Committee may retain such counsel, and actuarial, medical, accounting, clerical and other services as it may require to carry out the provisions and purposes of the Plan.

7. RELIANCE. The Committee shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any duly appointed auditor, or actuary, upon all certificates and reports made by any investment manager, or any duly appointed accountant, and upon all opinions given by any duly appointed legal counsel.

8. LIABILITY AND INDEMNIFICATION. No member of the Committee shall be personally liable by virtue of any instrument executed by the member, or on the member’s behalf, as a member of the Committee. Neither the Company nor a Participating Employer, nor any of their respective officers or directors, nor any member of the Committee, shall be personally liable for any action or inaction with respect to any duty or responsibility imposed upon such person by the terms of the Plan except when the same is finally judicially determined to be due to the self dealing, willful misconduct or recklessness of such person. The Company shall indemnify and hold harmless its officers, directors, and those of any Participating Employer, and each member of the Committee against any and all claims, losses, damages, expenses (including attorneys’ fees and the advancement thereof), and liability (including, in each case, amounts paid in settlement), arising from any action or failure to act regarding the Plan, to the greatest extent permitted by applicable law. The foregoing right of indemnification shall be in addition to any other rights to which any such person may be entitled.

9. CONFLICT OF INTEREST. If any Participant is a member of the Committee, he or she shall not participate as a member of the Committee in any determination under the Plan relating to his or her Basic Deferrals and Matching Deferrals.

SECTION XI

MODIFICATION AND TERMINATION

The Company reserves the right to terminate this Plan at any time or to modify, amend or suspend it from time to time, such right to include, without limitation, the right to distribute any and all Accrued Benefits. Any such termination, modification, amendment or suspension shall be effective at such date as the Company may determine and may be effective as to all Participating Employers, or as to one or more Participating Employers, and their respective employees. The Company shall notify all affected Participants of any such termination, modification, amendment or suspension and, in appropriate circumstances as determined by the Company, shall also notify the relevant Participating Employers. A termination, modification, amendment or suspension may affect Participants generally, by class or individually, and may apply irrespective of whether they are past, current or future Participants; provided, however, that any such action may not eliminate or reduce the Accrued Benefit of any Participant as of the effective date of such action.

SECTION XII

GENERAL PROVISIONS

1. NO EMPLOYMENT RIGHT. Nothing contained herein shall be deemed to give any employee the right to be retained in the service of the Company or a Participating Employer, as applicable, or to interfere with the rights of any such employer to discharge any employee at any time.

 

8


2. INTEREST NOT ASSIGNABLE. It is a condition of this Plan, and all rights of each Participant shall be subject thereto, that no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, subject, however, to applicable law, but excluding devolution by death or mental incompetency, and no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be liable for or subject to any obligation or liability of such Participant, subject, however, to applicable law.

3. TAXES AND WITHHOLDING. All deferrals and payments under the Plan shall be subject to such taxes and other withholdings (federal, state or local) as may be due thereon, and the determination of the Committee as to withholding with respect to deferrals and payments shall be binding upon the Participant and each Beneficiary.

4. SALE OF ASSETS. The sale of all or substantially all of the assets of the Company, or a merger, consolidation or reorganization of the Company wherein the Company is not the surviving corporation, or any other transaction which, in effect, amounts to a sale of the Company or voting control thereof, shall not terminate this Plan or any related agreements and the obligations created hereunder or thereby and the same shall be binding upon the successors and assigns of the Company.

5. LEGAL INCAPACITY. If a Participant or Beneficiary entitled to receive any benefits hereunder is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, the benefits will be paid to such persons as the Committee designates or to the duly appointed guardian.

6. GOVERNING LAW. This Plan shall be governed by and construed in accordance with the laws of North Carolina, notwithstanding the conflict of law rules applicable therein.

SECTION XIII

CESSATION OF PARTICIPATION

Notwithstanding any other provision in the Plan to the contrary, all participation in the Plan ceased as of the close of business on December 31, 2004, such that no Basic or Matching Deferrals shall be permitted with respect to Earnings paid on or after December 31, 2004 and no employee shall become a Participant after December 31, 2004.

*    *    *

Pursuant to its authority under Section XI of the Plan, the Company, as evidenced by the signature of its authorized officer below, hereby establishes the Plan effective as of the Distribution Date for the stated purposes set forth herein and this Plan shall, on and after such effective date, be applicable to all Participating Employers and their respective employees until such time as the Company may, in its discretion, further amend or take any other authorized action with respect to the Plan.

 

KONTOOR BRANDS, INC.

 

 

9

EX-10.14 18 d618285dex1014.htm EX-10.14 EX-10.14

Exhibit 10.14

KONTOOR BRANDS EXECUTIVE DEFERRED SAVINGS PLAN II

VF Corporation has maintained the VF Executive Deferred Savings Plan II (the “VF EDSP II”) for the benefit of eligible senior executive employees of VF Corporation and its affiliated employers. VF Corporation has determined to separate its jeanswear business into one or more newly formed legal entities (the “Jeanswear Group”), and in connection therewith, VF Corporation intends to distribute to its shareholders all of the stock of a newly formed company (“Kontoor Brands, Inc.”) that will be the parent holding company for the Jeanswear Group (the “Distribution”). In connection with the Distribution, Kontoor Brands, Inc. shall adopt this Kontoor Brands Executive Deferred Savings Plan II (the “Plan”) to provide benefits for the eligible senior executive employees of Kontoor Brands, Inc. and its affiliated employers, and to accept a spin-off of the accounts of such eligible senior executive employees and their respective beneficiaries under the VF EDSP II. This Plan shall be effective at and as of the date of consummation of the Distribution (the “Distribution Date”). In the event that the Distribution does not occur, this Plan shall be void and of no force and effect.

The Plan permits senior executive employees, who are among a select group of management or highly-compensated employees of Kontoor Brands, Inc. or a Participating Employer, to defer compensation in excess of the maximum amount permitted to be taken into account under the Kontoor Brands 401k Savings Plan and be credited with Matching Deferrals.

The intention of Kontoor Brands, Inc. is that the Plan be at all times maintained on an unfunded basis for federal income tax purposes under the Internal Revenue Code of 1986, as amended (“Code”), administered as a “top hat” plan exempt from the substantive requirements of the Employee Retirement Income Security Act of 1974, as amended, and operated in accordance with the requirements of section 409A of the Code.

SECTION I

DEFINITIONS

Unless otherwise required by the context, the terms used herein shall have the meanings as set forth below:

1. “Accrued Benefit” means the sum of a Participant’s Basic Deferrals and the vested portion of the Participating Employer’s Matching Deferrals and Company Retirement Deferrals. In the case of any Participant who also was a participant in the VF EDSP I, a Participant’s Accrued Benefit shall also include any Matching Deferrals that, as of December 31, 2004, were not vested under the VF EDSP I.

2. “Basic Deferral” means that percentage of a Participant’s Excess Earnings elected to be deferred under the terms of this Plan.

3. “Beneficiary” means the individual or entity named pursuant to the Plan to receive benefit payments hereunder in the event of the death of the Participant. Each Beneficiary designation by a Participant in effect under the VF EDSP II (including a beneficiary designation under the VF EDSP I that was recognized under the terms of the VF EDSP II) on the Distribution Date will be recognized and maintained immediately after the transfer of his or her account from the VF EDSP II to the Plan and shall remain until a new designation is made by the Participant and becomes effective.

4. “Change of Control” means, for purposes of vesting under Article III, the same as it does in the Company’s change of control agreements with its senior management in place at the relevant time; provided, however, that if there is ever a time that the Company no longer has any such agreements in place with its senior management, then the Committee shall determine the meaning of “Change of Control.” Notwithstanding the foregoing, for purposes of benefit entitlement under Article VI and payment rights under Article VII, when used in connection with a Participating Employer (including the Company), “Change of Control” means the same as “change in the ownership or effective control of a corporation” under Code Section 409A.

 

1


5. “Code Section 409A” means, collectively, Section 409A of the Code and any Treasury regulations and guidance issued thereunder.

6. “Committee” means the Kontoor Brands Retirement Plans Committee, as appointed from time to time by the Vice President — Chief Human Resources Officer of the Company.

7. “Company” means Kontoor Brands, Inc., a North Carolina corporation.

8. “Company Controlled Group” shall include the Company and each related company or business which is part of the same controlled group under Code sections 414(b) or 414(c); provided that in applying Code sections 1563(a)(1) — (a)(3) for purposes of determining a controlled group of corporations under Code section 414(b) and in applying Treasury Regulation section 1.414(c)-2 for purposes of determining whether trades or businesses are under common control under Code section 414(c), the phrase “at least 50 percent” is used instead of “at least 80 percent.”

9. “Company Retirement Deferral” means the additional deferral amount credited to a Participant by a Participating Employer under the terms of Subsection 3 of Section III of this Plan.

10. “Deferrals” means, collectively, a Participant’s Basic, Matching, and Company Retirement Deferrals under the Plan (and, unless specified otherwise, shall include any gains or losses attributable thereto).

11. “Earnings” means the Participant’s salary and any cash bonus payments made to a Participant by a Participating Employer in the relevant year under a Participating Employer’s performance-based incentive compensation plans. For purposes of the Plan, Earnings shall be determined without regard to any salary or bonus deferrals or reductions which may be made by a Participant pursuant to section 401(k) or section 125 of the Code. However, earnings shall not include: (i) any reimbursement for expenses paid to a Participant by a Participating Employer; (ii) any payments or contributions made by a Participating Employer to a plan or arrangement, on behalf of a Participant, which results in imputed income to the Participant for federal income tax purposes; or (iii) any compensation attributable to stock incentives such as stock option exercises, restricted stock, or restricted stock units. The Committee may, in its discretion and from time to time, identify additional forms of compensation to be included in or excluded from the Participant’s Earnings.

12. “Excess Earnings” means Earnings received by a Participant during a Plan Year in excess of the annual compensation limit described in section 401(a)(17) of the Code (as adjusted by the Secretary of the Treasury) applicable to the Kontoor Brands 401k Savings Plan.

13. “Initial Eligibility Date” means the earliest date on which a newly eligible employee may participate in the Plan. The Initial Eligibility Date of an employee shall be the earlier of: (a) the date on which the employee completes a three (3) consecutive month period of employment with a Participating Employer in which the employee is credited with 250 or more hours of service, (b) the date on which the employee completes a twelve (12) consecutive month period of employment with a Participating Employer in which the employee is credited with 1,000 or more hours of service or (c) in the case of a Transferred Employee who was a participant in the VF EDSP II on the Distribution Date. Notwithstanding the foregoing, the Initial Eligibility Date may not be earlier than the date the employee is notified, in writing, by the Participating Employer of the material terms of the Plan.

14. “Matching Deferral” means the additional deferral amount credited to a Participant by a Participating Employer under the terms of Subsection 2 of Section III of this Plan. In addition, in the case of any Participant who also was a participant in the VF EDSP I, the term “Matching Deferral” shall include any matching deferrals (and any gains and losses credited thereon) that, as of December 31, 2004, were not vested under the VF EDSP I.

16. “Participant” means an eligible employee who participates in this Plan in accordance with its provisions.

 

2


17. “Participating Employer” means the Company and each related company or business within the Company Controlled Group the eligible employees of which are designated by the Committee to participate in this Plan with respect to Basic and Matching Deferrals, and/or Company Retirement Deferrals (if such deferrals are provided).

18. “Performance-Based Compensation” shall have the meaning as set forth under Code Section 409A.

19. “Plan” means the Kontoor Brands Executive Deferred Savings Plan II as it may be amended subsequently from time to time.

20. “Plan Year” means the calendar year.

21. “Service” means the vesting service as is recognized for the Participant under the Kontoor Brands 401k Savings Plan.

22. “Severance from Service” shall have the same meaning as the term “separation from service” as set forth under Code Section 409A. Notwithstanding the foregoing, a Severance from Service does not occur if a Participant is transferred to another Participating Employer or any member of the Company Controlled Group.

23. “Specified Employee” means as of any given date, the one-hundred (100) highest compensated employees as of the end of the preceding Plan Year; provided that the group of one-hundred (100) employees shall include at least fifty (50) officers (except to the extent that there are fewer than fifty (50) officers, in which case the group shall include all officers), and provided further that such group of employees and officers shall be determined from a listing of same drawn from the Company Controlled Group, and compiled as of the end of such preceding Plan Year.

24. “Spouse” means the person to whom the Participant is legally married at the time relevant to any determination under the Plan.

25. “Total Disability” means a physical or mental impairment that qualifies a Participant for disability benefits under a long-term disability benefits plan maintained by the Participant’s Participating Employer and/or eligibility for disability benefits under the Social Security Act; provided that such impairment would also qualify as a “disability” as defined in Code Section 409A. All determinations of Total Disability for purposes of this Plan shall be based on the fact that the Participant is in receipt of disability payments under either or both of the above-referenced disability benefits plans.

26. “Transferred Employees” means those employees of the Company who participated in the VF EDSP II on the Distribution Date and whose accounts in the VF EDSP II were transferred to the Plan.

27. “VF EDSP I” means the VF Executive Deferred Savings Plan.

28. “VF EDSP II” means the VF Executive Deferred Savings Plan II.

SECTION II

ELIGIBILITY

1. Requirements. An individual shall be eligible to elect to contribute Basic Deferrals and be credited with Matching Deferrals if he or she is working for a Participating Employer in a capacity classified by the Participating Employer as that of an employee and, for compensation purposes, is assigned by the Participating Employer to grade 20 (or its equivalent) or above. An employee shall be eligible to participate only if the employee is so notified, in writing, by the Participating Employer of the material terms of the Plan.

 

3


2. Participation. Participation in this Plan by an eligible employee is voluntary with respect to the right to elect to contribute Basic Deferrals and be credited with Matching Deferrals.

3. Termination of Participation. In the event that a Participant ceases to be an eligible employee, the Participant’s Basic Deferral election shall remain in effect through the end of the Plan Year in which the Participant remains employed but has ceased to be an eligible employee, and thereafter, the Participant shall make no further Basic Deferrals unless and until the Participant again becomes an eligible employee.

SECTION III

DEFERRALS

1. Basic Deferrals.

(a) Election. A Participant may elect to defer any portion of his or her Excess Earnings (“Basic Deferral Election”) by directing his or her Participating Employer to reduce his or her Excess Earnings by an amount authorized by the Participant in the form and manner designated by the Committee.

(i) Amount of deferral. A Participant may not elect to defer an amount under this Plan that would, (A) with regard to annual salary, result in a reduction of his or her annual salary below fifty percent (50%) of annual salary for any payroll period, or (B) with regard to bonuses that constitute Performance-Based Compensation, exceed seventy-five percent (75%) of any cash bonus payment that qualifies as Earnings;

(ii) Timing of deferral.

(A) With respect to deferrals of Excess Earnings other than Performance-Based Compensation, a Participant’s Basic Deferral Election shall be made no later than the December immediately preceding the Plan Year to which the election relates;

(B) With respect to deferrals of Excess Earnings that are Performance-Based Compensation, a Participant’s Basic Deferral Election shall be made no later than six (6) months preceding the end of the performance period to which the Performance-Based Compensation relates;

(C) Notwithstanding the foregoing, with respect to an individual who is first eligible to participate in the Plan, such individual may submit a Basic Deferral Election within the first thirty (30) days after the individual’s Initial Eligibility Date with respect to Excess Earnings comprised of: (A) salary to be paid for services to be performed after the Basic Deferral Election is submitted, and (B) Performance-Based Compensation, if so permitted by the Committee at the time, provided that such election shall be prorated in accordance with Code Section 409A.

Any election made by a Participant to defer any portion of his or her Excess Earnings paid by a participating employer under the VF EDSP II during 2019 shall also apply to his or her compensation paid by a Participating Employer under this Plan following the Distribution Date and during the remainder of 2019.

(b) Vesting. A Participant shall have a nonforfeitable right to his or her Basic Deferrals.

(c) Change of Election. The percentage or amount of Excess Earnings designated by a Participant as a Basic Deferral for any given Plan Year shall continue in effect for such Plan Year, notwithstanding any change in Earnings. In the event a Participant is on a bona fide leave of absence with the Participating Employer’s consent, or in military service in conformity with the Participating Employer’s policies, such Participant’s Basic Deferrals shall continue if Earnings are being continued by the Participating Employer and if the Participant has Excess Earnings. If Earnings are not being continued or if the Participant does not have Excess Earnings, then, upon the Participant’s return to employment, his or her Basic Deferrals will be resumed, but no additional deferrals will be required or permitted to make up for amounts not deferred during periods of no or insufficient Earnings.

 

4


(d) Manner of Deferral. A Participant’s Basic Deferral election shall apply only to Earnings that constitute Excess Earnings at the time such amounts are otherwise payable to the Participant. A Participant’s Basic Deferrals of salary may be taken from salary ratably during the applicable Plan Year once the Participant has Excess Earnings or in any manner determined by the Committee; provided that such Basic Deferrals during the Plan Year, in the aggregate, reflect the Participant’s Basic Deferral Election with respect to salary in accordance with Code Section 409A. In the discretion of the Committee, a Participant’s deferral election may identify the particular forms of compensation to be included for purposes of such election.

(e) Hardship. Notwithstanding anything in the foregoing to the contrary, in the event a Participant receives a hardship withdrawal pursuant to Section VIII, such Participant’s Basic Deferral Election with respect to the Plan Year during which such hardship withdrawal under this Plan occurs shall be cancelled in accordance with Code Section 409A. The Participant may submit a new Basic Deferral Election with respect to future Plan Years to the extent permitted under this Subsection 1 of this Section III.

2. Matching Deferrals.

(a) Amount. The Participating Employer shall credit a Matching Deferral equal to 100% of a Participant’s Basic Deferrals for a Plan Year, provided, however, that (i) with respect to Basic Deferrals of salary, such Matching Deferrals shall be limited to six percent (6%) of the Participant’s salary that constitutes Excess Earnings for such Plan Year, and (ii) with respect to Basic Deferrals of Performance-Based Compensation, such Matching Deferrals shall be limited to six percent (6%) of the Participant’s Performance-Based Compensation that constitutes Excess Earnings for such Plan Year.

Following the end of the 2015 and 2016 Plan Years, an additional deferral (“Transitional Deferral”) was credited to each eligible employee of a participating employer under the VF EDSP II: (i) who was eligible for the VF EDSP II on December 31, 2014, (ii) who remained employed by the participating employer and eligible to participate as of the end of the applicable Plan Year (2015 and 2016), and (iii) whose Earnings for the Plan Year were below $208,334. The Transitional Deferral was equal to the excess, if any, of $12,500 over the product of the employee’s Earnings for the Plan Year and six percent (6%) (i.e., $12,500 — (Earnings x 6%). Such Transitional Deferrals were credited as Matching Deferrals and shall be subject to the same vesting, forfeiture, and other provisions applicable to Matching Deferrals, except as otherwise provided herein.

(b) Vesting. A Participant shall become vested in his or her Matching Deferrals at the rate of one-sixtieth (1/60th) per month of Service. Notwithstanding the foregoing, a Participant shall become 100% vested in his or her Matching Deferrals if, prior to his or her Severance from Service the Participant attains age sixty-five (65), incurs a Total Disability, dies, or a Change of Control of the Company occurs.

(c) Forfeitures. A Participant shall forfeit, upon his or her Severance from Service prior to becoming vested in accordance with Subsection 2(b) of this Section III, any right to Matching Deferrals in which he or she is not vested.

3. Company Retirement Deferrals.

(a) Amount. A Participant who also was a participant in the VF EDSP II may have been credited with an additional deferral amount (“Company Retirement Deferral”) with respect to Earnings prior to 2015 equal to the percentage of the Excess Earnings of each eligible Participant employed by his or her participating employer in accordance with the following schedule:

 

Years of Service

   Percentage of Excess
Earnings
 

Less than 10

     2

More, but less than 15

     3

More, but less than 20

     4

21 or more

     5

 

5


A Participant was eligible for Company Retirement Deferrals under the VF EDSP II only if he or she began employment with the a participating employer under the VF EDSP II on or after January 1, 2005 (or earlier, if determined by the applicable committee under the VF EDSP II) and was either not covered by the VF Corporation Pension Plan or not eligible to actively participate in the VF Corporation Pension Plan. For purposes of the above schedule, the term “Years of Service” was defined as each 12-month period of Service accrued by the Participant after December 31, 2004, unless otherwise determined by the applicable committee under the VF EDSP II. Notwithstanding the foregoing, no Company Retirement Deferrals were credited under the VF EDSP II after 2014.

(b) Vesting. A Participant shall become vested in his or her Company Retirement Deferrals at the rate of one-sixtieth (1/60th) per month of Service. Notwithstanding the foregoing, a Participant shall become 100% vested in his or her Company Retirement Deferrals if, prior to his or her Severance from Service, the Participant attains age sixty-five (65), incurs a Total Disability, dies, or a Change of Control of the Company occurs.

(c) Forfeitures. A Participant shall forfeit upon his or her Severance from Service prior to becoming vested in accordance with Subsection 3(b) of this Section III, any right to Company Retirement Deferrals in which he or she is not vested.

(d) Other Participating Employer Deferrals. A Participating Employer may, in its discretion and from time to time, and with the consent of the Company, credit a Participant’s Account with different or additional amounts of Company Retirement Deferrals for any reason as determined by the Participating Employer. Notwithstanding any provision herein to the contrary, the Committee may, with respect to such amounts, establish such terms and conditions as it deems appropriate.

SECTION IV

INVESTMENT

1. Investment Election. A Participant may elect, pursuant to procedures established by the Committee and subject to applicable limitations herein, that his or her Basic, Matching, and Company Retirement Deferrals be credited with gains and losses as if such Deferrals had been invested (in increments of at least one percent (1%)) in one or more of the investment funds offered under the Plan, as may be determined by the Committee from time to time. Each investment direction by a Participant in effect under the VF EDSP II on the Distribution Date will be recognized and maintained immediately after the transfer of his or her account from the VF EDSP II to the Plan and shall remain until a new direction is made by the Participant and becomes effective.

2. Change of Investment Election. A Participant may elect, pursuant to procedures established by the Committee and subject to applicable limitations herein, a change with respect to his or her previously-made investment election.

SECTION V

RECORDS

The Committee shall create and maintain, or may direct a third party to create and maintain, adequate records, in book entry form, for each Participant of Basic, Matching, and Company Retirement Deferrals. Each Participant shall, to the extent permitted by the Committee, have electronic access to the status of his or her account balance and vested percentage.

SECTION VI

PLAN BENEFITS

1. Severance from Service. Upon a Participant’s Severance from Service, he or she shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

 

6


2. Death. In the event of the death of a Participant prior to Severance from Service, the Participant’s Beneficiary shall be entitled to a benefit equal to the Participant’s Accrued Benefit payable in accordance with Section VII. In the event of the death of a Participant after a Severance from Service, the Participant’s Beneficiary shall be entitled to that part, if any, of the Participant’s Accrued Benefit which has not yet been paid to the Participant payable in accordance with Section VII.

3. Total Disability. In the event a Participant incurs a Total Disability prior to Severance from Service, the Participant shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

4. Change of Control. In the event a Participant’s Participating Employer undergoes a Change of Control prior to a Participant’s Severance from Service, the Participant shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

5. Beneficiary. Each Participant may designate a Beneficiary (along with alternate beneficiaries) to whom, in the event of the Participant’s death, any benefit is payable hereunder. Each Participant has the right to change any designation of Beneficiary and such change automatically revokes any prior designation. A designation or change of Beneficiary must be in writing on forms supplied by the Committee and any change of Beneficiary shall not become effective until filed with the Committee; provided, however, that the Committee shall not recognize the validity of any designation received after the death of the Participant. The interest of any Beneficiary who dies before the Participant shall terminate unless otherwise provided. If a Beneficiary is not validly designated, or is not living or cannot be found at the date of payment, any amount payable pursuant to this Plan shall be paid to the Spouse of the Participant if living at the time of payment, otherwise in equal shares to such of the children of the Participant as may be living at the time of payment; provided, however, that if there is no surviving Spouse or child at the time of payment, such payment shall be made to the estate of the Participant.

SECTION VII

PAYMENT OF BENEFITS

1. Normal Form. The normal form for the payment of a Participant’s Accrued Benefit shall be a lump-sum payment in cash payable to the Participant not earlier than the first business day of the month occurring three full calendar months following the event giving rise to the distribution and not later than the close of the Plan Year during which such three month period ends or any such later date as may be permitted under Code Section 409A.

2. Installments. Notwithstanding the foregoing, a Participant may elect in the form and manner designated by the Committee, that payment of his or her Basic Deferrals for a Plan Year be made in annual installments over a period of not more than ten (10) years with such payments commencing not earlier than the first business day of the month occurring three full calendar months following the event giving rise to the distribution and not later than the close of the Plan Year during which such three month period ends or any such later date as may be permitted under Code Section 409A. Such election must be made to the Committee at the same time that the Participant makes his or her Basic Deferral Elections for such Plan Year in accordance with Subsection 1 of Section III. Any such installment payment election with respect to salary deferred by a Participant for a Plan Year shall also apply with respect to the Matching Deferrals credited on account of such salary deferrals, any Company Retirement Deferrals credited on behalf of the Participant for the Plan Year, and any Transitional Deferrals for the Plan Year. Any such installment payment election with respect to Performance-Based Compensation deferred by a Participant for a Plan Year shall also apply with respect to the Matching Deferrals credited on account of such Performance-Based Compensation deferral for the Plan Year. A Participant’s installment payment elections in effect under the VF EDSP II shall continue to apply with respect to the portions of his account under the Plan attributable to deferred compensation under the VF EDSP II corresponding to those elections.

 

7


3. Death.

(a) If a Participant dies prior to a Severance from Service, his or her Accrued Benefit shall be distributed to his or her Beneficiary in a lump-sum payment in cash in accordance with Subsection 1 of this Section VII unless the Participant has elected an installment form of distribution in accordance with Subsection 2 of this Section VII, in which case, distribution to the Beneficiary shall be made in accordance with such election.

(b) If a Participant dies after a Severance from Service, his or her Accrued Benefit shall be distributed to his or her Beneficiary in the same form and at the same time as it would have been paid to the Participant had he or she survived.

Payment under Subsections 3(a) and 3(b) shall commence not earlier than the first business day of the month occurring three full calendar months following the event giving rise to the distribution and not later than the close of the Plan Year during which such three month period ends or any such later date as may be permitted under Code Section 409A.

4. Change of Control.

(a) In the event of a Change of Control of a Participant’s Participating Employer (other than the Company), his or her Accrued Benefit shall be distributed in a lump sum payment in accordance with Subsection 1 of this Section VII unless the Participant has elected an installment form of distribution in accordance with Subsection 2 of this Section VII, in which case, distribution to the Participant shall be made in accordance with such election.

(b) In the event of a Change of Control of the Company, all Accrued Benefits under the Plan (regardless of whether or not in pay status) shall be distributed in a lump sum payment as soon as practicable and in accordance with procedures determined by the Committee.

5. Specified Employee Restrictions. During any period in which the stock of any member of the Company Controlled Group is publicly traded on an established securities market, in the event benefits become payable to a Participant who is a Specified Employee due to the Participant’s Severance from Service, distribution of the Participant’s Accrued Benefit shall not commence any earlier than six (6) months following the Participant’s Severance from Service. Any payment that would have been made during such six (6) month period shall be retained in the Plan as part of the Participant’s Accrued Benefit (and credited with any applicable earnings and losses) and paid as soon as administratively feasible following the end of the six (6) month period.

SECTION VIII

HARDSHIP WITHDRAWALS

Distribution may be made to a Participant of some or all of his or her Accrued Benefit (excluding any Company Retirement Deferrals) in the event of an unforeseeable emergency. The Participant shall file a written request with the Committee, and the Committee shall determine in its sole discretion, if an unforeseeable emergency exists, based on the facts of each case. For this purpose, “unforeseeable emergency” shall have the meaning as set forth under Code Section 409A.

SECTION IX

FUNDING STATUS

This Plan is unfunded. All obligations hereunder shall constitute an unsecured promise of the Company to pay a Participant’s benefit out of the general assets of the Company, subject to all of the terms and conditions of the Plan, as amended from time to time, and applicable law. A Participant shall have no greater right to benefits provided hereunder than that of any unsecured general creditor of the Company.

 

8


SECTION X

ADMINISTRATION

1. Powers and Responsibilities. The Plan shall be administered by the Committee which shall have the following powers and responsibilities.

(a) to construe the Plan, make factual determinations, decide all benefit requests made by a Participant or any other person, correct defects, and take any and all similar actions considered by the Committee to be necessary to administer the Plan, with any such determinations under or interpretations of the Plan made in good faith by the Committee to be final and conclusive for all purposes;

(b) determine the investment options which may be utilized under the Plan, including any default option to be utilized if a Participant makes no investment request;

(c) to designate a related company or business as a Participating Employer and to revoke such status if, in the Committee’s discretion, such action is in the best interest of the Company; and

(d) to take all other actions and do all other things which are considered by the Committee to be necessary to the administration of the Plan.

2. Actions Conclusive. The Committee shall have complete discretion in carrying out its powers and responsibilities under the Plan, and its exercise of discretion hereunder shall be final and conclusive.

3. Delegation. The Committee may, in writing, delegate some or all of its powers and responsibilities to any other person or entity.

4. Meetings. The Committee may hold meetings upon such notice, at such time or times, and at such place or places as it may determine. The majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business at all meetings and a majority vote of those present and constituting a quorum at any meeting shall be required for action. The Committee may also act by written consent of a majority of its members.

5. Rules of Administration. The Committee may adopt such rules for administration of the Plan as is considered desirable, provided they do not conflict with the Plan.

6. Agents. The Committee may retain such counsel, and actuarial, medical, accounting, clerical and other services as it may require to carry out the provisions and purposes of the Plan.

7. Reliance. The Committee shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any duly appointed auditor, or actuary, upon all certificates and reports made by any investment manager, or any duly appointed accountant, and upon all opinions given by any duly appointed legal counsel.

8. Liability and Indemnification. No member of the Committee shall be personally liable by virtue of any instrument executed by the member, or on the member’s behalf, as a member of the Committee. Neither the Company nor a Participating Employer, nor any of their respective officers or directors, nor any member of the Committee, shall be personally liable for any action or inaction with respect to any duty or responsibility imposed upon such person by the terms of the Plan except when the same is finally judicially determined to be due to the self dealing, willful misconduct or recklessness of such person. The Company shall indemnify and hold harmless its officers, directors, and those of any Participating Employer, and each member of the Committee against any and all claims, losses, damages, expenses (including attorneys’ fees and the advancement thereof), and liability (including, in each case, amounts paid in settlement), arising from any action or failure to act regarding the Plan, to the greatest extent permitted by applicable law. The foregoing right of indemnification shall be in addition to any other rights to which any such person may be entitled.

 

9


9. Conflict of Interest. If any Participant is a member of the Committee, he or she shall not participate as a member of the Committee in any determination under the Plan relating specifically to his or her Basic, Matching, or Company Retirement Deferrals.

SECTION XI

MODIFICATION AND TERMINATION

The Company reserves the right to terminate this Plan at any time or to modify, amend or suspend it from time to time, such right to include, without limitation, the right to distribute any and all Accrued Benefits following a termination of the Plan. Any such termination, modification, amendment or suspension shall be effective at such date as the Company may determine and may be effective as to all Participating Employers, or as to one or more Participating Employers, and their respective employees. The Company shall notify all affected Participants of any such termination, modification, amendment or suspension and, in appropriate circumstances as determined by the Company, shall also notify the relevant Participating Employers. A termination, modification, amendment or suspension may affect Participants generally, by class or individually, and may apply irrespective of whether they are past, current or future Participants; provided, however, that any such action may not eliminate or reduce the Accrued Benefit of any Participant as of the effective date of such action.

SECTION XII

GENERAL PROVISIONS

1. No Employment Right. Nothing contained herein shall be deemed to give any employee the right to be retained in the service of the Company or a Participating Employer, as applicable, or to interfere with the rights of any such employer to discharge any employee at any time.

2. Interest Not Assignable. It is a condition of this Plan, and all rights of each Participant shall be subject thereto, that no right or interest of any Participant under this Plan or in his or her credited Deferrals shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, subject, however, to applicable law, but excluding devolution by death or mental incompetency, and no right or interest of any Participant under this Plan or in his or her credited Deferrals shall be liable for or subject to any obligation or liability of such Participant, subject, however, to applicable law.

3. Taxes and Withholding. All Deferrals and payments under the Plan shall be subject to such taxes and other withholdings (federal, state or local) as may be due thereon, and the determination of the Committee as to withholding with respect to Deferrals and payments shall be binding upon the Participant and each Beneficiary.

4. Sale of Assets. The sale of all or substantially all of the assets of the Company, or a merger, consolidation or reorganization of the Company wherein the Company is not the surviving corporation, or any other transaction which, in effect, amounts to a sale of the Company or voting control thereof, shall not terminate this Plan or any related agreements and the obligations created hereunder or thereby and the same shall be binding upon the successors and assigns of the Company.

5. Legal Incapacity. If a Participant or Beneficiary entitled to receive any benefits hereunder is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, the benefits will be paid to such persons as the Committee designates or to the duly appointed guardian.

6. Governing Law. This Plan shall be governed by and construed in accordance with the laws of North Carolina, notwithstanding the conflict of law rules applicable therein.

 

10


7. Compliance with Code Section 409A. Notwithstanding any other provision of the Plan to the contrary, the Plan shall be administered in accordance with all applicable requirements of Code Section 409A and the regulations or guidance issued with regard thereto, and any distribution, acceleration or election feature that could result in the early inclusion in gross income shall be deemed restricted or limited to the extent necessary to avoid such result.

Pursuant to its authority under Section XI of the Plan, the Company, as evidenced by the signature of its authorized officer below, hereby establishes the Plan effective as of the Distribution Date for the stated purposes set forth herein and this Plan shall, on and after such effective date, be applicable to all Participating Employers and their respective employees until such time as the Company may, in its discretion, further amend or take any other authorized action with respect to the Plan.

KONTOOR BRANDS, INC.

 

 

 

11

EX-10.15 19 d618285dex1015.htm EX-10.15 EX-10.15

Exhibit 10.15

CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT made this                  day of                 , 2019 (the “Agreement”) by and between                  (the “Executive”) and KONTOOR BRANDS, INC., a North Carolina corporation (the “Corporation”).

BACKGROUND

The Board of Directors of the Corporation (the “Board”) considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Corporation and its shareholders. In this connection, the Corporation recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of certain members of the Corporation’s management, including the Executive, to their assigned duties without distraction in the face of the potentially disturbing circumstances that could arise from the possibility of a change in control of the Corporation.

In order to induce the Executive to remain in the employ of the Corporation, the Corporation wishes to provide the Executive with certain severance benefits in the event his employment with the Corporation terminates subsequent to a change in control of the Corporation under the circumstances described herein.

NOW THEREFORE, the parties hereto, intending to be legally bound, agree as follows:

1.    TERM. The term of this Agreement commences as of the date and year first above written and shall continue until the second anniversary of the date set forth above. The prior sentence notwithstanding, commencing on the first day after the second anniversary of the date set forth above and on the first day of each subsequent twelve-month period thereafter, the term of this Agreement shall automatically be extended for an additional twelve-month period beyond the then existing term. This Agreement shall terminate (except as set forth in the next sentence) if (a) the Corporation gives the Executive notice that it wishes to terminate this Agreement, in which case this Agreement shall terminate as of the date set forth in such notice or (b) the Executive’s employment with the Corporation is terminated for any reason, including transfer to a subsidiary company of the Corporation, in which case this Agreement shall terminate on the last day of the Executive’s employment with the Corporation; provided, however, that, if the Executive is transferred to a subsidiary company of the Corporation, the Corporation may waive the termination of this Agreement, by a written amendment of this Agreement, executed by both the Corporation and the Executive, which shall refer to this clause and shall be limited to the Executive’s transfer to the subsidiary company of the Corporation named in the amendment, unless another amendment is executed upon the Executive’s subsequent transfer to another subsidiary company of the Corporation. The Corporation may not give such notice and this Agreement shall not automatically terminate in the event the Executive’s employment with the Corporation terminates for any reason, including a transfer to a subsidiary company of the Corporation, (x) at any time while the Board of Directors of the Corporation has actual knowledge of an event or transaction that if consummated would constitute a “Change in Control” (as hereinafter defined) of the Corporation, unless or until the Board of Directors of the Corporation has determined, in its reasonable opinion, that the potential Change in Control has been abandoned and shall not be consummated, and the Board of Directors of the Corporation does not have actual knowledge of other events or transactions that if consummated would constitute a Change in Control of the Corporation or (y) within twenty-four months after the date a Change in Control occurs. It is understood that the Corporation may terminate the Executive’s employment at any time, subject to providing, if required to do so in accordance with the terms hereof, the severance benefits hereinafter specified.

 

1


2.    CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a Change in Control of the Corporation and the Executive’s employment by the Corporation shall thereafter have been terminated by the Corporation or by the Executive under the circumstances described in paragraph 3(iii) hereof.

1.    Definition. For purposes of this Agreement, “Change in Control” shall mean the first to occur of:

(A)    an individual, corporation, partnership, group, association or other entity or “person,” as such term is defined in Section 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (a “Person”), other than (i) the Corporation, (ii) those certain trustees under Deeds of Trust dated August 21, 1951 and under the Will of John E. Barbey, deceased (a “Trust” or the “Trusts”), and (iii) any employee benefit plan of the Corporation or any subsidiary company of the Corporation, or any entity holding voting securities of the Corporation for or pursuant to the terms of any such plan (a “Benefit Plan” or the “Benefit Plans”), or any employee benefit plan(s) sponsored by the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the Corporation’s outstanding securities ordinarily having the right to vote at elections of directors;

(B)    individuals who constitute the Board on the effective date of this Agreement (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any Approved Director, as hereinafter defined, shall be, for purposes of this subsection (B), considered as though such person were a member of the Incumbent Board. An “Approved Director,” for purposes of this subsection (B), shall mean any person becoming a director subsequent to the effective date of this Agreement whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee of the Corporation for director), but shall not include any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board; or

(C)    the approval by the shareholders of the Corporation of a plan or agreement providing for a merger or consolidation of the Corporation other than with a wholly-owned subsidiary and other than a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 65% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or for a sale, exchange or other disposition of all or substantially all of the assets of the Corporation.

2.    Exceptions. (A) Notwithstanding the foregoing, a Change in Control of the Corporation shall not be deemed to have occurred for purposes of this Agreement (I) in the event of a sale, exchange, transfer or other disposition of substantially all of the assets of the Corporation to, or a merger, consolidation or other reorganization involving the Corporation and the Executive, alone or with other officers of the Corporation, or any entity in which the Executive (alone or with other officers) has, directly or indirectly, at least a 5% equity or ownership interest or (II) in a transaction otherwise commonly referred to as a “management leveraged buy-out.”

(B) Clause 2(i)(A) above to the contrary notwithstanding, a Change in Control shall not be deemed to have occurred if a Person becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then outstanding securities solely as the result of an acquisition by the Corporation or any subsidiary company of the Corporation of voting securities of the Corporation which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% or more of the combined voting power of the Corporation’s then outstanding securities; provided, however, that if a Person becomes the beneficial owner of 20% or more of the combined voting power of the Corporation’s then outstanding securities by reason of share purchases by the Corporation or any subsidiary company of the Corporation and shall, after such share

 

2


purchases by the Corporation or a subsidiary company of the Corporation, become the beneficial owner, directly or indirectly, of any additional voting securities of the Corporation, then a Change in Control of the Corporation shall be deemed to have occurred with respect to such Person under clause 2(i)(A) above. Notwithstanding the foregoing, in no event shall a Change in Control of the Corporation be deemed to occur under clause 2(i)(A) above if the Person acquiring such shares is the Trusts or Benefit Plans.

(C) Clauses 2(i)(A) and 2(i)(B) to the contrary notwithstanding, the Board may, by resolution adopted by at least two thirds of the directors comprising the Incumbent Board, declare that a Change in Control described in clauses 2(i)(A)(a) or 2(i)(B) has become ineffective for purposes of this Agreement if all of the following conditions then exist: (I) the declaration is made prior to the death or termination of employment of the Executive and within 120 days following the Change in Control; and (II) no Person, except for (x) the Trusts, and (y) the Benefit Plans, either is the beneficial owner, directly or indirectly, of securities of the Corporation representing 10% or more of the combined voting power of the Corporation’s outstanding securities or has the ability or power to vote securities representing 10% or more of the combined voting power of the Corporation’s then outstanding securities. If such a declaration shall be properly made, no benefits shall be payable hereunder as a result of such prior but now ineffective Change in Control, but benefits shall remain payable and this Agreement shall remain enforceable as a result of any other Change in Control unless it is similarly declared to be ineffective.

3.    TERMINATION FOLLOWING CHANGE IN CONTROL. The Executive shall be entitled to the severance benefits provided in Section 4 hereof if his employment is terminated within the 24-month period following a Change in Control of the Corporation (even if such 24-month period shall extend beyond the term of this Agreement or any extension thereof) unless his termination is (x) because of his death, (y) by the Corporation for Cause or due to the Executive’s Disability or (z) by the Executive other than for Good Reason.

(i)  Disability. The Corporation may terminate the Executive’s employment due to the Executive’s “Disability” if, as a result of the Executive’s incapacity due to physical or mental illness, he shall have been absent from his duties with the Corporation on a full-time basis for 26 consecutive weeks, and within 30 days after written notice of termination is given he shall not have returned to the full-time performance of his duties.

(ii)  Cause. The Corporation may terminate the Executive’s employment for Cause. For the purpose of this Agreement, the Corporation shall have “Cause” to terminate the Executive’s employment hereunder upon (A) the willful and continued refusal by the Executive substantially to perform his duties with the Corporation (other than any such refusal resulting from his incapacity due to physical or mental illness), after a demand for substantial performance is delivered to the Executive by the Board which provides reasonable detail of the manner in which the Board believes that the Executive has refused substantially to perform his duties or (B) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Corporation. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Corporation. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire members of the Board, at a meeting of the Board called and held for that purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth above in clauses (A) or (B) of the second sentence of this paragraph and specifying the particulars thereof in detail.

 

3


(iii) Good Reason. The Executive shall be entitled to terminate his employment, and receive benefits hereunder, for Good Reason at any time within 24 months after the date of a Change in Control of the Corporation. For purposes of this Agreement, “Good Reason” shall mean, unless the Executive shall have consented in writing thereto, any of the following:

(A)    a material reduction in the Executive’s authority or responsibilities, as compared to his authority or responsibilities immediately prior to the Change in Control or as the same may be increased after the Change in Control;

(B)    a material diminution in the budget for which the Executive is responsible;

(C)    a material reduction by the Corporation in the Executive’s compensation as in effect immediately prior to the Change in Control or as the same may be increased after the Change in Control;

(D)    a material change in the geographic location where the Executive is to provide services; or

(E)    a material breach of this Agreement on the part of the Corporation.

(iv) Notice of Termination. Any termination by the Corporation pursuant to paragraph 3(i) or 3(ii) hereof, or otherwise, or by the Executive pursuant to paragraph 3(iii) hereof, which, in any case, occurs within 24 months after a Change in Control of the Corporation, shall be communicated by written Notice of Termination (as hereinafter defined) to the other party hereto; provided that, in the case of a termination for Cause, there shall also have been delivered to the Executive the resolution required to be delivered pursuant to paragraph 3(ii) hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. In the case of termination by the Executive for Good Reason pursuant to paragraph 3(iii) hereof, the Executive must provide written Notice of Termination to the Corporation within 90 days of the event constituting Good Reason, the Corporation shall then have 30 days from its receipt of the Notice of Termination to remedy the facts and circumstances claimed to provide the basis for termination of the Executive’s employment for Good Reason, and the Executive shall not be deemed to have terminated employment for Good Reason unless and until the Corporation fails to remedy such circumstances during the 30 days following its receipt of the Notice of Termination.

(v) Date of Termination. “Date of Termination” shall mean (A) if this Agreement is terminated for Disability, the 31st day after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during the 30-day period preceding such 31st day), (B) if the Executive’s employment is terminated pursuant to paragraph 3(ii) above, the date specified in the Notice of Termination, and (C) if the Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given, or, if the Corporation terminates the Executive’s employment without giving a Notice of Termination, the date on which such termination is effective.

 

  4.    COMPENSATION

UPON TERMINATION OR DURING DISABILITY.

(i)    During any period in which the Executive fails to perform his duties as a result of incapacity due to physical or mental illness, he shall continue to receive his full base salary at the rate then in effect until his employment is terminated pursuant to paragraph 3(i) hereof. Thereafter, his benefits, if any, shall be determined in accordance with whatever disability income insurance plan or plans the Corporation may then have in effect; provided, however, that, if at the time Disability of the Executive is established the disability benefits then available are less advantageous to the Executive than the disability benefits which were available on the date the Change in Control became effective, then his termination of employment by the Corporation shall be deemed to have occurred as a voluntary termination for Good Reason under paragraph 3(iii) hereof and not by reason of Disability, and the provisions of paragraph 4(iii) hereof shall apply in lieu of the provisions of this paragraph 4(i).

 

4


(ii)    If the Executive’s employment shall be terminated for Cause or if the Executive’s employment is terminated by the Executive without Good Reason, the Corporation shall pay to him his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Corporation shall have no further obligations to the Executive under this Agreement.

(iii)    If the Corporation shall terminate the Executive’s employment other than pursuant to paragraph 3(i) or 3(ii) hereof within 24 months after a Change in Control of the Corporation, or if the Executive shall terminate his employment for Good Reason pursuant to paragraph 3(iii) hereof within 24 months after a Change in Control, then:

(A)    The Corporation shall pay to the Executive, not later than thirty (30) days following the Date of Termination, the Executive’s accrued but unpaid base salary through the Date of Termination, plus compensation for current and carried-over unused vacation and compensation days in accordance with the Corporation’s personnel policy, and reimbursement for all reasonable business expenses in accordance with the Corporation’s business expense policy.

(B)    In lieu of any further payments of salary to the Executive after the Date of Termination the Corporation shall pay to the Executive, not later than thirty (30) days following the Date of Termination and notwithstanding any dispute between the Executive and the Corporation as to the payment to the Executive of any other amounts under this Agreement or otherwise, a lump sum severance payment (the “Severance Payment”) equal to 2.99 times an amount equal to the sum of (1) the greater of the Executive’s highest annual base salary in effect at any time within the twelve-month period preceding a Change in Control or the Date of Termination, and (2) the greater of (I) the Target Incentive Award or Target Amount to which the Executive would have been entitled under the Corporation’s Executive Incentive Compensation Plan (the “EICP”) or Annual Discretionary Management Incentive Compensation Plan (the “ADMICP”), as applicable, and the base or target amount to which the Executive would have been entitled under any other annual cash bonus program of the Corporation, had he been employed by the Corporation at the end of the fiscal year in which the Date of Termination occurs, or (II) the highest amount awarded to the Executive under the EICP or ADMICP and under any other annual cash bonus program of the Corporation during the last three fiscal years prior to the Date of Termination.

(C)    In addition to the foregoing amounts payable under paragraph 4(iii)(A) and (B) above, the Executive will be entitled to the following:

(i)    a pro rata bonus for the year of termination equal to the Target Incentive Award or Target Amount under the EICP or ADMICP, as applicable, multiplied by a fraction, the numerator of which is the number of calendar days that have elapsed from the beginning of the fiscal year in which such termination occurs through the Date of Termination, and the denominator of which is the number of calendar days in the fiscal year, payable not later than thirty (30) days following the Date of Termination;

(ii)    any stock option rights held by the Executive which were not fully exercisable on the Date of Termination shall immediately become fully exercisable by the Executive and any restricted stock rights held by the Executive which were not fully vested on the Date of Termination shall immediately become fully vested;

(iii)    the Corporation shall maintain in full force and effect, for the Executive’s continued benefit, until the earlier of (I) 36 months after the Date of Termination or (II) the Executive’s 65th birthday, all life, medical and dental insurance programs in which the Executive was entitled to participate immediately prior to the Date of Termination; provided that his continued participation is possible under the general terms and provisions of such programs; provided, further, that, in the event the Executive’s participation in any such program is barred, the Corporation shall arrange to provide the Executive with benefits substantially similar to those which he was entitled to receive under such programs;

 

5


(iv)    in addition to the benefits to which the Executive is entitled under the Corporation’s retirement plans in which he participates or any successor plans or programs in effect on the Date of Termination, the Corporation shall pay to the Executive in one lump sum in cash, an amount equal to the actuarial equivalent of the retirement pension to which the Executive would have been entitled under the terms of such retirement plan or programs had he accumulated 36 additional months of continuous service after the Date of Termination (or, if less, the number of months between the Date of Termination and the date on which the Executive attains normal retirement age under the plan) at his base salary rate in effect on the Date of Termination reduced by the single sum actuarial equivalent of any amounts to which the Executive is entitled pursuant to the provisions of said retirement plans and programs, discounted to reflect its then present value, paid at the same time as the Severance Payment; provided that, for purposes of this subparagraph (3), the actuarial equivalents shall be determined, and all other calculations shall be made, using the same methods and assumptions utilized under the Corporation’s retirement plan or programs; provided, however, that such methods and assumptions shall be no less favorable to the Executive than those in effect on the date of the Change in Control; and

(v)    If a Change of Control occurs and Executive becomes entitled to compensation under this Paragraph that would be subject to the excise tax imposed under Section 4999 of the Code, the Company shall reduce its payment of Separation Benefits to the Participant to $1.00 less than that amount which would trigger the excise tax if such reduction would result in the Participant receiving an equal or greater after-tax benefit than the Participant would receive if the full Separation Benefits were paid.

(vi)    The Executive’s right to receive payments under this Agreement shall not decrease the amount of, or otherwise adversely affect, any other benefits payable to the Executive under any plan, agreement or arrangement relating to employee benefits provided by the Corporation.

(vii)    The Executive shall not be required to mitigate the amount of any payment provided for in this paragraph 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this paragraph 4 be reduced by any compensation earned by the Executive as the result of employment by another employer or by reason of the Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.

(viii)    The Corporation may, but shall not be obligated to, provide security for payment of the amounts set forth in this Agreement in a form that will cause such amounts to be includible in the Executive’s gross income only for the taxable year or years in which such amounts are paid to the Executive under the terms of this Agreement. The form of security may include a funded irrevocable grantor trust established so as to satisfy any published Internal Revenue Service guidelines.

(ix)    The Corporation may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

5.    FEES AND EXPENSES. The Corporation shall pay all reasonable legal fees and related expenses (including the costs of experts, evidence and counsel and other such expenses included in connection with any litigation or appeal) incurred by the Executive as a result of (i) his termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) or (ii) his seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Corporation under which he is or may be entitled to receive benefits. The Corporation further agrees to pay prejudgment interest on any money judgment against the Corporation obtained by the Executive in any arbitration or litigation against it to enforce such rights calculated at the prime interest rate of Wachovia Bank, N.A., or its successor, in effect from time to time from the date it is determined that payment(s) to him should have been made under this Agreement. In order to comply with Section 409A of the Code, (i) in no event shall the payments by the Corporation under this paragraph 5 be made later than the end of the calendar year next

 

6


following the calendar year in which such fees and expenses were incurred; provided that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred, (ii) the amount of such legal fees and expenses that the Corporation is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Corporation is obligated to pay in any other calendar year, (iii) the Executive’s right to have the Corporation pay such legal fees and expenses may not be liquidated or exchanged for any other benefit and (iv) the fees and expenses described herein shall be reimbursed until the 5th anniversary of the Change in Control.

 

  6.    SUCCESSORS;

BINDING AGREEMENT.

(i)    This Agreement shall inure to the benefit of and be binding on any successor to all or substantially all of the Corporation’s business and/or assets.

(ii)    This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there be no such designee, to his estate.

7.    NOTICES. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed in the case of the Executive, to [—] and in the case of the Corporation, to its principal executive offices, provided that all notices to the Corporation shall be directed to the attention of its Chief Executive Officer with copies to the Secretary of the Corporation and to the Board, or to such other address as either 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.

8.    MISCELLANEOUS. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and a duly authorized officer of the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall not be assigned in whole or in part without the prior written consent of the non-assigning party; provided, however, this sentence shall not be construed to relieve the Corporation or any successor (whether direct or indirect) from liability hereunder as provided in paragraph 6. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws (but not the law of conflicts of laws) of the State of North Carolina. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms.

9.    VALIDITY. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

10.  SECTION 409A. The Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and shall in all respects be administered in accordance with Section 409A of the Code. Any payments made under this Agreement upon a “termination,” “resignation,” or similar term shall only be made upon a “separation from service” under Section 409A. Additionally, any payments or benefits provided under this Agreement shall be treated as separate payments for purposes of Section 409A of the Code. Notwithstanding any provision to the contrary in the Agreement, if the Executive is deemed at the time of his separation from service to be a “specified employee” for purposes of

 

7


Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination benefits shall not be provided to Executive prior to the earlier of (a) the expiration of the six-month period measured from the date of the Executive’s “separation from service” (as such term is defined in the Treasury Regulations issued under Section 409A of the Code) with the Corporation or (b) the date of the Executive’s death (the “Delayed Payment Date”). Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period (including, without limitation, upon the Delayed Payment Date, where applicable), all payments deferred pursuant to this paragraph 10 shall be paid in a lump sum and any remaining payments due under the Agreement shall be paid as otherwise provided herein.

 

8


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

 

Witness:      EXECUTIVE

 

    

 

 

Attest:      KONTOOR BRANDS, INC.

 

     By:
[ – ]      [ – ]
Chief Human Resources Officer      [Chairman]

 

9

EX-10.16 20 d618285dex1016.htm EX-10.16 EX-10.16

Exhibit 10.16

KONTOOR BRANDS, INC. MANAGEMENT INCENTIVE COMPENSATION PLAN

                    , 2019

I. INTRODUCTION

The objective of the Management Incentive Compensation Plan (as amended from time to time, the “Plan”) is to provide incentive bonus compensation to selected members of the management team of Kontoor Brands, Inc. (the “Company”) upon the achievement of performance goals established for the Company or respective business unit for each fiscal year. The Plan is intended to provide an additional means to attract and retain talented executives, and to link a significant element of each participant’s compensation opportunity to measures of the Company’s or respective business unit’s performance, in order to motivate the Company’s management team toward an even greater contribution to the results of the Company.

II. DEFINITIONS

A. COMPENSATION COMMITTEE — The Talent and Compensation Committee of the Board of Directors of the Company, the composition and processes of which are governed by the Compensation Committee’s Charter.

B. PARTICIPANT — An employee of the Company or a business unit who has been designated as a member of the management team of the Company and selected for participation in a given Plan Period by the Company.

C. PERFORMANCE OBJECTIVE — The performance objective or objectives established by the Compensation Committee for each Plan Period, which must be reached as a condition to the earning and payment of an Incentive Award for that Plan Period. The Performance Objective shall be comprised of specified corporate, business group or divisional levels of performance relating to one or more of the following performance criteria: earnings per share; net earnings or net income; pretax earnings; profit before taxes; operating income; net sales or net revenues; net sales or net revenues from existing businesses; net sales or net revenues from acquired businesses, market share; balance sheet measurements; cash flow; cash return on assets; return on capital; book value; shareholder return, or return on average common equity; or such other measurements as the Compensation Committee may establish, including individual performance goals.

D. PLAN PERIOD — The Company’s fiscal year, provided, however, that the Compensation Committee may specify a different Plan Period to meet unusual circumstances.

E. RETIREMENT — Employment separation from the Company or any of its business units after attaining age 55 and at least 10 years of service with the Company and/or any of its business units.

F. BUSINESS UNIT — Any majority-owned business organization of the Company or its direct or indirect subsidiaries, including but not limited to corporations, limited liability companies, partnerships, and any “subsidiary corporation” as defined in Section 424(f) of the Internal Revenue Code (the “Code”) that is a subsidiary of the Company.

G. TARGET INCENTIVE AWARD — The target incentive bonus established by the Company for a Participant for a Plan Period.

 

1


III. OPERATION OF THE PLAN

A. ESTABLISHMENT OF TARGET INCENTIVE AWARDS AND PERFORMANCE OBJECTIVES — The Company will establish in writing a Target Incentive Award for each Participant for the Plan Period. The Compensation Committee will establish the Performance Objectives and a range of values for the Performance Objectives for the Plan Period, with each such value corresponding to a percentage of the Target Incentive Award that may be earned for achievement of the Performance Objectives (the “Incentive Awards”). For example, the Compensation Committee may establish a threshold level of achievement of each Performance Objective which, if not attained, will result in no Incentive Award, and the Committee may likewise establish a “stretch” level of achievement of each Performance Objective which, if attained, will result in an Incentive Award greater than 100% of the Target Incentive Award. In establishing the level of Performance Objectives to be attained and in determining the actual level of achievement of each Performance Objective, the Compensation Committee may disregard or offset the effect of such factors as extraordinary and/or nonrecurring items, changes in accounting standards or tax laws, differences between actual foreign currency exchange rates during a Plan Period and the foreign currency exchange rates assumed in the Company’s financial plan for the Plan Period as presented to the Board of Directors and the Compensation Committee, the Company’s consolidation entries directly impacting the business units and other unusual items or circumstances approved by the Compensation Committee and/or Board.

B. CALCULATION OF INCENTIVE AWARDS — Incentive Awards will be paid to each Participant by reference to the actual attainment of the Performance Objectives, as determined in accordance with Section III.A above, relative to the Performance Objective levels established by the Compensation Committee for the Plan Period. The Company may exercise discretion to increase or decrease, the amount of the Incentive Award paid to any Participant based on the Company’s assessment of the individual’s performance or other considerations deemed relevant by the Company, provided that, in the case of Participant who is an executive officer, any such discretion must be exercised by the Compensation Committee.

C. APPROVAL OF AGGREGATE INCENTIVE AWARDS — The aggregate amount of all Incentive Awards paid for any Plan Period shall be subject to approval of the Compensation Committee and the Board of Directors.

D. PAYMENT OF INCENTIVE AWARDS — Payment of Incentive Awards for a Plan Period will be made within thirty days following the Compensation Committee’s certification in writing as to the level of Performance Objective attained for the Plan Period (but not later than seventy-five days following the end of the Plan Period), except to the extent (i) the Committee has specified that Incentive Awards will be paid on a deferred basis or subject to additional conditions to payment, or (ii) payment has been deferred by the Participant pursuant to any Company deferred compensation plan then in effect. Deferrals under such plans shall be mandated or permitted at the election of the Participant only in compliance with Code Section 409A. The specific rules applicable to the timing of deferral elections and the permitted distribution dates for deferrals are incorporated by reference in this Plan from the 2019 Stock Compensation Plan, as amended from time to time.

IV. CONTINGENCIES

A. EMPLOYMENT TERMINATION — Except as provided in Sections IV.B, IV.C and IV.E regarding permanent disability, death and Retirement, or unless the Company exercises its discretion under Section IV.D, a Participant who terminates employment voluntarily or who is terminated involuntarily prior to his or her receipt of an Incentive Award payment under this Plan forfeits all such payments, except as provided under the terms of any required or permitted deferral of such payments. A Participant who is employed by the Company at the end of a Plan Period shall not be deemed or considered, solely for that reason, to have accrued any right to or vested in an Incentive Award for the Plan Period.

B. PERMANENT DISABILITY — A Participant whose employment with the Company is terminated by reason of permanent disability is eligible to earn an Incentive Award for the Plan Period in which he or she becomes permanently disabled. The Incentive Award payment will be calculated as if employment had continued

 

2


throughout the Plan Period based on actual performance for the Plan Period (and subject to the Company’s right under Section III.B to exercise discretion); but, unless otherwise determined by the Company, the amount of the Incentive Award payable will be prorated according to the Participant’s actual length of active service during the Plan Period.

C. DEATH — The estate of a Participant whose employment with the Company is terminated by reason of death during a Plan Period is eligible to earn an Incentive Award for the Plan Period in which death occurs. The Incentive Award payment will be calculated as if employment had continued throughout the Plan Period based on actual performance for the Plan Period (and subject to the Company’s right under Section III.B to exercise discretion), but, unless otherwise determined by the Company, the amount of the Incentive Award payable will be prorated according to the Participant’s actual length of active service during the Plan Period.

D. COMPANY DISCRETION — The Company may determine that a terminated employee who had been a Plan Participant for part or all of the Plan Period will be eligible to earn an Incentive Award for the Plan Period if, in the Company’s judgment, the earning and payment of such Incentive Award would be in the best interest of the Company. Subject to the Company’s discretion under Section III.B above, any such Incentive Award payment will be calculated as if employment had continued throughout the Plan Period based on actual performance for the Plan Period, but, unless otherwise determined by the Company, payment of the Incentive Award will be prorated according to the Participant’s actual length of active service during the Plan Period. In the case of a Participant who is an executive officer, any determination or discretion under this Section IV (including the other subsections of this Section IV) must be made or exercised by the Compensation Committee.

E. RETIREMENT — A Participant whose Retirement occurs prior to the distribution of an Incentive Award for a Plan Period remains eligible to earn an Incentive Award for the Plan Period. At the Company’s discretion, the Incentive Award payment may be calculated as if Retirement had not occurred based on actual performance for the relevant Plan Period (and subject to the Company’s right under Section III.B to exercise discretion), but, unless otherwise determined by the Company, with payment prorated according to the Participant’s actual length of active service during the Plan Period.

F. TIMING RULE IN CASE OF AWARDS MADE FOLLOWING TERMINATION — Incentive Awards payable to a Participant (or his or her estate) following termination of employment shall be paid at the time other Incentive Awards are payable to continuing employee Participants in respect of the relevant Plan Period, but in any event by the            following the end of the Plan Period. If the Participant’s rights relating to an Incentive Award cause it to be a deferral of compensation under Code Section 409A, no acceleration of the time of payment will be permitted to the extent necessary to comply with applicable rules under Code Section 409A.

G. ADDITIONAL FORFEITURE CONDITION — Incentive Awards shall be subject to the Company’s “Forfeiture Policy For Equity and Incentive Awards In the Event of Restatement of Financial Results” or, if later modified or replaced by a similar policy (regardless of the title of such policy), as in effect thereafter at the time the Participant’s Incentive Award was authorized for any such Plan Period. Such Policy imposes conditions on a Participant’s right to receive payments under an Incentive Award and right to retain previous payments in settlement of an Incentive Award (a so-called “clawback”) in certain circumstances if the Company’s financial statements are required to be restated and in other specified circumstances.

V. ADMINISTRATION

The Compensation Committee shall have the authority and responsibility for all aspects of administration of the Plan, including but not limited to:

A. Interpretation of the Plan.

B. Establishment of the Performance Objectives and related terms under Section III. A. for each Plan Period.

 

3


C. Certification in writing as to the level of each Performance Objective attained for each Plan Period, and that other material terms upon which payment of Incentive Awards was conditioned have been satisfied.

D. Final approval of aggregate payments to Participants.

The Compensation Committee may delegate to specified officers or employees of the Company authority to perform ministerial functions under the Plan. In furtherance of this authority, unless otherwise limited by further action of the Compensation Committee, the Committee has delegated to the Chief Executive Officer and the Vice President — Human Resources the authority (unless such authority is specifically reserved to the Committee hereunder) to take actions under the Plan on behalf of the Company relating to Participants who are not executive officers, including the selection of Participants who are not executive officers and the establishment of Target Incentive Awards for each such Participant under Section III.A.

VI. AMENDMENT AND TERMINATION

The Compensation Committee shall have the power to amend, modify, suspend or terminate any part of the Plan at any time; provided, however, that any such change to the Plan that is beyond the authority of the Compensation Committee delegated by the Board of Directors shall be subject to the approval of the Board of Directors of the Company.

VII. GENERAL PROVISIONS

A. NO RIGHT TO EMPLOYMENT — Eligibility to receive an Incentive Award or the grant or payment of an Incentive Award shall not be construed as giving a Participant the right to be retained in the employ of the Company, nor will it affect in any way the right of the Company to terminate such employment at any time, with or without cause. In addition, the Company may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan.

B. NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS — Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

C. TAX WITHHOLDING — The Company will deduct from any Incentive Award or other payment to a Participant any Federal, state, or local withholding or other tax or charge which the Company is then required to deduct under applicable law.

D. NON-TRANSFERABILITY— The opportunity to earn an Incentive Award, any resulting Incentive Award, and any other purported right hereunder, shall be non-assignable and non-transferable, and shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, hypothecation or garnishment by a Participant’s creditors or to or in favor of any party other than the Company or a subsidiary or subject to any lien, obligation, or liability of the Participant to any party other than the Company or a subsidiary.

E. GOVERNING LAW — The validity, construction and effect of the Plan or any Incentive Award hereunder shall be determined in accordance with the laws of the State of North Carolina, without giving effect to principles of conflicts of laws.

F. SEVERABILITY — If any provision of the Plan or any Incentive Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Incentive Award under any law deemed applicable by the Compensation Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Compensation Committee, materially altering the purpose or intent of the Plan or the Incentive Award, such provision shall be stricken as to such jurisdiction or Incentive Award, and the remainder of the Plan or any such Incentive Award shall remain in full force and effect.

 

4


G. NO TRUST OR FUND CREATED — Neither the Plan nor any Incentive 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 Participant or other person acquires a right to receive payments from the Company pursuant to the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

H. HEADINGS — Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

 

5

EX-10.17 21 d618285dex1017.htm EX-10.17 EX-10.17

Exhibit 10.17

KONTOOR BRANDS

DEFERRED SAVINGS PLAN FOR NON-EMPLOYEE DIRECTORS

VF Corporation has maintained the VF Deferred Savings Plan for Non-Employee Directors for the benefit of eligible non-employee members of the VF Corporation Board of Directors. VF Corporation has determined to separate its Jeanswear business into one or more newly formed legal entities (the “Jeanswear Group”), and in connection therewith, VF Corporation intends to distribute to its shareholders all of the stock of a newly formed company (“Kontoor Brands, Inc.”) that will be the parent holding company for the Jeanswear Group (the “Distribution”). In connection with the Distribution, Kontoor Brands, Inc. shall adopt this Kontoor Brands Deferred Savings Plan for Non-Employee Directors (the “Plan”) to provide benefits for the eligible non-employee members of the Kontoor Brands, Inc. Board of Directors. This Plan shall be effective at and as of the date of consummation of the Distribution (the “Distribution Date”). In the event that the Distribution does not occur, this Plan shall be void and of no force and effect.

The Plan permits non-employee members of the Kontoor Brands, Inc. (the “Company”) Board of Directors to elect to defer receipt of all or any portion of the compensation payable to them for services rendered to the Company.

The intention of the Company is that the Plan at all times be maintained on an unfunded basis for federal income tax purposes under the Internal Revenue Code of 1986, as amended (“Code”), exempt from the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and operated in accordance with the requirements of Section 409A of the Code.

NOW, THEREFORE, the Plan is hereby adopted, effective as of the Distribution Date subject to the requirements in the first paragraph, to read as follows:

SECTION I

DEFINITIONS

Unless otherwise required by the context, the terms used herein shall have the meanings as set forth below:

1. “Accrued Benefit” means the sum of a Participant’s Deferrals (and any gains and losses credited thereon).

2. “Beneficiary” means the individual or entity named pursuant to the Plan to receive benefit payments hereunder in the event of the death of the Participant.

3. “Change of Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder.

4. “Committee” means the Kontoor Brands, Inc. Retirement Plans Committee, as appointed from time to time by the Vice President — Chief Human Resources Officer of the Company.

5. “Company” means Kontoor Brands, Inc., a North Carolina corporation.

6. “Compensation” means the fees payable by the Company in cash to a Participant for services rendered as a Director, including the annual base retainer and attendance fees for board and committee meetings.

7. “Deferral” means that portion of a Participant’s Compensation elected to be deferred hereunder.

8. “Director” means a member of the Board of Directors of the Company.


9. “Participant” means a Director who is not employed by the Company or any of its subsidiaries or affiliates.

10. “Plan” means the Kontoor Brands Deferred Savings Plan for Non-Employee Directors, as it may be amended and/or restated from time to time.

11. “Plan Year” means the calendar year.

12. “Severance from Service” means the date on which a Participant ceases to be a Director of the Company.

13. “Spouse” means the person to whom the Participant is legally married.

SECTION II

ELIGIBILITY

1. A Director shall be eligible to make Deferral elections under this Plan as long as he or she (a) remains a Director of the Company and (b) is not concurrently employed by the Company or any of its subsidiaries or affiliates.

2. Participation in this Plan is voluntary.

SECTION III

DEFERRALS

1. Election. A Participant may elect to defer up to 100% of his or her Compensation for a Plan Year by directing the Company to reduce his or her Compensation for the Plan Year by a whole percentage or amount authorized by an election executed by the Participant and filed with and approved by the Committee. Such Deferral election shall be made on or before December 31 of the calendar year preceding the Plan Year to which the election relates. Notwithstanding the foregoing, a new Participant may elect to defer up to 100% of the Compensation that he or she would otherwise be entitled to receive in the Plan Year in which the Director’s election as a member of the Company’s Board of Directors becomes effective, beginning with Compensation earned following the filing of a Deferral election with the Committee and before the close of such Plan Year, by executing and filing a Deferral election with the Committee within thirty (30) days of the effective date of such Director’s election. A Participant’s Deferral election for a Plan Year is irrevocable.

2. Non-Deferred Compensation. Any Compensation not deferred under this Plan shall be paid in accordance with normal Company policy.

3. Vesting. A Participant shall have a fully vested and nonforfeitable right to his or her Deferrals and any credited gains or losses attributable thereto.

4. Separate Election for Each Plan Year. A separate Deferral election shall be made for each Plan Year for which a Participant desires to defer all or any portion of his or her Compensation for such Plan Year. The failure of a Participant to make a Deferral election for any Plan Year shall not affect such Participant’s right to make a Deferral election for any other Plan Year.

5. Election of Form of Payment. At the time that a Participant makes a Deferral election with respect to a Plan Year, the Participant shall designate the form in which such Deferral (and any gains and losses credited thereon) shall be distributed, in accordance with Section VII. All Deferral elections filed by Participants must

 

  -2-  


provide for distribution to be made in a form that is consistent with the distribution options made available under the Plan and permitted under applicable law, including, without limitation, Section 409A of the Code. A Participant’s election with respect to the form of payment of his or her Deferral for a Plan Year may not be changed, except as expressly provided for in this Plan or permitted under applicable law, including, without limitation, Section 409A of the Code.

SECTION IV

INVESTMENT

A Participant’s Deferrals shall be credited with gains and losses as if such Deferrals had been invested in a hypothetical fund which invests in common stock of the Company, purchased on the open market at the then prevailing price on the New York Stock Exchange on the date of purchase.

SECTION V

RECORDS

The Committee shall create and maintain adequate records, in book entry form, for each Participant of Deferrals and credited gains or losses attributable thereto. Each Participant shall be informed of the status of his or her Accrued Benefit at least quarterly.

SECTION VI

PLAN BENEFITS

1. Severance from Service. Upon a Participant’s Severance from Service, he or she shall be entitled to his or her Accrued Benefit payable in accordance with Section VII.

2. Death. In the event of the death of a Participant prior to Severance from Service, the Participant’s Beneficiary shall be entitled to a benefit equal to the Participant’s Accrued Benefit, payable in accordance with Section VII.

3. Beneficiary. Each Participant should designate a Beneficiary (along with alternate beneficiaries) to whom, in the event of the Participant’s death, any benefit is payable hereunder. Each Participant has the right to change any designation of Beneficiary and such change automatically revokes any prior designation. A designation or change of Beneficiary must be in writing on forms supplied by the Committee and any change of Beneficiary will not become effective until filed with the Committee; provided, however, that the Committee shall not recognize the validity of any designation received after the death of the Participant. The interest of any Beneficiary who dies before the Participant will terminate unless otherwise provided. If a Beneficiary is not validly designated, or is not living or cannot be found at the date of payment, any amount payable pursuant to this Plan will be paid to the Spouse of the Participant if living at the time of payment, otherwise in equal shares to such of the children of the Participant as may be living at the time of payment; provided, however, that if there is no surviving Spouse or child at the time of payment, such payment will be made to the estate of the Participant.

SECTION VII

PAYMENT OF BENEFITS

1. Benefits Subject to Code Section 409A. The Participant’s Deferral (and any gains and losses credited thereon) for a Plan Year shall be distributed in cash in either (a) a lump-sum payment or (b) substantially

 

  -3-  


equal annual installments over up to ten (10) years, as elected by the Participant in his or her Deferral election for such Plan Year. The payment to the Participant shall be made or commence, as applicable, within ninety (90) days after the Participant’s Severance from Service; provided, however, that in the case of a Participant who is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, payment of such Participant’s Accrued Benefit shall not be made or commence until the date which is six (6) months after the date of the Participant’s Severance from Service (or, if earlier, the date of death of the Participant). If a Participant dies prior to Severance from Service, his or her Beneficiary shall, within ninety (90) days after the Participant’s death, receive the Participant’s Accrued Benefit in a lump-sum payment in cash. In the event the Participant fails to make a valid election of the form of payment, the distribution will be made in a lump-sum payment in cash.

2. Limited Cash outs. Notwithstanding any Deferral election made by the Participant or the foregoing provisions of this Section VII, the Participant’s Accrued Benefit will be distributed in a lump-sum payment in cash, if the amount of such Accrued Benefit on the date that payment is to commence does not exceed the maximum amount permitted to be automatically distributed under the regulations promulgated under Section 409A of the Code, with such payment made on or before the later of (i) December 31 of the calendar year in which the Participant’s Severance from Service occurs, or (ii) the 15th day of the third month following the Participant’s Severance from Service.

3. Acceleration Prohibited. The acceleration of the time or schedule of any payment due under Section VII.1 of the Plan is prohibited, except as provided in regulations under Section 409A of the Code. To the extent permitted by the regulations under Section 409A of the Code, distribution of a Participant’s Accrued Benefit may be made at any time the Plan fails the requirements of Section 409A and the regulations thereunder, with such payment not to exceed the amount required to be included in the Participant’s income as a result of the failure.

4. Compliance with Section 409A. Notwithstanding the foregoing provisions of this Section VII, the portion of any Accrued Benefit (or the entire Accrued Benefit, if applicable) shall be paid at such time and in such form as shall not violate the requirements of Section 409A of the Code, including, without limitation, the restriction in Section 409A(a)(2)(B)(i) on the timing of distributions following the Severance from Service of a Participant who is a “specified employee”.

SECTION VIII

FUNDING STATUS

This Plan is unfunded. All obligations hereunder shall constitute an unsecured promise of the Company to pay a Participant’s benefit out of the general assets of the Company, subject to all of the terms and conditions of the Plan, as amended from time to time, and applicable law. A Participant hereunder shall have no greater right to benefits provided hereunder than that of any unsecured general creditor of the Company.

SECTION IX

ADMINISTRATION

1. The Plan shall be administered by the Committee, which shall have the following powers and responsibilities.

 

  (a)

to construe the Plan, make factual determinations, consider requests made by Participants, correct defects, and take any and all similar actions to the extent necessary to administer the Plan, with any instructions or interpretations of the Plan made in good faith by the Committee to be final and conclusive for all purposes;

 

  (b)

to prepare periodic administration reports to the Board of Directors which will show, in reasonable detail, the administrative operations of the Plan; and

 

  -4-  


  (c)

to take all other actions and do all other things which are reasonable and necessary to the proper administration of the Plan.

2. The Committee shall have complete discretion in carrying out its powers and responsibilities under the Plan, and its exercise of discretion hereunder shall be final and conclusive.

3. The Committee may, in writing, delegate some or all of its powers and responsibilities to any other person or entity.

4. The Committee may hold meetings upon such notice, at such time or times, and at such place or places as it may determine. The majority of the members of the Committee at the time in office will constitute a quorum for the transaction of business at all meetings and a majority vote of those present and constituting a quorum at any meeting will be required for action. The Committee may also act by written consent of a majority of its members.

5. The Committee may adopt such rules for administration of the Plan as is considered desirable, provided they do not conflict with the Plan. Records of administration of the Plan will be kept, and Participants and their Beneficiaries may examine records pertaining directly to themselves.

6. The Committee may retain such counsel, and actuarial, accounting, clerical and other services as they may require to carry out the provisions and purposes of the Plan.

7. The Committee shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any duly appointed auditor or actuary, upon all certificates and reports made by any investment manager or any duly appointed accountant, and upon all opinions given by any duly appointed legal counsel.

8. No member of the Committee shall be personally liable by virtue of any instrument executed by the member, or on the member’s behalf, as a member of the Committee. Neither the Company nor any of its officers or directors, nor any member of the Committee, shall be personally liable for any action or inaction with respect to any duty or responsibility imposed upon such person by the terms of the Plan unless such action or inaction is judicially determined to be a breach of that person’s responsibility as a fiduciary with respect to the Plan under any applicable law. The Company shall indemnify and hold harmless its officers, directors, and each member of the Committee against any and all claims, losses, damages, expenses (including attorneys’ fees), and liability (including, in each case, amounts paid in settlement), arising from any action or failure to act, except when the same is judicially determined to be due to the gross negligence or willful misconduct of such officer, director or member of the Committee. The foregoing right of indemnification shall be in addition to any other rights to which any such person may be entitled as a matter of law.

SECTION X

MODIFICATION AND TERMINATION

1. The Company reserves the right to terminate this Plan at any time or to modify, amend or suspend it from time to time. Any such termination or modification shall be effective at such date as the Company may determine. The Company shall promptly give notice of any such modification or termination to all Participants. A modification may affect Participants, irrespective of whether they are past, current or future Participants, provided, however, that a modification may not eliminate or reduce the Accrued Benefit of any Participant as of the effective date of such modification.

2. To the extent permitted by the regulations under Section 409A of the Code, within the thirty (30) days preceding or the twelve (12) months following a Change of Control, the Company may exercise its discretion to terminate the Plan and, notwithstanding any other provision of the Plan or of the terms of any Deferral election made under the Plan, distribute in full to each Participant the portion of his or her Accrued Benefit (or the entire Accrued Benefit, if applicable).

 

  -5-  


SECTION XI

GENERAL PROVISIONS

1. Nothing contained herein shall be deemed to give any Participant the right to be retained in the service of the Company.

2. It is a condition of this Plan, and all rights of each Participant shall be subject thereto, that no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including but without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, subject, however, to applicable law, but excluding devolution by death or mental incompetency, and no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be liable for or subject to any obligation or liability of such Participant, subject, however, to applicable law.

3. All payments of benefits under the Plan shall be subject to such taxes and other withholdings (federal, state or local) as may be due thereon, and the determination of the Committee as to withholding with respect to payments shall be binding upon the Participant and each Beneficiary.

4. The sale of all of the assets of the Company, or a merger, consolidation or reorganization of the Company wherein the Company is not the surviving corporation, or any other transaction which, in effect, amounts to a sale of the Company or voting control thereof, shall not terminate this Plan or any related agreements and the obligations created hereunder or thereby shall be binding upon the successors and assigns of the Company.

5. If a Participant or Beneficiary entitled to receive any benefits hereunder is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, the benefits will be paid to such persons as the Committee might designate or to the duly appointed guardian.

6. This Plan shall be governed by and construed in accordance with the laws of North Carolina, notwithstanding the conflict of law rules applicable therein.

IN WITNESS WHEREOF, Kontoor Brands, Inc., intending to be legally bound hereby, has adopted and executed this Plan this          day of             2019 to be effective as of the Distribution Date subject to the requirements in the first paragraph above.

 

KONTOOR BRANDS, INC.

 

 

  -6-  
EX-10.18 22 d618285dex1018.htm EX-10.18 EX-10.18

Exhibit 10.18

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made as of this      day of                     , 2019, by and between Kontoor Brands, Inc., a North Carolina corporation (the “Company”), and                                  (“Indemnitee”).

WHEREAS, the Company and Indemnitee recognize the prevalent risk of corporate shareholder litigation, in general, subjecting directors to the risk of expensive litigation; and

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as directors of the Company and to indemnify its directors so as to provide them with the maximum indemnification protection permitted by law as protection against such risks.

NOW, THEREFORE, the Company and Indemnitee, intending to be legally bound, hereby agree as follows:

1.    Indemnification.

a.    Third Party and Derivative Proceedings. Subject to Section 9, the Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (including, without limitation, an action by or in the right of the Company or any affiliate of the Company) by reason of the fact that Indemnitee is or was a director of the Company, or any affiliate of the Company, by reason of any action or inaction on the part of Indemnitee while a director, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, fiduciary, employee or agent of any other enterprise, against expenses (including attorneys’ fees), and all liabilities and loss, including, judgments, fines and amounts paid in settlement (if such settlement is approved pursuant to Section 2(g)) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding so long as the Indemnitee (i) conducted him or herself in good faith; and (ii) reasonably believed, (A) in the case of conduct in his or her official capacity with the Company, that his or her conduct was in the Company’s best interests, and (B) in all other cases, that his or her conduct was at least not opposed to the Company’s best interests; and (iii) in the case of any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. Indemnification under this Section 1(a) shall not be available in connection with a proceeding by or in the right of the Company in which the Indemnitee was adjudged liable to the Company, or in connection with any other proceeding charging improper personal benefit to the Indemnitee, whether or not involving action in his or her official capacity, in which the Indemnitee was adjudged liable on the basis that personal benefit was improperly received by him or her.

b.    Mandatory Indemnification. To the extent that Indemnitee has been wholly successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Section 1(a) or in defense of any claim, issue or matter therein, in either case because Indemnitee is or was a director of the Company, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith. For purposes of this Section 1(b), the term “wholly successful, on the merits or otherwise,” shall include, but not be limited to, (i) any termination, withdrawal, or dismissal (with or without prejudice) of any claim, action, suit or proceeding against Indemnitee without any express finding of liability or guilt against him or her, or (ii) the expiration of a reasonable period of time after the making of any claim or threat of an action, suit or proceeding without the institution of the same and without any promise or payment made to induce a settlement.

c.    Witness Expenses. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of the fact that Indemnitee is or was a director of the Company or any affiliate of the

 

-1-


Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, fiduciary, employee or agent of any other enterprise, a witness in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the Company or any affiliate of the Company) to which Indemnitee is not a party, Indemnitee shall be indemnified against all expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection therewith.

2.    Expenses and Indemnification Procedure.

a.    Advancement of Expenses. The Company shall advance all reasonable out-of-pocket expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil, criminal, administrative or investigative action, suit or proceeding referenced in Section 1(a) and Section 1(c), so long as the Company receives an undertaking by or on behalf of Indemnitee to repay such amount unless it shall ultimately be determined that Indemnitee is entitled to be indemnified by the Company against such expenses.

b.    Repayment of Expenses. In the event that it shall ultimately be determined that Indemnitee is not entitled to be indemnified for the expenses paid by the Company pursuant to Section 2(a) hereof or otherwise or was not entitled to be fully indemnified, Indemnitee shall repay to the Company such amount of the advanced expenses or the appropriate portion thereof.

c.    Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee, including the nature of and the facts underlying such claim, for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to Kontoor Brands, Inc., [400 N Elm St., Greensboro, North Carolina 27401], Facsimile: (336)                         , Attention: General Counsel (or such other address as the Company may from time to time designate in writing to Indemnitee). Notice shall be deemed received on the third business day after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise, notice shall be deemed received when such notice shall actually be received by the Company. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

d.    Procedure. Any indemnification and advances provided for in Section 1 and this Section 2 shall be made no later than 45 days after receipt of the written request of Indemnitee, coupled with appropriate documentation to support the requested payment and subject in each case to the applicable determination by the Board of Directors (or other determination made in accordance with Section 55-8-55 of the North Carolina Business Corporation Act) that such indemnification is permissible and such advances are reasonable in the circumstances, which determination shall be made as promptly as practicable. If a claim under this Agreement, under any statute, or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification is not paid in full by the Company within 45 days after receipt of a fully documented written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 13, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 2(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board

 

-2-


of Directors, independent legal counsel, or its shareholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not, as the case may be, met the applicable standard of conduct.

e.    Notice to Insurers. If, at the time of the receipt of a notice of claim pursuant to Section 2(c), the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

f.    Selection of Counsel. If the Company shall be obligated under Section 1 or Section 2 to pay the expenses of any proceeding against Indemnitee, the Company shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of any other counsel subsequently incurred by Indemnitee with respect to the same proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the reasonable fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

g.    Settlements. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Company nor Indemnitee will unreasonably withhold consent to any proposed settlement.

h.    Change in Control.

(1)    If, at any time subsequent to the date of this Agreement, members of the Incumbent Board do not constitute a majority of the members of the Board of Directors, or there is otherwise a Change in Control, then upon the request of Indemnitee, the Company shall cause the determination of indemnification and advances required by Section 2 to be made by a third party (mutually agreed upon by the parties or failing such agreement, as determined by the Chief Judge of the United States District Court for the Middle District of North Carolina). The fees and expenses incurred by the third party in making the determination of indemnification and advances shall be borne solely by the Company. If such third party is unwilling and/or unable to make the determination of indemnification and advances, then the Company shall cause the indemnification and advances to be made by a majority vote or consent of a Board of Directors committee consisting solely of members of the Incumbent Board.

(2)    For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if individuals who, as of the date of this Agreement, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a three-quarters (3/4) of the directors then comprising the Incumbent Board, (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee of the Corporation for director), shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election 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 of Directors.

 

-3-


3.    Additional Indemnification Rights.

a.    Scope. Notwithstanding any other provision of this Agreement, the Company shall indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a North Carolina corporation to indemnify a member of its board of directors, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a North Carolina corporation to indemnify a member of its board of directors, such changes (to the extent not otherwise required by such law, statute or rule to be applied to this Agreement) shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

b.    Non-exclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which an Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of shareholders or disinterested directors, the North Carolina Business Corporation Act, as amended, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office.

4.    Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is a director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of any other enterprise) and shall continue thereafter, so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative, by reason of the fact that Indemnitee was a director of the Company or serving in any other capacity referred to herein.

5.    Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by him or her in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

6.    Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that, in certain instances, federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

7.    Officer and Director Liability Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of directors’ and officers’ liability insurance, Indemnitee shall be insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by an affiliate of the Company.

 

-4-


8.    Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

9.    Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

a.    Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense (such as by counterclaim, cross-claim or third-party claim), except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under the North Carolina Business Corporation Act, as amended, but such indemnification or advancement of expenses may be provided by Company in specific cases if the Board of Directors, at its sole discretion, finds it to be appropriate;

b.    Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was made in bad faith or was frivolous;

c.    Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company or other enterprise;

d.    Claims Under Section 16(b). To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute;

e.    Illegal Activity. To indemnify Indemnitee if a court of competent jurisdiction finally adjudges that such indemnification is illegal, including, without limitation, by virtue of such indemnification being in violation of public policy or any provision of law.

10.    Interpretation; Construction of Certain Phrases.

a.    The headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement. The words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation.”    The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.

b.    For purposes of this Agreement:

(1)    references to the “Company” shall include, in addition to the resulting or surviving corporation, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent entity, or is or was serving at the request of such constituent entity as a director, officer, employee or agent of any other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent entity if its separate existence had continued;

 

-5-


(2)    references to any “other enterprise” shall include any corporation, trust, partnership, joint venture, or other entity;

(3)     references to “fines” shall include any excise taxes or penalties assessed on Indemnitee with respect to an employee benefit plan;

(4)    references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, Indemnitee with respect to an employee benefit plan, its participants, or beneficiaries;

(5)    references to “affiliates” shall mean any entity which, directly or indirectly, is in the control of, is controlled by, or is under common control with, the Company; and

(6)    references to “Sections” or “clauses” shall be to Sections or clauses of this Agreement.

11.    Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts (including by facsimile signature), each of which shall be deemed to be an original and all of which together shall constitute one and the same document.

12.    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns.

13.    Attorneys’ Fees. If any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action was made in bad faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action was made in bad faith or was frivolous.

14.    Notice. All notices, requests, demands, consents and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service). The address for notice to the Company shall be as set forth in Section 2(b), and the address for notice to Indemnitee shall be as set forth on the signature page of this Agreement, or as subsequently modified in a notice given in accordance with this Section 14.

15.    Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of North Carolina for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement. Any action or proceeding instituted under or to enforce this Agreement shall be brought only in the state courts of the State of North Carolina.

16.    Subrogation. In the event of payment under this Agreement, Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable Company effectively to bring suit to enforce such rights.

17.    Choice of Law. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of North Carolina, as applied to contracts between North Carolina residents entered into and to be performed within North Carolina.

 

-6-


18.    Prior Agreement. Notwithstanding any contrary provision contained herein, this Agreement supersedes and replaces any and all prior written indemnification agreements between the Indemnitee and the Company.

[Signature page follows]

 

-7-


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

KONTOOR BRANDS, INC.
By:  

 

Name:   [                    ]
Title:   Chairman
INDEMNITEE

 

[Name]
Address for Notice:

 

 

 

-8-

EX-10.19 23 d618285dex1019.htm EX-10.19 EX-10.19

Exhibit 10.19

KONTOOR BRANDS, INC.

Mid-Term Incentive Plan

1. Purposes. This Mid-Term Incentive Plan (as amended from time to time, the “Plan”) of Kontoor Brands, Inc. (the “Company”) is implemented under the Company’s 2019 Stock Compensation Plan (the “2019 Plan”). The Plan is intended to provide an additional means to attract and retain talented executives and employees, to link a significant element of such persons’ compensation opportunity to the Company’s performance over more than one year, thereby providing an incentive for successful long-term strategic management of the Company, and to further the purposes of the 2019 Plan.

2. Status as Subplan Under the 2019 Plan; Administration. This Plan is a subplan implemented under the 2019 Plan, and will be administered by the Talent and Compensation Committee of the Board of Directors in accordance with the terms of the 2019 Plan. All of the terms and conditions of the 2019 Plan are hereby incorporated by reference in this Plan, and if any provision of this Plan or an agreement evidencing an award hereunder conflicts with a provision of the 2019 Plan, the provision of the 2019 Plan shall govern. Capitalized terms used in this Plan but not defined herein shall have the same meanings as defined in the 2019 Plan.

3. Certain Definitions. In addition to terms defined above and in the 2019 Plan, the following are defined terms under this Plan:

(a) “Account” means the account established for a Participant under Section 7(a).

(b) “Administrator” means the officers and employees of the Company responsible for the day-to-day administration of the Plan and to which other authority may be delegated under Section 10(b). Unless otherwise specified by the Committee, the Administrator shall be the [Kontoor Brands, Inc. Pension Plan Committee].

(c) “Cause” means (i), if the Participant has an Employment Agreement defining “Cause,” the definition under such Employment Agreement, or (ii), if the Participant has no Employment Agreement defining “Cause,” the Participant’s gross misconduct, meaning (A) the Participant’s willful and continued refusal substantially to perform his or her duties with the Company (other than any such refusal resulting from his or her incapacity due to physical or mental illness), after a demand for substantial performance is delivered to the Participant by the Board of Directors that specifically identifies the manner in which the Board believes that the Participant has refused to perform his or her duties, or (B) the willful engaging by the Participant in misconduct materially and demonstrably injurious to the Company. For purposes of this definition, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.

(d) “Disability” means (i), if the Participant has an Employment Agreement defining “Disability,” the definition under such Employment Agreement, or (ii), if the Participant has no Employment Agreement defining “Disability,” the Participant’s incapacity due to physical or mental illness resulting in the Participant’s absence from his or her duties with the Company on a full-time basis for 26 consecutive weeks, and, within 30 days after written notice of termination has been given by the Company, the Participant has not returned to the full-time performance of his or her duties.

(e) “Dividend Equivalents” means credits in respect of each PRSU representing an amount equal to the dividends or distributions declared and paid on a share of Common Stock, subject to Section 7(b).

(f) “Employment Agreement” means a written agreement between the Company and a Participant securing the Participant’s services as an employee or service provider for a period of time and in effect at the time of the


Participant’s Designation of Participation (as defined below) or, if no such agreement is then in effect, an agreement providing severance benefits to the Participant upon termination of employment or service in effect at the time of the Participant’s Designation of Participation (including for this purpose an agreement providing such benefits only during a period following a defined change in control, whether or not a change in control in fact has occurred prior to the Participant’s Termination of Employment).

(g) “Good Reason” means “Good Reason” as defined in the Participant’s Employment Agreement. If the Participant has no such Employment Agreement, no circumstance will constitute “Good Reason” for purposes of this Plan unless otherwise specified in the agreement evidencing the Participant’s award of PRSUs.

(h) “Participant” means an Employee participating in this Plan.

(i) “Performance Cycle” means the period specified by the Committee over which a designated amount of PRSUs potentially may be earned. A Performance Cycle generally will be a period of three consecutive fiscal years of the Company. Unless otherwise determined by the Committee, for purposes of Section 8(a)(i)(B), one full year of a Performance Cycle shall be deemed to be completed on the earlier of (i) the last day of the first fiscal year of the Performance Cycle or (ii) the thirty-first day of the month that falls in the week before that fiscal-year-end date.

(j) “Performance Goal” means the performance required to be achieved as a condition of earning a specified amount of PRSUs, including the business metric and the level of performance required to be achieved. A Performance Goal can include more than one business metric and related performance levels.

(k) “PRSU” or “Performance Restricted Stock Unit” means a Stock Unit that is potentially earnable by a Participant upon achievement of the specified Performance Goal. PRSUs that have been earned but deferred at the election of the Participant continue to be referred to as PRSUs under the Plan, with the understanding that such PRSUs are no longer forfeitable upon Termination of Employment or based on performance.

(l) “Pro Rata Portion” means a portion of a specified number of PRSUs earned in a given Performance Cycle assuming continued employment throughout the Performance Cycle, such portion determined by multiplying such number of earned PRSUs by a fraction, the numerator of which is the number of calendar days from the beginning of the Performance Cycle until the applicable proration date and the denominator of which is the number of calendar days in the Performance Cycle.

(m) “Settlement Deadline” means the March 15 following the end of a given Performance Cycle; provided, however, that the Committee may specify a different Settlement Deadline for specific PRSUs so long as such Settlement Deadline is compliant with Code Section 409A.

(n) “Stock Unit” means a bookkeeping unit that represents a right to receive one share of Common Stock upon settlement, together with a right to accrual of additional Stock Units as a result of Dividend Equivalents as specified in Section 7(b), subject to the terms and conditions of this Plan. Stock Units, which constitute an award under Article VIII of the 2019 Plan (including Section 8.6 thereof), are arbitrary accounting measures created and used solely for purposes of this Plan and do not represent ownership rights in the Company, shares of Common Stock or any asset of the Company.

(o) “Target PRSUs” means a number of PRSUs designated as a target number that potentially may be earned by a Participant in a given Performance Cycle.

(q) “Termination of Employment” means the Participant’s termination of employment with the Company or any of its Subsidiaries or affiliates in circumstances in which, immediately thereafter, the Participant is not employed by the Company or any of its Subsidiaries or affiliates; provided, however, that in the case of any PRSUs that constitute a deferral of compensation for purposes of Code Section 409A, Termination of

 

2


Employment shall mean a “separation from service” as defined in Treasury Regulation § 1.409A-1(h). The date of Termination of Employment will be determined without giving effect to any period during which severance payments may be made to a Participant, unless otherwise specifically provided herein or in the Participant’s Award agreement.

4. Shares Available Under the Plan. Shares issuable or deliverable in settlement of PRSUs shall be drawn from the 2019 Plan. The Committee will monitor share usage under this Plan and the 2019 Plan to ensure that shares are available for settlement of PRSUs in compliance with the requirements of the 2019 Plan.

5. Eligibility. Employees and other service providers (excluding non-employee Directors) who are eligible to participate in the 2019 Plan may be selected by the Committee to participate in this Plan.

6. Designation and Earning of PRSUs.

(a) Designation of PRSUs, Pre-Set Goals, Challenge Goals and Related Terms. At such time as it may determine, the Committee will (i) select eligible persons to participate in a Performance Cycle, (ii) designate for each Participant the number of Target PRSUs and the range of PRSUs the Participant shall have the opportunity to earn in such Performance Cycle and (iii) specify the Performance Goal and the related number of PRSUs that may be earned based on the level of achievement of the Performance Goal. The time at which these terms have been designated for a given Participant shall be the Participant’s “Designation of Participation” for the specified Performance Cycle. The number of PRSUs potentially earnable by each Participant shall range from a minimum of 0% to a maximum of 225% of the specified number of Target PRSUs, unless the Committee specifies different percentage earning levels. The Performance Goal may be specified as a table, grid or formula that sets forth the amount of PRSUs that will be earned upon achievement of a specified level of performance during all or part of the Performance Cycle.

(b) Adjustments to Performance Goal. The Committee may provide for adjustments to the Performance Goal, the Performance Cycle and other terms of Awards to reflect changes in accounting rules, corporate structure or other circumstances of the Company, for the purpose of preventing dilution or enlargement of Participants’ opportunity to earn PRSUs hereunder, and subject to Section 12.15 of the Plan.

(c) Determination of Number of Earned PRSUs. Not later than the Settlement Deadline following the end of each Performance Cycle, the Committee shall determine the extent to which the Performance Goal for the earning of PRSUs was achieved during such Performance Cycle and the number of PRSUs earned by each Participant for the Performance Cycle. The date at which the Committee makes a final determination of PRSUs earned with respect to a given Performance Cycle will be the “Determination Date” for such Performance Cycle. The Committee may adjust upward or downward the number of PRSUs earned, in its discretion (subject to Plan Section 12.15), in light of such considerations as the Committee may deem relevant, but in accordance with a standard that the number of earned PRSUs shall correlate to the performance achieved by the efforts of management (including the Participant) as intended at the time of setting of the Performance Goal. Unless otherwise determined by the Committee, PRSUs that are not earned by achievement of the Performance Goal will be immediately forfeited.

7. Certain Terms of PRSUs.

(a) Accounts. The Company shall maintain a bookkeeping account for each Participant reflecting the number of PRSUs then credited to the Participant hereunder. The Account may include subaccounts or other designations showing, with respect to separate Performance Cycles, PRSUs that remain potentially earnable, PRSUs that have been earned but deferred and other relevant information. Fractional PRSUs shall be credited to at least three decimal places for purposes of this Plan, unless otherwise determined by the Administrator.

 

3


(b) Dividend Equivalents and Adjustments. Unless otherwise determined by the Administrator (subject to Plan Section 12.1), Dividend Equivalents shall be paid or credited on PRSUs that have been earned as follows:

 

  (i)

Regular Cash Dividends. At the time of settlement of PRSUs under Section 8 or 9, the Administrator shall determine the aggregate amount of regular cash dividends that would have been payable to the Participant, based on record dates for dividends since the beginning of the Performance Cycle (or, if later, the date of the Participant’s Designation of Participation), if the earned PRSUs then to be settled had been outstanding shares of Common Stock at such record date (without compounding of dividends but adjusted to account for splits and other extraordinary corporate transactions). Such aggregate cash amount will be withheld to cover withholding taxes applicable at the settlement date, with any amount in excess of such tax withholding amount converted to a number of shares (or deferred shares, if applicable) by dividing such excess amount by the Fair Market Value of a share of Common Stock at the settlement date.

 

  (ii)

Common Stock Dividends and Splits. If the Company declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then the number of PRSUs credited to each Participant’s Account and potentially earnable hereunder as of the payment date for such dividend or distribution or forward split shall be automatically adjusted by multiplying the number of PRSUs credited to the Account or potentially earnable as of the record date for such dividend or distribution or split by the number of additional shares of Common Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Common Stock.

 

  (iii)

Adjustments. If the Company declares and pays a dividend or distribution on Common Stock that is not a regular cash dividend and not in the form of additional shares of Common Stock, or if there occurs any other event referred to in Article XI of the 2019 Plan, the Committee may determine to adjust the number of PRSUs credited to each Participant’s Account and potentially earnable hereunder (including provision for the earning of property or other forms of compensation than Common Stock), in order to prevent dilution or enlargement of Participants’ rights with respect to PRSUs.

 

  (iv)

Vesting and Forfeiture of Additional PRSUs. PRSUs and other rights to compensation that result from a stock dividend or split under Section 7(b)(ii) or an adjustment under Section 7(b)(iii) shall be subject to the same vesting terms (including earning based on achievement of the Performance Goal) and risk of forfeiture as applied to the related PRSUs originally granted.

(c) Statements. An individual statement relating to a Participant’s Account will be issued to the Participant not less frequently than annually. Such statement shall report the amount of PRSUs potentially earnable and the number of PRSUs earned and remaining credited to the Participant’s Account (i.e., not yet settled), transactions therein during the period covered by the statement, and other information deemed relevant by the Administrator. Such statement may be combined with or include information regarding other plans and compensatory arrangements affecting the Participant. A Participant’s statements may evidence the Company’s obligations in respect of PRSUs without the need for the Company to enter into a separate agreement relating to such obligations; provided, however, that any statement containing an error shall not represent a binding obligation to the extent of such error.

8. Effect of Termination of Employment.

(a) Termination Prior to End of a Performance Cycle. Except to the extent set forth in subsections (i) through (v) of this Section 8(a), upon a Participant’s Termination of Employment prior to the end of a given Performance Cycle, all unearned PRSUs relating to such Performance Cycle shall cease to be earnable and shall be canceled and forfeited, and the Participant shall have no further rights or opportunities hereunder:

 

  (i)

Retirement. If Termination of Employment is due to the Retirement of the Participant, the Participant shall be entitled to receive settlement of the total number of PRSUs actually earned for the

 

4


  Performance Cycle in accordance with Section 6(c), except that PRSUs that have not been held for the minimum vesting period under Section 6.2 of the 2019 Plan (i.e., from the Designation of Participation to the date of Termination of Employment by reason of Retirement) will not be earnable and will be cancelled as of the date of Termination of Employment. The settlement of PRSUs for any such Performance Cycle shall occur promptly (and in any event not later than the Settlement Deadline) following completion of that Performance Cycle. Any deferral election filed by the Participant shall be effective and apply to the time of settlement of the PRSUs.

 

  (ii)

Death or Disability. If Termination of Employment is due to the Participant’s death or Disability, the Participant shall be entitled to receive settlement of the total number of PRSUs the Participant actually earned for the Performance Cycle in accordance with Section 6(c). Any deferral election filed by the Participant shall have no effect on the time of settlement of the PRSUs.

 

  (iii)

Involuntary Termination By the Company Not for Cause Prior to a Change in Control. If Termination of Employment is an involuntary separation by the Company not for Cause prior to a Change in Control, the Participant shall be entitled to receive settlement of a Pro Rata Portion of the total number of PRSUs that would have been actually earned for the Performance Cycle in accordance with Section 6(c), assuming continued employment throughout the Performance Cycle. For this purpose, the proration date (used to calculate the Pro Rata Portion) shall be the earlier of (A) the last day of the payroll period with respect to which a severance payment in the nature of salary continuation will be made and (B) the last day of the Performance Cycle. If no severance payments are to be made, the applicable proration date shall be the date of Termination of Employment. The foregoing notwithstanding, PRSUs that have not been held for the minimum vesting period under Section 6.2 of the 2019 Plan (i.e., from the Designation of Participation to the date of Termination of Employment without Cause) will not be earnable and will be canceled as of the date of Termination of Employment. The settlement of PRSUs shall occur promptly (and in any event not later than the Settlement Deadline) following completion of the applicable Performance Cycle. Any deferral election filed by the Participant shall have no effect on the time of settlement of the PRSUs.

 

  (iv)

At or Following a Change in Control, Involuntary Termination By the Company Not for Cause or by Participant for Good Reason. If Termination of Employment occurs at or after a Change in Control and is an involuntary separation by the Company not for Cause or a Termination by the Participant for Good Reason, the Participant shall be entitled to receive settlement of the total number of PRSUs the Participant is deemed to have earned in accordance with this Section 8(a)(iv), promptly (and in any event within 30 days) following the date of Termination of Employment (subject to the final paragraph of this Section 8(a)). The amount of the settlement shall assume that the Participant has remained with the Company through the completion of each open Performance Cycle and that the performance achieved by the Company with respect to the applicable Performance Goal for each such Performance Cycle is the average of the performance achieved for the completed year(s) in such Performance Cycle if greater than 100% (i.e., the performance required to earn at least the Target PRSUs), or, if such average is less than 100%, the performance achieved shall be deemed to be the average of the actual performance for the completed year(s) in such Performance Cycle (if any) together with performance for years not yet complete being deemed to be 100% of target performance. Any deferral election filed by the Participant shall have no effect on the time of settlement of the PRSUs.

 

  (v)

Termination by the Company for Cause or Voluntary Termination by the Participant. If Termination of Employment is either by the Company for Cause or voluntary by the Participant (excluding a Termination for Good Reason following a Change in Control and excluding a Retirement), PRSUs relating to each Performance Cycle which has not yet ended will cease to be earnable and will be canceled.

The foregoing provisions notwithstanding, in the case of any PRSUs that constitute a deferral of compensation for purposes of Code Section 409A: (i) if such PRSUs would be settled at a date related to a Termination of Employment (other than due to death) under this Section 8(a) or in connection with a permitted elective deferral

 

5


of the PRSUs, such settlement date would be within six months after the Termination of Employment, and the Participant is a “Specified Employee” at the date of Termination of Employment under Code Section 409A, then the settlement date will be delayed until the date six months after Termination of Employment; (ii) if a fiscal year ends in December, any settlement required to follow such fiscal year end shall occur only on or after January 1; and (iii) if a Change in Control occurs but in connection therewith no event has occurred that constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (as defined in Treasury Regulation § 1.409A-3(i)(5)), then the time of settlement under Section 8(a)(iv) shall not be as specified therein but shall instead be at the applicable time under Section 8(a)(iii) (for clarity, the amount of PRSUs earned nevertheless will be determined under Section 8(a)(iv)). PRSUs for a given Performance Cycle each will be deemed a separate payment for purposes of Code Section 409A. It is intended that PRSUs that are not electively deferred hereunder constitute short-term deferrals under Treasury Regulation § 1.409A-1(b)(4), unless otherwise specifically designated by the Company in the case of a specified Participant or class of PRSUs.

(b) Termination After Performance Cycle. Upon a Participant’s Termination of Employment at or after the end of a Performance Cycle, all PRSUs resulting from such Performance Cycle shall be settled in accordance with Section 9(a) as promptly as practicable after the Determination Date with respect to such Performance Cycle, except that, if the Participant has timely filed an irrevocable election to defer settlement of PRSUs following a Termination of Employment due to Retirement, such PRSUs shall be settled in accordance with such deferral election.

(c) Release. Any settlement of PRSUs following Termination of Employment may be delayed by the Committee if the Participant’s Employment Agreement or any policy of the Committee then in effect conditions such settlement or severance payments upon the Company receiving a full and valid release of claims against the Company. In such case, the Company shall supply the form of release to the Participant by the date of Termination of Employment, and Participant must sign the release and not revoke it by such date as may be specified by the Company but in no event later than 52 days after Termination of Employment. If such 52-day period would begin in one calendar year and end in the next, then settlement shall only occur in the latter calendar year.

9. Settlement of PRSUs.

(a) Settlement If PRSUs Not Deferred. Not later than the Settlement Deadline following the end of each Performance Cycle, the Committee shall settle all PRSUs earned in respect of such Performance Cycle, other than PRSUs deferred under Section 9(b) or settled as specified in Section 8, by issuing and/or delivering to the Participant one share of Common Stock for each PRSU being settled. Such issuance or delivery shall occur as promptly as practicable after the Determination Date for the Performance Cycle.

(b) Deferral of PRSUs. If and to the extent authorized by the Committee, at any time on or before such date as may be specified by the Administrator, the Participant may elect to defer settlement of PRSUs to a specified date (i) later than the Determination Date for the Performance Cycle to which the PRSUs relate or (ii) later than Termination of Employment due to Retirement, as specified by the Participant; provided, however, that an optional deferral shall be subject to such additional restrictions and limitations as the Committee or Administrator may from time to time specify, including for purposes of ensuring that the Participant will not be deemed to have constructively received compensation in connection with such deferral. Unless otherwise specified by the Committee not later than the Designation of Participation, dividend equivalents shall accrue on deferred PRSUs and shall be paid in cash annually to the Participant at an annual payment date set by the Administrator, without interest or compounding.

(c) Creation of Rabbi Trust. If and to the extent authorized by the Committee, the Company may create one or more trusts and deposit therein Common Stock or other property for delivery to the Participant in satisfaction of the Company’s obligations hereunder. Any such trust shall be a “rabbi” trust that shall not jeopardize the status of the Participant’s rights hereunder as “unfunded” deferred compensation for federal income tax purposes.

 

6


(d) Settlement of PRSUs at the End of the Deferral Period. Not later than 15 days after the end of any elective period of deferral or immediately in the case of a deferral period ending immediately prior to a Change in Control, the Company will settle all PRSUs then credited to a Participant’s Account by issuing and/or delivering to the Participant one share of Common Stock for each PRSU being settled. Any deferral period will end on an accelerated basis immediately prior to a Change in Control, except as limited under Section 8(a) (final paragraph) and Section 9(b).

(e) Manner of Settlement. The Committee or Administrator may, in its or his or her sole discretion, determine the manner in which shares of Common Stock shall be delivered by the Company, including the manner in which fractional shares shall be dealt with; provided, however, that no certificate shall be issued representing a fractional share. In furtherance of this authority, PRSUs may be settled by the Company issuing and delivering the requisite number of shares of Common Stock to a member firm of the New York Stock Exchange that is also a member of the National Association of Securities Dealers, as selected by the Company from time to time, which shares shall be deposited by such member firm in a separate brokerage account for each Participant. If there occurs any delay between the settlement date and the date shares are issued or delivered to the Participant, a cash amount equal to any dividends or distributions the record date for which fell between the settlement date and the date of issuance or delivery of the shares shall be paid to the Participant together with the delivery of the shares.

(f) Settlement of PRSUs Held by Non-US Residents. Other provisions of the Plan and this Plan (including Section 9(e) above) notwithstanding, PRSUs credited to the Account of a Participant who resides in or is subject to income tax laws of a country other than the United States may be settled in cash, in the discretion of the Committee. The cash amount payable in settlement of each PRSU shall equal the Fair Market Value of a share at the date of not more than five business days before the date of settlement. The Committee is authorized to vary the terms of participation of such a foreign Participant in any other respect (including in ways not consistent with the express provisions of the Plan) in order to conform to the laws, regulations and business customs of a foreign jurisdiction.

(g) Tax Withholding. The Company shall deduct from any settlement of a Participant’s PRSUs and cash dividends payable in respect of any deferred PRSUs any Federal, state, or local withholding or other tax or charge that the Company is then required to deduct under applicable law. In furtherance of this requirement, the Company shall withhold from the cash dividend equivalents deliverable as part of the settlement of PRSUs cash, and from the shares of Common Stock issuable in settlement of a Participant’s PRSUs the number of shares having an aggregate Fair Market Value, together with such cash, equal to any Federal, state, and local withholding or other tax or charge that the Company is required to withhold under applicable law, unless the Participant has otherwise elected and has made other arrangements satisfactory to the Company to pay such withholding amounts or unless otherwise determined by the Committee.

(h) Non-Transferability. Unless otherwise determined by the Committee, neither a Participant nor any beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate or encumber (except by reason of death) any PRSU, Account or Account balance, or other right hereunder, nor shall any such PRSU, Account or Account balance or other right be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or any beneficiary, or to the debts, contracts, liabilities, engagements or torts of the Participant or any Beneficiary or transfer by operation of law in the event of bankruptcy or insolvency of the Participant or any beneficiary, or any legal process.

10. General Provisions.

(a) Changes to this Plan. The Committee may at any time amend, alter, suspend, discontinue or terminate this Plan, and such action shall not be subject to the approval of the Company’s shareholders; provided, however, that, without the consent of an affected Participant, no such action may materially impair legally binding rights of such Participant under this Plan. The foregoing notwithstanding, the Committee may, in its discretion, accelerate

 

7


the termination of any Performance Cycle or any deferral period and the resulting settlement of PRSUs with respect to an individual Participant or all Participants, except that any accelerated settlement of PRSUs that constitute a deferral of compensation under Code Section 409A may occur only in compliance with applicable Regulations and interpretations of Section 409A.

(b) Delegation of Administrative Authority. The Committee may, in writing, delegate some or all of its power and responsibilities under the Plan to the Administrator or any other officer of the Company or committee of officers and employees, except such delegation may not include (i) authority to amend the Plan under Section 10(a), or (ii) authority that otherwise may not be delegated under the terms of the 2019 Plan, this Plan, or applicable law. In furtherance of this authority, the Committee hereby delegates to the Administrator, as from time to time designated, authority to administer the Plan and act on behalf of the Committee to the fullest extent permitted under this Section 10(b). This delegation of authority to the Administrator shall remain in effect until terminated or modified by resolution of the Committee (without a requirement that the Plan be amended further). The authority delegated to the Administrator hereunder shall include:

 

  (i)

Authority to adopt such rules for the administration of the Plan as the Administrator considers desirable, provided they do not conflict with the Plan; and

 

  (ii)

Authority under Section 9(b) to impose restrictions or limitations on Participant deferrals under the Plan, including to promote cost-effective administration of the Plan; no restriction or limitation on deferrals shall be deemed to conflict with the Plan.

No individual acting as Administrator (including any member of the Committee serving as Administrator) shall participate in a decision directly affecting his or her own rights or obligations under the Plan, although participation in a decision affecting all Participants shall not be prohibited by this provision.

(c) Non-exclusivity of the Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

(d) Effective Date and Plan Termination. This Plan became effective at the later of the completion of the spinoff of the Company by VF Corporation or its approval by the Committee. Once PRSUs have been granted under this Plan, the Plan will remain in effect until such time as the Company and Participants have no further rights or obligations in respect of PRSUs not yet settled or the Committee otherwise terminates this Plan.

 

8

EX-21.1 24 d618285dex211.htm EX-21.1 EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

The following are the subsidiaries of the Registrant:

 

Name

  

Jurisdiction of Incorporation

LeeWrangler Austria GmbH    Austria
LeeWrangler Belgium Services BVBA    Belgium
LeeWrangler Belgium BVBA    Belgium
LeeWrangler Apparel (Foshan) Ltd.    China
LeeWrangler Apparel (Shanghai) Ltd.    China
LeeWrangler Apparel (China) Ltd.    China
LeeWrangler Czech Republic s.r.o.    Czech Republic
Czech Distribution Services s.r.o.    Czech Republic
LeeWrangler France S.A.S.    France
LeeWrangler Germany GmbH    Germany
LeeWrangler Hellas IKE sole member    Greece
LeeWrangler Asia Ltd    Hong Kong
LeeWrangler Hong Kong Ltd    Hong Kong
LeeWrangler Hungary KFT    Hungary
LeeWrangler Italy Retail S.r.l.    Italy
LeeWrangler Italy S.r.l.    Italy
LeeWrangler Italy Holding S.r.l.    Italy
LeeWrangler Netherlands B.V.    Netherlands
LeeWrangler Netherlands Retail B.V.    Netherlands
VF Panama Finance S de RL    Panama
LeeWrangler Poland sp. z o.o.    Poland
LeeWrangler Portugal Lda    Portugal
LeeWrangler Slovakia s.r.o.    Slovakia
LeeWrangler Spain S.L.U.    Spain
LeeWrangler Sweden AB    Sweden
LeeWrangler Enterprises SpinCo Sagl    Switzerland
LeeWrangler Switzerland Holding Sagl    Switzerland
LeeWrangler Investments Holding Sagl    Switzerland
LeeWrangler Transglobal Sagl    Switzerland
LeeWrangler Mexico Holding Sagl    Switzerland
LeeWrangler MMB Investments Sagl    Switzerland
LeeWrangler International Sagl    Switzerland
LeeWrangler WH Sourcing Sagl    Switzerland
UK Guarantee NewCo    United Kingdom
LeeWrangler U.K. Limited    United Kingdom
KBI International Holdings, LLC    Delaware (USA)
Jeanswear Mexico Holdings, LLC    Delaware (USA)
Jeanswear Receivables, LLC    Delaware (USA)
Jeanswear Services, LLC    Delaware (USA)
Kontoor Enterprises, LLC    Delaware (USA)
Wrangler Apparel Corp    Delaware (USA)
The H.D. Lee Company, Inc.    Delaware (USA)
VF Jeanswear Sales, Inc.    Delaware (USA)
VF Outlet, Inc.    Delaware (USA)

 

1


Name

  

Jurisdiction of Incorporation

Jeanswear Ventures, LLC    Delaware (USA)
VFJ Ventures, LLC    Delaware (USA)
VF Jeanswear LP    Delaware (USA)
R&R Apparel Company, LLC    Delaware (USA)
Retail Productivity Management, Inc.    Delaware (USA)
VFJ-CSS De Mexico, S.A. de C.V.    Mexico
20X DE MEXICO S.A. de C.V.    Mexico
WRANGLER DE CHIHUAHUA S. de R.L. de C.V.    Mexico
WRANGLER DE MEXICO S. de R.L. de C.V.    Mexico
Manufacturera Lee De Mexico S. de R.L. de C.V.    Mexico
Jeanswear de Guatemala, Limitada (Sociedad Anonima)    Guatemala
VF Mauritius Limited    Mauritius
VF Jeanswear Nicaragua y Compania Limitada    Nicaragua
VF Jeanswear de Mexico S. de R.L. de C.V.    Mexico
VF Internacional S de RL de CV    Mexico
VF Servicios Mexicana, S. de R.L. de C.V.    Mexico
VF Canada Co.    Canada
VF Brands India Private Limited    India

 

2

EX-99.1 25 d618285dex991.htm EX-99.1 EX-99.1
Table of Contents

Exhibit 99.1

(Subject to Completion, Dated April 1, 2019)

 

 

LOGO

V.F. Corporation

105 Corporate Center Boulevard

Greensboro, North Carolina 27408

                    , 2019

Dear VF Shareholder:

On August 13, 2018, V.F. Corporation (“VF”) announced the strategic repositioning of VF through the spinoff of its Jeanswear and VF Outlet™ businesses from its remaining businesses (the “Separation”), which is expected to become effective on                     , 2019. On the effective date of the Separation, Kontoor Brands, Inc., a North Carolina corporation formed in anticipation of the Separation (“Kontoor Brands”), will become an independent, publicly traded company and will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the Jeanswear and VF Outlet™ businesses.

The Separation is subject to conditions as described in the enclosed information statement. Subject to the satisfaction or waiver of these conditions, the Separation will be completed by way of a pro rata distribution of all the outstanding shares of Kontoor Brands common stock to VF’s shareholders of record as of the close of business on                     , 2019, the distribution record date (the “Distribution”). Each VF shareholder of record will receive one share of Kontoor Brands common stock, no par value, for every                      shares of VF common stock, without par value, held by such shareholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. At any time following the Distribution, shareholders may request that their shares of Kontoor Brands common stock be transferred to a brokerage or other account. No fractional shares of Kontoor Brands common stock will be issued. The distribution agent for the Distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution.

VF expects to receive an opinion from counsel to the effect that, among other things, the Distribution, together with certain related transactions, will qualify as a transaction that is tax-free for U.S. federal income tax purposes, except to the extent of any cash received in lieu of fractional shares.

The Distribution does not require VF shareholder approval, nor do you need to take any action to receive your shares of Kontoor Brands common stock. VF’s common stock will continue to trade on the New York Stock Exchange under the ticker symbol “VFC.” Kontoor Brands has applied to have its shares of common stock listed on the New York Stock Exchange under the ticker symbol “KTB.”

The enclosed information statement, which we are mailing to all VF shareholders, describes the Separation in detail and contains important information about Kontoor Brands, including its historical combined financial statements. We urge you to read this information statement carefully.

We want to thank you for your continued support of VF.

Sincerely,

Steven E. Rendle

Chairman, President and Chief Executive Officer

V.F. Corporation


Table of Contents

Kontoor Brands, Inc.

400 N. Elm Street

Greensboro, North Carolina 27401

                    , 2019

Dear Future Kontoor Brands Shareholder:

I am excited to welcome you as a shareholder of our new company, Kontoor Brands, Inc. (“Kontoor Brands”). Following the spinoff by V.F. Corporation of its Jeanswear and VF Outlet™ businesses to us, we will be a global apparel leader focused on the design, manufacturing, sourcing, marketing, and distribution of our portfolio of brands, including our iconic brands Wrangler® and Lee®.

We endeavor to provide consumers with high-quality, innovative products at a superior value. We believe our experienced management team is executing a strategy that provides a better product and brand experience to our consumers, primarily by delivering on our high standards of product design and innovation, and offering a wide variety of compelling products across channels and categories. Our leadership team is largely a product of V.F. Corporation’s execution-focused culture, bringing a deep knowledge of the global business, strong customer relationships, and category management expertise to the enterprise. In addition, we believe the consumer appeal of our brands combined with consistent execution of our manufacturing and distribution strategies have supported our ability to produce strong financial results. We believe our consistent financial performance will provide us with the opportunity to invest in our business, return capital to shareholders, and repay debt as an independent public company.

I encourage you to learn more about Kontoor Brands and our business by reading the attached information statement. We have applied to list our common stock on the New York Stock Exchange under the ticker symbol “KTB.” We look forward to earning your continuing support for many years to come.

Sincerely,

Scott H. Baxter

President and Chief Executive Officer

Kontoor Brands


Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

Preliminary Information Statement

(Subject to Completion, Dated April 1, 2019)

INFORMATION STATEMENT

Kontoor Brands, Inc.

Common Stock

(No Par Value)

 

 

V.F. Corporation (“VF”) is furnishing this information statement in connection with the separation of its Jeanswear and VF Outlet™ businesses from its remaining businesses and the creation of an independent, publicly traded company, named Kontoor Brands, Inc. (“Kontoor Brands”). Kontoor Brands, directly or indirectly through its subsidiaries, will hold the assets, liabilities and legal entities comprising the Jeanswear and VF Outlet™ businesses after certain restructuring transactions are completed (the “Restructuring”). All of the shares of Kontoor Brands common stock owned by VF will be distributed to the shareholders of VF (the “Distribution” and, together with the Restructuring, the “Separation”). Kontoor Brands is currently a wholly owned subsidiary of VF.

Each holder of VF common stock will receive one share of common stock of Kontoor Brands for every              shares of VF common stock held as of the close of business on                     , 2019, the record date for the Distribution.

The distribution of Kontoor Brands’ shares is expected to be completed after the New York Stock Exchange (the “NYSE”) market closing on                     , 2019. Immediately after VF completes the Distribution, Kontoor Brands will be an independent, publicly traded company. We expect that, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income in connection with the Distribution, except to the extent of any cash you receive in lieu of fractional shares.

No vote or other action is required by you to receive shares of Kontoor Brands common stock in the Separation. You will not be required to pay anything for the new shares or to surrender any of your shares of VF common stock. We are not asking you for a proxy and you should not send us a proxy or your share certificates.

There currently is no trading market for Kontoor Brands common stock. We have applied to have Kontoor Brands’ shares of common stock listed on the NYSE under the ticker symbol “KTB.” Assuming that the NYSE authorizes Kontoor Brands’ common stock for listing, we anticipate that a limited market, commonly known as a “when-issued” trading market, for Kontoor Brands’ common stock will commence on                     , 2019 and will continue up to and including the Distribution Date (as defined herein). We expect the “regular-way” trading of Kontoor Brands’ common stock will begin on the first trading day following the Distribution Date.

 

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 17.

Neither the U.S. Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is                     , 2019.

A Notice of Internet Availability of Information Statement Materials containing instructions describing how to access the information statement was first mailed to VF shareholders on or about                     , 2019.


Table of Contents

TABLE OF CONTENTS

 

 

 

     Page  

Note Regarding the Use of Certain Terms

     ii  

Special Note Regarding Forward-Looking Statements

     iii  

Summary

     1  

Risk Factors

     17  

The Separation

     40  

Dividend Policy

     56  

Capitalization

     57  

Unaudited Pro Forma Combined Financial Statements

     58  

Selected Historical Combined Financial Data

     67  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     70  

Business

     95  

Management

     107  

Compensation Discussion and Analysis

     113  

Certain Relationships and Related Party Transactions

     135  

Ownership of Common Stock by Certain Beneficial Owners and Management

     136  

Description of Capital Stock

     139  

Where You Can Find More Information

     144  

Index to Financial Statements

     F-1  

 

i


Table of Contents

NOTE REGARDING THE USE OF CERTAIN TERMS

We use the following terms to refer to the items indicated:

 

   

“We,” “us,” “our,” “Company” and “Kontoor Brands,” unless the context otherwise requires, refer to Kontoor Brands, Inc., the entity that at the time of the Distribution will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the Spin Business, as defined below, and whose shares VF will distribute in connection with the Separation. Where appropriate in the context, the foregoing terms also include the subsidiaries of this entity; these terms may be used to describe the Spin Business prior to completion of the Separation.

 

   

The “Spin Business” refers to the business, operations, products, services and activities of VF’s Jeanswear and Outlet businesses. See “Business” for more information.

 

   

Except where the context otherwise requires, the term “VF” refers to V.F. Corporation, the entity that owns Kontoor Brands prior to the Separation and that after the Separation will be a separately traded public company consisting of its remaining operations.

 

   

The term “Distribution” refers to the distribution of all of the shares of Kontoor Brands common stock owned by VF to shareholders of VF as of the record date.

 

   

The term “Restructuring” refers to the series of transactions which will result in all of the assets, liabilities and legal entities comprising the Spin Business being owned directly, or indirectly through its subsidiaries, by Kontoor Brands.

 

   

Except where the context otherwise requires, the term “Separation” refers to the separation of the Spin Business from VF and the creation of an independent, publicly traded company, Kontoor Brands, through (1) the Restructuring and (2) the Distribution.

 

   

The term “Distribution Date” means the date on which the Distribution occurs.

We own various trademark registrations and applications, and unregistered trademarks, including Wrangler®, Lee® and Rock & Republic®. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this information statement may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

We will operate and report using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. Except where the context otherwise requires, all references to “2018,” “2017,” “2016” and “2015” relate to the 52-week fiscal periods ended December 29, 2018, December 30, 2017, December 31, 2016 and January 2, 2016, respectively, and all references to “2014” relate to the 53-week fiscal period ended January 3, 2015.

 

ii


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and in other sections of this information statement that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections, forecasts or assumptions of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including the numerous risks discussed under the caption entitled “Risk Factors.”

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Except as required by law, neither VF nor we are under any duty to update any of these forward-looking statements after the date of this information statement to conform our prior statements to actual results or revised expectations.

 

iii


Table of Contents

SUMMARY

This summary highlights information contained elsewhere in this information statement. This summary does not contain all of the information that you should consider. You should read this entire information statement carefully, especially the risks of owning our common stock discussed under “Risk Factors” and our audited combined financial statements, our unaudited pro forma combined financial statements and the respective notes to those statements appearing elsewhere in this information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of all the transactions referred to in this information statement in connection with the Separation.

Overview

We are a global apparel leader focused on the design, manufacturing, sourcing, marketing, and distribution of our portfolio of brands, including our iconic brands Wrangler® and Lee®. Our two key brands benefit from heritages spanning 200 combined years and together with our other brands accounted for over 170 million units of apparel produced or sourced in 2018. We endeavor to provide consumers with high-quality, innovative products at a superior value. We manufacture approximately 38% of our products in our owned and leased facilities, and distribute our products worldwide primarily through both major brick & mortar and e-commerce retailers. We believe our experienced management team is executing a strategy that provides a better product and brand experience to our consumers, primarily by delivering on our high standards of product design and innovation, and offering a wide variety of compelling products across channels and categories.

We focus on continuously improving the most important elements of our products, which include fit, fabric, finish, and overall construction, while continuing to provide consumers our products at attractive price points. We leverage innovation and design advancements as well as our unique brand heritages to create marketing campaigns that communicate our brand positioning, product attributes, and overall value proposition to consumers. We believe these marketing campaigns further elevate our brands, build our loyal global consumer base, and ultimately drive revenue growth.

We have a presence in over 65 countries and generated approximately $2.8 billion in global revenues in 2018 across our various channels. We sell our products primarily through our established wholesale and expanding digital channels, and utilize our branded brick & mortar locations to supplement our go-to-market strategy. We benefit from strong relationships with many of our customers who we believe depend on our ability to reliably and timely replenish them with our high-volume products.

Within the United States (“U.S.”), where we generated 73% of our revenues in 2018, we offer our apparel and accessories largely through our wholesale channel, which consists of mass and mid-tier retailers, specialty stores including western specialty retail, department stores, and retailer-owned and third-party e-commerce sites. We also sell our products in the U.S. through direct-to-consumer channels, including full-price stores, outlet stores and our own websites. Outside the U.S., where we generated 27% of our revenues in 2018, we operate through similar wholesale channels as in the U.S., and utilize distributors, agents, licensees, and partnerships along with our full-price and outlet stores and digital presence.

We believe our global supply chain provides us with significant competitive advantages and operating flexibility. Our internal manufacturing capabilities include owned and leased facilities, all of which are located in the Western Hemisphere, and produced approximately 38% of our total units sold in 2018. The remainder of our units sold were supplied by a range of third-party manufacturers. We distribute our products globally through our own distribution centers as well as through third-party distribution centers. We believe our flexible and balanced approach to manufacturing and distribution allows us to better manage our production, and in turn appeals to our customers who we believe view our ability to consistently meet their production needs as a point of competitive differentiation.



 

1


Table of Contents

We believe the consumer appeal of our brands combined with consistent execution of our manufacturing and distribution strategies have supported our ability to produce strong financial results. We generated over $2.75 billion in revenue and $330 million in operating income in each of the last five years. Additionally, our cash flows from operations were greater than $295 million in each of the years from 2014 through 2016. In 2017, our cash flows from operations were $168.6 million, which were impacted by a $110.6 million charge related to the transition tax component of the U.S. Tax Cut and Jobs Act (the “Tax Act”) that was deemed settled in cash with VF for purposes of carve-out financial reporting. In 2018, we reported cash flows used by operations of $96.3 million, primarily due to $323.3 million lower cash proceeds from settlement of the intercompany sale to VF of certain of the Company’s trade accounts receivable. The timing of the intercompany settlement was impacted by VF’s one-time change in fiscal year-end and does not reflect an operational deterioration in cash flows. We expect our cash flows to normalize post-Separation and intend to continue to invest in our brands, talent and capabilities, and growth strategies as well as to support a dividend to shareholders, and to repay our indebtedness over time.

Kontoor Brands is headquartered in Greensboro, North Carolina. Upon our separation from VF, we expect to trade under the ticker symbol “KTB” on the NYSE.

Our Competitive Strengths

Iconic Brands with Significant Global Scale.

Our two key brands are steeped in rich heritage and authenticity. The Wrangler® and Lee® brands generated approximately $1.6 billion and $960 million, respectively, in 2018 revenues and have an established global presence in the apparel market. Products bearing our brands are sold in more than 65 countries, and we believe they have strong consumer connectivity worldwide. We market our brands and products to highlight their differentiated position and product attributes. We strive to maximize our consumer reach by leveraging each brand’s “best practices” to drive growth across product categories and expand our overall revenues and earnings profile.

Founded over 70 years ago, Wrangler® is a classic American brand deeply rooted in U.S. western apparel and positioned as clothing ready for everyday life. Wrangler® branded products are offered in more than 20,000 retail doors worldwide and span a wide range of product categories including denim and non-denim bottoms, shirts, jackets, and other outerwear and accessories. We believe the Wrangler® brand appeals to a broad range of consumers worldwide who appreciate the brand’s western heritage, quality, and superior value. Outside the U.S., we believe the brand generally occupies a more premium positioning and carries a higher average price point.

Founded in 1889, Lee® is an authentic apparel brand with a heritage of purposeful craftsmanship and innovation. Lee® branded products offer versatile styling and superior comfort in denim and casual apparel for a multitude of activities, and target an active consumer interested in a stylish look through innovation designed for functional and visual appeal. The Lee® brand generates approximately 47% of its revenues outside the U.S., with a significant portion attributable to China and certain countries in Europe. In particular, since entering the Chinese market in 1995, the Lee® brand has developed a leading market position.

Deep Relationships with Brick & Mortar Retail and E-Commerce Leaders.

We have developed long-term relationships with many leading global brick & mortar and e-commerce retailers, whom we believe rely on our iconic brands, leading product quality and value, and innovation to address evolving consumer needs in our product categories. By fostering these relationships, we have become an important vendor for many of our customers and have built leading category positions, which in turn supports the availability of our brands to consumers and our ability to introduce new products and categories. We also endeavor to provide sophisticated logistics, planning, and merchandising expertise to support our customers,



 

2


Table of Contents

which we believe supports a level of insight that builds more integrated customer relationships. Over time, we believe we have developed an aptitude for addressing our customers’ unique and challenging inventory replenishment and planning needs, and have built a reputation as a reliable partner in a dynamic retail environment.

Integrated Supply Chain Built to Support Volume and Replenishment.

We are continually refining our supply chain to maximize efficiency and reinforce our reputation of reliability with our customers. Through our vertically integrated supply chain we manufacture, source, and distribute a significant quantity of high volume apparel products that are frequently replenished by our retail partners. Our product procurement and distribution strategies, combined with our internal manufacturing facilities and retail floor space management programs, allow us to maintain what we believe is a competitive advantage versus other apparel suppliers. Our supply chain is built to support large volumes and to meet customer needs while balancing cost and operational requirements. Our 13 internal manufacturing facilities are located in the Western Hemisphere, where their proximity to our primary markets enables us to deliver inventory in a consistent and timely manner. We also have established global third-party sourcing and distribution networks that we leverage across product categories and various regions. We believe our flexible and balanced approach to manufacturing and distribution allows us to better manage our production needs.

Many of our largest volume and highest velocity product styles continue from year to year, with design and innovation elements periodically updated to maintain our products’ relevance with consumers. We utilize real-time data provided by our customers to ensure timely delivery of our products and optimize our customers’ inventory levels. We believe our vertically integrated operations in combination with inventory and supply-demand reconciliation processes allow us to excel in meeting our retail customers’ rapid order requirements.

Highly Experienced Management Team and Board of Directors.

We have assembled a senior management team that is highly focused on continuing to grow our brands’ revenues, delivering strong and consistent financial results, and building a cohesive corporate culture. Together, our management team has over 50 years of combined experience in the apparel and accessories industry and brings deep global industry expertise to our newly independent company. Our President and Chief Executive Officer, Scott Baxter, served in various senior leadership positions at VF, including most recently as Vice President and Group President of Americas West, where he was responsible for overseeing brands such as The North Face® and Vans®, and previously as Group President of VF’s Jeanswear Americas business. Our Vice President and Chief Financial Officer, Rustin Welton, most recently served as Group Chief Financial Officer for VF’s Jeanswear, Workwear, Timberland® and VF Outlet™ businesses. Our two Vice Presidents and Global Brand Presidents, Thomas Waldron and Christopher Waldeck, maintain operational responsibility for the Wrangler® and Lee® brands, respectively, and have significant experience managing our brands domestically. We are also guided by a strong Board of Directors who bring valuable industry and management insight to Kontoor Brands. Our Board is led by our Non-Executive Chairman, Robert Shearer, who has extensive familiarity with our business and our industry, having served as Senior Vice President and Chief Financial Officer of VF from 2005 through 2015. We believe the depth of experience and deep industry knowledge of our management team and Board of Directors will drive the success of our new company.

Resilient Business Model That Delivers Consistent Results.

Our business has historically generated significant revenues, strong profits, and attractive cash flows due to our global brands, leading market positions, deep customer relationships, and the vertical integration of our supply chain. We believe we offer high product value and quality to our consumers, who respond to our value proposition by consistently purchasing our products over time. Over the last five years, we generated revenues in



 

3


Table of Contents

excess of $2.75 billion each year, and consistently delivered operating margins of 12% or greater each year. Our strong margin profile combined with our diligent approach to operational excellence and capital management have produced meaningful cash flows. We believe our consistent financial results will provide us with the opportunity to consistently invest in our business, return capital to shareholders, and repay debt.

Our Strategies

We have historically operated predominantly as a segment within VF. Following the Separation, we will become an independent publicly traded company led by a highly experienced management team fully dedicated to leveraging our capabilities and driving our strategic initiatives. We will also have increased flexibility to deploy our strong free cash flow towards our operating and capital allocation priorities.

Adopt a Global Approach for Optimizing the Wrangler® and Lee® Brands.

We believe the combination of our brands, scale, and global platform is differentiated in our industry. Historically, our brands have largely operated independently across geographic regions with regard to management, product design, and marketing. With one integrated senior leadership team to manage our brands and operations globally, there is an opportunity to implement an operating model that more efficiently leverages our global brands, scale, and platforms. We have built a leadership team based in Greensboro, North Carolina, that will include Global Presidents of both the Wrangler® and Lee® brands, as well as global leaders of the design, merchandising, digital, and direct-to-consumer departments. This centralized senior management team with global responsibility will work closely with our regional teams to deliver a unified brand and product design message while ensuring market-specific nuances are maintained. Through this integrated platform and management structure, we believe we can amplify the global strength of our brands, improve operating efficiency, and increase the overall demand for our products.

Continue to Increase Our Product Offering and Expand Our Target Consumer Base.

We see potential to enhance our existing product assortment, broaden our product offering, and expand into adjacent product categories. We leverage our Global Denim Innovation Network and Cognitive and Design Science Center to develop cognitive, design, textile, and product construction advancements that target the needs of our existing and potential new target consumer groups. We strive to create new products to attract a wide range of consumers, including women and younger generations, while seeking to ensure our core offering continues to serve the needs of our consumers. We believe we have the opportunity to also enter new categories that utilize our existing brand and product strengths, such as the outdoor and workwear categories. We have also introduced higher-end products at premium price points in the U.S. Successful execution of our product expansion strategies should broaden the appeal of our brands and products to new consumers, extend our reach into new product categories, and ultimately drive the overall revenues of our business. In addition, we also intend to opportunistically evaluate potential merger and acquisition targets to supplement our approach over the long-term.

Continue Expanding Our Distribution.

We believe there is an opportunity to expand the distribution of our products with new and existing brick & mortar and e-commerce customers internationally and in the U.S. We expect the integration and collaboration of our brands’ global leadership teams will help drive distribution opportunities for the Wrangler® and Lee® brands in both new and established markets by leveraging each brand’s relative distribution strengths across regions. Specifically, China provides an attractive geography to expand our existing presence and distribute more products across a range of price segments. In Europe, we intend to refine our strategy to become more consumer centric in addressing how and where our customers want to purchase our products. In the U.S., we see an opportunity to continue to grow with our major retail customers as well as drive distribution of our more premium products through higher-end department and specialty stores. We also expect to leverage our leading



 

4


Table of Contents

brand positions to increase our penetration with major global e-commerce players as this distribution channel continues to grow in consumer importance worldwide.

Drive Cost Savings and Efficiencies Across Our Global Organization.

We expect to realize efficiencies across our business as we create a more centralized global organization and pursue cost savings initiatives. As part of our centralized approach to our global business, our management team will oversee all brands for their respective business functions, including supply chain, digital, direct-to-consumer, and strategy while seeking to ensure we maintain our worldwide presence and regional approach. We have implemented initiatives to reduce costs and realize greater efficiencies, which have included transitioning our Central America and South America region to a distributor model, exiting certain supply chain operations, relocating Lee®’s North American headquarters to Greensboro, North Carolina and streamlining our global organizational structure. We will continue to implement various operational initiatives to address inefficiencies throughout our organization and cost savings programs that we expect to generate meaningful global cost savings. We plan to utilize such measures to fuel additional investments in our capabilities and brands while improving our overall profitability.

The Separation

On August 13, 2018, VF announced a plan to distribute to VF’s shareholders all of the shares of common stock of a newly formed company, Kontoor Brands, that would hold the Spin Business. Kontoor Brands is currently a wholly owned subsidiary of VF and, at the time of the Distribution will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the Spin Business.

The Separation will be achieved through the transfer of all the assets and liabilities of the Spin Business to Kontoor Brands or its subsidiaries in the Restructuring and the distribution of 100% of the outstanding capital stock of Kontoor Brands pro rata to holders of VF common stock as of the close of business on                 , 2019, the record date for the Distribution. At the effective time of the Distribution, VF shareholders will receive one share of Kontoor Brands common stock for every              shares of VF common stock held on the record date. The Separation is expected to be completed on                 , 2019. Immediately following the Separation, VF shareholders as of the record date for the Distribution will own 100% of the outstanding shares of common stock of Kontoor Brands.

Before the Distribution, we will enter into a Separation and Distribution Agreement and several other ancillary agreements with VF to effect the Separation and provide a framework for our relationship with VF after the Separation. These agreements will provide for the allocation between Kontoor Brands and VF of VF’s assets, liabilities and obligations (including with respect to employee matters, intellectual property matters, tax matters and certain other matters). Kontoor Brands and VF will also enter into a Transition Services Agreement, which will provide for various corporate, administrative, supply chain, logistics, distribution, contract manufacturing and information technology services, one or more lease, sub-lease or temporary service agreements or arrangements relating to real property and facilities used in both the Spin Business and the remaining businesses of VF, and certain additional commercial agreements.

The VF Board of Directors believes separating the Spin Business from VF’s other businesses is in the best interests of VF and its shareholders and has concluded the Separation will provide VF and Kontoor Brands with a number of potential opportunities and benefits, including the following:

 

   

Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business and opportunities. We believe the Separation will enable each company’s management team to better position its businesses to capitalize on developing macroeconomic trends, increase managerial focus to pursue its individual strategies and



 

5


Table of Contents
 

leverage its key strengths to drive performance. The management of each resulting company will be able to concentrate on its core competencies and growth opportunities, and will have increased flexibility and speed to design and implement corporate strategies based on the characteristics of its business.

 

   

Resource Allocation and Capital Deployment. Allow each company to allocate resources, incentivize employees and deploy capital to capture the significant long-term opportunities in their respective markets. The Separation will enable each company’s management team to implement a capital structure, dividend policy and growth strategy tailored to each unique business. Both businesses are expected to have direct access to the debt and equity capital markets to fund their respective growth strategies.

 

   

Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those characteristics. Separating the two businesses will provide investors with a more targeted investment opportunity so that investors interested in companies in our business will have the opportunity to acquire stock of Kontoor Brands.

The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For more information, see “Risk Factors—Risks Relating to the Separation” and “The Separation—Conditions to the Distribution” included elsewhere in this information statement.

Corporate Information

Kontoor Brands was incorporated in North Carolina on November 28, 2018. Kontoor Brands does not currently have any operations, has no assets and is not expected to conduct any operations until the completion of the Restructuring on or prior to the Distribution Date, pursuant to which the Spin Business assets will be contributed to and the Spin Business liabilities will be assumed by Kontoor Brands in accordance with the Separation and Distribution Agreement and other agreements entered into in connection with the Separation. Our principal executive offices are located at 400 N. Elm Street, Greensboro, North Carolina 27401 and our telephone number is 336-332-3400. Our Internet site will be www.kontoorbrands.com. Our website and the information contained therein or connected thereto is not incorporated into this information statement or the registration statement of which it forms a part.



 

6


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE SEPARATION

Please see “The Separation” for a more detailed description of the matters summarized below.

Q: Why am I receiving this document?

A: You are receiving this document because you are a holder of shares of VF common stock on the record date for the Distribution and, as such, will be entitled to receive shares of Kontoor Brands common stock upon completion of the transactions described in this information statement. We are sending you this document to inform you about the Separation and to provide you with information about Kontoor Brands and its business and operations upon completion of the Separation.

Q: What do I have to do to participate in the Separation?

A: Nothing. You will not be required to pay any cash or deliver any other consideration in order to receive the shares of Kontoor Brands common stock that you will be entitled to receive upon completion of the Separation. In addition, no shareholder approval will be required for the Separation and therefore you are not being asked to provide a proxy with respect to any of your shares of VF common stock in connection with the Separation and you should not send us a proxy.

Q: Why is VF separating the Spin Business from its other businesses?

A: The VF Board of Directors believes separating our business from VF’s other businesses will provide both companies with a number of potential opportunities and benefits, such as enabling (1) the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business and opportunities; (2) each company to allocate resources and deploy capital in a manner consistent with its own priorities; and (3) investors, both current and prospective, to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those characteristics.

Q: What is Kontoor Brands?

A: Kontoor Brands is a newly formed North Carolina corporation that will hold the Spin Business, directly or indirectly through its subsidiaries, and be publicly traded following the Separation.

Q: How will VF accomplish the Separation of Kontoor Brands?

A: The Separation involves the Restructuring (i.e., the transfer of the assets and liabilities related to the Spin Business to Kontoor Brands or its subsidiaries) and the Distribution (i.e., VF’s distribution to its shareholders of all the shares of Kontoor Brands’ common stock). Following this Restructuring and Distribution, Kontoor Brands will be a publicly traded company independent from VF, and VF will not retain any ownership interest in Kontoor Brands.

Q: What will I receive in the Distribution?

A: At the effective time of the Distribution, you will be entitled to receive one share of Kontoor Brands common stock for every              shares of VF common stock held by you on the record date.

Q: How does my ownership in VF change as a result of the Separation?

A: Your ownership of VF stock will not be affected by the Separation.



 

7


Table of Contents

Q: What is the record date for the Distribution?

A: The record date for the Distribution is                     , 2019, and ownership will be determined as of the close of business on that date. When we refer to the record date in this information statement, we are referring to that time and date.

Q: When will the Distribution occur?

A: The Distribution is expected to occur on                     , 2019.

Q: As a holder of shares of VF common stock as of the record date for the Distribution, how will shares of Kontoor Brands be distributed to me?

A: At the effective time, we will instruct our transfer agent and distribution agent to make book-entry credits for the shares of Kontoor Brands common stock that you are entitled to receive. Since shares of Kontoor Brands common stock will be in uncertificated book-entry form, you will receive share ownership statements in place of physical share certificates.

Q: What if I hold my shares through a broker, bank or other nominee?

A: VF shareholders who hold their shares through a broker, bank or other nominee will have their brokerage account credited with Kontoor Brands common stock. For additional information, those shareholders should contact their broker or bank directly.

Q: Why is no VF shareholder vote required to approve the Separation and its material terms?

A: VF is incorporated in Pennsylvania. Pennsylvania law does not require a shareholder vote to approve the Separation as long as (i) the Distribution is made in a manner that does not cause VF to be unable to pay its debts in the usual course of its business or (ii) cause the total assets of VF to be less than the sum of its total liabilities.

Q: How will fractional shares be treated in the Distribution?

A: You will not receive fractional shares of Kontoor Brands common stock in the Distribution. The distribution agent will aggregate and sell on the open market the fractional shares of Kontoor Brands common stock that would otherwise be issued in the Distribution, and if you would otherwise be entitled to receive a fractional share of Kontoor Brands common stock in connection with the Distribution, you will instead receive the net cash proceeds of the sale attributable to such fractional share.

Q: What are the U.S. federal income tax consequences to me of the Distribution?

A: A condition to the closing of the Separation is VF’s receipt of an opinion of each of Davis Polk & Wardwell LLP and Ernst & Young LLP (each, a “Tax Adviser”, together the “Tax Advisers”), to the effect that the Distribution will qualify under the Internal Revenue Code of 1986, as amended (the “Code”), as a transaction that is tax-free to VF and to its shareholders. On the basis that the Distribution so qualifies, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income in connection with the Distribution, except with respect to any cash received in lieu of fractional shares. You should review the section entitled “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution” for a discussion of the material U.S. federal income tax consequences of the Distribution.



 

8


Table of Contents

Q: How will I determine the tax basis I will have in my VF shares after the Distribution and the Kontoor Brands shares I receive in the Distribution?

A: Generally, for U.S. federal income tax purposes, your aggregate basis in your shares of VF common stock and the shares of Kontoor Brands common stock you receive in the Distribution (including any fractional shares for which cash is received) will equal the aggregate basis of VF common stock held by you immediately before the Distribution. This aggregate basis should be allocated between your shares of VF common stock and the shares of Kontoor Brands common stock you receive in the Distribution (including any fractional shares for which cash is received) in proportion to the relative fair market value of each immediately following the Distribution. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

Q: How will VF’s common stock and Kontoor Brands’ common stock trade after the Separation?

A: There is currently no public market for Kontoor Brands common stock. We have applied to have Kontoor Brands’ common stock listed on the NYSE under the ticker symbol “KTB.” VF common stock will continue to trade on the NYSE under the ticker symbol “VFC.”

Q: If I sell my shares of VF common stock before or on the Distribution Date, will I still be entitled to receive Kontoor Brands shares in the Distribution with respect to the sold shares?

A: Beginning on or shortly before the record date and continuing up to and including the Distribution Date, we expect there will be two markets in VF common stock: a “regular-way” market and an “ex-distribution” market. Shares of VF common stock that trade on the “regular-way” market will trade with an entitlement to receive shares of our common stock to be distributed in the Distribution. Shares that trade on the “ex-distribution” market will trade without an entitlement to receive shares of our common stock to be distributed in the Distribution, so that holders who initially sell VF shares ex-distribution will still be entitled to receive shares of Kontoor Brands common stock even though they have sold their shares of VF common stock before the Distribution, because the VF shares were sold after the record date. Therefore, if you owned shares of VF common stock on the record date and sell those shares on the “regular-way” market before the Distribution Date, you will also be selling the right to receive the shares of our common stock that would have been distributed to you in the Distribution. If you own shares of VF common stock as of the close of business on the record date and sell these shares in the “ex-distribution” market on any date up to and including the Distribution Date, you will still receive the shares of our common stock that you would be entitled to receive in respect of your ownership of the shares of VF common stock that you sold. You are encouraged to consult with your financial advisor regarding the specific implications of selling your VF common stock prior to or on the Distribution Date.

Q: Will I receive a stock certificate for Kontoor Brands shares distributed as a result of the Distribution?

A: No. Registered holders of VF common stock who are entitled to participate in the Distribution will receive a book-entry account statement reflecting their ownership of Kontoor Brands common stock. For additional information, registered shareholders in the U.S., Canada or Puerto Rico should contact VF’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), in writing at C/O: Shareholder Services, P.O. Box 505000, Louisville, Kentucky 40233-5000, Toll Free at 1-800-446-2617 or through its website at www.computershare.com/investor. Shareholders from outside the U.S., Canada and Puerto Rico may call 1-781- 575-2725. See “The Separation—When and How You Will Receive the Distribution of Kontoor Brands Shares.”

Q: Can VF decide to cancel the Distribution of the Kontoor Brands common stock even if all the conditions have been met?

A: Yes. VF has the right to terminate, or modify the terms of, the Separation at any time prior to the Distribution, even if all of the conditions to the Distribution are satisfied.



 

9


Table of Contents

Q: Do I have appraisal rights?

A: No, VF shareholders do not have any appraisal rights in connection with the Separation.

Q: Will Kontoor Brands incur any debt in connection with the Separation?

A: Yes. We intend to enter into new financing arrangements in anticipation of the Separation consisting of a term loan A facility, a term loan B facility (collectively with the term loan A facility, the “term loan facilities”) and a revolving facility. We expect to incur up to $1.05 billion of new debt from the proceeds of the term loan facilities, which we intend to use primarily to, directly or indirectly, fund a cash transfer to members of VF’s group as part of the Restructuring, to pay related fees and expenses and for other general corporate purposes. We expect for our revolving facility to be undrawn at the Separation, provided that it may be used, subject to a cap, as part of the Restructuring and to pay related fees and expenses at the Separation, and otherwise may be used for, among other things, working capital and general corporate purposes. See “The Separation—Incurrence of Debt.”

Following the Separation, our debt obligations could restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from VF’s other businesses may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to the businesses collectively. Also, our business, financial condition, results of operations and cash flows could be harmed by a deterioration of our credit profile or by factors adversely affecting the credit markets generally. See “Risk Factors—Risks Relating to the Separation.”

Q: Does Kontoor Brands intend to pay cash dividends?

A: We intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $            per share of our common stock (representing a quarterly rate initially equal to $            per share). The declaration and amount of any future dividends will be determined by our Board of Directors and will depend on our financial condition, earnings, cash flows, capital requirements, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors that our Board of Directors deems relevant. See “Dividend Policy.”

Q: Will the Separation affect the trading price of my VF stock?

A: Yes. The trading price of shares of VF common stock immediately following the Distribution is expected to be lower than immediately prior to the Distribution because the trading price will no longer reflect the value of the Spin Business. We cannot provide you with any assurance regarding the price at which the VF shares will trade following the Separation.

Q: What will happen to outstanding VF equity compensation awards?

A: In connection with the Separation, (i) VF equity awards held by individuals who will continue to be employed by or provide services to VF will be adjusted to reflect the difference in the trading price of VF common stock before and after the Distribution, and, if applicable, the trading price of our common stock, (ii) VF options held by retirement eligible individuals who will be transferred to Kontoor Brands will be treated in the same manner as VF equity awards held by individuals who will continue to be employed by or provide services to VF, and (iii) VF equity awards held by individuals who will be transferred to Kontoor Brands will be treated as follows: (a) stock options, restricted share units and other special awards will be converted into equity awards with respect to Kontoor Brands common stock, taking into account the difference in the trading price of VF common stock before and after the Distribution and the trading price of Kontoor Brands common stock following the Separation and (b) performance share unit awards granted in 2017 and 2018 will be pro-rated based on the portion of the performance periods that have elapsed as of the Distribution, with such pro-rated awards remaining as VF equity



 

10


Table of Contents

awards and the remaining portion of such VF awards will be converted into time-vested restricted share units with respect to Kontoor Brands Common Stock for the 2017 grant and performance share unit awards for the 2018 grant with respect to Kontoor Brands stock. VF performance share units granted in 2016 will be settled following the Distribution once the VF Compensation Committee (as defined below) has reviewed and certified VF’s performance metrics. See “Treatment of Outstanding Equity Compensation Awards.”

Q: What will the relationship between VF and Kontoor Brands be following the Separation?

A: After the Separation, VF will not own any shares of Kontoor Brands common stock, and each of VF and Kontoor Brands will be independent, publicly traded companies with their own management teams and boards of directors. However, in connection with the Separation, we will enter into a number of agreements with VF that, among other things, govern the Separation and allocate responsibilities for obligations arising before and after the Separation, including, among others, obligations relating to our employees, taxes and real and intellectual property. See “The Separation—Agreements with VF.”

Q: Who is the transfer agent for Kontoor Brands common stock?

A: Computershare will be the transfer agent for Kontoor Brands common stock. Computershare’s mailing address is C/O: Shareholder Services, P.O. Box 505000, Louisville, Kentucky 40233-5000 and Computershare’s phone number for shareholders in the U.S., Canada or Puerto Rico is Toll Free 1-800-446-2617 and for shareholders from outside the U.S., Canada and Puerto Rico is 1-781-575-2725.

Q: Who is the distribution agent for the Distribution?

A: Computershare Trust Company, N.A.

Q: Who can I contact for more information?

A: If you have questions relating to the mechanics of the distribution of Kontoor Brands shares, you should contact the distribution agent:

Computershare Trust Company, N.A.

C/O: Shareholder Services

P.O. Box 505000

Louisville, Kentucky 40233-5000

United States

Toll Free: 1-800-446-2617

  International:

1-781-575-2879

Before the Separation, if you have questions relating to the transactions described herein, you should contact VF at:

Scott A. Deitz

V.F. Corporation

105 Corporate Center Boulevard

Greensboro, North Carolina 27408

United States

Phone: 336-424-6000



 

11


Table of Contents

SUMMARY OF THE SEPARATION

The following is a summary of the material terms of the Separation, including the Restructuring, the Distribution and certain other related transactions.

 

Distributing Company

V.F. Corporation, a Pennsylvania corporation. After the Distribution, VF will not own any shares of Kontoor Brands common stock.

 

Distributed Company

Kontoor Brands, a North Carolina corporation, is a wholly owned subsidiary of VF and, at the time of the Distribution, will hold, directly or indirectly through its subsidiaries, all of the assets and liabilities of the Spin Business. After the Distribution, Kontoor Brands will be an independent, publicly traded company.

 

Distributed Company Structure

Kontoor Brands is a holding company. At the time of the Distribution it will own the shares of a number of subsidiaries operating its businesses.

 

Record Date

The record date for the Distribution is on the close of business on                     , 2019.

 

Distribution Date

The Distribution Date is                     , 2019.

 

Distributed Securities

VF will distribute 100% of the shares of Kontoor Brands common stock outstanding immediately prior to the Distribution. Based on the approximately              shares of VF common stock outstanding on                     , 2019, and applying the distribution ratio of one share of Kontoor Brands common stock for every              shares of VF common stock, VF will distribute approximately              shares of Kontoor Brands common stock to VF shareholders who hold VF common stock as of the record date.

 

Distribution Ratio

Each holder of VF common stock will receive one share of Kontoor Brands common stock for every              shares of VF common stock held as of the close of business on                     , 2019.

 

Fractional Shares

VF will not distribute any fractional shares of Kontoor Brands common stock to VF shareholders. Instead, as soon as practicable on or after the Distribution Date, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds, net of brokerage fees and commissions, transfer taxes and other costs and after making appropriate deductions of the amounts required to be withheld for U.S. federal income tax purposes, if any, from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any minimum sale price



 

12


Table of Contents
 

for the fractional shares or to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient shareholders for U.S. federal income tax purposes as described in “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

 

Distribution Method

Kontoor Brands common stock will be issued only by direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to shareholders, as is the case in this Distribution.

 

Conditions to the Distribution

The Distribution is subject to the satisfaction or waiver by VF of the following conditions, as well as other conditions described in this information statement in “The Separation—Conditions to the Distribution”:

 

   

The SEC will have declared effective our registration statement on Form 10, of which this information statement is a part, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no stop order suspending the effectiveness of our registration statement on Form 10 will be in effect, and no proceedings for such purpose will have been instituted or threatened by the SEC, and this information statement, or a notice of Internet availability thereof, will have been mailed to the holders of VF common stock as of the record date for the Distribution;

 

   

Our common stock to be delivered in the Distribution will have been approved for listing on the NYSE, subject to official notice of issuance;

 

   

VF shall have received opinions of the Tax Advisers, in each case reasonably satisfactory to VF, to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code;

 

   

Any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operations of our business after the distribution date substantially as conducted as of the date of the Separation and Distribution Agreement shall have been obtained; and

 

   

No event or development will have occurred or exist that, in the judgment of the VF Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the Separation or other transactions contemplated by the Separation and Distribution



 

13


Table of Contents
 

Agreement or by any of the ancillary agreements contemplated by the Separation and Distribution Agreement.

 

  The fulfillment of the conditions to the Distribution will not create any obligations on VF’s part to effect the Separation, and the VF Board of Directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the Separation, including by accelerating or delaying the timing of the consummation of all or part of the Distribution, at any time prior to the Distribution Date.

 

Stock Exchange Listing

We have applied to have our common stock listed on the NYSE under the ticker symbol “KTB.”

 

Dividend Policy

We intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $            per share of our common stock (representing a quarterly rate initially equal to $            per share). The declaration and amount of all future dividends will be determined by our Board of Directors and will depend on our financial condition, earnings, cash flows, capital requirements, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors that our Board of Directors believes are relevant. For more information, see “Dividend Policy.”

 

Transfer Agent

Computershare Trust Company, N.A.

 

U.S. Federal Income Tax Consequences

A condition to the closing of the Separation is VF’s receipt of opinions of the Tax Advisers to the effect that the Distribution will qualify under the Code as a transaction that is tax-free to VF and to its shareholders. You should review the section entitled “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution” for a discussion of the material U.S. federal income tax consequences of the Distribution.


 

14


Table of Contents

SUMMARY RISK FACTORS

We are subject to a number of risks, including risks related to the Separation, including the Restructuring and the Distribution, and other related transactions. The following list of risk factors is not exhaustive. Please read “Risk Factors” carefully for a more thorough description of these and other risks.

Risks Relating to the Separation

 

   

We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.

 

   

We have no history of operating as an independent company, and our historical combined and unaudited pro forma financial information is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

 

   

We have historically operated as a business segment of VF, and there are risks associated with our separation from VF.

 

   

We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company.

 

   

The obligations associated with being a public company will require significant resources and management attention.

 

   

Until the Distribution occurs, VF has sole discretion to change the terms of the Separation in ways that may be unfavorable to us.

 

   

In connection with the Separation, VF will indemnify us for certain liabilities and we will indemnify VF for certain liabilities. If we are required to act under these indemnities to VF, we may need to divert cash to meet those obligations, which could adversely affect our financial results. Moreover, the VF indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and VF may not be able to satisfy its indemnification obligations to us in the future.

 

   

Following the Separation, we will have debt obligations that could restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from VF’s other businesses may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

Risks Relating to Our Business

 

   

Kontoor Brands’ revenues and profits depend on the level of consumer spending for apparel, which is sensitive to global economic conditions and other factors. A decline in consumer spending could have a material adverse effect on Kontoor Brands.

 

   

The apparel industry is highly competitive, and Kontoor Brands’ success depends on its ability to gauge consumer preferences and product trends, and to respond to constantly changing markets.

 

   

Kontoor Brands’ results of operations could be materially harmed if we are unable to accurately forecast demand for our products.

 

   

Kontoor Brands’ business and the success of its products could be harmed if Kontoor Brands is unable to maintain the images of its brands.

 

   

Kontoor Brands’ profitability may decline as a result of increasing pressure on margins.



 

15


Table of Contents
   

Kontoor Brands may not succeed in its business strategy.

 

   

A substantial portion of Kontoor Brands’ revenues and gross profit is derived from a small number of large customers. The loss of any of these customers or the inability of any of these customers to pay us could substantially reduce our revenues and profits.

 

   

Kontoor Brands relies significantly on information technology. Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business.

 

   

Fluctuations in wage rates and the price, availability and quality of raw materials, including commodity costs, and finished goods could increase costs.

Risks Relating to Our Common Stock

 

   

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the Separation.

 

   

A large number of our shares are or will be eligible for future sale, which may cause the market price of our common stock to decline.

 

   

Because we do not expect our common stock will be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices, significant amounts of our common stock will likely need to be sold in the open market where there may not be offsetting demand.

 

   

Provisions in our amended and restated articles of incorporation and amended and restated bylaws and certain provisions of North Carolina Law (as defined below) could delay or prevent a change in control of Kontoor Brands.

 

   

Your percentage ownership in Kontoor Brands may be diluted in the future.



 

16


Table of Contents

RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained in this information statement. Some of these risks relate principally to our separation from VF, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock. Our business, prospects, results of operations, financial condition or cash flows could be materially and adversely affected by any of these risks, and, as a result, the trading price of our common stock could decline.

Risks Relating to the Separation

We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.

We may not be able to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all. The Separation is expected to enhance strategic and management focus, provide a distinct investment identity and allow us to efficiently allocate resources and deploy capital. We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

 

   

The Separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business;

 

   

Following the Separation, we may be more susceptible to economic downturns and other adverse events than if we were still a part of VF;

 

   

Following the Separation, our business will be less diversified than VF’s business prior to the Separation; our business will also experience a loss of scale and access to certain financial, managerial and professional resources from which we have benefited in the past; and

 

   

The other actions required to separate the respective businesses could disrupt our operations.

If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our business could be harmed.

We have no history of operating as an independent company, and our historical combined and unaudited pro forma financial information is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

Our historical combined and unaudited pro forma combined financial information included in this information statement have been derived from VF’s consolidated financial statements and accounting records and are not necessarily indicative of our future results of operations, financial condition or cash flows, nor do they reflect what our results of operations, financial condition or cash flows would have been as an independent public company during the periods presented. In particular, the historical combined financial information included in this information statement is not necessarily indicative of our future results of operations, financial condition or cash flows primarily because of the following factors:

 

   

Prior to the Separation, our business has been operated by VF as part of its broader corporate organization, rather than as an independent company. VF or one of its affiliates provide support for various corporate functions for us, such as information technology, shared services, medical insurance, procurement, logistics, marketing, human resources, legal, finance and internal audit;

 

   

Our historical combined financial results reflect the direct, indirect and allocated costs for such services historically provided by VF, and these costs may significantly differ from the comparable expenses we would have incurred as an independent company;

 

17


Table of Contents
   

Our working capital requirements and capital expenditures historically have been satisfied as part of VF’s corporate-wide cash management and centralized funding programs, and our cost of debt and other capital may significantly differ from that which is reflected in our historical combined financial statements;

 

   

The historical combined financial information may not fully reflect the costs associated with the Separation, including the costs related to being an independent public company;

 

   

Our historical combined financial information does not reflect our obligations under the various transitional and other agreements we will enter into with VF in connection with the Separation, though costs under such agreements are expected to be broadly similar to what was charged to the business in the past; and

 

   

Currently, our business is integrated with that of VF and we benefit from VF’s size and scale in costs, employees and vendor and customer relationships. Thus, costs we will incur as an independent company may significantly exceed comparable costs we would have incurred as part of VF and some of our customer relationships may be weakened or lost.

We based the pro forma adjustments included in this information statement on available information and assumptions that we believe are reasonable and factually supportable; actual results, however, may vary. In addition, our unaudited pro forma combined financial information included in this information statement may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma combined financial statements do not reflect what our results of operations, financial condition or cash flows would have been as an independent public company and are not necessarily indicative of our future financial condition or future results of operations.

Please refer to “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and the notes to those statements included elsewhere in this information statement.

We have historically operated within VF, and there are risks associated with our separation from VF.

We have historically operated within VF and a number of aspects of our current relationship with VF will change as a result of our separation from VF. For example, following a transition period, we will not be able to use certain VF trademarks in connection with our business, including on our products or promotional materials. In addition, some of our customers, landlords, vendors or other contract counterparties may have contracted with us because we were part of VF, and we may have difficulty marketing our products or obtaining favorable terms in our leases and other contractual arrangements in the future as a result of our separation from VF. As part of our separation from VF, we will also operate the U.S.-based VF Outlet™ business, which carries both of our primary brands as well as VF-branded products and third-party branded merchandise. Following the Separation, certain VF brands or third-party brands may decide to no longer sell products through the VF Outlet™ stores operated by us. Additionally, following a transition period, we will not be able to use the VF trademark in connection with our VF Outlet™ business and will need to either rebrand the business or enter into an arms-length trademark license with VF for the use of the VF trademark. These and other changes could have a material adverse effect on our business and results of operations.

We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company.

VF currently performs many important corporate functions for us, including internal audit, finance, accounting, tax, human resources, procurement, information technology, supply chain, logistics, distribution, litigation management, real estate, environmental and public affairs. The costs of these services has been allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenues, costs of goods sold or square footage, as applicable. Following the Separation, VF will continue to provide some of these services to us on a transitional basis, for a period of up to two years following

 

18


Table of Contents

the Distribution pursuant to a Transition Services Agreement that we will enter into with VF. See “The Separation—Agreements with VF—Transition Services Agreement.” VF may not successfully execute all of these functions during the transition period or we may have to expend significant efforts or costs materially in excess of those estimated under the Transition Services Agreement. Any interruption in these services could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf. The costs associated with performing or outsourcing these functions may exceed the amounts reflected in our historical combined financial statements that were incurred as a business segment of VF. We expect to incur costs beginning in the second quarter of 2019 to establish the necessary infrastructure. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, results of operations, financial condition and cash flows.

For example, VF will provide warehousing services to us at a facility retained by VF in Kunshan, China, our sole warehouse facility in Asia, for a period of up to 24 months following the Separation. We may have difficulty performing or outsourcing this function in a timely manner, at comparable costs or at all after the transition period. Moreover, certain of the assets, employees and liabilities transferred to us relating to our sole European distribution facility in the Czech Republic, which facility will be retained by VF and leased to us on a transitional basis, will be transferred to us subject to an option in favor of VF to purchase all of the outstanding equity interests of our subsidiary that will hold such assets, employees and liabilities. The option will be exercisable at VF’s sole discretion during the ninety day period following the expiration of our lease to such facility (which has a term of one year subject to a right for us to extend the lease term for an additional two-month period). If VF decides to exercise this option at the end of this 12-14 month period, we may have difficulty performing or outsourcing this function in a timely manner, at comparable costs or at all. Any disruption or interruption in our warehousing and distribution function could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The obligations associated with being a public company will require significant resources and management attention.

Currently, we are not directly subject to the reporting and other requirements of the Exchange Act. Following the effectiveness of the registration statement of which this information statement forms a part, we will be directly subject to such reporting and other obligations under the Exchange Act and the rules of the NYSE. As an independent public company, we are required to, among other things:

 

   

Prepare and distribute periodic reports, proxy statements and other shareholder communications in compliance with the federal securities laws and NYSE rules;

 

   

Have our own Board of Directors and committees thereof, which comply with federal securities laws and NYSE rules;

 

   

Maintain an internal audit function;

 

   

Institute our own financial reporting and disclosure compliance functions;

 

   

Establish an investor relations function;

 

   

Establish internal policies, including those relating to trading in our securities and disclosure controls and procedures; and

 

   

Comply with the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the Public Company Accounting Oversight Board and the NYSE.

These reporting and other obligations will place significant demands on our management and our administrative and operational resources, including accounting resources, and we expect to face increased legal, accounting, administrative and other costs and expenses relating to these demands that we had not incurred as a segment of VF. Our investment in compliance with existing and evolving regulatory requirements will result in

 

19


Table of Contents

increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

If we fail to maintain effective internal controls, we may not be able to report our financial results accurately or timely or prevent or detect fraud, which could have a material adverse effect on our business or the market price of our securities.

In accordance with Section 404 of the Sarbanes-Oxley Act, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls until the year following the first annual report required to be filed with the SEC. When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by our internal auditing and accounting staff and our outside independent registered public accounting firm, and testing of our internal controls over financial reporting by our internal auditing and accounting staff and our outside independent registered public accounting firm. This process will involve considerable time and attention, may strain our internal resources, and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If management or our independent registered public accounting firm determines that our internal control over financial reporting is not effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources. In addition, if our controls are not effective, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our combined financial statements, a decline in our stock price, suspension or delisting of our common stock from the NYSE, and could have a material adverse effect on our business, financial condition, prospects and results of operations.

Until the Distribution occurs, VF has sole discretion to change the terms of the Separation in ways that may be unfavorable to us.

Until the Distribution occurs, Kontoor Brands’ business will be a business segment of VF. Completion of the Separation remains subject to the satisfaction or waiver of certain conditions, some of which are in the sole and absolute discretion of VF, including final approval by the VF Board of Directors. Additionally, VF has the sole and absolute discretion to change certain terms of the Separation, including the amount of any cash transfer we make to VF, the amount of our indebtedness and the allocation of contingent liabilities, which changes could be unfavorable to us. In addition, VF may decide at any time prior to the completion of the Separation not to proceed with the Separation.

In connection with the Separation, VF will indemnify us for certain liabilities and we will indemnify VF for certain liabilities. If we are required to act under these indemnities to VF, we may need to divert cash to meet those obligations, which could adversely affect our financial results. Moreover, the VF indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and VF may not be able to satisfy its indemnification obligations to us in the future.

Pursuant to the Separation and Distribution Agreement and other agreements with VF, VF will agree to indemnify us for certain liabilities, and we will agree to indemnify VF for certain liabilities, as discussed further in “The Separation—Agreements with VF.” Payments that we may be required to provide under indemnities to VF are not subject to any cap, may be significant and could negatively affect our business, particularly under indemnities relating to our actions that could affect the tax-free nature of the Separation. Third parties could also seek to hold us responsible for the liabilities that VF has agreed to retain, and under certain circumstances, we may be subject to continuing contingent liabilities of VF following the Separation that arise relating to the operations of the Spin Business during the time that it was a business segment of VF prior to the Separation, such

 

20


Table of Contents

as certain tax liabilities which relate to periods during which taxes of the Spin Business were reported as a part of VF; liabilities retained by VF which relate to contracts or other obligations entered into jointly by the Spin Business and VF’s retained business; pension and other post-employment liabilities, including unfunded liabilities, that apply to VF, including the Spin Business; environmental liabilities related to sites at which both VF and the Spin Business operated; and liabilities arising from third-party claims in respect of contracts in which both VF and the Spin Business supply goods or provide services.

VF has agreed to indemnify us for such contingent liabilities. While we have no reason to expect that VF will not be able to support its indemnification obligations to us, we can provide no assurance that VF will be able to fully satisfy its indemnification obligations or that such indemnity obligations will be sufficient to cover our liabilities for matters which VF has agreed to retain, including such contingent liabilities. Moreover, even if we ultimately succeed in recovering from VF any amounts for which we are indemnified, we may be temporarily required to bear these losses ourselves. Each of these risks could have a material adverse effect on our business, results of operations and financial condition.

After the Separation, we will only have limited access to the insurance policies maintained by VF for events occurring prior to the Separation and VF’s insurers may deny coverage to us under such policies. Furthermore, there can be no assurance that we will be able to obtain insurance coverage following the Separation on terms that justify its purchase, and any such insurance may not be adequate to offset costs associated with certain events.

In connection with the Separation, we will enter into agreements with VF to address several matters associated with the Separation, including insurance coverage. The Separation and Distribution Agreement will provide that following the Distribution, Kontoor Brands will no longer have insurance coverage under VF insurance policies in connection with events occurring before, as of or after the Distribution, other than coverage for (i) events occurring prior to the Distribution and covered by occurrence-based policies of VF as in effect as of the Distribution and (ii) events or acts occurring prior to the Distribution and covered by claims-made policies of VF as in effect as of the Distribution. However, after the Separation, VF’s insurers may deny coverage to us for losses associated with occurrences prior to the Separation. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage. In addition, we will have to obtain our own insurance policies after the Distribution is complete. Although we expect to have insurance policies in place as of the Distribution that cover certain, but not all, hazards that could arise from our operations, we can provide no assurance that we will be able to obtain such coverage, that the cost of such coverage will be similar to those incurred by VF or that such coverage will be adequate to protect us from costs incurred with certain events. The occurrence of an event that is not insured or not fully insured could have a material adverse effect on our results of operations, financial condition and cash flows in the future. See “The Separation—Agreements with VF.”

Following the Separation, we will have debt obligations that could restrict our business and adversely impact our results of operations, financial condition or cash flows. In addition, the Separation of our business from VF may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

In connection with the Separation, we expect to incur up to $1.05 billion of new debt from the proceeds of the term loan facilities, which we intend to use primarily to, directly or indirectly, fund a cash transfer to members of VF’s group as part of the Restructuring, to pay related fees and expenses and for other general corporate purposes. We expect for our revolving facility to be undrawn at the Separation, provided that it may be used, subject to a cap, as part of the Restructuring and to pay related fees and expenses at the Separation, and otherwise may be used for, among other things, working capital and general corporate purposes. This level of debt could have significant consequences on our future operations, including:

 

   

Making it more difficult for us to meet our payment and other obligations under our outstanding debt;

 

   

Resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which could result in all of our debt becoming immediately due and payable;

 

21


Table of Contents
   

Reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

 

   

Limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and

 

   

Placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.

Any of the above-listed factors could have a material adverse effect on our business, financial condition and results of operations. We may also incur substantial additional indebtedness in the future.

In addition, any future indenture or credit agreements that we may enter into may include restrictive covenants that, subject to certain exceptions and qualifications, restrict or limit our ability and the ability of our restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends, make certain investments, sell certain assets and enter into certain strategic transactions, including mergers and acquisitions. These covenants and restrictions could affect our ability to operate our business, and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise.

Our separation from VF may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

Transfer or assignment to us of some contracts and other assets will require the consent of a third-party. If such consent is not given, we may not be entitled to the benefit of such contracts, investments and other assets in the future.

Transfer or assignment of some of the contracts and other assets in connection with the Separation will require the consent of a third-party to the transfer or assignment. Similarly, in some circumstances, we are joint beneficiaries of contracts, and we will need to enter into a new agreement with the third-party to replicate the existing contract or assign the portion of the existing contract related to our business. While we anticipate that most of these contract assignments and new agreements will be obtained prior to the Separation, we may not be able to obtain all required consents or enter into all such new agreements, as applicable, until after the Distribution Date. Some parties may use the requirement of a consent to seek more favorable contractual terms from us, which could include our having to obtain letters of credit or other forms of credit support. If we are unable to obtain such consents or such credit support on commercially reasonable and satisfactory terms, we may be unable to obtain some of the benefits, assets and contractual commitments that are intended to be allocated to us as part of the Separation. In addition, where we do not intend to obtain consent from third-party counterparties based on our belief that no consent is required, the third-party counterparties may challenge the transaction on the basis that the terms of the applicable commercial arrangements require their consent. We may incur substantial litigation and other costs in connection with any such claims and, if we do not prevail, our ability to use these assets could be adversely impacted.

Although we do not believe that any of the contracts or other assets requiring consent to transfer or the contracts requiring a new agreement are individually material to the Spin Business, we cannot provide assurance that all such required third-party consents and new agreements will be procured or put in place, as applicable, prior to the Distribution Date. Consequently, we may not realize certain of the benefits that are intended to be allocated to us as part of the Separation.

After the Separation, some of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in VF.

Because of their current or former positions with VF, following the Separation, some of our directors and executive officers may own shares of VF common stock or have options to acquire shares of VF common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. This

 

22


Table of Contents

ownership may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for VF or us. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between VF and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies.

The combined post-Distribution value of VF and Kontoor Brands shares may not equal or exceed the pre-Distribution value of VF shares.

After the Separation, we expect that VF common stock will continue to be traded on the NYSE. We have applied to list the shares of our common stock on the NYSE. We cannot assure you that the combined trading prices of VF common stock and our common stock after the Separation, as adjusted for any changes in the combined capitalization of both companies, will be equal to or greater than the trading price of VF common stock prior to the Separation. Until the market has fully evaluated the business of VF without our business and potentially thereafter, the price at which VF common stock trades may fluctuate significantly. Similarly, until the market has fully evaluated our business and potentially thereafter, the price at which our common stock trades may fluctuate significantly.

We potentially could have received better terms from unaffiliated third parties than the terms we received in our agreements with VF.

The agreements we entered into with VF in connection with the Separation were negotiated while we were still part of VF’s business. See “The Separation—Agreements with VF.” Accordingly, during the period in which the terms of those agreements will have been negotiated, we did not have an independent Board of Directors or a management team independent of VF. The terms of the agreements negotiated in the context of the Separation relate to, among other things, the allocation of assets, intellectual property, liabilities, rights and other obligations between VF and us, and arm’s-length negotiations between VF and an unaffiliated third-party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third-party.

If the Restructuring and Distribution, together with certain related transactions, do not qualify as transactions that are tax-free for U.S. federal income tax purposes or non-U.S. tax purposes, VF and/or holders of VF common stock could be subject to significant tax liability.

It is intended that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code. The consummation of the Separation and the related transactions is conditioned upon the receipt of opinions of the Tax Advisers to the effect that such transactions will qualify for this intended tax treatment. In addition, it is intended that the Restructuring steps will qualify as transactions that are tax-free for U.S. federal income tax and applicable non-U.S. tax purposes. The opinions will rely on certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and the opinions would not be valid if such representations, assumptions and undertakings were incorrect. Notwithstanding the opinions, the IRS could determine that the Distribution should be treated as a taxable transaction for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings that were relied on for the opinions are false or have been violated, if it disagrees with the conclusions in the opinions , or for other reasons, including as a result of significant changes in the stock ownership of VF or us after the Distribution. For more information regarding the opinions see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution—Tax Opinions.”

If the Restructuring and Distribution fail to qualify for tax-free treatment, for any reason, VF and/or holders of VF common stock would be subject to substantial U.S. and/or applicable non-U.S. taxes as a result of the Restructuring, Distribution and certain related transactions, and we could incur significant liabilities under applicable law or as a result of the Tax Matters Agreement. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

 

23


Table of Contents

If the Distribution is taxable to VF as a result of a breach by us of any covenant or representation made by us in the Tax Matters Agreement (as defined below), we will generally be required to indemnify VF; the obligation to make a payment on this indemnification obligation could have a material adverse effect on us.

As described above, it is intended that the Distribution, together with certain related transactions, will qualify as tax-free transactions to VF and to holders of VF common stock, except with respect to any cash received in lieu of fractional shares. If the Distribution and/or related transactions are not so treated or are taxable to VF (see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution”) due to a breach by us (or any of our subsidiaries) of any covenant or representation made by us in the Tax Matters Agreement, we will generally be required to indemnify VF for all tax-related losses suffered by VF. In addition, we will not control the resolution of any tax contest relating to taxes suffered by VF in connection with the Separation, and we may not control the resolution of tax contests relating to any other taxes for which we may ultimately have an indemnity obligation under the Tax Matters Agreement. In the event that VF suffers tax-related losses in connection with the Separation that must be indemnified by us under the Tax Matters Agreement, the indemnification liability could have a material adverse effect on us.

We will be subject to significant restrictions on our actions following the Separation in order to avoid triggering significant tax-related liabilities.

The Tax Matters Agreement generally will prohibit us from taking certain actions that could cause the Distribution and certain related transactions to fail to qualify as tax-free transactions, including:

 

   

During the two-year period following the Distribution Date (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur;

 

   

During the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);

 

   

During the two-year period following the Distribution Date, we may not sell or otherwise issue our common stock, other than pursuant to issuances that satisfy certain regulatory safe harbors set forth in Treasury regulations related to stock issued to employees and retirement plans;

 

   

During the two-year period following the Distribution Date, we may not redeem or otherwise acquire any of our common stock, other than pursuant to open-market repurchases of less than 20% of our common stock (in the aggregate);

 

   

During the two-year period following the Distribution Date, we may not amend our articles of incorporation (or other organizational documents) or take any other action, whether through a shareholder vote or otherwise, affecting the voting rights of our common stock; and

 

   

More generally, we may not take any action that could reasonably be expected to cause the Separation and certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes or for non-U.S. tax purposes.

If we take any of the actions above and such actions result in tax-related losses to VF, we generally will be required to indemnify VF for such tax-related losses under the Tax Matters Agreement. See “The Separation—Agreements with VF—Tax Matters Agreement.” Due to these restrictions and indemnification obligations under the Tax Matters Agreement, we may be limited in our ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in our best interests. Also, our potential indemnity obligation to VF might discourage, delay or prevent a change of control that our shareholders may consider favorable.

 

24


Table of Contents

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the Separation.

Prior to the Separation, our financial results were included within the consolidated results of VF, and we were not directly subject to reporting and other requirements of the Exchange Act. These and other obligations will place significant demands on our management, administrative, and operational resources, including accounting and information technology resources. To comply with these requirements, we anticipate that we will need to duplicate information technology infrastructure, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance, tax, treasury and information technology staff. If we are unable to do this in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired and our business could be harmed.

The relocation of our Lee® headquarters from Kansas City to Greensboro could adversely affect our operations, operating results and financial condition, as we may experience disruptions to our business and incur additional costs in connection with the relocation.

The process of moving our Lee® headquarters from Kansas City to Greensboro as part of the Separation is inherently complex and not part of our day-to-day operations. The relocation process could cause significant disruption to our operations, cause the temporary diversion of management resources and result in the loss of key employees who have substantial experience and expertise in our business, all of which could have a material adverse effect on our operations, operating results and financial condition. The need to replace personnel who do not relocate, train new employees and transition operating knowledge may cause disruptions in our business. While we have implemented a transition plan to provide for the move of our Lee® headquarters, we may encounter difficulties retaining employees who elect to transfer and attracting new talent in the Greensboro area to replace our employees who are unwilling to relocate. We may also experience difficulties in retaining employees who will remain in Kansas City during the transition period and who we are relying on to facilitate the transition of operating knowledge. In addition, we may incur additional costs for duplication in staff as we effect the transition. We can give no assurance that the relocation will be completed as planned or within the expected time frame. In addition, the relocation may involve significant additional costs to us and the expected benefits of the move may not be fully realized due to associated disruption to our operations and personnel.

Risks Relating to Our Business

Our revenues and profits depend on the level of consumer spending for apparel, which is sensitive to global economic conditions and other factors. A decline in consumer spending could have a material adverse effect on us.

The success of our business depends on consumer spending on apparel, and there are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, consumer credit availability, unemployment, stock market performance, weather conditions, energy prices, consumer discretionary spending patterns and tax rates in the international, national, regional and local markets where our products are sold. The current global economic environment is unpredictable, and adverse economic trends or other factors could negatively impact the level of consumer spending, which could have a material adverse impact on us.

The apparel industry is highly competitive, and our success depends on our ability to gauge consumer preferences and product trends, and to respond to constantly changing markets.

We compete with numerous apparel brands and manufacturers. Competition is generally based upon brand name recognition, price, design, product quality, selection, service and purchasing convenience. Some of our competitors are larger and have more resources than us in some product categories and regions. In addition, we

 

25


Table of Contents

compete directly with the private label brands of our wholesale customers. Our ability to compete within the apparel industry depends on our ability to:

 

   

Anticipate and respond to changing consumer preferences and product trends in a timely manner;

 

   

Develop attractive, innovative and high-quality products that meet consumer needs;

 

   

Maintain strong brand recognition;

 

   

Price products appropriately;

 

   

Provide best-in-class marketing support and intelligence;

 

   

Ensure product availability and optimize supply chain efficiencies;

 

   

Obtain sufficient retail store space and effectively present our products at retail;

 

   

Produce or procure quality products on a consistent basis; and

 

   

Adapt to a more digitally driven consumer landscape.

Failure to compete effectively or to keep pace with rapidly changing consumer preferences, markets and product trends could have a material adverse effect on our business, financial condition and results of operations. Moreover, there are significant shifts underway in the wholesale and retail (e-commerce and retail store) channels. We may not be able to manage our brands within and across channels sufficiently, which could have a material adverse effect on our business, financial condition and results of operations.

Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.

There can be no assurance that we will be able to successfully anticipate changing consumer preferences and product trends or economic conditions, and, as a result, we may not successfully manage inventory levels to meet our future order requirements. We often schedule internal production and place orders for products with independent manufacturers before our customers’ orders are firm. If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a shortage of product required to meet the demand. Inventory levels in excess of consumer demand may result in inventory write-downs, the sale of excess inventory at discounted prices or excess inventory held by our wholesale customers, which could have a negative impact on future sales, an adverse effect on the image and reputation of our brands and negatively impact profitability. On the other hand, if we underestimate demand for our products, our manufacturing facilities or third-party manufacturers may not be able to produce products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, as well as damage to our reputation and relationships. These risks could have a material adverse effect on our brand image as well as our results of operations and financial condition.

Our business and the success of our products could be harmed if we are unable to maintain the images of our brands.

Our success to date has been due in large part to the growth of our brands’ images and our customers’ connection to our brands. If we are unable to timely and appropriately respond to changing consumer demand, the names and images of our brands may be impaired. Even if we react appropriately to changes in consumer preferences, consumers may consider our brands’ images to be outdated or associate our brands with styles that are no longer popular. In addition, brand value is based in part on consumer perceptions on a variety of qualities, including merchandise quality and corporate integrity. Negative claims or publicity regarding us, our brands or our products could adversely affect our reputation and sales regardless of whether such claims are accurate. Social media, which accelerates the dissemination of information, can increase the challenges of responding to negative claims. In the past, many apparel companies have experienced periods of rapid growth in sales and

 

26


Table of Contents

earnings followed by periods of declining sales and losses. Our businesses may be similarly affected in the future. In addition, we have sponsorship contracts with a number of athletes, musicians and celebrities and feature those individuals in our advertising and marketing efforts. Actions taken by those individuals associated with our products could harm their reputations, which could adversely affect the images of our brands.

If we are unsuccessful in establishing effective advertising, marketing and promotional programs, our sales could be negatively affected.

Inadequate or ineffective advertising could inhibit our ability to maintain brand relevance and drive increased sales. Additionally, if our competitors increase their spending on advertising and promotions, if our advertising, media or marketing expenses increase, or if our advertising and promotions become less effective than those of our competitors, we could experience a material adverse effect on our business, results of operations and financial condition.

Our profitability may decline as a result of increasing pressure on margins.

The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, rising commodity and conversion costs, pressure from retailers to reduce the costs of products, changes in consumer demand and shifts to online shopping and purchasing. Customers may increasingly seek markdown allowances, incentives and other forms of economic support. If these factors cause us to reduce our sales prices to retailers and consumers, 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 results of operations, liquidity and financial condition.

We may not succeed in our business strategy.

One of our key strategic objectives is growth. We seek to grow organically and potentially, in the future, through acquisitions. We seek to grow by expanding our share with winning customers; stretching brands to new regions, channels, and categories; managing costs; leveraging our supply chain across Kontoor Brands; and expanding our direct-to-consumer business with emphasis on our e-commerce business. However, we may not be able to grow our existing businesses. For example:

 

   

We may not be able to transform our model to be more consumer- and retail-centric.

 

   

We may not be able to expand our market share with winning customers, or our wholesale customers may encounter financial difficulties and thus reduce their purchases of our products.

 

   

We may not be able to expand our brands in Asia or other geographies, transform our business in certain regions or achieve the expected results from our supply chain initiatives.

 

   

We may not be able to successfully integrate our Wrangler® and Lee® brand platforms or achieve the expected growth, cost savings or synergies from such integration.

 

   

We may have difficulty recruiting, developing or retaining qualified employees.

 

   

We may not be able to achieve our direct-to-consumer expansion goals and manage our growth effectively.

 

   

We may not be able to offset rising commodity or conversion costs in our product costs with pricing actions or efficiency improvements.

 

   

We may not be able to successfully implement costs savings initiatives at the levels that we anticipate or at all.

 

   

We may have difficulty completing potential acquisitions or dispositions, and we may not be able to successfully integrate a newly acquired business or achieve the expected growth, cost savings or synergies from such integration.

Failure to implement our strategic objectives may have a material adverse effect on our business.

 

27


Table of Contents

A substantial portion of our revenues and gross profit is derived from a small number of large customers. The loss of any of these customers or the inability of any of these customers to pay us could substantially reduce our revenues and profits.

A few of our customers account for a significant portion of revenues. Sales to our ten largest customers were 53% of total revenues in 2018, and our top customer, Walmart Inc. (“Walmart”), accounted for 32%, 33% and 33% of our total net revenues in 2018, 2017 and 2016, respectively. We expect that these customers will continue to represent a significant portion of our net sales in the future. Sales to our customers are generally on a purchase order basis and not subject to long-term agreements. A decision by any of our major customers to significantly decrease the volume of products purchased from us could substantially reduce revenues and have a material adverse effect on our financial condition and results of operations. Our larger customers generally have the scale to develop supply chains that permit them to change their buying patterns, or develop and market their own private label and other economy brands that compete with some of our products. This ability also makes it easier for them to resist our efforts to increase prices, reduce inventory levels and, potentially, de-list our products. Many of our largest customers have already developed significant private label brands under which they design and market apparel and accessories that compete directly with our products. These retailers have assumed an increasing degree of inventory risk in their private label products and, as a result, may first cancel advance orders with us in order to manage their own inventory levels downward during periods of unseasonable weather or weak economic cycles. In addition, if any of our customers devote less selling space to apparel products, our sales to those customers could be reduced even if we maintain our share of their apparel business. Any such reduction in apparel selling space could result in lower sales and our business, results of operations, financial condition and cash flows may be adversely affected.

We rely significantly on information technology. Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business.

Our ability to effectively manage and operate our business depends significantly on information technology systems. We rely heavily on information technology to track sales and inventory and manage our supply chain. We are also dependent on information technology, including the Internet, for our direct-to-consumer sales, including our e-commerce operations and retail business credit card transaction authorization. We expect to upgrade or replace many of these systems. Despite our preventative efforts, our systems and those of our third-party service providers may be vulnerable to damage, failure or interruption due to viruses, data security incidents, technical malfunctions, natural disasters or other causes, or in connection with upgrades to our systems or the implementation of new systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of our business, including management of inventory, ordering and replenishment of products, manufacturing and distribution of products, e-commerce operations, retail business credit card transaction authorization and processing, corporate email communications and our interaction with the public on social media.

We are subject to data security and privacy risks that could negatively affect our business operations, results of operations or reputation.

In the normal course of business, we often collect, retain and transmit certain sensitive and confidential customer information, including credit card information, over public networks. There is a significant concern by consumers and employees over the security of personal information transmitted over the Internet, identity theft and user privacy. Data security attacks are increasingly sophisticated, and if unauthorized parties gain access to our networks or databases, or those of our third-party service providers, they may be able to steal, publish, delete or modify our private and sensitive information, including credit card information and personal information. Despite the security measures we currently have in place, our facilities and systems and those of our third-party service providers may be vulnerable to, and unable to anticipate or detect, data security breaches and data loss. In addition, employees may intentionally or inadvertently cause data security breaches that result in the unauthorized release of personal or confidential information. We and our customers could suffer harm if valuable

 

28


Table of Contents

business data or employee, customer and other proprietary information were corrupted, lost or accessed or misappropriated by third parties due to a security failure in our systems or one of our third-party service providers. It could require significant expenditures to remediate any such failure or breach, severely damage our reputation and our relationships with customers, result in unwanted media attention and lost sales and expose us to risks of litigation and liability. In addition, as a result of recent security breaches at a number of prominent retailers, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become increasingly uncertain, rigorous and complex. As a result, we may incur significant costs to comply with laws regarding the protection and unauthorized disclosure of personal information and we may not be able to comply with new regulations such as the General Data Protection Regulation in the European Union. Any failure to comply with the laws and regulations surrounding the protection of personal information could subject us to legal and reputational risks, including significant fines for non-compliance, any of which could have a negative impact on revenues and profits.

Our business is exposed to the risks of foreign currency exchange rate fluctuations. Our hedging strategies may not be effective in mitigating those risks.

A percentage of our total revenues (approximately 27% in 2018) is derived from markets outside the U.S. Our international businesses operate in functional currencies other than the U.S. dollar. Changes in currency exchange rates affect the U.S. dollar value of the foreign currency-denominated amounts at which our international businesses purchase products, incur costs or sell products. In addition, for our U.S.-based businesses, the majority of products are sourced from independent contractors or our manufacturing facilities located in foreign countries. As a result, the costs of these products are affected by changes in the value of the relevant currencies. Furthermore, much of our licensing revenue is derived from sales in foreign currencies. Changes in foreign currency exchange rates could have an adverse impact on our financial condition, results of operations and cash flows.

In accordance with our operating practices, we plan to hedge a significant portion of our foreign currency transaction exposures arising in the ordinary course of business to reduce risks in our cash flows and earnings. Our hedging strategy may not be effective in reducing all risks, and no hedging strategy can completely insulate us from foreign exchange risk.

Further, our use of derivative financial instruments may expose us to counterparty risks. Although we plan to enter only into hedging contracts with counterparties having investment grade credit ratings, it is possible that the credit quality of a counterparty could be downgraded or a counterparty could default on its obligations, which could have a material adverse impact on our financial condition, results of operations and cash flows.

Our operations and earnings may be affected by legal, regulatory, political and economic risks.

Our ability to maintain the current level of operations in our existing markets and to capitalize on growth in existing and new markets is subject to legal, regulatory, political and economic risks. These include the burdens of complying with U.S. and international laws and regulations, unexpected changes in regulatory requirements, tariffs or other trade barriers and the economic uncertainty associated with the pending exit of the United Kingdom from the European Union (“Brexit”) or any other similar referendums that may be held.

A significant portion of our 2018 net income was earned in jurisdictions outside the U.S. and most of our goods are manufactured outside the U.S. We are exposed to risks of changes in U.S. policy for companies having business operations and manufacturing products outside the U.S. We cannot predict any changes to U.S. participation in or renegotiations of certain trade agreements or whether quotas, duties, taxes, exchange controls or other restrictions will be imposed by the U.S., the European Union or other countries on the import or export of our products, or what effect any of these actions would have on our business, financial condition or results of operations. Changes in regulatory, geopolitical policies and other factors may adversely affect our business or may require us to modify our current business practices. While enactment of any such change is not certain, if such changes were adopted, our costs could increase, which would reduce our earnings.

 

29


Table of Contents

Changes in tax laws could increase our worldwide tax rate and materially affect our financial position and results of operations.

We are subject to taxation in the U.S. and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act, which includes a broad range of tax reform proposals affecting businesses, including a reduction in the U.S. federal corporate tax rate from 35% to 21%, a one-time mandatory deemed repatriation tax on earnings of certain foreign subsidiaries that were previously tax-deferred, and a new minimum tax on certain foreign earnings. The Tax Act significantly impacts our effective tax rate for 2017 as a result of the deemed repatriation tax, and may impact several other elements of our operating model. Certain additional provisions of the Tax Act, such as a minimum tax on foreign earnings, also apply to Kontoor Brands and, as a result, could increase our effective tax rate. Taxes due over a period of time as a result of the new tax law could be accelerated upon certain triggering events, including failure to pay such taxes when due. The new law makes broad and complex changes to the U.S. tax code and we expect to see future regulatory, administrative or legislative guidance. To the extent any future guidance differs from our preliminary interpretation of the law, it could have a material effect on our financial position and results of operations.

In addition, many countries in the European Union and around the globe have adopted and/or proposed changes to current tax laws. Further, organizations such as the Organisation for Economic Co-operation and Development have published action plans that, if adopted by countries where we do business, could increase our tax obligations in these countries. Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the taxation of our activities could increase our worldwide effective tax rate and harm our financial position and results of operations.

We may have additional tax liabilities.

As a global company, we determine our income tax liability in various tax jurisdictions based on an analysis and interpretation of local tax laws and regulations. This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future actions of the local tax authorities. These determinations are the subject of periodic U.S. and international tax audits. Although we accrue for uncertain tax positions, our accrual may be insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our financial condition, results of operations or cash flows.

Our balance sheet includes intangible assets and goodwill. A decline in the fair value of an intangible asset or of a business unit could result in an asset impairment charge, which would be recorded as an operating expense in our combined statement of income and could be material.

Our policy is to evaluate indefinite-lived intangible assets and goodwill for possible impairment as of the beginning of the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying amount. In addition, intangible assets that are being amortized are tested for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. For these impairment tests, we use various valuation methods to estimate the fair value of our business units and intangible assets. If the fair value of an asset is less than its carrying value, we would recognize an impairment charge for the difference.

It is possible that we could have an impairment charge for goodwill or trademark and trade name intangible assets in future periods if (i) overall economic conditions in 2018 or future years vary from our current assumptions, (ii) business conditions or our strategies for a specific business unit or brand change from our current assumptions, (iii) investors require higher rates of return on equity investments in the marketplace or (iv) enterprise values of comparable publicly traded companies, or of actual sales transactions of comparable companies, were to decline, resulting in lower comparable multiples of revenues and earnings before interest,

 

30


Table of Contents

taxes, depreciation and amortization and, accordingly, lower implied values of goodwill and intangible assets. A future impairment charge for goodwill or intangible assets could have a material effect on our consolidated financial position or results of operations.

We use third-party suppliers and manufacturing facilities worldwide for a substantial portion of our raw materials and finished products, which poses risks to our business operations.

During 2018, approximately 62% of our units were purchased from independent manufacturers primarily located in Asia, with substantially all of the remainder produced by Kontoor Brands-owned and -operated manufacturing facilities located in Mexico and Central America. Any of the following could impact our ability to produce or deliver our products, or our cost of producing or delivering products and, as a result, our profitability:

 

   

Political or labor instability in countries where our facilities, contractors and suppliers are located;

 

   

Changes in local economic conditions in countries where our facilities, contractors, and suppliers are located;

 

   

Political or military conflict could cause a delay in the transportation of raw materials and products to us and an increase in transportation costs;

 

   

Disruption at domestic and foreign ports of entry, such as the West Coast dockworkers labor dispute that disrupted international trade at seaports, could cause delays in product availability and increase transportation times and costs;

 

   

Heightened terrorism security concerns could subject imported or exported goods to additional, more frequent or more lengthy inspections, leading to delays in deliveries or impoundment of goods for extended periods;

 

   

Decreased scrutiny by customs officials for counterfeit goods, leading to more counterfeit goods and reduced sales of our products, increased costs for our anti-counterfeiting measures and damage to the reputation of our brands;

 

   

Disruptions at suppliers and manufacturing or distribution facilities caused by natural and man-made disasters;

 

   

Disease epidemics and health-related concerns could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargo of our goods produced in infected areas;

 

   

Imposition of regulations and quotas relating to imports and our ability to adjust timely to changes in trade regulations could limit our ability to produce products in cost-effective countries that have the required labor and expertise;

 

   

Imposition of duties, taxes and other charges on imports; and

 

   

Imposition or the repeal of laws that affect intellectual property rights.

Although no single supplier and no one country is critical to our overall production needs, if we were to lose a supplier it could result in interruption of finished goods shipments to us, cancellation of orders by customers and termination of relationships. This, along with the damage to our reputation, could have a material adverse effect on our revenues and, consequently, our results of operations.

In addition, although we audit our third-party material suppliers and contracted manufacturing facilities and set strict compliance standards, actions by a third-party supplier or manufacturer that fail to comply could expose us to claims for damages, financial penalties and reputational harm, any of which could have a material adverse effect on our business and operations.

 

31


Table of Contents

Our business is subject to national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters. The costs of compliance with, or the violation of, such laws and regulations by us or by independent suppliers who manufacture products for us could have a material adverse effect on our operations and cash flows, as well as on our reputation.

Our business is subject to comprehensive national, state and local laws and regulations on a wide range of environmental, consumer protection, employment, privacy, safety and other matters. We could be adversely affected by costs of compliance with or violations of those laws and regulations. In addition, while we do not control their business practices, we require third-party suppliers to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices and environmental compliance. The costs of products purchased by us from independent contractors could increase due to the costs of compliance by those contractors.

Failure by us or our third-party suppliers to comply with such laws and regulations, as well as with ethical, social, product, labor and environmental standards, or related political considerations, could result in interruption of finished goods shipments to us, cancellation of orders by customers and termination of relationships. If one of our independent contractors violates labor or other laws, implements labor or other business practices or takes other actions that are generally regarded as unethical, it could jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts that may reduce demand for our merchandise. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation.

Fluctuations in wage rates and the price, availability and quality of raw materials, including commodity costs, and finished goods could increase costs.

Fluctuations in the price, availability and quality of fabrics, including cottons, blends, synthetics, and wools, or other raw materials used by us in our manufactured products, or of purchased finished goods, could have a material adverse effect on our cost of goods sold or our ability to meet our customers’ demands. The prices we pay depend on demand and market prices for the raw materials used to produce them. The price and availability of such raw materials may fluctuate significantly, depending on many factors, including general economic conditions and demand, crop yields, energy prices, weather patterns, freight rates and speculation in the commodities markets. Prices of purchased finished products also depend on wage rates in Asia and other geographic areas where our independent contractors are located, as well as freight costs from those regions. Inflation can also have a long-term impact on us because increasing costs of materials and labor may impact our ability to maintain satisfactory margins. For example, the cost of the materials that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, such as cotton, dyes and chemicals, and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation and other factors. Similarly, a significant portion of our products are manufactured in other countries and declines in the value of the U.S. dollar may result in higher manufacturing costs. In addition, fluctuations in wage rates required by legal or industry standards could increase our costs. In the future, we may not be able to offset cost increases with other cost reductions or efficiencies or to pass higher costs on to our customers. This could have a material adverse effect on our results of operations, liquidity and financial condition.

We rely on a limited number of North American mills for raw material sourcing, and we may not be able to obtain raw materials on a timely basis or in sufficient quantity.

We rely on a limited number of third-party suppliers for raw materials in North America. Such products may be available, in the short-term, from only one or a very limited number of sources. In 2018, approximately 71% of our raw materials were provided by our top three suppliers in North America. We have no long-term contracts with our suppliers or manufacturing sources, and we compete with other companies for raw materials, production and quota capacity. We may experience a significant disruption in the supply of raw materials from

 

32


Table of Contents

current sources or, in the event of a disruption, we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. In addition, if we experience significant increased demand, or if we need to replace an existing supplier manufacturer due to consolidation, closure or otherwise, we may be unable to locate additional supplies of raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or to fill our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality control, responsiveness and service, financial stability and labor and other ethical practices. Even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Delays related to supplier changes could also arise due to an increase in shipping times if new suppliers are located farther away from our markets or from other participants in our supply chain. Any delays, interruption or increased costs in the supply of raw materials or manufacture of our products could have a material adverse effect on our ability to meet customer demand for our products and could result in lower net revenue and income from operations both in the short and long term.

The retail industry has experienced financial difficulty that could adversely affect our business.

Recently there have been consolidations, reorganizations, restructurings, bankruptcies and ownership changes in the retail industry. These events individually, and together, could materially, adversely affect our business. These changes could impact our opportunities in the market and increase our reliance on a smaller number of large customers. In the future, retailers are likely to further consolidate, undergo restructurings or reorganizations or bankruptcies, realign their affiliations or reposition their stores’ target markets. In addition, consumers have continued to transition away from traditional wholesale retailers to large online retailers. These developments could result in a reduction in the number of stores that carry our products, an increase in ownership concentration within the retail industry, an increase in credit exposure to us or an increase in leverage by our customers over their suppliers.

Further, the global economy periodically experiences recessionary conditions with rising unemployment, reduced availability of credit, increased savings rates and declines in real estate and securities values. These recessionary conditions could have a negative impact on retail sales of apparel. The lower sales volumes, along with the possibility of restrictions on access to the credit markets, could result in our customers experiencing financial difficulties including store closures, bankruptcies or liquidations. This could result in higher credit risk to us relating to receivables from our customers who are experiencing these financial difficulties. If these developments occur, our inability to shift sales to other customers or to collect on our trade accounts receivable could have a material adverse effect on our financial condition and results of operations.

Our ability to obtain short-term or long-term financing on favorable terms, if needed, could be adversely affected by geopolitical risk and volatility in the capital markets.

Any disruption in the capital markets could limit the availability of funds or the ability or willingness of financial institutions to extend capital in the future. This could adversely affect our liquidity and funding resources or significantly increase our cost of capital. An inability to access capital and credit markets may have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our failure to obtain or maintain a satisfactory credit rating could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.

Our credit risk is expected to be evaluated by the major independent rating agencies. Once a credit rating is obtained, any future downgrades could increase the cost of borrowing under any indebtedness we may incur in connection with the Separation or otherwise. Our credit rating is expected to be lower than that of VF. There can be no assurance that we will be able to maintain our credit ratings once established, and any additional actual or

 

33


Table of Contents

anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to capital markets.

The loss of members of our executive management and other key employees could have a material adverse effect on our business.

We depend on the services and management experience of our executive officers and business leaders who have substantial experience and expertise in our business. The unexpected loss of services of one or more of these individuals could have a material adverse effect on us. Our future success also depends on our ability to recruit, retain and engage our personnel sufficiently. Competition for experienced and well-qualified personnel is intense and we may not be successful in attracting and retaining such personnel.

Most of the employees in our production and distribution facilities are covered by collective bargaining agreements, and any material job actions could negatively affect our results of operations.

In North America, most of our production and distribution employees are covered by various collective bargaining agreements, and outside North America, most of our production and distribution employees are covered by either industry-sponsored and/or government-sponsored collective bargaining mechanisms. Any work stoppages or other job actions by these employees could harm our business and reputation.

Our direct-to-consumer business includes risks that could have a material adverse effect on its results of operations.

We sell merchandise direct-to-consumer through our e-commerce sites. Our direct-to-consumer business is subject to numerous risks that could have a material adverse effect on our results. Risks include, but are not limited to, (a) U.S. or international resellers purchasing merchandise and reselling it overseas outside of our control, (b) failure of the systems that operate the stores and websites, and their related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions, (c) credit card fraud and (d) risks related to our direct-to- consumer distribution centers and processes. Risks specific to our e-commerce business also include (a) diversion of sales from our wholesale customers, (b) difficulty in recreating the in-store experience through direct channels, (c) liability for online content, (d) changing patterns of consumer behavior and (e) intense competition from online retailers. Our failure to successfully respond to these risks might adversely affect sales in our e-commerce business, as well as damage our reputation and brands.

We may be unable to protect our trademarks and other intellectual property rights.

Our trademarks, trade names, patents, and other intellectual property rights are important to our success and our competitive position. We are susceptible to others copying our products and infringing, misappropriating or otherwise violating our intellectual property rights, especially with the shift in product mix to higher priced brands and innovative new products in recent years.

Actions we have taken to establish and protect our intellectual property rights may not be adequate to prevent copying of our products by others or to prevent others from seeking to invalidate our trademarks or block sales of our products as a violation of the trademarks and intellectual property rights of others. In addition, unilateral actions in the U.S. or other countries, including changes to or the repeal of laws recognizing trademark or other intellectual property rights, could have an impact on our ability to enforce those rights.

Some of our brands, such as Wrangler® and Lee®, enjoy significant worldwide consumer recognition. The higher pricing of those products creates additional risk of counterfeiting and infringement, misappropriation or other violation by third parties. The counterfeiting of our products or the infringement, misappropriation or other violation of our intellectual property rights by third parties could diminish the value of our brands and adversely affect our revenues.

 

34


Table of Contents

The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks. We may be unable to successfully resolve these types of conflicts to our satisfaction. In some cases, there may be trademark owners who have prior rights to our trademarks because the laws of certain foreign countries may not protect intellectual property rights to the same extent as do the laws of the U.S. In other cases, there may be holders who have prior rights to similar trademarks.

There have been, and there may in the future be, opposition and cancellation proceedings from time to time with respect to some of our intellectual property rights. In some cases, litigation may be necessary to protect or enforce our trademarks and other intellectual property rights. Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, if available at all, required to rebrand our products and/or prevented from selling some of our products if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks, copyrights, patents or other intellectual property rights. Bringing or defending any such claim, regardless of merit, and whether successful or unsuccessful, could be expensive and time-consuming and have a negative effect on our business, reputation, results of operations and financial condition.

We are subject to the risk that our licensees may not generate expected sales or maintain the value of our brands.

During 2018, we generated approximately $32.7 million in revenues from licensing royalties. Although we generally have significant control over our licensees’ products and advertising, we rely on our licensees for, among other things, operational and financial controls over their businesses. Failure of our licensees to successfully market licensed products or our inability to replace existing licensees, if necessary, could adversely affect our revenues, both directly from reduced royalties received and indirectly from reduced sales of our other products. Risks are also associated with a licensee’s ability to:

 

   

Obtain capital;

 

   

Manage its labor relations;

 

   

Maintain relationships with its suppliers;

 

   

Manage its credit risk effectively;

 

   

Maintain relationships with its customers; and

 

   

Adhere to our Global Compliance Principles.

In addition, we rely on our licensees to help preserve the value of our brands. Although we attempt to protect our brands through approval rights over design, production processes, quality, packaging, merchandising, distribution, advertising and promotion of our licensed products, we cannot completely control the use of our licensed brands by our licensees. The misuse of a brand by a licensee, including through the marketing of products under one of our brand names that do not meet our quality standards, could have a material adverse effect on that brand and on us.

If we encounter problems with our distribution system, our ability to deliver our products to the market could be adversely affected.

We rely on owned or independently operated distribution facilities to warehouse and ship product to our customers. Our distribution system includes computer-controlled and automated equipment, which may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures. Because substantially all of our products are distributed from a relatively small number of locations, our operations could also be interrupted by earthquakes, floods, fires or other natural disasters affecting our distribution centers. We maintain business interruption insurance, but it

 

35


Table of Contents

may not adequately protect us from the adverse effects that could be caused by significant disruptions in our distribution facilities, such as the long-term loss of customers or an erosion of brand image. In addition, our distribution capacity is dependent on the timely performance of services by third parties, including the transportation of product to and from our distribution facilities. If we encounter problems with our distribution system, our ability to meet customer expectations, manage inventory, complete sales and achieve operating efficiencies could be materially adversely affected.

Our revenues and cash requirements are affected by seasonality.

Our business is affected by seasonal trends, with a higher proportion of revenues and operating cash flows generated during the second half of the fiscal year, which includes the back-to-school and holiday selling seasons. Poor sales in the second half of the fiscal year would have a material adverse effect on our full year operating results and cause higher inventories. In addition, fluctuations in sales and operating income in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events affecting retail sales.

We may be adversely affected by unseasonal or severe weather conditions.

Our business may be adversely affected by unseasonable or severe weather conditions. Periods of unseasonably warm weather in the fall or winter, or periods of unseasonably cool and wet weather in the spring or summer, can negatively impact retail traffic and consumer spending. In addition, severe weather events such as snowstorms or hurricanes typically lead to temporarily reduced retail traffic. Any of these conditions could result in negative point-of-sale trends for our merchandise and reduced replenishment shipments to our wholesale customers.

Risks Relating to Our Common Stock

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the Separation.

Prior to the Separation, there will have been no trading market for shares of our common stock. An active trading market may not develop or be sustained for our common stock after the Separation, and we cannot predict the prices at which our common stock will trade after the Separation. The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including:

 

   

Fluctuations in our quarterly or annual earnings results or those of other companies in our industry;

 

   

Failures of our operating results to meet the estimates of securities analysts or the expectations of our shareholders, or changes by securities analysts in their estimates of our future earnings;

 

   

Announcements by us or our customers, suppliers or competitors;

 

   

Changes in market valuations or earnings of other companies in our industry;

 

   

Changes in laws or regulations which adversely affect our industry or us;

 

   

General economic, industry and stock market conditions;

 

   

Future significant sales of our common stock by our shareholders or the perception in the market of such sales;

 

   

Future issuances of our common stock by us; and

 

   

The other factors described in these “Risk Factors” and elsewhere in this information statement.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may

 

36


Table of Contents

otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

The trading market for our common stock may also be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

A large number of our shares are or will be eligible for future sale, which may cause the market price of our common stock to decline.

Upon completion of the Separation, we estimate that we will have outstanding an aggregate of approximately             shares of our common stock (based on shares of VF common stock outstanding on                 , 2019). All of those shares (other than those held by our “affiliates”) will be freely tradable without restriction or registration under the Securities Act of 1933, as amended (the “Securities Act”). Shares held by our affiliates, which include our Directors and executive officers, can be sold subject to volume, manner of sale and notice provisions of Rule 144 under the Securities Act. We estimate that our directors and executive officers, who may be considered “affiliates” for purposes of Rule 144, will beneficially own approximately                  shares of our common stock immediately following the Separation. We are unable to predict whether large amounts of our common stock will be sold in the open market following the Separation. We are also unable to predict whether a sufficient number of buyers will be in the market at that time. As discussed in the immediately following risk factor, certain index funds will likely be required to sell shares of our common stock that they receive in the Separation. In addition, other VF shareholders may sell the shares of our common stock they receive in the Separation for various reasons. For example, such shareholders may not believe our business profile or level of market capitalization as an independent company fits their investment objectives.

Because our common stock may not be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices, significant amounts of our common stock will likely need to be sold in the open market where there may not be offsetting demand.

A portion of VF’s outstanding common stock is held by index funds tied to the Standard & Poor’s 500 Index and other stock indices. Based on a review of publicly available information as of                 , 2019, we believe approximately     % of VF’s outstanding common stock is held by index funds. Because our common stock may not be included in the Standard & Poor’s 500 Index, and it may not be included in other stock indices at the time of the Separation, index funds currently holding shares of VF common stock will likely be required to sell the shares of our common stock they receive in the Separation. There may not be sufficient buying interest to offset sales by those index funds. Accordingly, our common stock could experience a high level of volatility immediately following the Separation and, as a result, the price of our common stock could be adversely affected.

Provisions in our amended and restated articles of incorporation and amended and restated bylaws and certain provisions of North Carolina Law could delay or prevent a change in control of Kontoor Brands.

The existence of certain provisions of our amended and restated articles of incorporation and amended and restated bylaws and North Carolina Law could discourage, delay or prevent a change in control of Kontoor Brands that a shareholder may consider favorable. These include provisions:

 

   

Providing for a classified Board of Directors until our annual meeting of shareholders held in 2023;

 

37


Table of Contents
   

Providing that our Directors may be removed by our shareholders only for cause while our Board is classified;

 

   

Providing that the removal of our Directors with or without cause after our Board is de-classified must be approved by the holders of at least 80% of the voting power of Kontoor Brands;

 

   

Providing the right to our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval;

 

   

Authorizing a large number of shares of stock that are not yet issued, which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us;

 

   

Prohibiting shareholders from calling special meetings of shareholders or taking action by written consent;

 

   

Establishing advance notice and other requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at the annual shareholder meetings; and

 

   

Requiring the affirmative vote of the holders of at least 80% of the voting power of Kontoor Brands to approve certain business combinations.

We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions apply even if a takeover offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board of Directors determines is not in our and our shareholders’ best interests. See “Description of Capital Stock.”

Our amended and restated articles of incorporation will designate North Carolina as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.

Pursuant to our amended and restated articles of incorporation, as will be in effect upon the completion of the Separation, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the North Carolina Business Court (or another state or federal court located in North Carolina, if a dispute does not qualify for designation to the North Carolina Business Court or the North Carolina Business Court otherwise lacks jurisdiction) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers or other employees to us or our shareholders; (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of North Carolina Law or our amended and restated articles of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim against us or any director or officer or other employee of ours relating to the internal affairs doctrine. Our amended and restated articles of incorporation will further provide that if an action described in the preceding sentence is filed in a court other than as specified above in the name of any shareholder, such shareholder is deemed to have consented to (a) personal jurisdiction before any state or federal court located in North Carolina, as appropriate, in connection with any action brought in any such court to enforce our amended and restated articles of incorporation and (b) having service of process made upon such shareholder in any such action by service upon such shareholder’s counsel in the action as agent for such shareholder. The forum selection clause in our amended and restated bylaws may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock. See “Description of Capital Stock — Forum Selection.”

 

38


Table of Contents

Your percentage ownership in Kontoor Brands may be diluted in the future.

In the future, your percentage ownership in Kontoor Brands may be diluted because of equity issuances for acquisitions, strategic investments, capital market transactions or otherwise, including equity awards that we may grant to our Directors, officers and employees. Our compensation committee may grant additional equity awards to our employees after the Separation. These awards would have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. From time to time, we may issue additional equity awards to our employees under our employee benefits plans.

In addition, our amended and restated articles of incorporation authorize us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our Board of Directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant holders of preferred stock the right to elect some number of our Directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or dividend, distribution or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. See “Description of Capital Stock—Preferred Stock.”

Our common stock is and will be subordinate to all of our future indebtedness and any preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries.

Shares of our common stock are common equity interests in us and, as such, will rank junior to all of our future indebtedness and other liabilities. Additionally, holders of our common stock may become subject to the prior dividend and liquidation rights of holders of any class or series of preferred stock that our Board of Directors may designate and issue without any action on the part of the holders of our common stock. Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors and preferred shareholders.

We cannot assure you that our Board of Directors will declare dividends in the foreseeable future.

While we initially expect to return capital to shareholders through quarterly cash dividends, our Board of Directors may not declare dividends in the future or may decrease the amount of a dividend as compared to a prior period. The declaration and payment of dividends, if any, will always be subject to the discretion of our Board of Directors. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy and the terms of our outstanding indebtedness. We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein.

 

39


Table of Contents

THE SEPARATION

General

On August 13, 2018, VF announced that it was moving forward with a plan to distribute to VF’s shareholders all of the shares of common stock of Kontoor Brands through the VF Separation, including the Restructuring and the Distribution. Kontoor Brands is currently a wholly owned subsidiary of VF and, at the time of the Distribution, VF will hold, through its subsidiaries, the assets and liabilities associated with the Spin Business. The Separation will be achieved through the transfer of all the assets and liabilities of the Spin Business to Kontoor Brands or its subsidiaries through the Restructuring and the distribution of 100% of the outstanding capital stock of VF to holders of Kontoor Brands common stock on the record date of                     , 2019 through the Distribution. At the effective time of the Distribution, VF shareholders will receive one share of Kontoor Brands common stock for every                  shares of VF common stock held on the record date. The Separation is expected to be completed on                     , 2019. Immediately following the Separation, VF shareholders as of the record date will own 100% of the outstanding shares of common stock of Kontoor Brands. Following the Separation, Kontoor Brands will be an independent, publicly traded company, and VF will retain no ownership interest in Kontoor Brands.

As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements to effect the Separation and provide a framework for our relationship with VF after the Separation. These agreements will provide for the allocation between us and VF of the assets, liabilities and obligations of VF and its subsidiaries, and will govern the relationship between Kontoor Brands and VF after the Separation. In addition to the Separation and Distribution Agreement, the other principal agreements to be entered into with VF include:

 

   

A Tax Matters Agreement;

 

   

A Transition Services Agreement;

 

   

An Employee Matters Agreement;

 

   

Certain Intellectual Property License Agreements;

 

   

Certain Shared Facilities Agreements; and

 

   

Certain Commercial Arrangements.

The Separation as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “—Conditions to the Distribution” below. We cannot provide any assurances that VF will complete the Separation.

Reasons for the Separation

The VF Board of Directors believes separating the Spin Business from VF’s other businesses is in the best interests of VF and its shareholders and has concluded the Separation will provide VF and Kontoor Brands with a number of potential opportunities and benefits, including the following:

 

   

Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business and opportunities. We believe the Separation will enable each company’s management team to better position its businesses to capitalize on developing macroeconomic trends, increase managerial focus to pursue its individual strategies and leverage its key strengths to drive performance. The management of each resulting company will be able to concentrate on its core competencies and growth opportunities, and will have increased flexibility and speed to design and implement corporate strategies based on the characteristics of its business.

 

   

Resource Allocation and Capital Deployment. Allow each company to allocate resources, incentivize employees and deploy capital to capture the significant long-term opportunities in their respective

 

40


Table of Contents
 

markets. The Separation will enable each company’s management team to implement a capital structure, dividend policy and growth strategy tailored to each unique business. Both businesses are expected to have direct access to the debt and equity capital markets to fund their respective growth strategies.

 

   

Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those characteristics. Separating the two businesses will provide investors with a more targeted investment opportunity so that investors interested in companies in our business will have the opportunity to acquire stock of Kontoor Brands.

The financial terms of the Separation, including the new indebtedness expected to be incurred by Kontoor Brands or entities that are, or will become, prior to the completion of the Separation, subsidiaries of Kontoor Brands, and the amount of the cash transfer to VF has been, or will be, determined by the VF Board of Directors based on a variety of factors, including establishing an appropriate pro forma capitalization for Kontoor Brands as a stand-alone company considering the historical earnings of the Spin Business and the level of indebtedness relative to earnings of various comparable companies.

The Number of Shares You Will Receive

For every                  shares of VF common stock you own as of the close of business on                     , 2019, the record date for the Distribution, you will receive one share of Kontoor Brands common stock on the Distribution Date for the Separation.

Treatment of Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock to VF shareholders. Instead, as soon as practicable on or after the Distribution Date for the Separation, the distribution agent for the Distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales, net of brokerage fees and commissions, transfer taxes and other costs and after making appropriate deductions of the amounts required to be withheld for U.S. federal income tax purposes, if any, pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any minimum sale price for the fractional shares or to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient shareholders for U.S. federal income tax purposes as described below in “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution—The Distribution.”

When and How You Will Receive the Distribution of Kontoor Brands Shares

VF will distribute the shares of our common stock on                     , 2019 to holders of record as of the close of business on the record date for the Distribution. The Distribution is expected to be completed following the NYSE market closing on the Distribution Date for the Separation. VF’s transfer agent and registrar, Computershare, will serve as transfer agent and registrar for the Kontoor Brands common stock and as distribution agent in connection with the Distribution.

If you own VF common stock as of the close of business on the record date for the Distribution, the shares of Kontoor Brands common stock that you are entitled to receive in the Distribution will be issued electronically, as of the Distribution Date for the Separation, to your account as follows:

 

   

Registered Shareholders. If you own your shares of VF stock directly, either in book-entry form through an account at Computershare and/or if you hold paper stock certificates, you will receive your

 

41


Table of Contents
 

shares of Kontoor Brands common stock by way of direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to shareholders, as is the case in the Distribution.

On or shortly after the Distribution Date for the Separation, the distribution agent will mail to you an account statement that indicates the number of shares of Kontoor Brands common stock that have been registered in book-entry form in your name.

Shareholders having any questions concerning the mechanics of having shares of our common stock registered in book-entry form may contact Computershare at the address set forth in “Summary—Questions and Answers About the Separation” in this information statement.

 

   

Beneficial Shareholders. Many VF shareholders hold their shares of VF common stock beneficially through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your VF common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of Kontoor Brands common stock that you are entitled to receive in the Distribution. If you have any questions concerning the mechanics of having shares of common stock held in “street name,” we encourage you to contact your bank or brokerage firm.

Treatment of Outstanding Equity Compensation Awards

We expect that outstanding VF equity compensation awards will be equitably adjusted pursuant to the terms of the applicable compensation award and plan and the provisions of the Code. These equitable adjustments are intended to preserve each award’s intrinsic value, based on the relative fair market values of the pre- and post-Separation shares of VF, and, as applicable, Kontoor Brands, such that in the case of performance-based restricted stock units (“PSUs”) and restricted stock units (“RSUs”), the fair market value of the adjusted number of shares subject to the award (or to which the award relates) immediately after the Separation will be substantially equivalent to, but no more favorable to the award holder than, the fair market value of the shares subject to that award (or to which that award relates) immediately prior to the Separation. For outstanding stock options, the number of shares subject to the award and the applicable exercise or base price will be adjusted so that the aggregate spread value of the stock option immediately after the Separation will be substantially equivalent to, but no more favorable to the award holder than, the aggregate spread value immediately prior to the Separation. For these purposes, spread value will be the difference between the market value of the underlying shares as of the applicable date, and the exercise or base price of the stock option. Generally:

Options

Retirement Eligible and Remaining VF Service Providers. For each retirement eligible participant (i.e. each employee who is age 55 and has 10 years of service) transferring to Kontoor Brands, and for participants remaining with VF, each VF stock option which is outstanding immediately before the Distribution, whether vested or unvested, will be adjusted to reflect the difference in the fair market value of VF common stock pre- and post-Distribution. The number of shares of VF common stock subject to, and the exercise price per share of, such VF stock option will be determined by the VF Talent and Compensation Committee (the “VF Compensation Committee”) in a manner intended to preserve the value of such VF stock option by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value, and adjusted in a manner consistent with Section 409A of the Code (“Section 409A”). Each VF-adjusted stock option will be subject to the same terms and conditions (including vesting schedules) as applicable to the corresponding VF stock option as of immediately before the Distribution.

Non-Retirement Eligible Kontoor Brands Service Providers. For each non-retirement eligible participant transferring to Kontoor Brands, each VF stock option that is outstanding immediately before the Distribution will

 

42


Table of Contents

be converted into an option to acquire Kontoor Brands common stock and will be subject to the same terms and conditions (including vesting and expiration schedules) as applicable to the corresponding VF stock option as of immediately prior to the Distribution. The number of shares of Kontoor Brands common stock subject to, and the exercise price per share of, such Kontoor Brands stock option will be determined by the VF Compensation Committee in a manner consistent with Section 409A and intended to preserve the value of the VF stock option by taking into account (a) the exercise price per share of the VF stock option and (b) the relative values of the VF pre- and post-Distribution stock value and the Kontoor Brands stock value.

Performance-Based Restricted Stock Units (“PSUs”)

2016 PSUs. All VF PSU awards granted in 2016 and outstanding immediately before the Distribution, regardless of whether the participant is transferring to Kontoor Brands or remaining with VF, are expected to be settled in shares of VF’s common stock subject to the same terms and conditions as set forth in the participant’s award agreement. The shares of VF’s common stock will be adjusted, with the number of shares of VF common stock subject to such VF PSU award being determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. The VF Compensation Committee intends to review and certify the performance metrics following the Distribution.

2017 PSUs—Kontoor Brands Participants. For participants transferring to Kontoor Brands, a pro rata portion (based on the portion of the performance period that has elapsed as of the Distribution) of the participant’s VF PSU award that was granted in 2017 and is outstanding immediately before the Distribution will remain a VF PSU award, and will remain eligible to be earned based on VF’s actual performance. The number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution. The remaining portion of the VF PSU award granted in 2017 and outstanding immediately before the Distribution will be converted into Kontoor Brands time-vesting RSUs, vesting as of December 31, 2019. The number of shares of Kontoor Brands common stock subject to the Kontoor Brands RSUs, based on the target number of shares, will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock.

2017 PSUs—VF Participants. For participants remaining with VF, all of the participant’s VF PSU award that was granted in 2017 and is outstanding immediately before the Distribution will be adjusted, and the number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each such VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution.

Fiscal Year 2019 PSUs—Kontoor Brands Participants. For participants transferring to Kontoor Brands, a pro rata portion (based on the portion of the performance period that has elapsed as of the Distribution) of the participant’s VF PSU award that was granted in 2018 and is outstanding immediately before the Distribution will remain a VF PSU award, and will remain eligible to be earned based on VF’s actual performance. The number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution. The remaining portion of the VF

 

43


Table of Contents

PSU award granted in 2018 and outstanding immediately before the Distribution will be converted into a Kontoor Brands PSU award. The number of shares of Kontoor Brands common stock subject to the Kontoor Brands PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock value. Each Kontoor Brands PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution; however, each Kontoor Brands PSU award will be subject to new performance-based vesting conditions. Such performance-based vesting conditions shall be determined, in part, by the VF Compensation Committee (with respect to specific performance goals) prior to the Distribution and, in part, by the Kontoor Brands Compensation Committee (with respect to achievement levels and performance periods) on or after the Distribution reflecting Kontoor Brands’ applicable performance metrics.

Fiscal Year 2019 PSUs—VF Participants. For participants remaining with VF, the participant’s VF PSU award that was granted in 2018 and is outstanding immediately before the Distribution will be adjusted, and the number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution.

Restricted Stock Units (“RSUs”)

Kontoor Brands Participants. For participants transferring to Kontoor Brands, each VF RSU that is outstanding immediately before the Distribution will be converted into a new RSU with respect to Kontoor Brands common stock. The number of shares of Kontoor Brands common stock subject to such Kontoor Brands RSU will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF RSU, as applicable, by taking into account the relative values of the VF pre- and post-Distribution stock value and the Kontoor Brands stock value. Each RSU in Kontoor Brands will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the previously held VF RSUs immediately before the Distribution.

VF Participants. For participants remaining with VF, each VF RSU that is outstanding immediately before the Distribution will be adjusted, and the number of shares of VF common stock subject to such VF RSU will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF RSU by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted RSU will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF RSU immediately before the Distribution.

Special Awards

VF also offers special awards to executives in the form of restricted stock and RSUs.

Kontoor Brands Participants. For each participant transferring to Kontoor Brands, all shares and units designated as a VF special award that is outstanding immediately before the Distribution will be converted into units and shares with respect to Kontoor Brands common stock. The number of shares of Kontoor Brands common stock subject to such VF special award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF special award, as applicable, by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock value. Each such Kontoor Brands special award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF special award as of immediately before the Distribution.

 

44


Table of Contents

VF Participants. For each participant remaining with VF, all shares and units designated as a VF special award that are outstanding immediately before the Distribution will be adjusted, and the number of shares of VF common stock subject to such VF-adjusted special award will be determined by the VF Compensation Committee in a manner intended to preserve the value of such VF special award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted special award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF special award as of immediately before the Distribution.

Results of the Separation

After the Separation, we will be an independent, publicly traded company that directly or indirectly holds the assets and liabilities of the Spin Business. Immediately following the Separation, we expect to have approximately              shareholders of record, based on the number of registered shareholders of VF common stock on                     , 2019, applying a distribution ratio of one share of our common stock for every              shares of VF common stock. We expect to have approximately              shares of Kontoor Brands common stock outstanding. The actual number of shares to be distributed will be determined on the record date.

Before the completion of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with VF to effect the Separation and provide a framework for our relationship with VF after the Separation. These agreements will provide for the allocation between Kontoor Brands and VF of VF’s assets, liabilities and obligations subsequent to the Separation (including with respect to transition services, employee matters, intellectual property matters, tax matters and certain other commercial relationships).

For a more detailed description of these agreements, see “—Agreements with VF” below. The Separation will not affect the number of outstanding shares of VF common stock or any rights of VF shareholders.

Incurrence of Debt

We intend to enter into new financing arrangements in anticipation of the Separation consisting of the term loan facilities and a revolving facility. We expect to incur up to $1.05 billion of new debt from the proceeds of the term loan facilities, which we intend to use primarily, directly or indirectly, to fund a cash transfer to members of VF’s group as part of the Restructuring, to pay related fees and expenses and for other general corporate purposes. We expect for our revolving facility to be undrawn at the Separation, provided that it may be used, subject to a cap, as part of the Restructuring and to pay related fees and expenses at the Separation, and otherwise may be used for, among other things, working capital and general corporate purposes.

Material U.S. Federal Income Tax Consequences of the Distribution

The following is a discussion of the material U.S. federal income tax consequences of the Distribution to U.S. Holders (as defined below) of VF common stock. This discussion is based on the Code, applicable Treasury regulations, administrative interpretations and court decisions as in effect as of the date of this information statement, all of which may change, possibly with retroactive effect. For purposes of this discussion, a “U.S. Holder” is a beneficial owner of VF common stock that is for U.S. federal income tax purposes:

 

   

A citizen or resident of the U.S.;

 

   

A corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S., any state therein or the District of Columbia; or

 

   

An estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

 

45


Table of Contents

This discussion addresses only the consequences of the Distribution to U.S. Holders that hold VF common stock as a capital asset. It does not address all aspects of U.S. federal income taxation that may be important to a U.S. Holder in light of that shareholder’s particular circumstances or to a U.S. Holder subject to special rules, such as:

 

   

A financial institution, regulated investment company or insurance company;

 

   

A tax-exempt organization;

 

   

A dealer or broker in securities, commodities or foreign currencies;

 

   

A shareholder that holds VF common stock as part of a hedge, appreciated financial position, straddle, conversion, or other risk reduction transaction;

 

   

A shareholder that holds VF common stock in a tax-deferred account, such as an individual retirement account; or

 

   

A shareholder that acquired VF common stock pursuant to the exercise of options or similar derivative securities or otherwise as compensation.

If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, holds VF common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partners and the activities of the partnership. A partner in a partnership holding VF common stock should consult its tax adviser.

This discussion of material U.S. federal income tax consequences is not a complete analysis or description of all potential U.S. federal income tax consequences of the Distribution. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any U.S. federal, estate, gift or other non-income tax or any non-U.S., state or local tax consequences of the Distribution. Accordingly, each holder of VF common stock should consult his, her or its tax adviser to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the Distribution to such holder.

Tax Opinions

The consummation of the Separation, along with certain related transactions, is conditioned upon the receipt of opinions of the Tax Advisers substantially to the effect that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, which we refer to as the “Tax Opinions.” In rendering the Tax Opinions to be given as of the closing of the Separation, which we refer to as the “Closing Tax Opinions,” the Tax Advisers will rely on (i) customary representations and covenants made by us and VF, including those contained in certificates of officers of us and VF, and (ii) specified assumptions, including an assumption regarding the completion of the Separation and certain related transactions in the manner contemplated by the transaction agreements. In addition, the Tax Advisers’ ability to provide the Closing Tax Opinions will depend on the absence of changes in existing facts or law between the date of this information statement and the closing date of the Distribution. If any of the representations, covenants or assumptions on which the Tax Advisers will rely is inaccurate, the Tax Advisers may not be able to provide the Closing Tax Opinions or the tax consequences of the Separation could differ from those described below. The opinions of the Tax Advisers do not preclude the IRS or the courts from adopting a contrary position.

 

46


Table of Contents

The Distribution

Assuming that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, and that the Restructuring steps will qualify as transactions that are tax-free for U.S. federal income tax purposes, in general, for U.S. federal income tax purposes:

 

   

The Separation will not result in the recognition of income, gain or loss to VF or us;

 

   

No gain or loss will be recognized by, and no amount will be included in the income of, U.S. Holders of VF common stock upon the receipt of our common stock in the Distribution;

 

   

The aggregate tax basis of the shares of our common stock distributed in the Distribution to a U.S. Holder of VF common stock will be determined by allocating the aggregate tax basis such U.S. Holder has in the shares of VF common stock immediately before such Distribution between such VF common stock and our common stock in proportion to the relative fair market value of each immediately following the Distribution;

 

   

The holding period of any shares of our common stock received by a U.S. Holder of VF common stock in the Distribution will include the holding period of the shares of VF common stock held by a U.S. Holder prior to the Distribution; and

 

   

A U.S. Holder of VF common stock that receives cash in lieu of a fractional share of our common stock will recognize capital gain or loss, measured by the difference between the cash received for such fractional share and the U.S. Holder’s tax basis in that fractional share, determined as described above, and such gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period in the VF common stock is more than one year as of the closing date of the Distribution.

In general, if the Distribution, together with certain related transactions, does not qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, the Distribution will be treated as a taxable dividend to holders of VF common stock in an amount equal to the fair market value of our common stock received, to the extent of such holder’s ratable share of VF’s earnings and profits. In addition, if the Separation does not qualify as a tax-free transaction, VF will recognize taxable gain, which could result in significant tax to VF.

Even if the Separation were otherwise to qualify as a tax-free transaction, the Distribution will be taxable to VF under Section 355(e) of the Code if 50% or more of either the total voting power or the total fair market value of the stock of VF or our common stock is acquired as part of a plan or series of related transactions that includes the Distribution. If Section 355(e) applies as a result of such an acquisition, VF would recognize taxable gain as described above, but the Distribution would generally be tax-free to you. Under some circumstances, the Tax Matters Agreement would require us to indemnify VF for the tax liability associated with the taxable gain. See “—Agreements with VF—Tax Matters Agreement.”

Under the Tax Matters Agreement, we will generally be required to indemnify VF for the resulting taxes in the event that the Separation and/or related transactions fail to qualify for their intended tax treatment due to any action by us or any of our subsidiaries (see “—Agreements with VF—Tax Matters Agreement”). If the Separation were to be taxable to VF, the liability for payment of such tax by VF or by us under the Tax Matters Agreement could have a material adverse effect on VF or us, as the case may be.

Information Reporting and Backup Withholding

U.S. Treasury regulations generally require holders who own at least 5% of the total outstanding stock of VF (by vote or value) and who receive our common stock pursuant to the Distribution to attach to their U.S. federal income tax return for the year in which the Distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the Distribution. VF and/or we will provide the appropriate

 

47


Table of Contents

information to each holder upon request, and each such holder is required to retain permanent records of this information. In addition, payments of cash to a U.S. Holder of VF common stock in lieu of fractional shares of our common stock in the Distribution may be subject to information reporting, unless the U.S. Holder provides the withholding agent with proof of an applicable exemption. Such payments that are subject to information reporting may also be subject to backup withholding, unless such U.S. Holder provides the withholding agent with a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute additional tax, but merely an advance payment, which may be refunded or credited against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

Appraisal Rights

No VF shareholder will have any appraisal rights in connection with the Separation.

Listing and Trading of Our Common Stock

As of the date of this information statement, there is no public market for our common stock. We have applied to have our common stock listed on the NYSE under the ticker symbol “KTB.”

Trading Between Record Date and Distribution Date

Beginning on the record date for the Distribution and continuing up to and including the Distribution Date for the Separation, we expect there will be two markets in VF common stock: a “regular-way” market and an “ex-distribution” market. Shares of VF common stock that trade on the “regular-way” market will trade with an entitlement to receive shares of Kontoor Brands common stock in the Distribution. Shares that trade on the “ex-distribution” market will trade without an entitlement to receive shares of Kontoor Brands common stock in the Distribution. Therefore, if you sell shares of VF common stock in the “regular-way” market after the close of business on the record date for the Distribution and up to and including through the Distribution Date, you will be selling your right to receive shares of Kontoor Brands common stock in the Distribution. If you own shares of VF common stock as of the close of business on the record date for the Distribution and sell those shares in the “ex-distribution” market, up to and including through the Distribution Date, you will still receive the shares of Kontoor Brands common stock that you would be entitled to receive in respect of your ownership, as of the record date, of the shares of VF common stock that you sold.

Furthermore, beginning on                     , 2019 and continuing up to and including the Distribution Date for the Separation, we expect there will be a “when-issued” market in our common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for shares of Kontoor Brands common stock that will be distributed to VF shareholders on the Distribution Date. If you own shares of VF common stock as of the close of business on the record date, you would be entitled to receive shares of our common stock in the Distribution. You may trade this entitlement to receive shares of Kontoor Brands common stock, without trading the shares of VF common stock you own, in the “when-issued” market. On the first trading day following the Distribution Date, we expect “when-issued” trading with respect to Kontoor Brands common stock will end and “regular-way” trading in Kontoor Brands common stock will begin.

 

48


Table of Contents

Conditions to the Distribution

We expect the Distribution will be effective on                     , 2019, the Distribution Date, provided that, among other conditions described in the Separation and Distribution Agreement, the following conditions will have been satisfied or waived by VF in its sole discretion:

 

   

The Separation-related restructuring transactions contemplated by the Separation and Distribution Agreement (the “Restructuring Transactions”) and the consummation of certain new Kontoor Brands financing arrangements contemplated by the Separation and Distribution Agreement will each have been completed;

 

   

The VF Board of Directors will be satisfied that the Distribution will be made in a manner that does not cause VF to be unable to pay its debts in the usual course of its business or cause the total assets of VF to be less than the sum of its total liabilities, in each case in accordance with Section 1551 of the Corporations and Unincorporated Associations Law of the Commonwealth of Pennsylvania;

 

   

The VF Board of Directors will have approved the Distribution and will not have abandoned the Distribution or terminated the Separation and Distribution Agreement at any time prior to the Distribution;

 

   

The SEC will have declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, no stop order suspending the effectiveness of our registration statement on Form 10 will be in effect and no proceedings for such purpose will have been instituted or threatened by the SEC, and this information statement, or a notice of Internet availability thereof, will have been mailed to the holders of VF common stock as of the record date for the Distribution;

 

   

All actions and filings necessary or appropriate under applicable federal, state or other securities laws or “blue sky” laws and the rules and regulations thereunder will have been taken and, where applicable, become effective or accepted;

 

   

Our common stock to be delivered in the Distribution will have been approved for listing on the NYSE, subject to official notice of issuance;

 

   

The Kontoor Brands Board of Directors, as named in this information statement, will have been duly elected, and the amended and restated articles of incorporation and amended and restated bylaws of Kontoor Brands, in substantially the form attached as exhibits to the registration statement of which this information statement is a part, will be in effect;

 

   

Each of the ancillary agreements contemplated by the Separation and Distribution Agreement will have been executed and delivered by the parties thereto;

 

   

VF will have received opinions of the Tax Advisers (each of which will not have been revoked or modified in any material respect), in each case reasonably satisfactory to VF, to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code;

 

   

A nationally recognized valuation advisory firm acceptable to VF will have delivered one or more opinions to the VF Board of Directors concerning the solvency and capital adequacy matters relating to each of (a) VF and its remaining businesses and (b) Kontoor Brands and the Spin Business after consummation of the Distribution, and such opinions will be acceptable to the VF Board of Directors in its sole and absolute discretion and such opinions will not have been withdrawn or rescinded;

 

   

No applicable law will have been adopted, promulgated or issued that prohibits the consummation of the distribution or any of the transactions contemplated by the Separation and Distribution Agreement;

 

49


Table of Contents
   

Any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operation of the Spin Business after the Distribution substantially as conducted as of the date of the Separation and Distribution Agreement will have been obtained;

 

   

No event or development will have occurred or exist that, in the judgment of the VF Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the Distribution or other transactions contemplated by the Separation and Distribution Agreement; and

 

   

Certain necessary actions to complete the Separation will have occurred, including (a) the amended and restated articles of incorporation and amended and restated bylaws of Kontoor Brands, in substantially the form attached as exhibits to the registration statement of which this information statement forms a part, will be in effect and (b) VF will have entered into a distribution agent agreement with a distribution agent or otherwise provided instructions to a distribution agent regarding the Distribution.

The fulfillment of the foregoing conditions will not create any obligations on VF’s part to effect the Separation, and the VF Board of Directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the Separation, including by accelerating or delaying the timing of the consummation of all or part of the Distribution, at any time prior to the Distribution Date.

Agreements with VF

As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with VF to effect the Separation and provide a framework for our relationships with VF after the Separation. These agreements will provide for the allocation between us and VF of the assets, liabilities and obligations of VF and its subsidiaries, and will govern the relationships between Kontoor Brands and VF subsequent to the Separation (including with respect to transition services, employee matters, intellectual property matters, tax matters and certain other commercial relationships).

In addition to the Separation and Distribution Agreement (which will contain many of the key provisions related to our Separation from VF and the distribution of our shares of common stock to VF shareholders), these agreements include, among others:

 

   

A Tax Matters Agreement;

 

   

A Transition Services Agreement;

 

   

An Employee Matters Agreement;

 

   

Certain Intellectual Property License Agreements;

 

   

Certain Shared Facilities Agreements; and

 

   

Certain Commercial Arrangements.

The forms of the principal agreements described below have been filed as exhibits to the registration statement of which this information statement forms a part. The following descriptions of these agreements are summaries of the material terms of these agreements.

The Separation and Distribution Agreement

The Separation and Distribution Agreement will govern the overall terms of the Separation. Generally, the Separation and Distribution Agreement will include VF’s and our agreements relating to the restructuring steps to be taken to complete the Separation, including the assets and rights to be transferred, liabilities to be assumed and related matters.

Subject to the receipt of required governmental and other consents and approvals and the satisfaction of other closing conditions, in order to accomplish the Separation, the Separation and Distribution Agreement will

 

50


Table of Contents

provide for VF and us to transfer specified assets between the companies that will operate the Spin Business after the Distribution, on the one hand, and VF’s remaining businesses, on the other hand. The determination of the assets to be transferred between the companies shall be made by VF in its sole discretion. The Separation and Distribution Agreement will require VF and us to use reasonable efforts to obtain consents, approvals and amendments required to assign the assets and liabilities that are to be transferred pursuant to the Separation and Distribution Agreement.

Unless otherwise provided in the Separation and Distribution Agreement or any of the related ancillary agreements, all assets will be transferred on an “as is, where is” basis. Generally, if the transfer of any assets or any claim or right or benefit arising thereunder requires a consent that will not be obtained before the distribution for the Separation, or if the transfer or assignment of any such asset or such claim or right or benefit arising thereunder would be ineffective or would adversely affect the rights of the transferor thereunder so that the intended transferee would not in fact receive all such rights, the party retaining any asset that otherwise would have been transferred shall hold such asset in trust for the use and benefit of the party entitled thereto and retain such liability for the account of the party by whom such liability is to be assumed, and take such other action as may be reasonably requested by the party to which such asset is to be transferred, or by whom such liability is to be assumed, as the case may be, in order to place such party, insofar as reasonably possible, in the same position as would have existed had such asset or liability been transferred prior to the Distribution.

In addition, certain of the assets, employees and liabilities transferred to us relating to a distribution facility in the Czech Republic, which facility will be retained by VF and leased to us on a transitional basis, will be transferred to us subject to an option in favor of VF. The option will be exercisable at VF’s sole discretion during the ninety day period following the expiration of our lease to such facility, which has a term of one year subject to a right for us to extend the lease term for an additional two-month period. The option gives VF the right to purchase all of the outstanding equity interests of our subsidiary that will hold such assets, employees and liabilities for a purchase price equal to the fair market value of such equity interests as of the exercise of such option. Until the exercise or termination of such option, we are required to operate these assets in accordance with VF’s past practice and subject to certain other limitations.

The Separation and Distribution Agreement will specify those conditions that must be satisfied or waived by VF prior to the completion of the Separation, which are described further above in “—Conditions to the Distribution.” In addition, VF will have the right to determine the date and terms of the Separation, and will have the right, at any time until completion of the distribution, to determine to abandon or modify the distribution and to terminate the Separation and Distribution Agreement.

In addition, the Separation and Distribution Agreement will govern the treatment of indemnification, insurance and litigation responsibility and management. Generally, the Separation and Distribution Agreement will provide for uncapped cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of VF’s retained businesses with VF. The Separation and Distribution Agreement will also establish procedures for handling claims subject to indemnification and related matters.

Tax Matters Agreement

In connection with the Separation, we and VF will enter into a tax matters agreement (the “Tax Matters Agreement”) that will govern the parties’ respective rights, responsibilities and obligations with respect to taxes, including taxes arising in the ordinary course of business, and taxes, if any, incurred as a result of the failure of the Distribution (and certain related transactions) to qualify for tax-free treatment for U.S. federal income tax purposes. The Tax Matters Agreement will also set forth the respective obligations of the parties with respect to the filing of tax returns, the administration of tax contests and assistance and cooperation on tax matters.

In general, the Tax Matters Agreement will govern the rights and obligations that we and VF have after the Separation with respect to taxes for both pre- and post-closing periods. Under the Tax Matters Agreement, VF

 

51


Table of Contents

generally will be responsible for all of our pre-closing income taxes that are reported on combined tax returns with VF or any of its affiliates. We will generally be responsible for all other income taxes and all non-income taxes primarily related to Kontoor Brands that are due and payable after the Separation.

The Tax Matters Agreement will further provide that:

 

   

Without duplication for our indemnification obligations described in the prior paragraph, we will generally indemnify VF against (i) taxes arising in the ordinary course of business for which we are responsible (as described above) and (ii) any liability or damage resulting from a breach by us or any of our affiliates of a covenant or representation made in the Tax Matters Agreement; and

 

   

VF will indemnify us against taxes for which VF is responsible under the Tax Matters Agreement (as described above).

In addition to the indemnification obligations described above, the indemnifying party will generally be required to indemnify the indemnified party against any interest, penalties, additions to tax, losses, assessments, settlements or judgments arising out of or incident to the event giving rise to the indemnification obligation, along with costs incurred in any related contest or proceeding.

Further, the Tax Matters Agreement generally will prohibit us and our affiliates from taking certain actions that could cause the Separation and certain related transactions to fail to qualify for their intended tax treatment, including:

 

   

During the two-year period following the Distribution Date (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur;

 

   

During the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);

 

   

During the two-year period following the Distribution Date, we may not sell or otherwise issue our common stock, other than pursuant to issuances that satisfy certain regulatory safe harbors set forth in Treasury regulations related to stock issued to employees and retirement plans;

 

   

During the two-year period following the Distribution Date, we may not redeem or otherwise acquire any of our common stock, other than pursuant to open-market repurchases of less than 20% of our common stock (in the aggregate);

 

   

During the two-year period following the Distribution Date, we may not amend our articles of incorporation (or other organizational documents) or take any other action, whether through a shareholder vote or otherwise, affecting the voting rights of our common stock; and

 

   

More generally, we may not take any action that could reasonably be expected to cause the Separation and certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes or non-U.S. tax purposes.

In the event that the Separation and certain related transactions fail to qualify for their intended tax treatment, in whole or in part, and VF is subject to tax as a result of such failure, the Tax Matters Agreement will determine whether VF must be indemnified for any such tax by us. As a general matter, under the terms of the Tax Matters Agreement, we are required to indemnify VF for any tax-related losses in connection with the Separation due to any action by us or any of our subsidiaries following the Separation. Therefore, in the event that the Separation and/or related transactions fail to qualify for their intended tax treatment due to any action by us or any of our subsidiaries, we will generally be required to indemnify VF for the resulting taxes.

Transition Services Agreement

The Transition Services Agreement will set forth the terms on which VF will provide to us, and we will provide to VF, on a transitional basis, certain services or functions that the companies historically have shared.

 

52


Table of Contents

Transition services will include various corporate, administrative, logistics, supply chain, distribution, contract manufacturing and information technology services. The Transition Services Agreement will provide for the provision of specified transition services, generally for a period of up to two years following the Distribution. Compensation for transition services will be determined using an internal cost allocation methodology based on fully loaded cost (e.g., including an allocation of corporate overhead), or, in certain cases, may be based on terms and conditions comparable to those that would have been arrived at by parties bargaining at arm’s-length.

Employee Matters Agreement

We intend to enter into an Employee Matters Agreement with VF prior to the Separation that will govern each company’s respective compensation and benefit obligations with respect to current and former employees, directors and consultants. The Employee Matters Agreement will set forth general principles relating to employee matters in connection with the Separation, such as the assignment of employees, the assumption and retention of liabilities and related assets, expense reimbursements, workers’ compensation, leaves of absence, the provision of comparable benefits, employee service credit, the sharing of employee information and duplication or acceleration of benefits.

The Employee Matters Agreement generally will allocate liabilities and responsibilities relating to employee compensation and benefit plans and programs with VF retaining liabilities (both pre- and post-Distribution) and responsibilities with respect to VF participants who will remain with VF and Kontoor Brands assuming liabilities and responsibilities with respect to participants who will transfer to Kontoor Brands in connection with the Separation. The Employee Matters Agreement will provide that, following the Distribution, Kontoor Brands active employees generally will no longer participate in benefit plans sponsored or maintained by VF and will commence participation in Kontoor Brands benefit plans.

The Employee Matters Agreement will also provide that (i) the Distribution does not constitute a change in control under VF’s plans, programs, agreements or arrangements and (ii) the Distribution and the assignment, transfer or continuation of the employment of employees with another entity will not constitute a severance event under applicable plans, programs, agreements or arrangements.

Intellectual Property License Agreements

We intend to enter into two Intellectual Property License Agreements, pursuant to which we will grant and receive licenses under certain intellectual property. The Intellectual Property License Agreements will generally provide us and VF the freedom to continue operating our respective businesses following the Distribution, including as follows:

 

   

Under one Intellectual Property License Agreement, we will grant a non-exclusive, worldwide, fully paid-up and royalty-free license to any intellectual property, excluding trademarks, transferred to us in connection with the Separation in order for VF to continue operating its business in the manner conducted as of the Distribution, as well as any natural extensions or evolutions of such business.

 

   

Under the other Intellectual Property License Agreement, we will receive a non-exclusive, worldwide, fully paid-up and royalty-free license to any intellectual property, excluding trademarks, retained by VF but used in the Spin Business as of the Distribution in order for us to continue operating the Spin Business in the manner conducted as of the Distribution, as well as any natural extensions or evolutions of the Spin Business.

 

   

Under such Intellectual Property License Agreement, we will also receive the right to use certain VF trademarks on a transitional basis for a limited period of time following the Separation, including in connection with our VF Outlet business. If we desire to use such VF trademarks, including in connection with our VF Outlet business, after the transition period, we will be required to enter into an arms-length trademark license with VF.

 

53


Table of Contents

Shared Facilities Agreements

Prior to the Restructuring, the Spin Business shared approximately 59 owned or leased facilities with VF and its remaining businesses in 25 countries (the “Shared Facilities”). We intend to continue operating the Spin Business through 12 of such Shared Facilities, on a transitionary or permanent basis, and as part of the Restructuring we intend to enter into lease, sub-lease or temporary service agreements or arrangements with VF. These shared facilities agreements will be negotiated prior to the Separation between us and VF. Compensation for such lease, sub-lease or other agreements or arrangements will generally be determined based on the space allocated to the Spin Business and the remaining businesses of VF, respectively, or, in certain cases, may be based on terms and conditions comparable to those that would have been arrived at by the parties bargaining at arm’s length.

Commercial Arrangements

We intend to enter into certain commercial arrangements with VF in connection with the Separation. These commercial arrangements will include one or more agreements with VF or a subsidiary thereof pursuant to which VF or its subsidiary will continue to distribute certain products of the Spin Business in specified geographic regions, including, among others, Israel and Russia, for a term generally ending on March 31, 2020, depending on the product and region. These agreements modify our historical intercompany arrangements and reflect pricing we believe to be arm’s length.

We do not believe that any of such commercial arrangements, individually or in the aggregate, are material to the Spin Business.

Transferability of Shares of Our Common Stock

The shares of our common stock that you will receive in the Distribution will be freely transferable, unless you are considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the Separation generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by or are under common control with us, and may include certain of our officers and directors. In addition, individuals who are affiliates of VF on the Distribution Date may be deemed to be affiliates of ours. We estimate that our directors and executive officers, who may be considered “affiliates” for purposes of Rule 144, will beneficially own approximately                  shares of our common stock immediately following the Separation. See “Ownership of Common Stock by Certain Beneficial Owners and Management” included elsewhere in this information statement. Our affiliates may sell shares of our common stock received in the Distribution only:

 

   

Under a registration statement that the SEC has declared effective under the Securities Act; or

 

   

Under an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period, a number of shares of our common stock that does not exceed the greater of:

 

   

One percent of our common stock then outstanding; or

 

   

The average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 for the sale.

Rule 144 also includes notice requirements and restrictions governing the manner of sale for sales by our affiliates. Sales may not be made under Rule 144 unless certain information about us is publicly available.

 

54


Table of Contents

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to VF shareholders who are entitled to receive shares of our common stock in the Distribution. The information statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither VF nor we undertake any obligation to update such information except in the normal course of our respective public disclosure obligations.

 

55


Table of Contents

DIVIDEND POLICY

We intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $        per share of our common stock (representing a quarterly rate initially equal to $        per share). The declaration and amount of any dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the Board of Directors deems relevant.

 

56


Table of Contents

CAPITALIZATION

The following table sets forth our cash and equivalents and our capitalization as of December 29, 2018 on a historical and pro forma basis to give effect to the Separation, the incurrence of debt and other matters, as discussed in “The Separation.”

The pro forma adjustments are based upon available information and assumptions that management believes are reasonable; however, such adjustments are subject to change based on the finalization of the terms of the Separation and the agreements which define our relationship with VF after the completion of the Separation. In addition, such adjustments are estimates and may not prove to be accurate.

You should read the information in the following table together with “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Statements” and our historical combined financial statements and the related notes included elsewhere in this information statement.

We are providing the capitalization table for information purposes only. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operating as an independent, publicly traded company on December 29, 2018 and is not necessarily indicative of our future capitalization or financial condition.

 

     As of December 29, 2018  
     Actual     Pro Forma
(Unaudited)
 
     (In thousands, except
share amounts)
 

Cash and equivalents (1)

   $ 96,776     $ 100,000  
  

 

 

   

 

 

 

Indebtedness:

    

Short-term:

    

Short-term borrowings

     3,215       3,215  

Related party notes payable (2)

     269,112       —    

Long-term:

    

Long-term debt (3)

     —         1,030,253  
  

 

 

   

 

 

 

Total indebtedness

     272,327       1,033,468  
  

 

 

   

 

 

 

Equity:

    

Common stock, no par value;              shares authorized,
             shares issued and outstanding, pro forma (4)

     —         —    

Additional paid-in-capital (4)

     —         34,961  

Parent company investment (4)

     1,868,634       —    

Accumulated other comprehensive income (loss) (5)

     (145,182     (100,556
  

 

 

   

 

 

 

Total equity

   $ 1,723,452     $ (65,595
  

 

 

   

 

 

 

Total capitalization

   $ 1,995,779     $ 967,873  
  

 

 

   

 

 

 

 

(1)

Reflects an expected cash amount of $100.0 million at Separation following receipt of debt proceeds and expected cash transfer to VF or one or more of its subsidiaries.

(2)

Reflects that VF will retain this payable at Separation.

(3)

Reflects an estimated $1.05 billion of long-term indebtedness we expect to incur in connection with the Separation, less $19.7 million of estimated debt issuance costs.

(4)

At Separation, VF’s net investment in us will be eliminated to reflect the distribution of our common stock to VF’s shareholders, at an exchange ratio of one share of our common stock for every              shares of VF common stock.

(5)

Reflects elimination of the accumulated other comprehensive loss related to our operations in Argentina since VF will retain these operations at Separation.

 

57


Table of Contents

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The unaudited pro forma combined financial statements consist of an unaudited pro forma combined statement of income for the year ended December 29, 2018 and an unaudited pro forma combined balance sheet as of December 29, 2018. The unaudited pro forma combined financial statements should be read in conjunction with our historical audited combined financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement. The unaudited pro forma combined statement of income has been prepared to give effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred or became effective as of December 31, 2017, the beginning of our most recently completed fiscal year. The unaudited pro forma combined balance sheet has been prepared to give effect to the Pro Forma Transactions as though the Pro Forma Transactions had occurred as of December 29, 2018. The unaudited pro forma combined financial statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Special Note Regarding Forward-Looking Statements.”

The unaudited pro forma combined financial statements presented below have been derived from our historical audited combined financial statements included elsewhere in this information statement and do not purport to represent what our financial position and results of operations would have been had the Separation occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations. In addition, the unaudited pro forma combined financial statements are provided for illustrative and informational purposes only. The pro forma adjustments are based on available information and assumptions we believe are reasonable; however, such adjustments are subject to change.

VF did not account for us as, and we were not operated as, an independent, publicly traded company for the periods presented. Our unaudited pro forma combined financial statements have been prepared to reflect adjustments to our historical audited combined financial statements that are (1) directly attributable to the Pro Forma Transactions; (2) factually supportable; and (3) with respect to the unaudited pro forma statement of income, expected to have a continuing impact on our results of operations. The unaudited pro forma combined financial statements have been adjusted to give effect to the following (the “Pro Forma Transactions”):

 

   

The contribution by VF to us of all the assets and liabilities that comprise the Spin Business and the retention by VF of certain specified assets and liabilities reflected in our historical combined financial statements, in each case, pursuant to the Separation and Distribution Agreement;

 

   

The anticipated post-Separation capital structure, including: (i) the incurrence of debt and the funding of a cash transfer to VF; and (ii) the issuance of our common stock to holders of VF common stock;

 

   

The resulting elimination of VF’s net investment in us;

 

   

Transaction costs specifically related to the Separation; and

 

   

The impact of, and transactions contemplated by, the Separation and Distribution Agreement, Tax Matters Agreement, Transition Services Agreement, Employee Matters Agreement, Intellectual Property License Agreements, and other agreements related to the Separation between us and VF and the provisions contained therein.

A final determination regarding our capital structure has not yet been made, and the Separation and Distribution Agreement, Tax Matters Agreement, Transition Services Agreement, Employee Matters Agreement and Intellectual Property License Agreements and certain other transaction agreements have not been finalized. As such, the pro forma statements may be revised in future amendments to reflect the impact on our capital structure and the final form of those agreements, to the extent any such revisions would be deemed material.

The operating expenses reported in our historical audited combined statement of income include allocations of certain VF costs, such as corporate costs, shared services, and other related costs that benefit us.

 

58


Table of Contents

As an independent, publicly traded company, we expect to incur additional recurring expenses. The significant assumptions involved in determining our estimates of the recurring costs of being an independent, publicly traded company include:

 

   

Costs to perform financial reporting, tax, regulatory compliance, corporate governance, treasury, legal, internal audit and investor relations activities;

 

   

Compensation, including equity-based awards, and benefits with respect to new and existing positions;

 

   

Depreciation and amortization related to information technology infrastructure investments;

 

   

Insurance premiums; and

 

   

Changes in our overall facility costs.

Incremental recurring expenses attributable to these additional activities are estimated to be up to $10.0 million before income taxes annually. A pro forma adjustment has not been made to the accompanying unaudited pro forma combined statement of income to reflect these additional expenses because they are projected amounts based on estimates and would not be factually supportable.

We currently estimate that we will incur between $110.0 million and $125.0 million in costs and expenses associated with becoming an independent, publicly traded company within 18 to 24 months of the Distribution. The accompanying unaudited pro forma combined statement of income has not been adjusted for these estimated costs and expenses as they are not expected to have an ongoing impact on our operating results and are projected amounts based on estimates that are not factually supportable. These costs and expenses are expected to include:

 

   

Accounting, tax, and other professional costs pertaining to our separation and establishment as an independent, publicly traded company;

 

   

Recruiting and relocation costs associated with hiring key senior management personnel new to our company; and

 

   

Costs to separate and implement information systems.

Subject to the terms of the Separation and Distribution Agreement, VF will pay all nonrecurring third-party costs and expenses related to the Separation and incurred prior to the completion of the Separation. Such nonrecurring amounts are expected to include costs to separate and/or duplicate information technology systems, investment banker fees (other than fees and expenses in connection with the debt financing), third-party legal and accounting fees, and similar costs. After the completion of the Separation, subject to the terms of the Separation and Distribution Agreement, all costs and expenses related to the Separation incurred by either VF or us will be borne by the party incurring the costs and expenses.

Our retained cash balance is subject to adjustments prior to and following the completion of the Separation. The following unaudited pro forma combined balance sheet does not reflect any such adjustments, as the amounts are not currently determinable and would represent a financial projection.

 

59


Table of Contents

Kontoor Brands

Unaudited Pro Forma Combined Balance Sheet

As of December 29, 2018

(In thousands, except share amounts)

 

     Historical     Pro Forma
Adjustments (1)
         Pro Forma  

ASSETS

         

Current assets

         

Cash and equivalents

   $ 96,776     $ 3,224     (a)    $ 100,000  

Accounts receivable, less allowance for doubtful accounts

     252,966       (3,728   (b)      249,238  

Due from related parties, current

     547,690       (547,690   (c)      —    

Related party notes receivable

     517,940       (517,940   (d)      —    

Inventories

     473,812       (4,962   (b)      468,850  

Other current assets

     52,014       (6,282   (b) (c) (d)      45,732  
  

 

 

   

 

 

      

 

 

 

Total current assets

     1,941,198       (1,077,378        863,820  

Due from related parties, noncurrent

     611       (611   (e)      —    

Property, plant and equipment, net

     138,449       (720   (b)      137,729  

Intangible assets, net

     53,059       —            53,059  

Goodwill

     214,516       —            214,516  

Other assets

     110,632       (12,218   (b) (e) (f)      98,414  
  

 

 

   

 

 

      

 

 

 

TOTAL ASSETS

   $ 2,458,465     $ (1,090,927      $ 1,367,538  
  

 

 

   

 

 

      

 

 

 

LIABILITIES AND EQUITY (DEFICIT)

         

Current liabilities

         

Short-term borrowings

   $ 3,215     $ —          $ 3,215  

Accounts payable

     134,129       14,580     (b) (g)      148,709  

Due to related parties, current

     16,140       (16,140   (g)      —    

Related party notes payable

     269,112       (269,112   (d)      —    

Accrued liabilities

     194,228       (8,145   (b) (d) (f)      186,083  
  

 

 

   

 

 

      

 

 

 

Total current liabilities

     616,824       (278,817        338,007  

Other liabilities

     118,189       (53,316   (f)      64,873  

Long-term debt

     —         1,030,253     (h)      1,030,253  

Commitments and contingencies

         
  

 

 

   

 

 

      

 

 

 

Total liabilities

     735,013       698,120          1,433,133  
  

 

 

   

 

 

      

 

 

 

Equity (Deficit)

         

Common stock, no par value;         shares authorized,              shares issued and outstanding, pro forma

     —         —       (i)      —    

Additional paid-in-capital

     —         34,961     (i)      34,961  

Parent company investment

     1,868,634       (1,868,634   (i)      —    

Accumulated other comprehensive income (loss)

     (145,182     44,626     (b)      (100,556
  

 

 

   

 

 

      

 

 

 

Total equity (deficit)

     1,723,452       (1,789,047        (65,595
  

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES AND EQUITY (DEFICIT)

   $ 2,458,465     $ (1,090,927      $ 1,367,538  
  

 

 

   

 

 

      

 

 

 

 

(1)

The change in our cost structure related to becoming an independent, publicly traded company is not reflected above.

See Notes to Unaudited Pro Forma Combined Financial Statements.

 

60


Table of Contents

Kontoor Brands

Unaudited Pro Forma Combined Statement of Income

Year Ended December 29, 2018

(In thousands, except per share amounts)

 

     Historical     Pro Forma
Adjustments (1)
         Pro Forma  

Net revenues

   $ 2,763,998     $ (81,332 )   (b) (j)    $ 2,682,666  

Costs and operating expenses

         

Cost of goods sold

     1,649,435       (73,018   (b) (j) (k)      1,576,417  

Selling, general and administrative expenses

     781,521       (26,171 )   (b) (k) (l)      755,350  
  

 

 

   

 

 

      

 

 

 

Total costs and operating expenses

     2,430,956       (99,189        2,331,767  
  

 

 

   

 

 

      

 

 

 

Operating income

     333,042       17,857          350,899  

Related party interest income, net

     7,738       (7,738   (d)      —    

Other interest income (expense), net

     4,567       (59,110   (b) (h)      (54,543

Other income (expense), net

     (5,269     (149   (b)      (5,418
  

 

 

   

 

 

      

 

 

 

Income before income taxes

     340,078       (49,140        290,938  

Income taxes

     77,005       (11,204   (f)      65,801  
  

 

 

   

 

 

      

 

 

 

Net income

   $ 263,073     $ (37,936      $ 225,137  
  

 

 

   

 

 

      

 

 

 

Pro forma net income per share of common stock:

         

Basic

                (m)    $    

Diluted

                (n)    $  

Weighted average number of common shares outstanding:

                  

Basic

                (m)   

Diluted

                (n)   

 

(1)

The change in our cost structure related to becoming an independent, publicly traded company is not reflected above.

See Notes to Unaudited Pro Forma Combined Financial Statements.

 

61


Table of Contents

Notes to Unaudited Pro Forma Combined Financial Statements

 

(a)

The following represents adjustments to reflect an expected cash amount of $100.0 million at Separation:

 

     As of
December 29, 2018
 
     (In thousands)  

Cash received from incurrence of debt

   $ 1,050,000  

Cash transfer to VF at Separation

     (1,027,029

Cash paid for debt issuance costs

     (19,747
  

 

 

 

Total pro forma adjustment to cash

   $ 3,224  
  

 

 

 

 

(b)

In January 2019, VF decided to cease its operations in Argentina, including those of the Company. In conjunction with the Separation, VF will retain all assets and liabilities of the Company’s operations in Argentina. Consequently, we have removed all Argentina-related assets and liabilities from the unaudited pro forma combined balance sheet as of December 29, 2018. We have also removed operating results for the Argentina business from the unaudited pro forma combined statement of income for the year ended December 29, 2018, since VF’s decision to shut down operations in Argentina will have a continuing impact. The Company does not expect to incur any costs with respect to VF’s decision to cease operations in Argentina, as VF will retain responsibility for these costs.

The following assets and liabilities related to our Argentina business have been removed from the unaudited pro forma combined balance sheet as of December 29, 2018:

 

     As of
December 29, 2018
 
     (In thousands)  

Accounts receivable, less allowance for doubtful accounts

   $ 3,728  

Inventories

     4,962  

Other current assets

     1,769  

Property, plant and equipment, net

     720  

Other assets

     540  

Accounts payable

     1,560  

Accrued liabilities

     3,697  

Accumulated other comprehensive income (loss)

     (44,626

The following operating results for our Argentina business have been removed from the unaudited pro forma combined statement of income for the year ended December 29, 2018:

 

     For the
Year Ended
December 29, 2018
 
     (In thousands)  

Net revenues

   $ 30,370  

Cost and operating expenses

  

Cost of goods sold

     19,122  

Selling, general and administrative expenses

     20,235  
  

 

 

 

Total costs and operating expenses

     39,357  

Operating income (loss)

     (8,987

Other interest income (expense), net

     (579

Other income (expense), net

     149  
  

 

 

 

Income (loss) before income taxes

   $ (9,417
  

 

 

 

 

62


Table of Contents
(c)

In connection with the Separation, the Company’s portion of VF’s hedging agreements with counterparties will be novated to the Company. Additionally, VF will retain certain due from related parties, current balances. Accordingly, we have reflected the following adjustments in the unaudited pro forma combined balance sheet as of December 29, 2018:

 

     As of
December 29, 2018
 
     (In thousands)  

Sale of trade accounts receivable (retained by VF)

   $ (544,858

Hedging agreements with VF (reclassified to other current assets)

     (2,832
  

 

 

 

Total pro forma adjustment to due from related parties, current

   $ (547,690
  

 

 

 

 

(d)

In connection with the Separation, VF will retain the related party notes receivable and related party notes payable balances, along with any associated accrued interest balances. Accordingly, we have removed these amounts from the unaudited pro forma combined balance sheet as of December 29, 2018. We have also removed the related party interest income, net associated with these notes from the unaudited pro forma combined statement of income for the year ended December 29, 2018.

The following summarizes the related party accrued interest balances removed from the unaudited pro forma combined balance sheet as of December 29, 2018:

 

     As of
December 29, 2018
 
     (In thousands)  

Accrued interest receivable (other current assets)

   $ 7,345  

Accrued interest payable (accrued liabilities)

     4,280  

 

(e)

In connection with the Separation, the Company’s portion of VF’s hedging agreements with counterparties will be novated to the Company. Accordingly, we have reclassified the due from related parties, noncurrent balance to other assets in the unaudited pro forma combined balance sheet as of December 29, 2018.

 

(f)

In connection with the Separation, VF will retain the net liabilities associated with uncertain tax positions related to VF’s U.S. consolidated tax filing. Accordingly, we have removed the following uncertain tax positions from the unaudited pro forma combined balance sheet as of December 29, 2018:

 

     As of
December 29, 2018
 
     (In thousands)   

Other assets

   $ 12,289

Accrued liabilities

     168

Other liabilities

     53,316  

 

63


Table of Contents

The pro forma income tax expense adjustment reflects a blended statutory tax rate of 22.8% based on statutory rates by jurisdiction. Management believes the blended statutory tax rate provides a reasonable basis for the pro forma adjustment. However, the effective tax rate of Kontoor could be significantly different depending on actual operating results by jurisdiction and the application of enacted tax law to those specific results. The following summarizes the calculation of our pro forma income tax expense adjustment in the unaudited pro forma combined statement of income for the year ended December 29, 2018:

 

     For the
Year Ended
December 29, 2018
 
     (In thousands)  

Total pro forma adjustments to income before income taxes

   $ (49,140 )

Blended statutory tax rate

     22.8 %
  

 

 

 

Total pro forma adjustment to income taxes

   $ (11,204 )
  

 

 

 

 

(g)

In connection with the Separation, the purchase of finished goods through VF will be replaced by purchases from third parties. Accordingly, we have reclassified the due to related parties, current balance to third-party accounts payable in the unaudited pro forma combined balance sheet as of December 29, 2018.

 

(h)

The adjustments assume that we will incur debt comprised of two term loans in an aggregate principal amount of $1.05 billion that will be used primarily, directly or indirectly, to fund a cash transfer to members of VF’s group. We currently estimate the debt will have an estimated weighted average interest rate of approximately 5.4%. The terms of such indebtedness are being negotiated and will be finalized prior to the Separation, and the pro forma adjustments may change accordingly. The adjustments also assume that we will incur estimated debt issuance fees of $19.7 million. We also expect to enter into a revolver facility, but no amount is expected to be drawn or used to fund a cash transfer to VF upon Separation.

 

     For the
Year Ended
December 29, 2018
 
     (In thousands)  

Interest expense on total debt at estimated weighted average rate of approximately 5.4%

   $ (56,405

Amortization of debt issuance costs

     (3,284
  

 

 

 

Total interest expense from debt

   $ (59,689
  

 

 

 

A 1/8% variance in the estimated weighted average interest rate on the debt would change the annual interest expense by approximately $1.3 million.

 

(i)

Reflects the reclassification of VF’s net investment in us, which was recorded in Parent company investment, into additional paid-in-capital and common stock to reflect the assumed issuance of              million shares of our common stock with no par value pursuant to the Separation and Distribution agreement immediately prior to the Separation. We have assumed the number of outstanding shares of our common stock based on the number of shares of VF common stock outstanding on December 29, 2018 and a distribution ratio of one share of our common stock for every              shares of VF common stock.

 

64


Table of Contents

The following summarizes the pro forma adjustment to additional paid-in capital:

 

     As of
December 29, 2018
 
     (In thousands)  

Parent company investment

   $ 1,868,634  

Uncertain tax positions, net

     41,195  

Cash transfer to VF at Separation

     (1,027,029

Related party balances, net

     (796,751

Argentina balance sheet, net

     (51,088
  

 

 

 

Total pro forma adjustment to additional paid-in capital

   $ 34,961  
  

 

 

 

 

(j)

In connection with the Separation, the Company is exiting its transportation fleet operations and thus will no longer provide these services to other VF coalitions. Additionally, the Company will cease manufacturing products for other VF coalitions shortly following the Separation (currently expected to end September 2019). Accordingly, we have removed the related operating results from the unaudited pro forma combined statement of income for the year ended December 29, 2018 as follows:

 

     For the
Year Ended
December 29, 2018
 
     (In thousands)  

Net revenues

   $ 50,962  

Cost of goods sold

     48,643  

The Company does not expect to incur any costs with respect to exiting its transportation fleet, as VF will retain responsibility for these costs. In addition, the Company does not expect to incur any significant costs with respect to ceasing manufacturing products for other VF coalitions.

 

(k)

Reflects the removal of the service and non-service components of net periodic pension costs (benefit) related to the U.S. Shared Plans allocated to us by VF. During the quarter ended June 30, 2018, VF approved a freeze of all future benefit accruals under the U.S. Shared Plans, effective December 31, 2018. No portion of the U.S. Shared Plans will transfer to the Company upon Separation. Furthermore, the Company is not expected to replace the frozen pension benefits with other forms of compensation to Company employees. Accordingly, we recorded the following adjustments to remove these costs from the unaudited pro forma combined statement of income for the year ended December 29, 2018:

 

     For the
Year Ended
December 29, 2018
 
     (In thousands)  

Cost of goods sold

   $ 5,253  

Selling, general and administrative expenses

     (369

 

(l)

Reflects the removal of $6.3 million of transaction costs paid to advisors, attorneys and other third parties directly related to the Separation. Transaction costs have been eliminated as these costs are directly attributable to the Separation and are not expected to have a continuing impact on our operating results following consummation of the Separation.

 

(m)

Pro forma basic earnings per share (EPS) and pro forma basic weighted average number of shares outstanding are based on the number of VF basic weighted average shares outstanding for the year ended December 29, 2018, adjusted for a distribution ratio of one share of our common stock for every              shares of VF common stock.

 

65


Table of Contents
(n)

Pro forma diluted EPS and pro forma diluted weighted average number of shares outstanding are based on the number of basic shares of our common stock as described in Note (m) above. The actual dilutive effect following the completion of the Separation will depend on various factors, including employees who may change employment between Kontoor and VF and the impact of equity-based compensation arrangements. We cannot fully estimate the dilutive effects at this time.

 

66


Table of Contents

SELECTED HISTORICAL COMBINED FINANCIAL DATA

The following table presents our selected historical combined financial data as of and for each of the years in the five-year period ended December 29, 2018. We derived the selected historical combined financial data as of December 29, 2018 and December 30, 2017, and for each of the years in the three-year period ended December 29, 2018, from our audited combined financial statements included elsewhere in this information statement. We derived the selected historical combined financial data as of December 31, 2016, and as of and for the years ended January 2, 2016 and January 3, 2015, from our unaudited combined financial information that is not included in this information statement. In management’s opinion, the unaudited combined financial information has been prepared on the same basis as our audited combined financial statements and includes all adjustments necessary for a fair statement of the information for the periods presented.

Our historical audited combined financial statements and unaudited combined financial information include certain expenses of VF that have been charged to us for certain centralized functions and programs provided and administered by VF including, but not limited to, information technology, human resources, accounting shared services, supply chain, insurance, and the service cost component of net periodic pension costs. In addition, for purposes of preparing our audited combined financial statements and the unaudited combined financial information, we have allocated a portion of VF’s total corporate expenses to such financial statements, with the allocations related primarily to the support provided by VF’s executive management, finance, accounting, legal, human resources, the related benefit costs associated with such functions, such as stock-based compensation, and the cost of VF’s Greensboro, North Carolina corporate headquarters. Allocations also include the non-service components of net periodic pension costs. These costs may not be representative of the future costs we will incur as an independent, publicly traded company. In addition, our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from VF, including changes in financing, operations, cost structure and personnel needs of our business. Consequently, the financial information included here may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial condition, results of operations and cash flows would have been had we been an independent, publicly traded company during the periods presented.

The selected historical combined financial data presented below should be read in conjunction with our audited combined financial statements and the related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Unaudited Pro Forma Condensed Combined Financial Statements” and accompanying notes included elsewhere in this information statement.

 

    2018     2017 (1)     2016     2015     2014  
    (Dollars in thousands)  

Summary of Operations

                              

Net revenues

  $ 2,763,998     $  2,830,106     $  2,926,464     $  3,008,776     $  3,011,542  

Operating income (2)

    333,042       357,418       408,698       506,025       467,298  

Net income (2)

    263,073       116,191       315,030       376,802       331,114  

EBITDA (Non-GAAP) (3)

    358,808       387,688       441,259       530,424       492,033  

Financial Position (4)

         

Working capital

  $ 1,324,374     $ 935,125     $ 864,815     $ 846,776     $ 845,045  

Current ratio

    3.1       2.5       2.4       2.3       2.3  

Total assets (5)

  $ 2,458,465     $ 2,126,410     $ 2,158,292     $ 2,083,809     $ 2,101,312  

Equity

  $ 1,723,452       1,357,893       1,392,847       1,327,722       1,332,150  

Debt to total capital ratio (6)

    13.6     16.8     16.5     17.1     17.1

Other Statistics

         

Operating margin

    12.0     12.6     14.0     16.8     15.5

Cash (used) provided by operations (1)(7)

  $ (96,303   $ 168,601     $ 323,952     $ 297,904     $ 387,067  

Capital expenditures

    21,038       25,584       27,575       23,583       21,150  

Software purchases

    1,663       879       570       1,560       395  

 

67


Table of Contents
(1) 

We recorded a $136.7 million provisional tax charge during 2017 related to the impact of the Tax Act, of which $110.6 million related to the transition tax and was deemed settled in cash with VF at December 2017 for purposes of the combined financial statements.

(2) 

We recorded restructuring charges of $20.4 million, $9.5 million and $21.6 million in 2018, 2017 and 2016, respectively. Restructuring charges were not significant in 2015 and 2014.

(3) 

See below “—Non-GAAP Financial Measures.”

(4) 

We early adopted the accounting standards update regarding intra-entity transfers in the first quarter of 2017, which resulted in a cumulative adjustment to Parent company investment within equity and reduction in other assets in the combined balance sheet at January 1, 2017 of $70.2 million. We adopted the accounting standards update regarding revenue recognition in the first quarter of 2018, which resulted in a cumulative adjustment to increase Parent company investment within equity of $3.0 million.

(5) 

Total assets include related party notes receivable of $517.9 million, $547.7 million, $517.9 million, $518.0 million and $598.3 million at December 2018, 2017, 2016, 2015 and 2014, respectively.

(6)

Total capital is defined as equity plus debt. We did not have any long-term debt in the periods presented. Short-term debt includes short-term borrowings and related party notes payable. Related party notes payable approximated $269.1 million in all periods presented.

(7) 

2018 cash used by operations was adversely impacted by $323.3 million lower cash proceeds from settlement of the intercompany sale to VF of certain of the Company’s trade accounts receivable.

Non-GAAP Financial Measures (1)

It is management’s intent to provide non-GAAP financial information to enhance the understanding of our GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Management believes that the following non-GAAP financial measures provide investors and analysts useful insight into our financial position and operating performance. Each non-GAAP financial measure is presented along with the most directly comparable GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies and therefore may not be comparable among companies.

 

     2018     2017     2016     2015     2014  
     (In thousands)  

Net income—GAAP

   $ 263,073     $ 116,191     $ 315,030     $ 376,802     $ 331,114  

Related party interest income, net

     (7,738     (3,372     (1,470     (3,220     (3,478

Other interest income, net

     (4,567     (1,721     (1,909     (2,628     (1,358

Income taxes

     77,005       242,962       95,457       131,189       137,249  

Depreciation and amortization

     31,035       33,628       34,151       28,281       28,506  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (Non-GAAP)

   $ 358,808     $ 387,688     $ 441,259     $ 530,424     $ 492,033  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

We evaluate performance on the basis of EBITDA. We define “EBITDA” as our net income calculated in accordance with U.S. GAAP, plus the sum of net interest income, income taxes, depreciation and amortization. We believe that EBITDA is an important indicator of operating performance because:

 

   

EBITDA excludes the effects of income taxes, as well as the effects of financing and investing activities by eliminating the effects of interest and depreciation expenses and therefore more closely measures our operational performance; and

 

68


Table of Contents
   

certain adjustment items, while periodically affecting our results, may vary significantly from period to period and have disproportionate effect in a given period, which affects comparability of our results.

 

69


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the three years ended December 29, 2018 should be read in conjunction with our audited combined financial statements and the notes thereto, included elsewhere in this information statement, as well as the information presented under “Unaudited Pro Forma Combined Financial Statements,” “Selected Historical Combined Financial Data” and “Business.” The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed elsewhere in this information statement. See in particular “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

We are a global apparel leader focused on the design, manufacturing, sourcing, marketing, and distribution of our portfolio of brands, including our iconic brands Wrangler® and Lee®. Our two key brands benefit from heritages spanning 200 combined years and together with our other brands accounted for over 170 million units of apparel produced or sourced in 2018. We endeavor to provide consumers with high-quality, innovative products at a superior value. We manufacture approximately 38% of our products in our owned and leased facilities, and distribute our products worldwide primarily through both major brick and mortar and e-commerce retailers. We believe our experienced management team is executing a strategy that provides a better product and brand experience to our consumers, primarily by delivering on our high standards of product design and innovation, and offering a wide variety of compelling products across channels and categories.

We have a presence in over 65 countries and generated approximately $2.8 billion in global revenues in 2018 across our various channels. We sell our products primarily through our established wholesale and expanding digital channels, and utilize our branded brick and mortar locations to supplement our go-to-market strategy. We benefit from strong relationships with many of our customers who we believe depend on our ability to reliably replenish them with our high-volume products. Our distribution channels are as follows:

 

   

U.S. Wholesale includes sales of our Wrangler®, Lee®, and Rock and Republic® branded products to mass and mid-tier retailers, specialty stores including western specialty retail, department stores, retailer-owned and third-party e-commerce sites, as well as revenue from U.S. licensing arrangements. The U.S. Wholesale channel accounted for approximately 61% of our revenues in both 2018 and 2017, and 62% of our revenues in 2016.

 

   

Non-U.S. Wholesale includes international sales of our Wrangler® and Lee® branded products to specialty stores, department stores, mass retailers, retailer-owned and third-party e-commerce sites, independently operated partnership stores located across Europe, the Middle East and Africa (“EMEA”), Asia-Pacific (“APAC”), and non-U.S. Americas, as well as revenue from international licensing arrangements. The Non-U.S. Wholesale channel accounted for approximately 22% of our revenues in 2018, 23% of our revenues in 2017 and 22% of our revenues in 2016.

 

   

Branded Direct-to-Consumer includes the distribution of our products via concession retail locations internationally, Wrangler® and Lee® branded full-price stores globally, and Company-owned outlet stores globally. The channel also includes our branded products in our U.S.-based VF Outlet™ stores and our products that are marketed and distributed online via www.wrangler.com and www.lee.com. Our VF Outlet™ stores sell Wrangler® and Lee® branded products, VF-branded products and third-party branded merchandise, and provide a means for disposal of excess inventory. Revenues of Wrangler® and Lee® brand products sold in VF Outlet™ stores are reported as part of the Branded Direct-to-Consumer channel, while revenues of VF-branded products and third-party branded merchandise are reported in the Other channel below. The Branded Direct-to-Consumer channel accounted for approximately 11% of our revenues in 2018 and 10% of our revenues in both 2017 and 2016.

 

70


Table of Contents
   

Other includes (i) sales of VF-branded and third-party branded merchandise in our VF Outlet™ stores (not related to Wrangler® and Lee® brand apparel), (ii) sales to VF for products manufactured in our plants and use of our transportation fleet and (iii) revenues from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018. The Other channel accounted for approximately 6% of our revenues in each of 2018, 2017 and 2016.

In 2018, we generated 73% of our revenues in the U.S. and 27% of our revenues outside the U.S.

We are focused on growing our three strategic channels, with distorted growth anticipated in our Non-U.S. Wholesale and Branded Direct-to-Consumer channels, both of which we expect to become an increasing percentage of our revenue. Although the Other channel is not a strategic focus, we are committed to optimizing profitability in our VF Outlet™ stores.

We expect to realize efficiencies across our business as we create a more centralized global organization and pursue cost savings initiatives. As part of a centralized approach to our global business, our management team will oversee all brands for their respective business functions, including supply chain, digital, direct-to-consumer, and strategy while seeking to ensure we maintain our worldwide presence and regional approach. We have implemented initiatives to reduce costs and realize greater efficiencies, which have included transitioning our Central America and South America region to a distributor model, exiting certain supply chain operations, relocating Lee®’s North American headquarters to Greensboro, North Carolina and streamlining our global organizational structure. We will continue to implement various operational initiatives to address inefficiencies throughout our organization and cost savings programs that we expect to generate meaningful global cost savings. We plan to utilize such measures to fuel additional investments in our capabilities and brands while improving our overall profitability.

Background

On August 13, 2018, VF announced the repositioning of VF through the spinoff of the Spin Business from its remaining businesses to create an independent, publicly traded company. Directly or indirectly through our subsidiaries, we will hold the assets and liabilities of the Spin Business after the Separation. Each holder of VF common stock will receive one share of common stock of Kontoor Brands for every                  shares of VF common stock held as of the close of business on the record date for the Distribution. Following the Separation, we will be an independent, publicly traded company, and VF will retain no ownership interest in us. For additional information, see “The Separation.”

Basis of Presentation

We have historically operated as part of VF and not as a standalone company. The accompanying audited combined financial statements included in this information statement were prepared in connection with the Separation and were derived from the consolidated financial statements and accounting records of VF. These combined financial statements reflect our combined historical financial position, results of operations, and cash flows as they were historically managed in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The combined financial statements may not be indicative of our future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had we operated as an independent, publicly traded company during the periods presented, particularly because of changes we expect to experience in the future as a result of the Separation, including changes in the financing, cash management, operations, cost structure and personnel needs of our business.

The combined financial statements include certain assets and liabilities that have historically been held at the VF corporate level but are specifically identifiable to or otherwise attributable to us. Our combined statements of income also include costs for certain centralized functions and programs provided and administered by VF that are charged directly to VF’s businesses, including us. These centralized functions and programs

 

71


Table of Contents

include, but are not limited to, information technology, human resources, accounting shared services, supply chain, insurance, and the service cost component of net periodic pension costs. The Company was directly charged $106.1 million in 2018, $133.1 million in 2017 and $119.7 million in 2016 for these costs that were included in cost of goods sold and selling, general and administrative expenses in the combined statements of income.

In addition, for purposes of preparing the combined financial statements on a “carve-out” basis, a portion of VF’s total corporate expenses were allocated to us. These expense allocations include the cost of corporate functions and resources provided by VF including, but not limited to, executive management, finance, accounting, legal, human resources, the related benefit costs associated with such functions, such as stock-based compensation, and the cost of VF’s Greensboro, NC corporate headquarters. The Company was allocated $29.0 million in 2018, $32.9 million in 2017 and $28.7 million in 2016 for such corporate expenses, which were included within selling, general and administrative expenses in the combined statements of income.

The Company was also allocated a benefit of $5.1 million in 2018, benefit of $0.2 million in 2017 and expense of $15.4 million in 2016 for the non-service components of net periodic pension costs, which were included in selling, general and administrative expenses in the combined statements of income. In addition, the Company was allocated $3.5 million and $1.2 million for the Company’s portion of curtailment and pension settlement charges, respectively, in 2018, and $21.5 million for the Company’s portion of a pension settlement charge in 2016 recorded by VF. The curtailment and settlement charges were included in selling, general and administrative expenses.

Costs were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenues, cost of goods sold or square footage, as applicable. Management considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, us during the periods presented. However, the allocations may not reflect the expenses we would have incurred if we had been a standalone company for the periods presented. Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Going forward, we may perform these functions using our own resources or outsourced services. For a period following the planned separation, however, some of these functions will continue to be provided by VF under a transition services agreement. Additionally, we may provide some services to VF under a transition services agreement. We also may enter into certain commercial arrangements with VF in connection with the Separation.

Subsequent to the completion of the Separation, we expect to incur expenditures to establish certain standalone functions and information technology systems, and other one-time costs. Recurring standalone costs include accounting, financial reporting, tax, regulatory compliance, corporate governance, treasury, legal, internal audit and investor relations functions, as well as the annual expenses associated with running an independent, publicly traded company including listing fees, board of director fees and external audit costs. We expect recurring standalone costs to be higher than historical allocations, which may have an impact on profitability and operating cash flows. See “Unaudited Pro Forma Combined Financial Statements” for more information.

The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. All references to “2018”, “2017” and “2016” relate to the 52-week fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, respectively. Certain foreign subsidiaries report using a December 31 year-end due to local statutory requirements.

All percentages shown in the tables below and the discussion that follows have been calculated using unrounded numbers.

 

72


Table of Contents

References to 2018 foreign currency amounts below reflect the changes in foreign exchange rates from 2017 and their impact on translating foreign currencies into U.S. dollars and on foreign currency-denominated transactions in countries with highly inflationary economies. References to 2017 foreign currency amounts below reflect the changes in foreign exchange rates from 2016 and their impact on translating foreign currencies into U.S. dollars. Our most significant foreign currency exposure relates to business conducted in euro-based countries. However, we conduct business in other developed and emerging markets around the world with exposure to foreign currencies other than the euro.

Our two reportable segments are as follows:

 

   

Wrangler® which consists of Wrangler® branded products, along with various sub-brands and collections.

 

   

Lee® which consists of Lee® branded products, along with various sub-brands and collections.

In addition, we present an “other” category for purposes of reconciliation of revenues and profit, but it is not considered a reportable segment:

 

   

Other consists primarily of sales (i) of VF-branded and third-party branded merchandise in our VF Outlet™ stores (not related to Wrangler® and Lee® brand apparel), (ii) of Rock and Republic® brand apparel, (iii) to VF for products manufactured in our plants and use of our transportation fleet and (iv) from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018. Our VF Outlet™ stores in the U.S. sell Wrangler® and Lee® brand products, VF-branded products and third-party branded merchandise. Revenues and profits of Wrangler® and Lee® brand products sold in VF Outlet™ stores are reported as part of the operating results of the Wrangler® and Lee® segments above, while revenues and profits of VF-branded products and third-party branded merchandise are reported in this Other category.

Components of Results of Operations

Net Revenues

Net revenues are comprised of sales in our U.S. Wholesale, Non-U.S. Wholesale, Branded Direct-to-Consumer and Other channels described above. Our net revenues reflect adjustments for estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and returns.

Cost of Goods Sold

Cost of goods sold for Company-manufactured goods includes all materials, labor and overhead costs incurred in the production process. Cost of goods sold for purchased finished goods includes the purchase costs and related overhead. In both cases, overhead includes all costs related to manufacturing or purchasing finished goods, including costs of planning, purchasing, quality control, depreciation, freight to distribution centers and our owned stores, duties, royalties paid to third parties and shrinkage. Cost of goods sold also includes restructuring charges and the service cost component of net periodic pension costs related to these functions.

Cost of goods sold includes allocations of costs for certain centralized functions provided by and administered by VF. See “—Basis of Presentation” above and Note 1 to our audited combined financial statements for further details on the methodology for allocating these costs. Allocations of expenses from VF are not necessarily indicative of future expenses and do not necessarily reflect results that would have been achieved as an independent, publicly traded company for the periods presented. We expect recurring standalone costs to be higher than historical allocations, which may have an impact on profitability and operating cash flows. See “Unaudited Pro Forma Combined Financial Statements” for more information.

 

73


Table of Contents

Selling, General and Administrative Expenses

Selling, general and administrative expenses include costs of product development, selling, marketing and advertising, branded brick & mortar and concession stores, our own websites, warehousing, distribution, shipping and handling to customers, licensing and administration. Selling, general and administrative expenses also include restructuring charges and the service cost component of net periodic pension costs related to these functions, along with the non-service components of net periodic pension costs (including settlement charges).

Selling, general and administrative expenses include allocations of costs for certain centralized functions and programs provided and administered by VF. See “—Basis of Presentation” above and Note 1 to our audited combined financial statements for further details on our methodology for allocating these costs. Allocations of expenses from VF are not necessarily indicative of future expenses and do not necessarily reflect results that would have been achieved as an independent, publicly traded company for the periods presented. We expect recurring standalone costs to be higher than historical allocations, which may have an impact on profitability and operating cash flows. See “Unaudited Pro Forma Combined Financial Statements” for more information.

Related Party Interest Income, Net

Related party interest income, net includes interest income earned on related party notes receivable from VF and interest expense incurred on related party notes payable to VF. All related party notes outstanding at December 2018 mature in 2019. All outstanding related party notes at the time of the Separation are expected to be transferred to and retained by VF.

Other Interest Income, Net

Other interest income, net primarily includes interest earned on our cash and equivalent balances and interest expense incurred on short-term borrowings. Our future capital structure is expected to include the addition of third-party debt. This will result in a substantial increase in annual interest expense.

Other Expense, Net

Other expense, net primarily consists of the funding fee related to the sale of certain of our trade accounts receivable, and nonoperating foreign currency activity.

Results of Operations

The following table summarizes our results of operations for the periods presented:

 

                      Percent Change  
    2018     2017     2016     2018      2017  
    (In thousands)  

Net revenues

  $  2,763,998     $  2,830,106     $  2,926,464       (2.3)%        (3.3)%  

Costs and operating expenses

          

Cost of goods sold

    1,649,435       1,658,144       1,711,319       (0.5)%        (3.1)%  

Selling, general and administrative expenses

    781,521       814,544       806,447       (4.1)%        1.0%  
 

 

 

   

 

 

   

 

 

      

Total costs and operating expenses

    2,430,956       2,472,688       2,517,766       (1.7)%        (1.8)%  
 

 

 

   

 

 

   

 

 

      

Operating income

    333,042       357,418       408,698       (6.8)%        (12.5)%  

Related party interest income, net

    7,738       3,372       1,470       129.5%        129.4%  

Other interest income, net

    4,567       1,721       1,909       165.4%        (9.8)%  

Other expense, net

    (5,269     (3,358     (1,590     56.9%        111.2%  
 

 

 

   

 

 

   

 

 

      

Income before income taxes

    340,078       359,153       410,487       (5.3)%        (12.5)%  

Income taxes

    77,005       242,962       95,457       (68.3)%        154.5%  
 

 

 

   

 

 

   

 

 

      

Net income

  $ 263,073     $ 116,191     $ 315,030       126.4%        (63.1)%  
 

 

 

   

 

 

   

 

 

      

Gross margin

    40.3%       41.4%       41.5%       

Operating margin

    12.0%       12.6%       14.0%       

 

74


Table of Contents

2018 Compared to 2017

Net Revenues

Net revenues decreased 2% in 2018 compared to 2017 driven by a 5% decline in Lee® brand revenues and a 1% decline in Wrangler® brand revenues. The drivers of these declines relate to a number of global macroeconomic challenges that primarily impacted our wholesale channels, which were partially offset by strength in our direct-to-consumer business.

Both our U.S. Wholesale and Non-U.S. Wholesale channels declined in 2018 compared to 2017. The U.S. Wholesale channel was unfavorably impacted in 2018 by the continued effects of a key customer’s inventory destocking decision, along with door closures following bankruptcy filings by a limited number of key retailers. This decline was partially offset by strong growth with our digital wholesale partners and growth in other key brick and mortar retail accounts. Our Non-U.S. Wholesale channel was adversely affected by foreign exchange impacts from the highly inflationary economy in Argentina, as well as inventory reduction decisions by certain retailers in the non-US Americas region and the ongoing effects of the economic demonetization in India. Our Branded Direct-to-Consumer channel continued to grow, driven by the performance of our own websites. Branded brick & mortar decreased due to declines in EMEA attributable to door closures and an unseasonably warm summer weather pattern, partially offset by growth from increased branded doors in the U.S. and our concessions business in APAC. Our Other channel, which is not a strategic growth focus, remained relatively flat as the decrease in our VF Outlet™ business, resulting from door closures and the exiting of underperforming categories, was offset by revenues generated from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018.

Revenues in the Americas region decreased 3% in 2018 primarily due to the aforementioned U.S. wholesale decline and the impact from the highly inflationary economy in Argentina. Our branded direct-to-consumer revenues in the Americas region grew during the period driven by strong sales from our own websites and improved sales of the Lee® brand in our VF Outlet™ stores, which offset declining sales of the Wrangler® brand in our VF Outlet™ stores. Revenues in the non-U.S. Americas region were down 15%, primarily due to declines in wholesale revenues and a 10% unfavorable impact from foreign currency principally attributable to the highly inflationary economy in Argentina. Revenues in the APAC region decreased 1% in 2018 due to declines in wholesale revenues, partially offset by solid growth in our concessions business. Foreign currency had no meaningful impact on APAC revenues in 2018. Revenues in the EMEA region declined 1% in 2018 due to declines in branded brick & mortar revenues for the reasons noted above that were partially offset by an increase in revenues from our own websites, along with a 4% favorable impact from foreign currency. Total international revenues decreased 4% in 2018. International revenues represented 27% and 28% of our total revenues in 2018 and 2017, respectively.

Additional details on revenues are provided in the section titled “—Segment Results of Operations.”

Cost of Goods Sold

Cost of goods sold decreased 1% in 2018 compared to 2017. Gross margin declined 110 basis points to 40.3% in 2018 compared to 41.4% in 2017 driven by increased manufacturing labor, overhead and product costs, partially offset by favorable pricing, the benefit of facility closures and a mix shift toward higher margin products. Additionally, restructuring charges were higher in 2018 due to the planned exit of a manufacturing facility.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 4% in 2018 compared to 2017 driven by lower advertising spend following the timing of strategic investments in late 2017 to improve our brand messaging, compensation-related costs associated with reduced headcount and a reduction in costs allocated to us by VF as

 

75


Table of Contents

we were a smaller portion of VF’s total operating results in 2018. These decreases were partially offset by higher restructuring charges for severance costs related to ongoing efforts to enhance our cost efficiency and profitability, Separation transaction costs to advisors, attorneys and other third parties that were not incurred in 2017, as well as an increase in the non-service components of net periodic pension costs.

As noted earlier, allocations of corporate expenses from VF are not necessarily indicative of future expenses and do not necessarily reflect results that would have been achieved as an independent, publicly traded company for the periods presented.

Operating Income

Operating income decreased 7% in 2018 compared to 2017 due to the reasons discussed above.

Operating margin declined 60 basis points to 12.0% in 2018 compared to 12.6% in 2017 as declines in gross margin exceeded the reduction in selling, general and administrative expenses.

Related Party Interest Income, Net

Net related party interest income increased $4.4 million in 2018 compared to 2017 primarily due to increased interest income from an approximate 110 basis point increase in the average interest rate in effect on our related party notes receivable balances in 2018 as compared to 2017, partially offset by increased interest expense due to an approximate 70 basis point increase in the average interest rate in effect on our related party notes payable balances in 2018 compared to 2017.

Other Interest Income, Net

Net other interest income increased $2.8 million in 2018 compared to 2017 due to an increase in interest earned on cash and equivalent balances and a decrease in interest expense associated with reduced short-term borrowings outstanding during 2018.

Other Expense, Net

Other expense, net increased $1.9 million in 2018 compared to 2017 primarily due to increased funding fees related to the sale of certain of our trade accounts receivable.

Income Taxes

Income taxes decreased $166.0 million in 2018 compared to 2017 primarily due to the transitional impact of the Tax Act that resulted in a provisional net charge of $136.7 million during the fourth quarter of 2017.

The effective income tax rate was 22.6% in 2018 compared to 67.6% in 2017. The effective income tax rate is substantially lower in 2018 when compared to 2017 primarily due to the discrete tax expense associated with the Tax Act recorded in 2017. The Tax Act reduced the federal tax rate on U.S. earnings to 21% and moved from a global taxation regime to a modified territorial regime. As part of the legislation, U.S. companies were required to pay a tax on historical earnings generated offshore that have not been repatriated to the U.S. Additionally, revaluation of deferred tax asset and liability positions at the lower federal base rate of 21% was also required. The transitional impact of the Tax Act resulted in a provisional net charge of $136.7 million during the fourth quarter of 2017. This amount was primarily comprised of $110.6 million related to the transition tax and $19.4 million tax expense related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. Other provisional charges of $6.7 million were primarily related to establishing a deferred tax liability for foreign withholding and state taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain subsidiaries. All other foreign earnings, including basis

 

76


Table of Contents

differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested. The Company has not determined the deferred tax liabilities associated with these undistributed earnings and basis differences, as such determination is not practicable.

The 2018 effective income tax rate included a net discrete tax expense of $4.8 million, which included $5.5 million of net tax expense related to the Tax Act, $3.1 million of tax benefit related to stock compensation and $2.4 million of net tax expense related to unrecognized tax benefits and interest. The $4.8 million net discrete tax expense in 2018 increased the effective income tax rate by 1.4% compared to an increase of 36.2% for discrete items in 2017. Without discrete items, the effective income tax rate during 2018 decreased by approximately 10.2% primarily due to the impact of the Tax Act, including a lower U.S. corporate income tax rate that was effective beginning January 1, 2018. The international effective tax rate was 17.2% and 19.3% for 2018 and 2017, respectively.

Net Income

As a result of the above, net income in 2018 was $263.1 million compared to $116.2 million in 2017.

2017 Compared to 2016

Net Revenues

Net revenues decreased 3% in 2017 compared to 2016 driven by a 6% decline in Lee® brand revenues and a 1% decline in Wrangler® brand revenues.

Both our U.S. Wholesale and Non-U.S. Wholesale channels declined in 2017 compared to 2016. The U.S. Wholesale channel was adversely impacted throughout 2017 by a key customer’s inventory destocking decision, as well as ongoing financial pressure and continued door closures with a limited number of key retailers. This decline was partially mitigated by continuing strong growth with our digital wholesale partners, along with growth in other key brick and mortar retail accounts. Our Non-U.S. Wholesale channel was adversely affected by our efforts to manage inventory levels in a certain market, as well as an economic demonetization in India. Our Branded Direct-to-Consumer channel continued to grow, led by strong performance in our own websites. Similarly, branded brick & mortar also grew due to strong performance in our outlet and concessions business in EMEA and APAC. Our Other channel, which is not a strategic growth focus, reflected decreases in our VF Outlet™ business due to VF’s divestiture of the Majestic® brand in April 2017, relocation of our largest retail store in Reading, PA and ongoing efforts to close underperforming doors to improve profitability.

Revenues in the Americas region decreased 4% in 2017, due to the aforementioned U.S. wholesale and VF Outlet™ declines. Our branded direct-to-consumer revenues in the Americas region grew during the period led by strong sales in our own websites as well as growth in our full-price Wrangler® branded stores in the U.S. and sales of the Lee® brand in our VF Outlet™ stores. Revenues in the non-U.S. Americas region were essentially flat, reflecting operational growth in wholesale revenues offset by a 2% unfavorable impact from foreign currency. Revenues in the APAC region decreased 3% in 2017 due to declines in wholesale revenues, partially offset by robust growth in revenues from our own websites. Revenues in the EMEA region increased 4% in 2017, reflecting operational growth in our branded direct-to-consumer and wholesale revenues, along with a 2% favorable impact from foreign currency. Total international revenues increased 1% in 2017. International revenues represented 28% and 27% of our total revenues in 2017 and 2016, respectively.

Additional details on revenues are provided in the section titled “—Segment Results of Operations.”

Cost of Goods Sold

Cost of goods sold decreased 3% in 2017 compared to 2016, which is commensurate with our overall net revenue decline. Gross margin declined 10 basis points to 41.4% in 2017 compared to 41.5% in 2016 as

 

77


Table of Contents

favorable pricing, a mix shift toward higher margin products and decreased restructuring charges were offset by lower volume, higher product costs, and manufacturing downtime. Restructuring charges were higher in 2016 due to the exit of four manufacturing facilities that did not recur in 2017.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 1% in 2017 compared to 2016 due to strategic investments in our direct-to-consumer business, product development, and advertising as we invest to enhance our product offering, brand messaging, and availability of our products in new channels, segments, and markets, along with incremental general corporate allocations, compensation-related expenses, and restructuring charges for severance costs related to ongoing efforts to enhance our cost efficiency and profitability. These increases were partially offset by a $15.6 million reduction in the non-service components of net periodic pension costs and a $21.5 million pension settlement charge in 2016 that did not recur in 2017. See additional discussion in Note 11 to our audited combined financial statements.

As noted earlier, allocations of corporate expenses from VF are not necessarily indicative of future expenses and do not necessarily reflect results that would have been achieved as an independent, publicly traded company for the periods presented.

Operating Income

Operating income decreased 13% in 2017 compared to 2016 due to the reasons discussed above.

Operating margin declined 140 basis points to 12.6% in 2017 compared to 14.0% in 2016 due to reduced expense leverage on lower revenues and higher selling, general and administrative expenses.

Related Party Interest Income, Net

Net related party interest income increased $1.9 million in 2017 compared to 2016 primarily due to an approximate 40 basis point increase in the average interest rate in effect on our related party notes receivable balances in 2017 as compared to 2016.

Other Interest Income, Net

Net other interest income decreased $0.2 million in 2017 compared to 2016 due to a decline in interest earned on our cash and equivalent balances.

Other Expense, Net

Other expense, net increased $1.8 million in 2017 compared to 2016, due to additional funding fees related to the sale of certain of our trade accounts receivable and changes in our nonoperating foreign currency activity.

Income Taxes

Income taxes increased $147.5 million in 2017 compared to 2016 primarily due to the transitional impact of the Tax Act that resulted in a provisional net charge of $136.7 million during the fourth quarter of 2017.

The effective income tax rate was 67.6% in 2017 compared to 23.3% in 2016. The effective income tax rate was substantially higher in 2017 when compared to 2016 primarily due to discrete tax expense associated with the Tax Act. The Tax Act reduced the federal tax rate on U.S. earnings to 21% and moved from a global taxation regime to a modified territorial regime. As part of the legislation, U.S. companies were required to pay a tax on historical earnings generated offshore that have not been repatriated to the U.S. Additionally, revaluation of

 

78


Table of Contents

deferred tax asset and liability positions at the lower federal base rate of 21% was also required. The transitional impact of the Tax Act resulted in a provisional net charge of $136.7 million during the fourth quarter of 2017. This amount was primarily comprised of $110.6 million related to the transition tax and $19.4 million of tax expense related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. Other provisional charges of $6.7 million were primarily related to establishing a deferred tax liability for foreign withholding and state taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested. The Company has not determined the deferred tax liabilities associated with these undistributed earnings and basis differences, as such determination is not practicable.

The 2017 effective income tax rate included a net discrete tax expense of $130.1 million, which included the provisional net charge of $136.7 million related to the Tax Act, $3.2 million of tax benefits related to stock compensation, $2.9 million of net tax benefit related to the realization of previously unrecognized tax benefits and interest, and $0.5 million of discrete tax benefit related to the effects of tax rate changes, exclusive of the Tax Act. The $130.1 million net discrete tax expense in 2017 increased the effective income tax rate by 36.2% compared to a favorable 3.6% impact for discrete items in 2016. Without discrete items, the effective tax rate during 2017 increased by approximately 4.5% primarily due to the mix of earnings taxed at different jurisdictional rates. The international effective tax rate was 19.3% and 15.5% for 2017 and 2016, respectively.

Net Income

As a result of the above, net income in 2017 was $116.2 million compared to $315.0 million in 2016.

Segment Results of Operations

Management at each of the brands has direct control over and responsibility for its revenues and operating income, hereinafter termed “segment revenues” and “segment profit”, respectively. Our management evaluates operating performance and makes investment and other decisions based on segment revenues and segment profit. Common costs for certain centralized functions provided and administered by VF, such as information technology, human resources, accounting shared services, supply chain, insurance, and the service cost component of net periodic pension costs are allocated to the segments based on appropriate metrics such as usage or proportion of net revenues.

 

79


Table of Contents

The following tables present a summary of the changes in segment revenues and segment profit during the last two years:

 

     Wrangler     Lee     Other     Total  
     (In millions)  

Segment revenues—2016

   $ 1,631.5     $ 1,068.2     $ 226.8     $ 2,926.5  

Operations

     (14.6     (63.1     (21.9     (99.6

Impact of foreign currency

     2.4       0.7       0.1       3.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenues—2017

     1,619.3       1,005.8       205.0       2,830.1  

Operations

     (7.0     (51.1     (3.4     (61.5

Impact of foreign currency

     (10.1     5.5       —         (4.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenues—2018

   $ 1,602.2     $ 960.2     $ 201.6     $ 2,764.0  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Wrangler     Lee     Other     Total  
     (In millions)  

Segment profit—2016

   $ 325.2     $ 150.9     $ (3.4   $ 472.7  

Operations

     (46.7     (43.8     2.3       (88.2

Impact of foreign currency

     1.8       0.1       0.3       2.2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment profit—2017

     280.3       107.2       (0.8     386.7  

Operations

     (17.9     (18.6     0.8       (35.7

Impact of foreign currency

     3.6       4.1       —         7.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment profit—2018

   $ 266.0     $ 92.7     $ —       $ 358.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

The following section discusses changes in revenues and profitability by segment:

Wrangler    

 

                       Percent Change  
     2018     2017     2016     2018     2017  
     (In millions)              

Segment revenues

   $ 1,602.2     $ 1,619.3     $ 1,631.5       (1.1 )%      (0.8 )% 

Segment profit

     266.0       280.3       325.2       (5.1 )%      (13.8 )% 

Operating margin

     16.6     17.3     19.9    

2018 Compared to 2017

Global revenues for the Wrangler® brand decreased 1% in 2018 as growth in U.S. wholesale revenues were offset by declines in non-U.S. wholesale and branded direct-to-consumer revenues.

Revenues in the Americas region were flat in 2018, as declines in non-U.S. wholesale revenues and branded direct-to-consumer revenues were offset by growth in U.S. wholesale revenues. Branded brick & mortar revenues in the Americas region decreased, primarily due to declines in sales through our VF Outlet™ stores, partially offset by growth in our own websites. The U.S. Wholesale channel increase was attributable to strong growth with our digital wholesale partners and growth in certain key brick and mortar retail accounts. Revenues in the non-U.S. Americas region decreased 16% due to declines in wholesale and branded brick & mortar revenues, primarily due to a 13% adverse impact from foreign currency related to the highly inflationary economy in Argentina. Revenues in the APAC region decreased 4% in 2018 due to declines in wholesale revenues associated with the ongoing effects of economic demonetization in India, as well as a 3% unfavorable impact from foreign currency. Revenues in the EMEA region decreased 2% in 2018 led by declines in our wholesale and branded direct-to-consumer revenues attributed to door closures and an unseasonably warm summer weather pattern, partially offset by a 4% favorable impact from foreign currency.

 

80


Table of Contents

Operating margin decreased 70 basis points in 2018 over 2017 primarily due to increased restructuring costs primarily related to severance costs, additional strategic investments in our direct-to-consumer business and product development costs, resulting in reduced expense leverage on lower revenues.

2017 Compared to 2016

Global revenues for the Wrangler® brand decreased 1% in 2017 primarily due to declines in U.S. wholesale revenues that were partially offset by growth in branded direct-to-consumer revenues.

Revenues in the Americas region decreased 1% in 2017, driven by declines in U.S. wholesale revenues. The U.S. Wholesale channel was adversely impacted throughout 2017 by a key customer’s inventory destocking decision, as well as ongoing financial pressure and continued door closures with a limited number of key retailers. This decline was partially mitigated by continuing strong growth with our digital wholesale partners, along with growth in other key brick and mortar retail accounts. Revenues in the non-U.S. Americas region grew nearly 4% due to strength in wholesale revenues across nearly all markets, partially offset by a 3% unfavorable impact from foreign currency. Revenues in the APAC region decreased 5% in 2017 due to declines in wholesale revenues driven by an economic demonetization in India, partially offset by a 3% favorable impact from foreign currency. Revenues in the EMEA region increased 3% in 2017 due to growth in our wholesale and branded direct-to-consumer revenues, along with an approximate 2% favorable impact from foreign currency.

Operating margin decreased 260 basis points in 2017 over 2016 primarily due to lower volume, higher product costs, manufacturing downtime and higher compensation-related expenses, along with increased strategic investments in our direct-to-consumer business, product development and advertising.

Lee

 

                       Percent Change  
     2018     2017     2016     2018     2017  
     (In millions)              

Segment revenues

   $ 960.2     $ 1,005.8     $ 1,068.2       (4.5 )%      (5.8 )% 

Segment profit

     92.7       107.2       150.9       (13.5 )%      (28.9 )% 

Operating margin

     9.7     10.7     14.1    

2018 Compared to 2017

Global revenues for the Lee® brand decreased 5% in 2018, driven by declines in U.S. wholesale revenues, which were partially offset by growth in branded direct-to-consumer revenues.

Revenues in the Americas region decreased 9% in 2018 led by declines in U.S. wholesale revenues. The U.S. Wholesale channel was adversely impacted by a key customer’s inventory destocking decision related to our Lee® Riders® brand, as well as door closures following bankruptcy filings by a limited number of key retailers. This decline was partially mitigated by strong growth in our sales through our VF Outlet™ stores. Revenues in the non-U.S. Americas region decreased 14% primarily due to declines in wholesale revenues related to inventory reductions at a key retailer and a 4% unfavorable impact from foreign currency, led by the highly inflationary economy in Argentina. Revenues in the APAC region decreased 1% in 2018 due to declines in wholesale revenues that were adversely affected by higher product returns due to a market transition in a key market, partially offset by growth in branded direct-to-consumer revenues led by our concessions business and a 1% favorable impact from foreign currency. Revenues in the EMEA region were flat in 2018 as growth in wholesale revenues, along with a 4% favorable foreign currency impact, was offset by declines in our branded direct-to-consumer revenues due to door closures and an unseasonably warm summer weather pattern.

Operating margin decreased 100 basis points in 2018 over 2017 primarily due to increased manufacturing labor and overhead costs and higher product costs, while selling, general and administrative expenses remained flat on lower revenues.

 

81


Table of Contents

2017 Compared to 2016

Global revenues for the Lee® brand decreased 6% in 2017, driven by declines in wholesale revenues, which were partially offset by growth in branded direct-to-consumer revenues.

Revenues in the Americas region decreased 9% in 2017 led by declines in U.S. wholesale revenues. The U.S. Wholesale channel was adversely impacted throughout 2017 by a key customer’s inventory destocking decision, as well as ongoing financial pressure and continued door closures with a limited number of key retailers. This decline was partially mitigated by continuing strong growth with our digital wholesale partners, growth in other key brick and mortar retail accounts, and growth in our sales through our VF Outlet™ stores. Revenues in the non-U.S. Americas region decreased 6% due to declines in wholesale revenues and a 1% unfavorable impact from foreign currency. Revenues in the APAC region decreased 3% in 2017 due to declines in wholesale revenues that were adversely affected by our efforts to manage inventory levels in a certain market, as well as an economic demonetization in India, partially offset by growth in branded direct-to-consumer revenues. Foreign currency had a 1% unfavorable impact on APAC revenues. Revenues in the EMEA region increased 5% in 2017 primarily driven by growth in wholesale revenues and a 2% favorable impact from foreign currency.

Operating margin decreased 340 basis points in 2017 over 2016 primarily due to higher product costs and manufacturing downtime, along with increased strategic investments in our direct-to-consumer business, product development and advertising.

Other

 

                       Percent Change  
     2018     2017     2016     2018      2017  
     (In millions)               

Revenues

   $ 201.6     $ 205.0     $ 226.8       (1.7)%        (9.5)

Profit (loss)

     —         (0.8     (3.4     93.7%        77.3

Operating margin

     —       (0.4 )%      (1.5 )%      

The decrease in other revenues in 2018 was primarily due to a 12% decline in our VF Outlet™ store revenues resulting from exiting unprofitable doors and underperforming categories, partially offset by revenues generated from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018 and increased sales to VF. Our profit and operating margin improvement was primarily due to the margin earned on fulfilling the Nautica® transition services agreement.

The decrease in other revenues in 2017 was primarily due to a 10% decline in our VF Outlet™ store revenues driven in part by VF’s divestiture of the Majestic® brand in April 2017. Our loss and operating margin improvements were partially attributable to restructuring charges in 2016 related to severance costs that did not recur in 2017.

Total sales to VF included in other revenues were $51.0 million in 2018, $45.5 million in 2017 and $46.7 million in 2016.

 

82


Table of Contents

Reconciliation of Segment Profit to Combined Income Before Income Taxes

There are three types of costs necessary to reconcile total segment profit to combined income before income taxes. These costs are corporate and other expenses, discussed below, and related party interest income, net and other interest income, net, both of which were discussed in “—Components of Results of Operations” and “—Results of Operations” above. These costs are excluded from segment profit because these items are managed centrally and are not under the control of brand management.

 

                          Percent Change  
     2018      2017      2016      2018     2017  
     (In millions)               

Corporate and other expenses

   $ 30.9      $ 32.7      $ 65.6        (5.4 )%      (50.2 )% 

Related party interest income, net

     7.7        3.4        1.5        129.5     129.4

Other interest income, net

     4.6        1.7        1.9        165.4     (9.8 )% 

Corporate and Other Expenses

For purposes of preparing these combined financial statements on a “carve-out” basis, the Company has been allocated a portion of VF’s total corporate expenses. These additional allocations are reported as corporate and other expenses in the table above. See “—Basis of Presentation” above and Note 1 to our audited combined financial statements for further details on our methodology for allocating these costs.

Corporate and other expenses declined slightly in 2018 compared to 2017 as the $3.9 million decrease in the allocation of VF’s corporate expenses to us was partially offset by $2.3 million in Separation transaction costs (the remainder of the $6.3 million in total 2018 Separation transaction costs was recorded within the applicable segments that incurred the expense).

The decrease in corporate and other expenses in 2017 compared to 2016 was largely driven by a $15.6 million reduction in the non-service components of net periodic pension costs and a $21.5 million pension settlement charge in 2016 that did not recur in 2017.

Liquidity and Capital Resources

Historically, we have generated strong annual cash flow from operating activities. However, we have operated within VF’s cash management structure, which uses a centralized approach to cash management and financing of our operations. A substantial portion of the Company’s cash is transferred to VF. This arrangement is not reflective of the manner in which we would have been able to finance our operations had we been an independent, publicly traded company during the periods presented.

The cash and equivalents held by VF at the corporate level are not specifically identifiable to the Company and therefore have not been reflected in the combined balance sheet. VF’s third-party long-term debt and the related interest expense have not been allocated to the Company for any of the periods presented as it was not the legal obligor of such debt.

Following the separation from VF, our capital structure and sources of liquidity will change from the historical capital structure because we will no longer participate in VF’s centralized cash management program. Our ability to fund our operating needs will depend on our future ability to continue to generate positive cash flow from operations and obtain debt financing on acceptable terms. Based upon our history of generating strong cash flows, we believe we will be able to meet our short-term liquidity needs. We believe we will meet known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances and available borrowings through the issuance of third-party debt. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

 

83


Table of Contents

In connection with the Separation, we expect to incur up to $1.05 billion of new debt from the proceeds of the term loan facilities, which we intend to use primarily to, directly or indirectly, fund a cash transfer to members of VF’s group as part of the Restructuring, to pay related fees and expenses and for other general corporate purposes. We expect for our revolving facility to be undrawn at the Separation, provided that it may be used, subject to a cap, as part of the Restructuring and to pay related fees and expenses at the Separation, and otherwise may be used for, among other things, working capital and general corporate purposes. The debt may also restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from VF’s other businesses may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to the Company.

In addition, we also intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $        per share of our common stock (representing a quarterly rate initially equal to $        per share). The declaration and amount of any future dividends will be determined by our Board of Directors and will depend on our financial condition, earnings, cash flows, capital requirements, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors that our Board of Directors deems relevant. See “Dividend Policy.”

We expect to utilize our cash flows to continue to invest in our brands, talent and capabilities, and growth strategies as well as to support a dividend to shareholders, and to repay our indebtedness over time.

Our cash flows for the periods below were as follows:

 

     2018      2017      2016  
     (In millions)  

Cash (used) provided by operating activities

   $ (96.3    $ 168.6      $ 324.0  

Cash provided (used) by investing activities

     11.3        (57.6      (25.2

Cash provided (used) by financing activities

     106.3        (119.8      (320.4

Management believes that our cash balances and funds provided by operating activities, along with expected borrowing capacity and access to capital markets, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we expect to incur in connection with the Separation, (ii) adequate liquidity to fund capital expenditures and planned dividend payouts, and (iii) flexibility to meet investment opportunities that may arise.

Cash (Used) Provided by Operating Activities

Cash flow provided by operating activities is dependent on the level of net income, adjustments to net income and changes in working capital.

Cash provided by operating activities decreased $264.9 million in 2018. The decrease was primarily due to $323.3 million lower cash proceeds from settlement of the intercompany sale to VF of certain of the Company’s trade accounts receivable. The timing of the intercompany settlement was impacted by VF’s one-time change in fiscal year-end and does not reflect an operational deterioration in cash flows. The decrease was partially offset by higher net income and changes in other working capital.

Cash provided by operating activities decreased $155.4 million in 2017 primarily due to $117.2 million of additional income taxes deemed settled in cash with VF for purposes of carve-out financial reporting, with $110.6 million specifically related to the provisional transition tax impact of the Tax Act, and $51.3 million in lower income before income taxes, partially offset by changes in working capital.

The Company sells certain of its trade accounts receivables to VF, who then sells them to a financial institution and periodically remits cash back to the Company. Proceeds from this program are classified in operating activities in the combined statements of cash flows and the receivable from VF is reflected in due from related parties in the combined balance sheet. The amounts due from VF for the sale of these receivables were $544.9 million at December 2018, $221.6 million at December 2017 and $207.1 million at December 2016. Any amounts due from related parties associated with the sale of certain of our trade accounts receivable outstanding at the time of the Separation is expected to be transferred to and retained by VF.

 

84


Table of Contents

Cash Provided (Used) By Investing Activities

Cash provided by investing activities increased $68.9 million in 2018 primarily due to receipt of $29.8 million from VF for repayment of the related party notes advanced to VF in 2017, resulting in a $59.6 million cash flow improvement, along with a $4.5 million decline in capital expenditures.

Cash used by investing activities increased $32.4 million in 2017 primarily due to $29.8 million in amounts advanced to VF for related party notes receivable.

The Company had related party notes receivable, with VF as the counterparty, of $517.9 million at December 2018, $547.7 million at December 2017 and $517.9 million at December 2016. The notes outstanding at December 2018 mature in 2019. All related party notes receivable outstanding at the time of the Separation are expected to be transferred to and retained by VF.

Cash Provided (Used) By Financing Activities

Cash provided by financing activities increased $226.1 million in 2018 primarily due to a decrease in net transfers to VF.

Cash used by financing activities decreased $200.6 million in 2017 primarily due to a decrease in net transfers to VF.

The Company had related party notes payable, with VF as the counterparty, of $269.1 million at each of December 2018, 2017 and 2016. The notes outstanding at December 2018 mature in 2019. All related party notes payable outstanding at the time of the Separation are expected to be transferred to and retained by VF.

We have $35.9 million of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either us or the banks. Total outstanding balances under these arrangements were $3.2 million at December 2018 and $4.9 million at December 2017. Borrowings under these arrangements included letters of credit which are non-interest bearing to the Company of $3.2 million at December 2018 and $3.0 million at December 2017. Additionally, we had $1.9 million of interest-bearing borrowings at 2017 related to short-term borrowings in Argentina that had a weighted average interest rate of 32.7%.

Contractual Obligations

The following table summarizes our estimated material contractual obligations and other commercial commitments at December 29, 2018, and the future periods in which such obligations are expected to be settled in cash:

 

            Payment Due or Forecasted by Calendar Year  
     Total      2019      2020      2021      2022      2023      Thereafter  
     (In millions)  

Recorded liabilities:

                    

Other (1)

   $ 94      $ 39      $ 16      $ 11      $ 6      $ 4      $ 18  

Unrecorded commitments:

                    

Operating leases (2)

     98        34        29        18        8        4        5  

Minimum royalty payments (3)

     14        7        4        3        —          —          —    

Inventory obligations (4)

     430        430        —          —          —          —          —    

Other obligations (5)

     8        8        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 644      $ 518      $ 49      $ 32      $ 14      $ 8      $ 23  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Other recorded liabilities represent payments due for long-term liabilities in the combined balance sheet related to deferred compensation and other employee-related benefits and other liabilities. These amounts are based on historical and forecasted cash outflows. Amounts exclude liabilities for unrecognized income tax benefits and deferred income taxes.

 

85


Table of Contents
(2)

Operating leases represent required minimum lease payments during the noncancelable lease term. Most real estate leases also require payments of related operating expenses such as taxes, insurance, utilities and maintenance, which are not included above.

(3)

Minimum royalty payments represent obligations under license agreements to use trademarks owned by third parties and include required minimum advertising commitments. Actual payments could exceed related minimum royalty obligations.

(4)

Inventory obligations represent binding commitments to purchase raw materials, contract production and finished products that are payable upon delivery of the inventory. This obligation excludes the amount included in accounts payable at December 2018 related to inventory purchases.

(5)

Other obligations represent other binding commitments for the expenditure of funds, including (i) amounts related to contracts not involving the purchase of inventories, such as the noncancelable portion of service or maintenance agreements for management information systems, (ii) capital spending and (iii) advertising.

We had other financial commitments at the end of 2018 that are not included in the above table but may require the use of funds under certain circumstances:

 

   

$20.0 million of surety bonds, custom bonds, standby letters of credit and international bank guarantees are not included in the above table because they represent contingent guarantees of performance under self-insurance and other programs and would only be drawn upon if we were to fail to meet our other obligations.

 

   

Purchase orders for goods or services in the ordinary course of business are not included in the above table because they represent authorizations to purchase rather than binding commitments.

In addition, on February 12, 2018, VF entered into a 10-year power purchase agreement to procure electricity generated from renewable energy sources to meet a portion of the electricity needs for certain facilities in Mexico (including certain of our manufacturing plants). The contract has a total purchase commitment of $44.4 million over the contract term and requires delivery of electricity to commence no later than March 2020. A portion of this commitment may become the obligation of the Company upon the Separation and thus may require the use of funds in future periods.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to risks in the ordinary course of business. Management, as part of VF, regularly assesses and manages exposures to these risks through operating and financing activities and, when appropriate, by taking advantage of natural hedges within us. Potential risks are discussed below.

Insured Risks

VF is self-insured for a significant portion of its employee medical, workers’ compensation, vehicle and general liability exposures, and purchases insurance from highly-rated commercial carriers to cover other risks, including property and umbrella, and to establish stop-loss limits on self-insurance arrangements. We participate in these programs.

Cash and Equivalents Risks

We had $96.8 million of cash and equivalents at the end of 2018. Management continually monitors the credit ratings of the financial institutions with whom we conduct business. Similarly, management monitors the credit quality of cash equivalents.

 

86


Table of Contents

Defined Benefit Pension Plan Risks

Certain Company employees participate in U.S. and international defined benefit pension plans sponsored by VF (“Shared Plans”), which include participants of other VF operations. We account for our participation in the Shared Plans as a multiemployer benefit plan. Accordingly, net periodic pension costs specifically related to Company employees have been reported in the combined statements of income, and we do not record an asset or liability to recognize the funded or unfunded status of the Shared Plans. However, our reported earnings are subject to risk due to the volatility of net periodic pension costs, which ranged from $6.3 million to $44.7 million from 2016 to 2018, including the $21.5 million settlement charge in 2016. The volatility of VF’s pension expense is primarily due to varying amounts of actuarial gains and losses that are deferred and amortized to future years expense which are impacted by the rate of return on investments held by the Shared Plans, the discount rate used to value participant liabilities and demographic characteristics of the participants. These assumptions impact the amount of net periodic pension expense reported by the Company.

Deferred Compensation and Related Investment Security Risks

VF sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Code. This plan allows participants to defer a portion of their compensation and to receive matching contributions for a portion of the deferred amounts. Certain of the Company’s employees participate in this plan. Participants earn a return on their deferred compensation based on their selection of a hypothetical portfolio of publicly traded mutual funds, a separately managed fixed-income fund and VF common stock. Changes in the fair value of the participants’ hypothetical investments are recorded as an adjustment to deferred compensation liabilities and compensation expense. The increases and decreases in deferred compensation liabilities (except for the participants’ investment selections in VF common stock) are substantially offset by corresponding increases and decreases in the market value of VF’s investments, resulting in an insignificant net exposure to operating results and financial position.

Foreign Currency Exchange Rate Risks

We are a global enterprise subject to the risk of foreign currency fluctuations. Approximately 27% of our revenues in 2018 were generated in international markets. Most of our foreign businesses operate in functional currencies other than the U.S. dollar. In periods where the U.S. dollar strengthens relative to the euro or other foreign currencies where we have operations, there is a negative impact on our operating results upon translation of those foreign operating results into the U.S. dollar. The reported values of assets and liabilities in these foreign businesses are subject to fluctuations in foreign currency exchange rates. In 2018, 2017 and 2016, we did not enter into any derivative contracts with external counterparties. However, we have entered into contracts with VF to hedge certain foreign currency transactions, with maturities up to 20 months.

Commodity Price Risks

We are exposed to market risks for the pricing of cotton, wool and other materials, which we either purchase directly or in a converted form such as fabric. To manage risks of commodity price changes, management negotiates prices in advance when possible. We have not historically managed commodity price exposures by using derivative instruments.

Critical Accounting Policies and Estimates

We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with GAAP. We apply these accounting policies in a consistent manner. Significant accounting policies are summarized in Note 1 to our audited combined financial statements included elsewhere in this information statement.

The application of these accounting policies requires that we make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, contingent

 

87


Table of Contents

assets and liabilities, and related disclosures. These estimates, assumptions and judgments are based on historical experience, current trends and other factors believed to be reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis. Because our business cycle is relatively short (i.e., from the date that inventory is received until that inventory is sold and the trade accounts receivable is collected), actual results related to most estimates are known within a few months after any balance sheet date. In addition, we may retain outside specialists to assist in impairment testing of goodwill and intangible assets. If actual results ultimately differ from previous estimates, the revisions are included in results of operations when the actual amounts become known.

We believe the following accounting policies involve the most significant management estimates, assumptions and judgments used in preparation of the combined financial statements or are the most sensitive to change from outside factors.

Inventories

Our inventories are stated at the lower of cost or net realizable value. Cost includes all material, labor and overhead costs incurred to manufacture or purchase the finished goods. Overhead allocated to manufactured product is based on the normal capacity of plants and does not include amounts related to idle capacity or abnormal production inefficiencies. We perform a detailed review, at least quarterly, of all inventories on the basis of individual styles or individual style-size-color stock keeping units to identify slow moving or excess products, discontinued and to-be-discontinued products, and off-quality merchandise. This review matches inventory on hand, plus current production and purchase commitments, with current and expected future sales orders. Management performs an evaluation to estimate net realizable value using a systematic and consistent methodology of forecasting future demand, market conditions and selling prices less costs of disposal. If the estimated net realizable value is less than cost, we reflect the lower value of that inventory. This methodology recognizes inventory exposures at the time such losses are evident rather than at the time goods are actually sold. Historically, these estimates of future demand and selling prices have not varied significantly from actual results due to our timely identification and ability to rapidly dispose of these distressed inventories.

Existence of physical inventory is verified through periodic physical inventory counts and ongoing cycle counts at most locations throughout the year. We provide for estimated inventory losses that have likely occurred since the last physical inventory date. Historically, physical inventory shrinkage has not been material.

Long-Lived Assets, Including Intangible Assets and Goodwill

We allocate the purchase price of an acquired business to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess purchase price recorded as goodwill. We evaluate fair value at acquisition using three valuation techniques – the replacement cost, market and income methods – and weight the valuation methods based on what is most appropriate in the circumstances. The process of assigning fair values, particularly to acquired intangible assets, is highly subjective.

Fair value for acquired intangible assets is generally based on the present value of expected cash flows. Indefinite-lived and definite-lived trademark or trade name intangible assets (collectively referred to herein as “trademarks”) represent individually acquired trademarks, some of which are registered in multiple countries. Definite-lived customer relationship intangible assets are based on the value of relationships with wholesale customers at the time of acquisition. Goodwill represents the excess of cost of an acquired business over the fair value of net tangible assets and identifiable intangible assets acquired, and is assigned at the reporting unit level. Our depreciation policies for property, plant and equipment reflect judgments on their estimated economic lives and residual values, if any. Our amortization policies for definite-lived intangible assets reflect judgments on the estimated amounts and duration of future cash flows expected to be generated by those assets. In evaluating the amortizable life for customer relationship intangible assets, management considers historical attrition patterns for various groups of customers. In evaluating the amortizable life for definite-lived trademark intangible assets, management makes its best estimate of the duration and expected pattern of economic benefit.

 

88


Table of Contents

Testing of Definite-Lived Assets

Our policy is to review property, plant and equipment and definite-lived intangible assets for potential impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We test for potential impairment at the asset or asset group level, which is the lowest level for which there are identifiable cash flows that are largely independent, by comparing the carrying value to the estimated undiscounted cash flows expected to be generated by the asset. If the forecasted undiscounted cash flows to be generated by the asset are not expected to be adequate to recover the asset’s carrying value, a fair value analysis must be performed, and an impairment charge is recorded if there is an excess of the asset’s carrying value over its estimated fair value.

When testing property, plant and equipment for potential impairment, management uses the income-based discounted cash flow method using the estimated cash flows of the respective asset or asset group. The estimated undiscounted cash flows of the asset or asset group through the end of its useful life are compared to its carrying value. If the undiscounted cash flows of the asset or asset group exceed its carrying value, there is no impairment charge. If the undiscounted cash flows of the asset or asset group are less than its carrying value, the estimated fair value of the asset or asset group is calculated based on the discounted cash flows using the reporting unit’s weighted average cost of capital (“WACC”), and an impairment charge is recognized for the difference between the estimated fair value of the asset or asset group and its carrying value.

When testing definite-lived trademarks for potential impairment, management uses the income-based relief-from-royalty method. Under this method, forecasted revenues for products sold with the trademark are assigned a royalty rate that would be charged to license the trademark (in lieu of ownership), and the estimated undiscounted cash flows of the trademark (representing forecasted royalties avoided by owning the trademark) are compared to its carrying value. If the undiscounted cash flows of the trademark exceed its carrying value, there is no impairment charge. If the undiscounted cash flows of the trademark are less than its carrying value, the estimated fair value of the trademark is calculated in a manner consistent with indefinite-lived intangible assets discussed below, and an impairment charge is recognized for the difference between the estimated fair value of the trademark and its carrying value.

When testing customer relationship intangible assets for potential impairment, management uses the multi-period excess earnings method, which is a specific application of the discounted cash flow method. Under this method, we first calculate the undiscounted cash flows expected to be generated by the customer relationship asset after deducting contributory asset charges, considering historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. If the undiscounted cash flows of the customer relationship intangible asset exceed its carrying value, there is no impairment charge. If the undiscounted cash flows of the customer relationship intangible asset are less than its carrying value, the estimated fair value of the customer relationship intangible asset is calculated based on the discounted cash flows using the reporting unit’s WACC, and an impairment charge is recognized for the difference between the estimated fair value of the customer relationship intangible asset and its carrying value.

Testing of Indefinite-Lived Assets and Goodwill

Our policy is to evaluate indefinite-lived intangible assets and goodwill for possible impairment as of the beginning of the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying amount. As part of our annual impairment testing, we may elect to assess qualitative factors as a basis for determining whether it is necessary to perform quantitative impairment testing. If management’s assessment of these qualitative factors indicates that it is not more likely than not that the fair value of the intangible asset or reporting unit is less than its carrying value, then no further testing is required. Otherwise, the intangible asset or reporting unit must be quantitatively tested for impairment.

An indefinite-lived intangible asset is quantitatively tested for possible impairment by comparing the estimated fair value of the asset to its carrying value. Fair value of an indefinite-lived trademark is based on an

 

89


Table of Contents

income approach using the relief-from-royalty method. Under this method, forecasted revenues for products sold with the trademark are assigned a royalty rate that would be charged to license the trademark (in lieu of ownership), and the estimated fair value is calculated as the present value of those forecasted royalties avoided by owning the trademark. The appropriate discount rate is based on the reporting unit’s WACC that considers market participant assumptions, plus a spread that factors in the risk of the intangible asset. The royalty rate is selected based on consideration of (i) royalty rates included in active license agreements, if applicable, (ii) royalty rates received by market participants in the apparel industry and (iii) the current performance of the reporting unit. If the estimated fair value of the trademark intangible asset exceeds its carrying value, there is no impairment charge. If the estimated fair value of the trademark is less than its carrying value, an impairment charge would be recognized for the difference.

Goodwill is quantitatively evaluated for possible impairment by comparing the estimated fair value of a reporting unit to its carrying value. Reporting units are businesses with discrete financial information that is available and reviewed by segment management.

For goodwill impairment testing, we estimate the fair value of a reporting unit using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit’s forecasted future cash flows that are discounted to present value using the reporting unit’s WACC as discussed above. For the market-based approach, management uses both the guideline company and similar transaction methods. The guideline company method analyzes market multiples of revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for a group of comparable public companies. The market multiples used in the valuation are based on the relative strengths and weaknesses of the reporting unit compared to the selected guideline companies. Under the similar transactions method, valuation multiples are calculated utilizing actual transaction prices and revenue/EBITDA data from target companies deemed similar to the reporting unit.

Based on the range of estimated fair values developed from the income and market-based methods, we determine the estimated fair value for the reporting unit. If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is not impaired and no further review is required. However, if the estimated fair value of the reporting unit is less than its carrying value, we calculate the impairment loss as the difference between the carrying value of the reporting unit and the estimated fair value.

The income-based fair value methodology requires management’s assumptions and judgments regarding economic conditions in the markets in which we operate and conditions in the capital markets, many of which are outside of management’s control. At the reporting unit level, fair value estimation requires management’s assumptions and judgments regarding the effects of overall economic conditions on the specific reporting unit, along with assessment of the reporting unit’s strategies and forecasts of future cash flows. Forecasts of individual reporting unit cash flows involve management’s estimates and assumptions regarding:

 

   

Annual cash flows, on a debt-free basis, arising from future revenues and profitability, changes in working capital, capital spending and income taxes for at least a 10-year forecast period.

 

   

A terminal growth rate for years beyond the forecast period. The terminal growth rate is selected based on consideration of growth rates used in the forecast period, historical performance of the reporting unit and economic conditions.

 

   

A discount rate that reflects the risks inherent in realizing the forecasted cash flows. A discount rate considers the risk-free rate of return on long-term treasury securities, the risk premium associated with investing in equity securities of comparable companies, the beta obtained from comparable companies and the cost of debt for investment grade issuers. In addition, the discount rate may consider any company-specific risk in achieving the prospective financial information.

Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent transactions. Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of our reporting units.

 

90


Table of Contents

Rock & Republic® Impairment Analysis

The Rock & Republic® brand has an exclusive wholesale distribution and licensing arrangement with Kohl’s Corporation that covers all branded apparel, accessories and other merchandise. As of June 30, 2018, management performed a quantitative impairment analysis of the Rock & Republic® amortizing trademark intangible asset to determine if the carrying value was recoverable. We determined this testing was necessary based on the expectation that certain customer contract terms would be modified. Management used the income-based relief-from-royalty method and the contractual 4% royalty rate to calculate the pre-tax undiscounted future cash flows. Based on the analysis performed, management concluded that the trademark intangible asset did not require further testing as the undiscounted cash flows exceeded the carrying value of $49.0 million.

It is possible that management’s conclusion regarding the recoverability of the intangible asset could change in future periods as there can be no assurance that the estimates and assumptions used in the analysis as of June 30, 2018 will prove to be accurate predictions of the future.

2018 Impairment Testing

Management performed its annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of 2018. Management performed a qualitative impairment assessment for all reporting units and indefinite-lived trademark intangible assets, as discussed below in the “Qualitative Impairment Assessment” section. We did not record any impairment charges in 2018.

Qualitative Impairment Assessment

For all reporting units, we elected to perform a qualitative impairment assessment to determine whether it is more likely than not that the goodwill and indefinite-lived trademark intangible assets in those reporting units were impaired. We considered relevant events and circumstances for each reporting unit, including (i) current year results, (ii) financial performance versus management’s annual and five-year strategic plans, (iii) changes in the reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit and indefinite-lived trademark operates, (v) macroeconomic conditions, including discount rate changes, and (vi) changes in products or services offered by the reporting unit. If applicable, performance in recent years was compared to forecasts included in prior valuations. Based on the results of the qualitative impairment assessment, we concluded that it was not more likely than not that the carrying values of the goodwill and indefinite-lived trademark intangible assets were greater than their fair values, and that further quantitative impairment testing was not necessary.

Management’s Use Of Estimates and Assumptions

Management made its estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. It is possible that our conclusions regarding impairment or recoverability of goodwill or intangible assets in any reporting unit could change in future periods. There can be no assurance that the estimates and assumptions used in our goodwill and intangible asset impairment testing will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.

A future impairment charge for goodwill or intangible assets could have a material effect on our combined financial position and results of operations.

 

91


Table of Contents

Stock Options

VF sponsors an employee stock plan in which certain of our employees participate. The following describes VF’s key assumptions used in accounting for stock options.

VF uses a lattice option-pricing model to estimate the fair value of stock options granted to employees. VF believes that a lattice model provides a refined estimate of the fair value of options because it can incorporate (i) historical option exercise patterns and multiple assumptions about future option exercise patterns for each of several groups of option holders and (ii) inputs that vary over time, such as assumptions for interest rates and volatility. Management performs an annual review of all assumptions employed in the valuation of option grants and believes they are reflective of the outstanding options and underlying common stock and of groups of option participants. The lattice valuation incorporates the assumptions listed in Note 13 to our audited combined financial statements.

One of the critical assumptions in the valuation process is estimating the expected average life of the options before they are exercised. For each option grant, VF estimated the expected average life based on evaluations of the historical and expected option exercise patterns for each of the groups of option holders that have historically exhibited different option exercise patterns. These evaluations included (i) voluntary stock option exercise patterns based on a combination of changes in the price of VF common stock and periods of time that options were outstanding before exercise and (ii) involuntary exercise patterns resulting from turnover, retirement and death.

Volatility is another critical assumption requiring judgment. Management bases its estimates of future volatility on a combination of implied and historical volatility. Implied volatility is based on short-term (six to nine months) publicly traded near-the-money options on VF common stock. VF measures historical volatility over a ten-year period, corresponding to the contractual term of the options, using daily stock prices. Management’s assumption for valuation purposes is that expected volatility starts at a level equal to the implied volatility and then transitions to the historical volatility over the remainder of the ten-year option term.

Defined Benefit Pension Plans

Certain Company employees participate in the Shared Plans, which includes participants of other VF operations. We account for our participation in the Shared Plans as a multiemployer benefit plan. Accordingly, net periodic pension costs specifically related to Company employees have been reported in the combined statements of income, and the Company does not record an asset or liability to recognize the funded or unfunded status of the Shared Plans. See Note 11 to our audited combined financial statements for additional information.

VF’s employee pension costs and obligations are developed from actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates, and other factors. VF’s selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions. VF used a December 31 measurement date for all plans. Actual results that differ from VF’s assumptions are accumulated and amortized over future periods and, therefore, generally affect its recognized expense in such future periods. While VF management believes that the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect VF’s pension costs and obligations. Furthermore, the assumptions used by VF may not be indicative of assumptions which the Company would have made on a standalone basis.

The Company recognized $6.6 million, $6.9 million and $7.8 million for the service cost component of net periodic pension costs for the Shared Plans during 2018, 2017 and 2016, respectively, which is reflected in cost of goods sold and selling, general and administrative expenses in the combined statements of income. The

 

92


Table of Contents

Company recognized a benefit of $5.1 million in 2018, benefit of $0.2 million in 2017 and expense of $15.4 million in 2016 for the non-service components of net periodic pension costs for the Shared Plans, which are reflected in selling, general and administrative expenses in the combined statements of income. During the quarter ended June 30, 2018, VF approved a freeze of all future benefit accruals under the U.S. Shared Plans, effective December 31, 2018. This resulted in a pension curtailment loss for VF, of which $3.5 million was recorded by the Company in the combined statement of income for 2018. The Company also recorded a $1.2 million expense in 2018 reflecting the Company’s portion of pension settlement charges recorded by VF. In addition, the Company recorded a $21.5 million expense in 2016 reflecting the Company’s portion of a settlement charge recorded by VF. These curtailment and settlement charges are reflected in selling, general and administrative expenses in the combined statements of income in each respective period.

Income Taxes

As a global company, VF is subject to income taxes and files income tax returns in over 100 U.S. and foreign jurisdictions each year. For purposes of the combined financial statements, income taxes have been calculated as if we file income tax returns for the Company on a standalone basis. The Company’s U.S. operations and certain of its non-U.S. operations historically have been included in the tax returns of VF or its subsidiaries that may not be part of the spinoff transaction. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities. The Company makes an ongoing assessment to identify any significant exposure related to increases in tax rates in the jurisdictions in which the Company operates.

The calculation of income tax liabilities involves uncertainties in the application of complex tax laws and regulations, which are subject to legal interpretation and significant management judgment. VF’s income tax returns are regularly examined by federal, state and foreign tax authorities, and those audits may result in proposed adjustments. The Company has reviewed all issues raised upon examination, as well as any exposure for issues that may be raised in future examinations. The Company has evaluated these potential issues under the “more-likely-than-not” standard of the accounting literature. A tax position is recognized if it meets this standard and is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized. Such judgments and estimates may change based on audit settlements, court cases and interpretation of tax laws and regulations. Income tax expense could be materially affected to the extent VF prevails in a tax position or when the statute of limitations expires for a tax position for which a liability for unrecognized tax benefits or valuation allowances have been established, or to the extent VF is required to pay amounts greater than the established liability for unrecognized tax benefits. The Company does not currently anticipate any material impact on earnings from the ultimate resolution of income tax uncertainties. There are no accruals for general or unknown tax expenses.

The Company has $23.7 million of gross deferred income tax assets related to operating loss carryforwards, and $23.7 million of valuation allowances against those assets. Realization of deferred tax assets related to operating loss carryforwards is dependent on future taxable income in specific jurisdictions, the amount and timing of which are uncertain, and on possible changes in tax laws. If management believes that the Company will not be able to generate sufficient taxable income to offset losses during the carryforward periods, the Company records valuation allowances to reduce those deferred tax assets to amounts expected to be ultimately realized. If in a future period management determines that the amount of deferred tax assets to be realized differs from the net recorded amount, the Company would record an adjustment to income tax expense in that future period.

On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act included a broad range of complex provisions impacting the taxation of multi-national companies. Generally, accounting for the impacts of newly enacted tax legislation is required to be completed in the period of enactment; however, in response to the complexities and ambiguity surrounding the Tax Act, the SEC released Staff Accounting Bulletin No. 118 (“SAB 118”) to provide companies with relief around the initial accounting for the Tax Act. Pursuant to SAB 118, the

 

93


Table of Contents

SEC has provided a one-year measurement period for companies to analyze and finalize accounting for the Tax Act. During the one-year measurement period, SAB 118 allows companies to recognize provisional amounts when reasonable estimates can be made for the impacts resulting from the Tax Act. The Company has finalized accounting for the Tax Act during the one-year measurement period, as detailed below.

During the fourth quarter of 2017, we recognized a provisional charge of $136.7 million primarily comprised of $110.6 million related to the transition tax and $19.4 million of tax expense related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. The transition tax was treated consistently with other taxes payable (i.e., deemed settled and reflected within Parent company investment). Other provisional charges of $6.7 million were primarily related to establishing a deferred tax liability for foreign withholding and state taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain foreign subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested. The Company has not determined the deferred tax liabilities associated with these undistributed earnings and basis differences, as such determination is not practicable.

During the one-year measurement period provided for under SAB 118, we recognized additional net charges of $5.5 million, primarily comprised of $5.7 million of charges related to the transition tax, additional tax benefits of $1.5 million related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%, and other charges of $1.3 million related to establishing a deferred tax liability for foreign withholding taxes.

The Tax Act also includes the creation of a new minimum tax called the base erosion and anti-abuse tax (“BEAT”), a new provision that taxes U.S. allocated expenses (e.g., interest and general administrative expenses), a tax on global intangible low-tax income (“GILTI”) from foreign operations, a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a new limitation on deductible interest expense, and limitations on the deductibility of certain employee compensation. Under GAAP, companies are allowed to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. The Company completed its analysis related to this accounting policy election and treated the taxes resulting from GILTI as a current-period expense. We presently do not expect to be subject to the minimum tax imposed by BEAT provisions.

Recently Issued and Adopted Accounting Standards

Refer to Note 1 to our audited combined financial statements included elsewhere in this information statement for discussion of recently issued and adopted accounting standards.

 

94


Table of Contents

BUSINESS

Overview

We are a global apparel leader focused on the design, manufacturing, sourcing, marketing, and distribution of our portfolio of brands, including our iconic brands Wrangler® and Lee®. Our two key brands benefit from heritages spanning 200 combined years and together with our other brands accounted for over 170 million units of apparel produced or sourced in 2018. We endeavor to provide consumers with high-quality, innovative products at a superior value. We manufacture approximately 38% of our products in our owned and leased facilities, and distribute our products worldwide primarily through both major brick & mortar and e-commerce retailers. We believe our experienced management team is executing a strategy that provides a better product and brand experience to our consumers, primarily by delivering on our high standards of product design and innovation, and offering a wide variety of compelling products across channels and categories.

We focus on continuously improving the most important elements of our products, which include fit, fabric, finish, and overall construction, while continuing to provide consumers our products at attractive price points. We leverage innovation and design advancements as well as our unique brand heritages to create marketing campaigns that communicate our brand positioning, product attributes, and overall value proposition to consumers. We believe these marketing campaigns further elevate our brands, build our loyal global consumer base, and ultimately drive revenue growth.

We have a presence in over 65 countries and generated approximately $2.8 billion in global revenues in 2018 across our various channels. We sell our products primarily through our established wholesale and expanding digital channels, and utilize our branded brick & mortar locations to supplement our go-to-market strategy. We benefit from strong relationships with many of our customers who we believe depend on our ability to reliably and timely replenish them with our high-volume products.

Within the U.S., where we generated 73% of our revenues in 2018, we offer our apparel and accessories largely through our wholesale channel, which consists of mass and mid-tier retailers, specialty stores including western specialty retail, department stores, and retailer-owned and third-party e-commerce sites. We also sell our products in the U.S. through direct-to-consumer channels, including full-price stores, outlet stores and our own websites. Outside the U.S., where we generated 27% of our revenues in 2018, we operate through similar wholesale channels as in the U.S., and utilize distributors, agents, licensees, and partnerships along with our full-price and outlet stores and digital presence.

We believe our global supply chain provides us with significant competitive advantages and operating flexibility. Our internal manufacturing capabilities include owned and leased facilities, all of which are located in the Western Hemisphere, and produced approximately 38% of our total units sold in 2018. The remainder of our units sold were supplied by a range of third-party manufacturers. We distribute our products globally through our own distribution centers as well as through third-party distribution centers. We believe our flexible and balanced approach to manufacturing and distribution allows us to better manage our production, and in turn appeals to our customers who we believe view our ability to consistently meet their production needs as a point of competitive differentiation.

We believe the consumer appeal of our brands combined with consistent execution of our manufacturing and distribution strategies have supported our ability to produce strong financial results. We generated over $2.75 billion in revenue and $330 million in operating income in each of the last five years. Additionally, our cash flows from operations were greater than $295 million in each of the years from 2014 through 2016. In 2017, our cash flows from operations were $168.6 million, which were impacted by a $110.6 million charge related to the transition tax component of the Tax Act that was deemed settled in cash with VF for purposes of carve-out financial reporting. In 2018, we reported cash flows used by operations of $96.3 million, primarily due to $323.3 million lower cash proceeds from settlement of the intercompany sale to VF of certain of the Company’s

 

95


Table of Contents

trade accounts receivable. The timing of the intercompany settlement was impacted by VF’s one-time change in fiscal year-end and does not reflect an operational deterioration in cash flows. We expect our cash flows to normalize post-Separation and intend to continue to invest in our brands, talent and capabilities, and growth strategies as well as to support a dividend to shareholders, and to repay our indebtedness over time.

Kontoor Brands is headquartered in Greensboro, North Carolina. Upon our separation from VF, we expect to trade under the ticker symbol “KTB” on the NYSE.

Our Competitive Strengths

Iconic Brands with Significant Global Scale.

Our two key brands are steeped in rich heritage and authenticity. The Wrangler® and Lee® brands generated approximately $1.6 billion and $960 million, respectively, in 2018 revenues and have an established global presence in the apparel market. Products bearing our brands are sold in more than 65 countries, and we believe they have strong consumer connectivity worldwide. We market our brands and products to highlight their differentiated position and product attributes. We strive to maximize our consumer reach by leveraging each brand’s “best practices” to drive growth across product categories and expand our overall revenues and earnings profile.

Founded over 70 years ago, Wrangler® is a classic American brand deeply rooted in U.S. western apparel and positioned as clothing ready for everyday life. Wrangler® branded products are offered in more than 20,000 retail doors worldwide and span a wide range of product categories including denim and non-denim bottoms, shirts, jackets, and other outerwear and accessories. We believe the Wrangler® brand appeals to a broad range of consumers worldwide who appreciate the brand’s western heritage, quality, and superior value. Outside the U.S., we believe the brand generally occupies a more premium positioning and carries a higher average price point.

Founded in 1889, Lee® is an authentic apparel brand with a heritage of purposeful craftsmanship and innovation. Lee® branded products offer versatile styling and superior comfort in denim and casual apparel for a multitude of activities, and target an active consumer interested in a stylish look through innovation designed for functional and visual appeal. The Lee® brand generates approximately 47% of its revenues outside the U.S., with a significant portion attributable to China and certain countries in Europe. In particular, since entering the Chinese market in 1995, the Lee® brand has developed a leading market position.

Deep Relationships with Brick & Mortar Retail and E-Commerce Leaders.

We have developed long-term relationships with many leading global brick & mortar and e-commerce retailers, whom we believe rely on our iconic brands, leading product quality and value, and innovation to address evolving consumer needs in our product categories. By fostering these relationships, we have become an important vendor for many of our customers and have built leading category positions, which in turn supports the availability of our brands to consumers and our ability to introduce new products and categories. We also endeavor to provide sophisticated logistics, planning, and merchandising expertise to support our customers, which we believe supports a level of insight that builds more integrated customer relationships. Over time, we believe we have developed an aptitude for addressing our customers’ unique and challenging inventory replenishment and planning needs, and have built a reputation as a reliable partner in a dynamic retail environment.

Integrated Supply Chain Built to Support Volume and Replenishment.

We are continually refining our supply chain to maximize efficiency and reinforce our reputation of reliability with our customers. Through our vertically integrated supply chain we manufacture, source, and distribute a significant quantity of high volume apparel products that are frequently replenished by our retail

 

96


Table of Contents

partners. Our product procurement and distribution strategies, combined with our internal manufacturing facilities and retail floor space management programs, allow us to maintain what we believe is a competitive advantage versus other apparel suppliers. Our supply chain is built to support large volumes and to meet customer needs while balancing cost and operational requirements. Our 13 internal manufacturing facilities are located in the Western Hemisphere, where their proximity to our primary markets enables us to deliver inventory in a consistent and timely manner. We also have established global third-party sourcing and distribution networks that we leverage across product categories and various regions. We believe our flexible and balanced approach to manufacturing and distribution allows us to better manage our production needs.

Many of our largest volume and highest velocity product styles continue from year to year, with design and innovation elements periodically updated to maintain our products’ relevance with consumers. We utilize real-time data provided by our customers to ensure timely delivery of our products and optimize our customers’ inventory levels. We believe our vertically integrated operations in combination with inventory and supply-demand reconciliation processes allow us to excel in meeting our retail customers’ rapid order requirements.

Highly Experienced Management Team and Board of Directors.

We have assembled a senior management team that is highly focused on continuing to grow our brands’ revenues, delivering strong and consistent financial results, and building a cohesive corporate culture. Together, our management team has over 50 years of combined experience in the apparel and accessories industry and brings deep global industry expertise to our newly independent company. Our President and Chief Executive Officer, Scott Baxter, served in various senior leadership positions at VF, including most recently as Vice President and Group President of Americas West, where he was responsible for overseeing brands such as The North Face® and Vans®, and previously as Group President of VF’s Jeanswear Americas business. Our Vice President and Chief Financial Officer, Rustin Welton, most recently served as Group Chief Financial Officer for VF’s Jeanswear, Workwear, Timberland® and VF Outlet™ businesses. Our two Vice Presidents and Global Brand Presidents, Thomas Waldron and Christopher Waldeck, maintain operational responsibility for the Wrangler® and Lee® brands, respectively, and have significant experience managing our brands domestically. We are also guided by a strong Board of Directors who bring valuable industry and management insight to Kontoor Brands. Our Board is led by our Non-Executive Chairman, Robert Shearer, who has extensive familiarity with our business and our industry, having served as Senior Vice President and Chief Financial Officer of VF from 2005 through 2015. We believe the depth of experience and deep industry knowledge of our management team and Board of Directors will drive the success of our new company.

Resilient Business Model That Delivers Consistent Results.

Our business has historically generated significant revenues, strong profits, and attractive cash flows due to our global brands, leading market positions, deep customer relationships, and the vertical integration of our supply chain. We believe we offer high product value and quality to our consumers, who respond to our value proposition by consistently purchasing our products over time. Over the last five years, we generated revenues in excess of $2.75 billion each year, and consistently delivered operating margins of 12% or greater each year. Our strong margin profile combined with our diligent approach to operational excellence and capital management have produced meaningful cash flows. We believe our consistent financial results will provide us with the opportunity to consistently invest in our business, return capital to shareholders, and repay debt.

Our Strategies

We have historically operated predominantly as a segment within VF. Following the Separation, we will become an independent publicly traded company led by a highly experienced management team fully dedicated to leveraging our capabilities and driving our strategic initiatives. We will also have increased flexibility to deploy our strong free cash flow towards our operating and capital allocation priorities.

 

97


Table of Contents

Adopt a Global Approach for Optimizing the Wrangler® and Lee® Brands.

We believe the combination of our brands, scale, and global platform is differentiated in our industry. Historically, our brands have largely operated independently across geographic regions with regard to management, product design, and marketing. With one integrated senior leadership team to manage our brands and operations globally, there is an opportunity to implement an operating model that more efficiently leverages our global brands, scale, and platforms. We have built a leadership team based in Greensboro, North Carolina, that will include Global Presidents of both the Wrangler® and Lee® brands, as well as global leaders of the design, merchandising, digital, and direct-to-consumer departments. This centralized senior management team with global responsibility will work closely with our regional teams to deliver a unified brand and product design message while ensuring market-specific nuances are maintained. Through this integrated platform and management structure, we believe we can amplify the global strength of our brands, improve operating efficiency, and increase the overall demand for our products.

Continue to Increase Our Product Offering and Expand Our Target Consumer Base.

We see potential to enhance our existing product assortment, broaden our product offering, and expand into adjacent product categories. We leverage our Global Denim Innovation Network and Cognitive and Design Science Center to develop cognitive, design, textile, and product construction advancements that target the needs of our existing and potential new target consumer groups. We strive to create new products to attract a wide range of consumers, including women and younger generations, while seeking to ensure our core offering continues to serve the needs of our consumers. We believe we have the opportunity to also enter new categories that utilize our existing brand and product strengths, such as the outdoor and workwear categories. We have also introduced higher-end products at premium price points in the U.S. Successful execution of our product expansion strategies should broaden the appeal of our brands and products to new consumers, extend our reach into new product categories, and ultimately drive the overall revenues of our business. In addition, we also intend to opportunistically evaluate potential merger and acquisition targets to supplement our approach over the long-term.

Continue Expanding Our Distribution.

We believe there is an opportunity to expand the distribution of our products with new and existing brick & mortar and e-commerce customers internationally and in the U.S. We expect the integration and collaboration of our brands’ global leadership teams will help drive distribution opportunities for the Wrangler® and Lee® brands in both new and established markets by leveraging each brand’s relative distribution strengths across regions. Specifically, China provides an attractive geography to expand our existing presence and distribute more products across a range of price segments. In Europe, we intend to refine our strategy to become more consumer centric in addressing how and where our customers want to purchase our products. In the U.S., we see an opportunity to continue to grow with our major retail customers as well as drive distribution of our more premium products through higher-end department and specialty stores. We also expect to leverage our leading brand positions to increase our penetration with major global e-commerce players as this distribution channel continues to grow in consumer importance worldwide.

Drive Cost Savings and Efficiencies Across Our Global Organization.

We expect to realize efficiencies across our business as we create a more centralized global organization and pursue cost savings initiatives. As part of our centralized approach to our global business, our management team will oversee all brands for their respective business functions, including supply chain, digital, direct-to-consumer, and strategy while seeking to ensure we maintain our worldwide presence and regional approach. We have implemented initiatives to reduce costs and realize greater efficiencies, which have included transitioning our Central America and South America region to a distributor model, exiting certain supply chain operations, relocating Lee®’s North American headquarters to Greensboro, North Carolina and streamlining our global

 

98


Table of Contents

organizational structure. We will continue to implement various operational initiatives to address inefficiencies throughout our organization and cost savings programs that we expect to generate meaningful global cost savings. We plan to utilize such measures to fuel additional investments in our capabilities and brands while improving our overall profitability.

Our Brands

We own and operate a portfolio of apparel brands that each aim to address the differentiated needs of their consumers. Our two main brands, Wrangler® and Lee®, have product designs targeted at specific consumers, and also offer various collections for specific retailers.

Wrangler®

Wrangler® is an iconic American heritage brand rooted in the western lifestyle, with over 70 years of history offering denim, apparel, and accessories for men and women. Wrangler® branded products are available through wholesale arrangements with mass and mid-tier retailers, specialty stores, department stores, independently owned and operated partnership stores, and e-commerce platforms, as well as through owned retail stores and websites. Wrangler® branded products are available in the U.S., Canada, Mexico, Central America and South America, the United Kingdom and continental Europe, the Middle East, India, and through licensees across Australia, Asia and Africa. We offer multiple sub-brands and collections within the main Wrangler® brand that we develop to target specific consumer demographics and consumer end-uses, including: 20X®, Aura from the Women at Wrangler®, Cowboy Cut®, Premium Patch®, Riggs Workwear®, Rock 47®, Rustler®, W1947®, Wrangler Retro®, and Wrangler Rugged Wear®.

Lee®

Lee® is an iconic American denim and apparel brand celebrating 130 years of heritage and authenticity in 2019. Lee® product collections include a uniquely styled range of jeans, pants, shirts, shorts, and jackets for men, women, boys and girls, with the latter currently licensed in the U.S. The Lee® brand delivers trend-forward styles with exceptional fit and comfort through innovative fabric solutions and advanced design technology. Lee® branded products are distributed domestically and internationally through the wholesale channel including department stores, mass merchants, specialty stores, independently owned and operated partnership stores, and e-commerce platforms, as well as through owned retail stores and websites. Lee® branded products are available in the U.S., Canada, Mexico, Central and South America, the United Kingdom and continental Europe, the Middle East, India, China, and through licensees across Australia, Asia, and Africa. The Lee® brand offers multiple sub-brands and collections, making it attractive for a broader consumer base, including: Body OptixTM, Lee101TM, Lee Modern Series®, and Lee® Riders®.

Rock & Republic®

Rock & Republic® is a premium apparel brand known for its edgy styles and is marketed as a modern and active lifestyle brand to consumers. Since 2012, Rock & Republic® products have been sold in the U.S. exclusively through Kohl’s. We believe there remains an opportunity to expand the brand’s presence outside the U.S. by leveraging our retail and e-commerce relationships.

Other Brands

We also own and operate various smaller brands worldwide, which include Gitano® and Chic®.

Distribution Channels

Our distribution channels include U.S. Wholesale, Non-U.S. Wholesale, Branded Direct-to-Consumer, and Other. We utilize these channels based on the optimal route to reach our consumers in the physical and digital

 

99


Table of Contents

locations they frequent within their geographies. As part of our separation from VF, we will also operate the U.S.-based VF Outlet™ business, which carries both of our primary brands as well as VF-branded products and third-party branded merchandise.

U.S. Wholesale

The U.S. Wholesale channel is our largest distribution channel and accounted for approximately 61% of our revenues in 2018. Within this channel, our Wrangler® and Lee® branded products are marketed and sold by mass and mid-tier retailers, specialty stores including western specialty retail, department stores, and retailer-owned and third-party e-commerce sites. A portion of our U.S. Wholesale revenue is attributable to digital sales from our wholesale partners’ websites, third-party e-commerce platforms such as Amazon, and other smaller pure-play digital retailers. Third-party e-commerce platforms and pure-play digital retailers are a growing and important portion of this channel.

Our mass merchant customers include national retailers such as Walmart and Target, as well as various regional retail partners. Our mid-tier and traditional department store customers include national retailers such as Kohl’s, JCPenney, Belk, Macy’s, and various other retail partners. Rock & Republic® branded products are distributed through an exclusive agreement with Kohl’s. The specialty store channel, which includes revenue from Wrangler® Riggs Workwear® and Wrangler® Western branded products, consists primarily of national accounts such as Tractor Supply Company and Boot Barn as well as upscale modern specialty stores.

We aim to foster close and longstanding relationships with our wholesale customers, having partnered with each of our top three brick & mortar wholesale customers for over 25 years. In addition, we engage in an active dialogue with many of our key wholesale customers and receive proprietary insights about how our products are performing on a timely basis. Our brands’ top U.S. Wholesale customers include Walmart, Kohl’s, Target, and Amazon, and Walmart was our only customer representing greater than 10% of our total revenue in each of the last three years (approximately 32%, 33% and 33% of total revenue in 2018, 2017 and 2016, respectively). Sales to our customers are generally on a purchase order basis and not subject to long-term agreements.

In addition, a small portion of sales in our U.S. Wholesale channel are from licensing arrangements where we receive royalties based on a percentage of the licensed products’ revenues. Most of the agreements provide for a minimum royalty requirement. See “—Licensing Arrangements” below for more information.

Non-U.S. Wholesale

The Non-U.S. Wholesale channel represents the majority of our international business and accounted for approximately 22% of our revenues in 2018. The majority of the Wrangler® and Lee® international product business is located in EMEA and APAC, where we sell our products through department stores and specialty stores. In Canada and Mexico, our branded products are marketed through mass merchants, department stores, and specialty stores, while in South America our branded products are sold in department and specialty stores. Additionally, our Non-U.S. Wholesale channel includes non-U.S. sales on digital platforms operated by our wholesale partners, as well as sales in partnership stores located across EMEA, APAC, and South America. Partnership stores are owned and operated by our licensees, distributors, and other independent parties. They are primarily mono-brand retail locations selling our Wrangler® and Lee® branded products that have the appearance of Kontoor Brands-operated stores, and as such represent an important vehicle for presenting our brands to international consumers. Similar to the U.S. Wholesale channel, we use proprietary insights from our wholesale customers to strategically refine our products and adjust our go-to-market approach.

Geographically, our revenue in EMEA is concentrated in developed markets such as Germany, Poland, Italy, Scandinavia, France, Spain, the Netherlands, and the United Kingdom. We access the APAC market primarily through our business in China and India, which we anticipate will continue to be countries of growth for this distribution channel. Canada is the largest international market for Wrangler® branded products, while China is the largest international market for Lee® branded products.

 

100


Table of Contents

In addition, a small portion of sales in our Non-U.S. Wholesale channel are from international licensing arrangements where Kontoor Brands receives royalties based on a percentage of the licensed products’ revenues. Most of the agreements provide for a minimum royalty requirement. See “—Licensing Arrangements” below for more information.

Branded Direct-to-Consumer

Our Branded Direct-to-Consumer channel represents the distribution of our products via concession retail locations internationally, Wrangler® and Lee® branded full-price stores globally, and Company-owned outlet stores globally. The channel also includes our branded products in VF Outlet™ locations, and our products that are marketed and distributed online via www.wrangler.com and www.lee.com. Our Branded Direct-to-Consumer channel allows us to display the brands’ product lines in a manner that supports the brands’ positioning, providing an in-store and online experience that enables us to address the needs and preferences of our consumers. The channel accounted for approximately 11% of our revenues in 2018.

The Branded Direct-to-Consumer channel includes 241 concession retail stores, which are located internationally and consist of mono-brand and dual-brand stores. Under a typical concession arrangement, we have a dedicated sales area within our customers’ stores, and pay a concession fee for use of the space based on a percentage of retail sales. The concession model allows our partners to dedicate specific sales areas to our brands and helps differentiate and enhance the presentation of our products.

Our 41 owned full-price Wrangler® and Lee® branded retail stores are located in the U.S., South America, Europe, and Asia, and consist of both mono-brand stores, which exclusively carry either Wrangler® or Lee® branded products, and dual-brand stores, which carry both Wrangler® and Lee® branded products. In addition, we also have a limited number of dual-branded Wrangler® and Lee® outlet stores in the U.S., as well as a limited number of Wrangler® and Lee® branded clearance center stores.

We also operate multiple outlet stores in the U.S., in both premium outlet malls and more value-based outlet locations. The majority of our sites in the U.S. are traditional VF Outlet™ locations featuring Wrangler® and Lee® branded products, as well as VF-branded and third-party branded products. Branded Direct-to-Consumer channel revenues include all sales from VF Outlet™ locations excluding the VF-branded and third-party branded merchandise, which are reported in the Other channel described below.

We continue to prioritize serving our customers through digital platforms and include digitally enabled transactions through our own websites as part of this channel. This represents a growing portion of our revenues, and helps elevate the consumer experience with our brands. Wrangler® and Lee® branded products are currently available through our own e-commerce websites in 14 countries.

Other

Our Other distribution channel consists of sales of VF-branded and third-party branded merchandise in our VF Outlet™ stores, as well as sales to VF for products manufactured in our plants and use of our transportation fleet. This channel accounted for approximately 6% of our revenues in 2018, and while the Other channel is not a strategic focus, we are committed to optimizing profitability in our VF Outlet™ stores.

Design and Product Development

Our product design and innovation effort across fit, fabric, finish, and quality is an important element of our strategy. We leverage our expertise in these important areas to provide our consumers high-quality and high-value products. We operate a multi-site approach to product design and development, with hubs located in the U.S., Belgium, Hong Kong, and India. In the U.S. and EMEA, product design is housed within the merchandising, marketing, consumer insights, innovation, and executive teams to ensure product design delivers against brand positioning, consumer needs, and target costs.

 

101


Table of Contents

Our product development team, which includes technical development, pattern-making, and engineering, works closely with our product design team to facilitate collaboration between the two functions. These two teams collaborate from initial concept to product creation in order to craft a lifestyle association to our Wrangler® and Lee® branded products. Our vigorous product development is supported by a robust go-to-market process that seeks to ensure brand continuity across business units and strong, consistent execution. We have two primary selling seasons, spring and fall, but certain product lines offer more frequent introductions of new merchandise.

In addition to our design functions within existing collections, we operate a strategic Global Denim Innovation Network in Greensboro, North Carolina, as well as a Cognitive and Design Science Center in Irvine, California, with a focus on cognitive, design, textile, and construction advancements that we can leverage across our portfolio. These locations are staffed with dedicated scientists, engineers, and designers who leverage our proprietary consumer insights to create new designs, manufacturing, and material technologies. These centers are integral to our long-term growth as they allow us to deliver new products and experiences that aim to meet our consumers’ needs, which we believe drives demand for our products.

Manufacturing, Sourcing, and Distribution

Our global supply chain organization is responsible for the operational planning, manufacturing, sourcing, and distribution of products to our customers. We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain that produced or sourced more than 170 million apparel units in 2018. Our supply chain employs a centralized leadership model with localized regional expertise. Within our internal manufacturing facilities, we innovate and design our own proprietary equipment to drive our production output and capabilities. We focus on engineering and on efficiency, which we believe provides an ongoing competitive advantage in our internal manufacturing facilities. We leverage our manufacturing expertise to our sourcing operations, where we have developed longstanding relationships with third-party manufacturers and distributors. We believe this manufacturing and sourcing approach, coupled with strategic inventory and retail floor space management programs with many of our major retail customers, gives us a competitive advantage in our business.

Sourcing and Manufacturing

We believe the combination of our internal manufacturing and contracted production across different geographic regions provides a well-balanced, flexible approach to product procurement. Within our own manufacturing facilities, we purchase raw materials from numerous U.S. and international suppliers to meet our production needs. Raw materials include products made from cotton, polyester, spandex, and lycra blends, as well as thread and trim (such as product identification, buttons, zippers and snaps). Fixed price commitments for fabric and certain supplies are generally set on a quarterly basis for the next quarter’s purchases. No single contracted manufacturer supplier represents more than 10% of our total cost of goods sold. We operate global sourcing hubs, which are responsible for managing the contracted vendor manufacturing and procurement of product, including supplier oversight, product quality assurance, sustainability within the supply chain, responsible sourcing, and transportation and shipping functions.

We operate 13 manufacturing facilities (ten owned facilities in Mexico and three leased facilities in Nicaragua). We also source products from approximately 200 contractor manufacturing facilities in over 30 countries. In 2018, approximately 38% of our global units were manufactured in our internal manufacturing facilities, and approximately 62% of global units were sourced from third-party contractors. Products obtained from contractors in the Western Hemisphere frequently have a higher cost than products obtained from contractors in Asia. However, internal manufacturing combined with contracting in the Western Hemisphere gives us greater flexibility, shorter lead times, and allows for enhanced inventory management in the U.S. market. In making decisions about the location of manufacturing operations and suppliers, we consider a number of factors including the raw material source, the final destination, production lead times, duties and tariffs,

 

102


Table of Contents

product cost, product complexity, and the ability to pursue upside demand. Additionally, we continually monitor political risks and developments related to duties, tariffs and quotas and we often manufacture and source products from countries with tariff preferences and free trade agreements.

Distribution

Products are shipped from our independent suppliers and internal manufacturing facilities to distribution centers around the world. We directly operate the majority of the distribution centers and we carefully select the remaining third-party contracted centers depending on our presence in the region. All of our distribution centers are strategically located to provide speed and service to our consumers at the most efficient cost possible. Additionally, our established long-term third-party distribution relationships ensure maximum capacity, connectivity, responsiveness, and overall service coverage around the globe. In international markets where we do not have brick & mortar operations, our products are marketed through our distributors, as well as agents, licensees, and single-brand or multi-brand partnership stores.

Advertising and Customer Support

Our advertising and marketing effort focuses on differentiating our brands’ positioning and highlighting our product qualities. We are focused on creating globally unified brand messages with appropriate regional nuances in order to maximize our brand recognition, and drive brand demand from initial end consumer awareness to long-term loyalty. In conjunction with the appointment of our new global heads of marketing, we will continue to develop integrated, multi-channel marketing strategies designed to effectively reach the target consumers of each of our brands. We pursue this strategy through our use of a variety of media channels and other public endorsements, including traditional media such as television, print, and radio, as well as digital media channels such as display, online video, social media, paid search, and influencers. We employ marketing analytics to optimize the impact of advertising and promotional spending, and to identify the types of spending that provide the greatest return on our marketing investments.

We also participate in cooperative advertising on a shared cost basis with major retailers in print and digital media, radio, and television. We provide advertising support to our wholesale customers in the form of point-of-sale fixtures and signage to enhance the presentation and brand image of our products. Our websites, www.wrangler.com, www.lee.com, and corresponding regional websites, enhance consumer understanding of our brands and help consumers find and buy our products. We employ a support team for each brand that is responsible for customer service at the consumer level as well as a sales force that manages our customer relationships.

Social Responsibility and Community Outreach

Operating as a socially conscious company and working within our communities will remain an integral part of our values as an independent company. We are committed to environmental sustainability, labor welfare, and community development, not only because today’s consumers demand the highest standards from the brands they utilize, but because we believe these values are consistent with what our brands represent and are the right thing to do to enhance global welfare.

Licensing Arrangements

We seek to maximize our brands’ market penetration and consumer reach by entering into licensing agreements with independent parties. Pursuant to these licensing agreements, we generally grant our licensing partner an exclusive or non-exclusive license to use one of our brands in connection with specific licensed categories of products in specific geographic regions. Our licensing partners leverage the strength of our brands and our customer relationships to sell products in their licensed categories and/or geographic regions. Categories in which we currently have licensing agreements include jeanswear, casual apparel, belts, footwear, small leather goods and jewelry.

 

103


Table of Contents

We retain oversight and approvals of the design, quality control, advertising, marketing, and distribution of licensed products to ensure adherence to our brand and product quality standards. License agreements are for fixed terms of generally two to five years. Each licensee pays royalties based on its sales of licensed products, with the majority of agreements requiring a minimum royalty payment. Licensing income was $32.7 million in 2018.

Competition

The apparel industry is highly competitive, highly fragmented and characterized by low barriers to entry with many regional, local, and global competitors. We believe we compete in the apparel and accessories sector by leveraging our brands, scale, and ability to develop high-quality, innovative products at competitive prices that meet consumer needs.

Our primary branded competitors are large, globally focused apparel companies that also participate in a variety of categories, including, but not limited to, athletic wear, denim, exclusive or private labels, and workwear. A select list of key competitors includes Calvin Klein, Carhartt, Diesel, Guess, Levi’s, Tommy Hilfiger, and Uniqlo. Additionally, we see a large and growing offering from private label apparel created for retailers such as Walmart, Amazon, H&M, Old Navy, and Gap.

Employees

We employed approximately 17,000 people as of December 29, 2018, of which approximately 4,200 were located in the U.S. In international markets, a significant percentage of employees are covered by trade sponsored or governmental bargaining arrangements. Employee relations are considered to be good.

 

104


Table of Contents

Properties

We conduct manufacturing, distribution and administrative activities in owned and leased facilities. We operate 13 manufacturing-related facilities and nine distribution centers around the world. Our global headquarters are located in Greensboro, North Carolina, and house our various sales, marketing and corporate business functions. The following table sets forth our principal properties as of the date of this information statement.

 

Location

  Approximate
Square Feet
   

Use

  Owned
or
Leased
 

Greensboro, North Carolina

    140,000     Global Headquarters     Owned  

Hong Kong, China

    44,000     Office/Sourcing Hub     Leased  

Panama City, Panama

    6,000     Sourcing Hub     Leased  

Kansas City, Kansas*

    146,000     Office     Owned  

Antwerp, Belgium

    38,000     Office     Leased  

Reading, Pennsylvania

    32,000     Office     Leased  

Shanghai, China

    13,000     Office     Leased  

Mexico City, Mexico

    13,000     Office     Leased  

Mocksville, North Carolina

    494,000     Distribution Center     Owned  

Hackleburg, Alabama

    443,000     Distribution Center     Owned  

Seminole, Oklahoma

    394,000     Distribution Center     Owned  

El Paso, Texas

    385,000     Distribution Center     Leased  

Luray, Virginia

    321,000     Distribution Center     Owned  

Prague, Czech Republic

    270,000     Distribution Center     Leased  

Mexico City, Mexico

    162,000     Distribution Center     Leased  

Bangalore, India

    116,000     Distribution Center     Leased  

Buenos Aires, Argentina*

    29,000     Distribution Center     Owned  

Delicias, Mexico

    378,000     Manufacturing Facility     Owned  

Acanceh, Mexico

    306,000     Manufacturing Facility     Owned  

Torreon, Mexico

    304,000     Manufacturing Facility     Owned  

Izamal, Mexico

    93,000     Manufacturing Facility     Owned  

Jimenez, Mexico

    92,000     Manufacturing Facility     Owned  

Tekax, Mexico

    92,000     Manufacturing Facility     Owned  

LaRosita, Mexico

    90,000     Manufacturing Facility     Owned  

Saucillo, Mexico

    89,000     Manufacturing Facility     Owned  

San Pedro, Mexico

    88,000     Manufacturing Facility     Owned  

San Antonio del Coyote, Mexico

    88,000     Manufacturing Facility     Owned  

Managua, Nicaragua

    122,000     Manufacturing Facility     Leased  

San Marcos, Nicaragua

    118,000     Manufacturing Facility     Leased  

Masatepe City, Nicaragua

    108,000     Manufacturing Facility     Leased  

 

*

We expect to exit each of these properties in connection with or subsequent to the Separation.

We believe that all of these facilities, whether owned or leased, are well maintained and in good operating condition and expect they will accommodate our ongoing and foreseeable business needs. In addition, as of December 29, 2018, we operated 147 retail stores across the Americas, EMEA, and APAC regions. Retail stores are generally leased under operating leases and include renewal options.

Intellectual Property

We believe trademarks, trade names, patents and domain names, as well as related logos, designs and graphics, provide substantial value in the development and marketing of our products, and are important to our continued success. We have registered our intellectual property in the U.S. and in other countries where our products are manufactured and/or sold. In particular, our trademark portfolio consists of over 7,000 trademarks registrations and applications in the United States and other countries around the world, including U.S. and

 

105


Table of Contents

foreign trademark registrations for our two main brands, Wrangler® and Lee®. Although the laws vary by jurisdiction, 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. Generally, trademark registrations can be renewed indefinitely as long as the trademarks are in use. We also place high importance on product innovation and design, and a number of these innovations and designs are the subject of patents. However, we do not regard any segment of our business as being dependent upon any single patent or group of related patents.

Due to the worldwide consumer recognition of our products, we face an increased risk of counterfeiting by third parties. We vigorously monitor and enforce our intellectual property and proprietary rights against counterfeiting, infringement, misappropriation and other violations by third parties where and to the extent legal, feasible and appropriate. However, the actions we take to protect our intellectual property rights may not be adequate to prevent third parties from copying our products or infringing, misappropriating or otherwise violating our trademarks or other intellectual property rights, and the laws of foreign countries may not protect intellectual property rights to the same extent as do the laws of the U.S.

Legal Proceedings

There are no pending material legal proceedings. The Company continues to have ordinary, routine litigation incidental to the business, to which we or any of our subsidiaries is a party or to which any of our property is the subject.

 

106


Table of Contents

MANAGEMENT

Executive Officers Following the Separation

The following table sets forth information, as of the date of this information statement, regarding certain individuals who are expected to serve as our executive officers following the Separation. We expect that those individuals noted below who are current employees of VF will transfer from their respective employment with VF to Kontoor Brands and, immediately prior to the Separation, resign from any officer roles with VF.

 

Name

   Age     

Position

Scott H. Baxter

     54      President and Chief Executive Officer

Rustin Welton

     49      Vice President and Chief Financial Officer

Thomas E. Waldron

     51      Vice President and Global Brand President—Wrangler

Christopher Waldeck

     52      Vice President and Global Brand President—Lee

Laurel Krueger

     44      Vice President, General Counsel and Corporate Secretary

There are no family relationships among any of the officers named above. Each of our officers will hold office from the date of election until a successor is elected. Set forth below is information about the executive officers identified above.

Scott H. Baxter will be the President and Chief Executive Officer of Kontoor Brands. Mr. Baxter has been VF’s Group President of Jeanswear since August 2018. He previously served as VF’s Group President—Americas West from January 2018 to August 2018, Vice President and Group President—Outdoor & Action Sports Americas from March 2016 until December 2017, Vice President and Group President—Jeanswear Americas, Imagewear and South America from May 2013 until March 2016, Vice President and Group President —Jeanswear Americas and Imagewear from 2011 until May 2013, President of Imagewear, composed of both the Imagewear and VF’s former Licensed Sports Group businesses, from 2008 to 2011 and President of VF’s former Licensed Sports Group business from 2007 to 2008. He earned an M.B.A. from Northwestern University’s Kellogg School of Management and a B.A. in History from the University of Toledo. Mr. Baxter joined VF in 2007.

Rustin Welton will be the Vice President and Chief Financial Officer of Kontoor Brands. Mr. Welton has been VF’s Vice President and Chief Financial Officer—Americas East since January 2017. He previously served as VF’s Vice President and Chief Financial Officer for the Jeanswear Coalition, Imagewear Coalition, and Central America/South America from December 2014 to January 2017 and Chief Financial Officer—Jeanswear North and South America from 2012 to 2015. He earned an M.B.A. from Indiana University’s Kelley School of Business and a B.A. in Finance from the University of Illinois at Urbana-Champaign. Mr. Welton joined VF in 2012.

Thomas E. Waldron will be the Vice President and Global Brand President—Wrangler of Kontoor Brands. Mr. Waldron has been VF’s Global Brand President—Wrangler since October 2018. He previously served as President—Wrangler since March 2016, Vice President—Mass Brands from July 2010 until March 2016, Vice President General Manager—Wrangler Male Bottoms from July 2005 until July 2010, Merchandise Manager—Wrangler Men’s from January 2003 until July 2005, National Account Executive—Walmart from January 2000 until January 2003, National Account Executive from November 1996 until January 2000 and Replenishment Manager from September 1995 to November 1996. He earned a B.S. in Economics from the University of North Carolina at Greensboro. Mr. Waldron joined VF in 1995.

Christopher Waldeck will be the Vice President and Global Brand President—Lee of Kontoor Brands. Mr. Waldeck has been VF’s Global Brand President, Lee and Rock & Republic since October 2018. He previously served as President—Lee and Rock & Republic since May 2017. Before joining VF, Mr. Waldeck was with the Adidas Group as Vice President, General Manager, Reebok USA from October 2013 until April 2017, Brand Director, Reebok Korea from May 2010 until October 2013 and Senior Director of Marketing for Equipment, Cleated Footwear from May 2004 until May 2010. He earned a B.S. in Business from Emporia State University. Mr. Waldeck joined VF in 2017.

 

107


Table of Contents

Laurel Krueger will be the Vice President, General Counsel and Corporate Secretary of Kontoor Brands. Ms. Krueger previously served as Executive Vice President, General Counsel and Corporate Secretary of Signet Jewelers Limited from May 2012 until January 2019, a leading global retailer of diamond jewelry. Ms. Krueger previously held a variety of legal leadership roles at publicly traded companies in retail and manufacturing, including Federal-Mogul Corporation, Tecumseh Products Company and Borders Group, Inc. Ms. Krueger earned a bachelor’s degree with high distinction from the University of Michigan-Dearborn. She earned a law degree from the University of Michigan Law School, and a Master of Business Administration with distinction from the University of Michigan-Dearborn School of Management. Ms. Krueger joined VF in 2019.

Board of Directors Following the Separation

The following individuals are expected to serve as members of our Board of Directors following the Separation.

 

Name

   Age     

Position

Robert K. Shearer

     67      Chairman and Director

Scott H. Baxter

     54      Director

Richard T. Carucci

     61      Director

Juliana L. Chugg

     51      Director

Kathleen S. Barclay

     63      Director

Shelley Stewart, Jr.

     65      Director

Set forth below is additional information regarding the directors identified above, as well as a description of the specific skills and qualifications such candidates are expected to provide the Board of Directors of Kontoor Brands.

Robert K. Shearer will serve as the Chairman of the Board of Directors of Kontoor Brands. Mr. Shearer previously served as VF’s Senior Vice President and Chief Financial Officer from May 2005 until he retired in March 2015, Vice President—Finance and Chief Financial Officer from 1998 to 2005, Vice President—Controller from 1994 to 1998, Controller from 1989 to 1994 and Assistant Controller from 1986 to 1989. Before joining VF, Mr. Shearer was a Senior Audit Manager for Ernst & Young. He has served on the boards of directors of YETI Holdings, Inc. since October 2018 and Church & Dwight Co., Inc. since 2008, and previously served on the board of directors of The Fresh Market from May 2015 until April 2016. He earned a B.S. in Accounting from Catawba College and was a Certified Public Accountant from 1975 until 1986. Mr. Shearer’s qualifications for election include his prior service as Chief Financial Officer of VF and his 12 years of experience in public accounting, which enable him to provide important insights on a range of financial and internal control matters, as well as on matters relating to capital structure, information systems, risk management and public reporting.

Scott H. Baxter will serve on the Board of Directors of Kontoor Brands. For Mr. Baxter’s biography, see “—Executive Officers Following the Separation” above. Mr. Baxter’s qualifications for election include his service as President and Chief Executive Officer of Kontoor Brands and his previous service in various leadership roles at VF since 2007.

Richard T. Carucci will serve on the Board of Directors of Kontoor Brands. Mr. Carucci has served on the VF Board of Directors since 2009. He previously served as President of Yum! Brands, Inc. (previously named Tricon Global Restaurants), a company that operates quick service restaurants globally, from 2012 until his retirement in 2014. Mr. Carucci joined Yum! Brands in 1997 and held a series of finance positions, including Chief Financial Officer, prior to being appointed President in 2012. He earned an M.B.A. from the University of California’s Berkeley Haas School of Business and a B.S. in Applied Mathematics-Economics from Brown University. Mr. Carucci’s qualifications for election include his experience as a leader of a large global multi-brand publicly traded company serving retail consumers.

 

108


Table of Contents

Juliana L. Chugg will serve on the Board of Directors of Kontoor Brands. Ms. Chugg has served on the VF Board of Directors since 2009. She previously served as EVP, Chief Brands Officer of Mattel, Inc., a world-wide leader in the design, manufacture and marketing of toys and family products, from September 2015 until April 2018, a Partner of Noble Endeavors LLC from January 2015 until September 2015, a Senior Vice President of General Mills, Inc. from June 2006 to December 2014, President of General Mills, Inc.’s Frozen Frontier Division from May 2013 to December 2014, and had previously held a progression of leadership roles with General Mills and Pillsbury since 1996. Ms. Chugg has also served on the board of directors of Caesars Entertainment Corporation since December 2018 and previously served as a director of H.B. Fuller Company from April 2007 until January 2013. She earned a B.B.A. from the University of South Australia. Ms. Chugg’s qualifications for election include her extensive experience leading major functions and divisions of large publicly traded multi-brand consumer products companies and service on other public company boards of directors.

Kathleen S. Barclay will serve on the Board of Directors of Kontoor Brands. Ms. Barclay previously served as Senior Vice President, Human Resources of The Kroger Co., one of the largest retailers in the world, from December 2009 until October 2015, Vice President, Global Human Resources of General Motors Company, a multinational automotive corporation, from October 1998 until November 2009 and had previously held a progression of leadership roles with General Motors Company since 1985. Ms. Barclay has also served on the board of directors of Five Below, Inc. since March 2015. She earned a MBA from the Massachusetts Institute of Technology and a B.B.A. from Michigan State University. Ms. Barclay’s qualifications for election include her extensive experience in human resource management, retail management and senior leadership experience at large publicly-traded companies and service on other public company boards of directors.

Shelley Stewart, Jr. will serve on the Board of Directors of Kontoor Brands. Mr. Stewart previously served as Chief Procurement Officer at E. I. du Pont de Nemours & Co., which engages in agriculture, materials science, and specialty products businesses, from June 2012 until September 2018, Senior Vice President of Operational Excellence and Chief Procurement Officer at Tyco International plc, which includes electronics, healthcare and fire and security businesses, from August 2005 until June 2012, Vice President of Supply Chain Management of Tyco International plc from June 2003 until August 2005, Senior Vice President of Supply Chain at Invensys PLC, an engineering and information technology company, from May 2001 until June 2003, Vice President of Supply Chain Management at Raytheon Company, a company specializing in defense and other government markets, from July 2000 until June 2001, and had previously held a progression of leadership roles with United Technologies Corporation, a provider of technology products in the building systems and aerospace industries, since 1981. Mr. Stewart has previously served as a director of Cleco Corporation from April 2010 until April 2016. He earned a MBA from the University of New Haven and earned a B.S. and a M.S. from Northeastern University. Mr. Stewart’s qualifications for election include his extensive experience in senior-level supply chain and operational positions with leading industrial companies and service on other public company boards of directors.

Board Structure

Upon completion of the Separation, our Board of Directors is expected to consist of six members.

Upon completion of the Separation, our Board of Directors will initially be classified and will transition to an annually elected board through a gradual phase-out that will take place over the first four years of Kontoor Brands’ existence. Our Board of Directors will initially be divided into three classes, each of roughly equal size. The Directors designated as Class I Directors will have terms expiring at the annual meeting of shareholders in 2020, which will be the first annual meeting of shareholders following the Separation; the Directors designated as Class II Directors will have terms expiring at the annual meeting of shareholders in 2021; the Directors designated as Class III Directors will have terms expiring at the annual meeting of shareholders in 2022. Ms. Chugg and Mr. Stewart will serve as Class I Directors, Mr. Carucci and Ms. Barclay will serve as Class II Directors and Mr. Shearer and Mr. Baxter will serve as Class III Directors. At the annual meetings of shareholders held in 2020, 2021 and 2022, Directors will be elected for a

 

109


Table of Contents

term of office to expire at the annual meeting of shareholders in 2023. Beginning with the 2023 annual meeting, Directors will be elected for a term expiring at the next annual meeting of shareholders. Commencing with the annual meeting of shareholders held in 2024, the classification of the Board will cease. Before the phase-out, this classification of our Board of Directors could have the effect of increasing the length of time necessary to change the composition of a majority of the Board of Directors. In general, prior to 2023, at least two annual meetings of shareholders will be necessary for shareholders to effect a change in a majority of the members of the Board of Directors. This temporary classified Board structure is intended to provide better continuity of leadership during Kontoor Brands’ first years of operation as an independent, publicly held business, versus annually elected Directors. We have not yet set the date of the first annual meeting of shareholders to be held following the Separation.

Board Independence

Upon completion of the Separation, our Board of Directors will consist of six members. Our Board expects to determine that each of Mr. Shearer, Mr. Carucci, Ms. Chugg, Ms. Barclay and Mr. Stewart is independent under NYSE rules. In determining independence, the Board will consider whether each director has a material relationship with Kontoor Brands that would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director. The Board will consider all relevant facts and circumstances including, without limitation, transactions between Kontoor Brands and the director, family members of the director, and organizations with which the director is affiliated. All directors identified as independent will meet the categorical standards adopted by the Board to assist it in making determinations of director independence. A copy of these standards will be posted on our website after the Separation.

Director Compensation

Each of our directors is expected to receive an annual retainer of $245,000, $85,000 of which will be paid in cash quarterly in arrears and $160,000 of which will be provided as an annual equity retainer. The annual equity retainer is expected to be delivered 100% in RSUs. Such RSUs are vested and non-forfeitable at grant, and will be settled in shares of Kontoor Brands Common Stock one year after the date of grant. Such equity awards will be pro-rated in the year of initial election and will vest in the same manner as other awards subject to the annual equity grant. The non-executive Chairman is expected to receive an additional $175,000 cash retainer. The Chairs of the Audit, Talent and Compensation, and Corporate Governance and Nominating Committees will each receive an additional $20,000 cash retainer. Directors will also be entitled to an additional $1,500 for each Board meeting they attend in excess of 10 meetings per year.

Board Committees

Effective upon the completion of the Separation, the Board will have three standing committees which will operate under written charters approved by the full Board: Audit, Talent and Compensation, and Corporate Governance and Nominating. In accordance with current NYSE listing standards, all of the directors who serve on each Committee will be independent from us and our management. The charters of all the Committees will be posted on the our website after the Separation.

Each Committee operates under a written charter that details the scope of authority, composition and procedures of the Committee. The Committees may, when appropriate in their discretion, delegate authority with respect to specific matters to one or more members, provided that all decisions of any such members are presented to the full Committee at its next scheduled meeting. The Committees will report to the Board of Directors regularly, review and reassess the adequacy of their charters at least annually and will conduct an annual evaluation of their performance.

Audit Committee

The members of our Audit Committee will be Mr. Shearer, Mr. Carucci and Mr. Stewart. Mr. Shearer will be the Chair of our Audit Committee. Each member of our Audit Committee meets the requirements for

 

110


Table of Contents

independence under the current NYSE listing standards and SEC rules and regulations and our Director Independence Standards. Each member of our Audit Committee is financially literate. In addition, our Board of Directors expects to determine that each of Mr. Shearer and Mr. Carucci is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose on him any duties, obligations or liabilities that are greater than are generally imposed on members of our Audit Committee and our Board of Directors. The responsibilities of the Audit Committee will be more fully described in our Audit Committee charter and will include, among other duties:

 

   

Selecting the independent registered public accounting firm for us;

 

   

Reviewing the scope of the audit to be conducted by the independent registered public accounting firm;

 

   

Meeting with the independent registered public accounting firm concerning the results of their audit and our selection and disclosure of critical accounting policies;

 

   

Reviewing with management and the independent registered public accounting firm our annual and quarterly statements prior to filing with the SEC;

 

   

Overseeing the scope and adequacy of our system of internal controls over external financial reporting;

 

   

Reviewing the status of compliance with laws, regulations, and internal procedures, contingent liabilities and risks that may be material to us;

 

   

Preparing a report to shareholders annually for inclusion in the proxy statement; and

 

   

Serving as the principal liaison between the Board of Directors and our independent registered public accounting firm.

Talent and Compensation Committee

The members of our Talent and Compensation Committee (the “Kontoor Brands Compensation Committee”) will be Ms. Barclay and Ms. Chugg. Ms. Barclay will be the Chair of the Kontoor Brands Compensation Committee. Each member of the Kontoor Brands Compensation Committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and meets the requirements for independence under the current NYSE listing standards and SEC rules and regulations and our Director Independence Standards. The responsibilities of the Kontoor Brands Compensation Committee will be more fully described in the Kontoor Brands Compensation Committee Charter and will include, among other duties:

 

   

Reviewing and approving our goals and objectives relative to the compensation of the Chief Executive Officer, evaluating him in light of these goals and objectives, and setting his compensation level based on this evaluation;

 

   

Annually reviewing the performance evaluations of our other executive officers;

 

   

Annually recommending to the Board of Directors the salary of each of our named executive officers and reviewing management’s recommendations regarding the salaries of other senior officers;

 

   

Making recommendations to the Board of Directors with respect to incentive compensation-based plans and equity-based plans;

 

   

Periodically reviewing all of our compensation and benefit plans insofar as they relate to key employees to confirm that such plans remain equitable and competitive;

 

   

Administering and interpreting our Kontoor Brands Stock Plan, Kontoor Brands MIC Plan, and Kontoor Brands MTIP (each as defined below), in accordance with the terms of each plan;

 

   

Preparing a report to shareholders annually for inclusion in the proxy statement;

 

   

Reviewing our Compensation Discussion and Analysis in the proxy statement and discussing with management;

 

111


Table of Contents
   

Periodically reviewing the competitiveness and appropriateness of the compensation program for non-employee directors and recommending to the Board of Directors compensation to be paid to non-employee directors; and

 

   

Reviewing and recommending to the Board of Directors our submissions to shareholders on executive compensation matters.

Corporate Governance and Nominating Committee

The members of our Corporate Governance and Nominating Committee will be Ms. Chugg, Mr. Carucci, Ms. Barclay and Mr. Stewart. Ms. Chugg will be the Chair of our Corporate Governance and Nominating Committee. Each member of the Corporate Governance and Nominating Committee meets the requirements for independence under the current NYSE listing standards and our Director Independence Standards. The responsibilities of the Corporate Governance and Nominating Committee will be more fully described in our Corporate Governance and Nominating Committee Charter and will include, among other duties:

 

   

Recommending to the Board of Directors criteria for Board of Directors membership, screening potential candidates for director and recommending candidates to the Board of Directors;

 

   

Recommending to the Board of Directors a succession plan for the Chief Executive Officer; and

 

   

Reviewing developments in corporate governance and making recommendations to the Board on governance policies and principles for us.

Code of Ethics

In connection with the Separation, our Board of Directors will adopt one or more codes of ethics that will apply to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. Upon completion of the Separation, the full text of our codes of business conduct and ethics will be posted on the investor relations section of our website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by disclosing future amendments to our codes of business conduct and ethics, or any waivers of such codes, on our website or in public filings.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has served as a member of a compensation committee (or if no committee performs that function, the Board of Directors) of any other entity that has an executive officer serving as a member of our Board of Directors.

 

112


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Overview

This section presents information concerning VF’s existing compensation arrangements, the expected compensation arrangements for the named executive officers of Kontoor Brands and explains Kontoor Brands’ anticipated executive compensation arrangements, compensation philosophy and objectives, the components of executive compensation, and executive stock ownership. The focus of the analysis is on Kontoor Brands’ named executive officers listed in the Summary Compensation Table (the “NEOs”):

 

Name

  

Title

Scott H. Baxter

   President and Chief Executive Officer

Rustin Welton

   Vice President and Chief Financial Officer

Thomas E. Waldron

   Vice President and Global Brand President—Wrangler

Christopher Waldeck

   Vice President and Global Brand President—Lee

As set forth below, Messrs. Baxter, Welton, Waldron and Waldeck were previously employees of VF prior to the Separation. Thus, the historical information provided in this CD&A reflects the VF compensation policies applicable to our NEOs. This historical information is provided to give context to our new pay practices at Kontoor Brands, which are based on VF’s historical pay practices. Kontoor Brands’ pay practices are being developed and revised to fit with the pay philosophy of Kontoor Brands, which will be substantially similar to VF’s philosophy. Upon completion of the Separation, Kontoor Brands’ Board of Directors will establish a Talent and Compensation Committee (the “Kontoor Brands Compensation Committee”) which will review the impact of the Separation from VF and all aspects of compensation and make any adjustments that it believes are appropriate in structuring executive compensation arrangements. With respect to future compensation from Kontoor Brands we have presented information below under “—Components of Total Direct Compensation” concerning anticipated compensation for each of the NEOs. Each of our NEOs holds various long-term equity based incentive awards that were granted by VF. Treatment of these awards in the Separation is described under “Treatment of Outstanding Equity Compensation Awards held by NEOs.” As noted in “Note Regarding the Use of Certain Terms”, references to 2018 generally refer to the period ended December 29, 2018. As used in the CD&A and the related compensation tables, references to decisions and awards with respect to 2018 also include VF’s 2019 Fiscal Year ending March 30, 2019 (“VF’s Fiscal Year 2019”), except as otherwise specifically indicated.

Executive Summary

Compensation Philosophy—VF’s Executive Compensation Program (the “VF Program”) is designed to:

 

   

Enable VF to attract and retain talented executives;

 

   

Align its executives’ interests with those of shareholders by paying for performance; and

 

   

Provide a high percentage of its executives’ total direct compensation in pay at risk and long-term equity-based compensation to reward performance over the short- and long-term and align the compensation of our executives with shareholder returns.

Going forward: We share our compensation philosophy with VF. We intend to design the Kontoor Brands Executive Compensation Program (the “Kontoor Brands Program”) to be substantially similar to the VF Program’s design after the Separation.

Balance of Base Salary and At-Risk Pay for Performance Components—VF’s philosophy is that a significant portion of each executive’s total direct compensation should be at-risk, meaning subject to fluctuation based on VF’s financial performance and stock price performance. The at-risk components of total compensation targets are annual cash incentives and long-term equity compensation. The at-risk portion of target total compensation is progressively greater for higher-level positions.

Going forward: We intend to adopt VF’s philosophy and allocate a significant portion of each executive’s total direct compensation to at-risk components.

 

113


Table of Contents

Governance Practices—VF’s executive compensation practices support good governance and mitigate excessive risk-taking. Below we highlight key compensation practices that VF has implemented in the VF Program to promote the interests of shareholders and ensure responsible compensation and governance practices:

 

WHAT VF DOES

  Annual “say-on-pay” advisory vote for shareholders      Pay-for-performance emphasis with a balance of short- and long-term incentives, using an array of key performance metrics
  Alignment of executive compensation with shareholder returns through equity ownership and equity-based awards      Significant stock ownership guidelines for executives
  Long-term incentive compensation tied to VF’s total shareholder return (“TSR”) relative to TSR of S&P 500 companies      Clawback provisions for cash and equity performance-based compensation
  “Double trigger” required for severance under change-in-control agreements and for accelerated vesting of equity awards      Compensation consultant to the Committee will be independent and free of conflicts

 

WHAT VF DOES NOT DO

û   No excise tax gross-up payments under new or materially enhanced change-in-control agreements   û    No back dating or re-pricing of stock options and stock appreciation rights
û   No hedging or pledging of VF common stock   û    No employment agreements for U.S.-based executive officers

Going forward: We believe that VF’s governance practices support good governance and mitigate excessive risk-taking. We expect to adopt similar good governance practices, but, as a new, smaller company, Kontoor Brands will review its long-term compensation practices to determine what metrics are most appropriate going forward.

Compensation Program

Compensation Philosophy and Objectives

VF’s fundamental philosophy is to pay for performance, through the alignment of its executives’ pay to the achievement of overall short- and long-term business strategies of VF. The VF Program has incorporated the following objectives:

 

   

Motivate executives to accomplish VF’s short-term and long-term business objectives;

 

   

Provide annual incentives to executives based on corporate, business group and individual performance;

 

   

Provide executives with long-term equity-based compensation that aligns the interests of shareholders and executives; and

 

   

Offer total compensation that is competitive with other large U.S.-based companies with which VF may compete for executive talent.

The VF Program had been designed to balance fixed and performance-based compensation components, and incentivize responsible achievement of multiple operating goals over one- and three-year periods. For the purpose of valuing total direct compensation, the performance-based elements are valued at their grant date at target levels. Such awards also provide for above- and below-target payout levels and thereby directly motivate executives to achieve VF’s business goals, reward them for achieving and exceeding these goals and reduce compensation below target levels if goals are not achieved.

 

114


Table of Contents

Going forward: We expect that the Kontoor Brands Program will be designed with the same philosophies and objectives.

Compensation Decision-Making Process—Roles and Responsibilities

Talent and Compensation Committee

The VF Talent and Compensation Committee (the “VF Compensation Committee”), which is composed entirely of independent directors, reviews all components of the VF Program annually to confirm that they are necessary and appropriate to promote VF’s strategic objectives, while considering the competitive marketplace for executive talent.

Going forward: The Kontoor Brands Compensation Committee will be composed entirely of independent directors and will review all components of the Kontoor Brands Program annually to confirm that they are necessary and appropriate to promote Kontoor Brands’ strategic objectives while considering the competitive marketplace for executive talent.

Independent Committee Consultant

The VF Compensation Committee has historically retained Frederic W. Cook & Co. Inc. (“FW Cook”) as its independent compensation consultant.

Going forward: Once we are a separate public company, the Kontoor Brands Compensation Committee will determine whether to continue to engage FW Cook or another compensation consultant and will consider the six-factor test prescribed under the NYSE rules at such time.

Competitive Compensation Targets and the Role of the Industry Group

In 2018, FW Cook and VF management each independently utilized data from the Willis Towers Watson (“Towers”) executive compensation database, which includes executive compensation data for over 700 U.S.-based companies (the “Comparison Data”), to assist in establishing compensation targets for 2018.

 

   

The Comparison Data was provided by Towers on an aggregated basis: it reported actual salary levels and target levels of performance-based compensation and was adjusted to April 2018 using a 3% annual update factor.

 

   

Towers used regression analysis to size-adjust the compensation data due to significant variance in size among the companies compared to VF’s approximate annual revenue range.

 

   

Neither the VF Compensation Committee nor management receives or uses information on any subset of the Towers database and the VF Compensation Committee and management are not aware of the identities of the individual companies in the database.

 

   

FW Cook utilized that data to recommend compensation targets for VF’s Chairman and Chief Executive Officer, and the Chairman and Chief Executive Officer utilized the data to recommend compensation targets for the other NEOs.

VF Industry Group Fiscal Year 2019

In addition, the VF Compensation Committee has historically utilized an Industry Group to evaluate whether executive officer pay levels are reasonable on a relative basis. The VF Compensation Committee primarily identified companies that are of comparable size (based on revenue and market capitalization), and meet a majority of several criteria, such as:

 

   

Having significant non-U.S. (greater than 30%) revenue;

 

   

Having similar products and/or customers;

 

115


Table of Contents
   

Having a significant number of brands (at least 10, excluding licensed brands to the extent possible);

 

   

Considers VF as a compensation peer;

 

   

Is a peer of peers being listed as a compensation peer in at least four other current peer companies; and

 

   

Is a 2018 peer company identified by Institutional Shareholder Services (ISS), a leading independent proxy advisory firm.

The Industry Group falls into the following business types:

 

 

LOGO

The VF Compensation Committee has historically set target total direct compensation (base salary, target annual cash incentive awards and target annual long-term equity incentive award values) for senior executives generally between the 50th and 75th percentile of the Comparison Data (subject to the fluctuation of foreign exchange rates for executives paid in currency other than the U.S. dollar). The VF Compensation Committee has historically considered the scope of the executive’s duties, the executive’s experience in his or her role and individual performance relative to his or her peers to establish the appropriate point within that range of percentiles, or outside the range under circumstances that justify a deviation.

The VF Compensation Committee has historically targeted total direct compensation for each VF executive officer to be competitive with compensation paid to executives in comparable positions according to the Comparison Data based on targeted performance goals established by the VF Compensation Committee. Thus, the VF Compensation Committee balanced the elements of total direct compensation—salary, annual cash incentives and long-term equity incentives—in this process. Benefits have been set at levels intended to be competitive but are not included in the VF Compensation Committee’s evaluation of total direct compensation.

The components of the target total direct compensation opportunity set by the VF Compensation Committee annually for each executive are short-term cash compensation (annual base salary and target annual cash incentive award) and long-term equity incentive compensation (which have been composed of stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) under VF’s Mid-Term Incentive Plan). The VF Compensation Committee has historically generally allocated between total cash compensation and equity compensation in a way intended to be competitive with the Comparison Data and the Industry Group. The VF Compensation Committee also considered historical compensation levels, relative compensation levels among VF’s senior executives, and VF’s corporate performance as compared to the performance of companies in VF’s Industry Group.

 

116


Table of Contents

Going forward: Once we are a separate public company, we expect that our management and FW Cook (or such other compensation consultant as the Kontoor Brands Compensation Committee may select) will each independently utilize the same data from the Towers executive compensation database to assist in establishing compensation targets in the future.

Kontoor Brands Industry Group 2019

The Kontoor Brands Compensation Committee anticipates utilizing an Industry Group to evaluate whether executive officer pay levels are reasonable on a relative basis considering the following criteria:

 

   

having strong brand(s) that are respected and well-known;

 

   

having similar products and/or customers;

 

   

having significant wholesale and domestic/U.S. sales; and

 

   

having manufacturing operations.

The VF Compensation Committee, on a preliminary basis, has determined that the Industry Group may fall into the following business types:

 

 

LOGO

We expect that the Kontoor Brands Compensation Committee will set target total direct compensation (base salary, target annual cash incentive awards and target annual long-term equity incentive award values) for senior executives generally between the 50th and 75th percentile of the Comparison Data, and will consider the scope of the executive’s duties, the executive’s experience in his or her role and individual performance relative to his or her peers to establish the appropriate point within that range of percentiles, or outside the range under circumstances that justify a deviation.

For 2019, the target total direct compensation is expected to be set at the 50th percentile range for the President and CEO, and between the 25th and 50th percentile for the remaining NEOs who are new to their roles. In general, we believe that we should set total direct compensation targets for our senior executives within the 50th to 75th percentile range to appropriately motivate and reward strong performance and retain top talent at a reasonable cost to Kontoor Brands as indicated by the available data. We intend to target total direct compensation for each Kontoor Brands executive officer to be competitive with compensation paid to executives in comparable positions according to the Comparison Data based on targeted performance goals established by the Kontoor Brands Compensation Committee. Thus, the Kontoor Brands Compensation Committee will balance the elements of total direct compensation—salary, annual cash incentives and long-term equity incentives—in this process. Benefits are expected to be set at levels intended to be competitive but are not included in the Kontoor Brands Compensation Committee’s evaluation of total direct compensation. The Kontoor Brands

 

117


Table of Contents

Compensation Committee may also provide retention awards, but these are not considered in Kontoor Brands’ total direct compensation for purposes of setting target levels of NEO compensation.

The components of the target total direct compensation opportunity set by the Kontoor Brands Compensation Committee annually for each executive will be short-term cash compensation (annual base salary and target annual cash incentive award) and long-term equity incentive compensation (which may be composed of stock options, RSUs and PSUs under a newly established Kontoor Brands plan). We intend to allocate between total cash compensation and equity compensation in a way intended to be competitive with the Comparison Data and the Industry Group. The Kontoor Brands Compensation Committee will also consider historical compensation levels and relative compensation levels among Kontoor Brands’ senior executives. After the spinoff, the Kontoor Brands Compensation Committee will also consider Kontoor Brands’ corporate performance as compared to the performance of companies in Kontoor Brands’ Industry Group.

Expected Components of Total Direct Compensation

Base Salary

Base salary is designed to compensate executives for their level of responsibility, skills, experience and sustained individual contribution. Base salary is intended to be competitive as compared to salary levels for equivalent executive positions at companies in the Comparison Data and the Industry Group. The VF Compensation Committee believes that a competitive base salary provides the foundation for the total compensation package required to attract, retain and motivate executives in alignment with VF’s business strategies.

Target salary ranges and individual salaries for the NEOs are reviewed by the VF Compensation Committee annually, as well as at the time of a promotion or other change in responsibilities. Each NEO is evaluated annually based on several components: key job responsibilities, key accomplishments and annual goals and objectives. The resulting performance evaluations are presented to the VF Compensation Committee to be used in assessing each component of total compensation for each NEO.

Annual base salary increases for each NEO have been based on (i) an assessment of the individual’s performance, (ii) the competitive market salary range for the individual’s position, and (iii) VF’s overall merit increase budget for salaries. In addition, the VF Compensation Committee has historically considered substantial increases in an executive’s responsibilities in setting base salary increases. Base salaries of the NEOs are approved by the VF Compensation Committee members and all other independent members of the Board of Directors.

Going forward: We intend to continue VF’s base salary design. As of the Separation, we anticipate we will increase the annual base salaries for our NEOs based on (i) an assessment of the individual’s performance, (ii) the competitive market salary range for the individual’s position, and (iii) consideration for substantial increases in an executive’s responsibilities.

Annual Cash Incentives

VF has historically maintained cash incentive plans for its executives, including the VF Management Incentive Compensation Plan (“VF MIC Plan”). The VF MIC Plan focuses executive attention on annual VF performance as measured by pre-established goals. The incentives are designed to motivate VF’s executives by providing payments for achieving and exceeding goals related to VF’s annual business plan.

Under the VF MIC Plan, performance goals are set each year by the VF Compensation Committee. The VF Compensation Committee used the competitive external Comparison Data to assist it in establishing targeted dollar amounts to award each executive under the VF MIC Plan. The VF Compensation Committee established

 

118


Table of Contents

each NEO’s targeted annual incentive opportunity under the VF MIC Plan after consideration of compensation data and the recommendations of the Chairman and Chief Executive Officer and FW Cook. The VF Compensation Committee also makes a general assessment as to the relative amounts of annual incentives for the NEOs to make sure they are, in the VF Compensation Committee’s judgment, fair and reasonable.

Going forward: We intend to adopt the Kontoor Brands Management Incentive Compensation Plan (“Kontoor Brands MIC Plan”), an annual cash compensation plan similar to the VF MIC Plan. The Kontoor Brands Compensation Committee, in consultation with our President and Chief Executive Officer and FW Cook (or such other compensation consultant as the Kontoor Brands Compensation Committee may select), will review performance metrics appropriate for Kontoor Brands considering our different goals.

Discretionary Bonuses

VF has the discretion to award additional discretionary cash bonuses to its executives. In 2018, VF awarded Mr. Welton a discretionary bonus in the amount of $50,000 in recognition of his extraordinary efforts in connection with VF’s acquisition of Williamson-Dickie Mfg. Co. and a discretionary bonus to Mr. Waldron in the amount of $25,000 in recognition of his continued outstanding performance on behalf of VF. Mr. Waldeck received a sign-on bonus in the amount of $110,000 in connection with the commencement of his employment with VF.

Going forward: Kontoor Brands will continue to retain discretion to offer sign-on and other discretionary bonuses to its executives.

Equity-based Compensation

Performance-Based Restricted Stock Units (“PSUs”)

Under VF’s Mid-Term Incentive Plan (“VF MTIP”), executives are awarded PSUs that give them the opportunity to earn shares of VF common stock for performance achieved over three-year cycles. PSUs provide long-term incentive compensation for executives with the objectives of providing a focus on long-term value and increasing stock ownership. PSUs are designed to align the interests of VF’s executives with those of shareholders by encouraging the executives to enhance the value of VF common stock. In addition, through three-year performance periods, this component of the VF Program is designed to create an incentive for individual executives to remain with VF. VF MTIP awards are forfeitable upon an executive’s termination of employment, except for the following:

(i)    a pro rata portion of the award will be deemed earned in the event of death or disability;

(ii)    awards continue to accrue in full to the benefit of individuals who retire, provided that the individual was employed by VF for the first fiscal year of the cycle;

(iii)    a pro rata portion of the award will be deemed earned in the event of a termination of the executive’s employment by VF without cause prior to a change in control, with pro-ration based on the part of the performance period in which the executive remained employed plus any period during which severance payments will be made, provided the individual was an active participant for the first fiscal year of the cycle; and

(iv)    the full award at the higher of target performance or actual performance achieved through the date of termination will be deemed earned in the event of a termination by VF without cause or by the executive for good reason after a change in control of VF.

Dividend equivalents are paid on the shares actually paid out under the VF MTIP (no dividend equivalents are paid on any portion of the VF MTIP award not earned); at the payout date, the cash value of dividend equivalents is converted into additional shares.

 

119


Table of Contents

Stock Options

Stock options awarded under VF’s 1996 Stock Compensation Plan (the “VF Stock Plan”) are intended to align executives’ and shareholders’ interests and focus executives on attainment of VF’s long-term goals. Stock options provide executives with the opportunity to acquire an equity interest in VF and to share in the appreciation of the value of the stock. They also provide a long-term incentive for the executive to remain with VF and promote shareholder returns. The VF Compensation Committee determines a value of options awarded to NEOs as a component of the target total direct compensation.

Non-qualified stock options have a term of not greater than ten years and become exercisable not less than one year after the date of grant. Options are exercisable only so long as the option holder remains an employee of VF or its subsidiaries, except that, subject to earlier expiration of the option term, and to the specific terms and definitions contained in the VF Stock Plan, options generally remain exercisable for the period severance payments are made (if any) in the case of involuntary termination of employment, and for 36 months after death, retirement or termination of employment due to disability, provided that such continued vesting after retirement requires that the employee was employed by VF on last day of the fiscal year for which the option was granted.

Restricted Stock Units (“RSUs”)

RSUs awarded under the VF MTIP will consist of awards of the right to receive stock as determined by the VF Compensation Committee at the end of a specified restricted period. The VF Compensation Committee may award dividend equivalents relating to RSUs on terms and conditions as it determines; provided that such dividend equivalents may not be paid before the underlying restricted units vest.

Retention and Special Awards

Retention awards of restricted stock or RSUs are made by the VF Compensation Committee from time to time to attract or retain key executives and are designed to reward long-term employment with VF. Awards of restricted stock or RSUs for retention purposes under the VF Stock Plan are not part of regular annual compensation and are not treated as part of total direct compensation as discussed above.

Going forward: We intend to adopt the Kontoor Brands 2019 Stock Compensation Plan (the “Kontoor Brands Stock Plan”) and the Kontoor Brands Mid-Term Incentive Plan (“Kontoor Brands MTIP”), long-term equity incentive plans similar to the VF Stock Plan and the VF MTIP under which we expect to grant all equity incentive awards (which may include PSUs, RSUs, stock options, retention and other special awards) to our senior executives and other employees. The Kontoor Brands Compensation Committee, in consultation with our President and Chief Executive Officer and FW Cook (or such other compensation consultant as the Kontoor Brands Compensation Committee may select), will review performance metrics, vesting and other terms and conditions as it determines are appropriate for Kontoor Brands considering our business goals and objectives.

Policy for the Recovery of Awards or Payments in the Event of Financial Restatement

The VF Board of Directors (the “VF Board”) has adopted a policy for the recovery of cash and equity performance-based compensation from executives (these are generally referred to as “recoupment” or “clawback” policies). The policy provides that the VF Board may require an executive to forfeit a performance-based award or repay performance-based compensation if VF is required to prepare an accounting restatement as a result of misconduct, if such executive knowingly caused or failed to prevent such misconduct. The award agreements for stock options and RSUs under the VF Stock Plan include provisions respecting such recovery, as does the VF MIC Plan.

Going forward: We intend to adopt a clawback policy similar to VF’s policy.

 

120


Table of Contents

Policy Regarding Hedging or Pledging of VF Common Stock

The VF Board has adopted a policy prohibiting VF’s directors, executive officers named in its proxy statement and certain other executives from engaging in transactions in derivative securities (including puts, calls, collars, forward contracts, equity swaps, exchange funds and the like) relating to VF securities, transactions “hedging” the risk of ownership of VF securities and short sales of VF securities. In addition, VF’s directors, NEOs and certain other executives are prohibited from holding VF securities in margin accounts or pledging VF securities as collateral for loans.

Going forward: We intend to adopt a policy prohibiting the hedging or pledging of Kontoor Brands securities similar to VF’s policy.

Treatment of Outstanding Equity Compensation Awards held by NEOs

We expect that in connection with the Separation, outstanding VF equity compensation awards held by the NEOs will be equitably adjusted pursuant to the terms of the applicable compensation award and plan and the provisions of the Code. These equitable adjustments are intended to preserve each award’s intrinsic value, based on the relative fair market values of the pre- and post-Separation shares of VF, and, as applicable, Kontoor Brands, such that in the case of PSUs and RSUs, the fair market value of the adjusted number of shares subject to the award (or to which the award relates) immediately after the Separation will be substantially equivalent to, but no more favorable to the award holder than, the fair market value of the shares subject to that award (or to which that award relates) immediately prior to the Separation. For outstanding stock options, the number of shares subject to the award and the applicable exercise or base price will be adjusted so that the aggregate spread value of the stock option immediately after the Separation will be substantially equivalent to, but no more favorable to the award holder than, the aggregate spread immediately prior to the Separation. For these purposes, spread value will be the difference between the market value of the underlying shares as of the applicable date, and the exercise or base price of the option or stock appreciation right.

None of our NEOs meets the definition of Retirement Eligible as of the Distribution. Therefore, the treatment of outstanding options for our NEOs will be based on the same treatment of options as for all other non-retirement eligible Kontoor Brands Service Providers.

Stock Options

Each VF stock option held by our NEOs that is outstanding immediately before the Distribution will be converted into an option to acquire Kontoor Brands common stock and will be subject to the same terms and conditions (including vesting and expiration schedules) as applicable to the corresponding VF stock option as of immediately prior to the Distribution. The number of shares of Kontoor Brands common stock subject to, and the exercise price per share of, such Kontoor Brands stock option will be determined by the VF Compensation Committee in a manner consistent with Section 409A and intended to preserve the value of the VF stock option by taking into account (a) the exercise price per share of the VF stock option and (b) the relative values of the VF pre- and post-Distribution stock value and the Kontoor Brands stock value.

Performance-Based Restricted Stock Units (“PSUs”)

2016 PSUs. All VF PSU awards held by our NEOs that were granted in 2016 and are outstanding immediately before the Distribution are expected to be settled in shares of VF’s common stock subject to the same terms and conditions as set forth in the participant’s award agreement. The shares of VF’s common stock will be adjusted, with the number of shares of VF common stock subject to such VF PSU award being determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. The VF Compensation Committee intends to review and certify the performance metrics following the Distribution.

 

121


Table of Contents

2017 PSUs. A pro rata portion (based on the portion of the performance period that has elapsed as of the Distribution) of each NEO’s VF PSU award that was granted in 2017 and is outstanding immediately before the Distribution will remain a VF PSU award, and will remain eligible to be earned based on VF’s actual performance. The number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution. The remaining portion of the VF PSU award, based on the target number of shares, granted in 2017 and outstanding immediately before the Distribution will be converted into Kontoor Brands time-vesting RSUs, vesting as of December 31, 2019. The number of shares of Kontoor Brands common stock subject to the Kontoor Brands RSUs will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock value.

Fiscal Year 2019 PSUs. A pro rata portion (based on the portion of the performance period that has elapsed as of the Distribution) of each NEO’s VF PSU award that was granted in 2018 and is outstanding immediately before the Distribution will remain a VF PSU award, and will remain eligible to be earned based on VF’s actual performance. The number of shares of VF common stock subject to such VF PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value and the VF post-Distribution stock value. Each VF-adjusted PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution. The remaining portion of the VF PSU award granted in 2018 and outstanding immediately before the Distribution will be converted into a Kontoor Brands PSU award. The number of shares of Kontoor Brands common stock subject to the Kontoor Brands PSU award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF PSU award by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock value. Each Kontoor Brands PSU award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF PSU award as of immediately before the Distribution; however, each Kontoor Brands PSU award will be subject to new performance-based vesting conditions as determined by Kontoor Brands on or after the Distribution reflecting Kontoor Brands’ applicable performance metrics.

Restricted Stock Units

Each VF RSU held by our NEOs that is outstanding immediately before the Distribution will be converted into a new RSU with respect to Kontoor Brands common stock. The number of shares of Kontoor Brands common stock subject to such Kontoor Brands RSU will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF RSU, as applicable, by taking into account the relative values of the VF pre- and post-Distribution stock value and the Kontoor Brands stock value. Each RSU in Kontoor Brands will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the previously held VF RSUs immediately before the Distribution.

Retention and Special Awards

All shares and units designated as a VF special award held by our NEOs that is outstanding immediately before the Distribution will be converted into units and shares with respect to Kontoor Brands common stock. The number of shares of Kontoor Brands common stock subject to such VF special award will be determined by the VF Compensation Committee in a manner intended to preserve the value of the VF special award, as applicable, by taking into account the relative values of the VF pre-Distribution stock value, the VF post-Distribution stock value and the Kontoor Brands stock value. Each such Kontoor Brands special award will be subject to the same terms and conditions (including vesting and payment schedules) as applicable to the corresponding VF special award as of immediately before the Distribution.

 

122


Table of Contents

Retirement and Other Benefits

The VF Compensation Committee believes that retirement and other benefits are important components of competitive compensation packages necessary to attract and retain qualified senior executives. The VF Compensation Committee has historically reviewed the amounts of the benefits annually along with other compensation components. However, the benefits do not affect the decisions the VF Compensation Committee makes regarding other compensation components, which are generally structured to achieve VF’s short-term and long-term financial objectives.

Going forward: We intend to adopt retirement plans and other benefits substantially similar to VF’s plans and benefits except as described below.

Pension Benefits

VF sponsors and maintains the VF Pension Plan (the “VF Pension Plan”), a tax-qualified defined benefit plan that covers most of VF’s U.S.-based employees who were employed by VF on or before December 31, 2004. The purpose of the VF Pension Plan is to provide retirement benefits for those employees who qualify for such benefits under the provisions of the VF Pension Plan. The VF Pension Plan was closed to new participants at the end of 2004. Effective December 31, 2018, the VF Pension Plan ceased to recognize any future service performance and any eligible compensation paid for purposes of calculating participant accrued benefits under the VF Pension Plan. As of December 31, 2018, Thomas Waldron was the only one of our NEOs who participated in the VF Pension Plan, and none of our other NEOs have ever participated in the VF Pension Plan.

Going forward: As part of the Separation, VF retained the assets and liabilities associated with the VF Pension Plan; we do not share any of the assets or liabilities of the VF Pension Plan. We do not intend to adopt a defined benefit pension plan. None of our NEOs will continue to participate in the VF Pension Plan with respect to their service to us following the Distribution.

Supplemental Executive Retirement Plan

VF’s Supplemental Executive Retirement Plan (the “VF SERP”) is an unfunded, nonqualified plan for eligible participants primarily designed to restore benefits lost under the Pension Plan due to the maximum legal limit of pension benefits imposed under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Code. The VF SERP was closed to new participants at the end of 2004. Effective December 31, 2018, the VF SERP ceased to recognize any future service performance and any eligible compensation paid for purposes of calculating participant accrued benefits under the VF SERP. As of December 31, 2018, Thomas Waldron was the only one of our NEOs who participated in the VF SERP, and none of our other NEOs have ever participated in the VF SERP.

Going forward: We do not intend to adopt a defined benefit pension plan. Similarly, we do not intend to adopt a Supplemental Executive Retirement Plan to provide eligible participants with the ability to restore benefits lost under any applicable maximum legal limit of a defined benefit pension plan.

401k Plan

VF’s U.S.-based executives were permitted to participate in the VF Retirement Savings Plan (the “VF 401k Plan”). The VF 401k Plan is a broad-based tax-qualified defined contribution plan available to most of VF’s U.S.-based employees.

Going forward: We intend to establish the Kontoor Brands Retirement Savings Plan (the “Kontoor Brands 401k Plan”), a defined contribution plan, providing substantially similar benefits to the VF 401k Plan.

 

123


Table of Contents

Nonqualified Deferred Compensation

VF’s U.S.-based senior executives are permitted to defer compensation and receive a limited amount of matching credits under the VF Executive Deferred Savings Plan. This plan enables executives to save for retirement on a tax-deferred basis.

Going forward: We intend to offer our U.S.-based senior executives, including our NEOs, the opportunity to defer compensation and receive a limited amount of matching credits under the Kontoor Brands Executive Deferred Savings Plan. Nonqualified deferred compensation is discussed in further detail under “—Nonqualified Deferred Compensation.”

Employee Benefits

VF provides a number of benefit plans to all eligible employees, including its senior executives. These benefits include programs such as medical, dental, life insurance and short- and long-term disability coverage and a merchandise discount on most VF products. The NEOs are also eligible for financial counseling and an annual executive physical.

Going forward: We intend to implement substantially similar employee benefit plans, including medical, dental, life insurance and short- and long-term disability. We will continue to review available employee benefits to determine whether additional employee benefits or perquisites would be in the best interests of Kontoor Brands and its employees.

Change-in-Control Agreements

VF has entered into Change-in-Control Agreements (the “VF Agreements”) with certain VF senior executives, including Scott Baxter, but not any of our other NEOs, that would have provided the executives with certain severance benefits in the event their employment with VF had been terminated by VF or by the executive for good reason, as defined in the VF Agreements, subsequent to a change in control of VF. The VF Agreements are described and quantified below under “—Potential Payments Upon a Change in Control, Retirement or Termination of Employment.”

Under the terms of the VF Agreements, the executives would also be entitled to supplemental benefits, such as accelerated rights to exercise stock options, accelerated lapse of restrictions on restricted stock and RSUs, lump sum payments under the VF SERP, and continued life and medical insurance for specified periods after termination. Upon a change in control of VF, VF also will pay all reasonable legal fees and related expenses incurred by the executive as a result of the termination of his or her employment or in obtaining or enforcing any right or benefit provided by the VF Agreements.

Going forward: We intend to enter into change-in-control agreements with each of our NEOs and certain other Kontoor Brands senior executives that we expect will provide substantially similar benefits to the VF Agreements in connection with a change in control of Kontoor Brands.

Payments Upon Separation

None of the NEOs have contractual rights to receive separation payments if they terminate their employment or are terminated with or without cause prior to a change in control of Kontoor Brands.

Going forward: We do not intend to enter into any contracts providing our senior executives with separation payments not in connection with a change-in-control.

 

124


Table of Contents

2018 Summary Compensation Table

 

Name and Principal Position

  Year (5)     Salary ($)     Bonus ($) (6)     Stock
Awards ($) (7)
    Option
Awards ($) (8)
    Non-Equity
Incentive

Plan
Compensation
($) (9)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($) (10)
    All Other
Compensation
($) (11)
    Total ($)  

Scott H. Baxter

    2018       743,270       -0-       1,182,849       753,608       1,073,519       -0-       296,793       4,050,039  

President and Chief

Executive Officer (1)

                 

Rustin Welton

    2018       370,379       50,000       149,968       95,461       281,010       -0-       36,261       983,079  

Vice President and Chief Financial Officer (2)

                 

Thomas E. Waldron

    2018       417,999       25,000       276,032       175,842       243,600       1,026,013       38,511       2,202,997  

Vice President and Global Brand President—

Wrangler (3)

                 

Christopher Waldeck

    2018       395,551       110,000       209,030       133,151       114,000       -0-       94,911       1,056,643  

Vice President and

Global Brand President—

Lee (4)

                 

 

1 

Scott H. Baxter serves as VF’s Group President of Jeanswear. VF announced Mr. Baxter would assume the role of Chief Executive Officer in its Form 8-K filed on August 13, 2018.

2 

Rustin Welton serves as VF’s Vice President and Chief Financial Officer—Americas East. VF announced Mr. Welton would assume the role of Chief Financial Officer in its Form 8-K filed on August 13, 2018.

3 

Thomas E. Waldron serves as VF’s Global Brand President—Wrangler. He will serve as Vice President and Global Brand President—Wrangler with Kontoor Brands.

4 

Christopher Waldeck serves as VF’s Global Brand President—Lee and Rock & Republic. He will serve as Vice President and Global Brand President—Lee with Kontoor Brands.

5 

As discussed in the Compensation Discussion & Analysis on page 112, Kontoor Brands will adopt a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. Values provided in this table include amounts paid from December 31, 2017 through March 31, 2018 (the “Stub Period”) and for VF’s Fiscal Year 2019 Q1-Q3 (April 1, 2018 through December 29, 2018).

6 

Values in this column represent discretionary and/or sign-on bonuses provided in 2018 to Messrs. Welton, Waldron and Waldeck, as discussed in the Compensation Discussion & Analysis on page 118.

7

The amounts shown for the PSUs in this column include the aggregate grant date fair value of the PSU awards computed in accordance with FASB ASC Topic 718. The valuation assumptions used are summarized in Note 13 to our audited combined financial statements. Awards of PSUs for the three-year performance period from April 1, 2018 through April 3, 2021, as well as the performance period from December 31, 2017 through March 31, 2018, were made to the named executive officers in 2018, under the VF MTIP described in footnote 3 to the Grants of Plan-Based Awards Table. The grant date fair value of PSUs is the sum of two separate valuations, the larger portion being the target payout based on the probable outcome of financial performance goals and the remaining portion being the fair value of the award based on relative total shareholder return. To calculate this, we (i) multiply the average of the high and the low price of VF Common Stock on the date of the award by the target number of PSUs to determine the portion of fair value based on financial performance goals, and (ii) use a Monte Carlo simulated fair value to determine the portion of fair value based on relative total shareholder return (for the awards granted in 2018, this amount was $4.61 per PSU at target). Assuming achievement of the financial performance goals at the maximum level, the grant date fair value of the PSU awards would have been as follows: Mr. Baxter, $1,546,264; Mr. Welton, $196,001; Mr. Waldron, $360,851; and Mr. Waldeck, $273,261 (these amounts include the relative total shareholder return portion of grant date fair value, but that portion of fair value is not based on an assumed probable level of performance so does not change when fair value is shown assuming maximum performance). Similarly, assuming achievement of the financial performance goals at the maximum level, the grant date fair value of the Stub Period PSU awards would have been as follows: Mr. Baxter, $386,604; Mr. Welton, $49,039; Mr. Waldron, $90,213; and Mr. Waldeck, $68,315. Dividend equivalents (without compounding) accrue on these PSUs subject to the same performance-based vesting requirements as apply to the PSUs. Also included in this column are dollar amounts equal to the aggregate grant date fair value of RSUs awarded to Messrs. Baxter, Welton, Waldron and Waldeck, for 2018, including, for Mr. Baxter, $187,524 (2,507 RSUs that vest in 2022); for Mr. Welton, $23,786 (318 RSUs that vest in 2022); for Mr. Waldron, $43,758 (585 RSUs that vest in 2022); and for Mr. Waldeck, $33,136 (443 RSUs that vest in 2022). Fair value for each such share of restricted stock or each RSU was the average of the high and low price of VF Common Stock on the date of the award. For a discussion of the performance goals applicable to the PSU awards, as well as vesting, forfeiture and other terms, see the Compensation Discussion and Analysis on pages 118-122.

8 

Options to purchase shares of VF Common Stock are granted under the VF Stock Plan. The terms of options granted under the VF Stock Plan are described in footnote 1 to the Outstanding Equity Awards at Fiscal Year-End Table. The values of the option awards in this column are the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 and were estimated using a lattice option-pricing model, which incorporates a range of assumptions for inputs between the grant date of the option and date of expiration. The valuation assumptions used and the resulting weighted average value of stock options granted during 2018 is summarized in Note 13 to our audited combined financial statements.

 

125


Table of Contents
9

The amounts in this column represent cash awards earned under the VF MIC Plan. The general operation of the VF MIC Plan in 2018 is described in footnote 2 to the Grants of Plan-Based Awards Table. The amounts listed here represent amounts calculated for the Stub Period and for VF’s Fiscal Year 2019 Q1-Q3 (April 1, 2018 through December 29, 2018). The calculations provided in this column were determined by the VF Compensation Committee for our calendar year 2018, based on performance during the Stub Period and the first through third quarters of VF’s Fiscal Year 2019. The VF Compensation Committee expects to make determinations for performance covering VF’s full Fiscal Year 2019 in May 2019.

10 

The amounts reported in this column represent the aggregate positive change in the actuarial present value of the named executive officers’ accumulated benefits under all defined benefit and actuarial pension plans (including supplemental plans) in 2018. Messrs. Baxter, Welton and Waldeck joined VF after the defined benefit plans were closed to new participants. Mr. Waldron participated in VF’s Pension Plan and SERP during his employment with VF. See “Pension Benefits” on page 122 for a detailed discussion of VF’s pension benefits.

11

This amount includes VF’s matching contribution under the VF Executive Deferred Savings Plan II as follows: Mr. Baxter, $85,192; Mr. Welton, $19,761; Mr. Waldron, $21,811; and Mr. Waldeck, $20,839. This amount also includes VF’s matching contribution under the VF 401(k) Plan as follows: Mr. Baxter, $16,500; Mr. Welton, $16,500; Mr. Waldron, $16,500; and Mr. Waldeck, $15,889. For Mr. Baxter, this amount includes the following: (1) $150 for tax gross ups associated with gift cards he received for his participation in the “Be Fit For Life” Program; (2) $4,950 for financial planning services (which includes a tax gross up thereon in the amount of $2,225); (3) $3,088 for the annual physical (which includes a tax gross up thereon in the amount of $1,388); (4) $90,363 for moving expenses (which includes a tax gross up thereon in the amount of $40,618); and (5) $96,550 for a transitional allowance in connection with Mr. Baxter’s relocation. For Mr. Waldeck, this amount includes the following: (1) $14,337 for moving expenses (which includes a tax gross up thereon in the amount of $4,337); and (2) $43,846 for a transitional allowance in connection with Mr. Waldeck’s relocation. For Mr. Waldron, this amount includes $200 for tax gross ups associated with gift cards he received for his participation in the “Be Fit For Life” Program.

 

126


Table of Contents

2018 Grants of Plan-Based Awards

 

Name

  Date of
Board
Approval
of Awards (1)
    Grant
Date of
Equity
Awards (1)
   

 

Estimated Possible Payouts

Under Non-Equity Incentive
Plan Awards (2)

    Estimated Future Payouts
Under Equity Incentive
Plan Awards  (3)
    All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number of
Securities
Under-
Lying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/SH) (4)
    Closing
Market
Price on
Date of
Grant
($/SH)
    Grant Date
Fair Value
of Stock
and Option
Awards ($)
 
  Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

Mr. Baxter

    2/12/2018         -0-     $ 675,000     $ 1,350,000                  
    2/12/2018       2/21/2018             -0-       10,027       22,561             $ 796,244  (5)  
    2/12/2018       2/21/2018             -0-       2,507       5,640               199,081  (6)  
    2/12/2018       2/21/2018                   2,507             187,524  (7)  
    2/12/2018       2/21/2018                     49,127     $ 74.80         753,608  (8)  
                           

Mr. Welton

    2/12/2018         -0-       165,000       330,000                  
    2/12/2018       2/21/2018             -0-       1,271       2,860               100,930  (5)  
    2/12/2018       2/21/2018             -0-       318       716               25,252  (6)  
    2/12/2018       2/21/2018                   318             23,786  (7)  
    2/12/2018       2/21/2018                     6,223       74.80         95,461  (8)  
                           

Mr. Waldron

    2/12/2018         -0-       210,000       420,000                  
    2/12/2018       2/21/2018             -0-       2,340       5,265               185,819  (5)  
    2/12/2018       2/21/2018             -0-       585       1,316               46,455  (6)  
    2/12/2018       2/21/2018                   585             43,758  (7)  
    2/12/2018       2/21/2018                     11,463       74.80         175,842  (8)  
                           

Mr. Waldeck

    2/12/2018         -0-       190,000       380,000                  
    2/12/2018       2/21/2018             -0-       1,772       3,987               140,715  (5)  
    2/12/2018       2/21/2018             -0-       443       997               35,179  (6)  
    2/12/2018       2/21/2018                   443             33,136  (7)  
    2/12/2018       2/21/2018                     8,680       74.80         133,151  (8)  

 

1 

All equity awards are granted under the VF Stock Plan. Under the VF Stock Plan, the exercise price of stock options is the fair market value on the date of grant. “Fair market value” is defined under the VF Stock Plan as the average of the reported high and low sales price of VF Common Stock on the date of grant. The VF Compensation Committee’s policy under the VF Stock Plan is to fix the date of grant of the options and performance-based equity awards as the third business day after VF announces its earnings for the previously completed fiscal year or quarter depending upon whether the award is an annual award or a mid-year award.

2

The amounts in these columns represent the threshold, target and maximum annual incentive awards under the VF MIC Plan, as described above in the Compensation Discussion and Analysis on pages 117-118. Depending upon the level of achievement of each of the specified performance goals, annual cash awards could range from 0% to 200% of the targeted incentive opportunity for each VF MIC Plan participant. The non-equity incentives are for both the Stub Period and FY 2019 (i.e. 125% of the annual award).

3

The amounts in these columns represent the threshold, target and maximum PSU awards under the VF MTIP.

Depending on the average level of achievement of certain performance goals during the three years of the performance period, payouts of awards could range up to a maximum of 200% of the target award, and potentially plus or minus 25% of the target award depending on VF’s total shareholder return as compared to the total shareholder return of S&P 500 companies over the performance period, for a total maximum payout of 225% of the target award. For a discussion of the performance goals applicable to the VF MTIP awards, as well as vesting, forfeiture and other terms, see the Compensation Discussion and Analysis on pages 118-119.

4

The average of the high and the low on February 21, 2018, the award date, was $74.80. The closing price was $74.50.

5

These PSUs were granted to the named executive officers for the three-year performance period of April 1, 2018 through April 3, 2021. The aggregate fair value of the PSUs was computed in accordance with FASB ASC Topic 718. See footnote 7 to the Summary Compensation Table. The assumptions used are summarized in Note 13 to our audited combined financial statements.

6

These PSUs were granted to the named executive officers for the Stub Period, and the aggregate fair value represents the PSUs for the Stub Period. The aggregate fair value of the PSUs was computed in accordance with FASB ASC Topic 718. See footnote 7 to the Summary Compensation Table. The assumptions used are summarized in Note 13 to our audited combined financial statements.

7

In 2018, the VF Compensation Committee awarded each of Messrs. Baxter, Welton, Waldron and Waldeck 2,507 RSUs, 318 RSUs, 585 RSUs, and 443 RSUs, respectively, that each vest in 2022. The fair value of the RSUs was calculated by multiplying the average of the high and the low price of VF Common Stock on the date of the award ($74.80) by the number of RSUs granted. The aggregate fair value of the RSUs was computed in accordance with FASB ASC Topic 718. See footnote 7 to the Summary Compensation Table. The assumptions used are summarized in Note 13 to our audited combined financial statements. Vesting, forfeiture and other terms of this award are described in the Compensation Discussion and Analysis on pages 118-122. The aggregate fair value represents the time-vesting RSUs for the Stub Period.

8 

The fair value on the date of grant of each option award was computed in accordance with FASB ASC Topic 718. The terms of options are described in footnote 1 to the Outstanding Equity Awards at Fiscal Year-End Table. The assumptions used and the resulting weighted average fair value of stock options granted during 2018 are summarized in Note 13 to our audited combined financial statements.

 

127


Table of Contents

Outstanding Equity Awards at Fiscal Year-End 2018

 

    Option Awards (1)     Stock Awards  

Name

  Grant Date     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price ($)
    Option
Expiration
Date
    Number of
Shares or
Units of Stock
That Have Not
Vested
(#) (2)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (3)
    Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have  Not
Vested
(#) (2) (4)
    Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights  That
Have Not
Vested
($) (4)
 

Mr. Baxter

    2/20/2013       64,996     -0-   $ 40.49     2/19/2023        
    2/19/2014       51,911       -0-       56.79       2/18/2024          
    7/22/2014       -0-       -0-       -0-       -0-       33,075  (9)     $ 2,334,118      
    2/18/2015       47,398       -0-       75.35       2/17/2025          
    2/23/2016       55,832       18,610       61.29       2/22/2026          
    2/22/2017       76,025       50,683       53.47       2/21/2027       7,822  (9)       552,019       14,027  (5)     $ 989,885  
    2/21/2018       49,127       49,127       74.80       2/20/2028           10,027  (6)       715,326  
                  2,507  (7)       176,919  
                  2,549  (8)       179,879  
                 

Mr. Welton

    2/19/2014       6,437       -0-     56.79       2/18/2024          
    2/18/2015       6,671       -0-       75.35       2/17/2025          
    2/23/2016       7,858       2,619       61.29       2/22/2026          
    7/26/2016       -0-       -0-       -0-       -0-       5,834  (10)       416,172      
    2/22/2017       9,630       6,420       53.47       2/21/2027           1,777  (5)       125,403  
    7/26/2017       -0-       -0-       -0-       -0-       7,209  (10)       514,308      
    2/21/2018       6,223       6,223       74.80       2/20/2028           1,271  (6)       89,694  
                  318  (7)       22,441  
                  323  (8)       22,817  
                 

Mr. Waldron

    2/18/2015     9,305     -0-     75.35     2/17/2025        
    2/23/2016       10,960       3,653       61.29       2/22/2026          
    2/22/2017       17,740       11,826       53.47       2/21/2027       10,456  (11)       745,947       3,273  (5)       230,976  
    2/21/2018       11,463       11,463       74.80       2/20/2028           2,340  (6)       165,134  
                  585  (7)       41,283  
                  595  (8)       41,974  
                 

Mr. Waldeck

    7/26/2017       8,428     5,618     60.65     7/25/2027     8,491  (12)       605,781       1,556  (5)       109,807  
    2/21/2018       8,680       8,680       74.80       2/20/2028           1,772  (6)       125,050  
                  443  (7)       31,263  
                  450  (8)       31,786  

 

1

All of the options are non-qualified stock options awarded under the VF Stock Plan. Each option becomes vested and exercisable in thirds on the first, second and third anniversaries of the date of grant. Options generally become fully vested and exercisable upon the executive’s death or termination of the executive’s employment due to disability or in the event of certain terminations following a change in control of VF. All options have a ten-year term but, in the event of certain terminations of the optionee’s employment, the options generally expire on an accelerated basis, as follows: 36 months after retirement, death or termination due to disability; at the end of the period severance payments are made (if any) in the case of involuntary termination; and at the time of any voluntary termination.

2

For all restricted stock, dividends are reinvested at the dividend payment date in additional shares that are subject to the same restrictions as the original award. For all RSUs, dividend equivalents accrue as cash amounts until vesting and payout, at which time such amounts are paid in additional shares of stock calculated by dividing the accrued dividend equivalents by the average of the high and low price of a share of VF Common Stock on the date the award is paid out. Dividend equivalents are not compounded.

3

The market value of restricted awards reported in this column was computed by multiplying $70.57, the closing market price of VF’s stock at December 28, 2018, by the number of shares or units of stock awarded. For restricted stock awards, the amount also includes the value of accrued dividends as of that date.

4

The number of shares or units and values in these columns assumes an achievement level at target of 105% of the target amount, which was the actual level of achievement for the three-year performance period ended December 29, 2017. The final level of achievement for the awards in these columns may differ. The number of performance-based PSUs was calculated by multiplying 105% of the target number of PSUs awarded (the number of shares in the chart is rounded to the nearest whole number; the dollar value is based on the actual number of shares including fractional shares) by $70.57, the closing market price of VF Common Stock at December 28, 2018. For a discussion of vesting, forfeiture and other terms applicable to the PSUs, see the Compensation Discussion & Analysis on pages 118-122.

 

128


Table of Contents
5

The number represents the number of performance-based PSUs that were awarded under the VF MTIP by the VF Compensation Committee in 2017 for the three-year performance period ending December 2019 multiplied by an assumed achievement level of 105% (rounded to the nearest whole number of shares). At an achievement level of 225% (the maximum), the number of PSUs and the corresponding value would be as follows (the number of shares is rounded to the nearest whole number; the dollar value is based on the actual number of shares including fractional shares): Mr. Baxter: 31,561 PSUs with a value of $2,227,242; Mr. Welton: 3,998 PSUs with a value of $282,157; Mr. Waldron: 7,364 PSUs with a value of $519,695; Mr. Waldeck: 3,501 PSUs with a value of $247,066.

6

The number represents the number of PSUs that were awarded under the VF MTIP by the VF Compensation Committee in 2018 for the three-year performance period ending December 2020 multiplied by an assumed achievement level of 105% (rounded to the nearest whole number of shares). At an achievement of 225% (the maximum), the number of PSUs and the corresponding value would be as follows (the number of shares is rounded to the nearest whole number; the dollar value is based on the actual number of shares including fractional shares): Mr. Baxter: 22,561 PSUs with a value of $1,592,112; Mr. Welton: 2,860 PSUs with a value of $201,813; Mr. Waldron: 5,265 PSUs with a value of $371,551; Mr. Waldeck: 3,987 PSUs with a value of $281,363.

7

The number represents the number of PSUs that were awarded under the VF MTIP by the VF Compensation Committee in 2018 for the fiscal year transition period for the three-year performance period ending March 2021 multiplied by an assumed achievement level of 105% (rounded to the nearest whole number of shares). At an achievement level of 225% (the maximum), the number of PSUs and the corresponding value would be as follows (the number of shares is rounded to the nearest whole number; the dollar value is based on the actual number of shares including fractional shares: Mr. Baxter: 5,641 PSUs with a value of $398,068; Mr. Welton: 716 PSUs with a value of $50,493; Mr. Waldron: 1,316 PSUs with a value of $92,888; Mr. Waldeck: 997 PSUs with a value of $70,341.

8

The number represents the number of time vesting RSUs that were awarded under the VF Stock Plan by the VF Compensation Committee in 2018. Time vesting awards vest 50% in 2 years 50% in 4 years.

9

Mr. Baxter received awards of 30,000 and 7,481 shares of restricted stock in 2014 and 2017, respectively. These awards will convert to Kontoor Brands Awards upon the effective date of the spin-off. These shares of restricted stock vest in 2019 and 2021, respectively, provided that Mr. Baxter remains an employee of VF or Kontoor Brand (except a pro rata portion of the awards would vest in the event of termination due to death or disability and the awards would vest upon certain terminations following a change in control of VF). Dividends on these shares of restricted stock are reinvested, at the dividend payment date, in additional shares that are subject to the same restrictions as the original award.

10

Mr. Welton received awards of 5,500 and 7,000 shares of restricted stock in 2016 and 2017, respectively. These awards will convert to Kontoor Brands Awards upon the effective date of the spin-off. These shares of restricted stock vest in 2020, provided that Mr. Welton remains an employee of VF or Kontoor Brands (except a pro rata portion of the awards would vest in the event of termination due to death or disability and the awards would vest upon certain terminations following a change in control of VF). Dividends on these shares of restricted stock are reinvested, at the dividend payment date, in additional shares that are subject to the same restrictions as the original award.

11

Mr. Waldron received an award of 10,000 shares of restricted stock in 2017. This award will convert to a Kontoor Brands Award upon the effective date of the spin-off. These shares of restricted stock vest in 2021, provided that Mr. Waldron remains an employee of VF or Kontoor Brands (except a pro rata portion of the award would vest in the event of termination due to death or disability and the award would vest upon certain terminations following a change in control of VF). Dividends on these shares of restricted stock are reinvested, at the dividend payment date, in additional shares that are subject to the same restrictions as the original award.

12

Mr. Waldeck received an award of 8,245 shares of restricted stock in 2017. This award will convert to a Kontoor Brands Award upon the effective date of the spin-off. These shares of restricted stock vest in 2021, provided that Mr. Waldeck remains an employee of VF or Kontoor Brands (except a pro rata portion of the award would vest in the event of termination due to death or disability and the award would vest upon certain terminations following a change in control of VF). Dividends on these shares of restricted stock are reinvested, at the dividend payment date, in additional shares that are subject to the same restrictions as the original award.

2018 Option Exercises and Stock Vested

 

     Option Awards      Stock Awards (2)

Name

   Number of
Shares Acquired
on Exercise
(#)
     Value Realized
on Exercise
($) (1)
     Number of
Shares Acquired
on Vesting
(#)
    

Value Realized
on Vesting
($)

Mr. Baxter

     65,988        3,131,376        

Mr. Welton

     12,748        670,708        

Mr. Waldron

     21,819        755,000        

Mr. Waldeck

     -0-        -0-        

 

1

The dollar amount realized upon exercise of stock options was calculated by determining the difference between the market price of the underlying securities at exercise and the exercise price of the options.

 

129


Table of Contents
2

These columns would report payout of awards of PSUs under the VF MTIP, including accrued dividends, as generally described in footnote 3 to the Grants of Plan-Based Awards Table, for the three-year period ending March 30, 2019. As of the date of the Separation, the number of shares acquired upon vesting of the PSUs under the VF MTIP will not be known. The VF Compensation Committee will meet following the Separation to certify VF’s performance and determine the number of shares acquired by the NEOs upon vesting of the PSUs under the VF MTIP. Kontoor Brands will file a Form 8-K supplementing the 2018 Option Exercises and Stock Vested table to reflect the foregoing determination.

Pension Benefits

VF sponsors and maintains the VF Pension Plan, a tax-qualified defined benefit plan that covers most of VF’s U.S.-based employees who were employed by VF on or before December 31, 2004. Mr. Waldron is the only one of our NEOs who participated in the VF Pension Plan as of December 31, 2018, and none of our other NEOs have ever participated in the VF Pension Plan. Benefits under the VF Pension Plan are calculated by reference to the employee’s “average annual compensation,” which is his or her average annual salary and annual incentive compensation from January 1, 2014, with no less than five years immediately preceding retirement included in the average. If an employee does not have five years of compensation from January 1, 2014, such employee’s compensation for a sufficient number of years immediately prior to 2014 is included to produce a minimum five compensation years. The VF Pension Plan froze participants’ accumulation of benefits as of December 31, 2018.

There are two formulas for computing benefits under the VF Pension Plan. The “normal retirement” formula is used for employees who qualify for “early retirement” under the VF Pension Plan upon termination, by being credited with at least ten years of service with VF and having attained age 55. The second formula, less favorable to the employee, is used for employees who have not satisfied both conditions for “early retirement” upon termination. For employees who commence benefits under the VF Pension Plan prior to age 65, the benefit is reduced to account for the longer period of time over which the benefit is expected to be paid. The formula in effect for a specific employee is dependent upon the employee’s age and the number of years of service he has accrued as of the date of termination. Both formulas are based on years of service with VF, average annual compensation, and the covered compensation amount in effect for the employee relative to his birth year. Payments under the VF Pension Plan are made in monthly payments over the life of the participant and, in some circumstances, for a period thereafter to the participant’s beneficiary. All of the NEOs who participate in the VF Pension Plan are eligible for nonforfeitable benefits under the VF Pension Plan and the VF SERP.

The VF SERP is an unfunded, nonqualified plan for eligible employees primarily designed to restore benefits lost under the VF Pension Plan due to the maximum legal limit of pension benefits imposed under ERISA and the Code. Mr. Waldron is the only one of our NEOs who participated in the VF SERP as of December 31, 2018, and none of our other NEOs have ever participated in the VF SERP. The combined retirement income from the VF Pension Plan and the VF SERP for each of the eligible NEOs, upon retirement at age 65, would be an amount equal to his or her VF Pension Plan benefit calculated (i) without regard to any limitation imposed by the Code or ERISA, (ii) without regard to his participation in the Deferred Compensation Plan or the Executive Deferred Savings Plan, (iii) on the basis of the average of the highest three years of his salary and annual incentive compensation during the ten-year period immediately preceding retirement, and (iv) without deduction or offset of Social Security benefits. For purposes of the table below, the “normal retirement” formula has been used for determining the VF SERP benefits of all of our NEOs who participate in the VF Pension Plan, regardless of whether they otherwise qualify for “early retirement” under the VF Pension Plan. Payments under the VF SERP with respect to the period prior to December 31, 2004 are payable in monthly payments or in a lump sum, and payments with respect to the period after December 31, 2004 are payable in a lump sum.

At the end of December 2014 the VF Pension Plan and VF SERP were modified such that for certain executives, including Mr. Waldron, benefits would be frozen in the VF Pension Plan and would instead accrue in

 

130


Table of Contents

the VF SERP, and therefore accrued benefits under the VF SERP would increase at a higher rate for service and earnings after December 31, 2014. The VF SERP froze participants’ accumulation of benefits as of December 31, 2018.

The assumptions underlying the present values of Mr. Waldron’s pension benefits are the assumptions used for financial statement reporting purposes and are set forth in Note 11 to our audited combined financial statements, except that retirement age is assumed to be age 65, the normal retirement age specified in the VF Pension Plan.

2018 Pension Benefits Table

 

Name

 

Plan Name

  Number of Years
Credited Service
(#) (1)
    Present Value of
Accumulated
Benefit
($)
    Payments During
Last Fiscal Year
($)
 

Mr. Waldron

  VF Corporation Pension Plan     19       605,764 (2)       -0-  
 

Supplemental Executive Retirement Plan

    23       1,499,195 (2)       -0-  

 

1

The number of years of service credited under each plan was computed as of the same measurement date used for financial statement reporting purposes with respect to our audited combined financial statements.

2

The amounts in this column are the actuarial present value of the accumulated benefit under each plan, computed as of the same VF Pension Plan measurement date used for financial statement reporting purposes with respect to our audited combined financial statements.

Nonqualified Deferred Compensation

VF provides its senior executives, including our NEOs, with the opportunity to defer compensation under the VF Executive Deferred Savings Plan (the “VF EDSP”) and the VF Executive Deferred Savings Plan II (the “VF EDSP II”). While all of our NEOs participate in the VF EDSP II, only Mr. Waldron participates in the VF EDSP. No NEO made any contributions to, and VF did not make any contributions to, any account under the VF EDSP in 2018.

In 2015, the terms of the VF EDSP II were amended to permit an eligible executive to defer into a hypothetical “account,” on a pre-tax basis, annual compensation in excess of the IRS annual compensation limit for 401k contributions ($270,000 for 2017) (but not more than 50% of the executive’s annual salary and 75% of the executive’s annual cash incentive payment). A participating executive’s account was also credited with matching credits equal to 100% on the first 6% of annual compensation deferred by the executive for the year. Earnings below the IRS annual compensation limit are eligible for contributions to the VF 401k Plan. The VF 401k Plan is a broad-based tax-qualified defined contribution plan for most U.S. employees of VF. A participant is credited with matching credits equal to 100% on the first 6% of the annual compensation contributed by the participant, up to the IRS annual compensation limit of $270,000.

Accounts deferred after January 1, 2005 are payable in either a lump sum or in up to ten annual installments following termination of employment, as elected by the executive at the time of deferral. With respect to accounts prior to January 1, 2005 an executive may request, subject to VF approval, distribution in a lump sum or in up to ten annual installments following termination of employment. Prior to termination of employment, an executive may receive a distribution of the executive’s deferred account upon an unexpected financial hardship.

Accounts under the VF EDSP II are credited with earnings and losses based on certain hypothetical investments selected by the executive. The hypothetical investment alternatives available to executives include various funds. Executives may change such hypothetical investment elections on a daily basis (although VF generally restricts its senior officers from changing their hypothetical investment elections with respect to the VF common stock fund).

 

131


Table of Contents

2018 Nonqualified Deferred Compensation

 

Name

   Executive
Contributions
in 2018

($) (1)
     VF
Contributions
in 2018

($) (2)
     Aggregate
Earnings in
2018

($) (3)
    Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
December 29,
2018

($) (4)
 

Mr. Baxter

     749,037        85,192        (264,125     -0-        4,269,521  

Mr. Welton

     42,816        19,761      (36,213     -0-        251,754  

Mr. Waldron

     21,811      21,810        (96,140     -0-        1,606,622  

Mr. Waldeck

     24,312        20,839      (4,000     -0-      41,151  

 

1

Amounts reported in this column are included as salary and non-equity incentive compensation in the Summary Compensation Table. The type of compensation permitted to be deferred is cash compensation.

2

Amounts reported in this column are included as All Other Compensation in the Summary Compensation Table. The matching contribution for qualified executives is 100% on the first 6% of compensation deferred by the named executive officer under the EDSP (for compensation in excess of the 401k contribution limit, which was $270,000 in 2018).

3

This column includes earnings and (losses) on deferred compensation balances. Such amounts are not “above-market” or “preferential” and therefore are not reported as compensation in the Summary Compensation Table.

4

This column reflects the aggregate of salary and non-equity incentive awards deferred by each named executive officer during his career with VF plus the aggregate amount of contributions by VF and the investment earnings thereon. Amounts deferred each year by the named executive officers have been reported in the Summary Compensation Tables in VF’s proxy statements in the year earned to the extent the executive was a named executive officer for purposes of proxy statement disclosure.

Potential Payments Upon Change in Control, Retirement or Termination of Employment

The following section describes payments that would have been made to each of our NEOs and related benefits as a result of their termination of their employment with VF during 2018 due to (i) a termination of service in the event of a change in control of VF, (ii) the executive’s retirement, (iii) the executive’s termination by VF without “cause,” (iv) the executive’s termination by VF with “cause,” or (v) the executive’s resignation, assuming these events occurred on December 29, 2018.

The descriptions below do not include the following amounts that the executives also would have received in all termination scenarios:

 

  (a)

retirement benefits, the present value of which is disclosed in the 2018 Pension Benefits Table above;

 

  (b)

the aggregate balance disclosed in the Nonqualified Deferred Compensation table above;

 

  (c)

the executive’s portion of the VF MIC Plan payment for the year ended March 30, 2019, as disclosed in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above; or

 

  (d)

the value of the executive’s vested “in-the-money” unexercised stock options; the executive would be able to realize such value by exercise of the options prior to any termination, or the executive could retain the options after termination in all termination scenarios except termination by VF without “cause” with no severance, resignation not qualifying as a retirement or termination by VF with “cause.”

Our NEOs do not have employment contracts with VF; all of their potential payments outlined below are defined in benefit plan documents described in this proxy statement. As described below under “Payments Upon Retirement,” as a result of retirement executives do not receive enhanced benefits other than under the terms of

 

132


Table of Contents

certain equity awards, pursuant to which an executive who is eligible for retirement would not forfeit his awards due to retirement.

Potential Payments Upon a Change in Control of VF

VF has entered into a VF Agreement with Scott Baxter. The VF Agreement provides severance benefits to Mr. Baxter only if his employment is terminated by VF without cause or for good reason by Mr. Baxter within the 24-month period after a change in control of VF. The VF Agreement has a term of three years with automatic annual extensions. The VF Agreement may be terminated by VF, unless VF has knowledge that a third-party intends to effect a change in control of VF and, if a change in control has occurred, the VF Agreement may not be terminated until two years after the change in control. We intend to enter into a similar agreement with Mr. Baxter in connection with the Separation.

Generally, severance benefits payable to our NEOs include a lump-sum payment of an amount equal to 2.99 times the sum of the executive’s current annual salary plus the highest amount of annual incentive awarded to the executive during the three fiscal years prior to the date on which the executive’s employment is terminated following a change in control of VF (but not less than the target annual incentive for the year of termination). Under the terms of the VF Agreement or the VF Stock Plan, upon a qualifying termination, the executives would also be entitled to supplemental benefits, such as payment of a pro rata portion of non-equity incentive compensation, accelerated vesting of stock options, accelerated lapse of restrictions on VF RSUs and VF restricted stock, lump-sum payments under the VF SERP for U.S.-based executives, continued life and medical insurance for specified periods after termination, entitlements under retirement plans and a lump-sum payment upon attaining retirement age. In the case of PSUs under the VF MTIP, the PSUs would be deemed earned based on the actual performance achieved through the date of termination projected for the entire performance cycle (except if performance in completed years is below-target the uncompleted years are projected at target), and such PSUs would vest in full (without pro-ration).

Except as described below, the total payments to be made to an executive in the event of termination of employment upon a change in control of VF potentially could exceed the level of “parachute payments” (as that term is defined in the Code) that would trigger the “golden parachute excise tax,” which could result in imposition of excise taxes on the executive and loss of tax deductibility for VF. Mr. Baxter would receive additional payments under his VF Agreement to reimburse him for any such excise taxes and other increased taxes, penalties and interest resulting from any payments under his VF Agreement by reason of such payments being treated as excess parachute payments. However, if the parachute payments exceed the maximum amount that could be paid to the executive without giving rise to an excise tax, but are less than 105% of such amount, then no gross-up will be paid and the parachute payments will be reduced to just below such amount.

Potential Payments Upon Termination of Employment Following a Change in Control and Related Benefits

Only Mr. Baxter is entitled to payments in connection with a termination of his employment following a change in control. Under the VF Agreement between VF and Mr. Baxter, if Mr. Baxter’s employment had been terminated by VF without cause or by him for good reason following a change in control of VF, assuming the triggering event occurred on December 29, 2018, Mr. Baxter would be entitled to receive the following estimated amounts:

 

Name

   Severance
Amount ($)
     Stock
Awards ($)
     Unvested
Stock
Options ($)
     Estimated
Value of Benefit
Continuation ($)
     Lump-Sum
VF SERP
Benefit ($)
   Excise Tax
Gross-Up on
Change in
Control ($)
   Total ($)  

Mr. Baxter

   $ 5,087,784      $ 5,665,286      $ 1,039,380      $ 57,283            $ 11,849,733  

 

133


Table of Contents

Payments Upon Retirement

Retirement would not result in any enhanced benefits, but under the terms of certain equity awards an executive who is eligible for retirement would not forfeit his awards due to retirement. In the case of stock options, those options are in substance vested, with such options becoming exercisable at the specified vesting dates (including in the case in which those vesting dates occur after retirement). As of December 31, 2018, none of our NEOs are retirement eligible.

Payments Upon Termination Due to Death or Disability

The following table shows the estimated value of all VF unexercisable options, unvested VF PSU awards and VF unvested restricted stock or VF RSU awards on December 29, 2018, assuming the executive had terminated employment due to death or disability:

 

Name

   Unvested
Restricted
Stock or Units

($)
     PSU Awards
($)
     Unvested Stock
Options

($)
    

Total

($)

Mr. Baxter

   $ 2,347,525      $ 1,465,030      $ 1,039,380      $4,851,936

Mr. Welton

     496,893        185,596        134,086      816,576

Mr. Waldron

     344,658        341,844        236,124      922,626

Mr. Waldeck

     216,320        191,341        55,731      463,392

Payments Upon Termination Without Cause

In the event of a termination by VF without “cause” under the VF MTIP, if the executive has been an active participant for at least 12 months in a performance cycle, the executive would be eligible to receive a pro rata portion of the total number of PSUs the executive is deemed to have earned based on performance in the completed portion of the performance cycle, with the pro rata portion determined as of the earlier of (a) the date of the last severance payment, if any, and (b) the last day of the performance period. The determination of whether severance will be paid and the period over which it would be paid is in the discretion of the VF Compensation Committee. No NEO (other than Mr. Baxter following a change in control) is entitled to severance except at the discretion of the Committee. Under the VF Stock Plan, the executive’s stock options would continue to vest and to be exercisable until the end of the period of the executive’s receipt of installments of severance pay, if any, from VF.

Payments Upon Termination for Cause or Resignation

In the event of a termination for “cause” or resignation not qualifying as retirement, each NEO would receive no additional compensation.

 

134


Table of Contents

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We describe below transactions and series of similar transactions, during our last three fiscal years or currently proposed, to which we were a party or will be a party, in which:

 

   

The amounts involved exceeded or will exceed $120,000; and

 

   

Any of our directors, executive officers or beneficial holders of more than 5% of any class of our capital stock had or will have a direct or indirect material interest.

Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions meeting this criteria to which we have been or will be a party other than compensation arrangements, which are described where required under “Management—Board Structure,” “Management—Compensation of Directors” and “Compensation Discussion and Analysis.”

The Separation from VF

The Separation will be accomplished by VF distributing all of its shares of Kontoor Brands common stock to holders of VF common stock entitled to such distribution, as described in “The Separation” included elsewhere in this information statement. Completion of the Separation will be subject to satisfaction or waiver by VF of the conditions to the Distribution described under “The Separation—Conditions to the Distribution.”

As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with VF to effect the Separation and provide a framework for our relationships with VF after the Separation. See “The Separation—Agreements with VF” for information regarding these agreements.

Related Party Transactions

As a current business segment of VF, we engage in related party transactions with VF. Those transactions are described in more detail in Note 20 to the accompanying audited combined financial statements.

Review, Approval or Ratification of Transactions with Related Persons

We expect that our Board of Directors will adopt procedures for the review of any transactions and relationships in which we and any of our directors, nominees for director or executive officers, or any of their immediate family members, are participants, to determine whether any of these individuals have a direct or indirect material interest in any such transaction. We expect that we will develop and implement processes and controls to obtain information from the directors and executive officers about related person transactions, and for determining, based on the facts and circumstances, whether a related person has a direct or indirect material interest in any such transaction. Transactions that are determined to be directly or indirectly material to a related person will be disclosed by us as required. Pursuant to these processes, we expect that all directors and executive officers will annually complete, sign and submit a Director and Executive Officer Questionnaire designed to identify related person transactions and both actual and potential conflicts of interest.

As described above, we expect that the Board of Directors will adopt one or more codes of ethics applicable to our directors and executive officers that will prohibit directors and executive officers from entering into transactions, or having any relationships, that would result in a conflict of interest with us. If an actual or potential conflict of interest affects a director or an executive officer, he or she is required to immediately disclose all the relevant facts and circumstances so that a determination can be made whether a conflict exists, and, if so, the appropriate resolution. Any waivers of the codes of ethics for directors and executive officers will only be granted by the Board of Directors.

 

135


Table of Contents

OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of the date of this information statement, all of the outstanding shares of Kontoor Brands common stock are owned by VF. After the Separation, VF will not directly or indirectly own any of our common stock. The following tables provide information with respect to the expected beneficial ownership of Kontoor Brands common stock by (1) each person who is known by us who we believe will be a beneficial owner of more than 5% of Kontoor Brands outstanding common stock immediately after the Distribution (assuming they maintain such ownership positions when the Distribution occurs) based on current publicly available information, (2) each identified director of Kontoor Brands, (3) each NEO and (4) all identified Kontoor Brands executive officers and directors as a group. We based the share amounts on each person’s beneficial ownership of VF common stock as of the close of business on                 , 2019 and applying the distribution ratio of one share of our common stock for every              shares of VF common stock held as of the record date for the Distribution, unless we indicate some other date or basis for the share amounts in the applicable footnotes.

Except as otherwise noted in the footnotes below, each person or entity identified below is expected to have sole voting and investment power with respect to such securities. Following the Separation, Kontoor Brands will have outstanding an aggregate of approximately                  shares of common stock based upon approximately                  shares of VF common stock outstanding on                 , 2019 assuming no exercise of VF stock options, and applying the distribution ratio of one share of our common stock for every shares              of VF common stock.

To the extent our directors and executive officers own VF common stock at the record date for the Distribution, they will participate in the Distribution on the same terms as other holders of VF common stock.

The number of shares beneficially owned by each shareholder, director or officer is determined according to the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose.

Holdings of Certain Beneficial Owners

As of the date of this information statement, all of the outstanding shares of Kontoor Brands common stock are owned by VF. The following table sets forth information regarding each shareholder who is expected to beneficially own more than 5% of our common stock immediately following the Separation. The table is based upon an assumption that, for every              shares of VF common stock held by such persons, they will receive one share of Kontoor Brands common stock:

 

Name of Beneficial Owner

   Amount of Beneficial
Ownership (1)
     Percent of
Class
 

Trusts under Deeds of Trust dated August 21, 1951 (2,3,4)

                    %  

Trust under Will of John E. Barbey, deceased (2,3,4)

                           %  
  

 

 

    

 

 

 

Total

        %  

The Vanguard Group (5)

        %  

BlackRock, Inc. (6)

        %  

 

(1)

None of the shares in this column is known to be a share with respect to which any of the listed owners has the right to acquire beneficial ownership, as specified in Rule 13d-3(d)(1) under the Exchange Act.

(2) 

Juliana L. Chugg and Clarence Otis, Jr., who are members of the VF Board of Directors, and PNC Bank, N.A. act as the trustees under the Deeds of Trust dated August 21, 1951 and under the Will of John E. Barbey (the “Trusts”). Because neither the individual trustees nor PNC Bank, N.A. separately controls the decision-making of the trustees, the parties serving as trustees are not deemed to separately beneficially own the trust shares and are not deemed to share voting or dispositive power over the trust shares. The address of the trustees is PNC Bank, N.A., P.O. Box 7648, Philadelphia, Pennsylvania 19101.

 

136


Table of Contents
(3) 

Present life tenants and remaindermen under the Deeds of Trust and the Will are various. All present life tenants and all or most future life tenants and/or remaindermen under the Deeds of Trust are, or will be, descendants of John E. Barbey. No individual life tenant or remainderman may, within 60 days, attain beneficial ownership, as specified in Rule 13d-3(d)(1) under the Exchange Act, which exceeds 5% of the outstanding shares.

(4) 

Including shares in the above table, PNC Bank, N.A. and its affiliates held a total of 68,408,136 shares (17.24% of the class outstanding) of VF common stock in various trust and agency accounts based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 1, 2019 reporting beneficial ownership at December 31, 2018. As to all such VF shares, the Bank and its affiliates reported having sole voting power over 226,402 shares, shared voting power over 68,177,765 shares, sole dispositive power over 140,543 shares and shared dispositive power over 68,246,931 shares.

(5) 

The information in the above table concerning The Vanguard Group (“Vanguard”) was obtained from a Schedule 13G/A filed with the Securities and Exchange Commission on February 11, 2019 reporting beneficial ownership at December 31, 2018. Vanguard reported having sole voting power over 397,784 VF shares, shared voting power over 93,045 VF shares, sole dispositive power over 27,178,577 VF shares and shared dispositive power over 481,688 VF shares. Vanguard’s address is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(6)

The information in the above table concerning BlackRock, Inc. (“BlackRock”) was obtained from a Schedule 13G filed with the Securities and Exchange Commission by BlackRock on February 6, 2019 reporting beneficial ownership at December 31, 2018. BlackRock reported having sole voting power over 20,936,380 VF shares and sole dispositive power over 24,268,033 VF shares. BlackRock’s address is 55 East 52nd Street, New York, NY 10055.

Holdings of Directors and Executive Officers

As of the date of this information statement, all of the outstanding shares of Kontoor Brands common stock are owned by VF. The following table sets forth the number of shares of our common stock beneficially owned, based on the presentation previously described, as of                 , 2019 by each of the identified directors of Kontoor Brands, NEOs in the Summary Compensation Table in “Compensation Discussion and Analysis” and all identified Kontoor Brands executive officers and directors as a group. The table is based upon an assumption that, for every                  shares of VF stock held by such person, they will receive one share of Kontoor Brands common stock.

 

137


Table of Contents

For purposes of this table, shares are considered to be “beneficially” owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to such shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days of                 , 2019. No executive officer or director holds any class of equity securities other than VF common stock or VF equity awards that may give them the right to acquire beneficial ownership of VF common stock, and it is not expected that any of them will own any class of equity securities of Kontoor Brands other than common stock following the Distribution.

 

Name

  Personal with Full
Voting and
Investment Power
    Personal as
Beneficiary of
Trusts
    Voting and
Investment
Power Only
    Options
Exercisable
Within 60 Days
    Total     Percentage of
Outstanding
(If Greater Than 1%)
 

Scott H. Baxter

           

Rustin Welton

           

Thomas E. Waldron

           

Christopher Waldeck

           

Robert K. Shearer

           

Richard T. Carucci

           

Juliana L. Chugg

           

Kathleen S. Barclay

           

Shelley Stewart, Jr.

           

All executive officers and directors (10 persons)

           

 

138


Table of Contents

DESCRIPTION OF CAPITAL STOCK

Our articles of incorporation and bylaws will be amended and restated prior to the Separation. The following descriptions are summaries of the material terms of our capital stock based on the applicable provisions of North Carolina Law and our amended and restated articles of incorporation and our amended and restated bylaws that will be in effect at the time of the Separation. The summaries and descriptions below do not purport to be complete statements of the relevant provisions of the applicable provisions of North Carolina Law or of our amended and restated articles of incorporation or our amended and restated bylaws to be in effect at the time of the Separation. The summary is qualified in its entirety by reference to our amended and restated articles of incorporation and our amended and restated bylaws, which we recommend that you read (along with the applicable provisions of North Carolina Law) for additional information on our capital stock as of the time of the Separation. The amended and restated articles of incorporation and the amended and restated bylaws to be in effect at the time of the Separation will be included as exhibits to the registration statement on Form 10, of which this information statement forms a part, in a subsequent amendment.

General

Upon completion of the Separation, we will be authorized to issue                  shares of common stock, no par value, and                  shares of preferred stock, no par value. Our Board of Directors may authorize the issuance of one or more series of preferred stock and establish, among other things, the rights, preferences and privileges of any such series of preferred stock from time to time without shareholder approval.

Common Stock

Common stock outstanding. Upon completion of the Separation, we expect there will be approximately                  shares of our common stock outstanding, to be held of record by shareholders based upon approximately                  shares of VF common stock outstanding as of                 , applying the distribution ratio of one share of our common stock for every              shares of VF common stock. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of the Distribution will be fully paid and non-assessable.

Voting rights. The holders of common stock will be entitled to one vote per share on all matters to be voted on by shareholders. Generally, all matters to be voted on by shareholders must be approved by a majority of the votes entitled to be cast by the holders of common stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any preferred stock. Directors will be elected by a majority vote, except that if the number of nominees in any given election exceeds the number of directors to be elected, the directors will be elected by the vote of a plurality of the shares represented in person or by proxy and entitled to vote on the election of directors.

Dividends. Subject to the preferences that may be applicable to any outstanding preferred stock issued after the Distribution, the holders of common stock will be entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. See “Dividend Policy.”

Rights upon liquidation. In the event of a liquidation, dissolution or winding up of our company, the holders of common stock will be entitled to share ratably in all assets remaining after payment of, or provisions for, liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.

Other rights. The holders of our common stock will have no preemptive or conversion rights or other subscription rights. There will be no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that our Board of Directors may authorize and issue in the future.

 

139


Table of Contents

Preferred Stock

Our Board of Directors will have the authority to issue, without further vote or action by our shareholders, preferred stock in one or more series. Subject to the limitations prescribed by North Carolina Law and our amended and restated articles of incorporation, our Board of Directors may fix the designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series.

The issuance of preferred stock could adversely affect the voting power of the holders of the common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Kontoor Brands without further action by our shareholders and may adversely affect the voting and other rights of the holders of common stock. At present, Kontoor Brands has no plans to issue any of the preferred stock.

Election and Removal of Directors

We expect that our Board of Directors will initially consist of six directors, and thereafter, the number of directors will be fixed exclusively by one or more resolutions adopted from time to time solely by the affirmative vote of a majority of the Board of Directors. Each director shall be elected by the vote of the majority of the votes cast with respect to the director at any meeting of the shareholders called for the purpose of the election of directors at which a quorum is present, except that if as of a date that is ten days in advance of the date the Corporation files its definitive proxy statement with the SEC the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote in the election of directors generally. The Board of Directors or a committee of the Board of Directors shall not nominate for election or reelection as a director any candidate who has not agreed to tender, promptly following the meeting at which such director is elected or reelected as a director, an irrevocable resignation that will be effective upon (a) the failure of such director to receive the number of votes required for reelection at the next annual meeting of shareholders at which such director stands for reelection, and (b) the acceptance of such director’s resignation by the Board of Directors.

Prior to the annual meeting of shareholders held in 2023, no director will be removable by the shareholders except for cause, and directors may be removed for cause only by an affirmative vote of 80% of the total voting power of outstanding securities generally entitled to vote in the election of directors. After the annual meeting of shareholders held in 2023, directors will be removable, with or without cause, only by the affirmative vote of 80% of the total voting power of outstanding securities generally entitled to vote in the election of directors. Any vacancy occurring on the Board of Directors and any newly created directorship may be filled only by a majority of the remaining directors in office (although less than a quorum) or by the sole remaining director.

Board of Directors

Our Board of Directors will initially be classified and will transition to an annually elected board through a gradual phase-out that will take place over the first four years after completion of the Separation with the classification of our Board of Directors ending in 2023. Our Board of Directors will initially be divided into three classes, each of roughly equal size. The Directors designated as Class I Directors will have terms expiring at the annual meeting of shareholders in 2020, which will be the first annual meeting of shareholders following the Separation; the Directors designated as Class II Directors will have terms expiring at the annual meeting of shareholders in 2021; and the Directors designated as Class III Directors will have terms expiring at the annual meeting of shareholders in 2022. Directors elected at the annual meetings of shareholders held in 2020, 2021 and 2022 will be elected for a term expiring at the annual meeting of shareholders in 2023. Beginning with the 2023 annual meeting and continuing thereafter, directors will be elected for a term expiring at the next annual meeting

 

140


Table of Contents

of shareholders. Before the phase-out, the classification of our Board of Directors could have the effect of increasing the length of time necessary to change the composition of a majority of the Board of Directors. In general, prior to 2023, at least two annual meetings of shareholders will be necessary for shareholders to effect a change in a majority of the members of the Board of Directors. See “Management—Board of Directors Following the Separation.”

Limits on Shareholder Action by Written Consent

Our amended and restated articles of incorporation and amended and restated bylaws will provide that holders of our common stock will not be able to act by written consent without a shareholder meeting.

Shareholder Meetings

Our amended and restated articles of incorporation and amended and restated bylaws will provide that special meetings of the shareholders may be called only by the Chairman of the Board of Directors or by the Board of Directors acting pursuant to a resolution adopted by the majority of the Board of Directors.

Amendment of Articles of Incorporation

The affirmative vote of holders of at least 80% of the voting power of our outstanding shares of stock will generally be required to amend the provisions of our articles of incorporation.

Amendment of Bylaws

Our amended and restated bylaws will generally be subject to alteration, amendment or repeal, and new bylaws may be adopted, with:

 

   

The affirmative vote of a majority of the whole Board of Directors; or

 

   

The affirmative vote of holders of 80% of the total voting power of our outstanding securities entitled to vote on the proposed bylaw change or adoption, voting together as a single class.

Requirements for Advance Notification of Shareholder Nomination and Proposals

Under our amended and restated bylaws, shareholders of record will be able to nominate persons for election to our Board of Directors or bring other business constituting a proper matter for shareholder action only by providing proper notice to our secretary. Proper notice must be generally received not less 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year (or, in the case of the first annual meeting, not less than 90 days nor more than 120 days prior to 2020); provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days prior to such anniversary or delayed more than 70 days after such anniversary, then to be timely, such notice must be received no earlier than 120 days prior to such annual meeting and no later than the later of 70 days prior to the date of the meeting or the 10th day following the day on which announcement of the date of the meeting was first made. The notice must include, among other information, the name and address of the shareholder giving the notice, information about the shareholder’s ownership of securities in the company, certain information relating to each person whom such shareholder proposes to nominate for election as a director and a brief description of any business such shareholder proposes to bring before the meeting and the reason for bringing such proposal.

Limitation of Liability of Directors and Officers

Our amended and restated articles of incorporation provide that no director will be personally liable to us or our shareholders for monetary damages for breach of any duty as a director, except as required by applicable law, as in effect from time to time. Currently, North Carolina Law requires that personal liability be imposed on directors only for the following:

 

   

Any act or omission that the director at the time of such breach knew or believed was clearly in conflict with our best interest;

 

141


Table of Contents
   

The authorization of unlawful distributions as provided in Section 55-8-33 of North Carolina Law; and

 

   

Any transaction from which the director derived an improper personal benefit.

As a result, neither we nor our shareholders have the right, including through shareholders’ derivative suits on our behalf, to recover monetary damages against a director for breach of any duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above.

Our amended and restated articles of incorporation will provide that, to the fullest extent permitted by North Carolina Law, we will indemnify any of our officers and directors in connection with any threatened, pending or completed action, suit or proceeding to which such person is, or is threatened to be made, a party, whether civil, criminal, administrative or investigative, arising out of the fact that the person is or was our director or officer, or served any other enterprise at our request as a director or officer.

We will reimburse the expenses, including attorneys’ fees, incurred by a person indemnified by this provision in connection with any proceeding, including in advance of its final disposition, to the fullest extent permitted by North Carolina Law. Amending this provision will not reduce our indemnification obligations relating to actions taken before an amendment.

We expect to maintain insurance for our officers and directors against certain liabilities, including liabilities under the Securities Act, under insurance policies, the premiums of which will be paid by us. The effect of these will be to indemnify any of our officers or directors against expenses, judgments, attorneys’ fees and other amounts paid in settlements incurred by an officer or director arising from claims against such persons for conduct in their capacities as officers or Directors of Kontoor Brands.

The limitation of liability and indemnification provisions that will be in our amended and restated articles of incorporation may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against our directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. In addition, the indemnification provisions may adversely affect your investment to the extent that, in a class action or direct suit, we are required to pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any Kontoor Brands Directors, officers or employees for which indemnification is sought.

Forum Selection

Unless we consent in writing to the selection of an alternative forum, the North Carolina Business Court (or another state or federal court located in North Carolina, if a dispute does not qualify for designation to the North Carolina Business Court or the North Carolina Business Court otherwise lacks jurisdiction) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Kontoor Brands, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of Kontoor Brands to Kontoor Brands or Kontoor Brands’ shareholders, (iii) any action asserting a claim arising pursuant to any provision of North Carolina Law, or (iv) any action asserting a claim relating to the internal affairs doctrine. If an action described in the preceding sentence is filed in a court other than as specified above in the name of any shareholder, such shareholder shall be deemed to have consented to (a) personal jurisdiction before any state or federal court located in North Carolina, as appropriate, in connection with any action brought in any such court to enforce our amended and restated articles of incorporation and (b) having service of process made upon such shareholder in any such action by service upon such shareholder’s counsel in the action as agent for such shareholder.

The forum selection provision described above is intended to apply to the fullest extent permitted by law. However, the enforceability of forum selection provisions in the governing documents of other companies has been challenged in legal proceedings, and it is possible that a court could find our forum selection provision to be inapplicable or unenforceable with respect to actions arising under the Securities Act or the Exchange Act. Even if it

 

142


Table of Contents

is accepted that our forum selection provision applies to actions arising under the Securities Act, shareholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

Anti-Takeover Effects of Some Provisions

Some of the provisions of our amended and restated articles of incorporation and amended and restated bylaws (as described above), including the shareholder approval requirements for certain business combinations (as described below), could make the following more difficult:

 

   

Acquisition of control of us by means of a proxy contest or otherwise, or

 

   

Removal of our incumbent officers and Directors.

These provisions, including our ability to issue preferred stock and the classification of our Board of Directors until 2023, are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection will give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection will outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.

Shareholder Approval of Certain Business Combinations

North Carolina has two primary anti-takeover statutes, the Shareholder Protection Act and the Control Share Acquisition Act, which govern the shareholder approval required for certain business combinations. As permitted by North Carolina Law, we have opted out of both these provisions. Accordingly, we are not subject to any anti-takeover effects of the North Carolina Shareholder Protection Act or Control Share Acquisition Act. However, our amended and restated articles of incorporation require the affirmative vote of holders of at least 80% of the voting power of Kontoor Brands entitled to vote generally in the election of directors, voting together as a single class, to approve certain business combination transactions, which could have the effect of delaying or preventing a change in control of Kontoor Brands.

Distributions of Securities

Kontoor Brands was formed on November 28, 2018, and since its formation, it has not sold any securities, including sales of reacquired securities, new issues (other than to VF pursuant to Section 4(a)(2) of the Securities Act in connection with its formation, which Kontoor Brands did not register under the Securities Act because such issuance did not constitute a public offer), securities issued in exchange for property, services or other securities, and new securities resulting from the modification of outstanding securities.

Authorized But Unissued Shares

Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without your approval. We may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of Kontoor Brands by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock will be Computershare Trust Company, N.A.

Listing

We have applied to list our common stock on the NYSE under the ticker symbol “KTB.”

 

143


Table of Contents

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form 10 with the SEC with respect to the shares of our common stock being distributed in the Separation as contemplated by this information statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement and the exhibits to the registration statement. For further information with respect to our company and our common stock, please refer to the registration statement, including its exhibits. Statements made in this information statement relating to any contract or other document are not necessarily complete, and you should refer to the exhibits attached to the registration statement for the full text of the actual contract or document. You may review a copy of the registration statement, including its exhibits, at the Internet website maintained by the SEC at www.sec.gov. Information contained on any website referenced in this information statement is not incorporated by reference into this information statement or the registration statement of which this information statement forms a part.

After the Separation, we will become subject to the information and reporting requirements of the Exchange Act, and, in accordance with the Exchange Act, we will file periodic reports, proxy statements and other information with the SEC. Our future filings will be available from the SEC as described above.

 

144


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Index to Combined Financial Statements

TABLE OF CONTENTS

 

 

 

     Page  

Report of Independent Registered Public Accounting Firm

     F-2  

Combined Balance Sheets

     F-3  

Combined Statements of Income

     F-4  

Combined Statements of Comprehensive Income

     F-5  

Combined Statements of Cash Flows

     F-6  

Combined Statements of Equity

     F-7  

Notes to Combined Financial Statements

     F-8  

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of VF Corporation

Opinion on the Financial Statements

We have audited the accompanying combined balance sheets of the Kontoor Brands Business of VF Corporation (the “Company”) as of December 29, 2018 and December 30, 2017 and the related combined statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 29, 2018, including the related notes (collectively referred to as the “combined financial statements”). In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2018 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the combined financial statements, the Company changed the manner in which it accounts for the recognition of current and deferred income taxes for intra-entry asset transfers in 2017 and the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinion

These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s combined financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 of these combined financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined 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 combined 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 combined 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 combined financial statements. We believe that our audits provide a reasonable basis for our opinion.

Significant Transactions with Related Parties

As discussed in Notes 1 and 20 to the combined financial statements, the Company has entered into significant transactions with VF Corporation, the Company’s parent, a related party.

/s/ PricewaterhouseCoopers LLP

Greensboro, North Carolina

March 5, 2019

We have served as the Company’s auditor since 2018.

 

F-2


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Combined Balance Sheets

 

     December  
     2018     2017  
     (In thousands)  

ASSETS

    

Current assets

    

Cash and equivalents

   $ 96,776     $ 80,811  

Accounts receivable, less allowance for doubtful accounts of $10,549 in 2018 and $9,230 in 2017

     252,966       247,612  

Due from related parties, current

     547,690       221,615  

Related party notes receivable

     517,940       547,740  

Inventories

     473,812       440,297  

Other current assets

     52,014       34,901  
  

 

 

   

 

 

 

Total current assets

     1,941,198       1,572,976  

Due from related parties, noncurrent

     611       —    

Property, plant and equipment, net

     138,449       148,250  

Intangible assets, net

     53,059       57,542  

Goodwill

     214,516       219,288  

Other assets

     110,632       128,354  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 2,458,465     $ 2,126,410  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Short-term borrowings

   $ 3,215     $ 4,894  

Accounts payable

     134,129       174,352  

Due to related parties, current

     16,140       35,815  

Related party notes payable

     269,112       269,112  

Accrued liabilities

     194,228       153,678  
  

 

 

   

 

 

 

Total current liabilities

     616,824       637,851  

Other liabilities

     118,189       128,489  

Due to related parties, noncurrent

     —         2,177  

Commitments and contingencies

    
  

 

 

   

 

 

 

Total liabilities

     735,013       768,517  
  

 

 

   

 

 

 

Equity

    

Parent company investment

     1,868,634       1,480,375  

Accumulated other comprehensive income (loss)

     (145,182     (122,482
  

 

 

   

 

 

 

Total equity

     1,723,452       1,357,893  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 2,458,465     $ 2,126,410  
  

 

 

   

 

 

 

See notes to combined financial statements.

 

F-3


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Combined Statements of Income

 

     Year Ended December  
     2018     2017     2016  
     (In thousands)  

Net revenues (including sales to related parties of $50,962, $45,483 and $46,658 for 2018, 2017 and 2016, respectively)

   $ 2,763,998     $ 2,830,106     $ 2,926,464  

Costs and operating expenses

      

Cost of goods sold (including purchases from related parties of $2,078, $6,779 and $22,244 for 2018, 2017 and 2016, respectively)

     1,649,435       1,658,144       1,711,319  

Selling, general and administrative expenses

     781,521       814,544       806,447  
  

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

     2,430,956       2,472,688       2,517,766  
  

 

 

   

 

 

   

 

 

 

Operating income

     333,042       357,418       408,698  

Related party interest income, net

     7,738       3,372       1,470  

Other interest income, net

     4,567       1,721       1,909  

Other expense, net

     (5,269     (3,358     (1,590
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     340,078       359,153       410,487  

Income taxes

     77,005       242,962       95,457  
  

 

 

   

 

 

   

 

 

 

Net income

   $ 263,073     $ 116,191     $ 315,030  
  

 

 

   

 

 

   

 

 

 

See notes to combined financial statements.

 

F-4


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Combined Statements of Comprehensive Income

 

     Year Ended December  
     2018     2017      2016  
     (In thousands)  

Net income

   $ 263,073     $ 116,191      $ 315,030  

Other comprehensive (loss) income

       

Foreign currency translation, net of related taxes

     (22,700     25,606        (22,095
  

 

 

   

 

 

    

 

 

 

Comprehensive income

   $ 240,373     $ 141,797      $ 292,935  
  

 

 

   

 

 

    

 

 

 

See notes to combined financial statements.

 

F-5


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Combined Statements of Cash Flows

 

     Year Ended December  
     2018     2017     2016  
     (In thousands)  

OPERATING ACTIVITIES

      

Net income

   $ 263,073     $ 116,191     $ 315,030  

Adjustments to reconcile net income to cash (used) provided by operating activities:

      

Depreciation and amortization

     31,035       33,628       34,151  

Stock-based compensation

     14,894       13,021       9,386  

Provision for doubtful accounts

     6,484       4,571       3,751  

Deferred income taxes

     1,501       36,490       6,158  

Other, net

     3,790       905       (1,352

Changes in operating assets and liabilities:

      

Accounts receivable

     (17,743     (36,389     (4,636

Inventories

     (45,757     22,069       (23,402

Accounts payable

     (37,598     4,147       (17,241

Income taxes

     6,328       (3,308     16,001  

Accrued liabilities

     53,071       5,612       20,581  

Due from related parties

     (326,075     (14,523     (32,449

Due to related parties

     (22,524     (20,296     (3,522

Other assets and liabilities

     (26,782     6,483       1,496  
  

 

 

   

 

 

   

 

 

 

Cash (used) provided by operating activities

     (96,303     168,601       323,952  
  

 

 

   

 

 

   

 

 

 

INVESTING ACTIVITIES

      

Capital expenditures

     (21,038     (25,584     (27,575

Software purchases

     (1,663     (879     (570

Amounts advanced for related party notes receivable

     —         (29,800     —    

Repayments received from related party notes receivable

     29,800       —         102  

Other, net

     4,230       (1,354     2,864  
  

 

 

   

 

 

   

 

 

 

Cash provided (used) by investing activities

     11,329       (57,617     (25,179
  

 

 

   

 

 

   

 

 

 

FINANCING ACTIVITIES

      

Net (decrease) increase in short-term borrowings

     (915     (256     1,190  

Amounts received from related party notes payable

     —         —         52  

Net transfers from (to) Parent(1)

     107,246       (119,563     (321,657
  

 

 

   

 

 

   

 

 

 

Cash provided (used) by financing activities

     106,331       (119,819     (320,415
  

 

 

   

 

 

   

 

 

 

Effect of foreign currency rate changes on cash and cash equivalents

     (5,392     2,798       (8,032
  

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

     15,965       (6,037     (29,674

Cash and cash equivalents—beginning of year

     80,811       86,848       116,522  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents—end of year

   $ 96,776     $ 80,811     $ 86,848  
  

 

 

   

 

 

   

 

 

 

 

(1) 

See Basis of Presentation section within Note 1.

See notes to combined financial statements.

 

F-6


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Combined Statements of Equity

 

     Parent Company
Investment
    Accumulated Other
Comprehensive
Income (Loss)
    Total Equity  
     (In thousands)  

Balance, December 2015

   $ 1,453,715     $ (125,993   $ 1,327,722  

Net income

     315,030       —         315,030  

Foreign currency translation

     —         (22,095     (22,095

Net transfers to Parent

     (227,810     —         (227,810
  

 

 

   

 

 

   

 

 

 

Balance, December 2016

     1,540,935       (148,088     1,392,847  

Adoption of new accounting standard

     (70,209     —         (70,209

Net income

     116,191       —         116,191  

Foreign currency translation

     —         25,606       25,606  

Net transfers to Parent

     (106,542     —         (106,542
  

 

 

   

 

 

   

 

 

 

Balance, December 2017

     1,480,375       (122,482     1,357,893  

Adoption of new accounting standard

     3,047       —         3,047  

Net income

     263,073       —         263,073  

Foreign currency translation

     —         (22,700     (22,700

Net transfers from Parent

     122,139       —         122,139  
  

 

 

   

 

 

   

 

 

 

Balance, December 2018

   $ 1,868,634     $ (145,182   $ 1,723,452  
  

 

 

   

 

 

   

 

 

 

See notes to combined financial statements.

 

F-7


Table of Contents

KONTOOR BRANDS BUSINESS OF VF CORPORATION

Notes to Combined Financial Statements

NOTE 1—BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background

On August 13, 2018, VF Corporation (“VF” or “Parent”) announced that its Board of Directors had approved a plan to spinoff its Jeanswear business, comprising its global Jeanswear-related businesses and its VF Outlet™ stores (collectively, the “Company,” “we,” “us,” or “our”), and separate into two distinct, publicly traded companies. Under the plan, VF would execute a tax-free spinoff of the Company by way of a pro-rata distribution of common stock of the Company to VF’s shareholders of record as of the spinoff transaction record date. In connection with the spinoff transaction, VF is being treated as the accounting spinnor, consistent with the legal form of the transaction. Following the spinoff transaction, the Company will operate under the name Kontoor Brands, Inc.

We expect the transaction to be completed during the Company’s second quarter of 2019, which is VF’s first quarter of Fiscal 2020. The completion of the spinoff is subject to certain conditions, including effectiveness of the appropriate filings with the Securities and Exchange Commission (“SEC”), receipt of opinions of the Tax Advisers and final approval by VF’s Board of Directors. There are no assurances as to when the planned spinoff will be completed, if at all.

Description of Business

The Company is a global denim and casual apparel company headquartered in the United States (U.S.), which also operates VF Outlet™ stores in the U.S. The Company primarily designs, produces, procures, markets and distributes apparel. The Company’s products are sold in the U.S. through mass merchants, specialty stores, mid-tier and traditional department stores, Company-operated stores and online. The Company’s products are sold internationally, primarily in Europe and Asia, through department, specialty and concession retail stores, independently operated partnership stores and online. The Company’s products are marketed primarily under the Company-owned brand names of Wrangler® and Lee®. VF Outlet™ stores carry Wrangler® and Lee® branded products, as well as merchandise that is specifically purchased for sale in our stores, including products purchased from VF.

Basis of Presentation

These combined financial statements reflect the historical financial position, results of operations and cash flows of the Company for the periods presented as historically managed within VF. The combined financial statements have been derived from the consolidated financial statements and accounting records of VF and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had it operated as an independent company during the periods presented.

The combined statements of income include costs for certain centralized functions and programs provided and administered by VF that are charged directly to VF’s businesses, including the Company. These centralized functions and programs include, but are not limited to, information technology, human resources, accounting shared services, supply chain, insurance, and the service cost component of net periodic pension costs. During the years ended December 2018, 2017 and 2016, $106.1 million, $133.1 million and $119.7 million, respectively, of such costs were directly charged to the Company and were included in cost of goods sold and selling, general and administrative expenses in the accompanying combined statements of income.

 

F-8


Table of Contents

In addition, for purposes of preparing these combined financial statements on a “carve-out” basis, we have allocated a portion of VF’s total corporate expenses to the Company. These expense allocations include the cost of corporate functions and resources provided by or administered by VF including, but not limited to, executive management, finance, accounting, legal, human resources, and the related benefit costs associated with such functions, such as stock-based compensation. Allocations also include the cost of VF’s Greensboro, North Carolina corporate headquarters. During the years ended December 2018, 2017 and 2016, the Company was allocated $29.0 million, $32.9 million and $28.7 million, respectively, of such corporate expenses, which were included within selling, general and administrative expenses in the combined statements of income. The Company was also allocated a benefit of $5.1 million in 2018, a benefit of $0.2 million in 2017 and expense of $15.4 million in 2016 for the non-service components of net periodic pension costs, which were included in selling, general and administrative expenses in the combined statements of income. In addition, the Company was allocated $3.5 million and $1.2 million for the Company’s portion of curtailment and pension settlement charges, respectively, in 2018, and $21.5 million for the Company’s portion of a pension settlement charge in 2016 recorded by VF. The curtailment and settlement charges were included in selling, general and administrative expenses. See Note 11 for additional information.

Costs were allocated to the Company based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenues, cost of goods sold or square footage, as applicable. Management considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, the Company during the periods presented. However, the allocations may not reflect the expenses the Company would have incurred if the Company had been a standalone company for the periods presented. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Going forward, the Company may perform these functions using its own resources or outsourced services. For a period following the planned separation, however, some of these functions will continue to be provided by VF under a transition services agreement. Additionally, the Company may provide some services to VF under a transition services agreement. The Company may also enter into certain commercial arrangements with VF in connection with the planned separation.

VF utilizes a centralized approach to cash management and financing its operations. The cash and equivalents held by VF at the corporate level are not specifically identifiable to the Company and therefore have not been reflected in the Company’s combined balance sheets. Cash transfers between VF and the Company are accounted for through Parent company investment. Cash and equivalents in the combined balance sheets represent cash and equivalents held by legal entities that will be transferred to the Company or amounts otherwise attributable to the Company.

The combined financial statements include certain assets and liabilities that have historically been held at the VF corporate level but are specifically identifiable or otherwise attributable to the Company. VF’s third-party long-term debt and the related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of such debt.

In 2019, VF decided to cease its operations in Argentina, including those of the Company. VF will retain all assets and liabilities of the Company’s operations in Argentina. VF and the Company also decided in 2019 to exit the Company’s transportation fleet. The results of the Company’s transportation fleet and operations in Argentina, and related assets and liabilities, are included in the combined financial statements.

All intracompany transactions have been eliminated. All transactions between the Company and VF have been included in these combined financial statements. For those transactions between the Company and VF that are historically settled in cash, the Company has reflected such balances in the combined balance sheets as due from related parties or due to related parties. The aggregate net effect of transactions between the Company and VF that are not historically settled in cash has been reflected in the combined balance sheets as Parent company investment and in the combined statements of cash flows as net transfers to Parent.

 

F-9


Table of Contents

Fiscal Year

The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. All references to “2018,” “2017” and “2016” relate to the 52-week fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, respectively. Certain foreign subsidiaries report using a December 31 year-end due to local statutory requirements.

Use of Estimates

In preparing the combined financial statements in accordance with GAAP, management makes estimates and assumptions that affect amounts reported in the combined financial statements and accompanying notes. Actual results may differ from those estimates.

Foreign Currency Translation and Transactions

The financial statements of most foreign subsidiaries are measured using the foreign currency as the functional currency. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars using exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates during the period. Resulting translation gains and losses are reported in other comprehensive income (loss) (“OCI”). Beginning July 1, 2018, the Company began accounting for Argentina as highly inflationary because the projected three-year cumulative inflation rate exceeded 100%.

Foreign currency transactions are denominated in a currency other than the functional currency of a particular subsidiary. These transactions generally result in receivables or payables that are fixed in the foreign currency. Transaction gains or losses arise when exchange rate fluctuations either increase or decrease the functional currency cash flows from the originally recorded transaction. As discussed in Note 20, the Company enters into contracts with VF to manage foreign currency risk on certain of these transactions. Foreign currency transaction gains and losses reported in the combined statements of income, net of the related hedging gains and losses, were a loss of $3.4 million in 2018, loss of $0.8 million in 2017 and a gain of $3.8 million in 2016.

Cash and Equivalents

Cash and equivalents are demand deposits, receivables from third-party credit card processors, and highly liquid investments that mature within three months of their purchase dates. Cash equivalents totaling $24.2 million and $30.1 million at December 2018 and 2017, respectively, consist of money market funds and short-term time deposits.

Accounts Receivable

Upon adoption of the new revenue recognition accounting standard in 2018 (see Recently Adopted Accounting Standards section below), trade accounts receivable are recorded at invoiced amounts, less contractual allowances for trade terms, sales incentive programs and discounts. Prior to the adoption of the new revenue recognition accounting standard, trade accounts receivable were recorded at invoiced amounts, less estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and returns as discussed in the Revenue Recognition section below. Royalty receivables are recorded at amounts earned based on the licensees’ sales of licensed products, subject in some cases to contractual minimum royalties due from individual licensees.

 

     2018      2017  
     (In thousands)  

Trade

   $ 253,047      $ 239,549  

Royalty and other

     10,468        17,293  
  

 

 

    

 

 

 

Total accounts receivable

     263,515        256,842  

Less allowance for doubtful accounts

     10,549        9,230  
  

 

 

    

 

 

 
   $ 252,966      $ 247,612  
  

 

 

    

 

 

 

 

F-10


Table of Contents

The Company maintains an allowance for doubtful accounts for estimated losses that will result from the inability of customers and licensees to make required payments. The allowance is determined based on review of specific customer accounts where collection is doubtful, as well as an assessment of the collectability of total receivables considering the aging of balances, historical and anticipated trends, and current economic conditions. All accounts are subject to ongoing review of ultimate collectability. Receivables are written off against the allowance when it is probable the amounts will not be recovered. The following provides changes in our allowance for doubtful accounts in 2018, 2017 and 2016.

 

     2018     2017     2016  
     (In thousands)  

Balance at beginning of year

   $ 9,230     $ 5,176     $ 4,849  

Allowance provided

     7,025       4,571       3,751  

Deductions including write offs, recoveries, and foreign currency effects

     (5,706     (517     (3,424
  

 

 

   

 

 

   

 

 

 

Balance at end of year

   $ 10,549     $ 9,230     $ 5,176  
  

 

 

   

 

 

   

 

 

 

Sale of Accounts Receivable

VF has an agreement with a financial institution to sell selected trade accounts receivable on a recurring, nonrecourse basis. This agreement was amended in August 2018 to permit up to $377.5 million of VF’s accounts receivable to be sold to the financial institution and remain outstanding at any point in time, compared to the $367.5 million limit in place at December 2017. The Company has a separate agreement with VF, pursuant to which the Company’s trade accounts receivable are sold as part of this program. The Company does not retain any interests in the sold accounts receivable but continues to service and collect outstanding accounts receivable on behalf of VF.

The Company removes the sold balances from accounts receivable in the combined balance sheet at the time of sale. The amount due from VF for these sales is separately recorded in due from related parties in the combined balance sheet, as VF periodically remits cash to the Company for these sales. See Note 20 for disclosures of related party balances.

During 2018, 2017 and 2016, the Company sold total accounts receivable to VF of $1,057.0 million, $1,101.1 million and $1,177.8 million, respectively. As of December 2018 and 2017, $544.9 million and $221.6 million, respectively, of the sold accounts receivable had been removed from accounts receivable and reflected in due from related parties in the combined balance sheet.

The Company’s portion of the funding fee charged by the financial institution is included in other expense, net in the combined statements of income, and was $5.1 million in 2018, $3.6 million in 2017 and $3.0 million in 2016. Net proceeds of this program are classified in operating activities in the combined statements of cash flows.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method and is net of discounts or rebates received from vendors.

Long-lived Assets, Including Intangible Assets and Goodwill

Property, plant and equipment, intangible assets and goodwill are initially recorded at cost. The Company capitalizes improvements to property, plant and equipment that substantially extend the useful life of the asset, and interest cost incurred during construction of major assets. Repair and maintenance costs are expensed as incurred.

 

F-11


Table of Contents

Cost for acquired intangible assets represents the fair value at acquisition date, which is generally based on the present value of expected cash flows. Trademark intangible assets represent individual acquired trademarks, some of which are registered in multiple countries. Customer relationship intangible assets are based on the value of relationships with wholesale customers in place at the time of acquisition.

Goodwill represents the excess of cost of an acquired business over the fair value of net tangible assets and identifiable intangible assets acquired. Goodwill is assigned at the reporting unit level.

Depreciation of property, plant and equipment is computed using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 10 years for machinery and equipment and up to 40 years for buildings. Amortization expense for leasehold improvements is recognized over the shorter of their estimated useful lives or the lease terms, and is included in depreciation and amortization expense.

Intangible assets determined to have indefinite lives, consisting of major trademarks and trade names, are not amortized. Other intangible assets include customer relationships and trademarks determined to have a finite life, and are amortized over their estimated useful lives ranging from 15 to 16 years. Amortization of other intangible assets is computed using straight-line or accelerated methods consistent with the timing of the expected benefits to be received.

Depreciation and amortization expense related to producing or otherwise obtaining finished goods inventories is included in cost of goods sold, and all other depreciation and amortization expense is included in selling, general and administrative expenses.

The Company’s policy is to review property, plant and equipment and amortizable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If forecasted undiscounted cash flows to be generated by the asset are not expected to recover the asset’s carrying value, the estimated fair value of the asset is calculated and an impairment charge is recorded if the asset’s carrying value exceeds its estimated fair value.

The Company’s policy is to evaluate indefinite-lived intangible assets and goodwill for possible impairment as of the beginning of the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying value. The Company may first assess qualitative factors as a basis for determining whether it is necessary to perform quantitative impairment testing. If the Company determines that it is not more likely than not that the fair value of an asset or reporting unit is less than its carrying value, then no further testing is required. Otherwise, the assets must be quantitatively tested for impairment.

An indefinite-lived intangible asset is quantitatively evaluated for possible impairment by comparing the estimated fair value of the asset with its carrying value. An impairment charge is recorded if the carrying value of the asset exceeds its estimated fair value.

Goodwill is quantitatively evaluated for possible impairment by comparing the estimated fair value of a reporting unit with its carrying value, including the goodwill assigned to that reporting unit. An impairment charge is recorded if the carrying value of the reporting unit exceeds its estimated fair value.

Revenue Recognition

As discussed in the Recently Adopted Accounting Standards section below, the Company adopted the new revenue recognition accounting standard on December 31, 2017. Accordingly, revenue in 2018 is recognized when performance obligations under the terms of a contract with the customer are satisfied based on the transfer of control of promised goods or services. The transfer of control typically occurs at a point in time based on consideration of when the customer has i) an obligation to pay for, ii) physical possession of, iii) legal title to, iv)

 

F-12


Table of Contents

risks and rewards of ownership of and v) accepted the goods or services. The timing of revenue recognition within the wholesale channels occurs either on shipment or delivery of goods based on contractual terms with the customer. The timing of revenue recognition in the direct-to-consumer channels generally occurs at the point of sale within Company-operated or concession retail stores and either on shipment or delivery of goods for e-commerce transactions based on contractual terms with the customer. For finished products shipped directly to customers from our suppliers, the Company’s promise to the customer is a performance obligation to provide the specified goods and the Company has discretion in establishing pricing, and thus the Company is the principal in the arrangement and revenue is recognized on a gross basis at the transaction price.

The duration of contractual arrangements with our customers in the wholesale and direct-to-consumer channels is typically less than one year. Payment terms with customers are generally between 30 and 60 days. The Company does not adjust the promised amount of consideration for the effects of a significant financing component as it is expected, at contract inception, that the period between the transfer of the promised good or service to the customer and the customer payment for the good or service will be one year or less.

The amount of revenue recognized in the wholesale and direct-to-consumer channels reflects the expected consideration to be received for providing the goods or services to the customer, which includes estimates for variable consideration. Variable consideration includes allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and product returns. Estimates of variable consideration are determined at contract inception and reassessed at each reporting date, at a minimum, to reflect any changes in facts and circumstances. The Company utilizes the expected value method in determining its estimates of variable consideration, based on evaluations of specific product and customer circumstances, historical and anticipated trends, and current economic conditions.

Revenue from the sale of gift cards is deferred and recorded as a contract liability until the gift card is redeemed by the customer, factoring in breakage as appropriate, which considers whether the Company has a legal obligation to remit the value of the unredeemed gift card to any jurisdiction under unclaimed property regulations.

The VF Outlet™ stores maintain customer loyalty programs where customers earn rewards from qualifying purchases, which are redeemable for discounts on future purchases or other rewards. For its customer loyalty programs, the Company estimates the standalone selling price of the loyalty rewards and allocates a portion of the consideration for the sale of products to the loyalty points earned. The deferred amount is recorded as a contract liability, and is recognized as revenue when the points are redeemed or when the likelihood of redemption is remote.

The Company has elected to treat all shipping and handling activities as fulfillment costs and recognize the costs as selling, general and administrative expenses at the time the related revenue is recognized. Shipping and handling costs billed to customers are included in net revenues. Sales taxes and value added taxes collected from customers and remitted directly to governmental authorities are excluded from the transaction price.

The Company has licensing agreements for its symbolic intellectual property, most of which include minimum guaranteed royalties. Royalty income is recognized as earned over the respective license term based on the greater of minimum guarantees or the licensees’ sales of licensed products at rates specified in the licensing contracts. Royalty income related to the minimum guarantees is recognized using a measure of progress with variable amounts recognized only when the cumulative earned royalty exceeds the minimum guarantees. As of December 2018, the Company expects to recognize $44.4 million of fixed consideration related to the future minimum guarantees in effect under its licensing agreements and expects such amounts to be recognized over time through March 2023. The variable consideration is not disclosed as a remaining performance obligation as the licensing arrangements qualify for the sales-based royalty exemption. Royalty income was included in net revenues in the combined statements of income and was $32.7 million, $30.5 million and $30.4 million in 2018, 2017 and 2016, respectively.

 

F-13


Table of Contents

The Company has applied the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.

For 2017 and 2016, prior to the adoption of the new revenue recognition accounting standard, revenue was recognized when (i) there is a contract or other arrangement of sale, (ii) the sales price is fixed or determinable, (iii) title and the risks of ownership have been transferred to the customer and (iv) collection of the receivable is reasonably assured. Sales to wholesale customers were recognized when title and the risks and rewards of ownership had passed to the customer, based on the terms of sale. E-commerce sales were generally recognized when the product had been received by the customer. Sales at the Company-operated and concession retail stores were recognized at the time products were purchased by consumers.

Revenue from the sale of gift cards was deferred until the gift card was redeemed by the customer or the Company determined that the likelihood of redemption was remote and that it did not have a legal obligation to remit the value of the unredeemed gift card to any jurisdiction under unclaimed property regulations.

The Company sponsored customer loyalty programs where customers earned rewards from qualifying purchases or activities. The Company recognized revenue when (i) rewards were redeemed by the customer, (ii) points or certificates expired or (iii) a breakage factor was applied based on historical redemption patterns.

Net revenues reflected adjustments for estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and returns. These allowances were estimated based on evaluations of specific product and customer circumstances, historical and anticipated trends and current economic conditions.

Shipping and handling costs billed to customers were included in net revenues. Sales taxes and value added taxes collected from customers and remitted directly to governmental authorities were excluded from net revenues.

Royalty income was recognized as earned based on the greater of the licensees’ sale of licensed products at rates specified in the licensing contracts or contractual minimum royalty levels.

Cost of Goods Sold

Cost of goods sold for Company-manufactured goods includes all materials, labor and overhead costs incurred in the production process. Cost of goods sold for purchased finished goods includes the purchase costs and related overhead. In both cases, overhead includes all costs related to manufacturing or purchasing finished goods, including costs of planning, purchasing, quality control, depreciation, freight, duties, royalties paid to third parties and shrinkage. Cost of goods sold also includes restructuring charges and the service cost component of net periodic pension costs related to these functions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include costs of product development, selling, marketing and advertising, Company-operated retail stores, concession retail stores, warehousing, distribution, shipping and handling, licensing and administration. Selling, general and administrative expenses also include restructuring charges and the service cost component of net periodic pension costs related to these functions, along with the non-service components of net periodic pension costs (including settlement charges). Advertising costs are expensed as incurred and totaled $127.8 million in 2018, $137.3 million in 2017 and $131.9 million in 2016. Advertising costs include cooperative advertising payments made to the Company’s customers as reimbursement for their costs of advertising the Company’s products and totaled $7.2 million in 2018, $9.4 million in 2017 and $10.8 million in 2016. Shipping and handling costs for delivery of products to customers totaled $59.7 million in 2018, $56.4 million in 2017 and $54.2 million in 2016. Expenses related to royalty income were $1.3 million in 2018, $1.8 million in 2017 and $2.1 million in 2016.

 

F-14


Table of Contents

Rent Expense

The Company enters into noncancelable operating leases for office space, retail stores, distribution facilities and equipment. Leases for real estate typically have initial terms ranging from 1 to 10 years, generally with renewal options. Leases for equipment typically have initial terms ranging from 1 to 10 years. Most leases have fixed rentals, with many of the real estate leases requiring additional payments for real estate taxes and occupancy-related costs. Contingent rent is owed when sales at individual retail store locations exceed a stated base amount, and is recognized when the liability is probable. Rent expense for leases having rent holidays, landlord incentives or scheduled rent increases is recorded on a straight-line basis over the lease term beginning with the earlier of the lease commencement date or the date the Company takes possession or control of the leased premises. The amount of the excess straight-line rent expense over scheduled payments is recorded as a deferred liability.

Self-insurance

VF is self-insured for a significant portion of its employee medical, workers’ compensation, vehicle, property and general liability exposures and records an accrual for its retained liability. VF’s businesses, including the Company, are charged directly for their estimated share of the cost of these self-insured programs, and the Company’s share of the cost is included in the combined statements of income. The Company’s estimated share of VF’s retained liability for these programs has been reflected in the combined balance sheets within accrued liabilities.

Stock-Based Compensation

Certain Company employees participate in the stock-based compensation plan sponsored by VF. VF’s stock-based compensation awards consist of stock options, restricted stock units, and restricted stock, and are based on VF’s common shares. As such, the awards to Company employees are reflected in Parent company investment within the combined statements of equity at the time they are expensed. Compensation costs for all awards expected to vest are recognized over the shorter of the requisite service period or the vesting period and are included in costs of goods sold and selling, general and administrative expenses in the combined statements of income. The combined statements of income also include an allocation of VF’s corporate and shared employee stock-based compensation expenses. See Note 13 for additional information.

Pension Benefits

Certain Company employees participate in U.S. and international defined benefit pension plans sponsored by VF (“Shared Plans”), which include participants of other VF operations. We account for our participation in the Shared Plans as a multiemployer benefit plan. Accordingly, net periodic pension costs specifically related to Company employees have been reported in the combined statements of income, and the Company does not record an asset or liability to recognize the funded or unfunded status of the Shared Plans. See Note 11 for additional information.

Transaction Costs

The combined statement of income for 2018 includes $6.3 million of transaction costs for advisors, attorneys and other third parties directly related to the spinoff transaction. Since VF is paying for these transaction costs, no accrual has been reflected in the combined balance sheet at December 2018.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standard Codification Topic 740, Income Taxes (“ASC 740”). Income taxes as presented in the Company’s combined financial statements have

 

F-15


Table of Contents

been allocated in a manner that is systematic, rational, and consistent with the broad principles of ASC 740. Historically, the Company’s operations are included in the VF federal consolidated tax return, certain foreign tax returns, and certain state tax returns. For the purposes of these financial statements, the Company’s income tax provision was computed as if the Company filed separate tax returns (i.e., as if the Company had not been included in the consolidated income tax return group with its Parent). The separate return method applies ASC 740 to the combined financial statements of each member of a consolidated tax group as if the group member were a separate taxpayer. As a result, actual tax transactions included in the consolidated financial statements of VF may not be included in these combined financial statements. Further, the Company’s tax results as presented in the combined financial statements may not be reflective of the results that the Company expects to generate in the future. Also, the tax treatment of certain items reflected in the combined financial statements may not be reflected in the consolidated financial statements and tax returns of VF. It is conceivable that items such as net operating losses, other deferred taxes, uncertain tax positions and valuation allowances may exist in the combined financial statements that may or may not exist in VF’s consolidated financial statements.

Since the Company’s results are included in VF’s consolidated tax returns, payments to certain tax authorities are made by VF, and not by the Company. For tax jurisdictions where the Company is included with VF in a consolidated tax filing, the Company does not maintain taxes payable to or from VF and the payments are deemed to be settled immediately with the legal entities paying the tax in the respective tax jurisdictions through changes in Parent company investment.

Deferred income tax assets and liabilities, as presented in the combined balance sheets, reflect the net future tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess whether deferred tax assets will be realized and the adequacy of deferred tax liabilities, including the results of local, state, federal or foreign statutory tax audits and changes in estimates and judgments used. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (likelihood of more than 50%) that some portion or all of the deferred tax asset will not be realized. Accrued income taxes in the combined balance sheets includes unrecognized income tax benefits along with related interest and penalties, appropriately classified as current or noncurrent. All deferred tax assets and liabilities are classified as noncurrent in the combined balance sheets. The provision for income taxes also includes estimated interest and penalties related to uncertain tax positions.

Parent Company Investment

Parent company investment in the combined balance sheets represents VF’s historical investment in the Company, the accumulated net earnings after taxes and the net effect of the transactions with and allocations from VF. See the Basis of Presentation section above and Note 20 for additional information.

Concentration of Risks

The Company markets products to a broad customer base throughout the world. Products are sold at a range of price points through various wholesale and direct-to-consumer channels. The Company’s largest customer, a U.S.-based retailer, accounted for 32% of 2018 total revenues, and the top ten customers accounted for 53% of 2018 total revenues. Sales are generally made on an unsecured basis under customary terms that may vary by product, channel of distribution or geographic region. The Company continuously monitors the creditworthiness of its customers and has established internal policies regarding customer credit limits. The Company is not aware of any issues with respect to relationships with any of its top customers.

Legal and Other Contingencies

Management periodically assesses liabilities and contingencies in connection with legal proceedings and other claims that may arise from time to time. When it is probable that a loss has been or will be incurred, an estimate of the loss is recorded in the combined financial statements. Estimates of losses are adjusted when

 

F-16


Table of Contents

additional information becomes available or circumstances change. A contingent liability is disclosed when there is at least a reasonable possibility that a material loss may have been incurred. Management believes that the outcome of any outstanding or pending matters, individually and in the aggregate, will not have a material adverse effect on the combined financial statements.

Recently Adopted Accounting Standards

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory,” an update to the accounting guidance related to inventory that changes the measurement principle from lower of cost or market to lower of cost or net realizable value. This guidance became effective at the beginning of 2017, but did not impact the combined financial statements.

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” an update to the accounting guidance that addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance became effective for the Company at the beginning of 2018 but did not impact the combined statements of cash flows.

In October 2016, the FASB issued ASU No. 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” an update to the accounting guidance on the recognition of current and deferred income taxes for intra-entity asset transfers. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company early adopted this guidance at the beginning of 2017 using the modified retrospective method, which requires a cumulative adjustment to Parent company investment as of the beginning of the period of adoption. The cumulative adjustment to the January 1, 2017 combined balance sheet was a reduction to both other assets and Parent company investment of $70.2 million.

In November 2016, the FASB issued ASU No. 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash,” an update that requires restricted cash and restricted cash equivalents in the statement of cash flows to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flow. This guidance became effective for the Company at the beginning of 2018 but did not have a material impact to the combined statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” an update that eliminates the second step from the quantitative goodwill impairment test. The single step quantitative test requires companies to compare the fair value of a reporting unit with its carrying amount and record an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. The Company will continue to have the option of first performing a qualitative assessment to determine whether it is necessary to complete the quantitative goodwill impairment test. The Company early adopted this guidance in the fourth quarter of 2017, but it did not impact the combined financial statements.

In May 2017, the FASB issued ASU No. 2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” an update that amends the scope of modification accounting for share-based payment arrangements. This update provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. This guidance became effective for the Company at the beginning of 2018 but did not impact the combined financial statements.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the “Tax Act”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that companies must make a policy decision to either record deferred taxes related to GILTI inclusions or treat

 

F-17


Table of Contents

any taxes on GILTI inclusions as period costs. The Company completed its analysis related to this accounting policy election and treated the taxes resulting from GILTI as a current-period expense.

In March 2018, the FASB issued ASU No. 2018-05,Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” which allowed the Company to record provisional amounts in earnings for the year ended December 30, 2017 due to the complexities involved in accounting for the enactment of the Tax Act. The Company recognized the estimated income tax effects of the Tax Act in its 2017 combined financial statements in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”). The Company finalized the accounting for the Tax Act in 2018. Refer to Note 14 for additional income tax disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, a new accounting standard on revenue recognition that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The FASB subsequently issued updates to the standard to provide additional clarification on specific topics. Collectively, the guidance is referred to as FASB Accounting Standards Codification Topic 606 (“ASC 606”). The standard prescribes a five-step approach to revenue recognition: (1) identify the contracts with the customer; (2) identify the separate performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The standard also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. The Company adopted this standard on December 31, 2017, utilizing the modified retrospective method and applying this approach to contracts not completed as of that date. The cumulative effect of initially applying the new standard has been recognized in retained earnings. Comparative prior period information has not been restated and continues to be reported under accounting standards in effect for those periods.

The adoption of ASC 606 resulted in a net increase of $3.0 million in the Parent company investment in the combined balance sheet as of December 31, 2017. The cumulative effect adjustment relates primarily to recognition of revenues for certain wholesale and e-commerce transactions at shipment rather than upon delivery to the customer based on our evaluation of the transfer of control of the goods.

Other effects of the adoption include presentation of allowances for sales incentive programs, discounts, markdowns, chargebacks, and returns as refund liabilities rather than as a reduction to accounts receivable and presentation of the right of return asset within other current assets rather than as a component of inventory in the combined balance sheet. Additionally, certain billings associated with the Company’s fleet services that had previously been reported as an offset to expenses are now reported as revenue in the combined statement of income. Refer to Note 2 for additional revenue disclosures.

 

F-18


Table of Contents

The following tables compare amounts reported in accordance with the requirements of ASC 606 to the amounts that would have been reported had the new standard not been applied:

Condensed Combined Balance Sheet

 

     December 2018  
     As Reported      Impact of Adoption      Balances without
Adoption of ASC 606
 
     (In thousands)  

ASSETS

        

Cash and equivalents

   $ 96,776      $ —        $ 96,776  

Accounts receivable, net

     252,966        (48,924      204,042  

Due from related parties, current

     547,690        —          547,690  

Related party notes receivable

     517,940        —          517,940  

Inventories

     473,812        13,287        487,099  

Other current assets

     52,014        (13,134      38,880  
  

 

 

    

 

 

    

 

 

 

Total current assets

     1,941,198        (48,771      1,892,427  

Due from related parties, noncurrent

     611        —          611  

Property, plant and equipment, net

     138,449        —          138,449  

Goodwill and intangible assets, net

     267,575        —          267,575  

Other assets

     110,632        669        111,301  
  

 

 

    

 

 

    

 

 

 

TOTAL ASSETS

   $ 2,458,465      $ (48,102    $ 2,410,363  
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

        

Short-term borrowings

   $ 3,215      $ —        $ 3,215  

Accounts payable

     134,129        —          134,129  

Due to related parties, current

     16,140        —          16,140  

Related party notes payable

     269,112        —          269,112  

Accrued liabilities

     194,228        (43,761      150,467  
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     616,824        (43,761      573,063  

Other liabilities

     118,189        (374      117,815  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     735,013        (44,135      690,878  

Total equity

     1,723,452        (3,967      1,719,485  
  

 

 

    

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 2,458,465      $ (48,102    $ 2,410,363  
  

 

 

    

 

 

    

 

 

 

 

F-19


Table of Contents

Condensed Combined Statement of Income

 

     Twelve Months Ended December 2018  
     As Reported      Impact of
Adoption
     Balances
without
Adoption of
ASC 606
 
     (In thousands)  

Net revenues

   $ 2,763,998      $ (346    $ 2,763,652  

Cost of goods sold

     1,649,435        (2,887      1,646,548  

Selling, general and administrative expenses

     781,521        3,728        785,249  
  

 

 

    

 

 

    

 

 

 

Total costs and operating expenses

     2,430,956        841        2,431,797  
  

 

 

    

 

 

    

 

 

 

Operating income

     333,042        (1,187      331,855  

Interest income and other expense, net

     7,036        —          7,036  
  

 

 

    

 

 

    

 

 

 

Income before income taxes

     340,078        (1,187      338,891  

Income taxes

     77,005        (267      76,738  
  

 

 

    

 

 

    

 

 

 

Net income

   $ 263,073      $ (920    $ 262,153  
  

 

 

    

 

 

    

 

 

 

Condensed Combined Statement of Cash Flows—Operating Activities

 

     Twelve Months Ended December 2018  
     As
Reported
    Impact of
Adoption
    Balances without
Adoption of ASC 606
 
     (In thousands)  

OPERATING ACTIVITIES

      

Net income

   $ 263,073     $ (920   $ 262,153  

Adjustments to reconcile net income to cash used by operating activities:

      

Depreciation and amortization

     31,035       —         31,035  

Other adjustments, net

     26,669       —         26,669  

Changes in operating assets and liabilities:

      

Accounts receivable

     (17,743     41,292       23,549  

Inventories

     (45,757     (9,650     (55,407

Accounts payable

     (37,598     —         (37,598

Income taxes

     6,328       (267     6,061  

Accrued liabilities

     53,071       (43,049     10,022  

Due from related parties

     (326,075     —         (326,075

Due to related parties

     (22,524     —         (22,524

Other assets and liabilities

     (26,782     12,594       (14,188
  

 

 

   

 

 

   

 

 

 

Cash used by operating activities

   $ (96,303   $ —       $ (96,303
  

 

 

   

 

 

   

 

 

 

There was no impact to investing or financing activities within the combined statement of cash flows as a result of the adoption of ASC 606.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” a new accounting standard on leasing. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics, including permitted transition methods. This new standard will require companies to record most leased assets and liabilities on the balance sheets, and also retains a dual model approach for assessing lease classification and recognizing expense. The new standard provides a number of optional practical expedients for transition. The Company will elect the package of practical expedients that must be taken together that allows entities to i) not reassess whether existing contracts contain leases, ii) carryforward the existing lease

 

F-20


Table of Contents

classification and iii) not reassess initial direct costs associated with existing leases. The Company will also elect the land easement expedient that allows entities to not evaluate land easements under the new standard at adoption if they were not previously accounted for as leases. Further, the Company will elect a short-term lease exception policy that permits not applying the recognition requirements of the standard to leases with terms of 12 months or less. A cross-functional implementation team has completed its impact analysis and expects the standard to have a material impact on the combined balance sheet related to the recognition of right-of-use assets and lease liabilities for the Company’s operating leases of real estate space. Refer to Note 16 for disclosure of future minimum lease payments under these arrangements as of December 2018. The Company does not expect the standard to have a material impact on the combined statements of income. The Company will adopt the new standard as of the beginning of the year ending December 28, 2019 (“2019”) utilizing the modified retrospective method and will recognize in equity the immaterial cumulative effect, if any, of initially applying the new standard. The effective date of the standard will be used as the date of initial application and comparative prior period financial information will not be restated.

In June 2016, the FASB issued ASU No. 2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. This guidance will be effective for the Company in the year ending January 2, 2021 (“2020”) with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on the combined financial statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” an update that addresses the effect of the change in the U.S. federal corporate income tax rate due to the enactment of the Tax Act on items within accumulated other comprehensive income (loss). The guidance will be effective for the Company beginning in 2019 with early adoption permitted. The Company does not expect adoption of this guidance to have a material impact on the combined financial statements.

In July 2018, the FASB issued ASU No. 2018-09,Codification Improvements,” an update that provides technical corrections, clarifications and other improvements across a variety of accounting topics. The transition and effective date guidance is based on the facts and circumstances of each update; however, many of them will be effective for the Company beginning in 2019. The Company does not expect the adoption of this guidance to have a material impact on the combined financial statements.

In August 2018, the FASB issued ASU No. 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,” an update that modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The guidance will be effective for the Company beginning in 2020 with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on its disclosures.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” an update that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance will be effective for the Company beginning in 2020 with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on the combined financial statements.

NOTE 2—REVENUES

Performance Obligations

Disclosure is required for the aggregate transaction price allocated to performance obligations that are unsatisfied at the end of a reporting period, unless the optional practical expedients are applicable. The Company

 

F-21


Table of Contents

is electing the practical expedients to not disclose the transaction price allocated to remaining performance obligations for i) variable consideration related to sales-based royalty arrangements and ii) contracts with an original expected duration of one year or less.

As of December 2018, there are no arrangements with transaction price allocated to remaining performance obligations other than (i) contracts for which the Company has applied the practical expedients discussed above and (ii) fixed consideration related to future minimum guarantees discussed in Note 1.

For the twelve months ended December 2018, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.

Contract Balances

Accounts receivable represent the Company’s unconditional right to receive consideration from a customer and are recorded at net invoiced amounts, less an estimated allowance for doubtful accounts.

Contract assets are rights to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time. Once the Company has an unconditional right to consideration under a contract, amounts are invoiced and contract assets are reclassified to accounts receivable. The Company’s primary contract assets relate to sales-based royalty arrangements, which are discussed in more detail within Note 1.

Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer, and thus represent the Company’s obligation to transfer the good or service to the customer at a future date. The Company’s primary contract liabilities relate to gift cards, loyalty programs and sales-based royalty arrangements, which are discussed in more detail within Note 1.

The following table provides information about accounts receivable, contract assets and contract liabilities:

 

     December 2018      At Adoption –December 31,
2017 (a)
 
     (In thousands)  

Accounts receivable, net

   $ 252,966      $ 247,612  

Contract assets (b)

     2,841        118  

Contract liabilities (c)

     2,311        1,903  

 

(a)

The Company adopted ASC 606 on December 31, 2017. Refer to Note 1 for additional information.

(b)

Included in other current assets in the combined balance sheets.

(c)

Included in accrued liabilities in the combined balance sheets.

During 2018, the Company recognized $1.7 million of revenue that was previously included in the contract liability balance. The changes in the contract asset and contract liability balances primarily results from the timing differences between the Company’s satisfaction of performance obligations and the customer’s payment.

Disaggregation of Revenue

The following tables disaggregate our revenues by channel and geography, which provides a meaningful depiction of how the nature, timing and uncertainty of revenues are affected by economic factors. Revenues from licensing arrangements have been included within the U.S. or Non-U.S. Wholesale channels, based on the respective region covered by the agreement. Branded Direct-to-Consumer revenues include the distribution of our products via concession retail locations internationally, Wrangler® and Lee® branded full-price stores globally and Company-owned outlet stores globally. The Branded Direct-to-Consumer channel also includes our

 

F-22


Table of Contents

branded products sold in our U.S.-based VF Outlet™ stores and our products that are marketed and distributed online via www.wrangler.com and www.lee.com. The Other channel includes (i) sales of VF-branded and third-party branded merchandise in our VF Outlet™ stores, (ii) sales to VF for products manufactured in our plants and use of our transportation fleet and (iii) revenues from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018.

 

     Twelve Months Ended December 2018  
     Wrangler      Lee      Other      Total  
     (In thousands)  

Channel revenues

           

U.S. Wholesale

   $ 1,224,218      $ 420,244      $ 30,100      $ 1,674,562  

Non-U.S. Wholesale

     263,675        357,471        —          621,146  

Branded Direct-to-consumer

     114,313        182,528        —          296,841  

Other

     —          —          171,449        171,449  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,602,206      $ 960,243      $ 201,549      $ 2,763,998  
  

 

 

    

 

 

    

 

 

    

 

 

 

Geographic revenues

           

U.S.

   $ 1,303,948      $ 509,160      $ 201,549      $ 2,014,657  

International

     298,258        451,083        —          749,341  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,602,206      $ 960,243      $ 201,549      $ 2,763,998  
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 3—INVENTORIES

 

     2018      2017  
     (In thousands)  

Finished products

   $ 396,345      $ 368,679  

Work-in-process

     37,466        30,261  

Raw materials

     40,001        41,357  
  

 

 

    

 

 

 

Total inventories

   $ 473,812      $ 440,297  
  

 

 

    

 

 

 

NOTE 4—PROPERTY, PLANT AND EQUIPMENT

 

     2018      2017  
     (In thousands)  

Land and improvements

   $ 13,279      $ 14,124  

Buildings and improvements

     187,235        193,155  

Machinery and equipment

     415,682        432,329  
  

 

 

    

 

 

 

Property, plant and equipment, at cost

     616,196        639,608  

Less accumulated depreciation and amortization

     477,747        491,358  
  

 

 

    

 

 

 

Property, plant and equipment, net

   $ 138,449      $ 148,250  
  

 

 

    

 

 

 

Depreciation expense was $23.8 million, $26.1 million and $27.1 million in 2018, 2017 and 2016, respectively.

 

F-23


Table of Contents

NOTE 5—INTANGIBLE ASSETS

 

     Weighted
Average
Amortization
Period
     Amortization
Method
     Cost      Accumulated
Amortization
     Net Carrying
Amount
 
     (In thousands)  

December 2018

              

Amortizable intangible assets:

              

Trademarks

     16 years        Straight-line      $ 58,132      $ 10,900      $ 47,232  

Customer relationships

     15 years        Accelerated        10,743        9,530        1,213  
              

 

 

 

Amortizable intangible assets, net

 

     48,445  

Indefinite-lived intangible assets:

 

  

Trademarks and trade names

 

     4,614  
  

 

 

 

Intangible assets, net

 

   $ 53,059  
  

 

 

 

 

     Weighted
Average
Amortization
Period
     Amortization
Method
     Cost      Accumulated
Amortization
     Net Carrying
Amount
 
     (In thousands)  

December 2017

              

Amortizable intangible assets:

              

Trademarks

     16 years        Straight-line      $ 58,132      $ 7,266      $ 50,866  

Customer relationships

     15 years        Accelerated        11,008        9,180        1,828  
              

 

 

 

Amortizable intangible assets, net

 

     52,694  

Indefinite-lived intangible assets:

 

  

Trademarks and trade names

 

     4,848  
  

 

 

 

Intangible assets, net

 

   $ 57,542  
  

 

 

 

Amortization expense for 2018, 2017 and 2016 was $4.2 million, $4.2 million and $4.3 million, respectively. Estimated amortization expense for the years 2019 through 2023 is $4.1 million, $4.0 million, $3.8 million, $3.7 million, and $3.7 million, respectively.

The Company did not record any impairment charges in 2018, 2017 or 2016. The Company performed a quantitative impairment analysis of the Rock & Republic® amortizing trademark intangible asset as of June 30, 2018 and determined the carrying value was recoverable. Refer to Note 17 for additional information on the fair value measurements.

NOTE 6—GOODWILL

Changes in goodwill are summarized by business segment as follows:

 

     Wrangler      Lee      Total  
     (In thousands)  

Balance, December 2016

   $ 130,030      $ 80,735      $ 210,765  

Currency translation

     5,258        3,265        8,523  
  

 

 

    

 

 

    

 

 

 

Balance, December 2017

     135,288        84,000        219,288  

Currency translation

     (2,944      (1,828      (4,772
  

 

 

    

 

 

    

 

 

 

Balance, December 2018

   $ 132,344      $ 82,172      $ 214,516  
  

 

 

    

 

 

    

 

 

 

The Company did not record any impairment charges in 2018, 2017 or 2016 based on the results of its annual goodwill impairment testing. Refer to Note 17 for additional information on fair value measurement.

 

F-24


Table of Contents

NOTE 7—OTHER ASSETS

 

     2018      2017  
     (In thousands)  

Deferred income taxes (Note 14)

   $ 42,891      $ 46,674  

Investments held for deferred compensation plans (Note 11)

     34,957        46,551  

Deposits

     6,492        4,578  

Partnership stores and shop-in-shop costs, net of accumulated amortization of $23,344 in 2018 and $22,605 in 2017

     5,368        6,938  

Capitalized trademark costs

     3,314        3,027  

Computer software, net of accumulated amortization of $4,269 in 2018 and $3,803 in 2017

     3,308        3,948  

Other

     14,302        16,638  
  

 

 

    

 

 

 

Other assets

   $ 110,632      $ 128,354  
  

 

 

    

 

 

 

NOTE 8—SHORT-TERM BORROWINGS

At December 2018 and 2017, the Company had $35.9 million and $37.3 million, respectively, of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. Total outstanding balances under these arrangements were $3.2 million and $4.9 million at December 2018 and 2017, respectively. At December 2018 and 2017, borrowings under these arrangements included letters of credit of $3.2 million and $3.0 million, respectively, which are non-interest bearing to the Company. Additionally, at December 2017, borrowings also included $1.9 million in short-term borrowings in Argentina that had a weighted average interest of 32.7%.

NOTE 9—ACCRUED LIABILITIES

 

     2018      2017  
     (In thousands)  

Customer discounts, allowances, and incentives

   $ 45,220      $ 16,705  

Compensation

     44,427        45,120  

Other taxes

     21,651        21,560  

Restructuring (Note 19)

     21,169        5,244  

Deferred compensation (Note 11)

     11,709        15,592  

Customer deposits

     10,106        8,908  

Advertising

     7,740        8,825  

Professional services

     5,069        7,630  

Related party interest

     4,280        2,612  

Insurance

     4,192        4,631  

Other

     18,665        16,851  
  

 

 

    

 

 

 

Accrued liabilities

   $ 194,228      $ 153,678  
  

 

 

    

 

 

 

 

F-25


Table of Contents

NOTE 10—OTHER LIABILITIES

 

     2018      2017  
     (In thousands)  

Noncurrent taxes payable

   $ 58,854      $ 52,662  

Deferred compensation (Note 11)

     34,957        46,551  

Insurance

     4,751        5,268  

Deferred income taxes (Note 14)

     2,679        2,976  

Restructuring (Note 19)

     2,080        5,763  

Deferred rent credits

     1,436        1,845  

Other

     13,432        13,424  
  

 

 

    

 

 

 

Other liabilities

   $ 118,189      $ 128,489  
  

 

 

    

 

 

 

NOTE 11—RETIREMENT AND SAVINGS BENEFIT PLANS

VF provides several types of benefits for its employees, including defined benefit pension plans and other retirement and savings plans.

Defined Benefit Pension Plans

Certain Company employees participate in U.S. and international defined benefit pension plans sponsored by VF (“Shared Plans”), which include participants of other VF operations. We account for our participation in the Shared Plans as a multiemployer benefit plan. Accordingly, net periodic pension costs specifically related to Company employees have been reported in the combined statements of income, and the Company does not record an asset or liability to recognize the funded or unfunded status of the Shared Plans.

VF’s net periodic pension costs and obligations are developed from actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates, and other factors. VF’s selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions. Actual results that differ from VF’s assumptions are accumulated and amortized over future periods and, therefore, generally affect VF’s recognized expense in such future periods. While VF management believes that the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect VF’s net periodic pension costs and obligations. Furthermore, the assumptions used by VF may not be indicative of assumptions which the Company would have made on a standalone basis.

Prior to 2018, VF used a December 31 measurement date for the Shared Plans. Due to the change in VF’s fiscal year-end, VF changed the measurement date for all plans to March 31, 2018. Additionally, VF obtained interim remeasurements due to the curtailment and settlement transactions described below.

Net pension costs for Shared Plans were recognized by the Company as follows:

 

     2018      2017      2016  
     (In thousands)  

Service cost

   $ 6,629      $ 6,929      $ 7,758  

Non-service components

     (5,059      (181      15,402  

Curtailment losses

     3,502        —          —    

Settlement losses

     1,188        —          21,522  
  

 

 

    

 

 

    

 

 

 

Net pension costs recognized

   $ 6,260      $ 6,748      $ 44,682  
  

 

 

    

 

 

    

 

 

 

 

F-26


Table of Contents

The service cost component of net periodic pension costs is reflected in cost of goods sold and selling, general and administrative expenses in the combined statements of income. The non-service components of net periodic pension costs are reflected in selling, general and administrative expenses in the combined statements of income.

During 2018, VF approved a freeze of all future benefit accruals under the U.S. Shared Plans, effective December 31, 2018. Accordingly, the Company recognized a $3.5 million pension curtailment loss in selling, general and administrative expenses in the combined statement of income during 2018. Additionally, the Company recorded $1.2 million in settlement charges related to the recognition of deferred actuarial losses resulting from lump sum payments of retirement benefits under the U.S. Shared Plans, which is reflected in selling, general and administrative expenses in the combined statement of income during 2018.

During 2016, the Company recorded $21.5 million of expense reflecting the Company’s portion of

VF’s pension settlement charge related to its offer to former employees in the U.S. to receive a one-time

distribution of their deferred vesting benefits, which is reflected in selling, general and administrative expenses in the combined statement of income.

Other Retirement and Savings Plans

VF sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Internal Revenue Code. This plan allows participants to defer a portion of their compensation and to receive matching contributions for a portion of the deferred amounts. Certain of the Company’s employees participate in this plan. Participants earn a return on their deferred compensation based on their selection of a hypothetical portfolio of publicly traded mutual funds, a separately managed fixed-income fund and VF Common Stock. Changes in the fair value of the participants’ hypothetical investments are recorded as an adjustment to deferred compensation liabilities and compensation expense. Deferred compensation, including accumulated earnings, is distributable in cash at participant-specified dates upon retirement, death, disability or termination of employment. At December 2018, the liability to the Company’s participants in the combined balance sheet was $46.7 million, of which $11.7 million was recorded in accrued liabilities (Note 9) and $35.0 million was recorded in other liabilities (Note 10). At December 2017, the liability to the Company’s participants in the combined balance sheet was $62.1 million, of which $15.6 million was recorded in accrued liabilities (Note 9) and $46.6 million was recorded in other liabilities (Note 10).

VF has purchased (i) publicly traded mutual funds, a separately managed fixed-income fund and VF Common Stock in the same amounts as most of the participant-directed hypothetical investments underlying the deferred compensation liabilities and (ii) variable life insurance contracts that invest in institutional funds that are substantially the same as the participant-directed hypothetical investments. These investment securities and earnings thereon (other than VF Common Stock) are intended to provide a source of funds to meet the deferred compensation obligations, and serve as an economic hedge of the financial impact of changes in deferred compensation liabilities. They are held in an irrevocable trust but are subject to claims of creditors in the event of VF’s insolvency. Because VF’s plan is overfunded, the assets related to the Company’s participants are assumed to be held in publicly traded mutual funds equal to the liability balances. Accordingly, at December 2018, the fair value of investments attributable to the Company’s participants recorded in the combined balance sheet was $46.7 million, of which $11.7 million was recorded in other current assets and $35.0 million was recorded in other assets (Note 7). At December 2017, the fair value of investments attributable to the Company’s participants recorded in the combined balance sheet was $62.1 million, of which $15.6 million was recorded in other current assets and $46.6 million was recorded in other assets (Note 7).

VF sponsors 401(k) plans as well as other domestic and foreign retirement and savings plans. The Company’s expense under these plans was $11.0 million in 2018, $10.2 million in 2017 and $9.7 million in 2016.

 

F-27


Table of Contents

NOTE 12—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income consists of net income and specified components of OCI, which relate to changes in assets and liabilities that are not included in net income under GAAP but are instead deferred and accumulated within a separate component of equity in the balance sheet. The Company’s comprehensive income is presented in the combined statements of comprehensive income.

The changes in accumulated OCI, all of which related to foreign currency translation, were as follows:

 

     Accumulated
OCI
 
     (In thousands)  

Balance, December 2015

   $ (125,993

Gains (losses) arising during year

     (23,647

Income tax effect

     1,552  
  

 

 

 

Balance, December 2016

     (148,088

Gains (losses) arising during year

     26,682  

Income tax effect

     (1,076
  

 

 

 

Balance, December 2017

     (122,482

Gains (losses) arising during year

     (22,700

Income tax effect

     —    
  

 

 

 

Balance, December 2018

   $ (145,182
  

 

 

 

NOTE 13—STOCK-BASED COMPENSATION

VF sponsors the amended and restated 1996 Stock Compensation Plan (the “Plan”) approved by stockholders. Pursuant to the Plan, VF is authorized to grant nonqualified stock options, restricted stock units (“RSUs”) and restricted stock to officers, key employees and nonemployee members of VF’s Board of Directors. All stock-based compensation awards are accounted for in equity in the combined balance sheets. Compensation cost for all awards expected to vest is recognized over the shorter of the requisite service period or the vesting period. Awards that do not vest are forfeited.

Certain Company employees participate in the Plan. The following disclosures of stock-based compensation expense recognized by the Company are based on grants related directly to Company employees, and an allocation of VF’s corporate and shared employee stock-based compensation expenses. Accordingly, the amounts presented are not necessarily indicative of future awards and do not necessarily reflect the results that the Company would have experienced as an independent company for the periods presented.

Total stock-based compensation cost and the associated income tax benefits recognized by the Company in the combined statements of income were as follows:

 

     2018      2017      2016  
     (In thousands)  

Stock-based compensation cost

   $ 14,894      $ 13,021      $ 9,386  

Income tax benefits

     3,692        4,844        3,557  

There were no material amounts of stock-based compensation costs included in inventory at December 2018 or December 2017.

Of the total stock-based compensation cost recognized by the Company in 2018, 2017 and 2016, $10.9 million, $9.2 million and $6.2 million, respectively, related directly to Company employees and $4.0 million, $3.8 million and $3.2 million, respectively, is related to allocations of VF’s corporate and shared employee stock-based compensation expenses.

 

F-28


Table of Contents

At the end of 2018, there was $7.9 million of total unrecognized compensation cost related to all stock-based compensation arrangements for Company employees that will be recognized over a weighted average period of 1 year.

Stock Options

Stock options are granted with an exercise price equal to the fair market value of VF Common Stock on the date of grant. Employee stock options vest in equal annual installments over three years, and compensation cost is recognized ratably over the shorter of the requisite service period or the vesting period. All options have ten-year terms.

VF calculated the grant date fair value of each option awarded using a lattice option-pricing valuation model, which incorporated a range of assumptions for inputs as follows:

 

     2018     2017     2016  

Expected volatility

     22% to 29 %     23% to 30     21% to 29

Weighted average expected volatility

     25     24     24

Expected term (in years)

     6.1 to 7.6       6.3 to 7.7       6.3 to 7.6  

Weighted average dividend yield

     2.9     2.8     2.2

Risk-free interest rate

     1.9% to 3.2     0.7% to 2.4     0.4% to 1.7

Weighted average fair value at date of grant

   $ 15.40     $ 9.90     $ 12.08  

Expected volatility over the contractual term of an option was based on a combination of the implied volatility from publicly traded options on VF Common Stock and the historical volatility of VF Common Stock. The expected term represents the period of time over which vested options are expected to be outstanding before exercise. VF used historical data to estimate option exercise behaviors and to estimate the number of options that would vest.

Groups of employees that have historically exhibited similar option exercise behaviors were considered separately in estimating the expected term for each employee group. Dividend yield represents expected dividends on VF Common Stock for the contractual life of the options. Risk-free interest rates for the periods during the contractual life of the option were the implied yields at the date of grant from the U.S. Treasury zero coupon yield curve.

VF stock option activity for Company employees in 2018 is summarized as follows:

 

     Number of
Shares
     Weighted
Average
Exercise Price
     Weighted
Average
Remaining
Contractual
Term (Years)
     Aggregate
Intrinsic
Value
(In
thousands)
 

Outstanding, December 2017

     1,722,832      $ 53.10        

Transfers

     30,166        51.62        

Granted

     209,224        74.81        

Exercised

     (531,192      49.06        

Forfeited/cancelled

     (45,077      64.43        
  

 

 

          

Outstanding, December 2018

     1,385,953        57.50        6.6      $ 19,794  
  

 

 

       

 

 

    

 

 

 

Exercisable, December 2018

     819,219        54.28        5.4      $ 14,231  
  

 

 

       

 

 

    

 

 

 

The total fair value of stock options for Company employees that vested during 2018, 2017 and 2016 was $3.5 million, $3.4 million and $3.6 million, respectively. The total intrinsic value of stock options exercised by Company employees during 2018, 2017 and 2016 was $19.2 million, $15.6 million and $15.8 million, respectively.

 

F-29


Table of Contents

Restricted Stock Units

VF grants performance-based RSUs that enable employees to receive shares of VF Common Stock at the end of a three-year period. Each RSU has a potential final payout ranging from zero to two shares of VF Common Stock. For RSUs granted prior to 2018, the number of shares earned by participants, if any, is based on achievement of a three-year baseline profitability goal and annually established performance goals set by the Talent and Compensation Committee of VF’s Board of Directors. For RSUs granted in 2018, the number of shares earned by participants, if any, is based on achievement of three-year financial targets set by the Talent and Compensation Committee of VF’s Board of Directors. For all RSUs, shares are issued to participants in the year following the conclusion of each three-year performance period.

The actual number of shares earned may also be adjusted upward or downward by 25% of the target award based on how VF’s total shareholder return (“TSR”) over the three-year period compares to the TSR for companies included in the Standard & Poor’s 500 Consumer Discretionary Index for 2018 grants, and the Standard & Poor’s 500 Index for 2017 and 2016 grants. The grant date fair value of the TSR-based adjustment was determined using a Monte Carlo simulation technique that incorporates option-pricing model inputs, and was $4.61, $2.67 and $4.48 per share for the 2018, 2017 and 2016 RSU grants, respectively.

VF also grants nonperformance-based RSUs to certain key employees in international jurisdictions. Each nonperformance-based RSU entitles the holder to one share of VF Common Stock. These awards generally vest four years from the date of grant.

In addition, VF began making nonperformance-based RSU grants to employees as part of its annual stock compensation program during 2018. Each nonperformance-based RSU entitles the holder to one share of VF Common Stock. These awards generally vest 50% over a two-year period and 50% over a four-year period from the date of grant.

Dividend equivalents on the RSUs accrue without compounding and are payable in additional shares of VF Common Stock when the RSUs vest. Dividend equivalents are subject to the same risk of forfeiture as the RSUs.

VF RSU activity for Company employees in 2018 is summarized as follows:

 

     Performance-based      Nonperformance-based  
     Number
Outstanding
     Weighted
Average Grant
Date Fair Value
     Number
Outstanding
    Weighted
Average Grant
Date Fair Value
 

Outstanding, December 2017

     199,976      $ 61.99        20,200     $ 59.52  

Transfers

     587        59.44        —         —    

Granted

     36,150        74.80        58,034       74.81  

Issued as Common Stock

     (52,609      75.32        —         —    

Forfeited/cancelled

     —          —          (6,479     74.80  
  

 

 

       

 

 

   

Outstanding, December 2018

     184,104        60.65        71,755       70.51  
  

 

 

       

 

 

   

Vested, December 2018

     99,061        58.90        —         —    
  

 

 

       

 

 

   

The weighted average fair value of performance-based RSUs granted to Company employees during 2018, 2017 and 2016 was $74.80, $53.72 and $61.30 per share, respectively, which was equal to the fair market value of the underlying VF Common Stock on each grant date. The total fair market value of awards outstanding to Company employees at the end of 2018 was $13.0 million. Awards to Company employees that were earned and vested for the three-year performance period ended in 2017 and distributed in early 2018 totaled 58,394 shares of VF Common Stock having a value of $4.7 million. Similarly, 69,363 shares of VF Common Stock having a value of $3.5 million were earned by Company employees for the performance period ended in 2016.

 

F-30


Table of Contents

The weighted average fair value of nonperformance-based RSUs granted to Company employees during 2018 and 2017 was $74.81 and $57.64 per share, respectively, which was equal to the fair market value of the underlying VF Common Stock on each grant date. The total fair market value of awards outstanding to Company employees at the end of 2018 was $5.2 million. There were no nonperformance-based RSUs granted during 2016.

Restricted Stock

VF grants restricted shares of VF Common Stock to certain members of management. The fair value of the restricted shares, equal to the fair market value of VF Common Stock at the grant date, is recognized ratably over the vesting period. Restricted shares vest over periods of up to five years from the date of grant. Dividends accumulate in the form of additional restricted shares and are subject to the same risk of forfeiture as the restricted stock.

VF restricted stock activity for Company employees in 2018 is summarized below:

 

     Nonvested
Shares
Outstanding
     Weighted
Average Grant
Date Fair Value
 

Nonvested shares, December 2017

     54,763      $ 60.04  

Granted

     —          —    

Dividend equivalents

     1,107        79.32  

Vested

     (8,750      59.26  

Forfeited

     —          —    
  

 

 

    

Nonvested shares, December 2018

     47,120        60.63  
  

 

 

    

Nonvested shares of restricted stock for Company employees had a market value of $3.3 million at the end of 2018. The market value of the shares for Company employees that vested during 2018 and 2017 was $0.6 million in both periods. There was no restricted stock vesting activity in 2016.

NOTE 14—INCOME TAXES

For purposes of our combined financial statements, income taxes have been calculated as if we file income tax returns for the Company on a standalone basis. The Company’s U.S. operations and certain of its non-U.S. operations historically have been included in the tax returns of VF or its subsidiaries that may not be part of the spinoff transaction. The Company believes the assumptions supporting its allocation and presentation of income taxes on a separate return basis are reasonable. However, the Company’s tax results, as presented in the combined financial statements, may not be reflective of the results that the Company expects to generate in the future.

The provision for income taxes was computed based on the following amounts of income before income taxes:

 

     2018      2017      2016  
     (In thousands)  

Domestic

   $ 159,716      $ 169,160      $ 205,688  

Foreign

     180,362        189,993        204,799  
  

 

 

    

 

 

    

 

 

 

Income before income taxes

   $ 340,078      $ 359,153      $ 410,487  
  

 

 

    

 

 

    

 

 

 

 

F-31


Table of Contents

The provision for income taxes consisted of:

 

     2018      2017      2016  
     (In thousands)  

Current:

        

Federal

   $ 29,670      $ 161,482      $ 47,375  

Foreign

     32,501        31,444        32,276  

State

     12,303        13,546        9,648  

Deferred:

        

Federal and state

     4,067        36,009        6,789  

Foreign

     (1,536      481        (631
  

 

 

    

 

 

    

 

 

 

Income taxes

   $ 77,005      $ 242,962      $ 95,457  
  

 

 

    

 

 

    

 

 

 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The Tax Act included a broad range of complex provisions impacting the taxation of multi-national companies. Generally, accounting for the impacts of newly enacted tax legislation is required to be completed in the period of enactment; however, in response to the complexities and ambiguity surrounding the Tax Act, the SEC released SAB 118 to provide companies with relief around the initial accounting for the Tax Act. Pursuant to SAB 118, the SEC provided a one-year measurement period for companies to analyze and finalize the accounting for the Tax Act. During the one-year measurement period, SAB 118 allowed companies to recognize provisional amounts when reasonable estimates can be made for the impacts resulting from the Tax Act. The Company finalized the accounting for the Tax Act as detailed below.

During 2017, we recognized a provisional charge of $136.7 million, primarily comprised of $110.6 million related to the transition tax and $19.4 million of tax expense related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. The transition tax was treated consistently with other taxes payable (i.e., deemed settled and reflected within Parent company investment). Other provisional charges of $6.7 million were primarily related to establishing a deferred tax liability for foreign withholding and state taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain foreign subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested. The company has not determined the deferred tax liabilities associated with these undistributed earnings and basis differences, as such determination is not practicable.

During the one-year measurement period provided by SAB 118, we recognized additional net charges of $5.5 million, primarily comprised of $5.7 million of charges related to the transition tax, additional tax benefits of $1.5 million related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%, and other charges of $1.3 million primarily related to establishing a deferred tax liability for foreign withholding taxes.

Under GAAP, companies are allowed to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. The Company completed its analysis related to this accounting policy election and treated the taxes resulting from GILTI as a current-period expense.

 

F-32


Table of Contents

The differences between income taxes computed by applying the statutory federal income tax rate and income tax expense reported in the combined financial statements are as follows:

 

     2018      2017      2016  
     (In thousands)  

Tax at federal statutory rate

   $ 71,416      $ 125,703      $ 143,671  

State income taxes, net of federal tax benefit

     10,400        7,624        7,635  

Foreign rate differences

     (7,700      (24,793      (55,836

Tax reform

     5,526        136,722        —    

Stock compensation (federal)

     (2,692      (2,929      (4,591

Other

     55        635        4,578  
  

 

 

    

 

 

    

 

 

 

Income taxes

   $ 77,005      $ 242,962      $ 95,457  
  

 

 

    

 

 

    

 

 

 

Income tax expense includes tax benefits of $5.8 million, $4.7 million and $9.9 million in 2018, 2017 and 2016, respectively, from favorable audit outcomes on certain tax matters and from expiration of statutes of limitations.

On January 4, 2016, the Company sold certain intellectual property rights among various subsidiaries, which more closely aligns the intellectual property rights for certain foreign operations with the respective business activities of those operations, consistent with how the intellectual property is used and developed within the business. The sale of these intellectual property rights was classified as an intra-entity transaction under GAAP, and as such, the corresponding gain was eliminated from the 2016 combined financial statements and the tax impact of the gain was established at the transaction date as a deferred charge of $88.9 million. In October 2016, the FASB issued an update to their accounting guidance on the recognition of current and deferred income taxes for intra-entity asset transfers. The new guidance required an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company early adopted this guidance in the first quarter of 2017 using the modified retrospective method, which required a cumulative adjustment to retained earnings as of the beginning of the period of adoption. The cumulative adjustment to the January 1, 2017 combined balance sheet was a $70.2 million net reduction in both other assets (including recognition of a deferred tax asset) and Parent company investment.

 

F-33


Table of Contents

Deferred income tax assets and liabilities consisted of the following:

 

     2018      2017  
     (In thousands)  

Deferred income tax assets:

     

Inventories

   $ 7,676      $ 10,680  

Deferred compensation

     11,701        13,897  

Other employee benefits

     3,297        824  

Stock compensation

     6,243        6,232  

Other accrued expenses

     19,266        15,853  

Intangible assets

     7,541        9,009  

Operating loss carryforwards

     23,702        26,042  
  

 

 

    

 

 

 

Gross deferred income tax assets

     79,426        82,537  

Valuation allowances

     (24,175      (26,882
  

 

 

    

 

 

 

Net deferred income tax assets

     55,251        55,655  
  

 

 

    

 

 

 

Deferred income tax liabilities:

     

Depreciation

     4,142        4,296  

Taxes on unremitted earnings

     9,702        6,807  

Other deferred tax liabilities

     1,195        854  
  

 

 

    

 

 

 

Deferred income tax liabilities

     15,039        11,957  
  

 

 

    

 

 

 

Net deferred income tax assets

   $ 40,212      $ 43,698  
  

 

 

    

 

 

 

Amounts included in the combined balance sheets:

     

Other assets (Note 7)

   $ 42,891      $ 46,674  

Other liabilities (Note 10)

     (2,679      (2,976
  

 

 

    

 

 

 
   $ 40,212      $ 43,698  
  

 

 

    

 

 

 

The Company has potential tax benefits totaling $16.1 million for foreign operating loss carryforwards, of which $10.2 million have an unlimited carryforward life. In addition, there are $7.6 million of potential tax benefits for state operating loss carryforwards that expire between 2019 and 2038.

A valuation allowance has been provided where it is more likely than not that the deferred tax assets related to those operating loss carryforwards will not be realized. Valuation allowances totaled $16.1 million for available foreign operating loss carryforwards, $7.6 million for available state operating loss carryforwards, and $0.5 million for other foreign deferred income tax assets. During 2018, the Company had a net decrease in valuation allowances of $0.1 million related to state operating loss carryforwards and a decrease of $2.6 million related to foreign operating loss carryforwards and other foreign deferred tax assets, inclusive of foreign currency effects.

 

F-34


Table of Contents

A reconciliation of the change in the accrual for unrecognized income tax benefits is as follows:

 

     Unrecognized
Income Tax
Benefits
     Accrued
Interest
and Penalties
     Unrecognized
Income Tax
Benefits
Including
Interest and
Penalties
 
     (In thousands)  

Balance, December 2015

   $ 27,147      $ 1,700      $ 28,847  

Additions for current year tax positions

     31,859        —          31,859  

Additions for prior year tax positions

     98        518        616  

Reductions for prior year tax positions

     (18      (22      (40

Reductions due to statute expirations

     (10,148      (769      (10,917

Payments in settlement

     (96      (16      (112
  

 

 

    

 

 

    

 

 

 

Balance, December 2016

     48,842        1,411        50,253  

Additions for current year tax positions

     7,419        —          7,419  

Additions for prior year tax positions

     75        1,458        1,533  

Reductions for prior year tax positions

     (418      (1      (419

Reductions due to statute expirations

     (4,655      (380      (5,035
  

 

 

    

 

 

    

 

 

 

Balance, December 2017

     51,263        2,488        53,751  

Additions for current year tax positions

     2,458        8        2,466  

Additions for prior year tax positions

     6,286        2,870        9,156  

Reductions for prior year tax positions

     (191      0        (191

Reductions due to statute expirations

     (5,735      (427      (6,162
  

 

 

    

 

 

    

 

 

 

Balance, December 2018

   $ 54,081      $  4,939      $ 59,020  
  

 

 

    

 

 

    

 

 

 

 

     2018      2017  
     (In thousands)  

Amounts included in the combined balance sheets:

     

Unrecognized income tax benefits, including interest and penalties

   $ 59,020      $ 53,751  

Less deferred tax benefits

     (7,724      (8,340
  

 

 

    

 

 

 

Total unrecognized tax benefits

   $ 51,296      $ 45,411  
  

 

 

    

 

 

 

The unrecognized tax benefits of $51.3 million at the end of 2018, if recognized, would reduce the annual effective tax rate.

The Company is part of VF’s consolidated U.S. federal income tax return, as well as separate and combined VF income tax returns in numerous state and international jurisdictions. In the U.S., the Internal Revenue Service examinations for VF’s tax years through 2014 have been effectively settled. In addition, VF is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years, and has concluded that the Company’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s combined financial statements. Management believes that some of these audits and negotiations will conclude during the next 12 months. Management also believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease by $5.5 million within the next 12 months due to settlement of audits and expiration of statutes of limitations, $5.3 million of which would reduce income tax expense.

 

F-35


Table of Contents

NOTE 15—BUSINESS SEGMENT INFORMATION

The chief operating decision maker allocates resources and assesses performance based on a global brand view which determines the Company’s operating segments. These operating segments are the basis for the Company’s reportable segments, as described below:

 

   

Wrangler—Wrangler® branded denim, apparel and accessories.

 

   

Lee—Lee® branded denim, apparel and accessories.

In addition, we report an “Other” category for purposes of reconciliation of revenues, profit and assets, but it is not considered a reportable segment. Other includes sales (i) of VF-branded products (other than Wrangler® and Lee® branded products which are reported in the respective segments above) and third-party branded merchandise at VF Outlet™ stores, (ii) of Rock and Republic® brand apparel, (iii) to VF for products manufactured in our plants and use of our transportation fleet and, (iv) from fulfilling a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018.

Management at each of the segments has direct control over and responsibility for its revenues, operating income and assets, hereinafter termed segment revenues, segment profit and segment assets, respectively. Management evaluates operating performance and makes investment and other decisions based on segment revenues and segment profit. Accounting policies used for internal management reporting at the individual segments are consistent with those in Note 1, except as stated below.

The combined statements of income include costs for certain centralized functions and programs provided and administered by VF that are charged directly to VF’s businesses, including the Company. These centralized functions and programs include, but are not limited to, information technology, human resources, accounting shared services, supply chain, insurance, and the service cost component of net periodic pension costs. These historical allocations have been included in the measurement of segment profit below.

In addition, for purposes of preparing these combined financial statements on a “carve-out” basis, the Company has been allocated a portion of VF’s total corporate expenses. These expense allocations include the cost of corporate functions and resources provided by or administered by VF including, but not limited to, executive management, finance, accounting, legal, human resources, and the related benefit costs associated with such functions, such as stock-based compensation, as well as the cost of VF’s Greensboro, NC corporate headquarters. Additionally, the Company has been allocated the non-service components of net periodic pension costs. These additional allocations are reported as corporate and other expenses in the table below.

Corporate and other expenses, net related party interest income, and net other interest income are not controlled by segment management and therefore are excluded from the measurement of segment profit.

Segment assets, for internal management purposes, are those used directly in or resulting from the operations of each business, which are accounts receivable and inventories.

 

F-36


Table of Contents

Financial information for the Company’s reportable segments is as follows:

 

     2018      2017      2016  
     (In thousands)  

Segment revenues:

        

Wrangler

   $ 1,602,206      $ 1,619,252      $ 1,631,527  

Lee

     960,243        1,005,774        1,068,230  

Other

     201,549        205,080        226,707  
  

 

 

    

 

 

    

 

 

 

Total revenues

   $ 2,763,998      $ 2,830,106      $ 2,926,464  
  

 

 

    

 

 

    

 

 

 

Segment profit:

        

Wrangler

   $ 265,981      $ 280,257      $ 325,204  

Lee

     92,756        107,246        150,871  

Other

     (48      (767      (3,381
  

 

 

    

 

 

    

 

 

 

Total segment profit

     358,689        386,736        472,694  

Corporate and other expenses

     (30,916      (32,676      (65,586

Related party interest income, net

     7,738        3,372        1,470  

Other interest income, net

     4,567        1,721        1,909  
  

 

 

    

 

 

    

 

 

 

Income before income taxes

   $ 340,078      $ 359,153      $ 410,487  
  

 

 

    

 

 

    

 

 

 

 

     2018      2017  
     (In thousands)  

Segment assets:

     

Wrangler

   $ 383,122      $ 356,839  

Lee

     271,518        255,615  

Other

     72,138        75,455  

Total segment assets

     726,778        687,909  

Cash and cash equivalents

     96,776        80,811  

Due from related parties

     547,690        221,615  

Related party notes receivable

     517,940        547,740  

Other current assets

     52,014        34,901  

Due from related parties, noncurrent

     611        —    

Property, plant, and equipment, net

     138,449        148,250  

Goodwill and intangible assets

     267,575        276,830  

Other assets

     110,632        128,354  
  

 

 

    

 

 

 

Total assets

   $ 2,458,465      $ 2,126,410  
  

 

 

    

 

 

 

Supplemental information (with revenues by geographic area based on the location of the customer) is as follows:

 

     2018      2017      2016  
     (In thousands)  

Total revenues:

        

U.S.

   $ 2,014,657      $ 2,046,359      $ 2,146,797  

International

     749,341        783,747        779,667  
  

 

 

    

 

 

    

 

 

 
   $ 2,763,998      $ 2,830,106      $ 2,926,464  
  

 

 

    

 

 

    

 

 

 

 

F-37


Table of Contents
     2018      2017  
     (In thousands)  

Property, plant and equipment:

     

U.S.

   $ 80,551      $ 84,858  

International

     57,898        63,392  
  

 

 

    

 

 

 
   $ 138,449      $ 148,250  
  

 

 

    

 

 

 

One customer accounted for 32% in 2018 and 33% in both 2017 and 2016 of the Company’s total revenues. Sales to this customer are included in both the Wrangler and Lee reportable segments.

NOTE 16—COMMITMENTS

The Company is obligated under noncancelable operating leases related primarily to retail stores, office space, distribution facilities and equipment. Rent expense was included in the combined statements of income as follows:

 

     2018      2017      2016  
     (In thousands)  

Minimum rent expense

   $ 40,298      $ 41,958      $ 43,675  

Contingent rent expense

     515        446        187  
  

 

 

    

 

 

    

 

 

 

Rent expense

   $ 40,813      $ 42,404      $ 43,862  
  

 

 

    

 

 

    

 

 

 

Future minimum lease payments during the noncancelable lease terms are $33.6 million, $29.2 million, $17.8 million, $7.9 million and $4.4 million for the years 2019 through 2023, respectively, and $4.6 million thereafter.

The Company has entered into licensing agreements that provide the Company rights to market products under trademarks owned by other parties. Royalties under these agreements are recognized in cost of goods sold in the combined statements of income. Certain of these agreements contain minimum royalty and minimum advertising requirements. Future minimum royalty payments, including any required advertising payments, are $7.0 million, $3.6 million, $3.2 million, and $0.1 million for the years 2019 through 2022, respectively. There are no future payments for 2023 and thereafter.

In the ordinary course of business, the Company has entered into purchase commitments for raw materials, contract production and finished products. These agreements typically range from 1 to 5 months in duration and require total payments of $429.7 million in 2019.

The Company has entered into commitments for (i) service and maintenance agreements related to its management information systems, (ii) capital spending and (iii) advertising. Future payments under these agreements are $7.5 million and $0.1 million for the years 2019 through 2020, respectively. There are no future payments for 2021 and thereafter.

Surety bonds, customs bonds, standby letters of credit and international bank guarantees, all of which represent contingent guarantees of performance under self-insurance and other programs, totaled $20.0 million as of December 2018. These commitments would only be drawn upon if the Company were to fail to meet its claims or other obligations.

NOTE 17—FAIR VALUE MEASUREMENTS

Financial assets and financial liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within

 

F-38


Table of Contents

the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:

 

   

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

   

Level 2—Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

 

   

Level 3—Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.

Recurring Fair Value Measurements

The following table summarizes financial assets and financial liabilities that are measured and recorded in the combined financial statements at fair value on a recurring basis:

 

     Total      Fair Value Measurement Using (a)  
     Fair Value      Level 1      Level 2      Level 3  
     (In thousands)  
December 2018                            

Financial assets:

           

Cash equivalents:

           

Money market funds

   $ 21,687      $ 21,687      $ —        $ —    

Time deposits

     2,518        2,518        —          —    

Investment securities

     46,666        46,666        —          —    

Financial liabilities:

           

Deferred compensation

     46,666        —          46,666        —    

 

     Total      Fair Value Measurement Using (a)  
     Fair Value      Level 1      Level 2      Level 3  
     (In thousands)  
December 2017                            

Financial assets:

           

Cash equivalents:

           

Money market funds

   $ 21,845      $ 21,845      $ —        $ —    

Time deposits

     8,268        8,268        —          —    

Investment securities

     62,143        62,143        —          —    

Financial liabilities:

           

Deferred compensation

     62,143        —          62,143        —    

 

(a) 

There were no transfers among the levels within the fair value hierarchy during 2018 or 2017.

The Company’s cash equivalents include money market funds and short-term time deposits that approximate fair value based on Level 1 measurements. Investment securities are held in VF’s deferred compensation plans as an economic hedge of the related deferred compensation liabilities (Note 11). These investments are mutual funds (Level 1) that are valued based on quoted prices in active markets. Liabilities related to VF’s deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants’ selection of hypothetical investments.

All other financial assets and financial liabilities are recorded in the combined financial statements at cost. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable,

 

F-39


Table of Contents

due from related parties, related party notes receivable, short-term borrowings, accounts payable, due to related parties, related party notes payable, and accrued liabilities. At December 2018 and 2017, their carrying values approximated their fair values due to the short-term nature of these balances.

Nonrecurring Fair Value Measurements

Certain non-financial assets, primarily property, plant and equipment, goodwill and intangible assets, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable, and at least annually for goodwill and indefinite-lived intangible assets. In the event an impairment is required, the asset is adjusted to fair value, using market-based assumptions.

The Company recorded $0.3 million, $0.7 million and $0.3 million of fixed asset impairments in 2018, 2017 and 2016, respectively, related to retail store assets and other fixed assets. These impairments are recorded in selling, general and administrative expenses in the combined statements of income.

The Rock & Republic® brand has an exclusive wholesale distribution and licensing arrangement with Kohl’s Corporation that covers all branded apparel, accessories and other merchandise. As of June 30, 2018, management performed a quantitative impairment analysis of the Rock & Republic® amortizing trademark intangible asset to determine if the carrying value was recoverable. We determined this testing was necessary based on the expectation that certain customer contract terms would be modified. Management used the income-based relief-from-royalty method and the contractual 4% royalty rate to calculate the pre-tax undiscounted future cash flows. Based on the analysis performed, management concluded that the trademark intangible asset did not require further testing as the undiscounted cash flows exceeded the carrying value of $49.0 million.

Management performed its annual impairment testing of goodwill and indefinite-lived intangible assets as of the beginning of the fourth quarter of 2018 by applying a qualitative analysis. No impairment charges of goodwill or intangible assets were recorded in 2018, 2017 and 2016.

NOTE 18—SUPPLEMENTAL CASH FLOW INFORMATION

 

     2018      2017      2016  
     (In thousands)  

Income taxes paid

   $ 180      $ 1,723      $ 758  

Interest paid

     6,618        6,455        5,603  

Noncash transactions:

        

Property, plant and equipment expenditures included in accounts payable or accrued liabilities

     580        797        2,740  

Computer software costs included in accounts payable or accrued liabilities

     602        1,687        824  

The Company’s income taxes paid are significantly lower than reported income tax expense as the Company has historically been included in the tax returns of VF or its subsidiaries.

NOTE 19—RESTRUCTURING

The Company typically incurs restructuring costs related to the cost optimization of ongoing business activities.

Of the $20.4 million of restructuring charges recognized in 2018, $11.3 million were reflected in cost of goods sold and $9.1 million in selling, general and administrative expenses. Of the $9.5 million of restructuring charges recognized in 2017, $3.0 million were reflected in cost of goods sold and $6.5 million in selling, general and administrative expenses. Of the $21.6 million of restructuring charges recognized in 2016, $18.5 million were reflected in costs of goods sold and $3.1 million in selling, general and administrative expenses. All restructuring costs incurred in 2018, 2017 and 2016 were related to severance and employee-related benefits.

 

F-40


Table of Contents

The Company has not recognized significant incremental costs relating to the 2016 and 2017 actions during 2018, and has completed a substantial portion of the related restructuring activities as of December 2018. Of the $23.2 million total restructuring accrual reported in the combined balance sheet at December 2018, $21.2 million is expected to be paid out within the next 12 months and is classified within accrued liabilities (Note 9). The remaining $2.0 million will be paid out beyond the next 12 months and thus is classified within other liabilities (Note 10).

Restructuring costs by business segment are as follows:

 

     2018
Charges
     2017
Charges
     2016
Charges
 
     (In thousands)  

Wrangler

   $ 13,358      $ 3,367      $ 13,339  

Lee

     6,592        6,174        6,674  

Other

     435        —          1,277  

Corporate

     —          —          344  
  

 

 

    

 

 

    

 

 

 

Total

   $ 20,385      $ 9,541      $ 21,634  
  

 

 

    

 

 

    

 

 

 

The activity in the restructuring accrual for 2018 and 2017 is as follows:

 

     Total  
     (In thousands)  

Accrual at December 2016

   $ 21,634  

Charges

     9,541  

Cash payments

     (20,971

Adjustments to accruals

     (499

Currency translation

     1,302  
  

 

 

 

Accrual at December 2017

     11,007  

Charges

     20,385  

Cash payments

     (6,586

Adjustments to accruals

     (1,540

Currency translation

     (17
  

 

 

 

Accrual at December 2018

   $ 23,249  
  

 

 

 

NOTE 20—RELATED PARTY TRANSACTIONS

The combined financial statements have been prepared on a standalone basis and are derived from the consolidated financial statements and accounting records of VF. The following discussion summarizes activity between the Company and VF (and its affiliates that are not part of the planned spinoff transaction) referred to hereafter as “VF.”

Allocation of General Corporate Expenses

The combined statements of income include expenses for certain centralized functions and other programs provided and administered by VF that are charged directly to the Company. In addition, for purposes of preparing these combined financial statements on a carve-out basis, we have allocated a portion of VF’s total corporate expenses to the Company. See Note 1 for a discussion of the methodology used to allocate corporate-related costs for purposes of preparing these financial statements on a carve-out basis.

Related Party Sales and Purchases

During the years ended 2018, 2017 and 2016, the Company’s sales to VF totaled $51.0 million, $45.5 million and $46.7 million, respectively, which are included in net revenues in the combined statements of

 

F-41


Table of Contents

income. The Company’s cost of goods sold includes items purchased from VF totaling $2.1 million, $6.8 million and $22.2 million in 2018, 2017 and 2016, respectively. At December 2018 and 2017, the aggregate amount of inventories purchased from VF that remained on the Company’s combined balance sheet was $0.8 million and $1.8 million, respectively.

Related Party Notes

At December 2018 and 2017, the Company had related party notes receivable of $517.9 million and $547.7 million, respectively, with VF as the counterparty. These notes are short-term and are recorded in the accompanying combined balance sheets as related party notes receivable. The weighted-average interest rate for these notes was approximately 3.4% and 2.35% at December 2018 and 2017, respectively.

The Company had related party notes payable of $269.1 million at both December 2018 and 2017, with VF as the counterparty. These notes are short-term and are recorded in the accompanying combined balance sheets as related party notes payable. The weighted-average interest rate for these notes was approximately 3.4% and 2.33% at December 2018 and 2017, respectively.

The Company recorded net interest income related to these notes of $7.7 million, $3.4 million and $1.5 million during the years ended December 2018, 2017 and 2016, respectively, which is reflected in related party interest income, net in the combined statements of income.

Due To and From Related Parties

Balances in due to and from related parties are generated by (i) the sale of trade accounts receivable to VF, as discussed in Note 1, (ii) hedging agreements with VF, and (iii) sourcing payable to VF.

The Company does not enter into any derivative contracts with external counterparties. However, VF enters into derivative contracts with external counterparties to hedge certain foreign currency transactions with exposure to the euro, Mexican peso, Polish zloty, Canadian dollar, and other currencies. The Company enters into offsetting internal contracts with VF with maturities up to 20 months, and cash settles with VF on any asset or liability that arises under these contracts.

Due from related parties, current consists of the following:

 

     2018      2017  
     (In thousands)  

Sale of trade accounts receivable

   $ 544,858      $ 221,615  

Hedging agreements with VF

     2,832        —    
  

 

 

    

 

 

 
   $ 547,690      $ 221,615  
  

 

 

    

 

 

 

As discussed in Note 2, the Company sells certain of its trade accounts receivable to VF, who then sells them to a financial institution and periodically remits cash back to the Company.

Due from related parties, noncurrent consists of the following:

 

     2018      2017  
     (In thousands)  

Hedging agreements with VF

   $ 611      $ —    

 

F-42


Table of Contents

Due to related parties, current consists of the following:

 

     2018      2017  
     (In thousands)  

Sourcing payable

   $ 16,140      $ 35,105  

Hedging agreements with VF

     —          710  
  

 

 

    

 

 

 
   $ 16,140      $ 35,815  
  

 

 

    

 

 

 

Due to related parties, noncurrent consists of the following:

 

     2018      2017  
     (In thousands)  

Hedging agreements with VF

   $ —        $ 2,177  

Net Transfers To and From VF

Net transfers to and from VF are included within Parent company investment on the combined statements of equity. The components of the transfers to and from VF during the years ended 2018, 2017 and 2016 were as follows:

 

     2018      2017      2016  
     (In thousands)  

General financing activities

   $ (32,498    $ (436,910    $ (567,659

Corporate allocations

     113,581        146,042        131,184  

Stock compensation expense

     14,894        13,021        9,386  

Pension expense

     6,260        6,748        44,682  

Purchases from Parent

     998        2,357        21,754  

Sales to Parent

     (50,962      (45,483      (46,658

Other income tax

     64,150        97,121        95,040  

Transition tax related to the Tax Act

     5,716        110,562        —    

Intra-entity intellectual property transfer

     —          —          84,461  
  

 

 

    

 

 

    

 

 

 

Total net transfers from (to) Parent

   $ 122,139      $ (106,542    $ (227,810
  

 

 

    

 

 

    

 

 

 

 

F-43

GRAPHIC 26 g618285g07s14.jpg GRAPHIC begin 644 g618285g07s14.jpg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end GRAPHIC 27 g618285g72o70.jpg GRAPHIC begin 644 g618285g72o70.jpg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�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end GRAPHIC 28 g618285g99b00.jpg GRAPHIC begin 644 g618285g99b00.jpg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end