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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-K
(Mark One)                 _____________________________
  þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
or
  ¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended November 30, 2014
Commission file number: 002-90139
_____________________________
LEVI STRAUSS & CO.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
  
94-0905160
(State or Other Jurisdiction of
Incorporation or Organization)
  
(I.R.S. Employer
Identification No.)
1155 Battery Street, San Francisco, California 94111
(Address of Principal Executive Offices) (Zip Code)
(415) 501-6000
(Registrant’s Telephone Number, Including Area Code)
_____________________________
Securities registered pursuant to Section 12(b) of the Act: None  
Securities registered pursuant to Section 12(g) of the Act: None  
_____________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨     No   þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   þ     No   ¨
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ¨     No   þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ     No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “Large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  ¨
 
Accelerated filer  ¨
 
Non-accelerated filer  þ
 
Smaller reporting company  ¨
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨     No   þ
The Company is privately held. Nearly all of its common equity is owned by descendants of the family of the Company’s founder, Levi Strauss, and their relatives. There is no trading in the common equity and therefore an aggregate market value based on sales or bid and asked prices is not determinable.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock $.01 par value —  37,434,738  shares outstanding on February 9, 2015
Documents incorporated by reference: None
 
 
 
 
 
 
 
 
 
 

Table of Contents

LEVI STRAUSS & CO.
TABLE OF CONTENTS TO FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 2014
 
 
 
 
Page
Number
 
 
 
 
Item 1.
 
Item 1A.
 
Item 1B.
 
Item 2.
 
Item 3.
 
Item 4.
 
 
 
 
 
 
 
 
Item 5.
 
Item 6.
 
Item 7.
 
Item 7A.
 
Item 8.
 
Item 9.
 
Item 9A.
 
Item 9B.
 
 
 
 
 
 
 
 
 
Item 10.
 
Item 11.
 
Item 12.
 
Item 13.
 
Item 14.
 
 
 
 
 
 
 
 
 
Item 15.
 
 
 

Table of Contents

PART I  
Item 1.
BUSINESS
Overview
From our California Gold Rush beginnings, we have grown into one of the world's largest brand-name apparel companies. A history of responsible business practices, rooted in our core values, has helped us build our brands and engender consumer trust around the world. Under our Levi's ® , Dockers ® , Signature by Levi Strauss & Co.™ and Denizen ® brands, we design, market and sell – directly or through third parties and licensees – products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories for men, women and children around the world.
An Authentic American Icon
Our Levi's ® brand has become one of the most widely recognized brands in the history of the apparel industry. Its broad distribution reflects the brand's appeal across consumers of all ages and lifestyles. Its merchandising and marketing reflect the brand's core attributes: authentic, courageous, confident, effortless, connected and purposeful.
Our Dockers ® brand offers an alternative to suit dressing in the form of the American staple – the khaki pant. The Dockers ® brand has evolved around the world as a market leader in the casual pant category, while also providing tops and accessories to complete a head-to-toe offering.
Our Global Reach
Our products are sold in more than 110 countries, grouped into three geographic regions: Americas, Europe and Asia. We support our brands throughout these regions through a global infrastructure, developing, sourcing and marketing our products around the world. Although our brands are recognized as authentically “American,” we derive approximately half of our net revenues from outside the United States. A summary of financial information for each geographical region, which comprise our three reporting segments, is found in Note 20 to our audited consolidated financial statements included in this report. As a global company with sales and operations in foreign countries, we are subject to risks of doing business in foreign countries. See “Item 1A – Risk Factors”, specifically “Risks Relating to Our Industry – Our business is subject to risks associated with sourcing and manufacturing overseas ” and “Risks Relating to Our Business – We are a global company with significant revenues and earnings internationally, which exposes us to political and economic risks as well as the impact of foreign currency fluctuations ”.
Our products are sold in approximately 50,000 retail locations worldwide, including approximately 2,700 retail stores, both franchised and company-operated, and shop-in-shops dedicated to our brands. We distribute our Levi's ® and Dockers ® products primarily through chain retailers and department stores in the United States and primarily through department stores, specialty retailers, franchised or other brand-dedicated stores and shop-in-shops outside of the United States. Levi's ® and Dockers ® products are also sold through our brand-dedicated company-operated stores and through the eCommerce sites we operate, as well as the eCommerce sites operated by certain of our key wholesale customers and other third parties. We distribute Signature by Levi Strauss & Co.™ and Denizen ® brand products primarily through mass channel retailers in the Americas.
Levi Strauss & Co. was founded in San Francisco, California, in 1853 and incorporated in Delaware in 1971. We conduct our operations outside the United States through foreign subsidiaries owned directly or indirectly by Levi Strauss & Co. We have headquarter offices in San Francisco, Brussels and Singapore. Our corporate offices are located at Levi's Plaza, 1155 Battery Street, San Francisco, California 94111, and our main telephone number is (415) 501-6000.
Our common stock is primarily owned by descendants of the family of Levi Strauss and their relatives.
Our website – www.levistrauss.com – contains additional and detailed information about our history, our products and our commitments. Financial news and reports and related information about our company can be found at http://levistrauss.com/investors/financial-news . Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K.



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Our Business Strategies
Our goal is to generate and sustain profitable growth over the long term in order to significantly improve the value of the enterprise. The management team is focused on four key strategies to achieve this goal:
•
Drive the profitable core business . Our core businesses represent the greatest value on a brand, geographic, customer or business-segment basis. These include our men's bottoms business for the Levi's ® brand globally and the Dockers ® brand in the United States, including our iconic 501 ® jean and Dockers ® khaki pant. We also consider our key international markets of France, Germany, Mexico and the United Kingdom, as well as key wholesale accounts globally, to be vital elements of our long-term growth strategies. Accordingly, we are focused on managing collaborative relationships with these accounts to focus on customer support, marketing planning, and inventory levels, in order to achieve mutual commercial success.
•
Expand the reach of our brands and build a more balanced portfolio. We believe we have opportunities to grow our two largest brands through new or expanded product categories, consumer segments and geographic markets. We are building upon our iconic brands, our innovative design and marketing expertise to deepen our connection with consumers and expand the reach and appeal of our brands globally. For example, we believe we can better serve the female consumer, and that there are significant opportunities in tops, outerwear and accessories. We also believe opportunities remain to expand in emerging and underpenetrated geographic markets, including China, India, Russia and Brazil.
•
Become a world-class omni-channel retailer . We will continue to expand our consumer reach in brand-dedicated stores globally, including making selective investments in company-operated stores, dedicated eCommerce sites, franchisee and other dedicated store models. We believe these brand-dedicated stores represent an attractive opportunity to establish incremental distribution and sales, as well as to showcase the full breadth of our product offerings and deliver a consistent brand experience to the consumer.
•
Leverage our global scale to improve our cost structure .  We are focused on executional excellence: improving long-term profitable growth, removing duplicative roles, reducing our controllable cost structure and driving efficiencies by streamlining our product development, planning, and go-to-market strategies, implementing efficiencies across retail, supply chain and distribution networks and continuing to pursue practices that result in greater cost efficiencies. We will continue to balance our pursuit of improved organizational agility and marketplace responsiveness with our ongoing cost management efforts to improve the structural economics of the Company.
As part of our business strategies, we announced and began to implement a global productivity initiative on March 26, 2014, which will continue through the end of 2015. See “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations”.
Our Brands and Products
We offer a broad range of products, including jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories. Across all of our brands, pants – including jeans, casual pants and dress pants – represented approximately 82% , 85% and 86% of our total units sold in fiscal years 2014 , 2013 and 2012 , respectively. Men's products generated approximately 77% , 78% and 75% of our total net sales in fiscal years 2014 , 2013 and 2012 , respectively.
Levi's ® Brand
The Levi's ® brand epitomizes classic American style and effortless cool and is positioned as the authentic, original and definitive jeanswear brand.  Since their inception in 1873, Levi's ® jeans have become one of the most recognizable garments in the world – reflecting the aspirations and earning the loyalty of people for generations. Consumers around the world instantly recognize the distinctive traits of Levi's ® jeans – the double arc of stitching, known as the Arcuate Stitching Design, and the Red Tab Device, a fabric tab stitched into the back right pocket. Today, the Levi's ® brand continues to evolve, driven by its distinctive pioneering and innovative spirit. Our range of leading jeanswear and accessories for men, women and children is available in more than 110 countries, allowing individuals around the world to express their personal style.
The Levi's ® brand encompasses a range of products. Levi's ® Red Tab™ products are the foundation of the brand, consisting of a wide spectrum of jeans and jeanswear offered in a variety of fits, fabrics, finishes, styles and price points intended to appeal to a broad spectrum of consumers. The line includes the iconic 501 ® jean, the original and best-selling five-pocket jean of all time. The line also incorporates a full range of jeanswear fits and styles designed specifically for women. Sales of Red Tab™ products represented the majority of our Levi's ® brand net sales in all three of our regions in fiscal years 2014 , 2013 and 2012 . We also offer premium products around the world including a range of premium pants, tops, shorts, skirts, jackets, footwear, and related accessories.


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Our Levi's ® brand products accounted for approximately 85% , 84% and 84% of our total net sales in fiscal years 2014 , 2013 and 2012 , respectively, approximately half of which were generated in our Americas region.
Dockers ® Brand
The Dockers ® brand has embodied the spirit of khakis for more than 25 years. Since its introduction in 1986, the brand has focused on men's khakis and the essential goods to go with them.
Our Dockers ® brand products accounted for approximately 11%, 12% and 12% of our total net sales in fiscal years 2014 , 2013 and 2012 , respectively. Although the substantial majority of these net sales were in the Americas region, Dockers ® brand products are sold in more than 50 countries.
Signature by Levi Strauss & Co.™ Brand and Denizen ® Brand
In addition to our Levi's ® and Dockers ® brands, we offer two brands focused on consumers who seek high-quality, affordable and fashionable jeanswear from a company they trust. We offer denim jeans, casual pants, tops and jackets in a variety of fits, fabrics and finishes for men, women and kids under the Signature by Levi Strauss & Co.™ brand through the mass retail channel in the United States and Canada. The Denizen ® brand was introduced in Target stores in the United States starting in 2011, and includes a variety of jeans to complement active lifestyles and to empower consumers to express their aspirations, individuality and attitudes at an affordable price point.
Signature by Levi Strauss & Co.™ brand and Denizen ® brand products accounted for approximately 4% of our total net sales in each of fiscal years 2014 , 2013 and 2012 .
Licensing
The appeal of our brands across consumer groups and our global reach enable us to license our Levi's ® and Dockers ® trademarks for a variety of product categories in multiple markets in each of our regions, including footwear, belts, wallets and bags, outerwear, sweaters, dress shirts, kidswear, sleepwear and hosiery. We also license our Signature by Levi Strauss & Co.™ and our Denizen ® trademarks in various markets for certain product categories.
In addition to product category licenses, we enter into regional license agreements with third parties to produce, market and distribute our products in several countries around the world, including various Latin American, Middle Eastern and Asia Pacific countries. Licensing accounted for approximately 2% of our total net revenues in each of fiscal years 2014 , 2013 and 2012 .
We enter into licensing agreements with our licensees covering royalty payments, product design and manufacturing standards, marketing and sale of licensed products, and protection of our trademarks. We require our licensees to comply with our code of conduct for contract manufacturing and engage independent monitors to perform regular on-site inspections and assessments of production facilities.
Sales, Distribution and Customers
We distribute our products through a wide variety of retail formats around the world, including chain and department stores, franchise stores dedicated to our brands, our own company-operated retail network, multi-brand specialty stores, mass channel retailers, and both company-operated and retailer eCommerce sites.
Multi-brand Retailers
We seek to make our products available where consumers shop, including offering products and related assortments that are appropriately tailored for our wholesale customers and their retail consumers. Our products are also sold through authorized third-party eCommerce sites. Sales to our top ten wholesale customers accounted for approximately 31% , 31% and 32% of our total net revenues in fiscal years 2014 , 2013 and 2012 , respectively. No customer represented 10% or more of net revenues in any of these years. The loss of any major wholesale customer could have a material adverse effect on one or more of our segments or on the company as a whole.
Dedicated Stores
We believe retail stores dedicated to our brands are important for the growth, visibility, availability and commercial success of our brands, and they are an increasingly important part of our strategy for expanding distribution of our products. Our brand-dedicated stores are either operated by us or by independent third parties such as franchisees. In addition to the dedicated stores, we maintain brand-dedicated eCommerce sites that sell products directly to consumers.


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Company-operated retail stores .   Our company-operated eCommerce sites and retail stores, including both mainline and outlet stores, generated approximately 25% , 22% and 21% of our net revenues in fiscal 2014 , 2013 and 2012 , respectively. As of November 30, 2014 , we had 565 company-operated stores, predominantly Levi's ® stores, located in 32 countries across our three regions. We had 213 stores in the Americas, 217 stores in Europe and 135 stores in Asia. During 2014 , we added 57 company-operated stores and closed 21 stores.
Franchised and other stores .   Franchised, licensed, or other forms of brand-dedicated stores operated by independent third parties sell Levi's ® and Dockers ® products in markets outside the United States. There were approximately 1,400 of these stores as of November 30, 2014 , and they are a key element of our international distribution. In addition to these stores, we consider our network of dedicated shop-in-shops located within department stores, which may be either operated directly by us or third parties, to be an important component of our retail distribution in international markets. Outside of the United States, approximately 400 dedicated shop-in-shops were operated directly by us and approximately 400 were operated by third parties as of November 30, 2014 .
Seasonality of Sales
We typically achieve our largest quarterly revenues in the fourth quarter, reflecting the “holiday” season. In 2014 , our net revenues in the first, second, third and fourth quarters represented 24%, 23% 24% and 29%, respectively, of our total net revenues for the year. In 2013, our net revenues in the first, second, third and fourth quarters represented 25%, 23%, 24% and 28%, respectively, of our total net revenues for the year.
Our fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Fiscal 2014 was a 53-week year ending on November 30, 2014 . Fiscal 2013 and 2012 were 52-week years ending on November 24, 2013 , and November 25, 2012 , respectively. Each quarter of fiscal years 2014 , 2013 and 2012 consisted of 13 weeks, with the exception of the fourth quarter of 2014, which consisted of 14 weeks.
Marketing and Promotion
Our marketing is rooted in globally consistent brand messages that reflect the unique attributes of our brands, including the Levi's ® brand as the authentic, original and definitive jeanswear brand and the Dockers ® brand as world's best and most loved khaki. We support our brands with a diverse mix of marketing initiatives to drive consumer demand, such as through social media and digital and mobile outlets, sponsorships, product placement in leading fashion magazines and with celebrities, television and radio advertisements, personal sponsorships and endorsements, on-the-ground efforts such as street-level events and similar targeted “viral” marketing activities.
We also use our websites, www.levi.com , www.dockers.com , www.levistrausssignature.com , and www.denizen.com , in relevant markets to enhance consumer understanding of our brands and help consumers find and buy our products.
Sourcing and Logistics
Organization .   Our global sourcing and logistics organizations are responsible for taking a product from the design concept stage through production to delivery to our customers. Our objective is to leverage our global scale to achieve product development and sourcing efficiencies and reduce total product and distribution costs while maintaining our focus on local service levels and working capital management.
Product procurement .   We source nearly all of our products through independent contract manufacturers. The remainder are sourced from our company-operated manufacturing and finishing plants. See “Item 2 – Properties” for more information about those manufacturing facilities.
Sources and availability of raw materials .   The principal fabrics used in our products include cotton, blends, synthetics and wools. The prices we pay our suppliers for our products are dependent in part on the market price for raw materials used to produce them, primarily cotton. The price and availability of cotton may fluctuate substantially, depending on a variety of factors. The price fluctuations impact the cost of our products in future seasons due to the lead time of our product development cycle. Fluctuations in product costs can cause a decrease in our profitability if product pricing actions taken in response were to be insufficient or if those actions were to cause our wholesale customers or retail consumers to reduce the volumes they purchase.
Sourcing locations .   We use numerous independent contract manufacturers located throughout the world for the production and finishing of our garments. We conduct assessments of political, social, economic, trade, labor and intellectual property protection conditions in the countries in which we source our products before placing production in those countries and on an ongoing basis.


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In 2014 , we sourced products from contractors located in approximately 30 countries around the world. We sourced products in North and South Asia, South and Central America (including Mexico and the Caribbean), Europe and Africa. No single country accounted for more than 20% of our sourcing in 2014 .
Sourcing practices .   Our sourcing practices include these elements:
•
We require all third-party contractors and subcontractors who manufacture or finish products for us to comply with our code of conduct relating to supplier working conditions as well as environmental, employment and sourcing practices. We also require our licensees to ensure that their manufacturers comply with our requirements.
•
Our code of conduct covers employment practices such as wages and benefits, working hours, health and safety, working age and discriminatory practices, environmental matters such as wastewater treatment and solid waste disposal, and ethical and legal conduct.
•
We regularly assess manufacturing and finishing facilities through periodic on-site facility inspections and improvement activities, including use of independent monitors to supplement our internal staff. We integrate review and performance results into our sourcing decisions.
We disclose the names and locations of our contract manufacturers to encourage collaboration among apparel companies in factory monitoring and improvement. We regularly evaluate and refine our code of conduct processes.
Logistics .   We operate dedicated distribution centers in a number of countries. For more information, see “Item 2 – Properties.” Distribution center activities include receiving finished goods from our contractors and plants, inspecting those products, preparing them for retail presentation, and shipping them to our customers and to our own stores. Our distribution centers maintain a combination of replenishment and seasonal inventory from which we ship to our stores and wholesale customers. In certain locations around the globe we have consolidated our distribution centers to service multiple countries. In addition, we outsource some of our logistics activities to third-party logistics providers.
Competition
The global apparel industry is highly competitive and fragmented. It is characterized by low barriers to entry, brands targeted at specific consumer segments, many regional and local competitors, and an increasing number of global competitors. Principal competitive factors include:
•
developing high-quality, innovative products with relevant design, fits, finishes, fabrics, style and performance features that meet consumer needs;
•
maintaining favorable and strong brand name recognition and appeal through strong and effective best-in-class marketing support and intelligence in diverse market segments;
•
anticipating and responding to changing consumer demands and apparel trends in a timely manner;
•
securing desirable retail locations and presenting products effectively at company-operated retail and franchised and other brand-dedicated stores;
•
ensuring product availability at wholesale and eCommerce channels, and at company-operated retail, franchised and other brand-dedicated stores;
•
optimizing supply chain cost efficiencies and product development cycle lead times;
•
delivering compelling value for the price of our products in diverse market segments; and
•
generating competitive economics for wholesale customers, including retailers, franchisees, and distributors.
We face competition from a broad range of competitors at the global, regional and local levels in diverse channels across a wide range of retail price points, and some of our competitors are larger and have more resources than we do in the markets in which we operate. Globally, a few of our primary competitors include vertically integrated specialty stores operated by companies such as The Gap, Inc. and The Inditex Group; jeanswear brands such as those marketed by VF Corporation, a competitor in multiple channels and product lines including through their Wrangler, Lee and Seven for All Mankind brands; khakiwear brands such as Haggar; and athletic wear companies such as adidas Group, NIKE, Inc. and lululemon athletica inc. In addition, each region faces local or regional competition; and in the Americas, retailers' private or exclusive labels such as those from Wal-Mart Stores, Inc. (Faded Glory brand), Target Corporation (Mossimo and Merona brands) and JC Penney (Arizona brand). Many of our regional competitors are also seeking to expand globally through an expanded store footprint and the eCommerce channel. For more information on the factors affecting our competitive position, see “Item 1A – Risk Factors.”


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Trademarks
We have more than 5,000 trademark registrations and pending applications in approximately 180 jurisdictions worldwide, and we acquire rights in new trademarks according to business needs. Substantially all of our global trademarks are owned by Levi Strauss & Co., the parent and U.S. operating company. We regard our trademarks as our most valuable assets and believe they have substantial value in the marketing of our products. The Levi's ® , Dockers ® and 501 ® trademarks, the Arcuate Stitching Design, the Tab Device, the Two Horse ® Design, the Housemark and the Wings and Anchor Design are among our core trademarks.
We protect these trademarks by registering them with the U.S. Patent and Trademark Office and with governmental agencies in other countries, particularly where our products are manufactured or sold. We work vigorously to enforce and protect our trademark rights by engaging in regular market reviews, helping local law enforcement authorities detect and prosecute counterfeiters, issuing cease-and-desist letters against third parties infringing or denigrating our trademarks, opposing registration of infringing trademarks, and initiating litigation as necessary. We currently are pursuing approximately 400 infringement matters around the world. We also work with trade groups and industry participants seeking to strengthen laws relating to the protection of intellectual property rights in markets around the world.
Employees
As of November 30, 2014 , we employed approximately 15,000 people, approximately 6,500 of whom were located in the Americas, 4,500 in Europe, and 4,000 in Asia. Approximately 4,000 of our employees were associated with the manufacturing and procurement of our products, 6,400 worked in retail, including seasonal employees, 1,300 worked in distribution and 3,300 were other non-production employees.
History and Corporate Citizenship
Our history and longevity are unique in the apparel industry. Our commitment to quality, innovation and corporate citizenship began with our founder, Levi Strauss, who infused the business with the principle of responsible commercial success that has been embedded in our business practices throughout our more than 150-year history. This mixture of history, quality, innovation and corporate citizenship contributes to the iconic reputations of our brands.
In 1853, during the California Gold Rush, Mr. Strauss opened a wholesale dry goods business in San Francisco that became known as “Levi Strauss & Co.” Seeing a need for work pants that could hold up under rough conditions, he and Jacob Davis, a tailor, created the first jean. In 1873, they received a U.S. patent for “waist overalls” with metal rivets at points of strain. The first product line designated by the lot number “501” was created in 1890.
In the 19 th and early 20 th centuries, our work pants were worn primarily by cowboys, miners and other working men in the western United States. Then, in 1934, we introduced our first jeans for women, and after World War II, our jeans began to appeal to a wider market. By the 1960s, they had become a symbol of American culture, representing a unique blend of history and youth. We opened our export and international businesses in the 1950s and 1960s. In 1986, we introduced the Dockers ® brand of casual apparel which revolutionized the concept of business casual.
Throughout this long history, we upheld our strong belief that we can help shape society through civic engagement and community involvement, responsible labor and workplace practices, philanthropy, ethical conduct, environmental stewardship and transparency. We have engaged in a “profits through principles” business approach from the earliest years of the business. Among our milestone initiatives over the years, we integrated our factories two decades prior to the U.S. civil rights movement and federally mandated desegregation, we developed a comprehensive supplier code of conduct requiring safe and healthy working conditions among our suppliers (a first of its kind for a multinational apparel company), and we offered full medical benefits to domestic partners of employees prior to other companies of our size, a practice that is widely accepted today.
Item 1A.
RISK FACTORS
Risks Relating to the Industry in Which We Compete
Our revenues are influenced by economic conditions that impact consumer spending.
Apparel is a cyclical industry that is dependent upon the overall level of consumer spending. Consumer purchases of discretionary items, including our products, generally decline during periods when disposable income is adversely affected or there is economic uncertainty. Our wholesale customers anticipate and respond to adverse changes in economic conditions and uncertainty by reducing inventories, canceling orders or increasing promotional activity. Our brand-dedicated stores are also affected by these conditions which may lead to a decline in consumer traffic to, and spending in, these stores. As a result, factors that diminish consumer spending and confidence in any of the markets in which we compete, particularly deterioration in general


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economic conditions, volatility in investment returns, fear of unemployment, increases in energy costs or interest rates, housing market downturns, fear about and impact of pandemic illness, and other factors such as acts of war, acts of nature or terrorist or political events that impact consumer confidence, could reduce our sales and adversely affect our business and financial condition through their impact on our wholesale customers as well as their direct impact on us. These outcomes and behaviors have, and may continue to, adversely affect our business and financial condition.
Intense competition in the global apparel industry could lead to reduced sales and prices.
We face a variety of competitive challenges in the global apparel industry from a variety of jeanswear and casual apparel marketers, and competition has increased over the years due to factors such as the international expansion and increased presence of vertically integrated specialty stores; expansion into eCommerce by existing and new competitors; the proliferation of private labels and exclusive brands offered by department stores, chain stores and mass channel retailers; the introduction of jeans and casual apparel by well-known and successful athletic wear marketers; and the movement of apparel companies who traditionally relied on wholesale distribution channels into their own retail distribution network. Some of these competitors have greater financial and marketing resources than we do and may be able to adapt to changes in consumer preferences or retail requirements more quickly, devote greater resources to the building and sustaining of their brand equity and the marketing and sale of their products both in stores and online. In addition, some of these competitors may not respond to changing sourcing conditions in the same manner we do, and may be able to achieve lower product costs or adopt more aggressive pricing and discounting policies than we can. As a result, we may not be able to compete as effectively with them and may not be able to maintain or grow the demand for our products. These evolving competitive factors could reduce our sales and adversely affect our business and financial condition.
The success of our business depends upon our ability to offer innovative and updated products at attractive price points.
The global apparel industry is characterized by constant product innovation due to changing fashion trends and consumer preferences and by the rapid replication of new products by competitors. As a result, our success depends in large part on our ability to develop, market and deliver innovative and stylish products at a pace, intensity, and price competitive with other brands in the markets in which we sell our products. In addition, we must create products at a range of price points that appeal to the consumers of both our wholesale customers and our dedicated retail stores situated in each of our diverse geographic regions. Our development and production cycles take place prior to full visibility into all of these factors for the coming seasons. Failure on our part to forecast consumer demand and market conditions and to regularly and rapidly develop innovative and stylish products and update core products could limit sales growth, adversely affect retail and consumer acceptance of our products, negatively impact the consumer traffic in our dedicated retail stores, leave us with a substantial amount of unsold inventory which we may be forced to sell at discounted prices, all of which may adversely affect our gross margin, and impair the image of our brands on a local, regional and global level. Moreover, our newer products may not produce as high a gross margin as our traditional products and thus may have an adverse effect on our overall margins and profitability.
The global apparel industry is subject to ongoing pricing pressure.
The apparel market is characterized by low barriers to entry for both suppliers and marketers, global sourcing through suppliers located throughout the world, trade liberalization, continuing movement of product sourcing to lower cost countries, and the ongoing emergence of new competitors with widely varying strategies and resources. These factors have contributed, and may continue to contribute, to ongoing pricing pressure and uncertainty throughout the supply chain. Pricing pressure has been exacerbated by the variability of raw materials and energy costs in recent years. This pressure could have the following effects:
•
require us to raise wholesale prices on existing products resulting in decreased sales volume;
•
result in reduced gross margins across our product lines;
•
increase retailer demands for allowances, incentives and other forms of economic support; and
•
increase pressure on us to reduce our production costs and our operating expenses.
Any of these factors could adversely affect our business and financial condition.
Increases in the price of raw materials could increase our cost of goods and negatively impact our financial results.
The principal fabrics used in our products include cotton, blends, synthetics and wools. The prices we pay our suppliers for our products are dependent in part on the market price for raw materials used to produce them, primarily cotton. The price and availability of cotton may fluctuate substantially, depending on a variety of factors, including demand, acreage devoted to cotton crops and crop yields, weather, supply conditions, transportation costs, energy prices, work stoppages, government regulation and government policy, economic climates, market speculation and other unpredictable factors. Any and all of these factors may be exacerbated by global climate change. Cotton prices suffered from unprecedented variability and uncertainty in the past several years and may fluctuate significantly again in the future. Increases in raw material costs, unless sufficiently offset by our pricing


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actions, may cause a decrease in our profitability and negatively impact our sales volume. These factors may also have an adverse impact on our cash and working capital needs as well as those of our suppliers.
Our business is subject to risks associated with sourcing and manufacturing overseas.
We import both raw materials and finished garments into all of our operating regions. Our ability to import products in a timely and cost-effective manner may be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, labor disputes and work stoppages, political unrest, severe weather, or security requirements in the United States and other countries. These issues could delay importation of products or require us to locate alternative ports or warehousing providers to avoid disruption to our customers. These alternatives may not be available on short notice or could result in higher transportation costs, which could have an adverse impact on our business and financial condition, specifically our gross margin and overall profitability.
Substantially all of our import operations are subject to customs and tax requirements as well as trade regulations, such as tariffs and quotas set by governments through mutual agreements or bilateral actions. In addition, the countries in which our products are manufactured or imported may from time to time impose additional quotas, duties, tariffs or other restrictions on our imports or adversely modify existing restrictions. Adverse changes in these import costs and restrictions, or our suppliers' failure to comply with customs regulations or similar laws, could harm our business.
Our operations are also subject to the effects of international trade agreements and regulations such as the North American Free Trade Agreement, the Dominican-Republic Central America Free Trade Agreement, the Egypt Qualified Industrial Zone program, and the activities and regulations of the World Trade Organization. Although these trade agreements generally have positive effects on trade liberalization, sourcing flexibility and cost of goods by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country, trade agreements can also impose requirements that adversely affect our business, such as setting quotas on products that may be imported from a particular country into our key markets such as the United States or the European Union.
Risks Relating to Our Business
We depend on a group of key wholesale customers for a significant portion of our revenues. A significant adverse change in a customer relationship or in a customer's performance or financial position could harm our business and financial condition.
Sales to our top ten wholesale customers accounted for approximately 31% , 31% and 32% of our total net revenues in fiscal years 2014 , 2013 and 2012 , respectively. No customer represented 10% or more of net revenues in any of these years. While we have long-standing relationships with our wholesale customers, we do not have long-term contracts with them. As a result, purchases generally occur on an order-by-order basis, and the relationship, as well as particular orders, can generally be terminated by either party at any time. If any major wholesale customer decreases or ceases its purchases from us, reduces the floor space, assortments, fixtures or advertising for our products or changes its manner of doing business with us for any reason, such actions could adversely affect our business and financial condition. In addition, a decline in the performance or financial condition of a major wholesale customer – including bankruptcy or liquidation – could result in a material loss of revenues to us and cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer's receivables, or limit our ability to collect amounts related to previous purchases by that customer, all of which could in turn adversely affect our own business and financial condition.
The retail industry in the United States has experienced substantial consolidation over the last decade, and further consolidation may occur. Consolidation in the retail industry typically results in store closures, centralized purchasing decisions, and increased emphasis by retailers on inventory management and productivity. In addition, we and other suppliers may experience increased customer leverage over us and greater exposure to credit risk as a result of industry consolidation. Any of the foregoing results can and have adversely impacted our net revenues, margins and ability to operate efficiently.


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We face risks arising from the restructuring of our operations and uncertainty with respect to our ability to achieve the estimated cost savings.
In March 2014, we announced our global productivity initiative, the first two phases of which entailed, among other things:
•
eliminating approximately 800 positions within our global non-retail and non-manufacturing employee population and approximately 500 positions primarily reflecting the decision to outsource certain global business activities within the functional area of information technology, finance, human resources, customer service and consumer relations, and
•
initiating centrally-led cost savings and productivity projects.
Commencing in fiscal 2014, we incurred and expect to incur additional charges related to the global productivity initiative through fiscal 2015, which may harm our profitability in the periods incurred. If we incur unexpected charges related to the global productivity initiative, our financial condition and results of operations may suffer.
Implementation of the global productivity initiative presents a number of significant risks, including:
•
actual or perceived disruption of service or reduction in service levels to wholesale customers and retail consumers;
•
potential adverse effects on our internal control environment and inability to preserve adequate internal controls as we restructure our general and administrative functions in connection with the decision to outsource certain business service activities;
•
actual or perceived disruption to suppliers, distribution networks and other important operational relationships and the inability to resolve potential conflicts in a timely manner;
•
diversion of management attention from ongoing business activities and strategic objectives; and
•
the failure to maintain employee morale and retain key employees.
Because of these and other factors, such as implementation delays, we cannot predict whether we will fully realize the purpose and anticipated operational benefits or cost savings of the global productivity initiative and, if we do not, our business and results of operations may be adversely affected. Furthermore, if we experience adverse changes to our business, additional restructuring or reorganization activities may be required in the future.
We may be unable to maintain or increase our sales through our primary distribution channels.
In the United States, chain stores and department stores are the primary distribution channels for our Levi's ® and Dockers ® products. Outside the United States, department stores and independent jeanswear retailers have traditionally been our primary distribution channels.
We may be unable to maintain or increase sales of our products through these distribution channels for several reasons, including the following:
•
the retailers in these channels maintain – and seek to grow – substantial private-label and exclusive offerings as they strive to differentiate the brands and products they offer from those of their competitors;
•
these retailers may also change their apparel strategies in a way that shifts focus away from our typical consumer or that otherwise results in a reduction of sales of our products generally, a reduction of fixture spaces or purchases of brands misaligned with their strategic requirements;
•
other channels, including vertically integrated specialty stores, account for a substantial portion of jeanswear and casual wear sales. In some of our mature markets, these stores have already placed competitive pressure on our primary distribution channels, and many of these stores are now looking to our developing markets to grow their business; or
•
shrinking points of distribution, inclusive of fewer doors at our customer locations or bankruptcy of a customer.
Further success by retailer private-labels and vertically integrated specialty stores may continue to adversely affect the sales of our products across all channels, as well as the profitability of our brand-dedicated stores. Additionally, our ability to secure or maintain retail floor space, market share and sales in these channels depends on our ability to offer differentiated products and to increase retailer profitability on our products, which could have an adverse impact on our margins.



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We are a global company with significant revenues and earnings generated internationally, which exposes us to political and economic risks as well as the impact of foreign currency fluctuations.
In addition to our significant international revenues and earnings, a substantial amount of our products come from sources outside of the country of distribution. As a result, we are subject to the risks of doing business outside of the United States, including:
•
currency fluctuations, which have impacted our results of operations significantly in recent years;
•
political, economic and social instability;
•
changes in tariffs and taxes;
•
regulatory restrictions on repatriating foreign funds back to the United States; and
•
less protective foreign laws relating to intellectual property.
The functional currency for most of our foreign operations is the applicable local currency. As a result, fluctuations in foreign currency exchange rates affect the results of our operations and the value of our foreign assets and liabilities, including debt, which in turn may adversely affect results of operations and cash flows and the comparability of period-to-period results of operations. In addition, we engage in hedging activities to manage select foreign currency cash flow exposures resulting primarily from certain product sourcing activities, some intercompany sales, operating expenses, foreign subsidiaries' royalty payments, earnings repatriations and funding activities. We also hedge our net investments in select foreign operations. However, our earnings may be subject to volatility since we are required to record in income the changes in the market values of our exposure management instruments that we do not designate or that do not qualify for hedge accounting treatment. Changes in the value of the relevant currencies may affect the cost of certain items required in our operations as the majority of our sourcing activities are conducted in U.S. Dollars. Changes in currency exchange rates may also affect the relative prices at which we and foreign competitors sell products in the same market. Foreign policies and actions regarding currency valuation could result in actions by the United States and other countries to offset the effects of such fluctuations. Given the unpredictability and volatility of foreign currency exchange rates, ongoing or unusual volatility may adversely impact our business and financial conditions.
Furthermore, due to our global operations, we are subject to numerous domestic and foreign laws and regulations affecting our business, such as those related to labor, employment, worker health and safety, antitrust and competition, environmental protection, consumer protection, import/export, and anti-corruption, including but not limited to the Foreign Corrupt Practices Act which prohibits giving anything of value intended to influence the awarding of government contracts. Although we have put into place policies and procedures aimed at ensuring legal and regulatory compliance, our employees, subcontractors and agents could take actions that violate these requirements. Violations of these regulations could subject us to criminal or civil enforcement actions, any of which could have a material adverse effect on our business.
As a global company, we are exposed to risks of doing business in foreign jurisdictions and risks relating to U.S. policy with respect to companies doing business in foreign jurisdictions. Legislation or other changes in the U.S. tax laws could increase our U.S. income tax liability and adversely affect our after-tax profitability. For example, U.S. lawmakers are considering several U.S. corporate tax reform proposals, including, among others, proposals which could reduce or eliminate U.S. income tax deferrals on unrepatriated foreign earnings and eliminate tax incentives in exchange for a lower U.S. statutory tax rate.
If we encounter problems with distribution, our ability to deliver our products to market could be adversely affected.
We rely on company-owned and third-party distribution facilities to warehouse and ship products to our wholesale customers, retail stores and eCommerce consumers. 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. While these risks cannot be completely eliminated, we have implemented various maintenance programs and contingency plans and also work with our suppliers to mitigate these risks at both our company-owned and third-party distribution facilities.
We are focused on executional excellence, including improving productivity, reducing our controllable cost structure and driving efficiencies through our global supply chain.  As part of the pursuit for improved organizational agility and marketplace responsiveness, we have consolidated the number of distribution facilities we rely upon and continue to look for opportunities for further consolidation in certain regions. Such consolidation may make our operations more vulnerable to interruptions in the event of work stoppages, labor disputes, earthquakes, floods, fires or other natural disasters affecting our company-owned and third-party distribution centers. In addition, distribution capacity is dependent on the timely performance of services by third parties, including the transportation of products to and from its distribution facilities. If we encounter problems with our distribution system whether company-owned or third-party, our ability to meet wholesale customer and eCommerce consumer expectations, manage inventory, complete sales and achieve operating efficiencies could be adversely affected.


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If we are unable to effectively execute our eCommerce business our reputation and operating results may be harmed.
While still comprising a small portion of our net revenues, eCommerce has been our fastest growing business over the last several years. The success of our eCommerce business depends, in part, on third parties and factors over which we have limited control, including changing consumer confidence, preferences and buying trends relating to eCommerce usage, both domestically and abroad, as well as promotional or other advertising initiatives employed by our wholesale customers or other third parties on their eCommerce sites.
We are also vulnerable to certain additional risks and uncertainties associated with our eCommerce sites, including: changes in required technology interfaces; website downtime and other technical failures; costs and technical issues as we upgrade our website software; computer viruses; and changes in applicable federal and state regulations. In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other eCommerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not succeed in increasing sales or attracting consumers. Our competitors, some of whom have greater resources than we do, may also be able to benefit from changes in eCommerce technologies, which could harm our competitive position. Our failure to successfully respond to these risks and uncertainties might adversely affect the sales in our eCommerce business, as well as damage our reputation and brands.
Additionally, the success of our eCommerce business and the satisfaction of our consumers depends on their timely receipt of our products. The efficient flow of our products requires that our company-operated and third-party operated distribution facilities have adequate capacity to support the current level of eCommerce operations, and any anticipated increased levels that may follow from the growth of our eCommerce business. If we encounter difficulties with our distribution facilities or in our relationships with the third parties who operate the facilities, or if any facilities were to shut down for any reason, including as a result of fire or other natural disaster, we could face shortages of inventory, resulting in "out of stock" conditions in the eCommerce sites we operate, those operated by our wholesale customers or other third parties, incur significantly higher costs and longer lead times associated with distributing our products to our consumers and experience dissatisfaction from our consumers.  Any of these issues could have a material adverse effect on our business and harm our reputation.
Any major disruption or failure of our information technology systems could adversely affect our business and operations.
We rely on various information technology systems to manage our operations. Over the last several years, we have been and continue to implement modifications and upgrades to our systems, including making changes to legacy systems, replacing legacy systems with successor systems with new functionality and acquiring new systems with new functionality. These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time, and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. Our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have an adverse effect on our business and operations, if not anticipated and appropriately mitigated.
As we outsource functions, we become more dependent on the entities performing those functions. Disruptions or delays at our third-party service providers could adversely impact our operations.
As part of our long-term profitable growth strategy, we are continually looking for opportunities to provide essential business services in a more cost-effective manner. In some cases, this requires the outsourcing of functions or parts of functions that can be performed more effectively by external service providers. We recently entered into an agreement to outsource certain information technology operations, certain finance and human resource functions and certain consumer relations and customer service functions. While we believe we conduct appropriate diligence before entering into agreements with the outsourcing entity, the failure of one or more entities to meet our performance standards and expectations, including with respect to data security, provide them on a timely basis or to provide them at the prices we expect may have a material adverse effect on our results of operations or financial condition. In addition, we could face increased costs associated with finding replacement vendors or hiring new employees in order to return these services in-house. We may outsource other administrative functions in the future, which would increase our reliance on third parties.
We face cybersecurity risks and may incur increasing costs in an effort to minimize those risks.
We utilize systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, and others, including credit card information and personal identification information. As evidenced by companies who have recently suffered serious security breaches, we may be vulnerable to, and unable to anticipate or detect data security breaches and data loss, including rapidly evolving and increasingly sophisticated cybersecurity attacks. In


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addition, data and security breaches can also occur as a result of a breach by us or our employees or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. In addition to our own databases, we use third-party service providers to store, process and transmit confidential or sensitive information on our behalf. Although we contractually require these service providers to implement and use reasonable security measures, we cannot control third parties and cannot guarantee that a security breach will not occur in the future either at their location or within their systems.
A security breach may expose us to a risk of loss or misuse of this information, and could result in significant costs to us, which may include, among others, potential liabilities to payment card networks for reimbursement of credit card fraud and card reissuance costs, including fines and penalties, potential liabilities from governmental or third-party investigations, proceedings or litigation and diversion of management attention. We could also experience delays or interruptions in our ability to function in the normal course of business, including delays in the fulfillment or cancellation of customer orders or disruptions in the manufacture and shipment of products. In addition, actual or anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.
In addition, the regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements. Compliance with changes in privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes.
We currently rely on contract manufacturing of our products. Our inability to secure production sources meeting our quality, cost, working conditions and other requirements, or failures by our contractors to perform, could harm our sales, service levels and reputation.
We source approximately 95% of our products from independent contract manufacturers who purchase fabric and make our products and may also provide us with design and development services. As a result, we must locate and secure production capacity. We depend on independent manufacturers to maintain adequate financial resources, including access to sufficient credit, secure a sufficient supply of raw materials, and maintain sufficient development and manufacturing capacity in an environment characterized by continuing cost pressure and demands for product innovation and speed-to-market. In addition, we currently do not have any material long-term contracts with any of our independent manufacturers. Under our current arrangements with our independent manufacturers, these manufacturers generally may unilaterally terminate their relationship with us at any time. Finally, while we have historically worked with numerous manufacturers, in the past several years we have begun consolidating the number of independent manufacturers from which we source our products. Reliance on fewer numbers of independent manufacturers involves risk and any difficulties or failures to perform by our independent contract manufacturers could cause delays in product shipments or otherwise negatively affect our results of operations.
Our dependence on contract manufacturing could subject us to difficulty in obtaining timely delivery of products of acceptable quality. For example, a contractor's failure to ship products to us in a timely manner or to meet our quality standards, or interference with our ability to receive shipments due to factors such as port or transportation conditions, could cause us to miss the delivery date requirements of our customers. Failing to make timely deliveries may cause our customers to cancel orders, refuse to accept deliveries, impose non-compliance charges, demand reduced prices, or reduce future orders, any of which could harm our sales and margins.
We require contractors to meet our standards in terms of working conditions, environmental protection, raw materials, security and other matters before we are willing to place business with them. As such, we may not be able to obtain the lowest-cost production. In addition, the labor and business practices of apparel manufacturers have received increased attention from the media, non-governmental organizations, consumers and governmental agencies in recent years. Any failure by our independent manufacturers to adhere to labor or other laws or appropriate labor or business practices, and the potential litigation, negative publicity and political pressure relating to any of these events, could harm our business and reputation.
Our suppliers may be impacted by economic conditions and cycles and changing laws and regulatory requirements which could impact their ability to do business with us or cause us to terminate our relationship with them and require us to find replacements, which we may have difficulty doing.
Our suppliers are subject to the fluctuations in general economic cycles, and global economic conditions may impact their ability to operate their business. They may also be impacted by the increasing costs of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses. The performance and financial condition of a supplier may cause us to alter our business terms or to cease doing


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business with a particular supplier, or change our sourcing practices generally, which could in turn adversely affect our own business and financial condition.
Regulatory developments such as the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries could affect the sourcing and availability of raw materials used by our suppliers in the manufacture of certain of our products. We may be subject to costs associated with new regulations, including for the diligence pertaining to the presence of any conflict minerals used in our products and the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. The impact of the regulations may result in a limited pool of suppliers who provide conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices. Also, because our supply chain is complex, we may face reputational challenges with our consumers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in the products that we sell.
If one or more of our counterparty financial institutions default on their obligations to us, we may incur significant losses.
As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty’s liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.
The loss of members of the Company’s executive management and other key employees could harm our business.
Our future success depends in part on the continued service of our executive management team and other key employees. The loss of the services of any key individual could harm our business. Our future success depends, in part, on our ability to recruit, retain and motivate our employees sufficiently, both to maintain our current business and to execute our strategic initiatives. Competition for experienced and well-qualified employees in our industry 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 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 licensees may not comply with our product quality, manufacturing standards, marketing and other requirements which could negatively affect our reputation and business.
We license our trademarks to third parties for manufacturing, marketing and distribution of various products. While we enter into comprehensive agreements with our licensees covering product design, product quality, sourcing, manufacturing, marketing and other requirements, our licensees may not comply fully with those agreements. Non-compliance could include marketing products under our brand names that do not meet our quality and other requirements or engaging in manufacturing practices that do not meet our supplier code of conduct. These activities could harm our brand equity, our reputation and our business.
Our success depends on the continued protection of our trademarks and other proprietary intellectual property rights.
Our trademarks and other intellectual property rights are important to our success and competitive position, and the loss of or inability to enforce trademark and other proprietary intellectual property rights could harm our business. We devote substantial resources to the establishment and protection of our trademark and other proprietary intellectual property rights on a global basis. Our efforts to establish and protect our trademark and other proprietary intellectual property rights may not be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products. Unauthorized copying of our products or unauthorized use of our trademarks or other proprietary rights may not only erode sales of our products but may also cause significant reputational harm to our brand names and our ability to effectively represent ourselves to our customers, contractors, suppliers and/or licensees. Moreover, others may seek to assert rights in, or ownership of, our trademarks and other proprietary intellectual property, and we may not be able to successfully resolve those claims. In addition, the laws and enforcement


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mechanisms of some foreign countries may not allow us to protect our proprietary rights to the same extent as we are able to in the United States and other countries.
We have substantial liabilities and cash requirements associated with postretirement benefits, pension and our deferred compensation plans.
Our postretirement benefits, pension, and our deferred compensation plans result in substantial liabilities on our balance sheet. These plans and activities have and will generate substantial cash requirements for us, and these requirements may increase beyond our expectations in future years based on changing market conditions. The difference between plan obligations and assets, or the funded status of the plans, is a significant factor in determining the net periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Many variables, such as changes in interest rates, mortality rates, health care costs, investment returns, and/or the market value of plan assets can affect the funded status of our defined benefit pension, other postretirement, and postemployment benefit plans and cause volatility in the net periodic benefit cost and future funding requirements of the plans. Plan liabilities may impair our liquidity, have an unfavorable impact on our ability to obtain financing and place us at a competitive disadvantage compared to some of our competitors who do not have such liabilities and cash requirements.
Earthquakes or other events outside of our control may damage our facilities or the facilities of third parties on which we depend.
Our global headquarters and the headquarters of our Americas region are both located in California near major geologic faults that have experienced earthquakes in the past. An earthquake or other natural disaster or the loss of power caused by power shortages could disrupt operations or impair critical systems. Any of these disruptions or other events outside of our control could affect our business negatively, harming our operating results. In addition, if any of our other facilities, including our manufacturing, finishing or distribution facilities or our company-operated or franchised stores, or the facilities of our suppliers or customers, is affected by earthquakes, tsunamis, power shortages, floods, monsoons, terrorism, epidemics, political instability or conflict or other events outside of our control, our business could suffer. The Company has plans in place to mitigate the impact of these types of events on its own facilities including the geographic diversity of our IT infrastructure, the duplication of headquarter locations, training and education of employees for such circumstances, and the capacity for many employees to work remotely. Oversight to these preparedness strategies is provided by several committees comprised of key functions representing the regions in which the company does business. However, we cannot assure that these mitigation plans will offset the impact of such events, and we cannot control the impact of such events on the operations of our suppliers or customers.
Risks Relating to Our Debt
We have debt and interest payment requirements at a level that may restrict our future operations.
As of November 30, 2014 , we had approximately $1.2 billion of debt, of which all but approximately $100.0 million was unsecured, and we had $664.9 million of additional borrowing capacity under our amended and restated senior secured revolving credit facility. Our debt requires us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which will reduce funds available for other business purposes, and result in us having lower net income than we would otherwise have had. This dedicated use of cash could impact our ability to successfully compete by, for example:
•
increasing our vulnerability to general adverse economic and industry conditions;
•
limiting our flexibility in planning for or reacting to changes in our business and industry;
•
placing us at a competitive disadvantage compared to some of our competitors that have less debt; and
•
limiting our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes.
In addition, borrowings under our amended and restated senior secured revolving credit facility bear interest at variable rates. As a result, increases in market interest rates could require a greater portion of our cash flow to be used to pay interest, which could further hinder our operations. Increases in market interest rates may also affect the trading price of our debt securities that bear interest at a fixed rate. Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control.


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Volatility in the capital markets could affect our ability to access capital or could increase our costs of capital.
A downturn or disruption in the credit markets may reduce sources of liquidity available to us or increase our costs of capital, which could impact our ability to maintain or grow our business, which in turn may adversely affect our business and results of operations.
Restrictions in our notes, indentures and amended and restated senior secured revolving credit facility may limit our activities, including dividend payments, share repurchases and acquisitions.
Our amended and restated senior secured revolving credit facility and the indentures relating to our senior unsecured notes and our Yen-denominated Eurobonds contain restrictions, including covenants limiting our ability to incur additional debt, grant liens, make acquisitions and other investments, prepay specified debt, consolidate, merge or acquire other businesses, sell assets, pay dividends and other distributions, repurchase stock, and enter into transactions with affiliates. These restrictions, in combination with our leveraged condition, may make it more difficult for us to successfully execute our business strategy, grow our business or compete with companies not similarly restricted.
If our foreign subsidiaries are unable to distribute cash to us when needed, we may be unable to satisfy our obligations under our debt securities, which could force us to sell assets or use cash that we were planning to use elsewhere in our business.
We conduct our international operations through foreign subsidiaries and we only receive the cash that remains after our foreign subsidiaries satisfy their obligations. We may depend upon funds from our foreign subsidiaries for a portion of the funds necessary to meet our debt service obligations. Any agreements our foreign subsidiaries enter into with other parties, as well as applicable laws and regulations limiting the right and ability of non-U.S. subsidiaries and affiliates to pay dividends and remit cash to affiliated companies, may restrict the ability of our foreign subsidiaries to pay dividends or make other distributions to us. If those subsidiaries are unable to pass on the amount of cash that we need, we may be unable to make payments on our debt obligations, which could force us to sell assets or use cash that we were planning on using elsewhere in our business, which could hinder our operations and affect the trading price of our debt securities.



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Item 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
Item 2.
PROPERTIES
We conduct manufacturing, distribution and administrative activities in owned and leased facilities. We operate four manufacturing-related facilities abroad and seven distribution centers around the world. We have renewal rights for most of our property leases. We anticipate that we will be able to extend these leases on terms satisfactory to us or, if necessary, locate substitute facilities on acceptable terms. We believe our facilities and equipment are in good condition and are suitable for our needs. Information about our key operating properties in use as of November 30, 2014 , is summarized in the following table :
 
Location
 
Primary Use
 
Leased/Owned
 
 
Americas
 
 
 
 
 
 
San Francisco, CA
 
Design and Product Development
 
Leased
 
 
Hebron, KY
 
Distribution
 
Owned
 
 
Canton, MS
 
Distribution
 
Owned
 
 
Henderson, NV
 
Distribution
 
Owned
 
 
Etobicoke, Canada
 
Distribution
 
Owned
 
 
Cuautitlan, Mexico
 
Distribution
 
Leased
 
 
 
 
 
 
 
 
 
Europe
 
 
 
 
 
 
Plock, Poland
 
Manufacturing and Finishing
 
Leased (1)
 
 
Northhampton, U.K.
 
Distribution
 
Owned
 
 
Corlu, Turkey (2)
 
Finishing and Distribution
 
Owned
 
 
 
 
 
 
 
 
 
Asia
 
 
 
 
 
 
Adelaide, Australia
 
Distribution
 
Leased
 
 
Cape Town, South Africa
 
Manufacturing, Finishing and Distribution
 
Leased
 
 
Ninh Binh, Vietnam
 
Finishing
 
Leased
 
______________
(1)
Building and improvements are owned but subject to a ground lease.
(2)
In September 2014, we announced that we would close our owned finishing and distribution center in Turkey in 2015.
Our global headquarters and the headquarters of our Americas region are both located in leased premises in San Francisco, California. Our Europe and Asia headquarters are located in leased premises in Brussels, Belgium and Singapore, respectively. In addition to the above, we operate finance shared service centers in Eugene, Oregon and Singapore. We also operate a back-up data center located in Westlake, Texas. As of November 30, 2014 , we also leased or owned 92 administrative and sales offices in 41 countries, as well as leased 17 warehouses in nine countries.
In addition, as of November 30, 2014 , we had 565 company-operated retail and outlet stores in leased premises in 32 countries. We had 213 stores in the Americas region, 217 stores in the Europe region and 135 stores in the Asia region.
Item 3.
LEGAL PROCEEDINGS
In the ordinary course of business, we have various pending cases involving contractual matters, facility and employee-related matters, distribution matters, product liability claims, trademark infringement and other matters. We do not believe any of these pending legal proceedings will have a material impact on our financial condition, results of operations or cash flows.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.  


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PART II
Item 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is primarily owned by descendants of the family of Levi Strauss and their relatives. Shares of our common stock are not publicly held or traded. All shares are subject to a stockholders' agreement. The agreement, which expires in April 2019, unless otherwise extended pursuant to its terms as further described in Item 12, limits the transfer of shares to other holders, family members, specified charities and foundations and back to the Company. The agreement does not provide for registration rights or other contractual devices for forcing a public sale of shares or certificates, or other access to liquidity.
As of February 9, 2015 , there were 282 record holders of our common stock. Our shares are not registered on any national securities exchange, there is no established public trading market for our shares and none of our shares are convertible into shares of any other class of stock or other securities.
We paid a cash dividend of $30.0 million on our common stock in the second quarter of 2014 , and cash dividends of $25.1 million and $20.0 million in the first half of each of 2013 and 2012 , respectively. Subsequent to the fiscal year-end, on February 4, 2015, our Board of Directors declared a cash dividend of $50.0 million . Please see Note 15 to our audited consolidated financial statements included in this report for more information. The Company does not have an established annual dividend policy. The Company will continue to review its ability to pay cash dividends at least annually, and dividends may be declared at the discretion of our board of directors depending upon, among other factors, our financial condition and compliance with the terms of our debt agreements. Our debt arrangements limit our ability to pay dividends. For more detailed information about these limitations, see Note  6 to our audited consolidated financial statements included in this report.
We did not repurchase any shares of common stock during the fourth quarter of the fiscal year ended November 30, 2014 , in connection with the exercise of call or put rights under our 2006 Equity Incentive Plan. For more detailed information, see Note 11 to our audited consolidated financial statements included in this report.



17
Table of Contents

Item 6.
SELECTED FINANCIAL DATA
The following table sets forth our selected historical consolidated financial data which are derived from our audited consolidated financial statements for 2014 , 2013 , 2012 , 2011 and 2010 . The financial data set forth below should be read in conjunction with, and are qualified by reference to, “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations,” our audited consolidated financial statements for 2014 , 2013 and 2012 and the related notes to those audited consolidated financial statements, included elsewhere in this report.
 
Year Ended November 30, 2014
 
Year Ended November 24, 2013
 
Year Ended November 25, 2012
 
Year Ended November 27, 2011
 
Year Ended November 28, 2010
 
(Dollars in thousands)
Statements of Income Data:
 
 
 
 
 
 
 
 
 
Net revenues
$
4,753,992

 
$
4,681,691

 
$
4,610,193

 
$
4,761,566

 
$
4,410,649

Cost of goods sold
2,405,552

 
2,331,219

 
2,410,862

 
2,469,327

 
2,187,726

Gross profit
2,348,440

 
2,350,472

 
2,199,331

 
2,292,239

 
2,222,923

Selling, general and administrative expenses
1,906,164

 
1,884,965

 
1,865,352

 
1,955,846

 
1,841,562

Restructuring, net
128,425

 
—

 
—

 
—

 
—

Operating income
313,851

 
465,507

 
333,979

 
336,393

 
381,361

Interest expense
(117,597
)
 
(129,024
)
 
(134,694
)
 
(132,043
)
 
(135,823
)
Loss on early extinguishment of debt
(20,343
)
 
(689
)
 
(8,206
)
 
(248
)
 
(16,587
)
Other income (expense), net
(22,057
)
 
(13,181
)
 
4,802

 
(1,275
)
 
6,647

Income before taxes
153,854

 
322,613

 
195,881

 
202,827

 
235,598

Income tax expense
49,545

 
94,477

 
54,922

 
67,715

 
86,152

Net income
104,309

 
228,136

 
140,959

 
135,112

 
149,446

Net loss attributable to noncontrolling interest
1,769

 
1,057

 
2,891

 
2,841

 
7,057

Net income attributable to Levi Strauss & Co.
$
106,078

 
$
229,193

 
$
143,850

 
$
137,953

 
$
156,503

 
 
 
 
 
 
 
 
 
 
Statements of Cash Flow Data:
 
 
 
 
 
 
 
 
 
Net cash flow provided by (used for):
 
 
 
 
 
 
 
 
 
Operating activities
$
232,909

 
$
411,268

 
$
530,976

 
$
1,848

 
$
146,274

Investing activities
(71,849
)
 
(92,798
)
 
(75,198
)
 
(140,957
)
 
(181,781
)
Financing activities
(341,676
)
 
(230,509
)
 
(250,939
)
 
77,707

 
32,313

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
298,255

 
$
489,258

 
$
406,134

 
$
204,542

 
$
269,726

Working capital
777,518

 
1,054,236

 
881,493

 
870,960

 
891,607

Total assets
2,924,073

 
3,127,418

 
3,170,077

 
3,279,555

 
3,135,249

Total debt, excluding capital leases
1,224,002

 
1,545,877

 
1,729,211

 
1,972,372

 
1,863,146

Total capital leases
12,142

 
10,833

 
2,022

 
3,713

 
5,355

Total Levi Strauss & Co. stockholders' equity (deficit)
153,243

 
171,666

 
(106,921
)
 
(165,592
)
 
(219,609
)
Other Financial Data:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
$
109,474

 
$
115,720

 
$
122,608

 
$
117,793

 
$
104,896

Capital expenditures
73,396

 
91,771

 
83,855

 
130,580

 
154,632

Cash dividends paid
30,003

 
25,076

 
20,036

 
20,023

 
20,013




18
Table of Contents

Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND   RESULTS OF OPERATIONS  
Overview
Our Company
We design, market and sell – directly or through third parties and licensees – products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories for men, women and children around the world under our Levi’s ® , Dockers ® , Signature by Levi Strauss & Co.™ (“Signature”) and Denizen ® brands.
Our business is operated through three geographic regions: Americas, Europe and Asia. Our products are sold in approximately 50,000 retail locations in more than 110 countries. We support our brands through a global infrastructure, developing, sourcing and marketing our products around the world. We distribute our Levi’s ® and Dockers ® products primarily through chain retailers and department stores in the United States and primarily through department stores, specialty retailers and approximately 2,100 franchised or other brand-dedicated stores and shop-in-shops outside of the United States. We also distribute our Levi’s ® and Dockers ® products through 565 company-operated stores located in 32 countries, including the United States, and through the eCommerce sites we operate. Our company-operated stores and eCommerce sites generated approximately 25% of our net revenues in 2014 , as compared to 22% in the same period in 2013 , with our eCommerce sites representing approximately 11% of this revenue in both 2014 and 2013 . In addition, we distribute our Levi’s ® and Dockers ® products through eCommerce sites operated by certain of our key wholesale customers and other third parties. We distribute products under our Signature and Denizen ® brands primarily through mass channel retailers in the Americas.
Our Europe and Asia businesses, collectively, contributed approximately 40% of our net revenues and 35% of our regional operating income in 2014 , as compared to 39% and 36% of our net revenues and regional operating income, respectively, in 2013 . Sales of Levi’s ® brand products represented approximately 85% of our total net sales in 2014 , as compared to 84% of our total net sales in 2013 . Pants represented approximately 82% of our total units sold in 2014 , as compared to 85% of our total units sold in 2013 , and men's products generated approximately 77% of our total net sales in 2014, as compared to 78% of our total net sales in 2013 .
Our Objectives
Our key long-term objectives are to strengthen our brands globally in order to deliver sustainable profitable growth, generate strong cash flow and reduce our debt. Critical strategies to achieve these objectives include driving our profitable core business; expanding the reach of our brands and building a more balanced product portfolio; elevating the performance of our retail channel, including eCommerce; and leveraging our global scale to improve our cost structure.
For 2015, our objective is to grow full-year revenues as compared to 2014, with growth concentrated in the second half of 2015.  Full-year gross margin in 2015 is projected to be approximately 50%. 
Global Productivity Initiative
On February 5, 2014, our Board of Directors (“Board”) endorsed a global productivity initiative designed to streamline operations and fuel long-term profitable growth. On March 26, 2014, we announced and began to implement the global productivity initiative, which will continue to be implemented through the end of 2015, with a focus on redesigning business processes and identifying opportunities to reduce costs, increase efficiencies and further streamline processes in supporting functions and supply chain. We expect that this initiative, when completed, will generate net annualized cost savings of $175 – $200 million, relative to the cost structure of the Company prior to the commencement of this initiative.
The first phase of the global productivity initiative included the elimination of approximately 800 positions within our global non-retail and non-manufacturing employee population. The elimination of positions in connection with this phase was completed during the last three fiscal quarters of 2014.
The next phase of the global productivity initiative, announced in November 2014, included the elimination of approximately 500 positions, primarily reflecting the outsourcing of certain global business service activities within information technology, finance, human resources, customer service and customer relations functions, as well as a further reduction of the non-manufacturing employee population. We anticipate the elimination of these positions will be substantially completed in the U.S. within the second half of fiscal 2015 to accommodate the transition of outsourced services. Final estimates for headcount, timing and charges in certain areas of the international business are subject to completion of applicable local works council and other consultative processes.


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Table of Contents

Approximately $128 million was recorded as restructuring charges in 2014 for the global productivity initiative, and consist primarily of severance benefits, consulting fees and noncash pension and postretirement curtailment gains or losses. Related charges of approximately $28 million , consisting primarily of consulting fees for centrally-led cost-savings and productivity projects, were recorded in selling, general and administrative expense ("SG&A") in 2014. Cash payments for charges recorded to date were made primarily in 2014 and are expected to continue through the first half of 2016. Actions taken in 2014 for the global productivity initiative are expected to deliver approximately $125 – $150 million in net annualized savings.
We are unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, for additional actions associated with the global productivity initiative. We expect additional savings in future periods to come from streamlining our planning and go-to-market strategies, implementing efficiencies across our retail, supply chain and distribution network, and continuing to pursue improved procurement practices. Additional restructuring charges will be recorded for these efforts as they become estimable and probable.
Trends Affecting Our Business
We believe the key business and marketplace factors that we are managing include the following:
•
Factors that impact consumer discretionary spending, which remains mixed globally, have created a challenging retail environment for us and our customers, characterized by inconsistent traffic patterns and contributing to a more promotional environment. Such factors include continuing pressures in the U.S. and international economies related to the lingering high unemployment rates, slow real wage increase, muted growth in emerging markets, a shift in spending to non-apparel categories such as consumer technology and interest-rate sensitive durable goods, and other similar macroeconomic elements.
•
Wholesaler/retailer dynamics and wholesale channels remain challenged by slowed growth prospects due to increased competition from vertically-integrated specialty stores, fast-fashion retail, and eCommerce shopping, and pricing transparency enabled by proliferation of online technologies. As a result, many of our customers desire increased returns on their investment with us through increased margins and inventory turns, and they continue to build competitive exclusive or private-label offerings. Many apparel wholesalers, including us, seek to strengthen relationships with customers as a result of these changes in the marketplace through efforts such as investment in new products, marketing programs, fixtures and collaborative planning systems.
•
Many apparel companies that have traditionally relied on wholesale distribution channels have invested in expanding their own retail store and eCommerce distribution and consumer-facing technologies, which has raised competitiveness in the retail market.
•
More competitors are seeking growth globally, thereby raising the competitiveness across regions. Some of these competitors are entering into markets where we already have a mature business such as the United States, Mexico, Western Europe and Japan, and those new brands may provide consumers discretionary purchase alternatives or lower-priced apparel offerings.
•
Competition for, and price volatility of, resources throughout the supply chain have increased, causing us and other apparel manufacturers to continue to seek alternative sourcing channels and create new efficiencies in our global supply chain. Trends affecting the supply chain include the proliferation of lower-cost sourcing alternatives, resulting in reduced barriers to entry for new competitors, and the impact of fluctuating prices of labor and raw materials. Trends such as these can bring additional pressure on us and other wholesalers and retailers to shorten lead-times, reduce costs and raise product prices.
These factors contribute to a global market environment of intense competition, constant product innovation and continuing cost pressure, and combine with the continuing global economic conditions to create a challenging commercial and economic environment. We evaluate these factors as we develop and execute our strategies.
Our 2014 Results
Our 2014 results reflect net revenues growth and the implementation of our global productivity initiative.
 
•
Net revenues.   Compared to 2013 , consolidated net revenues increased by 2% on a reported basis and 3% on a constant-currency basis. The increase primarily reflected the inclusion of an additional sales week, since 2014 had 53 fiscal weeks compared to 52 weeks in 2013, and increased sales from our global retail network.
•
Operating income .  Compared to 2013 , consolidated operating income decreased by 33% and operating margin declined to 7% , primarily due to charges associated with the global productivity initiative, a lower gross margin as well as a noncash settlement charge related to an early pension settlement in the fourth quarter of 2014.


20
Table of Contents

•
Cash flows.   Cash and cash equivalents decreased $191 million to $298 million , as total debt was reduced by $322 million to $1.2 billion . Cash flows provided by operating activities were $233 million for 2014 as compared to $411 million for 2013 , primarily reflecting payments related to our global productivity initiative, a decrease in cash received from customers, higher cash used for inventory purchases, and higher payments to vendors.
Financial Information Presentation
Fiscal year .   Our fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Fiscal 2014 was a 53-week year ending on November 30, 2014 . Fiscal 2013 and 2012 were 52-week years ending on November 24, 2013 , and November 25, 2012 , respectively. Each quarter of fiscal years 2014 , 2013 and 2012 consisted of 13 weeks, with the exception of the fourth quarter of 2014, which consisted of 14 weeks.
Segments .   We manage our business according to three regional segments: the Americas, Europe and Asia. Effective as of the beginning of 2014, our reporting segments were revised to combine our Middle East and North Africa markets, previously managed by our Europe region, with our Asia region. Financial information attributable to these markets are not significant to any of the Company's regional segments individually in any of the periods presented herein, and accordingly, business segment information for the prior periods have not been revised.
Classification .   Our classification of certain significant revenues and expenses reflects the following:
•
Net revenues is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated eCommerce sites and stores and at our company-operated shop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives. Net revenues also includes royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing, advertising and distribution of trademarked products.
•
Cost of goods sold is primarily comprised of product costs, labor and related overhead, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense.
•
Selling costs include, among other things, all occupancy costs and depreciation associated with our company-operated stores and commissions associated with our company-operated shop-in-shops.
•
We reflect substantially all distribution costs in SG&A, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.
Gross margins may not be comparable to those of other companies in our industry since some companies may include costs related to their distribution network and occupancy costs associated with company-operated stores in cost of goods sold.
Constant currency .   Effective as of the beginning of 2014, constant-currency comparisons are based on translating local currency amounts in the prior-year period at actual foreign exchange rates for the current year. Prior to 2014, local currency amounts were translated utilizing foreign exchange rates used in our internal planning process. There was no significant impact to our constant-currency comparisons as a result of this change. We routinely evaluate our financial performance on a constant-currency basis in order to facilitate period-to-period comparisons without regard to the impact of changing foreign currency exchange rates.


21
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Results of Operations
2014 compared to 2013
The following table summarizes, for the periods indicated, our consolidated statements of income, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
%
Increase
(Decrease)
 
November 30,
2014
 
November 24,
2013
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
(Dollars in millions)
Net revenues
$
4,754.0

 
$
4,681.7

 
1.5
 %
 
100.0
 %
 
100.0
 %
Cost of goods sold
2,405.6

 
2,331.2

 
3.2
 %
 
50.6
 %
 
49.8
 %
Gross profit
2,348.4

 
2,350.5

 
(0.1
)%
 
49.4
 %
 
50.2
 %
Selling, general and administrative expenses
1,906.1

 
1,885.0

 
1.1
 %
 
40.1
 %
 
40.3
 %
Restructuring, net
128.4

 
—

 
—

 
2.7
 %
 
—

Operating income
313.9

 
465.5

 
(32.6
)%
 
6.6
 %
 
9.9
 %
Interest expense
(117.6
)
 
(129.0
)
 
(8.9
)%
 
(2.5
)%
 
(2.8
)%
Loss on early extinguishment of debt
(20.3
)
 
(0.7
)
 
2,852.5
 %
 
(0.4
)%
 
—

Other income (expense), net
(22.1
)
 
(13.2
)
 
67.3
 %
 
(0.5
)%
 
(0.3
)%
Income before income taxes
153.9

 
322.6

 
(52.3
)%
 
3.2
 %
 
6.9
 %
Income tax expense
49.6

 
94.5

 
(47.6
)%
 
1.0
 %
 
2.0
 %
Net income
104.3

 
228.1

 
(54.3
)%
 
2.2
 %
 
4.9
 %
Net loss attributable to noncontrolling interest
1.8

 
1.1

 
67.4
 %
 
—

 
—

Net income attributable to Levi Strauss & Co.
$
106.1

 
$
229.2

 
(53.7
)%
 
2.2
 %
 
4.9
 %


22
Table of Contents

Net revenues
The following table presents net revenues by reporting segment for the periods indicated and the changes in net revenues by reporting segment on both reported and constant-currency bases from period to period:
 
 
Year Ended
 
 
 
 
 
 
 
% Increase
(Decrease)
 
 
 
November 30,
2014
 
November 24,
2013
 
As
Reported
 
Constant
Currency
 
 
 
(Dollars in millions)
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Americas
$
2,862.9

 
$
2,851.0

 
0.4
%
 
1.0
%
 
 
Europe
1,143.3

 
1,103.5

 
3.6
%
 
4.1
%
 
 
Asia
747.8

 
727.2

 
2.8
%
 
6.7
%
 
 
Total net revenues
$
4,754.0

 
$
4,681.7

 
1.5
%
 
2.6
%
 
As compared to the same period in the prior year, total net revenues were affected unfavorably by changes in foreign currency exchange rates across all regions.
Americas .   Net revenues in our Americas region increased on both reported and constant-currency bases, with currency affecting net revenues unfavorably by approximately $16 million .
Net revenues increased due to the inclusion of an additional sales week, since 2014 had 53 fiscal weeks compared to 52 weeks in 2013. Declines at wholesale in sales of Levi's ® women's and Dockers ® products were partially offset by a higher volume of sales at our company-operated retail network on increased promotional activity.
Europe .  Net revenues in Europe increased on both reported and constant-currency bases, with currency affecting net revenues unfavorably by approximately $5 million , and with respect to the fourth quarter, by approximately $19 million .
Net revenues increased from the expansion and performance of our company-operated retail network, as well as the inclusion of an additional sales week in 2014.
Asia .   Net revenues in Asia increased on both reported and constant-currency bases, with currency affecting net revenues unfavorably by approximately $26 million .
The increase in net revenues was primarily due to higher promotional activity across the region, with improved product availability during the Chinese New Year sales season. Higher traditional wholesale revenues, particularly in Japan due to changes in customer discount programs as well as inventory disposition efforts, was partially offset by the liquidation in the prior year of Denizen ®  brand products as we exited that business in Asia.


23
Table of Contents

Gross profit
The following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period:  
 
 
Year Ended
 
 
 
November 30,
2014
 
November 24,
2013
 
%
Increase
(Decrease)
 
 
 
(Dollars in millions)
 
 
Net revenues
$
4,754.0

 
$
4,681.7

 
1.5
 %
 
 
Cost of goods sold
2,405.6

 
2,331.2

 
3.2
 %
 
 
Gross profit
$
2,348.4

 
$
2,350.5

 
(0.1
)%
 
 
Gross margin
49.4
%
 
50.2
%
 
 
 
Currency affected gross profit unfavorably by approximately $22 million . Gross margin declined primarily due to higher discounted sales across channels, reflecting a promotional marketplace and our efforts to manage our inventory to more appropriate levels, as well as product investment costs. Higher cost inflation was mitigated by improvements in supply chain operations as a result of the global productivity initiative. Offsetting the decline in gross margin was increased revenue contribution from company-operated retail network.
Selling, general and administrative expenses
The following table shows our SG&A for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
 
Year Ended
 
 
 
November 30,
2014
 
November 24,
2013
 
%
Increase
(Decrease)
 
November 30,
2014
 
November 24,
2013
 
 
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
 
(Dollars in millions)
 
 
Selling
$
730.9

 
$
719.2

 
1.6
 %
 
15.4
%
 
15.4
%
 
 
Advertising and promotion
272.8

 
274.0

 
(0.4
)%
 
5.7
%
 
5.9
%
 
 
Administration
377.7

 
399.8

 
(5.5
)%
 
7.9
%
 
8.5
%
 
 
Other
466.4

 
492.0

 
(5.2
)%
 
9.8
%
 
10.5
%
 
 
Restructuring-related charges
27.6

 
—

 
—

 
0.6
%
 
—

 
 
Lump-sum pension settlement loss
30.7

 
—

 
—

 
0.6
%
 
—

 
 
Total SG&A
$
1,906.1

 
$
1,885.0

 
1.1
 %
 
40.1
%
 
40.3
%
 
Currency affected SG&A favorably by approximately $15 million as compared to the prior year.
Selling .   We had 36 more company-operated stores at the end of 2014 than we did at the end of 2013 . Higher expenses associated with the expansion of our company-operated store network were partially offset by savings resulting from our global productivity initiative.
Advertising and promotion .   The decrease as a percentage of net revenues reflected lower advertising spend, particularly in the fourth quarter as compared to the prior-year period.
Administration .   Administration expenses decreased primarily due to savings resulting from our global productivity initiative as well lower amortization expense for intangible assets, as certain intangible assets became fully amortized beginning in 2014.
Other .   Other SG&A includes distribution, information resources, and marketing organization costs. Lower costs primarily reflected information resources and marketing organization savings resulting from our global productivity initiative.
Restructuring-related charges .   Restructuring-related charges consist primarily of consulting fees incurred for our centrally-led cost-savings and productivity projects. These related charges represent costs incurred associated with ongoing operations to benefit future periods and were recorded in SG&A in the Company's consolidated statements of income.


24
Table of Contents

Lump-sum pension settlement loss .    Settlement loss consist of a noncash pension settlement charge taken in the fourth quarter related to an early pension settlement for our U.S. pension plans.
Restructuring, net
For the year ended November 30, 2014 , the Company recognized restructuring charges, net, of $128.4 million related to the global productivity initiative, consisting primarily of severance benefits, consulting fees and noncash pension and postretirement curtailment gains or losses.
Operating income
The following table shows operating income by reporting segment and corporate expenses for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
Year Ended
 
 
November 30,
2014
 
November 24,
2013
 
%
Increase
(Decrease)
 
November 30,
2014
 
 
November 24,
2013
 
 
 
 
% of Net
Revenues
 
 
% of Net
Revenues
 
 
(Dollars in millions)
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
531.1

 
$
510.5

 
4.0
 %
 
18.6
%
 
 
17.9
%
 
Europe
181.0

 
167.6

 
8.0
 %
 
15.8
%
 
 
15.2
%
 
Asia
108.5

 
123.7

 
(12.3
)%
 
14.5
%
 
 
17.0
%
 
Total regional operating income
820.6

 
801.8

 
2.3
 %
 
17.3
%
*
 
17.1
%
*
 
 
 
 
 
 
 
 
 
 
 
 
Corporate:
 
 
 
 
 
 
 
 
 
 
 
Restructuring, net
128.4

 
—

 
—

 
2.7
%
*
 
—

*
Restructuring-related charges
27.6

 
—

 
—

 
0.6
%
*
 
—

*
Lump-sum pension settlement loss
30.7

 
—

 
—

 
0.6
%
*
 
—

*
Other corporate staff costs and expenses
320.0

 
336.3

 
(4.8
)%
 
6.7
%
*
 
7.2
%
*
Corporate expenses
506.7

 
336.3

 
50.7
 %
 
10.7
%
*
 
7.2
%
*
Total operating income
$
313.9

 
$
465.5

 
(32.6
)%
 
6.6
%
*
 
9.9
%
*
Operating margin
6.6
%
 
9.9
%
 
 
 
 
 
 
 
 
______________
* Percentage of consolidated net revenues
Currency unfavorably affected total operating income by approximately $7 million .
Regional operating income .    
•
Americas.   The increase in operating income and operating margin primarily reflected the region's lower SG&A, reflecting savings from our global productivity initiative and the lower amortization expense for intangible assets, partially offset by lower gross margin.
•
Europe.   The increase in operating income and operating margin primarily reflected the region's higher revenues.
•
Asia.   The decrease in operating income and operating margin primarily reflected the region's lower gross margin.
Corporate .   Corporate expenses are SG&A that are not attributed to any of our regional operating segments. Included in corporate expenses are restructuring charges, the consulting fees incurred for our centrally-led cost-savings and productivity projects, and the noncash pension settlement charge. As compared to the prior year, other corporate staff costs and expenses decreased primarily due to savings resulting from our global productivity initiative.


25
Table of Contents

Interest expense
Interest expense was $117.6 million for the year ended November 30, 2014 , as compared to $129.0 million in the prior year. The decrease in 2014 was due to lower average debt balances in 2014, which resulted from our redemption of Euro Senior Notes due in 2018 in two tranches, the first of which was redeemed in May 2014, and the remainder was redeemed in November 2014. Interest expense also decreased due to lower interest expense on our deferred compensation plans.
The weighted-average interest rate on average borrowings outstanding for 2014 was 7.63% , as compared to 7.52% for 2013 .
Loss on early extinguishment of debt
For the year ended November 30, 2014 , we recorded a loss of $20.3 million on early extinguishment of debt as a result of our debt refinancing activities during 2014. The loss was comprised of redemption premiums of $15.2 million and the write-off of $5.1 million unamortized debt issuance costs.
For the year ended November 24, 2013 , we recorded a loss of $0.7 million on early extinguishment of debt as a result of our debt refinancing activities during the second quarter of 2013. The loss was comprised of the write-off of the remaining unamortized discount and unamortized debt issuance costs.
Other income (expense), net
Other income (expense), net, primarily consists of foreign exchange management activities and transactions. For the year ended November 30, 2014 , we recorded expense of $22.1 million as compared to $13.2 million for the prior year. The expense in 2014 reflected losses on our foreign currency denominated balances as well as losses on foreign exchange derivatives, which economically hedge future foreign currency cash flow obligations. The expense in 2013 primarily reflected losses on our foreign currency denominated balances.
Income tax expense
Income tax expense was $49.6 million for the year ended November 30, 2014 , compared to $94.5 million for the prior year. Our effective income tax rate was 32.2% for the year ended November 30, 2014 , compared to 29.3% for the prior year.
The increase in the effective tax rate in 2014 was primarily due to a $15.2 million discrete tax benefit recognized in 2013, attributable to the finalization in July 2013 of the U.S. federal tax audit of tax years 2003 – 2008, and an unfavorable impact in the mix of foreign earnings, partially offset by a $3.7 million tax benefit that we recorded during the year ended November 30, 2014 , as a result of reversing a deferred tax liability associated with undistributed foreign earnings.
For the year ended November 30, 2014 , management asserted indefinite reinvestment on $100.0 million of undistributed foreign earnings, as management determined that this amount is required to meet ongoing working capital needs in certain foreign subsidiaries; no U.S. income taxes have been provided for such earnings. If the Company were to repatriate such foreign earnings to the United States, the deferred tax liability associated with such earnings would have been approximately $27.3 million .


26
Table of Contents

2013 compared to 2012
The following table summarizes, for the periods indicated, our consolidated statements of income, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
Year Ended
 
November 24,
2013
 
November 25,
2012
 
%
Increase
(Decrease)
 
November 24,
2013
 
November 25,
2012
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
(Dollars in millions)
Net revenues
$
4,681.7

 
$
4,610.2

 
1.6
 %
 
100.0
 %
 
100.0
 %
Cost of goods sold
2,331.2

 
2,410.9

 
(3.3
)%
 
49.8
 %
 
52.3
 %
Gross profit
2,350.5

 
2,199.3

 
6.9
 %
 
50.2
 %
 
47.7
 %
Selling, general and administrative expenses
1,885.0

 
1,865.3

 
1.1
 %
 
40.3
 %
 
40.5
 %
Operating income
465.5

 
334.0

 
39.4
 %
 
9.9
 %
 
7.2
 %
Interest expense
(129.0
)
 
(134.7
)
 
(4.2
)%
 
(2.8
)%
 
(2.9
)%
Loss on early extinguishment of debt
(0.7
)
 
(8.2
)
 
(91.6
)%
 
—

 
(0.2
)%
Other income (expense), net
(13.2
)
 
4.8

 
(374.5
)%
 
(0.3
)%
 
0.1
 %
Income before income taxes
322.6

 
195.9

 
64.7
 %
 
6.9
 %
 
4.2
 %
Income tax expense
94.5

 
54.9

 
72.0
 %
 
2.0
 %
 
1.2
 %
Net income
228.1

 
141.0

 
61.8
 %
 
4.9
 %
 
3.1
 %
Net loss attributable to noncontrolling interest
1.1

 
2.9

 
(63.4
)%
 
—

 
0.1
 %
Net income attributable to Levi Strauss & Co.
$
229.2

 
$
143.9

 
59.3
 %
 
4.9
 %
 
3.1
 %


27
Table of Contents

Net revenues
The following table presents net revenues by reporting segment for the periods indicated and the changes in net revenues by reporting segment on both reported and constant-currency bases from period to period:
 
 
Year Ended
 
 
 
 
 
 
 
% Increase
(Decrease)
 
 
 
November 24,
2013
 
November 25,
2012
 
As
Reported
 
Constant
Currency
 
 
 
(Dollars in millions)
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Americas
$
2,851.0

 
$
2,749.3

 
3.7
 %
 
3.7
 %
 
 
Europe
1,103.5

 
1,103.2

 
—

 
(2.1
)%
 
 
Asia
727.2

 
757.7

 
(4.0
)%
 
0.4
 %
 
 
Total net revenues
$
4,681.7

 
$
4,610.2

 
1.6
 %
 
1.8
 %
 
As compared to the same periods in the prior year, net revenues were affected unfavorably by changes in foreign currency exchange rates across all regions.
Americas .   Net revenues in our Americas region increase on both reported and constant-currency bases.
Net revenues increased in our retail channel at our outlet and online stores primarily due to improved performance. Levi's ® and Dockers ® brand wholesale revenues increased due to strong sales to certain key customers. Partially offsetting the higher wholesale revenues was our decision in the third quarter of 2012 to license the Levi's ® brand boys business, whereby we now recognize a royalty rate on the licensee's sales of these products, in lieu of recognizing the full wholesale revenues and related costs. During the fourth quarter, increased sales of Levi's ® men's products through all channels offset declines in sales of women's products at wholesale.
Europe . Net revenues in Europe were flat on a reported basis but decreased on a constant-currency basis, with currency affecting net revenues favorably by approximately $23 million.
Net revenues decreased in our traditional wholesale channels throughout the region, most notably during the fourth quarter, and to our franchisees in Southern Europe. This decline was partially offset by net revenue growth from the performance and expansion of our company-operated retail network, particularly at our outlet stores and in Russia.
Asia . Net revenues in Asia decreased on a reported basis but increased slightly on a constant-currency basis, with currency affecting net revenues unfavorably by approximately $33 million.
The increase in constant-currency net revenues reflects our decision to phase out the Denizen ® brand in the third quarter of 2012. Revenues were negatively impacted in the second half of 2012 due to support we provided to our customers in conjunction with exiting the brand.
Excluding the Denizen ® impact, net revenues decreased in 2013 reflecting lower Levi's ® brand sales at our wholesale and retail channels due to ongoing challenging conditions in most markets in the region, which also led to declining franchisee performance and selective closure of unproductive stores. Partially offsetting these declines was a slight improvement in our performance in Levi's ® brand sales in India.


28
Table of Contents

Gross profit
The following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period:
 
 
Year Ended
 
 
 
November 24,
2013
 
November 25,
2012
 
%
Increase
(Decrease)
 
 
 
(Dollars in millions)
 
 
Net revenues
$
4,681.7

 
$
4,610.2

 
1.6
 %
 
 
Cost of goods sold
2,331.2

 
2,410.9

 
(3.3
)%
 
 
Gross profit
$
2,350.5

 
$
2,199.3

 
6.9
 %
 
 
Gross margin
50.2
%
 
47.7
%
 
 
 
Currency affected gross profit favorably by approximately $25 million. Gross margin improved primarily due to the benefit of the lower cost of cotton in the products we sold in the first half of 2013. Gross margin also improved due to the unfavorable impact in 2012 of the $32 million in customer support and markdown charges taken to exit the Denizen ® brand in Asia. This was partially offset by a decline in margin in the fourth quarter reflecting higher discounts and inventory markdown, particularly in the women's business.
Selling, general and administrative expenses
The following table shows our SG&A for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
 
Year Ended
 
 
 
November 24,
2013
 
November 25,
2012
 
%
Increase
(Decrease)
 
November 24,
2013
 
November 25,
2012
 
 
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
 
(Dollars in millions)
 
 
Selling
$
719.2

 
$
717.0

 
0.3
 %
 
15.4
%
 
15.6
%
 
 
Advertising and promotion
274.0

 
260.4

 
5.2
 %
 
5.9
%
 
5.6
%
 
 
Administration
399.8

 
376.2

 
6.3
 %
 
8.5
%
 
8.2
%
 
 
Other
492.0

 
511.7

 
(3.8
)%
 
10.5
%
 
11.1
%
 
 
Total SG&A
$
1,885.0

 
$
1,865.3

 
1.1
 %
 
40.3
%
 
40.5
%
 
Currency affected SG&A favorably by approximately $6 million as compared to the prior year.
Selling .   We had 18 more company-operated stores at the end of 2013 than we did at the end of 2012. Higher expenses associated with the performance and expansion of our company-operated store network were offset by savings in our wholesale sales organization.
Advertising and promotion .   The increase as a percentage of net revenues reflected increased advertising campaigns in our fourth quarter as compared to the prior-year period.
Administration .   Incentive compensation expense increased more than $30 million, reflecting improved achievement against our internally-set objectives in 2013 as compared to 2012; additionally, postretirement benefit plan costs increased, as the favorable impact of past plan amendments had been substantially recognized by the end of fiscal 2012. These increases were partially offset by lower severance expenses in 2013.
Other .   Other SG&A includes distribution, information resources, and marketing organization costs. Lower costs primarily reflected a third-quarter 2012 impairment charge of $19 million recorded in conjunction with our decision to outsource distribution in Japan to a third party and close our owned distribution center in that country.


29
Table of Contents

Operating income
The following table shows operating income by reporting segment and corporate expenses for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
Year Ended
 
 
November 24,
2013
 
November 25,
2012
 
%
Increase
(Decrease)
 
November 24,
2013
 
 
November 25,
2012
 
 
 
 
% of Net
Revenues
 
 
% of Net
Revenues
 
 
(Dollars in millions)
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
510.5

 
$
431.6

 
18.3
 %
 
17.9
%
 
 
15.7
%
 
Europe
167.6

 
178.3

 
(6.0
)%
 
15.2
%
 
 
16.2
%
 
Asia
123.7

 
66.8

 
85.1
 %
 
17.0
%
 
 
8.8
%
 
Total regional operating income
801.8

 
676.7

 
18.5
 %
 
17.1
%
*
 
14.7
%
*
Corporate expenses
336.3

 
342.7

 
(1.9
)%
 
7.2
%
*
 
7.4
%
*
Total operating income
$
465.5

 
$
334.0

 
39.4
 %
 
9.9
%
*
 
7.2
%
*
Operating margin
9.9
%
 
7.2
%
 
 
 
 
 
 
 
 
______________
* Percentage of consolidated net revenues
Currency favorably affected total operating income by approximately $31 million.
Regional operating income .    
•
Americas.   The increase in operating income and operating margin primarily reflected the region's improved gross margin.
•
Europe.   The decrease in operating income reflected the region's lower net revenues and higher expenses related to our company-operated stores as well as advertising.
•
Asia.   The increase in operating income and operating margin reflected the charges recorded in 2012 in connection with our decision to phase out the Denizen ® brand in the region, as well as the region's improved gross margin.
Corporate .   Corporate expenses are SG&A that are not attributed to any of our regional operating segments. As compared to the prior year, corporate expenses in 2013 included lower severance expenses and lower distribution expenses, reflecting the third-quarter 2012 impairment charge of $19 million recorded for our distribution center in Japan. These declines were partially offset by higher incentive compensation expense and higher postretirement benefit plan costs.
Interest expense
Interest expense was $129.0 million for the year ended November 24, 2013 , as compared to $134.7 million in the prior year. The decrease in 2013 was due to lower debt balances, which resulted from our debt refinancing activities during the second quarters of 2012 and 2013, partially offset by higher interest expense on our deferred compensation plans.
The weighted-average interest rate on average borrowings outstanding for the 2013 was 7.52%, as compared to 7.05% for 2012.
Loss on early extinguishment of debt
For the year ended November 24, 2013 , we recorded a loss on early extinguishment of debt as a result of our debt refinancing activities during the second quarter of 2013. The loss was comprised of the write-off of the remaining unamortized discount and unamortized debt issuance costs.
For the year ended November 25, 2012, we recorded an $8.2 million net loss on early extinguishment of debt as a result of our debt refinancing activities during the second quarter of 2012. The loss was primarily comprised of a tender premium of $11.4 million and the write-off of $4.0 million of unamortized debt issuance costs, partially offset by a gain of $7.6 million related to the partial repurchase of Yen-denominated Eurobonds due 2016 at a discount to their par value. For more information, see Note 6 to our audited consolidated financial statements included in this report.


30
Table of Contents

Other income (expense), net
Other income (expense), net, primarily consists of foreign exchange management activities and transactions. For the year ended November 24, 2013 , we recorded expense of $13.2 million as compared to income of $4.8 million for the prior year. The expense in 2013 primarily reflected losses on our foreign currency denominated balances. The income in 2012 primarily reflected gains on our foreign currency denominated balances.
Income tax expense
Income tax expense was $94.5 million for the year ended November 24, 2013 , compared to $54.9 million for the prior year. Our effective income tax rate was 29.3% for the year ended November 24, 2013 , compared to 28.0% for the prior year.
The increase in income tax expense in 2013 as compared to 2012 is primarily due to an increase in income before income taxes. The effective tax rate in 2013 reflected a $15.2 million discrete tax benefit attributable to the finalization in July 2013 of the U.S. federal tax audit of tax years 2003 – 2008, and a favorable change in the impact of foreign operations as compared to 2012. The effective tax rate in 2012 reflected a net tax benefit of $27.0 million recognized in 2012, resulting from a definitive agreement with the State of California on state tax refund claims involving tax years 1986 – 2004.
Liquidity and Capital Resources
Liquidity outlook
We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements.
Cash sources
We are a privately-held corporation. We have historically relied primarily on cash flows from operations, borrowings under credit facilities, issuances of notes and other forms of debt financing. We regularly explore financing and debt reduction alternatives, including new credit agreements, unsecured and secured note issuances, equity financing, equipment and real estate financing, securitizations and asset sales. Key sources of cash include earnings from operations and borrowing availability under our revolving credit facility.
We are borrowers under an amended and restated senior secured revolving credit facility. The facility is an asset-based facility, in which the borrowing availability is primarily based on the value of our U.S. Levi’s ® trademarks and the levels of accounts receivable and inventory in the United States and Canada. The maximum availability under the facility is $850 million, of which $800 million is available to us for revolving loans in U.S. Dollars and $50 million is available to us for revolving loans either in U.S. Dollars or Canadian Dollars.
On March 21, 2014, we amended and restated our senior secured revolving credit facility to extend the term to March 21, 2019. The terms of the amended and restated credit facility are similar to the terms under the original credit facility, except that of the maximum availability of $850.0 million, $350.0 million is secured by our U.S. Levi's ® trademarks, an increase from the $250.0 million in the original credit facility. The interest rate for borrowings under the credit facility was reduced from LIBOR plus 150 – 275 basis points to LIBOR plus 125 – 200 basis points, depending on borrowing base availability, and the range of the rate for undrawn availability was reduced from 37.5 – 50 basis points to 25 – 30 basis points (depending on the Company's credit ratings). All other terms of the original credit agreement, including, without limitation, guarantees and security, covenants, and events of default, have not been materially changed as a result of the amended and restated credit agreement and remain in full force and effect.
As of November 30, 2014 , we had borrowings of $100.0 million under the credit facility, all of which is classified as short-term debt. Unused availability under the facility was $664.9 million , as our total availability of $724.7 million , based on collateral levels as defined by the agreement, was reduced by $59.8 million of other credit-related instruments.
As of November 30, 2014 , we had cash and cash equivalents totaling approximately $298.3 million , resulting in a total liquidity position (unused availability and cash and cash equivalents) of $963.2 million .
Cash uses
Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to our pension plans and payments for postretirement health benefit plans, settlement of shares issued under our 2006 Equity Incentive Plan, as amended to date (“EIP”) and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures in our line of business. In addition, we regularly evaluate our ability to pay dividends or repurchase stock, all consistent with the terms of our debt agreements.


31
Table of Contents

The following table presents selected cash uses in 2014 and the related projected cash uses for these items in 2015 as of November 30, 2014 :
 
 
 
 
 
 
 
 
 
 
Cash Used in
 
Projected
Cash Uses in
 
 
 
 
2014
 
2015
 
 
 
 
(Dollars in millions)
 
 
Capital expenditures (1)
 
$
73

 
$
120

 
 
Interest
 
110

 
86

 
 
Federal, foreign and state taxes (net of refunds)
 
61

 
62

 
 
Pension plans (2)
 
21

 
34

 
 
Postretirement health benefit plans
 
14

 
14

 
 
Dividend (3)
 
30

 
50

 
 
Total selected cash requirements
 
$
309

 
$
366

 
______________
(1)
Capital expenditures consist primarily of costs associated with information technology investments for eCommerce and investment in company-operated retail stores.
(2)
The 2015 pension contribution amounts will be recalculated at the end of the plans' fiscal years, which for our U.S. pension plan is at the beginning of the Company's third fiscal quarter. Accordingly, actual contributions may differ materially from those presented here, based on factors such as changes in discount rates and the valuation of pension assets.
(3)
Subsequent to the fiscal year-end, our Board of Directors declared a cash dividend of approximately $50 million .


32
Table of Contents

The following table provides information about our significant cash contractual obligations and commitments as of November 30, 2014 :
 
Payments due or projected by period
 
Total
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
(Dollars in millions)
Contractual and Long-term Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term and long-term debt obligations
$
1,224

 
$
132

 
$
34

 
$
—

 
$
—

 
$
—

 
$
1,058

Interest (1)
532

 
86

 
81

 
79

 
79

 
77

 
130

Capital lease obligations
37

 
5

 
4

 
4

 
4

 
5

 
15

Operating leases (2)
614

 
148

 
114

 
92

 
71

 
57

 
132

Purchase obligations (3)
862

 
497

 
50

 
44

 
45

 
38

 
188

Postretirement obligations (4)
123

 
14

 
14

 
13

 
13

 
12

 
57

Pension obligations (5)
303

 
34

 
32

 
35

 
39

 
28

 
135

Long-term employee related benefits (6)
94

 
14

 
21

 
10

 
7

 
7

 
35

Total
$
3,789

 
$
930

 
$
350

 
$
277

 
$
258

 
$
224

 
$
1,750

______________
(1)
Interest obligations are computed using constant interest rates until maturity.
(2)
Amounts reflect contractual obligations relating to our existing leased facilities as of November 30, 2014 , and therefore do not reflect our planned future openings of company-operated retail stores. For more information, see “Item 2 – Properties.”
(3)
Amounts reflect estimated commitments of $376 million for inventory purchases, $221 million for sponsorship, naming rights and related benefits with respect to the Levi's ® Stadium, and $264 million for human resources, advertising, information technology and other professional services.
(4)
The amounts presented in the table represent an estimate for the next ten years of our projected payments, based on information provided by our plans' actuaries, and have not been reduced by estimated Medicare subsidy receipts, the amounts of which are not material. Our policy is to fund postretirement benefits as claims and premiums are paid. For more information, see Note  8 to our audited consolidated financial statements included in this report.
(5)
The amounts presented in the table represent an estimate of our projected contributions to the plans for the next ten years based on information provided by our plans' actuaries. For U.S. qualified plans, these estimates can exceed the projected annual minimum required contributions in an effort to level out potential future funding requirements and provide annual funding flexibility. The 2015 contribution amounts will be recalculated at the end of the plans' fiscal years, which for our U.S. pension plan is at the beginning of the Company's third fiscal quarter. Accordingly, actual contributions may differ materially from those presented here, based on factors such as changes in discount rates and the valuation of pension assets. For more information, see Note  8 to our audited consolidated financial statements included in this report.
(6)
Long-term employee-related benefits relate to the current and non-current portion of deferred compensation arrangements and workers' compensation. We estimated these payments based on prior experience and forecasted activity for these items. For more information, see Note  12 to our audited consolidated financial statements included in this report.
This table does not include amounts related to our uncertain tax positions of $41.6 million . We do not anticipate a material effect on our liquidity as a result of payments in future periods of liabilities for uncertain tax positions. The table also does not include amounts related to potential cash settlement of stock appreciation rights (“SARs”) put to the Company under the terms of our EIP. Based on the fair value of the Company's stock and the number of shares outstanding as of November 30, 2014 , future payments under the terms of the EIP could range up to approximately $130 million, of which up to approximately $70 million could become payable in 2015. These payments are contingent on the Company's liquidity and the Board's discretion.
Information in the two preceding tables reflects our estimates of future cash payments. These estimates and projections are based upon assumptions that are inherently subject to significant economic, competitive, legislative and other uncertainties and contingencies, many of which are beyond our control. Accordingly, our actual expenditures and liabilities may be materially higher or lower than the estimates and projections reflected in these tables. The inclusion of these projections and estimates should not be regarded as a representation by us that the estimates will prove to be correct.


33
Table of Contents

Cash flows
The following table summarizes, for the periods indicated, selected items in our consolidated statements of cash flows:
 
 
Year Ended
 
 
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
 
 
(Dollars in millions)
 
 
Cash provided by operating activities
$
232.9

 
$
411.3

 
$
531.0

 
 
Cash used for investing activities
(71.8
)
 
(92.8
)
 
(75.2
)
 
 
Cash used for financing activities
(341.7
)
 
(230.5
)
 
(250.9
)
 
 
Cash and cash equivalents
298.3

 
489.3

 
406.1

 
2014 as compared to 2013
Cash flows from operating activities
Cash provided by operating activities was $232.9 million for 2014 , as compared to $411.3 million for 2013 . Cash provided by operating activities decreased compared to the prior year due to cash payments for our global productivity initiative, a decrease in cash received from customers, reflecting our lower beginning accounts receivable balance, higher cash used for inventory purchases, and higher payments to vendors. Partially offsetting the declines in cash provided by operating activities were our higher net revenues and lower pension payments.
Cash flows from investing activities
Cash used for investing activities was $71.8 million for 2014 , as compared to $92.8 million for 2013 . The decrease in cash used for investing activities as compared to the prior year primarily reflects lower spend on facilities, partially offset by increased cash used toward information technology projects.
Cash flows from financing activities
Cash used for financing activities was $341.7 million for 2014 , as compared to $230.5 million for 2013 . Cash used in both periods primarily related to our refinancing activities and debt reduction in each year.
2013 as compared to 2012
Cash flows from operating activities
Cash provided by operating activities was $411.3 million for 2013 , as compared to $531.0 million for 2012 . Cash provided by operating activities decreased compared to the prior year due to an increase in cash used for inventory, reflecting our higher inventory build, and higher payments to vendors, reflecting our higher SG&A.
Cash flows from investing activities
Cash used for investing activities was $92.8 million for 2013 , as compared to $75.2 million for 2012 . The increase in cash used for investing activities as compared to the prior year primarily reflects the higher spend on facilities improvements and our company-operated retail stores, partially offset by lower cash used toward information technology projects.
Cash flows from financing activities
Cash used for financing activities was $230.5 million for 2013 , as compared to cash provided of $250.9 million for 2012 . Cash used in both periods primarily related to our refinancing activities and debt reduction in each year.
Indebtedness
The borrower of substantially all of our debt is Levi Strauss & Co., the parent and U.S. operating company. Of our total debt of $1.2 billion as of November 30, 2014 , we had fixed-rate debt of $1.1 billion (92% of total debt) and variable-rate debt of $0.1 billion (8% of total debt). As of November 30, 2014 , our required aggregate debt principal payments on our unsecured long-term debt were $34.0 million in 2016 and the remaining $1.1 billion in 2020 and years after. Short-term debt of $100.0 million borrowed under our amended and restated senior secured revolving credit facility was expected to be repaid over the next twelve months, and short-term borrowings of $31.5 million at various foreign subsidiaries were expected to be either paid over the next twelve months or refinanced at the end of their applicable terms.
Our long-term debt agreements contain customary covenants restricting our activities as well as those of our subsidiaries. As of November 30, 2014 , we were in compliance with all of these covenants.


34
Table of Contents

Effects of Inflation
We believe that inflation in the regions where most of our sales occur has not had a significant effect on our net revenues or profitability.
Off-Balance Sheet Arrangements, Guarantees and Other Contingent Obligations
Off-balance sheet arrangements and other . We have contractual commitments for non-cancelable operating leases; for more information, see Note 14 to our audited consolidated financial statements included in this report. We participate in a multiemployer pension plan; however, our exposure to risks arising from participation in the plan and the extent to which we can be liable to the plan for other participating employers' obligations are not material. We have no other material non-cancelable guarantees or commitments, and no material special-purpose entities or other off-balance sheet debt obligations.
Indemnification agreements .   In the ordinary course of our business, the Company enters into agreements containing indemnification provisions under which the Company agrees to indemnify the other party for specified claims and losses. For example, the Company's trademark license agreements, real estate leases, consulting agreements, logistics outsourcing agreements, securities purchase agreements and credit agreements typically contain such provisions. This type of indemnification provision obligates the Company to pay certain amounts associated with claims brought against the other party as the result of trademark infringement, negligence or willful misconduct of Company employees, breach of contract by the Company including inaccuracy of representations and warranties, specified lawsuits in which the Company and the other party are co-defendants, product claims and other matters. These amounts generally are not readily quantifiable; the maximum possible liability or amount of potential payments that could arise out of an indemnification claim depends entirely on the specific facts and circumstances associated with the claim. The Company has insurance coverage that minimizes the potential exposure to certain of such claims. The Company also believes that the likelihood of material payment obligations under these agreements to third parties is remote.
Critical Accounting Policies, Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. We believe that the following discussion addresses our critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Changes in such estimates, based on newly available information, or different assumptions or conditions, may affect amounts reported in future periods.
We summarize our critical accounting policies below.
Revenue recognition .   Net sales is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores. We recognize revenue on sale of product when the goods are shipped or delivered and title to the goods passes to the customer provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is reasonably assured. Revenue is recorded net of an allowance for estimated returns, discounts and retailer promotions and other similar incentives. Licensing revenues from the use of our trademarks in connection with the manufacturing, advertising, and distribution of trademarked products by third-party licensees are earned and recognized as products are sold by licensees based on royalty rates as set forth in the licensing agreements.
We recognize allowances for estimated returns in the period in which the related sale is recorded. We recognize allowances for estimated discounts, retailer promotions and other similar incentives at the later of the period in which the related sale is recorded or the period in which the sales incentive is offered to the customer. We estimate non-volume based allowances based on historical rates as well as customer and product-specific circumstances. Actual allowances may differ from estimates due to changes in sales volume based on retailer or consumer demand and changes in customer and product-specific circumstances. Sales and value-added taxes collected from customers and remitted to governmental authorities are presented on a net basis in the accompanying consolidated statements of income.
Inventory valuation .   We value inventories at the lower of cost or market value. Inventory cost is generally determined using the first-in first-out method. We include product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense, in the cost of inventories. We estimate quantities of slow-moving and obsolete inventory by reviewing on-hand quantities, outstanding purchase obligations and forecasted sales. In determining inventory market values, substantial consideration is given to the expected product selling price. We estimate expected selling prices based on our historical recovery rates for sale of slow-moving and obsolete inventory and other factors, such as market conditions, expected channel of disposition, and current consumer preferences. Estimates


35
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may differ from actual results due to changes in resale or market value, avenues of disposition, consumer and retailer preferences and economic conditions.
Impairment . We review our goodwill and other non-amortized intangible assets for impairment annually in the fourth quarter of our fiscal year, or more frequently as warranted by events or changes in circumstances which indicate that the carrying amount may not be recoverable. We qualitatively assess goodwill impairment for certain reporting units and impairment for other non-amortized intangible assets to determine whether it is more likely than not that the fair value of a reporting unit or other non-amortized intangible asset is less than its carrying amount. The reporting units and non-amortized intangibles selected for the qualitative assessment approach have fair values that are significantly higher than their carrying values and remote risk of impairment. For goodwill and other non-amortized intangible assets not qualitatively assessed, a two-step quantitative approach is utilized. In the first step, we compare the carrying value of the reporting unit or applicable asset to its fair value, which we estimate using a discounted cash flow analysis or by comparison to the market values of similar assets. If the carrying amount of the reporting unit or asset exceeds its estimated fair value, we perform the second step, and determine the impairment loss, if any, as the excess of the carrying value of the goodwill or intangible asset over its fair value. The assumptions used in such valuations are subject to volatility and may differ from actual results; however, based on the carrying value of our goodwill and other non-amortized intangible assets as of November 30, 2014 , relative to their estimated fair values, we do not anticipate any material impairment charges in the near-term.
We review our other long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of an other long-lived asset exceeds the expected future undiscounted cash flows, we measure and record an impairment loss for the excess of the carrying value of the asset over its fair value.
To determine the fair value of impaired assets, we utilize the valuation technique or techniques deemed most appropriate based on the nature of the impaired asset and the data available, which may include the use of quoted market prices, prices for similar assets or other valuation techniques such as discounted future cash flows or earnings.
Income tax assets and liabilities .   The future effective tax rate will ultimately depend on the mix of earnings between domestic and foreign operations, the impact of certain undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are planned to be indefinitely reinvested outside of the United States, changes in tax laws and regulations and potential resolutions on tax examinations, refund claims and litigation. Remittances of foreign earnings to the United States are planned based on projected cash flow, working capital and investment needs of our foreign and domestic operations. Based on these assumptions, we estimate the amount that will be distributed to the United States and provide U.S. federal taxes on these amounts. Material changes in our estimates as to how much of our foreign earnings will be distributed to the United States or tax legislation that limits or restricts the amount of undistributed foreign earnings that we consider indefinitely reinvested outside the United States could materially impact our income tax provision and effective tax rate. Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise from examinations in various jurisdictions and assumptions and estimates used in evaluating the need for valuation allowance.
We are subject to income taxes in both the United States and numerous foreign jurisdictions. We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Significant judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including historical operating results, estimates of future taxable income and the existence of prudent and feasible tax planning strategies. Changes in the expectations regarding the realization of deferred tax assets could materially impact income tax expense in future periods.
We continuously review issues raised in connection with all ongoing examinations and open tax years to evaluate the adequacy of our tax liabilities. We evaluate uncertain tax positions under a two-step approach. The first step is to evaluate the uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination based on its technical merits. The second step is, for those positions that meet the recognition criteria, to measure the tax benefit as the largest amount that is more than fifty percent likely of being realized. We believe our recorded tax liabilities are adequate to cover all open tax years based on our assessment. This assessment relies on estimates and assumptions and involves significant judgments about future events. To the extent that our view as to the outcome of these matters changes, we will adjust income tax expense in the period in which such determination is made. We classify interest and penalties related to income taxes as income tax expense.


36
Table of Contents

Employee benefits and incentive compensation
Pension and postretirement benefits.   We have several non-contributory defined benefit retirement plans covering eligible employees. We also provide certain health care benefits for U.S. employees who meet age, participation and length of service requirements at retirement. In addition, we sponsor other retirement or post-employment plans for our foreign employees in accordance with local government programs and requirements. We retain the right to amend, curtail or discontinue any aspect of the plans, subject to local regulations. Any of these actions, either individually or in combination, could have a material impact on our consolidated financial statements and on our future financial performance.
We recognize either an asset or liability for any plan's funded status in our consolidated balance sheets. We measure changes in funded status using actuarial models which utilize an attribution approach that generally spreads individual events either over the estimated service lives of the remaining employees in the plan, or, for plans where participants will not earn additional benefits by rendering future service, over the plan participants' estimated remaining lives. The attribution approach assumes that employees render service over their service lives on a relatively smooth basis and as such, presumes that the income statement effects of pension or postretirement benefit plans should follow the same pattern. Our policy is to fund our pension plans based upon actuarial recommendations and in accordance with applicable laws, income tax regulations and credit agreements.
Net pension and postretirement benefit income or expense is generally determined using assumptions which include expected long-term rates of return on plan assets, discount rates, compensation rate increases and medical trend and mortality rates. We use a mix of actual historical rates, expected rates and external data to determine the assumptions used in the actuarial models. For example, we utilized a yield curve constructed from a portfolio of high-quality corporate bonds with various maturities to determine the appropriate discount rate to use for our U.S. benefit plans. Under this model, each year's expected future benefit payments are discounted to their present value at the appropriate yield curve rate, thereby generating the overall discount rate. We utilized country-specific third-party bond indices to determine appropriate discount rates to use for benefit plans of our foreign subsidiaries. Changes in actuarial assumptions and estimates, either individually or in combination, could have a material impact on our consolidated financial statements and on our future financial performance. For example, as of November 30, 2014 , a twenty-five basis-point change in the discount rate would yield an approximately three-percent change in the projected benefit obligation and annual service cost of our pension and postretirement benefit plans.
Employee incentive compensation.   We maintain short-term and long-term employee incentive compensation plans. For our short-term plans, the amount of the cash bonus earned depends upon business unit and corporate financial results as measured against pre-established targets, and also depends upon the performance and job level of the individual. Our long-term plans are intended to reward certain levels of management for its long-term impact on our total earnings performance. Performance is measured at the end of a three-year period based on our performance over the period measured against certain pre-established targets such as the compound annual growth rates over the periods for net revenues and average margin of net earnings adjusted for certain items such as interest and taxes. We accrue the related compensation expense over the period of the plan, and changes in our projected future financial performance could have a material impact on our accruals.
Recently Issued Accounting Standards
See Note 1 to our audited consolidated financial statements included in this report for recently issued accounting standards, including the expected dates of adoption and expected impact to our consolidated financial statements upon adoption.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including (without limitation) statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected.
These forward-looking statements include statements relating to our anticipated financial performance and business prospects and/or statements preceded by, followed by or that include the words “believe”, “will”, “so we can”, “when”, “anticipate”, “intend”, “estimate”, “expect”, “project”, “could”, “plans”, “seeks” and similar expressions. These forward-looking statements speak only as of the date stated and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control, that could cause actual results to differ materially from those suggested by the forward-looking statements and include, without limitation:


37
Table of Contents

•
changes in general economic and financial conditions, and the resulting impact on the level of discretionary consumer spending for apparel and pricing trend fluctuations, and our ability to plan for and respond to the impact of those changes;
•
our ability to timely and effectively implement our global productivity initiative as planned, which is intended to increase productivity and efficiency in our global operations, take advantage of lower-cost service-delivery models in our distribution network and streamline our procurement practices to maximize efficiency in our global operations, without business disruption or mitigation to such disruptions;
•
consequences of impacts to the businesses of our wholesale customers, including a significant decline in a wholesale customer's financial condition, leading to restructuring actions, bankruptcies, liquidations or other unfavorable events for our wholesale customers, caused by factors such as inability to secure financing, decreased discretionary consumer spending, inconsistent traffic patterns and an increase in promotional activity as a result of decreased traffic, pricing fluctuations, general economic and financial conditions and changing consumer preferences;
•
our and our wholesale customers' decisions to modify strategies and adjust product mix and pricing, and our ability to manage any resulting product transition costs, including liquidating inventory or increasing promotional activity;
•
our ability to purchase products through our independent contract manufacturers that are made with quality raw materials and our ability to mitigate the variability of costs related to manufacturing, sourcing, and raw materials supply and to manage consumer response to such mitigating actions;
•
our ability to gauge and adapt to changing U.S. and international retail environments and fashion trends and changing consumer preferences in product, price-points, as well as in-store and digital shopping experiences;
•
our ability to respond to price, innovation and other competitive pressures in the global apparel industry, on and from our key customers and in our key markets;
•
our ability to increase the number of dedicated stores for our products, including through opening and profitably operating company-operated stores;
•
consequences of foreign currency exchange and interest rate fluctuations;
•
the impact of the variables that affect the net periodic benefit cost and future funding requirements of our postretirement benefits and pension plans;
•
our dependence on key distribution channels, customers and suppliers;
•
our ability to utilize our tax credits and net operating loss carryforwards;
•
ongoing or future litigation matters and disputes and regulatory developments;
•
changes in or application of trade and tax laws; and
•
political, social and economic instability in countries where we or our customers do business.
Our actual results might differ materially from historical performance or current expectations. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
 


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Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Investment and Credit Availability Risk
We manage cash and cash equivalents in various institutions at levels beyond FDIC coverage limits, and we purchase investments not guaranteed by the FDIC. Accordingly, there may be a risk that we will not recover the full principal of our investments or that their liquidity may be diminished. To mitigate this risk, our investment policy emphasizes preservation of principal and liquidity.
Multiple financial institutions are committed to provide loans and other credit instruments under our amended and restated senior secured revolving credit facility. There may be a risk that some of these institutions cannot deliver against these obligations in a timely manner, or at all.
Foreign Exchange Risk
The global scope of our business operations exposes us to the risk of fluctuations in foreign currency markets. This exposure is the result of certain product sourcing activities, some intercompany sales, foreign subsidiaries' royalty payments, interest payments, earnings repatriations, net investment in foreign operations and funding activities. Our foreign currency management objective is to minimize the effect of fluctuations in foreign exchange rates on nonfunctional currency cash flows of the Company and its subsidiaries and selected assets or liabilities of the Company and its subsidiaries without exposing the Company to additional risk associated with transactions that could be regarded as speculative.
We use a centralized currency management operation to take advantage of potential opportunities to naturally offset exposures against each other. For any residual exposures under management, we may enter into various financial instruments, including forward exchange contracts, to hedge certain forecasted transactions, as well as certain firm commitments, including third-party and intercompany transactions.
Our foreign exchange risk management activities are governed by a foreign exchange risk management policy approved by our Treasury committee. Members of our Treasury committee, comprised of a group of our senior financial executives, review our foreign exchange activities to monitor compliance with our policies. The operating policies and guidelines outlined in the foreign exchange risk management policy provide a framework that allows for a managed approach to the management of currency exposures while ensuring the activities are conducted within established parameters. Our policy includes guidelines for the organizational structure of our treasury risk management function and for internal controls over foreign exchange risk management activities, including various measurements for monitoring compliance. We monitor foreign exchange risk and related derivatives using different techniques, including a review of market value, sensitivity analysis and a value-at-risk model. We use the market approach to estimate the fair value of our foreign exchange derivative contracts.
We use derivative instruments to manage certain but not all exposures to foreign currencies. Our approach to managing foreign currency exposures is consistent with that applied in previous years. As of November 30, 2014 , we had forward foreign exchange contracts to buy $470.5 million and to sell $305.7 million against various foreign currencies. These contracts are at various exchange rates and expire at various dates through February 2016 .
As of November 24, 2013 , we had forward foreign exchange contracts to buy $519.5 million and to sell $233.9 million against various foreign currencies. These contracts were at various exchange rates and expired at various dates through January 2015.
Derivative Financial Instruments
We are exposed to market risk primarily related to foreign currencies. We manage foreign currency risks with the objective to minimize the effect of fluctuations in foreign exchange rates on nonfunctional currency cash flows of the Company and its subsidiaries and selected assets or liabilities of the Company and its subsidiaries without exposing the Company to additional risk associated with transactions that could be regarded as speculative.
We are exposed to credit loss in the event of nonperformance by the counterparties to the over-the-counter forward foreign exchange contracts. However, we believe that our exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. We monitor the creditworthiness of our counterparties in accordance with our foreign exchange and investment policies. In addition, we have International Swaps and Derivatives Association, Inc. (“ISDA”) master agreements in place with our counterparties to mitigate the credit risk related to the outstanding derivatives. These agreements provide the legal basis for over-the-counter transactions in many of the world's commodity and financial markets.


39
Table of Contents

The following table presents the currency, average forward exchange rate, notional amount and fair values for our outstanding forward contracts as of November 30, 2014 , and November 24, 2013 . The average forward exchange rate is the weighted average of the forward rates of the contracts for the indicated currency. The notional amount represents the U.S. Dollar equivalent amount of the foreign currency at the inception of the contracts, and is the net sum of all buy and sell transactions for the indicated currency. A net positive notional amount represents a position to buy the U.S. Dollar versus the exposure currency, while a net negative notional amount represents a position to sell the U.S. Dollar versus the exposure currency. All transactions will mature before the end of February 2016 .
 
As of November 30, 2014
 
As of November 24, 2013
 
Average Forward Exchange Rate
 
Notional Amount
 
Fair Value
 
Average Forward Exchange Rate
 
Notional Amount
 
Fair Value
 
(Dollars in thousands)
Currency
 
 
 
 
 
 
 
 
 
 
 
Australian Dollar
0.87

 
$
6,393

 
$
200

 
0.95

 
$
23,954

 
$
1,045

Brazilian Real
2.46

 
704

 
(72
)
 
2.53

 
7,526

 
(417
)
Canadian Dollar
1.12

 
42,224

 
1,212

 
1.04

 
22,506

 
449

Swiss Franc
0.93

 
(12,121
)
 
166

 
0.89

 
973

 
18

Czech Koruna
21.91

 
292

 
4

 
—

 
—

 
—

Danish Krone
5.84

 
(1,258
)
 
(29
)
 
5.41

 
(555
)
 
(11
)
Euro
1.28

 
(38,235
)
 
(2,900
)
 
1.36

 
77,318

 
445

British Pound Sterling
1.61

 
(23,766
)
 
(613
)
 
1.61

 
(31,148
)
 
45

Hong Kong Dollar
7.76

 
(2,571
)
 
1

 
7.75

 
878

 
(1
)
Hungarian Forint
244.56

 
(1,452
)
 
(17
)
 
—

 
—

 
—

Indonesian Rupiah
13,310.00

 
3,276

 
(266
)
 
11,769.10

 
12,689

 
261

Indian Rupee
66.79

 
599

 
(41
)
 
69.40

 
5,905

 
(348
)
Japanese Yen
106.79

 
46,375

 
5,165

 
94.48

 
35,668

 
2,356

South Korean Won
1,088.39

 
26,613

 
197

 
1,102.82

 
21,329

 
(968
)
Mexican Peso
13.43

 
73,099

 
2,783

 
13.20

 
54,199

 
11

Malaysian Ringgit
3.31

 
11,290

 
284

 
3.24

 
18,231

 
(18
)
Norwegian Krone
6.67

 
2,881

 
164

 
6.03

 
1,827

 
(7
)
New Zealand Dollar
0.78

 
(3,352
)
 
(22
)
 
0.82

 
(2,635
)
 
(25
)
Philippine Peso
45.20

 
3,908

 
(6
)
 
43.47

 
10,321

 
53

Polish Zloty
3.36

 
(514
)
 
(79
)
 
3.08

 
(3,325
)
 
(198
)
Russian Ruble
—

 
—

 
—

 
32.41

 
3,165

 
119

Swedish Krona
7.41

 
11,935

 
(7
)
 
6.54

 
1,647

 
2

Singapore Dollar
1.27

 
(3,051
)
 
(135
)
 
1.24

 
256

 
2

Turkish Lira
2.22

 
1,281

 
8

 
—

 
—

 
—

New Taiwan Dollar
29.68

 
3,669

 
146

 
29.63

 
7,708

 
(9
)
South African Rand
11.52

 
16,558

 
(175
)
 
10.44

 
17,200

 
(58
)
Total
 
 
$
164,777

 
$
5,968

 
 
 
$
285,637

 
$
2,746




40
Table of Contents

Interest rate risk
The following table provides information about our financial instruments that may be sensitive to changes in interest rates. The table presents principal (face amount) outstanding balances of our debt instruments and the related weighted-average interest rates for the years indicated based on expected maturity dates. All amounts are stated in U.S. Dollar equivalents.
 
As of November 30, 2014
 
As of November 24, 2013
 
Expected Maturity Date
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
 
Total
 
(Dollars in thousands)
Debt Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate (US$)
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,050,000

 
$
1,050,000

 
$
1,050,000

Average Interest Rate
—

 
—

 
—

 
—

 
—

 
7.25
%
 
7.25
%
 
 
Fixed Rate (Yen 4.0 billion)
—

 
33,985

 
—

 
—

 
—

 
—

 
33,985

 
39,545

Average Interest Rate
—

 
4.250
%
 
—

 
—

 
—

 
—

 
4.250
%
 
 
Fixed Rate (Euro 300 million)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
404,430

Average Interest Rate
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
Variable Rate (US$)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Average Interest Rate
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
Total Principal (face amount) of our debt instruments (1)
$
—

 
$
33,985

 
$
—

 
$
—

 
$
—

 
$
1,050,000

 
$
1,083,985

 
$
1,493,975

______________
(1)
Amounts presented in this table exclude short-term, variable-rate debt of $100.0 million as of November 30, 2014 , borrowed under our senior secured revolving credit facility, which was expected to be repaid over the next twelve months. Also excluded from this table are other short-term borrowings of $31.5 million as of November 30, 2014 , consisting of term loans and revolving credit facilities at various foreign subsidiaries which we expect to either pay over the next twelve months or refinance at the end of their applicable terms. Of the $31.5 million , $28.9 million was fixed-rate debt and $2.6 million was variable-rate debt.




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Table of Contents

Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Levi Strauss & Co.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, stockholders' equity (deficit), and of cash flows present fairly, in all material respects, the financial position of Levi Strauss & Co. and its subsidiaries at November 30, 2014 and November 24, 2013 , and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2014 , in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the related financial statement schedule listed in the index appearing under Item 15(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA
February 12, 2015




42

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
November 30,
2014
 
November 24,
2013
 
(Dollars in thousands)
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
298,255

 
$
489,258

Trade receivables, net of allowance for doubtful accounts of $12,704 and $18,264
481,981

 
446,671

Inventories:
 
 
 
Raw materials
4,501

 
3,361

Work-in-process
5,056

 
6,597

Finished goods
591,359

 
593,909

Total inventories
600,916

 
603,867

Deferred tax assets, net
178,015

 
187,836

Other current assets
99,347

 
112,082

Total current assets
1,658,514

 
1,839,714

Property, plant and equipment, net of accumulated depreciation of $784,493 and $775,933
392,062

 
439,861

Goodwill
238,921

 
241,228

Other intangible assets, net
45,898

 
49,149

Non-current deferred tax assets, net
488,398

 
448,839

Other non-current assets
100,280

 
108,627

Total assets
$
2,924,073

 
$
3,127,418

 
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current Liabilities:
 
 
 
Short-term debt
$
131,524

 
$
41,861

Accounts payable
234,892

 
254,516

Accrued salaries, wages and employee benefits
178,470

 
209,966

Restructuring liabilities
57,817


—

Accrued interest payable
5,679

 
5,346

Accrued income taxes
9,432

 
11,301

Other accrued liabilities
263,182

 
262,488

Total current liabilities
880,996

 
785,478

Long-term debt
1,092,478

 
1,504,016

Long-term capital leases
11,619

 
10,243

Postretirement medical benefits
122,213

 
122,248

Pension liability
406,398

 
326,767

Long-term employee related benefits
80,066

 
73,386

Long-term income tax liabilities
35,821

 
30,683

Other long-term liabilities
62,363

 
61,097

Total liabilities
2,691,954

 
2,913,918

 
 
 
 
Commitments and contingencies


 


Temporary equity
77,664

 
38,524

 
 
 
 
Stockholders’ Equity:
 
 
 
Levi Strauss & Co. stockholders’ equity
 
 
 
Common stock — $.01 par value; 270,000,000 shares authorized; 37,430,283 shares and 37,446,087 shares issued and outstanding
374

 
374

Additional paid-in capital
—

 
7,361

Retained earnings
528,209

 
475,960

Accumulated other comprehensive loss
(375,340
)
 
(312,029
)
Total Levi Strauss & Co. stockholders’ equity
153,243

 
171,666

Noncontrolling interest
1,212

 
3,310

Total stockholders’ equity
154,455

 
174,976

Total liabilities, temporary equity and stockholders’ equity
$
2,924,073

 
$
3,127,418

The accompanying notes are an integral part of these consolidated financial statements.


43
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME  
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
Net revenues
$
4,753,992

 
$
4,681,691

 
$
4,610,193

Cost of goods sold
2,405,552

 
2,331,219

 
2,410,862

Gross profit
2,348,440

 
2,350,472

 
2,199,331

Selling, general and administrative expenses
1,906,164

 
1,884,965

 
1,865,352

Restructuring, net
128,425

 
—

 
—

Operating income
313,851

 
465,507

 
333,979

Interest expense
(117,597
)
 
(129,024
)
 
(134,694
)
Loss on early extinguishment of debt
(20,343
)
 
(689
)
 
(8,206
)
Other income (expense), net
(22,057
)
 
(13,181
)
 
4,802

Income before income taxes
153,854

 
322,613

 
195,881

Income tax expense
49,545

 
94,477

 
54,922

Net income
104,309

 
228,136

 
140,959

Net loss attributable to noncontrolling interest
1,769

 
1,057

 
2,891

Net income attributable to Levi Strauss & Co.
$
106,078

 
$
229,193

 
$
143,850
































The accompanying notes are an integral part of these consolidated financial statements.


44
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
Net income
$
104,309

 
$
228,136

 
$
140,959

Other comprehensive income (loss), net of related income taxes:
 
 
 
 
 
Pension and postretirement benefits
(34,682
)
 
104,189

 
(75,277
)
Net investment hedge gains (losses)
4,978

 
(7,846
)
 
9,840

Foreign currency translation (losses) gains
(34,904
)
 
4,965

 
(5,214
)
Unrealized gain on marketable securities
968

 
252

 
1,561

Total other comprehensive (loss) income
(63,640
)
 
101,560

 
(69,090
)
Comprehensive income
40,669

 
329,696

 
71,869

Comprehensive loss attributable to noncontrolling interest
2,098

 
2,103

 
3,348

Comprehensive income attributable to Levi Strauss & Co.
$
42,767

 
$
331,799

 
$
75,217





































The accompanying notes are an integral part of these consolidated financial statements.


45
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 
Levi Strauss & Co. Stockholders
 
 
 
 
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Earnings
 
Accumulated Other Comprehensive Loss
 
Noncontrolling Interest
 
Total Stockholders' Equity (Deficit)
 
(Dollars in thousands)
Balance at November 27, 2011
$
374

 
$
29,266

 
$
150,770

 
$
(346,002
)
 
$
8,761

 
$
(156,831
)
Net income (loss)
—

 
—

 
143,850

 
—

 
(2,891
)
 
140,959

Other comprehensive loss (net of tax)
—

 
—

 
—

 
(68,633
)
 
(457
)
 
(69,090
)
Stock-based compensation and dividends, net
—

 
4,118

 
(25
)
 
—

 
—

 
4,093

Repurchase of common stock
—

 
(19
)
 
(584
)
 
—

 
—

 
(603
)
Cash dividends paid
—

 
—

 
(20,036
)
 
—

 
—

 
(20,036
)
Balance at November 25, 2012
374

 
33,365

 
273,975

 
(414,635
)
 
5,413

 
(101,508
)
Net income (loss)
—

 
—

 
229,193

 
—

 
(1,057
)
 
228,136

Other comprehensive income (loss) (net of tax)
—

 
—

 
—

 
102,606

 
(1,046
)
 
101,560

Stock-based compensation and dividends, net
—

 
8,272

 
(23
)
 
—

 
—

 
8,249

Reclassification to temporary equity
—

 
(30,641
)
 
—

 
—

 
—

 
(30,641
)
Repurchase of common stock
—

 
(3,635
)
 
(2,109
)
 
—

 
—

 
(5,744
)
Cash dividends paid
—

 
—

 
(25,076
)
 
—

 
—

 
(25,076
)
Balance at November 24, 2013
374

 
7,361

 
475,960

 
(312,029
)
 
3,310

 
174,976

Net income (loss)
—

 
—

 
106,078

 
—

 
(1,769
)
 
104,309

Other comprehensive loss (net of tax)
—

 
—

 
—

 
(63,311
)
 
(329
)
 
(63,640
)
Stock-based compensation and dividends, net
—

 
13,290

 
(23
)
 
—

 
—

 
13,267

Reclassification to temporary equity
—

 
(19,298
)
 
(19,842
)
 
—

 
—

 
(39,140
)
Repurchase of common stock
—

 
(1,353
)
 
(3,961
)
 
—

 
—

 
(5,314
)
Cash dividends paid
—

 
—

 
(30,003
)
 
—

 
—

 
(30,003
)
Balance at November 30, 2014
$
374

 
$
—

 
$
528,209

 
$
(375,340
)
 
$
1,212

 
$
154,455


















The accompanying notes are an integral part of these consolidated financial statements.


46
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS  
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
Cash Flows from Operating Activities:
 
 
 
 
 
Net income
$
104,309

 
$
228,136

 
$
140,959

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
109,474

 
115,720

 
122,608

Asset impairments
6,531

 
8,330

 
27,031

Gain on disposal of property, plant and equipment
(197
)
 
(2,112
)
 
(351
)
Unrealized foreign exchange losses (gains)
5,392

 
4,573

 
(3,146
)
Realized loss (gain) on settlement of forward foreign exchange contracts not designated for hedge accounting
6,184

 
2,904

 
(8,508
)
Employee benefit plans’ amortization from accumulated other comprehensive loss and settlement losses
45,787

 
22,686

 
1,412

Employee benefit plans’ curtailment gain, net
—

 
(564
)
 
(2,391
)
Noncash loss (gain) on extinguishment of debt, net of write-off of unamortized debt issuance costs
5,103

 
689

 
(3,643
)
Noncash restructuring charges
3,347

 
—

 
—

Amortization of deferred debt issuance costs
3,878

 
4,331

 
4,323

Stock-based compensation
12,441

 
8,249

 
5,965

Allowance for doubtful accounts
662

 
1,158

 
5,024

Deferred income taxes
(28,177
)
 
37,520

 
19,853

Change in operating assets and liabilities:
 
 
 
 
 
Trade receivables
(51,367
)
 
65,955

 
145,717

Inventories
(6,184
)
 
(63,920
)
 
87,547

Other current assets
5,377

 
32,808

 
34,384

Other non-current assets
4,094

 
10,081

 
1,019

Accounts payable and other accrued liabilities
(28,871
)
 
3,107

 
46,578

Restructuring liabilities
66,574


—


—

Income tax liabilities
16,639

 
(24,042
)
 
(27,811
)
Accrued salaries, wages and employee benefits and long-term employee related benefits
(42,878
)
 
(51,974
)
 
(74,140
)
Other long-term liabilities
(3,740
)
 
8,618

 
7,995

Other, net
(1,469
)
 
(985
)
 
551

Net cash provided by operating activities
232,909

 
411,268

 
530,976

Cash Flows from Investing Activities:
 
 
 
 
 
Purchases of property, plant and equipment
(73,396
)
 
(91,771
)
 
(83,855
)
Proceeds from sale of assets
8,049

 
2,277

 
640

(Payments) proceeds on settlement of forward foreign exchange contracts not designated for hedge accounting
(6,184
)
 
(2,904
)
 
8,508

Acquisitions, net of cash acquired
(318
)
 
(400
)
 
(491
)
Net cash used for investing activities
(71,849
)
 
(92,798
)
 
(75,198
)
Cash Flows from Financing Activities:
 
 
 
 
 
Proceeds from issuance of long-term debt
—

 
140,000

 
385,000

Repayments of long-term debt and capital leases
(395,853
)
 
(327,281
)
 
(407,963
)
Proceeds from senior revolving credit facility
265,000

 
—

 
50,000

Repayments of senior revolving credit facility
(165,000
)
 
—

 
(250,000
)
Proceeds from short-term credit facilities
24,372

 
46,187

 
121,200

Repayments of short-term credit facilities
(24,000
)
 
(53,726
)
 
(124,517
)
Other short-term borrowings, net
(10,080
)
 
(3,711
)
 
2,623

Debt issuance costs
(2,684
)
 
(2,557
)
 
(7,376
)
Restricted cash
1,060

 
(139
)
 
565

Repurchase of common stock
(5,314
)
 
(5,744
)
 
(603
)
Excess tax benefits from stock-based compensation
826

 
1,538

 
168

Dividend to stockholders
(30,003
)
 
(25,076
)
 
(20,036
)
Net cash used for financing activities
(341,676
)
 
(230,509
)
 
(250,939
)
Effect of exchange rate changes on cash and cash equivalents
(10,387
)
 
(4,837
)
 
(3,247
)
Net (decrease) increase in cash and cash equivalents
(191,003
)
 
83,124

 
201,592

Beginning cash and cash equivalents
489,258

 
406,134

 
204,542

Ending cash and cash equivalents
$
298,255

 
$
489,258

 
$
406,134

 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
Cash paid during the period for:
 
 
 
 
 
Interest
$
110,029

 
$
121,827

 
$
128,718

Income taxes
60,525

 
47,350

 
49,346

The accompanying notes are an integral part of these consolidated financial statements.


47
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED NOVEMBER 30, 2014 , NOVEMBER 24, 2013 , AND NOVEMBER 25, 2012

NOTE  1 : SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Levi Strauss & Co. (the “Company”) is one of the world’s leading branded apparel companies. The Company designs and markets jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories, for men, women and children around the world under the Levi’s ® , Dockers ® , Signature by Levi Strauss & Co.™ and Denizen ® brands. The Company operates its business through three geographic regions: Americas, Europe and Asia.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company and its wholly-owned and majority-owned foreign and domestic subsidiaries are prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated. The Company is privately held primarily by descendants of the family of its founder, Levi Strauss, and their relatives.
The Company’s fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Fiscal 2014 was a 53 -week year ending on November 30, 2014 . Fiscal 2013 and 2012 were 52 -week years ending on November 24, 2013 , and November 25, 2012 , respectively. Each quarter of fiscal years 2014 , 2013 and 2012 consists of 13  weeks, with the exception of the fourth quarter of 2014, which consisted of 14 weeks. All references to years relate to fiscal years rather than calendar years.
Subsequent events have been evaluated through the issuance date of these financial statements.
Out-of-period Adjustments
The Company's results for the year ended November 30, 2014 , include out-of-period adjustments which, on a year-to-date basis, decreased income before income taxes and net income by $1.3 million and $6.9 million , respectively. These adjustments were comprised of $1.3 million of pre-tax items, principally related to duty accruals, and $5.6 million of additional tax expense, all associated with prior years. The correction of certain of these items during the fourth quarter of 2014 decreased fourth quarter 2014 income before income taxes and net income by approximately $4.0 million and $6.0 million , respectively. Management has evaluated these items in relation to the current period as well as the periods in which they originated, and believes these items are immaterial to both the consolidated quarterly and annual financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to the consolidated financial statements. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. Management evaluates its estimates and assumptions on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on more accurate future information, or different assumptions or conditions, may affect amounts reported in future periods.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at fair value.
Restricted Cash
Restricted cash primarily relates to required cash deposits for customs and rental guarantees to support the Company's international operations. As restricted cash is not material in any period presented, it is included in “Other current assets” and “Other non-current assets” on the consolidated balance sheets.


48

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Accounts Receivable, Net
The Company extends credit to its customers that satisfy pre-defined credit criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company estimates the allowance for doubtful accounts based upon an analysis of the aging of accounts receivable at the date of the consolidated financial statements, assessments of collectability based on historic trends, customer-specific circumstances, and an evaluation of economic conditions. Actual write-off of receivables may differ from estimates due to changes in customer and economic circumstances.
Inventory Valuation
The Company values inventories at the lower of cost or market value. Inventory cost is determined using the first-in first-out method. The Company includes product costs, labor and related overhead, inbound freight, internal transfers, and the cost of operating its remaining manufacturing facilities, including the related depreciation expense, in the cost of inventories. The Company estimates quantities of slow-moving and obsolete inventory, by reviewing on-hand quantities, outstanding purchase obligations and forecasted sales. The Company determines inventory market values by estimating expected selling prices based on the Company's historical recovery rates for slow-moving and obsolete inventory and other factors, such as market conditions, expected channel of distribution and current consumer preferences.
Income Tax Assets and Liabilities   
The future effective tax rate will ultimately depend on the mix of earnings between domestic and foreign operations, the impact of certain undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are planned to be indefinitely reinvested outside of the United States, changes in tax laws and regulations and potential resolutions on tax examinations, refund claims and litigation. Remittances of foreign earnings to the United States are planned based on projected cash flow, working capital and investment needs of our foreign and domestic operations. Based on these assumptions, the Company estimates the amount that will be distributed to the United States and provides U.S. federal taxes on these amounts. Material changes in the Company's estimates as to how much of the Company's foreign earnings will be distributed to the United States or tax legislation that limits or restricts the amount of undistributed foreign earnings that the Company considers indefinitely reinvested outside the United States could materially impact the Company's income tax provision and effective tax rate. Significant judgment is required in determining the Company's worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise from examinations in various jurisdictions and assumptions and estimates used in evaluating the need for valuation allowance.
The Company is subject to income taxes in both the United States and numerous foreign jurisdictions. The Company computes its provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Significant judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need for a valuation allowance, the Company's management evaluates all significant available positive and negative evidence, including historical operating results, estimates of future taxable income and the existence of prudent and feasible tax planning strategies.
The Company continuously reviews issues raised in connection with all ongoing examinations and open tax years to evaluate the adequacy of its tax liabilities. The Company evaluates uncertain tax positions under a two-step approach. The first step is to evaluate the uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination based on its technical merits. The second step, for those positions that meet the recognition criteria, is to measure the tax benefit as the largest amount that is more than fifty percent likely to be realized. The Company believes that its recorded tax liabilities are adequate to cover all open tax years based on its assessment. This assessment relies on estimates and assumptions and involves significant judgments about future events. To the extent that the Company's view as to the outcome of these matters change, the Company will adjust income tax expense in the period in which such determination is made. The Company classifies interest and penalties related to income taxes as income tax expense.


49

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated depreciation. The cost is depreciated on a straight-line basis over the estimated useful lives of the related assets. Costs relating to internal-use software development are capitalized when incurred during the application development phase. Buildings are depreciated over 20 to 40  years, and leasehold improvements are depreciated over the lesser of the life of the improvement or the initial lease term. Machinery and equipment includes furniture and fixtures, automobiles and trucks, and networking communication equipment, and is depreciated over a range from three to 20  years. Capitalized internal-use software is depreciated over periods ranging from three to seven years.
Goodwill and Other Intangible Assets
Goodwill resulted primarily from a 1985 acquisition of the Company by Levi Strauss Associates Inc., a former parent company that was subsequently merged into the Company in 1996, and the Company's 2009 acquisitions. Goodwill is not amortized. Intangible assets are comprised of owned trademarks with indefinite useful lives which are not being amortized as well as acquired contractual rights and customers lists with finite lives which are being amortized over periods ranging from four to eight years. The amortization of these intangible assets is included in "Selling, general, and administrative expenses" in the Company's consolidated statements of income.
Impairment
The Company reviews its goodwill and other non-amortized intangible assets for impairment annually in the fourth quarter of its fiscal year, or more frequently as warranted by events or changes in circumstances which indicate that the carrying amount may not be recoverable. The Company qualitatively assesses goodwill impairment for certain reporting units and impairment for other non-amortized intangible assets to determine whether it is more likely than not that the fair value of a reporting unit or other non-amortized intangible asset is less than its carrying amount. For goodwill and other non-amortized intangible assets not assessed qualitatively, a two-step quantitative approach is utilized. In the first step, the Company compares the carrying value of the reporting unit or applicable asset to its fair value, which the Company estimates using a discounted cash flow analysis or by comparison with the market values of similar assets. If the carrying amount of the reporting unit or asset exceeds its estimated fair value, the Company performs the second step, and determines the impairment loss, if any, as the excess of the carrying value of the goodwill or intangible asset over its fair value.
The Company reviews its other long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of an asset exceeds the expected future undiscounted cash flows, the Company measures and records an impairment loss for the excess of the carrying value of the asset over its fair value.
To determine the fair value of impaired assets, the Company utilizes the valuation technique or techniques deemed most appropriate based on the nature of the impaired asset and the data available, which may include the use of quoted market prices, prices for similar assets or other valuation techniques such as discounted future cash flows or earnings.
Debt Issuance Costs
The Company capitalizes debt issuance costs, which are included in “Other non-current assets” in the Company's consolidated balance sheets. Bond issuance costs are generally amortized utilizing the effective interest method whereas revolving credit facility issuance costs are amortized utilizing the straight-line method. Amortization of debt issuance costs is included in “Interest expense” in the consolidated statements of income.
Restructuring Liabilities
Upon approval of a restructuring plan, the Company records restructuring liabilities for employee severance and related termination benefits when they become probable and estimable for formal and pre-existing severance arrangements. The Company records other costs associated with exit activities as they are incurred. The long-term portion of restructuring liabilities is included in “Other long-term liabilities” in the Company’s consolidated balance sheets.


50

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Deferred Rent
The Company is obligated under operating leases of property for manufacturing, finishing and distribution facilities, office space, retail stores and equipment. Rental expense relating to operating leases are recognized on a straight-line basis over the lease term after consideration of lease incentives and scheduled rent escalations beginning as of the date the Company takes physical possession or control of the property. Differences between rental expense and actual rental payments are recorded as deferred rent liabilities included in “Other accrued liabilities” and “Other long-term liabilities” on the consolidated balance sheets.
Fair Value of Financial Instruments
The fair values of the Company's financial instruments reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to the Company as of November 30, 2014 , and November 24, 2013 .
The carrying values of cash and cash equivalents, trade receivables and short-term borrowings approximate fair value. The Company has estimated the fair value of its other financial instruments using the market and income approaches. Rabbi trust assets and forward foreign exchange contracts are carried at their fair values. The Company's debt instruments are carried at historical cost and adjusted for amortization of premiums or discounts, foreign currency fluctuations and principal payments.
Pension and Postretirement Benefits   
The Company has several non-contributory defined benefit retirement plans covering eligible employees. The Company also provides certain health care benefits for U.S. employees who meet age, participation and length of service requirements at retirement. In addition, the Company sponsors other retirement or post-employment plans for its foreign employees in accordance with local government programs and requirements. The Company retains the right to amend, curtail or discontinue any aspect of the plans, subject to local regulations.
The Company recognizes either an asset or a liability for any plan's funded status in its consolidated balance sheets. The Company measures changes in funded status using actuarial models which utilize an attribution approach that generally spreads individual events over the estimated service lives of the remaining employees in the plan. For plans where participants will not earn additional benefits by rendering future service, which includes the Company's U.S. plans, individual events are spread over the plan participants' estimated remaining lives. The Company's policy is to fund its retirement plans based upon actuarial recommendations and in accordance with applicable laws, income tax regulations and credit agreements. Net pension and postretirement benefit income or expense is generally determined using assumptions which include expected long-term rates of return on plan assets, discount rates, compensation rate increases and medical and mortality trend rates. The Company considers several factors including historical rates, expected rates and external data to determine the assumptions used in the actuarial models.
Employee Incentive Compensation
The Company maintains short-term and long-term employee incentive compensation plans. Provisions for employee incentive compensation are recorded in “Accrued salaries, wages and employee benefits” and “Long-term employee related benefits” in the Company's consolidated balance sheets. The Company accrues the related compensation expense over the period of the plan and changes in the liabilities for these incentive plans generally correlate with the Company's financial results and projected future financial performance.
Stock-Based Compensation
The Company has stock-based incentive plans which reward certain employees and directors with cash or equity. Compensation cost for these awards is estimated based on the number of awards that are expected to vest. Compensation cost for equity awards is measured based on the fair value at the grant date, while liability award expense is measured and adjusted based on the fair value at the end of each quarter. No compensation cost is ultimately recognized for certain equity awards which are unvested and forfeited at an employees' termination date or for liability awards which are out-of-the-money at the award expiration date. Compensation cost for performance awards with a market condition is recognized regardless of whether the performance or market condition is met, as long as the employee has not terminated prior to the vesting date. Compensation cost is recognized over the period that an employee provides service for that award, which generally is the vesting period.


51

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company's common stock is not listed on any established stock exchange. Accordingly, the stock's fair value is approved by the Company's board of directors (the "Board") and determined based upon a valuation performed by an independent third-party, Evercore Group LLC (“Evercore”). Determining the fair value of the Company's stock requires complex judgments. The valuation process includes comparison of the Company's historical and estimated future financial results with selected publicly-traded companies and application of an appropriate discount for the illiquidity of the stock to derive the fair value of the stock. The Company uses this valuation for, among other things, making determinations under its stock-based compensation plans, such as the grant date fair value of awards.
The fair value of equity awards granted to employees is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions including volatility. Due to the fact that the Company's common stock is not publicly traded, the computation of expected volatility is based on the average of the historical and implied volatilities, over the expected life of the awards, of comparable companies from a representative peer group of publicly-traded entities, selected based on industry and financial attributes. Other assumptions include expected life, risk-free rate of interest and dividend yield. For equity awards with a service condition, the expected life is derived based on historical experience and expected future post-vesting termination and exercise patterns. For equity awards with a performance condition , the expected life is computed using the simplified method until historical experience is available. The risk-free interest rate is based on zero coupon U.S. Treasury bond rates corresponding to the expected life of the awards. Dividend assumptions are based on historical experience.
The fair value of equity awards granted to directors is based on the fair value of the common stock at the date of grant. The fair value of liability awards granted prior to 2013 is estimated using the Black-Scholes option pricing model and is calculated using the common stock value and assumptions at each quarter end. The fair value of liability awards granted in 2013 and 2014 is calculated using the common stock fair value at each quarter end.
Due to the job function of the award recipients, the Company has included stock-based compensation cost in “Selling, general and administrative expenses” in the consolidated statements of income.
Self-Insurance
Up to certain limits, the Company self-insures various loss exposures primarily relating to workers' compensation risk and employee and eligible retiree medical health benefits.  The Company carries insurance policies covering claim exposures which exceed predefined amounts, per occurrence and/or in the aggregate.    Accruals for losses are made based on the Company's claims experience and actuarial assumptions followed in the insurance industry, including provisions for incurred but not reported losses.
Derivative Financial Instruments and Hedging Activities
The Company recognizes all derivatives as assets and liabilities at their fair values, which are included in "Other current assets", "Other non-current assets" or "Other accrued liabilities" on the Company's consolidated balance sheets. The Company uses derivatives to manage exposures that are sensitive to changes in market conditions, such as foreign currency risk. Additionally, some of the Company's contracts contain provisions that are accounted for as embedded derivative instruments. The Company does not designate its derivative instruments for hedge accounting; changes in the fair values of these instruments are recorded in “Other income (expense), net” in the Company's consolidated statements of income. The non-derivative instruments the Company designates and that qualify for hedge accounting treatment hedge the Company's net investment position in certain of its foreign subsidiaries. For these instruments, the Company documents the hedge designation by identifying the hedging instrument, the nature of the risk being hedged and the approach for measuring hedge effectiveness. The ineffective portions of these hedges are recorded in “Other income (expense), net” in the Company's consolidated statements of income. The effective portions of these hedges are recorded in “Accumulated other comprehensive loss” in the Company's consolidated balance sheets and are not reclassified to earnings until the related net investment position has been liquidated.
Foreign Currency
The functional currency for most of the Company's foreign operations is the applicable local currency. For those operations, assets and liabilities are translated into U.S. Dollars using period-end exchange rates, income and expenses are translated at average monthly exchange rates, and equity accounts are translated at historical rates. Net changes resulting from such translations are


52

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

recorded as a component of translation adjustments in “Accumulated other comprehensive income (loss)” in the Company's consolidated balance sheets.
Foreign currency transactions are transactions denominated in a currency other than the entity's functional currency. At each balance sheet date, each entity remeasures the recorded balances related to foreign-currency transactions using the period-end exchange rate. Gains or losses arising from the remeasurement of these balances are recorded in “Other income (expense), net” in the Company's consolidated statements of income. In addition, at the settlement date of foreign currency transactions, foreign currency gains and losses are recorded in “Other income (expense), net” in the Company's consolidated statements of income to reflect the difference between the rate effective at the settlement date and the historical rate at which the transaction was originally recorded.
Noncontrolling Interest
Noncontrolling interest includes a 16.4% minority interest of third parties in Levi Strauss Japan K.K., the Company's Japanese subsidiary.
Revenue Recognition
Net sales is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at the Company's company-operated and online stores and at the Company's company-operated shop-in-shops located within department stores. The Company recognizes revenue on sale of product when the goods are shipped or delivered and title to the goods passes to the customer provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is reasonably assured. The revenue is recorded net of an allowance for estimated returns, discounts and retailer promotions and other similar incentives. Licensing revenues from the use of the Company's trademarks in connection with the manufacturing, advertising, and distribution of trademarked products by third-party licensees are earned and recognized as products are sold by licensees based on royalty rates set forth in the licensing agreements.
The Company recognizes allowances for estimated returns in the period in which the related sale is recorded. The Company recognizes allowances for estimated discounts, retailer promotions and other similar incentives at the later of the period in which the related sale is recorded or the period in which the sales incentive is offered to the customer. The Company estimates non-volume based allowances based on historical rates as well as customer and product-specific circumstances. Sales and value-added taxes collected from customers and remitted to governmental authorities are presented on a net basis in the consolidated statements of income.
Net sales to the Company's ten largest customers totaled approximately 31% , 31% and 32% of net revenues for 2014 , 2013 and 2012 , respectively. No customer represented 10% or more of net revenues in any of these years.
Cost of Goods Sold
Cost of goods sold includes the expenses incurred to acquire and produce inventory for sale, including product costs, labor and related overhead, inbound freight, internal transfers, and the cost of operating the Company's remaining manufacturing facilities, including the related depreciation expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") are primarily comprised of costs relating to advertising, marketing, selling, distribution, information technology and other corporate functions. Costs relating to the Company's licensing activities are also included in SG&A. Selling costs include, among other things, all occupancy costs associated with company-operated stores and with the Company's company-operated shop-in-shops located within department stores. The Company expenses advertising costs as incurred. For 2014 , 2013 and 2012 , total advertising expense was $272.8 million , $274.0 million and $260.4 million , respectively. Distribution costs include costs related to receiving and inspection at distribution centers, warehousing, shipping to the Company's customers, handling and certain other activities associated with the Company's distribution network. These expenses totaled $168.7 million , $171.7 million and $186.7 million for 2014 , 2013 and 2012 , respectively.


53

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Recently Issued Accounting Standards
The following recently issued accounting standards have been grouped by their required effective dates for the Company:
First Quarter of 2015
•
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists," ("ASU 2013-11"). ASU 2013-11 requires entities to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward when settlement in this manner is available under the tax law. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.
First Quarter of 2017
•
In June 2014, the FASB issued Accounting Standards Update No. 2014-12, "Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period," ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.
First Quarter of 2018
•
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
NOTE  2 : PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment (“PP&E”) were as follows:
 
 
November 30, 2014
 
November 24, 2013
 
 
 
(Dollars in thousands)
 
 
Land
$
14,111

 
$
21,240

 
 
Buildings and leasehold improvements
382,787

 
408,486

 
 
Machinery and equipment
417,414

 
439,627

 
 
Capitalized internal-use software
334,168

 
324,818

 
 
Construction in progress
28,075

 
21,623

 
 
Subtotal
1,176,555

 
1,215,794


 
Accumulated depreciation
(784,493
)
 
(775,933
)
 
 
PP&E, net
$
392,062

 
$
439,861


Depreciation expense for the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , was $106.5 million , $104.6 million and $110.5 million , respectively.


54

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  3 : GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill by business segment for the years ended November 30, 2014 , and November 24, 2013 , were as follows:
 
 
Americas
 
Europe
 
Asia
 
Total
 
 
 
(Dollars in thousands)
 
 
Balance, November 25, 2012
$
207,423

 
$
30,627

 
$
1,921

 
$
239,971

 
 
Additions
—

 
156

 
—

 
156

 
 
Foreign currency fluctuation
—

 
1,327

 
(226
)
 
1,101

 
 
Balance, November 24, 2013
207,423

 
32,110

 
1,695

 
241,228

 
 
Additions
—

 
182

 
—

 
182

 
 
Foreign currency fluctuation
(4
)
 
(2,355
)
 
(130
)
 
(2,489
)
 
 
Balance, November 30, 2014
$
207,419

 
$
29,937

 
$
1,565

 
$
238,921

 

Other intangible assets, net, were as follows:
 
November 30, 2014
 
November 24, 2013
 
Gross Carrying Value
 
Accumulated Amortization
 
Total
 
Gross Carrying Value
 
Accumulated Amortization
 
Total
 
(Dollars in thousands)
Non-amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Trademarks
$
42,743

 
$
—

 
$
42,743

 
$
42,743

 
$
—

 
$
42,743

Amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Acquired contractual rights
7,596

 
(6,469
)
 
1,127

 
7,882

 
(6,134
)
 
1,748

Customer lists
18,701

 
(16,673
)
 
2,028

 
20,221

 
(15,563
)
 
4,658

Total
$
69,040

 
$
(23,142
)
 
$
45,898

 
$
70,846

 
$
(21,697
)
 
$
49,149

For the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , amortization of these intangible assets were $2.8 million , $10.5 million and $11.4 million , respectively. The amortization of these intangible assets in the succeeding fiscal years is immaterial.
As of November 30, 2014 , there was no impairment to the carrying value of the Company's goodwill or non-amortized intangible assets.


55

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  4 : FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the Company’s financial instruments that are carried at fair value:
 
November 30, 2014
 
November 24, 2013
 
 
 
Fair Value  Estimated
Using
 
 
 
Fair Value  Estimated
Using
 
Fair Value
 
Level 1 Inputs (1)
 
Level 2 Inputs (2)
 
Fair Value
 
Level 1 Inputs (1)
 
Level 2 Inputs (2)
 
(Dollars in thousands)
Financial assets carried at fair value
 
 
 
 
 
 
 
 
 
 
 
Rabbi trust assets
$
25,891

 
$
25,891

 
$
—

 
$
23,752

 
$
23,752

 
$
—

Forward foreign exchange contracts, net (3)
10,511

 
—

 
10,511

 
7,145

 
—

 
7,145

Total
$
36,402

 
$
25,891

 
$
10,511

 
$
30,897

 
$
23,752

 
$
7,145

Financial liabilities carried at fair value
 
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts, net (3)
$
10,353

 
$
—

 
$
10,353

 
$
2,335

 
$
—

 
$
2,335

_____________
(1)
Fair values estimated using Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities. See Note 12 for more information on rabbi trust assets.
(2)
Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices.
(3)
The Company’s over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net-settlement of these contracts on a per-institution basis.
The following table presents the carrying value – including related accrued interest – and estimated fair value of the Company’s financial instruments that are carried at adjusted historical cost:
 
November 30, 2014
 
November 24, 2013
 
Carrying
Value
 
Estimated Fair Value
 
Carrying
Value
 
Estimated Fair Value (1)
 
(Dollars in thousands)
Financial liabilities carried at adjusted historical cost
 
 
 
 
 
 
 
Senior revolving credit facility
$
100,098

 
$
100,098

 
$
—

 
$
—

4.25% Yen-denominated Eurobonds due 2016 (1)
34,108

 
35,383

 
39,659

 
38,523

7.75% Euro senior notes due 2018 (1)
—

 
—

 
405,304

 
432,098

7.625% senior notes due 2020 (1)
526,779

 
556,967

 
526,112

 
577,956

6.875% senior notes due 2022 (1)
536,501

 
583,848

 
537,447

 
588,275

Short-term borrowings
31,742

 
31,742

 
41,976

 
41,976

Total
$
1,229,228

 
$
1,308,038

 
$
1,550,498

 
$
1,678,828

_____________
(1)
Fair values are estimated using Level 1 inputs and incorporate mid-market price quotes. Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.


56

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  5 : DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company's foreign currency management objective is to minimize the effect of fluctuations in foreign exchange rates on nonfunctional currency cash flows of the Company and its subsidiaries and selected assets or liabilities of the Company and its subsidiaries without exposing the Company to additional risk associated with transactions that could be regarded as speculative. Forward exchange contracts on various currencies are entered into to manage foreign currency exposures associated with certain product sourcing activities, some intercompany sales, foreign subsidiaries' royalty payments, interest payments, earnings repatriations, net investment in foreign operations and funding activities. The Company manages certain forecasted foreign currency exposures and uses a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency exposures against each other. The Company designates a portion of its outstanding Yen-denominated Eurobonds as a net investment hedge to manage foreign currency exposures in its foreign operations. The Company does not apply hedge accounting to its derivative transactions. As of November 30, 2014 , the Company had forward foreign exchange contracts to buy $470.5 million and to sell $305.7 million against various foreign currencies. These contracts are at various exchange rates and expire at various dates through February 2016 .
The table below provides data about the carrying values of derivative instruments and non-derivative instruments:
 
November 30, 2014
 
November 24, 2013
 
Assets
 
(Liabilities)
 
Derivative Net Carrying Value
 
Assets
 
(Liabilities)
 
Derivative Net Carrying Value
 
Carrying
Value
 
Carrying
Value
 
 
Carrying
Value
 
Carrying
Value
 
 
(Dollars in thousands)
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts
$
15,587

 
$
(5,076
)
 
$
10,511

 
$
11,145

 
$
(4,000
)
 
$
7,145

Forward foreign exchange contracts
1,833

 
(12,186
)
 
(10,353
)
 
880

 
(3,215
)
 
(2,335
)
Total
$
17,420

 
$
(17,262
)
 
 
 
$
12,025

 
$
(7,215
)
 
 
Non-derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
4.25% Yen-denominated Eurobonds due 2016
$
—

 
$
(10,195
)
 
 
 
$
—

 
$
(20,564
)
 
 
7.75% Euro senior notes due 2018
—

 
—

 
 
 
—

 
(404,430
)
 
 
Total
$
—

 
$
(10,195
)
 
 
 
$
—

 
$
(424,994
)
 
 


57

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company's over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net-settlement of these contracts on a per-institution basis. The table below presents, by type of financial instrument, the gross amounts of the Company's derivative instruments, amounts offset due to master netting arrangements with the Company's various counterparties, and the net amounts recognized on the Company's consolidated balance sheets:
 
November 30, 2014
 
November 24, 2013
 
Gross Amounts of Recognized Assets / (Liabilities)
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amounts of Assets / (Liabilities) Presented in the Statement of Financial Position
 
Gross Amounts of Recognized Assets / (Liabilities)
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amounts of Assets / (Liabilities) Presented in the Statement of Financial Position
 
 
 
 
 
 
(Dollars in thousands)
Over-the-counter forward foreign exchange contracts
 
 
 
 
 
 
 
 
 
 
 
Financial assets
$
15,555

 
$
(6,908
)
 
$
8,647

 
$
8,600

 
$
(4,880
)
 
$
3,720

Financial liabilities
(9,587
)
 
6,908

 
(2,679
)
 
(5,855
)
 
4,880

 
(975
)
Total
 
 
 
 
$
5,968

 
 
 
 
 
$
2,745

Embedded derivative contracts
 
 
 
 
 
 
 
 
 
 
 
Financial assets
$
1,865

 
$
—

 
$
1,865

 
$
3,425

 
—

 
$
3,425

Financial liabilities
(7,675
)
 
—

 
(7,675
)
 
(1,360
)
 
—

 
(1,360
)
Total
 
 
 
 
$
(5,810
)
 
 
 
 
 
$
2,065

    


58

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The table below provides data about the amount of gains and losses related to derivative instruments and non-derivative instruments designated as net investment hedges:
 
Gain or (Loss)
Recognized in AOCI
(Effective Portion)
 
Gain or (Loss) Recognized in Other
Income (Expense), net (Ineffective
Portion and Amount Excluded from
Effectiveness Testing)
 
As of
 
As of
 
Year Ended
November 30,
2014
November 24,
2013
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
 
 
Forward foreign exchange contracts
$
4,637

 
$
4,637

 


 


 


4.25% Yen-denominated Eurobonds due 2016
(19,367
)
 
(21,161
)
 
$
3,767

 
$
3,839

 
$
3,474

7.75% Euro senior notes due 2018
(15,751
)
 
(27,361
)
 
—

 
—

 
—

Cumulative income taxes
8,760

 
17,186

 
 
 
 
 
 
Total
$
(21,721
)
 
$
(26,699
)
 
 
 
 
 
 
The table below provides data about the amount of gains and losses related to derivatives not designated as hedging instruments included in “Other income (expense), net” in the Company’s consolidated statements of income:
 
Gain or (Loss)
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
(Dollars in thousands)
Forward foreign exchange contracts:
 
 
 
 
 
Realized
$
(6,184
)
 
$
(2,904
)
 
$
8,508

Unrealized
(4,920
)
 
2,365

 
(17,952
)
Total
$
(11,104
)
 
$
(539
)
 
$
(9,444
)


59

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  6 : DEBT  
 
 
November 30,
2014
 
November 24,
2013
 
 
 
(Dollars in thousands)
 
 
Long-term debt
 
 
 
 
 
Unsecured:
 
 
 
 
 
4.25% Yen-denominated Eurobonds due 2016
$
33,985

 
$
39,545

 
 
7.75% Euro senior notes due 2018
—

 
404,430

 
 
7.625% senior notes due 2020
525,000

 
525,000

 
 
6.875% senior notes due 2022
533,493

 
535,041

 
 
Total unsecured
1,092,478

 
1,504,016

 
 
Total long-term debt
$
1,092,478

 
$
1,504,016

 
 
Short-term debt
 
 
 
 
 
Secured:
 
 
 
 
 
Senior revolving credit facility
$
100,000

 
$
—

 
 
Unsecured:
 
 
 
 
 
Short-term borrowings
31,524

 
41,861

 
 
Total short-term debt
$
131,524

 
$
41,861

 
 
Total long-term and short-term debt
$
1,224,002

 
$
1,545,877

 
Senior Revolving Credit Facility
The Company is a party to a credit agreement for a senior secured revolving credit facility. The credit facility, which was amended and restated on March 21, 2014, as further described below, provides for an asset-based facility, in which the borrowing availability is primarily based on the value of the U.S. Levi's ® trademarks and the levels of accounts receivable and inventory in the United States and Canada, as further described below.
Availability, interest and maturity.   The maximum availability under the credit facility is $850.0 million , of which $800.0 million is available to the Company for revolving loans in U.S. Dollars and $50.0 million is available to the Company for revolving loans either in U.S. Dollars or Canadian Dollars. Subject to the level of this borrowing base, the Company may make and repay borrowings from time to time until the maturity of the credit facility. The Company may make voluntary prepayments of borrowings at any time and must make mandatory prepayments if certain events occur. On March 21, 2014, the Company amended and restated its senior secured revolving credit facility to extend the term to March 21, 2019. The terms of the amended and restated credit facility are similar to the terms under the original credit facility, except that of the maximum availability of $850.0 million , $350.0 million is secured by the U.S. Levi’s ® trademarks, an increase from the $250.0 million in original credit facility. The interest rate for borrowing under the credit facility was reduced from LIBOR plus 150 to 275 basis points to LIBOR 125 to 200 basis points, depending on borrowing base availability, and the range of the rate for undrawn availability was reduced from 37.5 to 50 basis points to 25 to 30 basis points (depending on the Company’s credit ratings). Upon the maturity date, all of the obligations outstanding under the credit agreement become due.
The Company’s unused availability under its amended and restated senior secured revolving credit facility was $664.9 million at November 30, 2014 , as the Company’s total availability of $724.7 million , based on the collateral levels discussed above, was reduced by $59.8 million of letters of credit and other credit usage allocated under the facility. The $59.8 million was comprised of $3.0 million of other credit usage and $56.8 million of stand-by letters of credit with various international banks which serve as guarantees to cover U.S. workers' compensation claims and the working capital requirements for certain subsidiaries, primarily India.
Guarantees and security.   The Company's obligations under the credit agreement are guaranteed by its domestic subsidiaries. The obligations under the agreement are secured by, among other domestic assets, certain U.S. trademarks associated with the


60

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Levi's ® brand and accounts receivable, goods and inventory in the United States. Additionally, the obligations of Levi Strauss & Co. (Canada) Inc. under the credit agreement are secured by Canadian accounts receivable, goods, inventory and other Canadian assets. The lien on the U.S. Levi's ® trademarks and related intellectual property may be released at the Company's discretion so long as it meets certain conditions; such release would reduce the borrowing base.
Covenants.   The credit agreement contains customary covenants restricting the Company's activities as well as those of the Company's subsidiaries, including limitations on the ability to sell assets; engage in mergers; enter into transactions involving related parties or derivatives; incur or prepay indebtedness or grant liens or negative pledges on the Company's assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third-party obligations; and make changes in the Company's corporate structure. There are exceptions to these covenants, and some are only applicable when unused availability falls below specified thresholds. In addition, the credit agreement includes, as a financial covenant, a springing fixed charge coverage ratio of 1.0 :1.0, which arises when availability falls below a specified threshold.
Events of default.   The credit agreement contains customary events of default, including payment failures; failure to comply with covenants; failure to satisfy other obligations under the credit agreements or related documents; defaults in respect of other indebtedness; bankruptcy, insolvency and inability to pay debts when due; material judgments; pension plan terminations or specified underfunding; substantial stock ownership changes; and specified changes in the composition of the Board. The cross-default provisions in the agreement apply if a default occurs on other indebtedness in excess of $50.0 million and the applicable grace period in respect of the indebtedness has expired, such that the lenders of or trustee for the defaulted indebtedness have the right to accelerate. If an event of default occurs under the credit agreement, the lenders may terminate their commitments, declare immediately payable all borrowings under the agreement and foreclose on the collateral.
Yen-denominated Eurobonds due 2016
In 1996, the Company issued ¥20 billion principal amount Eurobonds (equivalent to approximately $180.0 million at the time of issuance) due in November 2016, with interest payable at 4.25%  per annum. The bond is redeemable at the option of the Company at a make-whole redemption price. The Company repurchased a portion of the Yen-denominated Eurobonds due 2016 in May 2010, and again in May 2012, as described below.
The agreement governing these bonds contains customary events of default and restricts the Company's ability and the ability of its subsidiaries and future subsidiaries to incur liens; engage in sale and leaseback transactions and engage in mergers and sales of assets. The agreement contains a cross-acceleration event of default that applies if any of the Company's debt in excess of $25.0 million is accelerated and the debt is not discharged or acceleration rescinded within 30 days after the Company's receipt of a notice of default from the fiscal agent or from the holders of at least 25% of the principal amount of the bond.
Euro Notes due 2018
The Company issued €300.0 million in aggregate principal amount of 7.75% Euro senior notes due 2018 (the “Euro Notes due 2018”) to qualified institutional buyers in May 2010. The notes were unsecured obligations that ranked equally with all of the Company's other existing and future unsecured and unsubordinated debt. The Company redeemed €150.0 million of the Euro Notes due in 2018 prior to May 15, 2014, at a price equal to 100% of the principal amount plus accrued and unpaid interest and a "make-whole" premium. The Company redeemed the remaining €150.0 million of notes, in November 2014, at redemption prices specified in the indenture governing the notes, after giving the required notice under the indenture.
Senior Notes due 2020
Principal, interest and maturity . On May 6, 2010, the Company issued $525.0 million in aggregate principal amount of 7.625% senior notes due 2020 (the “Senior Notes due 2020”) to qualified institutional buyers. The notes are unsecured obligations that rank equally with all of the Company's other existing and future unsecured and unsubordinated debt. The Senior Notes due 2020 mature on May 15, 2020. Interest on the notes is payable semi-annually in arrears on May 15 and November 15, commencing on November 15, 2010. The Company may redeem some or all of the Senior Notes due 2020 prior to May 15, 2015, at a price equal to 100% of the principal amount plus accrued and unpaid interest and a “make-whole” premium. On or after May 15, 2015, the Company may redeem all or any portion of the notes, at once or over time, at redemption prices specified in the indenture governing the notes, after giving the required notice under the indenture. Costs representing underwriting fees and other expenses of $10.1 million are amortized over the term of the notes to interest expense.


61

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Covenants . The indenture governing both notes contains covenants that limit, among other things, the Company's and certain of the Company's subsidiaries' ability to incur additional debt; make certain restricted payments; consummate specified asset sales; enter into transactions with affiliates; incur liens; impose restrictions on the ability of its subsidiaries to pay dividends or make payments to the Company and its restricted subsidiaries; enter into sale and leaseback transactions; merge or consolidate with another person; and dispose of all or substantially all of the Company's assets. The indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the trustee under the indenture or holders of at least 25% in principal amount of the then outstanding notes may declare all notes to be due and payable immediately. Upon the occurrence of a change in control (as defined in the indenture), each holder of notes may require the Company to repurchase all or a portion of the notes in cash at a price equal to 101% of the principal amount of notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of purchase.
Use of Proceeds . The proceeds from the issuance of the Euro Notes due 2018, which have been redeemed in their entirety, and the Senior Notes due 2020 were used to repurchase and repay all of the Company's then-existing Euro Notes due 2013 and Senior Notes due 2015. The proceeds were also used to repurchase ¥10,883,500,000 in principal amount tendered of the Yen-denominated Eurobonds due 2016 for total consideration of $100.0 million including accrued interest.
Senior Notes due 2022
Principal, interest and maturity . On May 8, 2012, the Company issued $385.0 million in aggregate principal amount of 6.875% senior notes due 2022 (the “Original Senior Notes due 2022”) to qualified institutional buyers and to purchasers outside the United States in compliance with the Securities Act of 1933, as amended (the “Securities Act”).
On March 14, 2013, the Company issued an additional $140.0 million in 6.875% senior notes due 2022 (the “Additional Senior Notes due 2022”) to qualified institutional buyers in compliance with the Securities Act (the Additional Senior Notes due 2022 along with the Original Senior Notes due 2022, hereinafter referred to as the "Senior Notes due 2022"). The Additional Senior Notes due 2022 were offered at a premium of $11.2 million , which will be amortized as a reduction to interest expense over the term of the notes. Costs of approximately $2.6 million associated with the issuance of the Additional Senior Notes due 2022, representing underwriting fees and other expenses, are also amortized to interest expense over the term of the notes.
The notes are unsecured obligations that rank equally with all of the Company's other existing and future unsecured and unsubordinated debt. The Senior Notes due 2022 mature on May 1, 2022. Interest on the notes is payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2012. The Company may redeem some or all of the Senior Notes due 2022 prior to May 1, 2017, at a price equal to 100% of the principal amount plus accrued and unpaid interest and a “make-whole” premium. On or after May 1, 2017, the Company may redeem all or any portion of the notes, at once or over time, at redemption prices specified in the indenture governing the notes, after giving the required notice under the indenture. In addition, at any time prior to May 1, 2015, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Senior Notes due 2022 with the proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the Senior Notes due 2022, plus accrued and unpaid interest, if any, to the date of redemption. Costs of approximately $7.4 million associated with the issuance of the notes, representing underwriting fees and other expenses, are amortized to interest expense over the term of the notes.
Covenants and other terms . The Additional Senior Notes due 2022 and the Original Senior Notes due 2022 are treated as a single class for all purposes under the indenture governing the Company's Senior Notes due 2022. The covenants, events of default, asset sale, change in control and other terms of the Senior Notes due 2022 are comparable to those contained in the indentures governing the Company's Senior Notes due 2020, and will remain in effect until such time as the Company obtains the requirement investment grade rating.
Use of Proceeds . The proceeds from the issuance of the Original Senior Notes due 2022 were used to repurchase and repay all of the Company's then-existing Senior Notes due 2016. The proceeds were also used to repurchase ¥5,116,500,000 in aggregate principal amount tendered of the Yen-denominated Eurobonds due 2016 for total consideration of $56.4 million including interest. The Company used the net proceeds from the offering of the Additional Senior Notes due 2022, together with cash on hand, to prepay in full its then-existing Senior Term Loan due 2014.



62

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Short-term Borrowings
Short-term borrowings consist of term loans and revolving credit facilities at various foreign subsidiaries which the Company expects to either pay over the next twelve months or refinance at the end of their applicable terms. Certain of these borrowings are guaranteed by stand-by letters of credit allocated under the Company's amended and restated senior secured revolving credit facility.
Loss on Early Extinguishment of Debt
During the year ended November 30, 2014 , the Company amended and restated its senior secured revolving credit facility and redeemed its Euro Notes due in 2018. The Company recorded a loss of $20.3 million on early extinguishment of debt as a result of our debt refinancing activities during the period. The loss was comprised of redemption premiums of $15.2 million and the write-off of $5.1 million of unamortized debt issuance costs.
During the year ended November 24, 2013 , the Company repaid in full the remaining balance of its then-existing Senior Term Loan due in 2014 and recorded a loss on the early extinguishment of debt, which was comprised of the write-off of the remaining unamortized discount and unamortized debt issuance costs.
Principal Payments on Short-term and Long-term Debt
The table below sets forth, as of November 30, 2014 , the Company's required aggregate short-term and long-term debt principal payments (inclusive of premium and discount) for the next five fiscal years and thereafter.
 
 
(Dollars in thousands)
 
 
2015
$
131,524

 
 
2016
33,985

 
 
2017
—

 
 
2018
—

 
 
2019
—

 
 
Thereafter
1,058,493

 
 
Total future debt principal payments
$
1,224,002

 
Interest Rates on Borrowings
The Company’s weighted-average interest rate on average borrowings outstanding during 2014 , 2013 and 2012 was 7.63% , 7.52% and 7.05% , respectively. The weighted-average interest rate on average borrowings outstanding includes the amortization of capitalized bank fees and underwriting fees, and excludes interest on obligations to participants under deferred compensation plans.
Dividends and Restrictions
The terms of certain of the indentures relating to the Company's unsecured notes and its amended and restated senior secured revolving credit facility agreement contain covenants that restrict the Company's ability to pay dividends to its stockholders. For information about the Company's dividend payments, see Note 15 . As of November 30, 2014 , and at the time the dividends were paid, the Company met the requirements of its debt instruments. Subsidiaries of the Company that are not wholly-owned subsidiaries are permitted under the indentures to pay dividends to all stockholders either on a pro rata basis or on a basis that results in the receipt by the Company of dividends or distributions of greater value than it would receive on a pro rata basis. The Company has not entered into any arrangements that would restrict the transfer of the assets of the Company's subsidiaries to the Company in the form of loans, advances or cash dividends.


63

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  7 : GUARANTEES
Indemnification agreements.   In the ordinary course of business, the Company enters into agreements containing indemnification provisions under which the Company agrees to indemnify the other party for specified claims and losses. For example, the Company's trademark license agreements, real estate leases, consulting agreements, logistics outsourcing agreements, securities purchase agreements and credit agreements typically contain such provisions. This type of indemnification provision obligates the Company to pay certain amounts associated with claims brought against the other party as the result of trademark infringement, negligence or willful misconduct of Company employees, breach of contract by the Company including inaccuracy of representations and warranties, specified lawsuits in which the Company and the other party are co-defendants, product claims and other matters. These amounts generally are not readily quantifiable; the maximum possible liability or amount of potential payments that could arise out of an indemnification claim depends entirely on the specific facts and circumstances associated with the claim. The Company has insurance coverage that minimizes the potential exposure to certain of such claims. The Company also believes that the likelihood of material payment obligations under these agreements to third parties is low.
Covenants.   The Company's long-term debt agreements contain customary covenants restricting its activities as well as those of its subsidiaries, including limitations on its, and its subsidiaries', ability to sell assets; engage in mergers; enter into capital leases or certain leases not in the ordinary course of business; enter into transactions involving related parties or derivatives; incur or prepay indebtedness or grant liens or negative pledges on its assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third-party obligations; make capital expenditures; and make changes in its corporate structure. For additional information see Note 6 . As of November 30, 2014 , the Company was in compliance with all of these covenants.


64

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE 8 : EMPLOYEE BENEFIT PLANS
Pension plans.   The Company has several non-contributory defined benefit retirement plans covering eligible employees. Plan assets are invested in a diversified portfolio of securities including stocks, bonds, real estate investment funds, cash equivalents, and alternative investments. Benefits payable under the plans are based on years of service, final average compensation, or both. The Company retains the right to amend, curtail or discontinue any aspect of the plans, subject to local regulations.
Postretirement plans.   The Company maintains plans that provide postretirement benefits to eligible employees, principally health care, to substantially all U.S. retirees and their qualified dependents. These plans were established with the intention that they would continue indefinitely. However, the Company retains the right to amend, curtail or discontinue any aspect of the plans at any time. The plans are contributory and contain certain cost-sharing features, such as deductibles and coinsurance. The Company's policy is to fund postretirement benefits as claims and premiums are paid.
The following tables summarize activity of the Company's defined benefit pension plans and postretirement benefit plans:
 
Pension Benefits
 
Postretirement Benefits
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
1,233,799

 
$
1,388,650

 
$
135,595

 
$
155,864

Service cost
8,397

 
8,707

 
255

 
376

Interest cost
54,958

 
51,984

 
5,199

 
4,957

Plan participants' contribution
700

 
771

 
4,658

 
5,242

Actuarial loss (gain) (1)
166,664

 
(114,441
)
 
6,455

 
(10,626
)
Net curtailment loss (gain)
2,093

 
(341
)
 
733

 
—

Impact of foreign currency changes
(12,532
)
 
1,219

 
—

 
—

Plan settlements (2)
(102,021
)
 
(7,909
)
 
—

 
—

Special termination benefits
35

 
74

 
—

 
—

Net benefits paid (3)
(62,756
)
 
(94,915
)
 
(18,811
)
 
(20,218
)
Benefit obligation at end of year
$
1,289,337

 
$
1,233,799

 
$
134,084

 
$
135,595

 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
903,033

 
894,362

 
—

 
—

Actual return on plan assets (4)
128,281

 
75,683

 
—

 
—

Employer contribution
20,046

 
35,064

 
14,153

 
14,976

Plan participants' contributions
700

 
771

 
4,658

 
5,242

Plan settlements (2)
(102,021
)
 
(7,909
)
 
—

 
—

Impact of foreign currency changes
(8,460
)
 
(23
)
 
—

 
—

Net benefits paid (3)
(62,756
)
 
(94,915
)
 
(18,811
)
 
(20,218
)
Fair value of plan assets at end of year
878,823

 
903,033

 
—

 
—

Unfunded status at end of year
$
(410,514
)
 
$
(330,766
)
 
$
(134,084
)
 
$
(135,595
)
_____________
(1)
Actuarial losses in 2014 in the Company's pension benefit plans resulted from changes in mortality rate assumptions, primarily for the Company's U.S. plans. Actuarial gains in 2013 in the Company's pension benefit plans resulted from changes in discount rate assumptions, primarily for the Company's U.S. plans. Changes in financial markets during 2014 and 2013 , including a decrease and increase, respectively, in corporate bond yield indices, resulted in an increase and decrease in benefit obligations, respectively.


65

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

(2)
The increase in pension plan settlements in 2014 was primarily due to a voluntary lump-sum, cash-out program offered to vested, terminated U.S. pension plan participants in the last half of 2014. The extent of the funding from the cash-out program exceeded the settlement accounting threshold, and as such in 2014, these activities have been categorized as settlements. Pension plan assets were utilized to settle pension obligations for deferred participants that elected to participate in the program.
(3)
The decrease in pension benefits paid in 2014 was primarily due the 2013 voluntary cash-out program offered to vested, terminated U.S. pension plan participants in the first half of 2013. The extent of the funding from the cash-out program was below the settlement accounting threshold, and as such in 2013, these activities were categorized as net benefit payments. Pension plan assets were utilized to settle pension obligations for deferred participants that elected to participate in the program.
(4)
The increase in return on plan assets in 2014 was primarily due to the better-than-expected asset performance caused by the decrease in interest rates which resulted in higher returns on fixed income securities.
Amounts recognized in the consolidated balance sheets as of November 30, 2014 , and November 24, 2013 , consist of the following:
 
Pension Benefits
 
Postretirement Benefits
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Prepaid benefit cost
$
1,587

 
$
1,331

 
$
—

 
$
—

Accrued benefit liability – current portion
(8,926
)
 
(8,622
)
 
(11,871
)
 
(13,347
)
Accrued benefit liability – long-term portion
(403,175
)
 
(323,475
)
 
(122,213
)
 
(122,248
)
 
$
(410,514
)
 
$
(330,766
)
 
$
(134,084
)
 
$
(135,595
)
 
 
 
 
 
 
 
 
Accumulated other comprehensive loss:
 
 
 
 
 
 
 
Net actuarial loss
$
(394,090
)
 
$
(343,148
)
 
$
(36,505
)
 
$
(34,248
)
Net prior service benefit
548

 
666

 
—

 
—

 
$
(393,542
)
 
$
(342,482
)
 
$
(36,505
)
 
$
(34,248
)
The accumulated benefit obligation for all defined benefit plans was $1.3 billion and $1.2 billion at November 30, 2014 , and November 24, 2013 , respectively. Information for the Company's defined benefit plans with an accumulated or projected benefit obligation in excess of plan assets is as follows:
 
Pension Benefits
 
2014
 
2013
 
(Dollars in thousands)
Accumulated benefit obligations in excess of plan assets:
 
 
 
Aggregate accumulated benefit obligation
$
1,123,972

 
$
1,147,938

Aggregate fair value of plan assets
728,844

 
827,764

 
 
 
 
Projected benefit obligations in excess of plan assets:
 
 
 
Aggregate projected benefit obligation
$
1,202,714

 
$
1,195,923

Aggregate fair value of plan assets
790,614

 
863,826



66

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The components of the Company's net periodic benefit cost (income) were as follows:
 
Pension Benefits
 
Postretirement Benefits
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(Dollars in thousands)
Net periodic benefit cost (income):
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
8,397

 
$
8,707

 
$
8,952

 
$
255

 
$
376

 
$
397

Interest cost
54,958

 
51,984

 
57,635

 
5,199

 
4,957

 
6,634

Expected return on plan assets
(55,521
)
 
(56,183
)
 
(52,029
)
 
—

 
—

 
—

Amortization of prior service benefit (1)
(53
)
 
(80
)
 
(78
)
 
(5
)
 
(488
)
 
(16,356
)
Amortization of actuarial loss
10,932

 
16,311

 
12,612

 
4,201

 
6,765

 
5,157

Curtailment loss (gain)
2,614

 
(564
)
 
(2,391
)
 
733

 
—

 
—

Special termination benefit
35

 
98

 
159

 
—

 
—

 
—

Net settlement loss
30,558

 
517

 
383

 
—

 
—

 
—

Net periodic benefit cost (income)
51,920

 
20,790

 
25,243

 
10,383

 
11,610

 
(4,168
)
Changes in accumulated other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Actuarial loss (gain)
92,544

 
(134,378
)
 
 
 
6,453

 
(10,626
)
 
 
Amortization of prior service benefit (1)
53

 
80

 
 
 
5

 
488

 
 
Amortization of actuarial loss
(10,932
)
 
(16,311
)
 
 
 
(4,201
)
 
(6,765
)
 
 
Curtailment gain
113

 
498

 
 
 
—

 
—

 
 
Net settlement loss
(30,712
)
 
(178
)
 
 
 
—

 
—

 
 
Total recognized in accumulated other comprehensive loss
51,066

 
(150,289
)
 
 
 
2,257

 
(16,903
)
 
 
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss
$
102,986

 
$
(129,499
)
 
 
 
$
12,640

 
$
(5,293
)
 
 
_____________
(1)
Postretirement benefits amortization of prior service benefit recognized during 2012 relates primarily to the favorable impact of the February 2004 and August 2003 plan amendments, which concluded amortization in 2012.
The amounts that will be amortized from “Accumulated other comprehensive loss” into net periodic benefit cost in 2015 for the Company's defined benefit pension and postretirement benefit plans are expected to be $12.7 million and $4.5 million , respectively.


67

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Assumptions used in accounting for the Company's benefit plans were as follows:
 
Pension Benefits
 
Postretirement Benefits
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Weighted-average assumptions used to determine net periodic benefit cost:
 
 
 
 
 
 
 
Discount rate
4.6%
 
3.8%
 
4.2%
 
3.3%
Expected long-term rate of return on plan assets
6.3%
 
6.4%
 
 
 
 
Rate of compensation increase
3.7%
 
3.5%
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average assumptions used to determine benefit obligations:
 
 
 
 
 
 
 
Discount rate
3.8%
 
4.6%
 
3.6%
 
4.2%
Rate of compensation increase
3.4%
 
3.7%
 
 
 
 
 
 
 
 
 
 
 
 
Assumed health care cost trend rates were as follows:
 
 
 
 
 
 
 
Health care trend rate assumed for next year
 
 
 
 
7.0%
 
7.2%
Rate trend to which the cost trend is assumed to decline
 
 
 
 
4.5%
 
4.5%
Year that rate reaches the ultimate trend rate
 
 
 
 
2028
 
2028
For the Company's U.S. benefit plans, the discount rate used to determine the present value of the future pension and postretirement plan obligations was based on a yield curve constructed from a portfolio of high quality corporate bonds with various maturities. Each year's expected future benefit payments are discounted to their present value at the appropriate yield curve rate, thereby generating the overall discount rate. The Company utilized a variety of country-specific third-party bond indices to determine the appropriate discount rates to use for the benefit plans of its foreign subsidiaries.
The Company bases the overall expected long-term rate of return on assets on anticipated long-term returns of individual asset classes and each pension plans' target asset allocation strategy based on current economic conditions.  For the U.S. pension plan, the expected long-term returns for each asset class are determined through a mean-variance model to estimate 20 -year returns for the plan. 
Health care cost trend rate assumptions are a significant input in the calculation of the amounts reported for the Company's postretirement benefits plans. A one percentage-point change in assumed health care cost trend rates would have no significant effect on the total service and interest cost components or on the postretirement benefit obligation.
Consolidated pension plan assets relate primarily to the U.S. pension plan. The Company utilizes the services of independent third-party investment managers to oversee the management of U.S. pension plan assets.  The Company's investment strategy is to invest plan assets in a diversified portfolio of domestic and international equity securities, fixed income securities and real estate and other alternative investments with the objective of generating long-term growth in plan assets at a reasonable level of risk. Prohibited investments for the U.S. pension plan include certain privately placed or other non-marketable debt instruments, letter stock, commodities or commodity contracts and derivatives of mortgage-backed securities, such as interest-only, principal-only or inverse floaters. The current target allocation percentages for the Company's U.S. pension plan assets are 34-38% for equity securities, 54-58% for fixed income securities and 6-10% for other alternative investments, including real estate.


68

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The fair value of the Company's pension plan assets by asset class are as follows:
 
Year Ended November 30, 2014
Asset Class
Total
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
(Dollars in thousands)
Cash and cash equivalents
$
2,348

 
$
2,348

 
$
—

 
$
—

Equity securities (1)
 
 
 
 
 
 
 
U.S. large cap
172,702

 
—

 
172,702

 
—

U.S. small cap
30,775

 
—

 
30,775

 
—

International
135,434

 
—

 
135,434

 
—

Fixed income securities (2)
464,685

 
—

 
464,685

 
—

Other alternative investments


 
 
 
 
 
 
Real estate (3)
58,215

 
—

 
58,215

 
—

Private equity (4)
2,471

 
—

 
—

 
2,471

Hedge fund (5)
7,273

 
—

 
7,273

 
—

Other (6)
4,921

 
—

 
4,921

 
—

Total investments at fair value
$
878,824

 
$
2,348

 
$
874,005

 
$
2,471

 
Year Ended November 24, 2013
Asset Class
Total
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
(Dollars in thousands)
Cash and cash equivalents
$
1,132

 
$
1,132

 
$
—

 
$
—

Equity securities (1)
 
 
 
 
 
 
 
U.S. large cap
175,181

 
—

 
175,181

 
—

U.S. small cap
31,163

 
—

 
31,163

 
—

International
133,339

 
—

 
133,339

 
—

Fixed income securities (2)
490,701

 
—

 
490,701

 
—

Other alternative investments
 
 
 
 
 
 
 
Real estate (3)
55,082

 
—

 
55,082

 
—

Private equity (4)
3,041

 
—

 
—

 
3,041

Hedge fund (5)
7,090

 
—

 
7,090

 
—

Other (6)
6,304

 
—

 
6,304

 
—

Total investments at fair value
$
903,033

 
$
1,132

 
$
898,860

 
$
3,041

_____________
(1)
Primarily comprised of equity index funds that track various market indices.
(2)
Predominantly includes bond index funds that invest in long-term U.S. government and investment grade corporate bonds.
(3)
Primarily comprised of investments in U.S. Real Estate Investment Trusts.
(4)
Represents holdings in a diversified portfolio of private equity funds and direct investments in companies located primarily in North America. Fair values are determined by investment fund managers using primarily unobservable market data.
(5)
Primarily invested in a diversified portfolio of equities, bonds, alternatives and cash with a low tolerance for capital loss.
(6)
Primarily relates to accounts held and managed by a third-party insurance company for employee-participants in Belgium. Fair values are based on accumulated plan contributions plus a contractually-guaranteed return plus a share of any incremental investment fund profits.


69

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The fair value of plan assets are composed of U.S. plan assets of $728.8 million and non-U.S. plan assets of $150.0 million . The fair values of the substantial majority of the equity, fixed income and real estate investments are based on the net asset value of comingled trust funds that passively track various market indices.
The Company's estimated future benefit payments to participants, which reflect expected future service, as appropriate are anticipated to be paid as follows:
 
Fiscal year
Pension Benefits
 
Postretirement Benefits
 
Total
 
 
 
(Dollars in thousands)
 
 
2015
$
65,054

 
$
14,256

 
$
79,310

 
 
2016
62,460

 
13,830

 
76,290

 
 
2017
63,601

 
13,332

 
76,933

 
 
2018
64,795

 
12,807

 
77,602

 
 
2019
64,898

 
12,378

 
77,276

 
 
2020-2023
346,869

 
56,777

 
403,646

 
At November 30, 2014 , the Company's contributions to its pension plans in 2015 were estimated to be approximately $33.5 million .
NOTE  9 : EMPLOYEE INVESTMENT PLANS
The Company's Employee Savings and Investment Plan (“ESIP”) is a qualified plan that covers eligible home office employees. The Company matches 125% of ESIP participant's contributions to all funds maintained under the qualified plan up to the first 6.0% of eligible compensation. Total amounts charged to expense for the Company's employee investment plans for the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , were $12.1 million , $12.2 million and $11.0 million , respectively.
NOTE  10 : EMPLOYEE INCENTIVE COMPENSATION PLANS
Annual Incentive Plan
The Annual Incentive Plan (“AIP”) provides a cash bonus that is earned based upon the Company's business unit and consolidated financial results as measured against pre-established internal targets and upon the performance and job level of the individual. Total amounts charged to expense for this plan for the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , were $68.3 million , $76.6 million and $54.6 million , respectively. As of November 30, 2014 , and November 24, 2013 , the Company had accrued $70.5 million and $79.6 million , respectively, for the AIP.
Long-Term Incentive Plans
2006 Equity Incentive Plan (“EIP”). In July 2006, the Board adopted, and the stockholders approved, the EIP. The EIP was subsequently amended by the Board of Directors in 2011 and 2014, and approved by the stockholders in April 2014. For more information on this plan, see Note 11 .
2005 Long-Term Incentive Plan (“LTIP”).   The Company established a long-term cash incentive plan effective at the beginning of 2005. Executive officers are not participants in this plan. Performance will be measured at the end of a three -year period based on the Company's performance over the period measured against the following pre-established targets: (i) the target compound annual growth rate in the Company's net revenues over the three -year period; and (ii) the target compound annual growth rate of the Company's net earnings adjusted for certain items such as interest and taxes for the three -year period. Beginning in 2013, the net earnings target measurement component will be determined at the end of a three -year period based on the Company's average margin of net earnings over the period adjusted for certain items such as interest and taxes. Individual target amounts are set for each participant based on job level. Awards will be paid out in the quarter following the end of the three -year period based on Company performance against objectives.


70

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company recorded expense for the LTIP of $2.3 million and $2.8 million for the years ended November 30, 2014 and November 24, 2013 , respectively, and a net reversal of expense for the LTIP of $3.6 million for the year ended November 25, 2012 . As of November 30, 2014 , and November 24, 2013 , the Company had accrued a total of $4.5 million and $2.9 million , respectively, for the LTIP.
NOTE 11 : STOCK-BASED INCENTIVE COMPENSATION PLANS
The Company recognized stock-based compensation expense of $24.8 million , $18.6 million and $5.1 million , and related income tax benefits of $9.6 million , $5.6 million and $2.0 million , respectively, for the years ended November 30, 2014 , November 24, 2013 and November 25, 2012 , respectively. As of November 30, 2014 , there was $34.3 million of total unrecognized compensation cost related to unvested equity and liability awards, which cost is expected to be recognized over a weighted-average period of 1.92 years. No stock-based compensation cost has been capitalized in the accompanying consolidated financial statements.
2006 Equity Incentive Plan
Under the Company's EIP, a variety of stock awards, including stock options, restricted stock, restricted stock units (“RSUs”), and stock appreciation rights (“SARs”) may be granted. The EIP also provides for the grant of performance awards in the form of cash or equity. The aggregate number of shares of common stock authorized for issuance under the EIP is 6,000,000 shares. At November 30, 2014 , 2,321,241 shares remained available for issuance.
Under the EIP, stock awards have a maximum contractual term of ten years and generally must have an exercise price at least equal to the fair market value of the Company's common stock on the date the award is granted. The Company's common stock is not listed on any stock exchange. Accordingly, as provided by the EIP, the stock's fair market value is determined by the Board based upon a stock valuation performed by Evercore. Awards vest according to terms determined at the time of grant. Unvested stock awards are subject to forfeiture upon termination of employment prior to vesting, but are subject in some cases to early vesting upon specified events, including certain corporate transactions as defined in the EIP or as otherwise determined by the Board in its discretion. Some stock awards are payable in either shares of the Company's common stock or cash at the discretion of the Board as determined at the time of grant.
Upon the exercise of a SAR, the participant will receive shares of common stock. The number of shares of common stock issued per SAR unit exercised is equal to (i) the excess of the per-share fair market value of the Company's common stock on the date of exercise over the exercise price of the SAR, divided by (ii) the per-share fair market value of the Company's common stock on the date of exercise.
Only non-employee members of the Board have received RSUs. Each recipient's initial grant of RSUs is converted to a share of common stock six months after discontinuation of service with the Company for each fully vested RSU held at that date. Subsequent grants of RSUs provide recipients with the opportunity to make deferral elections regarding when the shares of the Company's common stock are to be delivered in settlement of vested RSUs. If the recipient does not elect to defer the receipt of common stock, then the RSUs are immediately converted to common stock upon vesting. The RSUs additionally have “dividend equivalent rights,” of which dividends paid by the Company on its common stock are credited by the equivalent addition of RSUs.
Shares of common stock will be issued from the Company's authorized but unissued shares and are subject to the Stockholders Agreement that governs all shares.
Put rights. Prior to an initial public offering (“IPO”) of the Company's common stock, a participant (or estate or other beneficiary of a deceased participant) may require the Company to repurchase shares of the common stock held by the participant at then-current fair market value (a “put right”). Put rights may be exercised only with respect to shares of the Company's common stock that have been held by a participant for at least six months following their issuance date, thus exposing the holder to the risk and rewards of ownership for a reasonable period of time. Accordingly, the SARs and RSUs are classified as equity awards, and are reported in “Stockholders' equity” in the accompanying consolidated balance sheets.
Call rights. Prior to an IPO, the Company also has the right to repurchase shares of its common stock held by a participant (or estate or other beneficiary of a deceased participant, or other permitted transferee) at then-current fair market value (a “call right”). Call rights apply to an award as well as any shares of common stock acquired pursuant to the award. If the award or common stock is transferred to another person, that person is subject to the call right. As with the put rights, call rights may be


71
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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

exercised only with respect to shares of common stock that have been held by a participant for at least six months following their issuance date.
Temporary equity. Equity-classified stock-based awards that may be settled in cash at the option of the holder are presented on the balance sheet outside permanent equity. Accordingly, “Temporary equity” on the face of the accompanying consolidated balance sheets includes the portion of the intrinsic value of these awards generally relating to the elapsed service period since the grant date as well as the fair value of common stock issued pursuant to the EIP. The increase in temporary equity from the year ended November 24, 2013 , to November 30, 2014 , was primarily due to an increase in the fair value of the Company's common stock.
Equity Awards
SARs. The Company grants SARs, which include service or performance conditions, to a small group of the Company's senior executives. Beginning in 2013, the Company issued cliff vesting performance awards ("performance-based SARs") to align with the achievement of three -year financial performance goals. SARs activity during the years ended November 30, 2014 , and November 24, 2013 , was as follows:
 
Service SARs
 
Performance-based SARs
 
Units
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Life (Years)
 
Units
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Life (Years)
 
(Units in thousands)
Outstanding at November 25, 2012
2,537

 
 
$
37.82

 
 
4.5
 
—

 
 
 
 
 
 
Granted
672

 
 
40.21

 
 
 
 
672

 
 
$
40.21

 
 
 
Exercised
(380
)
 
 
35.91

 
 
 
 
—

 
 
 
 
 
 
Forfeited
(79
)
 
 
35.07

 
 
 
 
(28
)
 
 
37.75

 
 
 
Expired
(737
)
 
 
47.59

 
 
 
 
—

 
 
 
 
 
 
Outstanding at November 24, 2013
2,013

 
 
$
35.51

 
 
5.5
 
644

 
 
$
40.32

 
 
6.3
Granted
508

 
 
64.71

 
 
 
 
507

 
 
$
64.71

 
 
 
Exercised
(96
)
 
 
36.10

 
 
 
 
—

 
 
 
 
 
 
Forfeited
(59
)
 
 
44.30

 
 
 
 
(46
)
 
 
48.49

 
 
 
Expired
(16
)
 
 
68.00

 
 
 
 
—

 
 
 
 
 
 
Outstanding at November 30, 2014
2,350

 
 
$
41.36

 
 
4.9
 
1,105

 

$
51.18

 
 
5.8
Vested and expected to vest at November 30, 2014
2,272

 
 
$
40.93

 
 
4.8
 
930

 
 
$
50.54

 
 
5.7
Exercisable at November 30, 2014
1,210

 
 
$
34.38

 
 
4.3
 
—

 
 
 
 
 
 
SARs with service conditions ("service SARs") vest from two-and-a-half to four years, and have maximum contractual lives ranging from six-and-a-half to ten years. The performance-based SARs vest at varying unit amounts based on the attainment of certain three -year cumulative performance goals and have maximum contractual lives of seven years. In addition, approximately one-fifth of the performance-based SARs granted and outstanding also require the attainment of a specified common stock value as of the end of the three -year performance period in order to vest. The total intrinsic value of service SARs exercised during the year ended November 30, 2014 , and November 24, 2013 , was $2.9 million and $7.7 million , respectively. The total fair value of service SARs vested as of November 30, 2014 , and November 24, 2013 , was $57.6 million and $20.8 million , respectively. Unrecognized future compensation costs as of November 30, 2014 , of $12.1 million for service SARs and $7.3 million for performance-based SARs are expected to be recognized over weighted-average periods of 2.41 years and 1.79 years, respectively. The Company believes it is probable that the performance-based SARs will vest.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The weighted-average grant date fair value of SARs was estimated using the Black-Scholes option valuation model. The weighted-average grant date fair values and corresponding weighted-average assumptions used in the model were as follows:
 
Service SARs Granted
 
Performance-based SARs Granted
 
2014
 
2013
 
2012
 
2014
2013
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value
$
14.62

 
$
12.21

 
$
10.96

 
$
15.75

$
12.54

 
 
 
 
 
 
 
 
 
Weighted-average assumptions:
 
 
 
 
 
 
 
 
Expected life (in years)
4.7

 
4.6

 
4.5

 
5.0

5.0

Expected volatility (1)
31.8
%
 
43.2
%
 
47.1
%
 
33.1
%
42.6
%
Risk-free interest rate
1.5
%
 
0.8
%
 
0.6
%
 
1.6
%
0.9
%
Expected dividend
1.2
%
 
1.7
%
 
1.7
%
 
1.2
%
1.7
%
_____________
(1)
On an annual basis, the Company reviews and modifies the representative peer group based on changes to the Company’s business and changes to the businesses of the companies within the peer group. The decrease in expected volatility, as compared to 2013, is primarily driven by the addition or removal of certain companies in the representative peer group to ensure that the peer group is representative of the Company’s current operations. 
RSUs . The Company grants RSUs to certain members of its Board. RSU activity during the years ended November 30, 2014 , and November 24, 2013 , was as follows:
 
 
Units
 
Weighted-Average Fair Value
 
 
 
(Units in thousands)
 
 
Outstanding at November 25, 2012
72

 
 
$
38.11

 
 
 
Granted
26

 
 
56.79

 
 
 
Converted
(23
)
 
 
37.37

 
 
 
Outstanding at November 24, 2013
75

 
 
$
44.66

 
 
 
Granted
20

 
 
67.29

 
 
 
Converted
(23
)
 
 
44.85

 
 
 
Outstanding, vested and expected to vest at November 30, 2014
72

 
 
$
50.75

 
 
The weighted-average grant date fair value of RSUs was estimated using the Evercore stock valuation. The total fair value of RSUs outstanding, vested and expected to vest as of November 30, 2014 , and November 24, 2013 , was $5.9 million and $4.7 million , respectively.
RSUs vest in a series of three equal installments at thirteen months, twenty-four months and thirty-six months following the date of grant. However, if the recipient's continuous service terminates for a reason other than cause after the first vesting installment, but prior to full vesting, then the remaining unvested portion of the award becomes fully vested as of the date of such termination.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Liability Awards
Cash settled liability awards provide long-term incentive compensation for select levels of the Company’s management. The common stock values used in the determination of the cash settled awards and payouts are approved by the Board based on the Evercore stock valuation. Unvested awards are subject to forfeiture upon termination of employment, but are subject in some cases to early vesting upon specified events, as defined in the agreement. From 2008 through 2012, the Company's Total Shareholder Return Plan (“TSRP”) provided grants of units that vest over a three-year performance period. Upon vesting of a TSRP unit, the participant will receive a cash payout in an amount equal to the excess of the per-share value of the Company's common stock at the end of the three -year performance period over the per-share value at the date of grant. In 2013, the Company replaced the TSRP with the Phantom Restricted Stock Unit Plan (“PRSU”). The PRSU provides for grants of units, with actual number of units vesting subject to a minimum and maximum, based on the fair value of the common stock at the end of a three-year performance period. Upon vesting of a PRSU unit, the participant will receive a cash payout in an amount equal to the vested units multiplied by the fair value of the Company’s common stock at the end of the three -year performance period. Unrecognized future compensation cost as of November 30, 2014 , for PRSUs is $14.9 million and is expected to be recognized over a weighted-average period of 1.60 years. The Company believes it is probable that the liability awards will vest.
Liability award activity during the years ended November 30, 2014 , and November 24, 2013 , was as follows:
 
TSRPs
 
PRSUs
 
Units
 
Weighted-Average Exercise Price
 
Weighted-Average Fair Value At Period End
 
Units
 
Weighted-Average Exercise Price
 
Weighted-Average Fair Value At Period End
 
(Units in thousands)
Outstanding at November 25, 2012
832

 
 
$
36.83

 
 
 
$
4.22

 
 
—

 
 
 
 
 
 
 
 
Granted
—

 
 
—

 
 
 
 
 
 
398

 
 
$
38.19

 
 
 
 
 
Exercised
(252
)
 
 
36.36

 
 
 
 
 
 
—

 
 
 
 
 
 
 
 
Performance Adjustment of PRSU
 
 
 
 
 
 
 
 
 
 
66

 
 
37.75

 
 
 
 
 
Forfeited
(164
)
 
 
37.23

 
 
 
 
 
 
(60
)
 
 
37.75

 
 
 
 
 
Outstanding at November 24, 2013
416

 
 
$
36.96

 
 
 
$
25.42

 
 
404

 
 
$
38.19

 
 
 
$
62.75

 
Granted
—

 
 
—

 
 
 
 
 
 
222

 
 
$
64.57

 
 
 
 
 
Exercised
(174
)
 
 
42.65

 
 
 
 
 
 
—

 
 
 
 
 
 
 
 
Performance Adjustment of PRSU
 
 
 
 
 
 
 
 
 
 
58

 
 
46.16

 
 
 
 
 
Forfeited
(104
)
 
 
33.85

 
 
 
 
 
 
(207
)
 
 
43.76

 
 
 
 
 
Outstanding at November 30, 2014
138

 
 
$
32.14

 
 
 
$
49.78

 
 
477

 
 
$
49.00

 
 
 
$
82.00

 
Vested and expected to vest at November 30, 2014
138

 
 
$
32.14

 
 
 
$
49.78

 
 
339

 
 
$
47.56

 
 
 
$
82.00

 
Exercisable at November 30, 2014
138

 
 
$
32.14

 
 
 
$
49.78

 
 
—

 
 
 
 
 
 
 
 




74
Table of Contents

 
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The total intrinsic value of TSRPs exercised during the year ended November 30, 2014 , and November 25, 2012 , was $3.5 million and $3.1 million , respectively. The total fair value of TSRPs vested as of November 30, 2014 , and November 24, 2013 , was $6.9 million and $3.8 million , respectively. The weighted-average fair value of TSRPs at November 30, 2014 , and November 24, 2013 , was estimated using the Black-Scholes option valuation model. The weighted-average fair value of PRSUs at the grant date was estimated using the Evercore stock valuation while the PRSUs fair value at November 30, 2014 , was estimated using an internally derived calculation consistent with Evercore’s calculation methodology. The weighted-average assumptions used in the TSRPs Black-Scholes model were as follows:
 
 
TSRPs Outstanding at
 
 
 
November 30, 2014
 
November 24, 2013
 
 
 
 
 
 
 
 
Weighted-average assumptions:
 
 
 
 
 
 
 
 
 
Expected life (in years)
 
0.1

 
 
 
0.6

 
 
 
Expected volatility
 
27.3
%
 
 
 
30.8
%
 
 
 
Risk-free interest rate
 
—

 
 
 
0.1
%
 
 
 
Expected dividend
 
1.2
%
 
 
 
1.1
%
 
 
NOTE  12 : LONG-TERM EMPLOYEE RELATED BENEFITS
Long-term employee-related benefit liabilities primarily consist of the Company's liabilities for its deferred compensation plans.
Deferred compensation plan for executives and outside directors, established January 1, 2003.   The Company has a non-qualified deferred compensation plan for executives and outside directors that was established on January 1, 2003 and amended thereafter. The deferred compensation plan obligations are payable in cash upon retirement, termination of employment and/or certain other times in a lump-sum distribution or in installments, as elected by the participant in accordance with the plan. As of November 30, 2014 , and November 24, 2013 , these plan liabilities totaled $24.0 million and $22.2 million , respectively, of which $1.1 million and $1.4 million was included in “Accrued salaries, wages and employee benefits” as of November 30, 2014 , and November 24, 2013 , respectively. The Company held funds of approximately $25.9 million and $23.8 million in an irrevocable grantor's rabbi trust as of November 30, 2014 , and November 24, 2013 , respectively, related to this plan. Rabbi trust assets are included in “Other current assets” or “Other non-current assets” on the Company's consolidated balance sheets.
Deferred compensation plan for executives, prior to January 1, 2003.   The Company also maintains a non-qualified deferred compensation plan for certain management employees relating to compensation deferrals for the period prior to January 1, 2003. The rabbi trust is not a feature of this plan. As of November 30, 2014 , and November 24, 2013 , liabilities for this plan totaled $37.5 million and $41.1 million , respectively, of which $4.6 million and $6.0 million , respectively, was included in “Accrued salaries, wages and employee benefits” on the Company's consolidated balance sheets.
Interest earned by the participants in deferred compensation plans was $5.3 million , $8.7 million and $6.8 million for the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , respectively. The charges were included in “Interest expense” in the Company's consolidated statements of income.


75
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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  13 : RESTRUCTURING
On February 5, 2014, the Company's Board of Directors (the “Board”) endorsed a global productivity initiative designed to streamline operations and fuel long-term profitable growth. On March 26, 2014, the Company announced and began to implement the global productivity initiative, which will continue to be implemented through the end of 2015, with a focus on redesigning business processes and identifying opportunities to reduce costs, increase efficiencies and further streamline processes in supporting functions and supply chain.
The first phase of the global productivity initiative included the elimination of approximately 800 positions within the Company’s global non-retail and non-manufacturing employee population, as well as initiating centrally-led cost-savings and productivity projects. The role eliminations reflect a reduction of management layers, an increase in spans of control, the removal of duplicative roles, a regrouping of country clusters and other structural changes. The elimination of positions in connection with this phase was completed during the last three fiscal quarters of 2014.
The next phase of the global productivity initiative, announced in November 2014, included the elimination of approximately 500 positions, primarily reflecting the outsourcing of certain global business service activities within information technology, finance, human resources, customer service and customer relations functions, as well as a further reduction of the non-manufacturing employee population. The Company anticipates the elimination of these positions will be substantially completed in the U.S. within the second half of fiscal 2015 to accommodate the transition of outsourced services. Final estimates for headcount, timing and charges in certain areas of the international business are subject to completion of applicable local works council and other consultative processes.
For the year ended November 30, 2014 , the Company recognized restructuring charges, net, of $128.4 million , which was recorded in "Restructuring, net" in the Company's consolidated statements of income. Related charges of $27.6 million for the year ended November 30, 2014 , consist primarily of consulting fees for the Company's centrally-led cost-savings and productivity projects. These related charges represent costs incurred associated with ongoing operations to benefit future periods and were recorded in "Selling, general and administrative expenses" in the Company's consolidated statements of income. Cash payments for charges recognized to date were made primarily in 2014 and are expected to continue through the first half of 2016.
The table below summarizes the components of charges included in “Restructuring, net” in the Company’s consolidated statements of income:
 
Year Ended
 
November 30,
2014
 
November 24,
2013
 
(Dollars in thousands)
Restructuring, net:
 
 
 
Severance and employee-related benefits (1)
$
104,398

 
$
—

Adjustments to severance and employee-related benefits
(5,697
)
 
—

Lease and other contract termination costs
—

 
—

Other (2)
25,027

 
—

Adjustments to other
1,350

 
—

Noncash pension and postretirement curtailment losses, net (3)
3,347

 
—

Total
$
128,425

 
$
—

_____________

(1)
Severance and employee-related benefits relate to items such as severance, based on separation benefits provided by Company policy or statutory benefit plans, out-placement services and career counseling for employees affected by the global productivity initiative.

(2)
Other restructuring costs are expensed as incurred and primarily relate to consulting fees and legal expenses associated with the execution of the restructuring initiative.

(3)
Noncash pension and postretirement curtailment gains or losses resulting from the global productivity initiative are included in restructuring charges, with the associated liabilities included in "Pension liability" and "Postretirement medical benefits" in the Company's consolidated balance sheets.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company is unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, for additional actions associated with the global productivity initiative.
The following table summarizes the activities associated with restructuring liabilities for the year ended November 30, 2014 . In the table below, "Charges" represents the initial charge related to the restructuring activity. "Adjustments" includes revisions of estimates related to severance, employee-related benefits, lease and other contract termination costs, and other restructuring costs. "Payments" consists of cash payments for severance, employee-related benefits, lease and other contract termination costs, and other restructuring costs.
 
Year Ended November 30, 2014
 
Liabilities
 
 
 
Adjustments
 
 
 
Foreign Currency Fluctuation
 
Liabilities
 
November 24, 2013
 
Charges
 
 
Payments
 
 
November 30, 2014
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Severance and employee-related benefits
$
—

 
$
104,398

 
$
(5,697
)
 
$
(38,527
)
 
$
(3,211
)
 
$
56,963

Lease and other contract termination costs
—

 
—

 
—

 
—

 
—

 
—

Other
—

 
25,027

 
1,350

 
(19,977
)
 
—

 
6,400

Total
$
—

 
$
129,425

 
$
(4,347
)
 
$
(58,504
)
 
$
(3,211
)
 
$
63,363

 
 
 
 
 
 
 
 
 
 
 
 
Current portion
$
—

 
 
 
 
 
 
 
 
 
$
57,817

Long-term portion
—

 
 
 
 
 
 
 
 
 
5,546

Total
$
—

 
 
 
 
 
 
 
 
 
$
63,363

NOTE  14 : COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company is obligated under operating leases for manufacturing, finishing and distribution facilities, office space, retail stores and equipment. At November 30, 2014 , obligations for future minimum payments under operating leases were as follows:
 
 
(Dollars in thousands)
 
 
2015
 
$
148,744

 
 
 
2016
 
114,213

 
 
 
2017
 
91,913

 
 
 
2018
 
70,798

 
 
 
2019
 
56,779

 
 
 
Thereafter
 
132,052

 
 
 
Total future minimum lease payments
 
$
614,499

 
 
In general, leases relating to real estate include renewal options of up to approximately 13 years , except for the San Francisco headquarters office lease, which contains multiple renewal options of up to 57 years . Some leases contain escalation clauses relating to increases in operating costs. Rental expense for the years ended November 30, 2014 , November 24, 2013 , and November 25, 2012 , was $193.0 million , $194.5 million and $186.1 million , respectively.
Forward Foreign Exchange Contracts
The Company uses over-the-counter derivative instruments to manage its exposure to foreign currencies. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the forward foreign exchange contracts. However, the Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. Please see Note 5 for additional information.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Other Contingencies
Litigation.   In the ordinary course of business, the Company has various pending cases involving contractual matters, facility and employee-related matters, distribution matters, product liability claims, trademark infringement and other matters. The Company does not believe any of these pending legal proceedings will have a material impact on its financial condition, results of operations or cash flows.
NOTE  15 : DIVIDEND
The Company paid a cash dividend of $30.0 million on our common stock in the second quarter of 2014 , and cash dividends of $25.1 million and $20.0 million in the first half of each of 2013 and 2012 , respectively. Subsequent to the Company's year-end, the Company's Board of Directors declared a cash dividend of $50.0 million .
The Company does not have an established annual dividend policy. The Company will continue to review its ability to pay cash dividends at least annually, and dividends may be declared at the discretion of the Board depending upon, among other factors, the Company's financial condition and compliance with the terms of the Company's debt agreements.
NOTE 16 : ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive income (loss) is summarized below:  
 
Levi Strauss & Co.
 
 
 
 
 
Pension and Postretirement Benefits
 
Translation Adjustments
 
Unrealized Gain (Loss) on Marketable Securities
 
 
 
 
 
 
 
 
Net Investment Hedges
 
Foreign Currency Translation
 
 
Total
 
Noncontrolling Interest
 
Totals
 
(Dollars in thousands)
Accumulated other comprehensive income (loss) at November 27, 2011
$
(255,684
)
 
$
(28,693
)
 
$
(61,078
)
 
$
(547
)
 
$
(346,002
)
 
$
10,869

 
$
(335,133
)
Gross changes
(119,450
)
 
16,070

 
(4,755
)
 
2,549

 
(105,586
)
 
(457
)
 
(106,043
)
Tax
44,173

 
(6,230
)
 
(2
)
 
(988
)
 
36,953

 
—

 
36,953

Other comprehensive income (loss), net of tax
(75,277
)
 
9,840

 
(4,757
)
 
1,561

 
(68,633
)
 
(457
)
 
(69,090
)
Accumulated other comprehensive income (loss) at November 25, 2012
(330,961
)
 
(18,853
)
 
(65,835
)
 
1,014

 
(414,635
)
 
10,412

 
(404,223
)
Gross changes
167,192

 
(12,786
)
 
4,797

 
411

 
159,614

 
(1,046
)
 
158,568

Tax
(63,003
)
 
4,940

 
1,214

 
(159
)
 
(57,008
)
 
—

 
(57,008
)
Other comprehensive income (loss), net of tax
104,189

 
(7,846
)
 
6,011

 
252

 
102,606

 
(1,046
)
 
101,560

Accumulated other comprehensive income (loss) at November 24, 2013
(226,772
)
 
(26,699
)
 
(59,824
)
 
1,266

 
(312,029
)
 
9,366

 
(302,663
)
Gross changes
(53,323
)
 
13,404

 
(35,872
)
 
1,577

 
(74,214
)
 
(329
)
 
(74,543
)
Tax
18,641

 
(8,426
)
 
1,297

 
(609
)
 
10,903

 
—

 
10,903

Other comprehensive income (loss), net of tax
(34,682
)
 
4,978

 
(34,575
)
 
968

 
(63,311
)
 
(329
)
 
(63,640
)
Accumulated other comprehensive income (loss) at November 30, 2014
$
(261,454
)
 
$
(21,721
)
 
$
(94,399
)
 
$
2,234

 
$
(375,340
)
 
$
9,037

 
$
(366,303
)
No amounts were reclassified out of "Accumulated other comprehensive loss" into net income other than those that pertain to the Company's pension and postretirement benefit plans. Please see Note 8 for additional information. These amounts are included in "Selling, general and administrative expenses" in the consolidated statements of income.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE  17 : OTHER INCOME (EXPENSE), NET
The following table summarizes significant components of “Other income (expense), net”:
 
 
Year Ended
 
 
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
 
 
(Dollars in thousands)
 
 
Foreign exchange management (losses) gains (1)
$
(11,104
)
 
$
(539
)
 
$
(9,444
)
 
 
Foreign currency transaction (losses) gains (2)
(15,331
)
 
(21,697
)
 
8,512

 
 
Interest income
1,930

 
1,600

 
1,514

 
 
Investment Income
562

 
3,019

 
525

 
 
Other
1,886

 
4,436

 
3,695

 
 
Total other income (expense), net
$
(22,057
)
 
$
(13,181
)
 
$
4,802

 
_____________
(1)
Gains and losses on forward foreign exchange contracts primarily result from currency fluctuations relative to negotiated contract rates. Losses in 2014 were primarily due to unfavorable currency fluctuations on embedded foreign currency derivatives in certain of the Company's operating leases in Russia. Losses in 2013 were primarily due to unfavorable currency fluctuations against the U.S. Dollar relative to negotiated contract rates. Losses in 2012 primarily resulted from unfavorable currency fluctuations relative to negotiated contract rates on positions to sell the Mexican Peso.
(2)
Foreign currency transaction gains and losses reflect the impact of foreign currency fluctuation on the Company's foreign currency denominated balances. Losses in 2014 and 2013 were primarily due to the weakening of various currencies against the U.S. Dollar. Gains in 2012 were primarily due to a significant increase in Euro denominated intercompany receivables and the appreciation of the U.S. Dollar against the Japanese Yen.
NOTE 18 : INCOME TAXES
The Company's income tax expense was $49.6 million , $94.5 million and $54.9 million for the years 2014 , 2013 and 2012 , respectively. The Company's effective income tax rate was 32.2% , 29.3% , and 28.0% for 2014 , 2013 and 2012 , respectively.
The decrease in income tax expense in 2014 as compared to 2013 is primarily due to a decrease in income before income taxes. The effective tax rate increased in 2014 as compared to 2013 primarily due to a $15.2 million discrete tax benefit recognized in 2013, attributable to the finalization in July 2013 of the U.S. federal tax audit of tax years 2003 – 2008, and an unfavorable impact in the mix of foreign earnings, partially offset by a $3.7 million tax benefit that was recorded during the year ended November 30, 2014 , as a result of reversing a deferred tax liability associated with undistributed foreign earnings.
The increase in income tax expense in 2013 as compared to 2012 is primarily due to an increase in income before income taxes. The effective tax rate in 2013 reflected a $15.2 million discrete tax benefit attributable to the finalization in July 2013 of the U.S. federal tax audit of tax years 2003 – 2008, and a favorable change in the impact of foreign operations as compared to 2012. The effective tax rate in 2012 reflected a net tax benefit of $27.0 million recognized in 2012, resulting from a definitive agreement with the State of California on state tax refund claims involving tax years 1986 – 2004.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company's income tax expense differed from the amount computed by applying the U.S. federal statutory income tax rate of 35% to income before income taxes as follows:
 
Year Ended
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
(Dollars in thousands)
Income tax expense at U.S. federal statutory rate
$
53,849

35.0
 %
 
$
112,914

35.0
 %
 
$
68,558

35.0
 %
State income taxes, net of U.S. federal impact
7

—

 
3,994

1.2
 %
 
892

0.5
 %
Change in valuation allowance
—

—

 
5,169

1.6
 %
 
(1,329
)
(0.7
)%
Impact of foreign operations
(5,296
)
(3.4
)%
 
(17,160
)
(5.3
)%
 
7,313

3.7
 %
Reassessment of tax liabilities
(3,466
)
(2.3
)%
 
(15,215
)
(4.7
)%
 
(29,500
)
(15.1
)%
Write-off of deferred tax assets
4,899

3.2
 %
 
4,289

1.3
 %
 
9,061

4.6
 %
Other, including non-deductible expenses
(448
)
(0.3
)%
 
486

0.2
 %
 
(73
)
—

Total
$
49,545

32.2
 %
 
$
94,477

29.3
 %
 
$
54,922

28.0
 %
Impact of foreign operations. The reduction of tax benefit in 2014 as compared to 2013 is primarily due to an unfavorable change in the mix of earnings in jurisdictions with lower effective tax rate as compared to 2013.
Reassessment of tax liabilities. In 2014, the $3.5 million tax benefit primarily relates to the lapse of statutes of limitations in various jurisdictions. In 2013, the $15.2 million tax benefit was primarily attributable to the finalization of the U.S. federal tax audit for tax years 2003 – 2008. In 2012, the $29.5 million tax benefit was primarily attributable to the net tax benefit recognized in 2012 resulting from a definitive agreement with the State of California on the state tax refund claims involving tax years 1986 – 2004.
The U.S. and foreign components of income before income taxes were as follows:
 
 
Year Ended
 
 
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
 
 
(Dollars in thousands)
 
 
Domestic
$
31,733

 
$
86,167

 
$
82,764

 
 
Foreign
122,121

 
236,446

 
113,117

 
 
Total Income before Income Taxes
$
153,854

 
$
322,613

 
$
195,881

 


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Income tax expense (benefit) consisted of the following:
 
 
Year Ended
 
 
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
 
 
(Dollars in thousands)
 
 
U.S. Federal
 
 
 
 
 
 
 
Current
$
15,470

 
$
11,294

 
$
15,334

 
 
Deferred
(1,983
)
 
20,597

 
29,537

 
 
 
$
13,487

 
$
31,891

 
$
44,871

 
 
U.S. State
 
 
 
 
 
 
 
Current
$
4,096

 
$
3,732

 
$
(34,603
)
 
 
Deferred
(4,089
)
 
3,607

 
(2,956
)
 
 
 
$
7

 
$
7,339

 
$
(37,559
)
 
 
Foreign
 
 
 
 
 
 
 
Current
$
58,156

 
$
41,931

 
$
54,338

 
 
Deferred
(22,105
)
 
13,316

 
(6,728
)
 
 
 
$
36,051

 
$
55,247

 
$
47,610

 
 
Consolidated
 
 
 
 
 
 
 
Current
$
77,722

 
$
56,957

 
$
35,069

 
 
Deferred
(28,177
)
 
37,520

 
19,853

 
 
Total Income Tax Expense
$
49,545

 
$
94,477

 
$
54,922

 



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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Deferred Tax Assets and Liabilities
The Company's deferred tax assets and deferred tax liabilities were as follows:
 
 
November 30, 2014
 
November 24, 2013
 
 
 
(Dollars in thousands)
 
 
Deferred tax assets
 
 
 
 
 
Foreign tax credit carryforwards
$
120,793

 
$
176,222

 
 
State net operating loss carryforwards
13,014

 
15,587

 
 
Foreign net operating loss carryforwards
87,062

 
95,542

 
 
Employee compensation and benefit plans
272,970

 
240,198

 
 
Advance royalties
99,649

 
55,581

 
 
Restructuring and related charges
49,654

 
21,474

 
 
Sales returns and allowances
33,078

 
31,706

 
 
Inventory
14,533

 
16,469

 
 
Property, plant and equipment
14,966

 
21,426

 
 
Unrealized gains or losses on investments
—

 
7,971

 
 
Other
45,155

 
51,645

 
 
Total gross deferred tax assets
750,874

 
733,821

 
 
Less: Valuation allowance
(89,814
)
 
(96,026
)
 
 
Deferred tax assets, net of valuation allowance
661,060

 
637,795

 
 
Deferred tax liabilities
 
 
 
 
 
Unrealized gains or losses on investments
(196
)
 
—

 
 
Unremitted earnings of certain foreign subsidiaries
—

 
(3,690
)
 
 
Total deferred tax liabilities
(196
)
 
(3,690
)
 
 
Total net deferred tax assets
$
660,864

 
$
634,105

 
 
 
 
 
 
 
 
Current
 
 
 
 
 
Net deferred tax assets
$
186,791

 
$
196,581

 
 
Valuation allowance
(12,475
)
 
(9,503
)
 
 
Total current net deferred tax assets
$
174,316

 
$
187,078

 
 
 
 
 
 
 
 
Long-term
 
 
 
 
 
Net deferred tax assets
$
563,887

 
$
533,550

 
 
Valuation allowance
(77,339
)
 
(86,523
)
 
 
Total long-term net deferred tax assets
$
486,548

 
$
447,027

 
Foreign tax credit carryforwards . The asset decrease from prior year is primarily due to the utilization of foreign tax credits in the 2014 U.S. federal income tax return, which resulted from the inclusion of $182.9 million advance royalty payments from the Company’s operations in Europe relating to fiscal year 2016 and thereafter. The foreign tax credit carryforwards at November 30, 2014 , are subject to expiration through 2024 if not utilized. There are no foreign tax credits expiring in 2015.
Foreign net operating loss carryforwards. As of November 30, 2014 , the Company had a deferred tax asset of $87.1 million for foreign net operating loss carryforwards of $290.4 million . Approximately $174.5 million of these operating losses are subject to expiration through 2023 if not utilized, including $4.8 million in 2015. The remaining $115.9 million are available as indefinite carryforwards under applicable tax law.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

Valuation Allowance. The following table details the changes in valuation allowance during the year ended November 30, 2014 :
 
 
Valuation Allowance at November 24, 2013
 
Changes in Related Gross Deferred Tax Asset
 
Charge
 
Valuation Allowance at November 30, 2014
 
(Dollars in thousands)
U.S. state net operating loss carryforwards
 
$
3,824

 
$
(324
)
 
$
—

 
$
3,500

Foreign net operating loss carryforwards and other foreign deferred tax assets
 
92,202

 
(5,888
)
 
—

 
86,314

 
 
$
96,026

 
$
(6,212
)
 
$
—

 
$
89,814

At November 30, 2014 , the Company's valuation allowance primarily related to its gross deferred tax assets for state and foreign net operating loss carryforwards, which reduced such assets to the amount that will more likely than not be realized.
Unremitted earnings of certain foreign subsidiaries. For the year ended November 30, 2014 , management asserted indefinite reinvestment on $100.0 million of undistributed foreign earnings, as management determined that this amount is required to meet ongoing working capital needs in certain foreign subsidiaries; no U.S. income taxes have been provided for such earnings. If the Company were to repatriate such foreign earnings to the United States, the deferred tax liability associated with such earnings would have been approximately $27.3 million . The Company also recorded a $3.7 million tax benefit resulting from a reversal of the previously recorded deferred tax liability on undistributed foreign earnings due to the management assertion on undistributed foreign earnings.
Uncertain Income Tax Positions
As of November 30, 2014 , the Company’s total gross amount of unrecognized tax benefits was $41.6 million , of which $21.9 million could impact the effective tax rate, if recognized, as compared to November 24, 2013 , when the Company’s total gross amount of unrecognized tax benefits was $37.8 million , of which $19.2 million could have impacted the effective tax rate, if recognized.
The following table reflects the changes to the Company's unrecognized tax benefits for the year ended November 30, 2014 , and November 24, 2013 :
 
 
 
November 30,
2014
 
November 24,
2013
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
Unrecognized tax benefits beginning balance
 
$
37,836

 
$
63,626

 
 
Increases related to current year tax positions
 
3,863

 
2,839

 
 
Increases related to tax positions from prior years
 
4,858

 
1,650

 
 
Decreases related to tax positions from prior years
 
—

 
—

 
 
Settlement with tax authorities
 
—

 
(23,380
)
 
 
Lapses of statutes of limitation
 
(4,715
)
 
(7,026
)
 
 
Other, including foreign currency translation
 
(271
)
 
127

 
 
Unrecognized tax benefits ending balance
 
$
41,571

 
$
37,836

 
The Company believes that it is reasonably possible that unrecognized tax benefits could decrease within the next twelve months by as much as $1.9 million due to the lapse of statutes of limitations in various jurisdictions.
As of November 30, 2014 , and November 24, 2013 , accrued interest and penalties primarily relating to non-U.S. jurisdictions were $9.6 million and $11.8 million , respectively.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

The Company's income tax returns are subject to examination in the U.S. federal and state jurisdictions and numerous foreign jurisdictions. The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the major jurisdictions in which the Company operates:
 
Jurisdiction
Open Tax Years
 
 
U.S. federal
2009 – 2014
 
 
California
2006 – 2014
 
 
Belgium
2011 – 2014
 
 
United Kingdom
2012 – 2014
 
 
Spain
2010 – 2014
 
 
Mexico
2009 – 2014
 
 
Canada
2004 – 2014
 
 
China
2010 – 2014
 
 
Hong Kong
2010 – 2014
 
 
India
2008 – 2014
 
 
Italy
2009 – 2014
 
 
France
2011 – 2014
 
 
Turkey
2009 – 2014
 
NOTE  19 : RELATED PARTIES
Robert D. Haas, Chairman Emeritus of the Company, Charles V. Bergh, President and Chief Executive Officer, Peter E. Haas Jr., a director of the Company, and Kelly McGinnis, Senior Vice President of Corporate Affairs and Chief Communications Officer, are board members of the Levi Strauss Foundation, which is not a consolidated entity of the Company. Seth R. Jaffe, Senior Vice President and General Counsel, is Vice President of the Levi Strauss Foundation. During 2014 , 2013 , and 2012 , the Company donated $6.3 million , $4.2 million and $2.8 million , respectively, to the Levi Strauss Foundation.
Kelly McGinnis and Lisa Collier, Executive Vice President and President of Global Dockers ® Brand, are board members of the Red Tab Foundation, which is not a consolidated entity of the Company. Peter E. Haas Jr. is President of the Red Tab Foundation. During 2014 , 2013 , and 2012 the Company donated $0.6 million , $0.1 million , and $0.1 million , respectively, to the Red Tab Foundation.



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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE 20 : BUSINESS SEGMENT INFORMATION
The Company manages its business according to three regional segments: the Americas, Europe and Asia. The Company considers its chief executive officer to be the Company’s chief operating decision maker. The Company’s chief operating decision maker manages business operations, evaluates performance and allocates resources based on the regional segments’ net revenues and operating income. The Company reports net trade receivables and inventories by segment as that information is used by the chief operating decision maker in assessing segment performance. The Company does not report its other assets by segment as that information is not used by the chief operating decision maker in assessing segment performance.
Effective as of the beginning of 2014, the Company's reporting segments were revised to combine its Middle East and North Africa markets, previously managed by the Company's Europe region, with the Company's Asia region. Financial information attributable to these markets are not significant to any of the Company's regional segments individually in any of the periods presented herein, and accordingly, business segment information for the prior periods have not been revised.
Business segment information for the Company is as follows:
 
 
Year Ended
 
 
 
November 30,
2014
 
November 24,
2013
 
November 25,
2012
 
 
 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
 
 
Americas
$
2,862,867

 
$
2,851,037

 
$
2,749,327

 
 
Europe
1,143,313

 
1,103,487

 
1,103,212

 
 
Asia
747,812

 
727,167

 
757,654

 
 
Total net revenues
$
4,753,992

 
$
4,681,691

 
$
4,610,193

 
 
Operating income:
 
 
 
 
 
 
 
Americas
$
531,064

 
$
510,496

 
$
431,552

 
 
Europe
181,036

 
167,605

 
178,313

 
 
Asia
108,511

 
123,723

 
66,839

 
 
Regional operating income
820,611

 
801,824

 
676,704

 
 
Corporate:
 
 
 
 
 
 
 
Restructuring, net
128,425

 
—

 
—

 
 
Restructuring-related charges
27,621

 
—

 
—

 
 
Lump-sum pension settlement loss
30,666

 
—

 
—

 
 
Other corporate staff costs and expenses (1)
320,048

 
336,317

 
342,725

 
 
Corporate expenses
506,760

 
336,317

 
342,725

 
 
Total operating income
313,851

 
465,507

 
333,979

 
 
Interest expense
(117,597
)
 
(129,024
)
 
(134,694
)
 
 
Loss on early extinguishment of debt
(20,343
)
 
(689
)
 
(8,206
)
 
 
Other income (expense), net
(22,057
)
 
(13,181
)
 
4,802

 
 
Income before income taxes
$
153,854

 
$
322,613

 
$
195,881

 
_____________
(1)
Included in other corporate staff costs and expenses for the year ended November 25, 2012, is an $18.8 million impairment charge related to the Company's decision in the third quarter of 2012 to outsource distribution in Japan to a third party and close its owned distribution center in that country.


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

 
 
Year Ended
 
 
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
 
 
(Dollars in thousands)
 
 
Depreciation and amortization expense:
 
 
 
 
 
 
 
Americas
$
29,508

 
$
37,520

 
$
43,368

 
 
Europe
20,564

 
20,597

 
21,891

 
 
Asia
8,501

 
9,422

 
12,887

 
 
Corporate
50,901

 
48,181

 
44,462

 
 
Total depreciation and amortization expense
$
109,474

 
$
115,720

 
$
122,608

 

 
 
November 30, 2014
 
 
 
Americas
 
Europe
 
Asia
 
Unallocated
 
Consolidated Total
 
 
 
(Dollars in thousands)
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Trade receivables, net
$
322,501

 
$
93,604

 
$
48,468

 
$
17,408

 
$
481,981

 
 
Inventories
289,838

 
143,990

 
101,477

 
65,611

 
600,916

 
 
All other assets
—

 
—

 
—

 
1,841,176

 
1,841,176

 
 
Total assets
 
 
 
 
 
 
 
 
$
2,924,073

 
 
 
November 24, 2013
 
 
 
Americas
 
Europe
 
Asia
 
Unallocated
 
Consolidated Total
 
 
 
(Dollars in thousands)
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Trade receivables, net
$
288,360

 
$
101,010

 
$
40,520

 
$
16,781

 
$
446,671

 
 
Inventories
338,849

 
117,442

 
113,212

 
34,364

 
603,867

 
 
All other assets
—

 
—

 
—

 
2,076,880

 
2,076,880

 
 
Total assets
 
 
 
 
 
 
 
 
$
3,127,418

 

Geographic information for the Company was as follows:
 
 
Year Ended
 
 
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
 
 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
 
 
United States
$
2,490,994

 
$
2,497,756

 
$
2,412,647

 
 
Foreign countries
2,262,998

 
2,183,935

 
2,197,546

 
 
Total net revenues
$
4,753,992

 
$
4,681,691

 
$
4,610,193

 


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

 
Deferred tax assets:
 
 
 
 
 
 
 
United States
$
580,122

 
$
567,984

 
$
647,767

 
 
Foreign countries
80,742

 
66,121

 
81,373

 
 
Total deferred tax assets
$
660,864

 
$
634,105

 
$
729,140

 
 
Long-lived assets:
 
 
 
 
 
 
 
United States
$
322,329

 
$
346,533

 
$
353,567

 
 
Foreign countries
84,507

 
110,387

 
123,977

 
 
Total long-lived assets
$
406,836

 
$
456,920

 
$
477,544

 


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LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE YEARS ENDED NOVEMBER 30, 2014, NOVEMBER 24, 2013, AND NOVEMBER 25, 2012

NOTE 21 : QUARTERLY FINANCIAL DATA (UNAUDITED)
Set forth below are the consolidated statements of operations for the first, second, third and fourth quarters of 2014 and 2013 .
Year Ended November 30, 2014
First
Quarter
 
Second Quarter
 
Third
Quarter
 
Fourth Quarter (1)
 
(Dollars in thousands)
Net revenues
$
1,129,990

 
$
1,081,847

 
$
1,154,129

 
$
1,388,026

Cost of goods sold
553,637

 
551,542

 
591,926

 
708,447

Gross profit
576,353

 
530,305

 
562,203

 
679,579

Selling, general and administrative expenses
424,762

 
446,072

 
454,712

 
580,618

Restructuring, net
57,935

 
19,105

 
2,371

 
49,014

Operating income
93,656

 
65,128

 
105,120

 
49,947

Interest expense
(31,829
)
 
(31,310
)
 
(27,179
)
 
(27,279
)
Loss on early extinguishment of debt
—

 
(11,151
)
 
—

 
(9,192
)
Other income (expense), net
4,183

 
(6,122
)
 
(5,605
)
 
(14,513
)
Income (loss) before income taxes
66,010

 
16,545

 
72,336

 
(1,037
)
Income tax expense
16,387

 
5,556

 
22,536

 
5,066

Net income (loss)
49,623

 
10,989

 
49,800

 
(6,103
)
Net loss attributable to noncontrolling interest
348

 
469

 
820

 
132

Net income (loss) attributable to Levi Strauss & Co.
$
49,971

 
$
11,458

 
$
50,620

 
$
(5,971
)
_____________
(1)
Includes certain out-of-period adjustments, which decreased income before income taxes and net income by approximately $4.0 million and $6.0 million , respectively. For additional information see Note 1 .
Year Ended November 24, 2013
First
Quarter
 
Second Quarter
 
Third
Quarter
 
Fourth Quarter
 
(Dollars in thousands)
Net revenues
$
1,146,678

 
$
1,098,898

 
$
1,141,284

 
$
1,294,831

Cost of goods sold
554,800

 
550,187

 
568,448

 
657,784

Gross profit
591,878

 
548,711

 
572,836

 
637,047

Selling, general and administrative expenses
410,423

 
449,074

 
454,750

 
570,718

Operating income
181,455

 
99,637

 
118,086

 
66,329

Interest expense
(32,157
)
 
(32,883
)
 
(30,903
)
 
(33,081
)
Loss on early extinguishment of debt
(114
)
 
(575
)
 
—

 
—

Other income (expense), net
6,066

 
(830
)
 
(10,661
)
 
(7,756
)
Income before income taxes
155,250

 
65,349

 
76,522

 
25,492

Income tax expense
48,375

 
17,140

 
20,077

 
8,885

Net income
106,875

 
48,209

 
56,445

 
16,607

Net loss (income) attributable to noncontrolling interest
145

 
(60
)
 
630

 
342

Net income attributable to Levi Strauss & Co.
$
107,020

 
$
48,149

 
$
57,075

 
$
16,949



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Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND   FINANCIAL DISCLOSURE
None.  
Item 9A.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the "Exchange Act") that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
We have evaluated, under the supervision and with the participation of management, including our chief executive officer and our chief financial officer, the effectiveness of the design and operation of our disclosure controls and procedures as of  November 30, 2014 . Based on that evaluation, our chief executive officer and our chief financial officer concluded that as of November 30, 2014 , our disclosure controls and procedures were effective at the reasonable assurance level.
Management's annual report on internal control over financial reporting
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of November 30, 2014 . In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (1992) .
Changes in internal controls
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. There were no changes to our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
OTHER INFORMATION
None.  


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PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following provides information about our directors and executive officers as of February 9, 2015 .
Name
 
Age
 
Position
Stephen C. Neal (1)
 
65
 
Chairman of the Board of Directors
Charles V. Bergh
 
57
 
Director, President and Chief Executive Officer
Troy Alstead (2)(4)
 
51
 
Director
Jill Beraud (3)(4)
 
54
 
Director
Vanessa J. Castagna (2)(4)(5)
 
65
 
Director
Robert A. Eckert (1)(2)
 
60
 
Director
Spencer C. Fleischer (3)(4)
 
61
 
Director
Mimi L. Haas (1)(3)
 
68
 
Director
Peter E. Haas Jr. (1)(2)
 
67
 
Director
Jenny Ming (4)
 
59
 
Director
Patricia Salas Pineda (1)(2)
 
63
 
Director
Roy Bagattini
 
51
 
Executive Vice President and President, Asia, Middle East and Africa
Lisa Collier
 
49
 
Executive Vice President and President, Global Dockers ®  Brand
James Curleigh
 
49
 
Executive Vice President and President, Global Levi's ®  Brand
Seth M. Ellison
 
56
 
Executive Vice President and President, Europe
Seth R. Jaffe
 
57
 
Senior Vice President and General Counsel
David Love
 
52
 
Senior Vice President and Chief Supply Chain Officer
Kelly McGinnis
 
46
 
Senior Vice President, Corporate Affairs and Chief Communications Officer
Craig Nomura
 
51
 
Executive Vice President and President, Global Retail
Anne Rohosy
 
56
 
Executive Vice President and President, Americas
Marc Rosen
 
46
 
Executive Vice President and President, Global eCommerce
Harmit Singh
 
51
 
Executive Vice President and Chief Financial Officer
_____________
(1)
Member, Nominating, Governance and Corporate Citizenship Committee.
(2)
Member, Human Resources Committee.
(3)
Member, Finance Committee.
(4)
Member, Audit Committee.
(5)
As announced on December 12, 2014, Ms. Castagna has decided not to stand for re-election when her term expires at the 2015 annual meeting of stockholders. Ms. Castagna will continue to serve as a director until the 2015 annual meeting of stockholders.
Peter E. Haas Jr. is a descendant of the family of our founder, Levi Strauss.
Directors
Stephen C. Neal , a director since 2007, became our Chairman of the Board in September 2011. He is also the Chairman of the law firm Cooley LLP, where he was Chief Executive Officer from 2001 until January 1, 2008. In addition to his extensive experience as a trial lawyer on a broad range of corporate issues, Mr. Neal has represented and advised numerous boards of directors, special committees of boards and individual directors on corporate governance and other legal matters. Prior to joining Cooley in 1995, Mr. Neal was a partner of the law firm Kirkland & Ellis LLP. Mr. Neal brings to the board deep knowledge and broad experience in corporate governance as well as his perspectives drawn from advising many companies throughout his career.



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Charles V. Bergh, a director since he joined the Company in September 2011, is our President and Chief Executive Officer. Prior to joining the Company, Mr. Bergh was Group President of Global Male Grooming, for The Procter & Gamble Company (“P&G”), a manufacturer and distributor of consumer products. He held a progression of leadership roles during his 28-year career at P&G. Mr. Bergh previously served on the Board of Directors for VF Corporation and on the Singapore Economic Development Board, and was a member of the US-AESAN Business Council, Singapore. Mr. Bergh's position as our Chief Executive Officer and his past experience as a leader of large, global consumer brands make him well-suited to be a member of our board of directors.
Troy Alstead , a director since 2012, is Chief Operating Officer for Starbucks Corporation, a role he assumed as of February 3, 2014, and from which on January 9, 2015, it was announced that on March 1, 2015, he begins a 12-month sabbatical under the company's established sabbatical program available to long-term employees. Mr. Alstead was most recently Group President and Chief Financial Officer from September 2013 until his promotion to his current role. From November 2008 to September 2013, Mr. Alstead was Chief Financial Officer and Chief Administrative Officer of Starbucks. He joined Starbucks in 1992, previously serving as Chief Operating Officer of Starbucks Greater China from April 2008 to October 2008, Senior Vice President of Global Finance and Business Operations from August 2007 to April 2008, and Senior Vice President of Corporate Finance from September 2004 to August 2007. Mr. Alstead served in a number of other senior positions with Starbucks prior to 2004. Mr. Alstead brings to the board his broad financial and business perspective developed over many years in the global consumer goods industry.
Jill Beraud , a director since 2013, is Executive Vice President for Tiffany & Co., a jeweler and specialty retailer, with responsibility for its Global Retail Operations and oversight of strategic store development and real estate. Before joining Tiffany & Co. in October 2014, Ms. Beraud was with Living Proof, Inc., a privately-held company that uses advanced medical and materials technologies to create hair care and skin care products for women, where she was Chief Executive Officer since December 2011. Prior to that, Ms. Beraud served as President of Starbucks/Lipton Joint Ventures and Chief Marketing Officer of PepsiCo Americas Beverages from July 2009 to June 2011, and PepsiCo’s Global Chief Marketing Officer from December 2008 to July 2009. Before PepsiCo, Ms. Beraud spent 13 years at Limited Brands in various roles, including Chief Marketing Officer of Victoria’s Secret and Executive Vice President of Marketing for its broader portfolio of specialty brands, including Bath & Body Works, C.O. Bigelow, Express, Henri Bendel, and Limited Stores. Ms. Beraud was selected to join the board due to her extensive marketing, social media and consumer branding experience, as well as her extensive managerial and operational knowledge in the apparel and other consumer goods industries. Ms. Beraud is currently a director of New York & Company, Inc.
Vanessa J. Castagna , a director since 2007, led Mervyn's LLC department stores as its Executive Chairwoman of the Board from 2005 until early 2007. Prior to Mervyn's LLC, Ms. Castagna served as Chairman and Chief Executive Officer of JC Penney Stores, Catalog and Internet from 2002 through 2004. She joined JC Penney in 1999 as Chief Operating Officer, and was both President and Chief Operating Officer of JC Penney Stores, Catalog and Internet in 2001. Ms. Castagna was selected to serve on the board due to her extensive retail leadership experience. She brings to the board a valuable perspective on the retail and wholesale business. In March 2013, Ms. Castagna was appointed to the Board of Trustees of Purdue University. Ms. Castagna is currently a director of Carter's, Inc. and was a director of SpeedFC until 2012.
Robert A. Eckert , a director since 2010, is Operating Partner of Friedman Fleischer & Lowe, LLC (“FFL”), a private equity firm, since September 2014. Mr. Eckert is also Chairman Emeritus of Mattel, Inc., a role he has held since January 2013. He was Mattel’s Chairman and Chief Executive Officer from May 2000 until December 2011, and he continued to serve as its Chairman until December 2012. He previously worked for Kraft Foods, Inc. for 23 years, and served as President and Chief Executive Officer from October 1997 until May 2000. From 1995 to 1997, Mr. Eckert was Group Vice President of Kraft Foods, and from 1993 to 1995, Mr. Eckert was President of the Oscar Mayer foods division of Kraft Foods. Mr. Eckert was selected to join the board due to his experience as a senior executive engaged with the dynamics of building global consumer brands through high performance expectations, integrity, and decisiveness in driving businesses to successful results. Mr. Eckert is currently a director of McDonald's Corporation, Amgen, Inc. and Eyemart Express Holdings, LLC. He was a director of Smart & Final Stores, Inc. from May 2013 to July 2014.
Spencer C. Fleischer, a director since 2013, is Co-Founder and President of Friedman Fleischer & Lowe, LLC (“FFL”), a private equity firm. Before co-founding FFL in 1997, Mr. Fleischer spent 19 years at Morgan Stanley as an investment banker and senior leader. During his time there, he led business units across the globe, including serving as Head of Investment Banking in Asia, Head of Corporate Finance for Europe and Head of Corporate Finance in San Francisco. Mr. Fleischer was selected to join the board due to his broad financial and international business perspective developed over many years in the investment banking industry. Mr. Fleischer currently serves as a director of AmericanWest Bank and Strategic Investment Group. He was a director of Wilton Re Holdings Limited from June 2004 to June 2014.


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Mimi L. Haas, a director since April 2014, is President of the Mimi and Peter Haas Fund, a position she has held since August 1981.  Mrs. Haas is Vice Chair of the Board of Trustees and Chair of the Painting and Sculpture Acquisitions Committee of the New York Museum of Modern Art, a director of the Lincoln Center for the Performing Arts, Vice Chair of the San Francisco Museum of Modern Art, a member of the National Advisory Board of the Haas Center for Public Service at Stanford University, a member of the Council on Foreign Relations, and a member of the Global Philanthropists Circle.  In addition, Mrs. Haas served on the Company’s Board from 2004 to 2006. Mrs. Haas brings to the Board her long and deep knowledge of the Company and her extensive experience in corporate citizenship endeavors.
Peter E. Haas Jr. , a director since 1985, is a director or trustee of each of the Levi Strauss Foundation, Red Tab Foundation, Walter and Elise Haas Fund and the Novato Youth Center Honorary Board, a Trustee Emeritus of the San Francisco Foundation, and he is Vice President of the Peter E. Haas Jr. Fund. Mr. Haas was one of our managers from 1972 to 1989. He was Director of Product Integrity of The Jeans Company, one of our former operating units, from 1984 to 1989. He served as Director of Materials Management for Levi Strauss USA in 1982 and Vice President and General Manager in the Menswear Division in 1980. Mr. Haas' background in numerous operational roles specific to the Company and his familial connection to the Company's founder enable him to engage in board deliberations with valuable insight and experience.
Jenny Ming, a director since September 2014, is President and Chief Executive Officer of Charlotte Russe Inc., a fast-fashion specialty retailer of apparel and accessories catering to young women, a position she has held since October 2009. From March 1999 to October 2006, Ms. Ming served as President of Old Navy, where she oversaw all aspects of Old Navy and its 900 retail clothing stores in the U.S. and Canada. Ms. Ming joined The Gap, Inc. in 1986, serving in various executive capacities in its San Francisco headquarters, and in 1994, she was a member of the executive team who launched Old Navy. Ms. Ming was selected to join the Board due to her extensive operational and retail leadership experience in the apparel industry. Ms. Ming serves on the Board of Barneys New York, on the Board of Trustees for the Museum of Chinese in America (MOCA) in New York and also sits on the Board of the Merage Foundation for the American Dream. She is also a member of the Committee of 100, a non-profit organization of accomplished Chinese Americans from business leaders to the arts.
Patricia Salas Pineda , a director since 1991, is currently Group Vice President of Hispanic Business Strategy for Toyota Motor North America, Inc., an affiliate of one of the world's largest automotive firms, a position she has held since May 2013. Previously, Ms. Pineda served Toyota Motor North America as Group Vice President, National Philanthropy and the Toyota USA Foundation from 2004 until her appointment to her current role. During this period, Ms. Pineda also served as General Counsel and Group Vice President of Administration from 2006 to 2008 and as Group Vice President of Corporate Communications and General Counsel from 2004 to 2006. Prior to that, Ms. Pineda was Vice President of Legal, Human Resources and Government Relations, and Corporate Secretary of New United Motor Manufacturing, Inc. with which she had been associated since 1984. Ms. Pineda was selected as a member of the board to bring her expertise in government relations and regulatory oversight, corporate governance and human resources matters. Her long tenure on the board also provides valuable historical perspective. She is currently a member of the corporate advisory board of the National Council of La Raza and Chairwoman and member of the Board of Directors of the Latino Corporate Directors Association.
Executive Officers
Charles V. Bergh's biography is set forth under the heading "Directors" above.
Roy Bagattini is currently serving as our Executive Vice President and President of our Asia, Middle East and Africa ("Asia") region. Mr. Bagattini joined the Company in June 2013 as Executive Vice President and President of Commercial Operations for the Asia Pacific (now Asia) region before his role was expanded to include the Middle East and Africa at the end of November 2013. Mr. Bagattini was Senior Vice President for Asia and Africa at Carlsberg Group, a leading brewing and beverage company, from 2009 to 2013. Prior to that, Mr. Bagattini served in a variety of executive and leadership roles in Russia, China, India and the United States for SABMiller plc, one of the world’s largest brewing companies, from 1991 to 2009.
Lisa Collier is currently serving as our Executive Vice President and President of Global Dockers ® Brand, a position she has held since July 2013.  From October 2013 to January 2015, Ms. Collier also served as Chief Transformation Officer. From July 2012 until July 2013, Ms. Collier served as Senior Vice President of Product Development and Innovation across all of our brands.  Before that, Ms. Collier held various leadership roles in the Company, at times serving in dual roles, including Senior Vice President of Dockers ® Merchandising, Licensing & Supply Chain from April 2010 to November 2012, Managing Director and General Manager of Levi Strauss Australia and New Zealand from December 2007 to April 2011, and Vice President of U.S. Retail from May 2006 to November 2007.  Ms. Collier joined the Company in October 2003 as Vice President of Product Management for the U.S. Levi’s ® Brand, a position she held until May 2006.  Ms. Collier has more than 25 years of professional experience in the


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apparel industry.  Before joining the Company, she served as Vice President of Product Development, Planning and Sourcing at Tarrant Apparel Group and held various positions at The Limited in merchandising and buying.
James Curleigh is currently serving as our Executive Vice President and President of the Global Levi's ® Brand, a position he has held since July 2012. Prior to joining the Company, Mr. Curleigh served as the President and Chief Executive Officer of Keen Footwear, Inc., a footwear and accessory company, from March 2008 to May 2012. Before Keen, he was President and Chief Executive Officer of Salomon Sports North America, an innovative performance sports company, from 2001 to 2007. He also established and led TaylorMade adidas golf division in Europe and held various leadership positions in the London office of M&M Mars, a global consumer goods company.
Seth M. Ellison is currently serving as our Executive Vice President and President of our Europe region. Mr. Ellison joined the Company in September 2012 as Executive Vice President and President of the Global Dockers ® Brand before assuming his current role in July 2013. Prior to joining the Company, Mr. Ellison was Executive Vice President and Chief Commercial Officer at Alternative Apparel from February 2009 to July 2012. Before Alternative Apparel, Mr. Ellison was President of the Swimwear Group at Perry Ellis from 2005 to 2009, and held various leadership positions at NIKE, Inc. from 1996 to 2005, including Vice President and General Manager of Nike EMEA Apparel and President of Hurley.
Seth Jaffe is currently serving as our Senior Vice President and General Counsel, a position he has held since September 2011. Prior to joining the Company, Mr. Jaffe served as Senior Vice President, General Counsel and Secretary of Williams-Sonoma, Inc. from January 2002 to August 2011. From 2000 to 2001, Mr. Jaffe served as Chief Administrative Officer and General Counsel of CareThere, Inc., a healthcare technology company. Mr. Jaffe also held various legal roles at the Company from 1984 to 1999 with increasing responsibilities in the United States and Europe during that time.
David Love is currently serving as our Senior Vice President and Chief Supply Chain Officer, a position he has held since August 2004. Since January 2015, Mr. Love has also served as Chief Transformation Officer, leading the Company’s centrally-led cost-savings and global productivity initiative. Mr. Love is responsible for development, sourcing and delivery of our products worldwide. Prior to assuming this role, Mr. Love was Vice President of our U.S. Supply Chain organization from 2001 to 2004 and Senior Director of Product Services for the U.S. Levi's ® brand from 1999 to 2001. From 1981, when he joined the Company, to 2001, Mr. Love held various managerial positions.
Kelly McGinnis is currently serving as our Senior Vice President of Corporate Affairs and Chief Communications Officer, a position she has held since August 2013.  Prior to joining the Company, Ms. McGinnis served as Vice President of Global Communications at Dell Inc. from March 2010 to 2013. Before Dell, from March 2008 to 2010, she was President of Axicom U.S., a global technology public relations company. From 2001 to 2008, Ms. McGinnis was a senior partner at Fleishman-Hillard, Inc. and served as general manager of the firm’s San Francisco office.
Craig Nomura joined the Company as our Executive Vice President and President of Global Retail in February 2014.  Mr. Nomura served as Senior Vice President of Global Development for Williams-Sonoma, Inc. from May 2011 until he joined the Company.  From January 2005 to April 2011, Mr. Nomura was Representative Director and Managing Director for The Gap, Inc. based in Japan.  Mr. Nomura has more than 20 years of professional experience in the apparel industry working at companies that include The Gap, Inc., The Gymboree Corporation, Guess? Inc. and Foot Locker, Inc.
Anne Rohosy is currently serving as our Executive Vice President and President of the Americas region, a position she has held since July 2013. From February 2012 until her appointment to her current role, Ms. Rohosy served as President of Commercial Operations for the Americas and Europe regions while continuing her role as Executive Vice President and President of the Global Dockers ® Brand, a position she held from May 2011 until September 2012. From October 2009, when she joined the Company, until May 2011, she served as Senior Vice President, Levi's ® North America Commercial Operations, and then served as Senior Vice President, Levi's ® Wholesale, Americas. Ms. Rohosy's professional experience in the apparel industry spans more than 30 years with such global brands as Swatch, Liz Claiborne and NIKE, Inc., where she held various leadership roles from 1990 to 2005 and led the company's commercial strategy development and apparel sales in the United States and Europe.


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Marc Rosen joined the Company as our Executive Vice President and President of Global eCommerce in April 2014. He is responsible for leading the Company’s global eCommerce business to drive new growth, consumer loyalty and sustainable profitability. Mr. Rosen brings more than 20 years of retail and eCommerce leadership to the role, most recently as Senior Vice President of Global eCommerce at Wal-Mart Stores, Inc., a role he held from January 2011 to April 2014. He was responsible for designing, building, operating and expanding Wal-Mart’s eCommerce platforms globally.  From January 2006 to December 2010, Mr. Rosen was Senior Vice President of Information Systems, with responsibility for Wal-Mart’s global merchandising, supply chain and store systems. He also held senior leadership positions for Wal-Mart’s international business unit and Ernst & Young LLP.
Harmit Singh is currently serving as our Executive Vice President and Chief Financial Officer, a position he has held since January 2013. Previously, Mr. Singh, was Executive Vice President and Chief Financial Officer of Hyatt Hotels Corporation from August 2008 to December 2012. Prior to that, he spent 14 years at Yum! Brands, Inc. in a variety of roles including Senior Vice President and Chief Financial Officer of Yum Restaurants International from 2005 to 2008. Before joining Yum!, Mr. Singh worked in various financial capacities for American Express India & Area Countries, a worldwide travel, financial and network services company. Mr. Singh served on the board of directors and was also the Audit Committee Chair of Avendra, LLC through August 2012. Mr. Singh is a Chartered Accountant from India.
Our Board of Directors
Our board of directors currently has eleven members. Our board is divided into three classes with directors elected for overlapping three-year terms. The term for directors in Class I (Ms. Beraud, Mr. Fleischer and Mr. Neal) will end at our annual stockholders' meeting in 2017. The term for directors in Class II (Ms. Castagna, Mrs. Haas, Mr. P. E. Haas Jr. and Ms. Ming) will end at our annual stockholders' meeting in 2015. As previously announced, Ms. Castagna has decided not to stand for re-election when her term expires at the 2015 annual meeting of stockholders. The term for directors in Class III (Mr. Alstead, Mr. Bergh, Mr. Eckert and Ms. Pineda) will end at our annual stockholders' meeting in 2016.
Committees .   Our board of directors has four standing committees.
•
Audit.   Our Audit Committee provides assistance to the board in the board's oversight of the integrity of our financial statements, financial reporting processes, internal controls systems and compliance with legal requirements. The committee meets with our management regularly to discuss our critical accounting policies, internal controls and financial reporting process and our financial reports to the public. The committee also meets with our independent registered public accounting firm and with our financial personnel and internal auditors regarding these matters. The committee also examines the independence and performance of our internal auditors and our independent registered public accounting firm. The committee has sole and direct authority to engage, appoint, evaluate and replace our independent auditor. Both our independent registered public accounting firm and our internal auditors regularly meet privately with this committee and have unrestricted access to the committee. The Audit Committee held eight meetings during 2014 .
–  Members: Mr. Alstead (Chair), Ms. Beraud, Ms. Castagna, Ms. Ming and Mr. Fleischer.
Each of Messrs. Alstead and Fleischer have been determined to be our Audit Committee financial experts as currently defined under SEC rules. We believe that the composition of our Audit Committee meets the criteria for independence under, and the functioning of our Audit Committee complies with the applicable requirements of, the Sarbanes-Oxley Act and SEC rules and regulations.
•
Finance.   Our Finance Committee provides assistance to the board in the board's oversight of our financial condition and management, financing strategies and execution and relationships with stockholders, creditors and other members of the financial community. The Finance Committee held six meetings in 2014 and otherwise acted by unanimous written consent.
– Members: Mr. Fleischer (Chair), Ms. Beraud and Mrs. Haas.
•
Human Resources.   Our Human Resources Committee provides assistance to the board in the board's oversight of our compensation, benefits and human resources programs and of senior management performance, composition and compensation. The committee reviews our compensation objectives and performance against those objectives, reviews market conditions and practices and our strategy and processes for making compensation decisions and approves (or, in the case of our chief executive officer, recommends to the Board) the annual and long term compensation for our executive officers, including our long term incentive compensation plans. The committee also reviews our succession planning, diversity and benefit plans. The Human Resources Committee held three meetings in 2014 .
–  Members: Mr. Eckert (Chair), Mr. Alstead, Ms. Castagna, Mr. P.E. Haas Jr. and Ms. Pineda.


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•
Nominating, Governance and Corporate Citizenship.   Our Nominating, Governance and Corporate Citizenship Committee is responsible for identifying qualified candidates for our board of directors and making recommendations regarding the size and composition of the board. In addition, the committee is responsible for overseeing our corporate governance matters, reporting and making recommendations to the board concerning corporate governance matters, reviewing the performance of our chairman and chief executive officer and determining director compensation. The committee also assists the board with oversight and review of corporate citizenship and sustainability matters which may have a significant impact on the Company. The Nominating, Governance and Corporate Citizenship Committee held five meetings in 2014 .
– Members: Mr. Neal (Chair), Mr. Eckert, Mrs. Haas, Mr. P.E. Haas Jr. and Ms. Pineda.
Board Composition and Risk Management Practices
Board Leadership
While our by-laws do not require separation of the offices of chairman and chief executive officer, these positions are held by different individuals. The Board believes that the separation of the roles of chairman and chief executive officer is a matter to be addressed as part of the succession planning process for those roles and that it is in the best interests of the Company for the board, upon the review and advice of the Nominating, Governance and Corporate Citizenship Committee, to make such a determination when it elects a new chairman or chief executive officer or otherwise as the circumstances may require.
Board Selection Criteria
According to the board's written membership policy, the board seeks directors who are committed to the values of the Company and are, by reason of their character, judgment, knowledge and experience, capable of contributing to the effective governance of the Company. Additionally, the board is committed to maintaining a diverse and engaged board of directors composed of both stockholders and non-stockholders. Upon any vacancy on the board, it seeks to fill that vacancy with any specific skills, experiences or attributes that will enhance the overall perspective or functioning of the board.
Board's Role in Risk Management
Management is responsible for the day-to-day management of the risks facing the Company, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. Management engages the board in discussions concerning risk periodically and as needed, and addresses the topic as part of the annual planning discussions where the board and management review key risks to the Company's plans and strategies and the mitigation plans for those risks. In addition, the Audit Committee of the board has the responsibility to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, with management, the senior internal auditing executive and the independent registered public accounting firm.
Worldwide Code of Business Conduct
We have a Worldwide Code of Business Conduct which applies to all of our directors and employees, including the chief executive officer, the chief financial officer, the controller and our other senior financial officers. The Worldwide Code of Business Conduct covers a number of topics including:
•
accounting practices and financial communications;
•
conflicts of interest;
•
confidentiality;
•
corporate opportunities;
•
insider trading; and
•
compliance with laws.
A copy of the Worldwide Code of Business Conduct is an exhibit to this Annual Report on Form 10-K.


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Item 11.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS FOR NAMED EXECUTIVE OFFICERS
The Compensation Discussion and Analysis describes our compensation program, the compensation decisions we made under our program, and the reasoning underlying those decisions. This discussion and analysis focuses on the compensation of our named executive officers, who in fiscal 2014 were:
•
Charles V. Bergh, President and Chief Executive Officer ("CEO")
•
Harmit Singh, Executive Vice President and Chief Financial Officer ("CFO")
•
Roy Bagattini, Executive Vice President and President, Asia, Middle East & Africa
•
Craig Nomura, Executive Vice President and President, Global Retail
•
Anne Rohosy, Executive Vice President and President, Americas
Our compensation policies and programs are designed to support the achievement of our strategic business plans by attracting, retaining and motivating exceptional talent. Our ability to compete effectively in the marketplace depends on the knowledge, capabilities and integrity of our leaders. Our compensation programs help create a high-performance, outcome-driven and principled culture by holding leaders accountable for delivering results, developing our employees and exemplifying our core values. In addition, we believe that our compensation policies and programs for leaders and employees do not promote risk-taking to any degree that would have a material adverse effect on the company.
The Human Resources Committee (the “HR Committee”) of our Board of Directors (the "Board") is responsible for overseeing our executive compensation practices. Each year, the HR Committee conducts a review of our compensation and benefits programs to assess whether the programs are aligned with our business strategies, the competitive practices of our peer companies and our stockholders' interests.
Compensation Philosophy and Objectives
Our executive compensation philosophy, which also applies to all members of our Worldwide Leadership Team, focuses on the following key goals:
•
Attract, motivate and retain high performing talent in an extremely competitive marketplace
◦
Our ability to achieve our strategic business plans and compete effectively in the marketplace is based on our ability to attract, motivate and retain exceptional leadership talent in a highly competitive talent market. 
•
Deliver competitive compensation for achievement of annual and long-term results
◦
We provide competitive total compensation opportunities that are intended to attract, motivate and retain a highly capable and results-driven executive team, with the majority of compensation based on the achievements of long-term performance results.
•
Align the interests of our executives with those of our stockholders
◦
Our programs offer compensation incentives that are intended to motivate executives to enhance total stockholder return. These programs align certain elements of compensation with our achievement of corporate growth objectives (including defined financial targets and increases in stockholder value) as well as individual performance.
Policies and Practices for Establishing Compensation Packages
Establishing the elements of compensation
The HR Committee establishes the elements of compensation for our executives after an extensive review of market data on the executives from the peer group described below. The HR Committee reviews each element of compensation independently and in the aggregate to determine the right mix of elements, and associated amounts, for each executive that it believes best helps us further our goals of motivating and retaining our executives, achieving our strategic business plans, and enhancing total stockholder return.
A consistent approach is used for all executives when establishing each compensation element. However, the HR Committee, and the Board for the CEO, maintains flexibility to exercise its independent judgment in how it applies the standard approach to each executive, taking into account unique considerations existing at an executive's time of hire, promotion or annual performance review, and the current and future estimated value of previously granted long-term incentives, both performance and time-vesting.


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Competitive peer group
In determining the design and the amount of each element of compensation, the HR Committee conducts a thorough annual review of competitive market information. The HR Committee reviews data provided by Aon Hewitt concerning peer companies in the consumer products, apparel and retail industry segments. The peer group is comprised of companies with median revenue and other industry related characteristics (such as apparel, retail and select consumer products companies with premium branded products) that are comparable to us and, more importantly, that we compete with for executive talent. The 2014 peer group used in establishing our executives' 2014 compensation packages is presented below.
Company Name
Abercrombie & Fitch Co.*
Hanesbrands Inc.*
Aéropostale, Inc.*
Hasbro, Inc.
American Eagle Outfitters, Inc.*
J. C. Penney Company, Inc.
ANN INC.*
The Jones Group Inc.*
Avon Products, Inc.
L Brands, Inc. (formerly Limited Brands, Inc.)*
Burberry Group Plc
Mattel, Inc.
The Clorox Company
NIKE, Inc.*
Coach, Inc.*
Nordstrom, Inc.
Dillard's, Inc.
PVH Corp.*
The Estée Lauder Companies Inc.
Ralph Lauren Corporation*
Foot Locker, Inc.
Tiffany & Co.
The Gap, Inc.*
VF Corporation*
Guess? Inc.*
Williams-Sonoma, Inc.
In addition to the companies noted with an asterisk (*) in the table above, the following companies are part of an expanded peer group for purposes of measuring total shareholder return for the performance-based stock appreciations rights granted in 2014 that are further described below under “Performance-Based SARs”.
Company Name
adidas AG
HUGO BOSS AG
Ascena Retail Group Inc.
INDUSTRIA DE DISEÑO TEXTIL, S.A.
Billabong International Limited
Lands’ End, Inc.
Carter’s, Inc.
lululemon athletica Inc.
Chico’s FAS Inc.
LVMH Moet Hennessy-Louis Vuitton
Christopher & Banks Corp.
NEXT plc
Columbia Sportswear Co.
Oxford Industries Inc.
Esprit Holdings Limited
Pacific Sunwear of California Inc.
Express Inc.
Perry Ellis, International Inc.
Kate Spade & Company (formerly Fifth & Pacific Companies, Inc.)
Quiksilver Inc.
Fossil Group Inc.
Skechers U.S.A. Inc.
Gerry Weber International AG
The Cato Corporation
G III Apparel Group, Ltd.
The Children’s Place, Inc.
Gildan Activewear Inc.
Under Armour, Inc.
H & M Hennes & Mauritz AB
Urban Outfitters, Inc.
Hermès International Société en Commandite par Actions
Wolverine World Wide Inc.
Hot Topic, Inc.
 


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Establishing compensation for executives other than the CEO
While the HR Committee uses peer group market data percentiles as reference points in setting executive compensation, the HR Committee does not target specific benchmark percentiles for any element of compensation or total direct compensation for the executive officers (including the CEO). Instead, the HR Committee uses a number of factors in determining compensation for our executives in a manner that it believes best helps us further our goals of motivating and retaining our executives, achieving our strategic business plans, and enhancing total stockholder return. The factors considered in establishing compensation for our executives include, among others, our performance, the individual's performance in the prior year, the scope of each individual's responsibilities, internal and external pay equity, the guidelines used for setting annual cash, long-term and total compensation for the executives, succession planning strategies, and data regarding pay practices and trends.
The CEO conducts an annual performance review of each executive and makes recommendations to the HR Committee about the structure of the executive compensation program and individual arrangements. The CEO is generally present at HR Committee meetings when compensation, other than his own, is considered and approved.
The HR Committee carefully considers the CEO's recommendation and consults with its consultant, Exequity, an independent board advisor firm, which informs the HR Committee of market trends and conditions, comments on market data relative to each executive’s current compensation, and provides perspective on other company executive compensation practices. The HR committee approves all compensation decisions affecting the executives, other than that of the CEO which is approved by the full Board. The HR Committee then reports on its decisions to the full Board.
Establishing the CEO compensation package
At the completion of each year, the Nominating, Governance and Corporate Citizenship Committee (the “NG&CC Committee”) assesses the CEO's performance against annual objectives that were established jointly by the CEO and the NG&CC Committee at the beginning of that year, and submits its performance assessment to the HR Committee. The HR Committee then reviews the performance assessment and peer group compensation data in its deliberations. During this decision-making process, the HR Committee consults with its consultant, Exequity, which informs the HR Committee of market trends and conditions, comments on market data relative to the CEO's current compensation, and provides perspective on other companies' CEO compensation practices. Based on all of these inputs, the company's performance, and the guidelines used for setting annual cash, long-term and total compensation for the other executives, the HR Committee prepares a recommendation to the full Board on all aspects of the CEO's compensation. The full Board then considers the HR Committee's recommendation and approves the final compensation package for the CEO.
Role of the Compensation Consultant in compensation decisions
The HR Committee has also engaged Exequity to provide the HR Committee with periodic advice on the compensation program structure and individual compensation arrangements for all executives. The consultant was selected by the HR Committee in its sole discretion and does not provide any other services to the Company. The consultant attends HR Committee meetings from time to time, presents an annual briefing on general and retail-industry compensation trends and developments, and is also available to the HR Committee outside of meetings as necessary. The consultant reports directly to the HR Committee, although the consultant meets with management from time to time to obtain information necessary to advise the HR Committee.
In addition, the HR Committee periodically reviews its relationship with its independent compensation consultant. The HR Committee believes that the consultant it retains is able to provide it with independent advice.
Elements of Compensation
The primary elements of compensation for our executives including our named executive officers are:
•
Base Salary;
•
Annual Incentive Plan Awards; and
•
Long-Term Incentive Awards.
Base Salary
The objective of base salary is to reward each executive for their current contributions to the Company, reflect the scope of the executives’ roles and responsibilities and compensate each executive for their expected day-to-day performance, as well as provide fixed compensation that reflects what the market pays to individuals in similar roles with comparable experience. The peer group data serves as a general guideline only. The HR Committee, and for the CEO, the Board, retains the authority to exercise its independent judgment in establishing the base salary levels for each executive. The HR Committee reviews base salaries for


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executives on an annual basis in the first fiscal quarter considering the factors described above under “Establishing compensation for executives other than the CEO,” and as needed in connection with promotions or other changes in responsibilities. The table below summarizes base salaries during fiscal 2014, and changes that occurred during the year for our named executive officers.
 
Name
 
Base Salary as of November 30, 2014 (3)
 
Base Salary as of November 24, 2013
 
 
 
 
 
 
 
 
 
Charles V. Bergh
$
1,280,000

 
$
1,250,000

 
 
Harmit Singh
700,000

 
675,000

 
 
Roy Bagattini (1)
650,902

 
636,260

 
 
Craig Nomura (2)
580,000

 
N/A

 
 
Anne Rohosy
720,000

 
700,000

 
______________
(1)
Mr. Bagattini was paid in Singapore Dollars (SGD). For purposes of this table, an exchange rate of 0.7746, which is the average exchange rate for November 2014, was used to convert Mr. Bagattini’s base salary (SGD 840,307 as of November 30, 2014, and SGD 821,405 as of November 24, 2013) to U.S. Dollars.
(2)
Mr. Nomura joined the Company in February 2014 as the Executive Vice President & President, Global Retail.
(3)
The base salary for each of Messrs. Bergh, Singh, and Ms. Rohosy were increased in February 2014 as part of the annual review to position each appropriately relative to the other executives of the Company.
Annual Incentive Plan
Our Annual Incentive Plan (“AIP”) provides the executives, and other eligible employees, an opportunity to share in any success that they help create by aligning annual incentive compensation with annual performance. The AIP encourages the achievement of our internal annual business goals and rewards Company, business unit and individual performance against those annual objectives. The alignment of AIP with our internal annual business goals is intended to motivate all participants to achieve and exceed our annual performance objectives. Actual AIP bonus payments were based on the following two components:
Financial performance
•
75% of their total opportunity was based on financial performance of the Company or a combination of Company (weighted 50%) and business unit (weighted 25%) performance for business unit executives. Company and business unit financial performance is based 50% on earnings before interest and taxes (“EBIT”), 25% on free cash flow and 25% on net revenues. Performance measures are described in more detail below under “Performance measures.”
Individual performance
•
25% of their total opportunity was based on individual objectives, to recognize achievement of other organizational goals.
Financial performance above threshold is required before any bonus payout is made to executives.
The table below describes the target AIP participation rate and potential AIP payout range for each named executive officer. Mr. Bergh’s AIP target percentage of base salary was higher to ensure competitiveness and to recognize the impact of his role relative to the other executives .
 
Name
 
2014 AIP Participation Rate as a Percentage of Base Salary (Target)
 
Potential AIP Payout Range as a Percentage of Base Salary
 
 
 
 
 
 
 
 
 
Charles V. Bergh
150%
 
0 – 300%
 
 
Harmit Singh
80%
 
0 – 160%
 
 
Roy Bagattini
70%
 
0 – 140%
 
 
Craig Nomura (1)
70%
 
70 – 140%
 
 
Anne Rohosy
80%
 
0 – 160%
 
____________
(1)
Pursuant to his employment arrangement, Mr. Nomura was guaranteed a minimum AIP payment for fiscal 2014 equal to his target payout.


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Performance measures
Our priorities for 2014 were to drive business growth and create stockholder value. Our 2014 AIP funding goals were aligned with these key priorities through the use of three performance measures:
•
EBIT, a non-GAAP measure that is determined by deducting from operating income, as determined under generally accepted accounting principles in the United States (“GAAP”), the following: restructuring expense, net curtailment gains and losses from our post retirement medical plan in the United States and pension plans worldwide, and certain management-defined unusual, non-recurring selling, general and administrative expense/income items;
•
Free cash flow, a non-GAAP measure defined as cash flow generated from Company operations minus capital expenditures minus dividends paid; and
•
Net revenues, a GAAP measure defined as gross product sales minus returns, discounts and allowances, plus licensing revenue.
We used these measures because we believe they are key drivers in increasing stockholder value and because every AIP participant can impact them in some way. EBIT and free cash flow are used as indicators of our earnings and operating cash flow performance, and net revenues is used as an indicator of our growth. These measures may change from time to time based on business priorities. The HR Committee approves the goals for each measure and the respective funding scale each year. The reward for meeting the AIP goals is set by the HR Committee. If goal levels are not met, but financial performance reaches minimum thresholds, participants may receive partial payouts to recognize their efforts that contributed to Company and/or business unit performance.
The table below shows the 2014 goals at target for each of our three performance measures and the actual 2014 payout percentage reflecting the total Company performance. In the case of Messrs. Bergh and Singh, 75% of their total AIP opportunity was based on financial performance of the Company. For Messrs. Bagattini, Nomura, and Ms. Rohosy, a combination of Company (weighted 50%) and their respective business unit performance (weighted 25%) was used to calculate their actual financial performance achievement. EBIT, free cash flow, and net revenues goals for each business unit were set using the same methodology as the Company goals.
 
EBIT Goal
 
Free Cash Flow
Goal
 
Net Revenues Goal
 
Actual Percentage Achieved After Adjustments*
 
(Dollars in millions)
 
 
 
 
 
 
 
 
Total Company
$497
 
$190
 
$4,844
 
111%
_____________
* The actual percentage achieved results are weighted 50% on EBIT and 25% for Free Cash Flow and Net Revenues, respectively. Actual results also excludes the impact of foreign currency exchange rate fluctuations on our business results. See “Actual AIP awards” below for details of the calculation.
At the close of the fiscal year, the HR Committee reviews and approves the final AIP payout results based on the level of attainment of the designated financial measures at the business unit and total Company levels. The Committee's review includes an analysis of the fundamentals of the underlying business performance and adjustments for items that are not indicative of ongoing results . Such adjustments may include external factors or internal business decisions that may have impacted financial results during the year. For example, EBIT, free cash flow and net revenues are expressed in constant currencies ( i.e., excluding the effects of foreign currency translation), since we believe that period-to-period changes in foreign exchange rates can cause our reported results to appear more or less favorable than business fundamentals indicate.
Individual performance measures
Executives were eligible to receive bonuses based on individual performance. For executives other than the CEO, individual performance and resulting individual performance payout percentage is based on the CEO’s assessment of the executive's performance against his or her annual objectives and performance relative to his or her internal peers. The CEO’s individual performance is based on the HR Committee’s assessment of Mr. Bergh’s performance against his annual objectives, including the feedback from the Nominating, Governance and Corporate Citizenship Committee, and the HR Committee's assessment of his leadership in 2014. During this decision-making process, the HR Committee consults with its consultant Exequity. Based on all of these inputs, the HR Committee prepares a recommendation to the full Board on the CEO’s individual performance. The full Board then considers the HR Committee's recommendation and approves the final individual performance payout percentage for the CEO. Individual annual objectives include non-financial goals which are not stated in quantitative terms, and a particular weighting is not assigned to any one of these individual goals. The non-financial objectives are not established in terms of how


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difficult or easy they are to attain; rather, they are taken into account in assessing the overall quality of the individual's performance. For fiscal 2014, these objectives consisted of initiatives that focused on five key behaviors: (1) understanding the Company’s business in the context of the market, (2) owning and delivering on commitments, (3) placing Company success over individual or group success, (4) collaboration, and (5) leading by positive example.
Actual AIP awards
For fiscal 2014 , financial performance applicable to each named executive officer was mixed, and AIP payouts reflect the different performance outcomes. The table below shows the inputs used for the calculation of the actual bonus for fiscal 2014 for each eligible named executive officer.
Name
 
Base Salary
 
AIP Target
 
Actual Percentage Achieved: Total Company
 
Actual Percentage Achieved: Business Unit
 
Actual Percentage Achieved: Individual Performance
 
Actual Bonus (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
 
$
1,280,000

 
150%
 
111%
 
N/A
 
140%
 
$
2,270,400

Harmit Singh
 
700,000

 
80%
 
111%
 
N/A
 
150%
 
676,200

Roy Bagattini (2)
 
650,902

 
70%
 
111%
 
119%
 
130%
 
536,506

Craig Nomura (3)
 
470,566

 
70%
 
111%
 
143%
 
50%
 
406,000

Anne Rohosy
 
720,000

 
80%
 
111%
 
69%
 
—
 
419,040

______________
(1)
Except for Messrs. Bergh and Singh where Total Company performance is weighted 75%, Total Company performance is weighted 50% and Business Unit performance is weighted 25%. For all executives, Individual Performance is weighted 25%.
(2)
Mr. Bagattini was paid in Singapore Dollars (SGD). For presentation purposes of this table, his base salary of SGD 840,297 and bonus of SGD 692,623 was converted into U.S. Dollars using an exchange rate of 0.7746, which is the average exchange rate for November 2014.
(3)
Mr. Nomura's prorated bonus is $341,749, based on his February 2014 start date. However, per his offer letter, his bonus is guaranteed to be at least equal to target ($406,000).
Long-Term Incentives
The HR Committee believes a large part of an executive's compensation should be linked to long-term stockholder value creation as an incentive for sustained, profitable growth. Therefore, our long-term incentives for our executives are in the form of equity awards, both performance and time-vested, and provide reward opportunities competitive with those offered by companies in the peer group for similar jobs. Consistent with the other elements of compensation, the HR Committee does not target specific benchmark percentiles for long-term incentive awards for our executives and uses a number of factors in establishing the long-term incentive award levels for each individual including a review of each individual’s accumulated vested and unvested awards, the current and potential realizable value over time using stock appreciation assumptions, vesting schedules, comparison of individual awards between executives and in relation to other compensation elements, market data, stockholder dilution and accounting expense. Should we deliver against our long-term goals, the long-term equity incentive awards become a significant portion of the total compensation of each executive. For more information on the 2014 long-term equity grants, see the 2014 Grants of Plan-Based Awards table. Stock-based awards are granted under our omnibus 2006 Equity Incentive Plan, as amended to date (“EIP”) that enables the HR Committee to select from a variety of stock awards, including stock options, restricted stock and restricted stock units, and time-vested as well as performance-based stock appreciation rights (“SARs”).
Stock Appreciation Rights
Stock settled SARs are the primary form of equity granted to our executives under the EIP. SARs are typically granted annually (or, in the case of new executives, at the HR Committee meeting held in February or July following the date they join the Company or first become an executive) with four-year vesting periods and exercise periods of up to seven years. (See the table entitled “Outstanding Equity Awards at 2014 Fiscal Year-End” for details concerning the SARs' vesting schedule, including any individual variations from the typical four-year vesting period.) During fiscal 2014, time-based SARs with a four-year vesting period accounted for 60% of each executive’s total 2014 annual SAR grant value. The HR Committee chose to grant SARs to align the interests of executives to our stockholders. SARs provide value to the executive only if the price of our stock increases. The terms of the SAR grants made to our executives to date provide for stock settlement only. When a SAR is exercised and settled in stock, the shares issued are subject to the terms of the Stockholders' Agreement, including restrictions on transfer. After the participant has held the shares issued under the EIP for six months, he or she may require the Company to repurchase, or the Company may require the participant to sell to the Company, those shares of common stock. The Company's obligations under the EIP are subject to certain restrictive covenants in our various debt agreements (see Note 6 to our audited consolidated financial statements included in this report for more details).


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Performance-based SARs
During fiscal 2013, the HR Committee introduced and awarded performance-based SARs with the objective of driving greater accountability for the achievement of the strategic plan of the Company and long-term value creation for stockholders. During fiscal 2014, performance-based SARs again accounted for 40% of each executive’s total 2014 annual SAR grant value. The key features of the 2014 performance-based SARs are described below:
•
Each executive is eligible to receive an annual performance-based SAR award. Performance-based SARs give the executive the right (subject to HR Committee discretion to reduce but not increase awards) to vest in a number of SARs based on achievement against performance goals over a three year performance period. Actual shares that will vest, if any, will vary based on achievement of the performance goals at the end of the three years. The three-year performance period was designed to discourage short-term risk taking and reinforce the link between the interests of our stockholders and our executives over the long-term.
•
50% of the number of actual performance-based SARs that vest at the end of three years is based on the following two internal performance metrics: 1) the Company's average margin of net earnings over the three-year period adjusted for certain items such as interest and taxes, and 2) the target compound annual growth rate in the Company's net revenues over the three-year period covering fiscal 2014 through fiscal 2016. The potential payout range as a percentage of this portion of the target award is 0% to 150%.
•
The remaining 50% of the number of actual performance-based SARs that vest is based on the Company’s total shareholder return (“TSR”) over the three-year period covering fiscal 2014 through fiscal 2016 relative to the expanded peer group approved by the HR Committee in December 2013 as listed above under "Competitive peer group". The potential payout range as a percentage of this portion of the target award is 0% to 150%.
•
If earned at target, 100% of the performance-based SARs vest at the end of the three-year performance period.
Similar to our SARs that are not performance-based, performance-based SARs that vest will only provide value to the extent that the price of our stock increases.
Long-term incentive grant practices
The Company does not have any program, plan, or practice to time equity grants to take advantage of the release of material, non-public information. The Company's common stock is not listed on any stock exchange. Accordingly, the price of a share of our common stock for all purposes, including setting the grant price of SARs, is established by the Board based on an independent third-party valuation conducted by Evercore Group LLC (“Evercore”). The valuation process is typically conducted two times a year, with interim valuations occurring from time to time based on stockholder and Company needs. Equity grants are made in connection with compensation decisions made by the HR Committee and the timing of the Evercore valuation process, and are made under the terms of the EIP. Please see “Stock-Based Compensation” under Note 1 to our audited consolidated financial statements included in this report for more information about the valuation process.
Benefits and Perquisites
Executives generally are eligible for the same health and welfare insurance plans offered to all employees such as medical, dental, supplemental life, long-term disability and business travel insurance. In addition, although not a significant part of total compensation, the Company provides limited perquisites to executives. The primary perquisite provided to the executives is a flexible allowance to cover expenses such as auto-related expenses, financial and tax planning, legal assistance and excess medical costs. The Company also requires and pays for an annual medical exam for its executives and other members of its worldwide leadership team. Like many of the companies in the peer group, the Company also offers a non-qualified supplement to the 401(k) plan, which is not subject to the IRS and ERISA limitations, through the Deferred Compensation Plan for Executives and Outside Directors. The Deferred Compensation Plan for Executives and Outside Directors is a U.S. non-qualified, unfunded tax deferred savings plan provided to senior level executives including the executives, and the outside directors.
We entered into an employment arrangement with Mr. Bagattini, who is based in Singapore, in connection with his becoming the Executive Vice President & President of our Asia region, to provide him certain benefits under our global assignment program, including a housing allowance to cover the cost of his rent and utilities. In addition, as an Italian citizen, he does not participate in the local retirement plan offered in Singapore. Mr. Bagattini participates in an international supplemental retirement savings plan designed for globally mobile employees. The Company contributes 14% of Mr. Bagattini’s annual base salary on his behalf to such plan. Mr. Bagattini may voluntarily contribute funds to this plan above and beyond what the Company contributes on his behalf. The Company’s contribution is grossed up to provide a tax-advantaged contribution. As a participant under this plan, Mr. Bagattini may direct investments similar to a 401(k) plan. Mr. Bagattini is allowed to make partial withdrawals from the plan two times per calendar year.


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The benefits and perquisites received by our named executive officers and their value are described in more detail in the footnotes to the Summary Compensation Table.
Tax and Accounting Considerations
We have structured our compensation program in a manner intended to comply with Internal Revenue Code Section 409A. Because our common stock is not registered on any exchange, we are not subject to Section 162(m) of the Internal Revenue Code.
Severance and Change in Control Benefits
The terms of Mr. Bergh’s severance and change in control benefits were determined through negotiations of his employment agreement in 2011 at the time he was hired. As part of these negotiations, the HR Committee determined that the benefits and structure of these benefits were within normal competitive practice, reasonable and appropriate for the circumstances, and necessary to attract Mr. Bergh to the Company. Enhanced termination benefits in the case of a change in control of the Company were included in his employment agreement for the same reasons and to help ensure retention of Mr. Bergh in the case of a potential or actual change in control.
For executives other than Mr. Bergh, we maintain an Executive Severance Plan that is meant to provide a reasonable and competitive level of financial transitional support to executives who are involuntarily terminated. If an executive's employment is involuntarily terminated by the Company due to reduction in force, layoff or position elimination, the executive is eligible for severance payments and benefits. Severance benefits are not payable upon a change in control if the executive is still employed by or offered a comparable position with the surviving entity.
While compensation decisions affect potential payouts under these severance arrangements, these arrangements generally did not affect such decisions as these severance provisions are conditional and may never come into effect.
More information about the severance benefits payable to our named executive officers under the Executive Severance Plan and to Mr. Bergh under his employment agreement is set forth in the sections entitled “Potential Payments Upon Termination Or Change In Control” and “Employment Contracts.”
Under the 2006 EIP, in the event of a change in control in which the surviving corporation does not assume or continue the outstanding SARs program or substitute similar awards for such outstanding SARs, the vesting schedule of all SARs held by executives that are still employed upon the change in control will be accelerated in full as of a date prior to the effective date of the transaction as the Board determines. This accelerated vesting structure is designed to encourage the executives to remain employed with the Company through the date of the change in control and to ensure that the equity incentives awarded to the executives are not eliminated by the surviving company.
Compensation Committee Report
The Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussion, the Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's annual report on Form 10-K for the fiscal year ended November 30, 2014 .
The Human Resources Committee
Robert Eckert (Chair)
Vanessa J. Castagna
Peter E. Haas Jr.
Patricia Salas Pineda


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SUMMARY COMPENSATION DATA
The following table provides compensation information for (i) our chief executive officer, (ii) our chief financial officer, and(iii) three other executive officers who were our most highly compensated executive officers and who were serving as executive officers as of the last day of the fiscal year ended November 30, 2014 . The table also shows compensation information for fiscal 2013 and fiscal 2012 , which ended November 24, 2013 , and November 25, 2012 , respectively, for those current named executive officers who also were named executive officers in either of those years.
Name and Principal Position (1)
 
Year
 
Salary (2)
 
Bonus (3)
 
Option Awards (4)
 
Non-Equity Incentive Plan Compensation (5)
 
Change in Pension Value and Non-qualified Deferred Compensation Earnings (6)
 
All Other Compensation (7)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
President and Chief Executive Officer
 
2014
 
$
1,298,846

 
$
—

 
$
5,793,629

 
$
2,270,400

 
$
—

 
$
312,374

 
$
9,675,249

 
2013
 
1,239,615

 
—

 
5,824,736

 
2,257,500

 
—

 
248,406

 
9,570,257

 
2012
 
1,200,000

 
—

 
10,159,786

 
1,500,000

 
—

 
141,842

 
13,001,628

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Harmit Singh
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive Vice President and Chief Financial Officer
 
2014
 
$
708,654

 
$
—

 
$
1,321,350

 
$
676,200

 
—

 
38,587

 
2,744,791

 
2013
 
578,942

 
250,000

 
1,328,443

 
580,500

 
—

 
187,709

 
2,925,594

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roy Bagattini
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive Vice President and President, Asia, Middle East and Africa
 
2014
 
$
608,053

 
$
244,713

 
$
686,077

 
$
536,506

 
$
—

 
$
449,647

 
$
2,524,996

 
2013
 
328,465

 
254,000

 
740,390

 
513,139

 
—

 
275,722

 
2,111,716

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Craig Nomura
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive Vice President and President, Global Retail
 
2014
 
$
472,923

 
$
580,000

 
$
965,605

 
$
406,000

 
$
—

 
$
11,621

 
$
2,436,149

 

 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Anne Rohosy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive Vice President and President, Americas
 
2014
 
$
730,000

 
$
—

 
$
1,118,056

 
$
419,040

 
$
—

 
$
141,443

 
$
2,408,539

 
2013
 
694,808

 
—

 
1,021,884

 
848,150

 
—

 
110,570

 
2,675,412

 
2012
 
626,538

 
—

 
824,250

 
510,300

 
—

 
162,791

 
2,123,879

______________
(1)
In January 2013, Mr. Singh was appointed as Executive Vice President and Chief Financial Officer of the Company.
In June 2013, Mr. Bagattini joined the Company and currently serves as Executive Vice President and President of the Asia region. Mr. Bagattini’s cash compensation is paid in Singapore Dollars (SGD). For presentation purposes, his compensation was converted into U.S. Dollars using an exchange rate of 0.7746, which is the average exchange rate for November 2014.
In February 2014, Mr. Nomura joined the Company as Executive Vice President and President of Global Retail.
(2)
Due to the 53 rd week for fiscal 2014, amounts in the table include an extra week of salary for each executive.
(3)
Mr. Singh received a new hire sign-on bonus of $250,000 in January 2013.
Mr. Bagattini received the second and final installment (SGD 315,925) of a new hire sign-on bonus of $500,000 in June 2014. For presentation purposes, this amount was converted into U.S. Dollars using an exchange rate of 0.7746, which is the average exchange rate for November 2014.
Mr. Nomura received the first installment ($580,000) of a new hire sign-on bonus of $880,000 in February 2014.
(4)
These amounts reflect the aggregate grant date fair value of SARs, including performance-based SARs, granted to the recipient under the Company's 2006 Equity Incentive Plan, computed in accordance with FASB ASC 718. These amounts reflect the grant date fair value, and do not represent the actual value that may be realized by the executives. For 2014, this column includes the grant date fair value of the target number of performance-based SARs that may be earned for the three-year performance period beginning with fiscal 2014. For a description of the assumptions used to determine the compensation cost of our awards, see Notes 1 and 11 of the audited consolidated financial statements. Please refer to the Grants of Plan-Based Awards table in this report and in our 2013 and 2012 Annual Report on Form 10-K for information on awards actually granted in fiscal 2013 and 2012.
(5)
The amounts in this column reflect the non-equity amounts earned by the executives under the Company’s annual incentive plan (“AIP”).
(6)
No above-market or preferential interest rate options are available under our deferred compensation programs. Please refer to the Non-Qualified Deferred Compensation table for additional information on deferred compensation earnings.


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(7)
The amounts shown in the All Other Compensation column for fiscal 2014 are detailed in the table below:
 
Name
 
Executive Perquisites
(a)
 
Relocation
(b)
 
401(k) Plan Match
(c)
 
Deferred Compensation Match
(d)
 
Tax Payments
(e)
 
Charitable Match
(f)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
$
35,845

 
$
—

 
$
19,500

 
$
249,029

 
$
—

 
$
8,000

 
$
312,374

 
 
Harmit Singh
20,092

 
2,880

 
14,135

 
—

 
1,480

 
—

 
38,587

 
 
Roy Bagattini
122,315

 
225,132

 
84,826

 
—

 
17,374

 
—

 
449,647

 
 
Craig Nomura
11,471

 
—

 
—

 
—

 
—

 
150

 
11,621

 
 
Anne Rohosy
20,092

 
—

 
21,413

 
99,938

 
—

 
—

 
141,443

 
Please refer to “Compensation Discussion and Analysis for Named Executive Officers” for more details on the items in the table above.
(a)
For Mr. Bergh, this amount reflects a payment for home security services, parking, health club membership subsidy, an allowance of $15,000 intended to cover legal, financial and/or other incidental business related expenses, and a car allowance of $14,733.
For Mr. Singh, and Ms. Rohosy, this amount reflects parking, health club membership subsidy, and an allowance of $15,000 intended to cover legal, financial and/or other incidental business related expenses.
For Mr. Nomura, this amount reflects parking, health club membership subsidy, and a cash allowance intended to cover legal, financial and/or other incidental business related expenses.
For Mr. Bagattini, this amount reflects an allowance of $14,683 intended to cover legal, financial and/or other incidental business related expenses, parking and a car allowance of $61,110 and $19,892 for a club membership, a typical benefit provided to executives in Singapore and $26,631 for tuition costs for his children, a benefit he received in connection with his international assignment. For presentation purposes, his payments in this table were converted into U.S. Dollars using an exchange rate of 0.7746, which is the average exchange rate for the last month of the Company’s 2014 fiscal year.
(b)
For Mr. Singh, these amounts reflect costs in connection with relocation assistance.
For Mr. Bagattini, this amount reflects $22,630 for travel costs in connection with home leave benefits and $202,502 for housing and utilities assistance in connection with his international assignment.
(c)
These amounts reflect Company matching contributions under the Company’s 401(k) Plan. For Mr. Bagattini, this amount reflects the Company’s contribution to an international supplemental retirement savings plan. For additional information about Mr. Bagattini’s supplemental retirement savings plan, see “Compensation Discussion and Analysis for Named Executive Officers.”
(d)
These amounts reflect Company matching contributions under the Company’s Deferred Compensation Plan.
(e)
For Mr. Singh, these amounts reflect tax reimbursements in connection with relocation expenses. For Mr. Bagattini, this amount reflects tax reimbursements on his contributions to the international supplemental retirement savings plan.
(f)
These amounts reflect Company matching under the Company’s Matching Gift Program, available to all employees.
Other Matters
Employment Contracts
Mr. Bergh .  We have an employment agreement with Mr. Bergh effective September 1, 2011. The agreement initially provided for an annual base salary of $1,200,000 and an AIP target participation rate of 135%, which have since been adjusted, and may be further adjusted, pursuant to annual review. For 2014, his base salary and target participation rate under the AIP were $1,280,000 and 150% of base salary, respectively.
Mr. Bergh also participates in our 2006 Equity Incentive Plan. This element of Mr. Bergh’s compensation for 2014 is reflected and discussed in “Compensation Discussion and Analysis for Named Executive Officers.”
His employment agreement also provides that if Mr. Bergh is terminated from employment either by the Company or constructively within four years of his effective date of employment or in connection with a change in control of the Company under certain circumstances, he will be entitled to receive, among other standard benefits, (1) an aggregate amount equal to two times the sum of his then-effective base salary plus his then-effective target AIP amount, (2) a prorated AIP award in respect of the performance period at the time, and (3) company-paid continuation coverage for certain benefits for 18 months. In addition, upon his termination from the Company at any time under certain circumstances, the unvested portion of his SAR awards that would have vested during the 24 months following the date of such termination will immediately vest, and all vested SAR awards shall be exercisable for 18 months following such termination. Upon his termination in connection with a change in control of the Company under certain circumstances, 100% of his SAR awards will immediately vest, and all vested SAR awards shall be exercisable for 18 months following such event. If he resigns from the Company after the fifth anniversary of his effective date of employment, 100% of his SAR awards that have remained outstanding for at least 12 months will immediately vest, and all vested SAR awards shall be exercisable for 18 months following such resignation.
Mr. Bergh's right to any severance or vesting acceleration is subject to his execution of an effective release of claims in favor of the Company and compliance with certain restrictive covenants.


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Mr. Bergh is eligible to receive standard healthcare, life insurance and long-term savings program benefits, as well as relocation program benefits. He also receives benefits under the Company's various executive perquisite programs consistent with that provided to his predecessor.
Mr. Bergh's employment is at-will and may be terminated by the Company or by him at any time. Mr. Bergh does not receive any separate compensation for his services as a member of our Board.
Mr. Singh. We have an employment arrangement with Mr. Singh effective January 16, 2013. It provides for his annual base salary and participation in our AIP, which are subject to annual review and adjustment, and his participation in our 2006 Equity Incentive Plan. These elements of Mr. Singh's compensation for 2014 are reflected and discussed in "Compensation Discussion and Analysis for Named Executive Officers." Under this arrangement, Mr. Singh also received a one-time sign-on bonus that is subject to prorated repayment if his employment with the Company does not exceed twenty-four months under certain conditions.
Mr. Singh also receives standard healthcare, life insurance and long-term savings program benefits, as well as benefits under our various executive perquisite programs.
Mr. Singh’s employment is at-will and may be terminated by the Company or by Mr. Singh at any time.
Mr. Bagattini. We have an employment arrangement with Mr. Bagattini effective June 3, 2013. He is on assignment in Singapore. His arrangement provides for his annual base salary and participation in our AIP, which are subject to annual review and adjustment, and his participation in our 2006 Equity Incentive Plan. These elements of Mr. Bagattini's compensation for 2014 are reflected and discussed in "Compensation Discussion and Analysis for Named Executive Officers." Under this arrangement, he received a sign-on bonus of $500,000 to be paid in two installments. The first installment of $250,000 has already been paid. The second installment of $250,000 was paid in July 2014. These payments are subject to repayment if his employment with the Company does not exceed 24 months under certain conditions.
He is eligible to receive benefits under our global assignment program, including, education association fees and a housing allowance of up to approximately $18,000 per month to cover the cost of his rental and utilities.
Mr. Bagattini also receives standard healthcare, life insurance, and long-term savings program benefits, as well as benefits under our various executive perquisite programs.
Mr. Bagattini’s employment is at-will and may be terminated by the Company or by Mr. Bagattini upon 3 months' notice or pay in lieu of notice.
Mr. Nomura . We have an employment arrangement with Mr. Nomura effective February 3, 2014. It provides for his annual base salary and participation in our AIP, which are subject to annual review and adjustment, and his participation in our 2006 Equity Incentive Plan. These elements of Mr. Nomura's compensation for 2014 are reflected and discussed in "Compensation Discussion and Analysis for Named Executive Officers." Under this arrangement, he received a sign-on bonus of $880,000 to be paid in two installments. The first installment of $580,000 has already been paid. The second installment of $300,000 will be made following the end of the 12 th month from his start date. These payments are subject to repayment if his employment with the Company does not exceed 24 months under certain conditions.
Mr. Nomura also receives standard healthcare, life insurance and long-term savings program benefits, as well as benefits under our various executive perquisite programs.
Mr. Nomura’s employment is at-will and may be terminated by the Company or by Mr. Nomura at any time.
Ms. Rohosy .  We have an employment arrangement with Ms. Rohosy effective May 9, 2011. It initially provided for an annualized base salary of $350,000 and an AIP participation rate of 40%, both of which have since been adjusted, and may be further adjusted, pursuant to annual review. The arrangement also provides for her participation in our 2006 Equity Incentive Plan. These elements of Ms. Rohosy's compensation for 2014 are reflected and discussed in "Compensation Discussion and Analysis for Named Executive Officers."
Ms. Rohosy also receives standard healthcare, life insurance and long-term savings program benefits, as well as benefits under our various executive perquisite programs.
Ms. Rohosy's employment is at-will and may be terminated by the Company or by Ms. Rohosy at any time.



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2014 Grants of Plan-Based Awards
The following table provides information on all plan-based awards granted to each of our named executive officers during the year ended November 30, 2014 . The awards and the unvested portion of stock appreciation rights ("SARs") identified below are also reported in the Outstanding Equity Awards at Fiscal Year-End table.
 
 
 
 
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards (1)
 
Estimated Future Payouts
Under Equity
Incentive Plan Awards (2)
 
All Other Option Awards
Name
Grant Date
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Number of Securities Underlying Options (3)
(#)
 
Exercise or Base Price of Option Awards (4)
($)
 
Full Grant Date Fair Value (5)
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
N/A
 
$
—

 
$
1,920,000

 
$
3,840,000

 
 
 
 
 
 
 
 
 
 
 
 
 
2/5/2014
 
 
 
 
 
 
 
64,385

 
128,770

 
193,154

 
 
 
$
64.50

 
$
2,421,571

 
2/5/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
193,154

 
64.50

 
3,372,057

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Harmit Singh
N/A
 
—

 
560,000

 
1,120,000

 
 
 
 
 
 
 
 
 
 
 
 
 
2/5/2014
 
 
 
 
 
 
 
14,684

 
29,369

 
44,052

 
 
 
64.50

 
552,296

 
2/5/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
44,052

 
64.50

 
769,054

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roy Bagattini
N/A
 
—

 
465,500

 
931,000

 
 
 
 
 
 
 
 
 
 
 
 
 
2/5/2014
 
 
 
 
 
 
 
7,625

 
15,249

 
22,873

 
 
 
64.50

 
286,764

 
2/5/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
22,873

 
64.50

 
399,314

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Craig Nomura
N/A
 
—

 
406,000

 
812,000

 
 
 
 
 
 
 
 
 
 
 
 
 
2/5/2014
 
—

 
 
 
 
 
10,731

 
21,462

 
32,192

 
 
 
64.50

 
403,602

 
2/5/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
32,192

 
64.50

 
562,004

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Anne Rohosy
N/A
 
—

 
576,000

 
1,152,000

 
 
 
 
 
 
 
 
 
 
 
 
 
2/5/2014
 
 
 
 
 
 
 
12,425

 
24,850

 
37,275

 
 
 
64.50

 
467,314

 
2/5/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
37,275

 
64.50

 
650,742

______________
(1)
The amounts shown in these columns reflect the estimated potential payment levels for the fiscal 2014 performance period under the Company’s annual incentive plan (the “AIP”), further described under “Compensation Discussion and Analysis for Named Executive Officers.” The potential payouts were performance-based and, therefore, were completely at risk. The potential target and maximum payment amounts assume achievement of 100% and 200%, respectively, of the individual objectives of the AIP. There were no threshold payment amounts for fiscal 2014 under the AIP. Each executive received a bonus under the AIP, which is reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation."
(2)
For each executive, the amounts shown in these columns reflect, in shares, the threshold, target and maximum amounts for performance-based SARs subject to a three-year performance period beginning in fiscal 2014 that is further described under “Compensation Discussion and Analysis for Named Executive Officers.” The potential awards are performance-based and, therefore, completely at risk.
(3)
Reflects SARs granted in 2014 under the 2006 Equity Incentive Plan.
(4)
The exercise price is based on the fair market value of the Company's common stock as of the grant date established by the Evercore valuation process.
(5)
The value of an option award, which is granted in the form of stock appreciation rights, is based on the fair value as of the grant date of such award determined in accordance with FASB ASC 718. Please refer to Notes 1 and 11 of the audited consolidated financial statements for the relevant assumptions used to determine the valuation of our option awards. Values for future payouts of performance-based SARs reflect the aggregate grant date fair value based on target award achievement. If maximum performance conditions are achieved over the entire three-year period, the grant date fair values would be $3,632,338 for Mr. Bergh, $828,416 for Mr. Singh, $430,136 for Mr. Bagattini, $605,383 for Mr. Nomura, and $700,971 for Ms. Rohosy.



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Outstanding Equity Awards at 2014 Fiscal Year-End
The following table shows all outstanding equity awards held by each of our named executive officers as of November 30, 2014 . The vesting schedule for each grant is shown following this table.
 
 
 
SAR Awards
Name
 
 
Number of Securities Underlying Unexercised SARs Exercisable
 
Number of Securities Underlying Unexercised SARs Unexercisable (1)
 
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised (2)
 
SAR Exercise Price (3)
 
SAR Expiration Date
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
 
354,835

 
81,885

(a)
 
 
 
$
32.00

 
2/2/2019
 
 
 
353,362

 
145,502

(b)
 
 
 
32.00

 
2/2/2019
 
 
 
131,944

 
155,934

(c)
 
 
 
37.75

 
2/5/2020
 
 
 
 
 
193,154

(d)
 
 
 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
191,919

 
37.75

 
2/5/2020
 
 
 
 
 
 
 
 
128,770

 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
Harmit Singh
 
30,092

 
35,564

(c)
 
 
 
37.75

 
2/5/2020
 
 
 
 
 
44,052

(d)
 
 
 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
43,771

 
37.75

 
2/5/2020
 
 
 
 
 
 
 
 
29,369

 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
Roy Bagattini
 
11,404

 
20,796

(f)
 
 
 
59.25

 
7/11/2020
 
 
 
 
 
22,873

(d)
 
 
 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
21,467

 
59.25

 
7/11/2020
 
 
 
 
 
 
 
 
15,249

 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
Craig Nomura
 
 
 
32,192

(d)
 
 
 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
21,462

 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
Anne Rohosy
 
9,375

 
4,375

(e)
 
 
 
39.50

 
7/14/2018
 
 
 
10,938

 
21,875

(b)
 
 
 
32.00

 
2/2/2019
 
 
 
7,366

 
27,375

(c)
 
 
 
37.75

 
2/5/2020
 
 
 
 
 
37,275

(d)
 
 
 
64.50

 
2/5/2021
 
 
 
 
 
 
 
 
33,670

 
37.75

 
2/5/2020
 
 
 
 
 
 
 
 
24,850

 
64.50

 
2/5/2021
______________
(1)
The following sets forth the vesting schedule for the outstanding SAR awards and generally depends upon continued employment:
(a)
SARs vest 25% on 9/1/2012 and then monthly over the remaining 36 months.
(b)
SARs vest 25% on 2/1/2013 and then monthly over the remaining 36 months.
(c)
SARs vest 25% on 2/5/2014 and then monthly over the remaining 36 months.
(d)
SARs vest 25% on 2/5/2015 and then monthly over the remaining 36 months.
(e)
SARs vest 25% on 7/13/2012 and then monthly over the remaining 36 months.
(f)
SARs vest 25% on 7/10/2014 and then monthly over the remaining 36 months.
(2)
Represents the target number of SARs that may be earned under the performance-based SAR award program (see "Compensation Discussion and Analysis for Named Executive Officers" for more details) that vest at the end of the three-year performance period. The total number of SARs that could vest if the maximum performance is achieved over the three-year performance period for each named executive is as follows: Mr. Bergh (481,032), Mr. Singh (109,710), Mr. Bagattini (55,074), Mr. Nomura (32,192), and Ms. Rohosy (87,780).
(3)
The SAR exercise prices reflect the fair market value of the Company's common stock as of the grant date as established by the Evercore valuation process.


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Option Exercises
The following table shows all SARs exercised and the value realized upon exercise by each of our named executive officers for the year ended November 30, 2014 .
 
Name
 
Number of Shares Acquired on Exercise
(#)
 
Value Realized on Exercise
($)
 
 
 
 
 
 
 
 
 
Charles V. Bergh
—
 
$
—

 
 
Harmit Singh
—
 
—

 
 
Roy Bagattini
—
 
—

 
 
Craig Nomura
—
 
—

 
 
Anne Rohosy
28,282
 
828,419

 
Executive Retirement Plans
Non-Qualified Deferred Compensation
The Deferred Compensation Plan for Executives and Outside Directors (“Deferred Compensation Plan”) is a U.S. non-qualified, unfunded deferred tax effective savings plan provided to the executives, among other executives and the directors, as part of competitive compensation.
Participants may elect to defer all or a portion of their base salary and AIP payment and may elect an in-service and/or retirement distribution. Executive officers who defer salary or bonus under this plan are credited with market-based returns depending upon the investment choices made by the executive applicable to each deferral. The investment options under the plan, which closely mirror the options provided under our qualified 401(k) plan, include a number of mutual funds with varying risk and return profiles. Participants may change their investment choices as frequently as they desire, consistent with our 401(k) plan.
In addition, under the Deferred Compensation Plan, the Company provides a match up to 6% of eligible deferred compensation that cannot be provided under the qualified 401(k) plan due to IRS qualified plan compensation limits. The amounts in the table below reflect non-qualified contributions over the 401(k) limit by the executive officers and the resulting Company match.
The table below provides information on the non-qualified deferred compensation activity for each of our named executive officers for the year ended November 30, 2014 .
 
 
 
Year Ended November 30, 2014
 
 
 
 
Name
 
Company Contributions (1)
 
Executive Contributions
 
Aggregate Earnings
 
Aggregate Withdrawals / Distributions
 
Aggregate Balance at November 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles V. Bergh
$
249,029

 
$
199,233

 
$
105,537

 
$
—

 
$
1,155,974

 
 
Harmit Singh
—

 
—

 
—

 
—

 
—

 
 
Roy Bagattini (2)
102,200

 
—

 
—

 
—

 
165,626

 
 
Craig Nomura
—

 
—

 
—

 
—

 
—

 
 
Anne Rohosy
99,938

 
665,095

 
233,688

 
—

 
3,395,408

 
______________
(1)
For Mr. Bergh and Ms. Rohosy, these amounts reflect the deferred compensation plan match contributions made by the Company and are reflected in the Summary Compensation Table under All Other Compensation.
(2)
Mr. Bagattini participates in an international supplemental retirement savings plan designed for globally mobile employees. The Company contributes 14% of Mr. Bagattini's annual base salary on his behalf to such plan. The Company’s contribution is grossed up to provide a tax-advantaged contribution. For additional detail, please refer to the section entitled Benefits and Perquisites in “Compensation Discussion and Analysis for Named Executive Officers.”


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Potential Payments Upon Termination Or Change In Control
On June 9, 2011, the Company and Charles V. Bergh, our President and CEO, executed an employment agreement in connection with Mr. Bergh joining the Company. The employment agreement provides that if Mr. Bergh is involuntarily terminated without Cause, or Mr. Bergh terminates his employment for Good Reason, other than in connection with a Change in Control of the Company (each as defined in the Employment Agreement) within four years of his effective date of employment, he will be entitled to receive, among other standard benefits, (1) an aggregate amount equal to two times the sum of his then-effective base salary plus his then-effective target AIP amount, (2) a prorated AIP award in respect of the performance period at the time, and (3) company-paid continuation coverage for certain benefits for 18 months. In addition, the unvested portion of his SAR awards that would have vested during the 24 months following the date of such termination will immediately vest, and all vested SAR awards will be exercisable for 18 months following such termination.
Mr. Bergh's right to any severance or vesting acceleration is subject to his execution of an effective release of claims in favor of the Company and compliance with certain restrictive covenants.
Following the expiration of such four-year anniversary, in lieu of the payments and benefits described above, Mr. Bergh will participate in any severance policy applicable to the other senior executives of the Company in effect at such time in accordance with the terms of such policy.
The named executive officers, other than the CEO, are eligible to receive certain benefits and payments upon their separation from the Company under certain circumstances under the terms of the Executive Severance Plan for U.S. executives and the Equity Incentive Plan.
In 2014 , our U.S. severance arrangements under our Executive Severance Plan offered the named executive officers, except Mr. Bergh and Mr. Bagattini, basic severance of two weeks of base salary or upon execution of a General Release Agreement, enhanced severance of 78 weeks of base salary plus the beneficiaries' AIP target amount, if their employment ceases due to a reduction in force, layoff or position elimination. Mr. Bagattini, under local Singapore law, is eligible for three months annual base salary plus a month of base salary for every year of service. We also cover the cost of the COBRA health coverage premium for the duration of the executive's severance payment period, up to a maximum of 18 months. The COBRA premium coverage is shared between the individual and the Company at the same shared percentage that was effective during the executive's employment. We also provide life insurance, career counseling and transition services. These severance benefits would not be payable upon a change in control if the executive is still employed or offered a comparable position with the surviving entity.
Under the Equity Incentive Plan, in the event of a change in control in which the surviving corporation does not assume or continue the outstanding SARs or substitute similar awards for the outstanding SARs, the vesting schedule of all SARs held by executives that are still employed will be accelerated in full to a date prior to the effective time of the transaction as determined by the Board. If the SARs are not exercised at or prior to the effective time of the transaction, all rights to exercise them will terminate, and any reacquisition or repurchase rights held by the Company with respect to such SARs shall lapse.
The information in the tables below reflects the estimated value of the compensation to be paid by us to each of the named executive officers in the event of termination or a change in control. The amounts shown below assume that each named individual was employed and that a termination or change in control was effective as of November 30, 2014 . The actual amounts that would be paid can only be determined at the time of an actual termination event. The amounts also assume a share price of $81 for the SAR grants, which is based on the Evercore share valuation dated as of December 31, 2014 .


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Charles V. Bergh
 
 
 
 
 
 
 
 
 
 
Executive Benefits and Payments Upon Termination
 
Voluntary Termination
 
Retirement
 
Involuntary
Not for Cause
Termination
 
For Cause
Termination
 
Change in Control
 
 
 
 
 
 
 
 
 
 
 
Compensation:
 
 
 
 
 
 
 
 
 
 
Severance (1)
 
$
—

 
$
—

 
$
8,320,000

 
$
—

 
$
8,320,000

Stock Appreciation Rights (2)
 
—

 
—

 
19,558,409

 
—

 
31,498,351

 
 
 
 
 
 
 
 
 
 
 
Benefits:
 
 
 
 
 
 
 
 
 
 
COBRA & Life Insurance (3)
 
—

 
—

 
18,575

 
—

 
18,575

_____________
(1)
In the event of involuntary termination without Cause, Good Reason, or Change in Control, Mr. Bergh would be eligible for severance based on Mr. Bergh's annual salary of $1,280,000, his AIP target of 150% of his base salary as set forth in the termination provisions in his employment contract.
(2)
In the event of a Change in Control, assumes vesting acceleration of all unvested SARs and the target number of shares underlying performance-based SARs.
(3)
Reflects 18 months of a COBRA subsidy and life insurance premiums at the same Company/employee percentage sharing as during employment. Mr. Bergh is also eligible for a COBRA subsidy should termination occur due to a Change in Control, based on his employment contract.
Harmit Singh
 
 
 
 
 
 
 
 
 
 
Executive Benefits and Payments Upon Termination
 
Voluntary Termination
 
Retirement
 
Involuntary
Not for Cause
Termination
 
For Cause
Termination
 
Change in Control
 
 
 
 
 
 
 
 
 
 
 
Compensation:
 
 
 
 
 
 
 
 
 
 
Severance (1)
 
$
—

 
$
—

 
$
1,890,000

 
$
—

 
$
—

Stock Appreciation Rights (2)
 
—

 
—

 
—

 
—

 
4,642,685

 
 
 
 
 
 
 
 
 
 
 
Benefits:
 
 
 
 
 
 
 
 
 
 
COBRA & Life Insurance (3)
 
—

 
—

 
18,575

 
—

 
—

_____________
(1)
Based on Mr. Singh's annual base salary of $700,000 and his AIP target of 80% of his base salary.
(2)
In the event of a Change in Control, assumes vesting acceleration of all unvested SARs and the target number of shares underlying performance-based SARs.
(3)
Reflects 18 months of a COBRA subsidy and life insurance premiums at the same Company/employee percentage sharing as during employment.


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Roy Bagattini
 
 
 
 
 
 
 
 
 
Executive Benefits and Payments Upon Termination
 
Voluntary Termination
 
Retirement
 
Involuntary
Not for Cause
Termination
 
For Cause
Termination
 
Change in Control
 
 
 
 
 
 
 
 
 
 
 
Compensation:
 
 
 
 
 
 
 
 
 
 
Severance (1)
 
$
—

 
$
—

 
$
216,967

 
$
—

 
$
—

Stock Appreciation Rights (2)
 
—

 
—

 
—

 
—

 
1,548,233

 
 
 
 
 
 
 
 
 
 
 
Benefits:
 
 
 
 
 
 
 
 
 
 
COBRA & Life Insurance
 
—

 
—

 
—

 
—

 
—

_____________
(1)
Based on on three months of Mr. Bagattini’s annual base salary expressed in U.S. Dollars of $650,902 as notice pay and one month of salary based on years of service, in accordance with local Singapore provisions.
(2)
In the event of a Change in Control, assumes vesting acceleration of all unvested SARs and the target number of shares underlying performance-based SARs.
Craig Nomura
 
 
 
 
 
 
 
 
 
Executive Benefits and Payments Upon Termination
 
Voluntary Termination
 
Retirement
 
Involuntary
Not for Cause
Termination
 
For Cause
Termination
 
Change in Control
 
 
 
 
 
 
 
 
 
 
 
Compensation:
 
 
 
 
 
 
 
 
 
 
Severance (1)
 
$
—

 
$
—

 
$
1,479,000

 
$
—

 
$
—

Stock Appreciation Rights (2)
 
—

 
—

 
—

 
—

 
885,291

 
 
 
 
 
 
 
 
 
 
 
Benefits:
 
 
 
 
 
 
 
 
 
 
COBRA & Life Insurance (3)
 
—

 
—

 
18,575

 
—

 
—

_____________
(1)
Based on Mr. Nomura's annual base salary of $580,000 and his AIP target of 70% of his base salary.
(2)
In the event of a Change in Control, assumes vesting acceleration of all unvested SARs and the target number of shares underlying performance-based SARs.
(3)
Reflects 18 months of a COBRA subsidy and life insurance premiums at the same Company/employee percentage sharing as during employment.

Anne Rohosy
 
 
 
 
 
 
 
 
 
 
Executive Benefits and Payments Upon Termination
 
Voluntary Termination
 
Retirement
 
Involuntary
Not for Cause
Termination
 
For Cause
Termination
 
Change in Control
 
 
 
 
 
 
 
 
 
 
 
Compensation:
 
 
 
 
 
 
 
 
 
 
Severance (1)
 
$
—

 
$
—

 
$
1,944,000

 
$
—

 
$
—

Stock Appreciation Rights (2)
 
—

 
—

 
—

 
—

 
4,917,918

 
 
 
 
 
 
 
 
 
 
 
Benefits:
 
 
 
 
 
 
 
 
 
 
COBRA & Life Insurance (3)
 
—

 
—

 
18,575

 
—

 
—

____________
(1)
Based on Ms. Rohosy's annual base salary of $720,000 and her AIP target of 80% of her base salary.
(2)
In the event of a Change in Control, assumes vesting acceleration of all unvested SARs and the target number of shares underlying performance-based SARs.
(3)
Reflects 18 months of a COBRA subsidy and life insurance premiums at the same Company/employee percentage sharing as during employment.


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DIRECTOR COMPENSATION
The following table provides compensation information for our directors who were not employees in fiscal 2014 :
 
Name
 
Fees Earned or Paid in Cash
 
Stock Awards (1)
 
All Other Compensation (2)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Stephen C. Neal (3)
$
207,500

 
$
224,910

 
$
9,095

 
$
441,505

 
 
Robert D. Haas (4)
25,000

 
—

 
96,000

 
121,000

 
 
Fernando Aguirre (5)
281,948

 
—

 
5,483

 
287,431

 
 
Troy Alstead
120,000

 
124,943

 
4,580

 
249,523

 
 
Jill Beraud
100,000

 
124,943

 
2,580

 
227,523

 
 
Vanessa J. Castagna
100,000

 
124,943

 
5,418

 
230,361

 
 
Robert A. Eckert (6)
120,000

 
124,943

 
9,030

 
253,973

 
 
Spencer Fleischer
111,250

 
124,943

 
1,677

 
237,870

 
 
Mimi L. Haas (7)
75,000

 
156,161

 
—

 
231,161

 
 
Peter E. Haas, Jr.
100,000

 
124,943

 
5,354

 
230,297

 
 
Jenny Ming (8)
25,000

 
—

 
—

 
25,000

 
 
Patricia Salas Pineda (9)
100,000

 
124,943

 
17,433

 
242,376

 
___________
(1)
These amounts, from RSUs granted under the Equity Incentive Plan in 2014 , reflect the aggregate grant date fair value computed in accordance with the Company's accounting policy for stock-based compensation. The following table shows the aggregate number of RSUs outstanding but unexercised at fiscal year-end for those who were directors in fiscal 2014, including RSUs that were vested but deferred and RSUs that were not vested:
 
Name
Aggregate Outstanding RSUs
 
 
 
 
 
 
Stephen C. Neal
10,592
 
 
Robert D. Haas
2,541
 
 
Fernando Aguirre
1,821
 
 
Troy Alstead
6,926
 
 
Jill Beraud
4,392
 
 
Vanessa J. Castagna
6,018
 
 
Robert A. Eckert
12,590
 
 
Spencer Fleischer
3,986
 
 
Mimi L. Haas
2,335
 
 
Peter E. Haas, Jr.
5,986
 
 
Jenny Ming
—
 
 
Patricia Salas Pineda
14,467
 
(2)
This column includes the aggregate grant date fair value of dividend equivalents provided to each director in fiscal 2014 in the following amounts:
 
Name
Fair Value of Dividend Equivalent RSUs Granted
 
 
 
 
 
 
Stephen C. Neal
$
9,095

 
 
Robert D. Haas
2,000

 
 
Fernando Aguirre
5,483

 
 
Troy Alstead
4,580

 
 
Jill Beraud
2,580

 
 
Vanessa J. Castagna
5,418

 
 
Robert A. Eckert
9,030

 
 
Spencer Fleischer
1,677

 
 
Mimi L. Haas
—

 
 
Peter E. Haas, Jr.
5,354

 
 
Jenny Ming
—

 
 
Patricia Salas Pineda
9,933

 


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(3)
Mr. Neal is the Chairman of the Board. Mr. Neal elected to defer 100% of his director's fees under the Deferred Compensation Plan.
(4)
Mr. R.D. Haas retired from the Board on April 3, 2014. This amount represents other compensation received both as a member of the Board and as Chairman Emeritus. Includes administrative support services valued at $66,435, provision of a car at a value of $8,530, use of an office at a value of $16,932, and home security services for his services as Chairman Emeritus.
(5)
Mr. Aguirre resigned from the Board effective on August 15, 2014. This amount includes a cash distribution in the amount of $208,198 under the Deferred Compensation Plan.
(6)
Mr. Eckert elected to defer 100% of his director's fees under the Deferred Compensation Plan.
(7)
On February 5, 2014, the Board elected Mrs. Haas to the Board effective as of April 4, 2014
(8)
On September 30, 2014, the Board elected Ms. Ming to the Board effective as of that date.
(9)
Ms. Pineda elected to defer 50% of her director’s fees under the Deferred Compensation Plan. Ms. Pineda's 2014 amount includes charitable matches of $7,500.
Board compensation is reviewed by the Nominating, Governance and Corporate Citizenship Committee and approved by the Board. In fiscal 2014, director compensation consisted of an annual retainer paid in cash and equity compensation in the form of RSUs. Committee chairpersons also received an additional cash retainer, as described below.
Annual Cash Retainer
In fiscal 2014, each non-employee director received compensation consisting of an annual cash retainer fee of $100,000 and was eligible to participate in the provisions of the Deferred Compensation Plan for Executives and Outside Directors that apply to directors. In 2014 , Mr. Eckert, Mr. Neal and Ms. Pineda participated in this Deferred Compensation Plan.
Equity Compensation
In fiscal 2014, each non-employee director also received an annual equity award in the form of RSUs which are granted under the Equity Incentive Plan. The annual equity award value in the form of RSUs granted under the Equity Incentive Plan is $125,000. RSU recipients have target stock ownership guidelines of $300,000 worth of equity ownership within five years of participation in the program. The value of the RSUs is tracked against the Company's share prices, established by the Evercore valuation process.
RSUs are units, representing beneficial ownership interests, corresponding in number and value to a specified number of underlying shares of stock. The RSUs vest in three equal installments after thirteen, twenty-four and thirty-six months following the grant date. After the recipient of the RSU has held the shares for six months, he or she may require the Company to repurchase, or the Company may require the participant to sell to the Company, those shares of common stock. If the director's service terminates for reason other than cause after the first, but prior to full, vesting period then any unvested portion of the award will fully vest as of the date of such termination. In addition, each director's initial RSU grant includes a deferral delivery feature, under which the director will not receive the vested awards until six months following the cessation of service on the Board.
Under the terms of the Equity Incentive Plan, recipients of RSUs receive additional grants as a dividend equivalent when the Board declares a dividend to all stockholders. Therefore, all directors who held RSUs as of February 18, 2014, received additional RSUs as a dividend equivalent. Dividend equivalents are subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
Compensation of Committee Chairpersons
In addition to the compensation described above, committee chairpersons receive an additional retainer fee in the amount of $20,000 for the Audit Committee and the Human Resources Committee and $15,000 for the Finance Committee and the Nominating, Governance and Corporate Citizenship Committee.
Mr. Neal is the Chairman of the Board. As the Chairman of the Board, he is entitled to receive an additional annual retainer in the amount of $200,000, 50% of which is paid in cash and 50% of which is paid in the form of RSUs. The Chairman may also receive the additional retainers attributable to committee chairmanship if applicable.
Robert D. Haas is Chairman Emeritus of the Board, and in that role receives support in form of an office, related administrative support, a leased car with driver and home security services.
Compensation Committee Interlocks and Insider Participation
The Human Resources Committee serves as the compensation committee of our Board. Its members are Mr. Eckert (Chair), Ms. Castagna, Mr. P.E. Haas Jr., and Ms. Pineda. In 2014 , no member of the Human Resources Committee was a current officer or employee of ours. Mr. R.D. Haas was a member of the Human Resources Committee until he retired from the Board on April 3, 2014. He served as our Chief Executive Officer from 1984 to 1999. There are no compensation committee interlocks between us and other entities involving our executive officers and our Board members who serve as executive officers of those other entities.


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Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Our common stock is primarily owned by descendants of the family of Levi Strauss and their relatives. Shares of our common stock are not publicly held or traded. All shares are subject to a stockholders' agreement described below. The following table contains information about the beneficial ownership of our common stock as of February 9, 2015 , by:
•
Each person known by us to own beneficially more than 5% of our common stock;
•
Each of our directors and each of our named executive officers; and
•
All of our directors and executive officers as a group.
Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose of or to direct the disposition of the security. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which that person has no economic interest. Except as described in the footnotes to the table below, the individuals named in the table have sole voting and investment power with respect to all common stock beneficially owned by them, subject to community property laws where applicable.
As of February 9, 2015 , there were 282 record holders of common stock. The percentage of beneficial ownership shown in the table is based on 37,434,738  shares of common stock outstanding as of February 9, 2015 . The business address of all persons listed is 1155 Battery Street, San Francisco, California 94111.
 
Name
Number of Shares Beneficially Owned
 
Percentage of Shares Outstanding
 
 
Mimi L. Haas
6,547,314

 
17.49
%
 
 
Peter E. Haas Jr. 
6,406,307

(1)
17.11
%
 
 
Margaret E. Haas
4,354,330

(2)
11.63
%
 
 
Robert D. Haas
3,932,883

(3)
10.51
%
 
 
Peter E. Haas Jr. Family Fund
2,911,770

(4)
7.78
%
 
 
Troy Alstead
712

 
*

 
 
Jill Beraud
712

 
*

 
 
Vanessa J. Castagna
16,615

 
*

 
 
Robert A. Eckert
712

 
*

 
 
Spencer Fleischer
—

 
—

 
 
Jenny Ming
—

 
—

 
 
Stephen C. Neal
14,678

 
*

 
 
Patricia Salas Pineda
6,461

 
*

 
 
Charles V. Bergh
585,307

(5)
1.56
%
 
 
Harmit Singh
22,336

(6)
*

 
 
Anne Rohosy
32,849

(7)
*

 
 
Craig Nomura
1,912

(8)
*

 
 
Roy Bagattini
5,140

(9)
*

 
 
Directors and executive officers as a group (22 persons)
13,830,374

(10)
36.95
%
 
 
 
 
 
 
 
 
* Less than 1%.
 
 
 
 
_____________
(1)
Includes 2,911,770 shares held by the Peter E. Haas Jr. Family Fund, of which Mr. Haas is Vice President, for the benefit of charitable entities, and for which Mr. Haas shares voting and investment power. Includes an aggregate of 1,474,031 shares held by trusts, of which Mr. Haas is trustee, for the benefit of his children, grandchildren, stepdaughters and sister. Mr. Haas has sole voting and investment power over these shares. Includes 40,000 shares held by Mr. Haas' spouse over which Mr. Haas has no voting or investment power. Mr. Haas disclaims beneficial ownership of these shares.
(2)
Includes 1,314,462 shares held in trusts and a limited liability company, of which Ms. Haas is trustee and managing member, respectively, for the benefit of Ms. Haas' son. Ms. Haas has sole voting and investment power over these shares. Includes 886,122 shares held by the Margaret E. Haas Fund and 84,468 shares held by the Lynx Foundation, of which Ms. Haas is a board member, for the benefit of charitable entities and for which Ms. Haas shares voting and investment power.


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(3)
Includes 1,991,649 shares held jointly by Mr. Haas and his spouse and, as co-trustees, they share voting and investment power. Includes 599,307 shares held by a trust, of which Mr. Haas is trustee, for the benefit of his daughter. Mr. Haas has sole voting and investment power over these shares. Includes 23,645 shares held by Mr. Haas' spouse over which Mr. Haas has no voting or investment power. Mr. Haas disclaims beneficial ownership of these shares.
(4)
Peter E. Haas Jr. is a Vice President of this fund. The shares are also included in Mr. Haas' ownership amounts as referenced above.
(5)
Includes 585,307 shares that Mr. Bergh has the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
(6)
Includes 22,336 shares that Mr. Singh has the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
(7)
Includes 26,382 shares that Ms. Rohosy has the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
(8)
Includes 1,912 shares that Mr. Nomura has the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
(9)
Includes 5,140 shares that Mr. Bagattini has the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
(10)
Includes 830,396 shares that our executive officers have the right to acquire pursuant to outstanding SARs that may be exercised within 60 days of February 9, 2015 .
Equity Compensation Plan Information
The following table sets forth certain information, as of November 30, 2014 , with respect to the EIP, our only equity compensation plan. This plan was amended and restated by the Board in February 2014 and approved by our stockholders at the Annual Meeting of Stockholders in April 2014. See Note 11 to our audited consolidated financial statements included in this report for more information about the EIP.
 
Number of Outstanding Options, Warrants and Rights (1)
 
Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (2)
 
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1)
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (3)
 
 
3,526,714
 
1,628,457
 
$44.63
 
2,321,241
 
_____________
(1)
Includes only dilutive SARs.
(2)
Represents the number of shares of common stock the dilutive SARs would convert to if exercised November 30, 2014 , calculated based on the conversion formula as defined in the plan and the fair market value of our common stock on that date as determined by an independent third party.
(3)
Calculated based on the number of stock awards authorized upon the adoption of the EIP, less the number of securities to be issued upon exercise of outstanding dilutive SARs, less shares issued in connection with converted RSUs, less securities expected to be issued in the future upon conversion of outstanding RSUs. The EIP provides for an award pool of 6,000,000 shares of Company common stock that may be subject to awards under the plan (prior to the amendment, the plan provided that 700,000 shares of Company common stock could be issued to awards under the plan). The 1,628,457 shares in the table above reflects the potential number of shares which could be issued pursuant to outstanding awards. Note that the following shares may return to the EIP and be available for issuance in connection with a future award: (i) shares covered by an award that expires or otherwise terminates without having been exercised in full; (ii) shares that are forfeited or awards which are cancelled and regranted in accordance with the terms of the plan; (iii) shares covered by an award that may only be settled in cash per the terms of the award which do not count against the plan's award pool; (iv) shares withheld to cover payment of an exercise price or cover applicable tax withholding obligations; (v) shares tendered to cover payment of an exercise price; and (vi) shares that are cancelled pursuant to an exchange or repricing program.
Stockholders' Agreement
Our common stock is primarily owned by descendants of the family of Levi Strauss and their relatives and are not publicly held or traded. All shares are subject to a stockholders' agreement. The agreement limits the transfer of shares and certificates to other holders, family members, specified charities and foundations and to the Company. The agreement does not provide for registration rights or other contractual devices for forcing a public sale of shares or certificates, or other access to liquidity. The Stockholders' Agreement will terminate on April 15, 2019, (unless extended for a maximum of two, two-year periods), or earlier upon the first of the following to occur: (1) the Company's receipt of a written notice signed by stockholders holding at least two-thirds of the shares of common stock seeking to terminate the Stockholders' Agreement, or (2) 180 days following the consummation of an initial public offering ("IPO") (or such earlier date following the consummation of an IPO that the Company's Board of Directors may determine).
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Robert D. Haas, Chairman Emeritus of the Company, Charles V. Bergh, President and Chief Executive Officer, Peter E. Haas Jr., a director of the Company, and Kelly McGinnis, Senior Vice President of Corporate Affairs and Chief Communications Officer, are board members of the Levi Strauss Foundation, which is not a consolidated entity of the Company. Seth R. Jaffe, Senior Vice President and General Counsel, is Vice President of the Levi Strauss Foundation. During 2014 , we donated $6.3 million to the Levi Strauss Foundation.


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Kelly McGinnis and Lisa Collier, Executive Vice President and President of Global Dockers ® Brand, are board members of the Red Tab Foundation, which is not a consolidated entity of the Company. Peter E. Haas Jr. is President of the Red Tab Foundation. During 2014 , the Company donated $0.6 million to the Red Tab Foundation.
Procedures for Approval of Related Party Transactions
We have a written policy concerning the review and approval of related party transactions. Potential related party transactions are identified through an internal review process that includes a review of director and officer questionnaires and a review of any payments made in connection with transactions in which related persons may have had a direct or indirect material interest. Any business transactions or commercial relationships between the Company and any director, stockholder, or any of their immediate family members, are reviewed by the Nominating, Governance and Corporate Citizenship Committee of the board and must be approved by at least a majority of the disinterested members of the board. Business transactions or commercial relationships between the Company and named executive officers who are not directors or any of their immediate family members requires approval of the chief executive officer with reporting to the Audit Committee.
Director Independence Policy
Although our shares are not registered on a national securities exchange, we review and take into consideration the director independence criteria required by both the New York Stock Exchange and the NASDAQ Stock Market in determining the independence of our directors on an annual basis. In addition, the charters of our board committees prohibit members from having any relationship that would interfere with the exercise of their independence from management and the Company. The fact that a director may own stock in the Company is not, by itself, considered an "interference" with independence under the committee charters. Family stockholders or other family member directors are not eligible for membership on the Audit Committee. These independence standards are disclosed on our website at http://www.levistrauss.com/investors/corporate-governance . Except as described below, all of our directors are independent under the independence criteria required by the New York Stock Exchange and the NASDAQ Stock Market.
Charles V. Bergh, who serves as our full-time President and Chief Executive Officer, is not considered independent due to his employment with the Company. Robert A. Eckert will not serve as a member of the Audit Committee while he has a family member through marriage who is employed by our independent registered public accounting firm. The Board does not have a lead director.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Engagement of the independent registered public accounting firm.   The audit committee is responsible for approving every engagement of our independent registered public accounting firm to perform audit or non-audit services for us before being engaged to provide those services. The audit committee's pre-approval policy provides as follows:
•
First, once a year when the base audit engagement is reviewed and approved, management will identify all other services (including fee ranges) for which management knows or believes it will engage our independent registered public accounting firm for the next 12 months. Those services typically include quarterly reviews, statutory audits, specified tax matters, certifications to the lenders as required by financing documents, and consultation on new accounting and disclosure standards.
•
Second, if any new proposed engagement comes up during the year that was not pre-approved by the audit committee as discussed above, the engagement will require: (i) specific approval of the chief financial officer and corporate controller (including confirming with counsel permissibility under applicable laws and evaluating potential impact on independence) and, if approved by management, (ii) approval of the audit committee.
•
Third, the chair of the audit committee will have the authority to give such approval, but may seek full audit committee input and approval in specific cases as he or she may determine.


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Auditor fees.   The following table shows fees billed to or incurred by us for professional services rendered by PricewaterhouseCoopers LLP, our independent registered public accounting firm during 2014 and 2013 :
 
Year Ended
 
November 30, 2014
 
November 24, 2013
 
(Dollars in thousands)
Services provided:
 
 
 
Audit fees (1)
$
5,897

 
$
4,931

Audit-related fees
—

 
—

Tax fees
644

 
703

All other fees (2)
—

 
1,805

Total fees
$
6,541

 
$
7,439

_____________
(1)
These include fees for the audit of our annual consolidated financial statements, quarterly reviews of interim consolidated financial statements and statutory audits. Further, these include fees for services in support of issuing non-audit letters over financial information, as well as fees for access to electronic accounting and audit reference materials.
(2)
Consist of fees for other permissible services other than the services reported above. The 2013 fees primarily consist of consulting services associated with the Company's operational planning processes.


118
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PART IV
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES

  List the following documents filed as a part of the report:

1. Financial Statements

The following consolidated financial statements of the Company are included in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders' Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts

All other schedules have been omitted because they are inapplicable, not required or the information is included in the Consolidated Financial Statements or Notes thereto.
3.1
 
Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on April 6, 2001.
 
 
 
3.2
 
Amended and Restated By-Laws. Incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K filed with the Commission on July 16, 2012.
 
 
 
4.1
 
Fiscal Agency Agreement, dated November 21, 1996, between the Registrant and Citibank, N.A., relating to ¥20 billion 4.25% bonds due 2016. Incorporated by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 4, 2000.
 
 
 
4.2
 
Indenture, relating to the Euro denominated Senior Notes due 2018 and the U.S. Dollar denominated Senior Notes due 2020, dated as of May 6, 2010, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 7, 2010.
 
 
 
4.3
 
Indenture relating to the 6.875% Senior Notes due 2022, dated as of May 8, 2012, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.4
 
First Supplemental Indenture, dated as of March 14, 2013, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Commission on March 15, 2013.
 
 
 
10.1
 
Stockholders Agreement, dated April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant) and the stockholders. Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 4, 2000.
 
 
 
10.2
 
Excess Benefit Restoration Plan. Incorporated by reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.3
 
Supplemental Benefit Restoration Plan. Incorporated by reference to Exhibit 10.5 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*


119
Table of Contents

 
 
 
10.4
 
First Amendment to Supplemental Benefit Restoration Plan. Incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.5
 
Executive Severance Plan effective February 10, 2014. Incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on April 8, 2014.*
 
 
 
10.6
 
Annual Incentive Plan, effective November 25, 2013. Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 6, 2014.*
 
 
 
10.7
 
Deferred Compensation Plan for Executives and Outside Directors, Amended and Restated, effective January 1, 2011. Incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.8
 
First Amendment to Deferred Compensation Plan for Executives and Outside Directors, dated August 26, 2011. Incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.9
 
Levi Strauss & Co. 2006 Equity Incentive Plan, as amended and restated to date. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 10, 2014.*
 
 
 
10.10
 
Rabbi Trust Agreement, effective January 1, 2003, between the Registrant and Boston Safe Deposit and Trust Company. Incorporated by reference to Exhibit 10.65 to Registrant's Annual Report on Form 10-K filed with the Commission on February 12, 2003.*
 
 
 
10.11
 
Form of stock appreciation right award agreement. Incorporated by reference to Exhibit 99.2 to Registrant's Current Report on Form 8-K filed with the Commission on July 19, 2006.*
 
 
 
10.12
 
Director Indemnification Agreement. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on July 10, 2008.
 
 
 
10.13
 
Second Amendment to Lease, dated November 12, 2009, by and among the Registrant, Blue Jeans Equities West, a California general partnership, Innsbruck LP, a California limited partnership, and Plaza GB LP, a California limited partnership. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on November 25, 2009.
 
 
 
10.14
 
Employment Agreement between the Registrant and Charles V. Bergh, dated June 9, 2011. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on June 16, 2011.*
 
 
 
10.15
 
Amended and Restated Credit Agreement, dated as of March 21, 2014, by and among Levi Strauss & Co., Levi Strauss & Co. (Canada) Inc., certain other subsidiaries of Levi Strauss & Co. party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Multicurrency Administrative Agent, the other financial institutions, agents and arrangers party thereto. Filed herewith.
 
 
 
10.16
 
Exhibits to the Amended and Restated Credit Agreement. Filed herewith.
 
 
 
10.17
 
U.S. Security Agreement, dated September 30, 2011, by the registrant and certain subsidiaries of the Registrant in favor of JP Morgan Chase Bank, N.A., as Administrative Agent. Incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed with the Commission on September 30, 2011.
 
 
 
10.18
 
Employment Offer Letter between Harmit Singh and the Registrant, dated December 10, 2012. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on December 13, 2012.*
 
 
 
10.19
 
Amendment to Employment Agreement, effective as of May 8, 2012, between the Registrant and Charles V. Bergh. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.*
 
 
 
10.20
 
Employment Offer Letter between Roy Bagattini and the Registrant, dated February 20, 2013, as amended by that certain addendum by and between Mr. Bagattini and the Registrant dated December 18, 2013. Incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K filed with the Commission on February 11, 2014.*
 
 
 
10.21
 
Employment Offer Letter between Anne Rohosy and the Registrant, dated September 29, 2009. Incorporated by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K filed with the Commission on February 11, 2014.*
 
 
 
10.22
 
Employment Offer Letter between Craig Nomura and the Registrant, dated January 6, 2014. Filed herewith.*
 
 
 


120
Table of Contents

10.23
 
Forms of stock appreciation rights award agreements. Filed herewith*
 
 
 
10.24
 
Master Services Agreement, by and between the Registrant and Wipro Limited, dated as of November 7, 2014. Filed herewith. **
 
 
 
10.25
 
Exhibits to the Master Services Agreement, by and between the Registrant and Wipro Limited. Filed herewith. **
 
 
 
10.26
 
First Amendment to Stockholders' Agreement, dated December 22, 2014. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on December 23, 2014.
 
 
 
12
 
Statements re: Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
 
 
 
14.1
 
Worldwide Code of Business Conduct of Registrant. Incorporated by reference to Exhibit 14.1 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.
 
 
 
21
 
Subsidiaries of the Registrant. Filed herewith.
 
 
 
31.1
  
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
31.2
  
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
32
  
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
 
 
 
101.INS
  
XBRL Instance Document. Filed herewith.
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document. Filed herewith.
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
 
 
 
* Management contract, compensatory plan or arrangement.
** Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Commission.

 



121
Table of Contents

SCHEDULE II
 
 
 
 
 
 
 
 
 
LEVI STRAUSS & CO. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
 
 
 
 
 
 
 
 
Allowance for Doubtful Accounts
Balance at Beginning of Period
 
Additions Charged to Expenses
 
Deductions (1)
 
Balance at End of Period
 
(Dollars in thousands)
November 30, 2014
$
18,264

 
$
662

 
$
6,222

 
$
12,704

November 24, 2013
$
20,738

 
$
1,158

 
$
3,632

 
$
18,264

November 25, 2012
$
22,684

 
$
5,024

 
$
6,970

 
$
20,738

 
 
 
 
 
 
 
 
Sales Returns
Balance at Beginning of Period
 
Additions Charged to Net Sales
 
Deductions (1)
 
Balance at End of Period
 
(Dollars in thousands)
November 30, 2014
$
32,675

 
$
138,577

 
$
139,061

 
$
32,191

November 24, 2013
$
40,575

 
$
137,613

 
$
145,513

 
$
32,675

November 25, 2012
$
51,023

 
$
161,620

 
$
172,068

 
$
40,575

 
 
 
 
 
 
 
 
Sales Discounts and Incentives
Balance at Beginning of Period
 
Additions Charged to Net Sales
 
Deductions (1)
 
Balance at End of Period
 
(Dollars in thousands)
November 30, 2014
$
110,572

 
$
322,164

 
$
334,320

 
$
98,416

November 24, 2013
$
102,361

 
$
331,937

 
$
323,726

 
$
110,572

November 25, 2012
$
102,359

 
$
254,556

 
$
254,554

 
$
102,361

 
 
 
 
 
 
 
 
Valuation Allowance Against Deferred Tax Assets
Balance at Beginning of Period
 
Charges/(Releases) to Tax Expense
 
(Additions) / Deductions
 
Balance at End of Period
 
(Dollars in thousands)
November 30, 2014
$
96,026

 
$
—

 
$
6,212

 
$
89,814

November 24, 2013
$
74,456

 
$
5,169

 
$
(16,401
)
 
$
96,026

November 25, 2012
$
98,736

 
$
(1,329
)
 
$
22,951

 
$
74,456

_____________
(1)
The charges to the accounts are for the purposes for which the allowances were created.




122
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  
Date:
February 9, 2015
 
LEVI STRAUSS & Co.
 
 
 
(Registrant)
 
 
 
 
 
 
By:
/s/    H ARMIT  S INGH
 
 
 
Harmit Singh
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
 
 
 
 
 
 
/s/ S TEPHEN  C. N EAL
Chairman of the Board
Date:
February 9, 2015
Stephen C. Neal
 
 
 
 
 
 
 
/s/ C HARLES  V. B ERGH
Director, President and
Date:
February 9, 2015
Charles V. Bergh
Chief Executive Officer
 
 
 
 
 
 
/s/ T ROY  A LSTEAD
Director
Date:
February 9, 2015
Troy Alstead
 
 
 
 
 
 
 
/s/ J ILL  B ERAUD
Director
Date:
February 9, 2015
Jill Beraud
 
 
 
 
 
 
 
/s/ V ANESSA  J. C ASTAGNA
Director
Date:
February 9, 2015
Vanessa J. Castagna
 
 
 
 
 
 
 
/s/ R OBERT  A. E CKERT
Director
Date:
February 9, 2015
Robert A. Eckert
 
 
 
 
 
 
 
/s/ S PENCER  C. F LEISCHER
Director
Date:
February 9, 2015
Spencer C. Fleischer
 
 
 
 
 
 
 
/s/ M IMI  L. H AAS
Director
Date:
February 9, 2015
Mimi L. Haas
 
 
 
 
 
 
 
/s/ P ETER  E. H AAS  JR.
Director
Date:
February 9, 2015
Peter E. Haas Jr.
 
 
 
 
 
 
 
/s/ J ENNY  M ING
Director
Date:
February 9, 2015
Jenny Ming
 
 
 
 
 
 
 
/s/ P ATRICIA  S ALAS  P INEDA
Director
Date:
February 9, 2015
Patricia Salas Pineda
 
 
 
 
 
 
 
/s/ W ADE  W. W EBSTER
Vice President and Controller
Date:
February 9, 2015
Wade W. Webster
(Principal Accounting Officer)
 
 


123
Table of Contents

SUPPLEMENTAL INFORMATION
We will furnish our 2014 annual report and proxy statement to our stockholders after the filing of this Form 10-K and will furnish copies of such material to the SEC at such time.


124
Table of Contents

EXHIBIT INDEX
3.1
 
Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on April 6, 2001.
 
 
 
3.2
 
Amended and Restated By-Laws. Incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K filed with the Commission on July 16, 2012.
 
 
 
4.1
 
Fiscal Agency Agreement, dated November 21, 1996, between the Registrant and Citibank, N.A., relating to ¥20 billion 4.25% bonds due 2016. Incorporated by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 4, 2000.
 
 
 
4.2
 
Indenture, relating to the Euro denominated Senior Notes due 2018 and the U.S. Dollar denominated Senior Notes due 2020, dated as of May 6, 2010, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 7, 2010.
 
 
 
4.3
 
Indenture relating to the 6.875% Senior Notes due 2022, dated as of May 8, 2012, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.4
 
First Supplemental Indenture, dated as of March 14, 2013, between the Registrant and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Commission on March 15, 2013.
 
 
 
10.1
 
Stockholders Agreement, dated April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant) and the stockholders. Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 4, 2000.
 
 
 
10.2
 
Excess Benefit Restoration Plan. Incorporated by reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.3
 
Supplemental Benefit Restoration Plan. Incorporated by reference to Exhibit 10.5 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.4
 
First Amendment to Supplemental Benefit Restoration Plan. Incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.5
 
Executive Severance Plan effective February 10, 2014. Incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on April 8, 2014.*
 
 
 
10.6
 
Annual Incentive Plan, effective November 25, 2013. Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 6, 2014.*
 
 
 
10.7
 
Deferred Compensation Plan for Executives and Outside Directors, Amended and Restated, effective January 1, 2011. Incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.8
 
First Amendment to Deferred Compensation Plan for Executives and Outside Directors, dated August 26, 2011. Incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.*
 
 
 
10.9
 
Levi Strauss & Co. 2006 Equity Incentive Plan, as amended and restated to date. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 10, 2014.*
 
 
 
10.10
 
Rabbi Trust Agreement, effective January 1, 2003, between the Registrant and Boston Safe Deposit and Trust Company. Incorporated by reference to Exhibit 10.65 to Registrant's Annual Report on Form 10-K filed with the Commission on February 12, 2003.*
 
 
 
10.11
 
Form of stock appreciation right award agreement. Incorporated by reference to Exhibit 99.2 to Registrant's Current Report on Form 8-K filed with the Commission on July 19, 2006.*
 
 
 
10.12
 
Director Indemnification Agreement. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on July 10, 2008.
 
 
 
10.13
 
Second Amendment to Lease, dated November 12, 2009, by and among the Registrant, Blue Jeans Equities West, a California general partnership, Innsbruck LP, a California limited partnership, and Plaza GB LP, a California limited partnership. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on November 25, 2009.
 
 
 


125
Table of Contents

10.14
 
Employment Agreement between the Registrant and Charles V. Bergh, dated June 9, 2011. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on June 16, 2011.*
 
 
 
10.15
 
Amended and Restated Credit Agreement, dated as of March 21, 2014, by and among Levi Strauss & Co., Levi Strauss & Co. (Canada) Inc., certain other subsidiaries of Levi Strauss & Co. party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Multicurrency Administrative Agent, the other financial institutions, agents and arrangers party thereto. Filed herewith.
 
 
 
10.16
 
Exhibits to the Amended and Restated Credit Agreement. Filed herewith.
 
 
 
10.17
 
U.S. Security Agreement, dated September 30, 2011, by the registrant and certain subsidiaries of the Registrant in favor of JP Morgan Chase Bank, N.A., as Administrative Agent. Incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed with the Commission on September 30, 2011.
 
 
 
10.18
 
Employment Offer Letter between Harmit Singh and the Registrant, dated December 10, 2012. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on December 13, 2012.*
 
 
 
10.19
 
Amendment to Employment Agreement, effective as of May 8, 2012, between the Registrant and Charles V. Bergh. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.*
 
 
 
10.20
 
Employment Offer Letter between Roy Bagattini and the Registrant, dated February 20, 2013, as amended by that certain addendum by and between Mr. Bagattini and the Registrant dated December 18, 2013. Incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K filed with the Commission on February 11, 2014.*
 
 
 
10.21
 
Employment Offer Letter between Anne Rohosy and the Registrant, dated September 29, 2009. Incorporated by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K filed with the Commission on February 11, 2014.*
 
 
 
10.22
 
Employment Offer Letter between Craig Nomura and the Registrant, dated January 6, 2014. Filed herewith.*
 
 
 
10.23
 
Forms of stock appreciation rights award agreements. Filed herewith*
 
 
 
10.24
 
Master Services Agreement, by and between the Registrant and Wipro Limited, dated as of November 7, 2014. Filed herewith. **
 
 
 
10.25
 
Exhibits to the Master Services Agreement, by and between the Registrant and Wipro Limited. Filed herewith. **
 
 
 
10.26
 
First Amendment to Stockholders' Agreement, dated December 22, 2014. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on December 23, 2014.
 
 
 
12
 
Statements re: Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
 
 
 
14.1
 
Worldwide Code of Business Conduct of Registrant. Incorporated by reference to Exhibit 14.1 to Registrant's Annual Report on Form 10-K filed with the Commission on February 7, 2012.
 
 
 
21
 
Subsidiaries of the Registrant. Filed herewith.
 
 
 
31.1
  
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
31.2
  
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
32
  
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
 
 
 
101.INS
  
XBRL Instance Document. Filed herewith.
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document. Filed herewith.
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
 
 
 
* Management contract, compensatory plan or arrangement.
** Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Commission.


126


Exhibit 10.15

EXECUTION VERSION



AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
March 21, 2014
among
LEVI STRAUSS & CO.,
as U.S. Borrower
LEVI STRAUSS & CO. (CANADA) INC.,
as Canadian Borrower
The Lenders Party Hereto
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH,
as Multicurrency Administrative Agent
BANK OF AMERICA, N.A.,
WELLS FARGO BANK, N.A.
and
HSBC BANK USA, NATIONAL ASSOCIATION,
as Co-Syndication Agents
DEUTSCHE BANK SECURITIES INC.,
and
GOLDMAN SACHS BANK USA,
as Co-Documentation Agents
___________________________
J.P. MORGAN SECURITIES LLC,
BANK OF AMERICA, N.A.,
WELLS FARGO BANK, N.A.
and
HSBC BANK USA, NATIONAL ASSOCIATION,
as Joint Bookrunners and Joint Lead Arrangers




         


TABLE OF CONTENTS
Page
ARTICLE I

Definitions
SECTION 1.01.
Defined Terms    1
SECTION 1.02.
Classification of Loans and Borrowings        46
SECTION 1.03.
Terms Generally    47
SECTION 1.04.
Accounting Terms; GAAP    47
SECTION 1.05.
Currency Matters    47
SECTION 1.06.
Effect of this Agreement on the Existing Credit Agreement and the Other Existing Loan Documents 48
ARTICLE II

The Credits
SECTION 2.01.
Commitments    48
SECTION 2.02.
Loans and Borrowings    49
SECTION 2.03.
Requests for Revolving Borrowings    50
SECTION 2.04.
Protective Advances    51
SECTION 2.05.
Swingline Loans    52
SECTION 2.06.
Letters of Credit    53
SECTION 2.07.
Funding of Borrowings    57
SECTION 2.08.
Interest Elections    58
SECTION 2.09.
Termination and Reduction of Commitments; Increase in Commitments 60
SECTION 2.10.
Repayment of Loans; Evidence of Debt    61
SECTION 2.11.
Prepayment of Loans    62
SECTION 2.12.
Fees    63
SECTION 2.13.
Interest    64
SECTION 2.14.
Alternate Rate of Interest    66
SECTION 2.15.
Increased Costs    66
SECTION 2.16.
Break Funding Payments    68
SECTION 2.17.
Taxes    68
SECTION 2.18.
Payments Generally; Allocation of Proceeds; Sharing of Setoffs    72
SECTION 2.19.
Mitigation Obligations; Replacement of Lenders    75
SECTION 2.20.
Defaulting Lenders    75
SECTION 2.21.
Returned Payments    77
SECTION 2.22.
Banking Services and Swap Agreements    77
ARTICLE III

Representations and Warranties
SECTION 3.01.
Organization; Powers    77
SECTION 3.02.
Authorization; Enforceability    78
SECTION 3.03.
Governmental Approvals; No Conflicts    78
SECTION 3.04.
Financial Condition; No Material Adverse Change    78
SECTION 3.05.
Properties    78
SECTION 3.06.
Litigation and Environmental Matters    79

-i-
         
    

SECTION 3.07.
Compliance with Laws and Agreements    79
SECTION 3.08.
Investment Company Status; Margin Stock    79
SECTION 3.09.
Taxes    79
SECTION 3.10.
ERISA    79
SECTION 3.11.
Canadian Pension Plan and Benefit Plans    79
SECTION 3.12.
Disclosure    80
SECTION 3.13.
Material Agreements    80
SECTION 3.14.
Solvency    80
SECTION 3.15.
Insurance    80
SECTION 3.16.
Capitalization and Subsidiaries    81
SECTION 3.17.
Security Interest in Collateral    81
SECTION 3.18.
Employment Matters    81
SECTION 3.19.
OFAC and Patriot Act    81
SECTION 3.20.
Anti-Corruption Laws and Sanctions    82
ARTICLE IV

Conditions
SECTION 4.01.
Amendment Effective Date    82
SECTION 4.02.
Each Credit Event    84
ARTICLE V

Affirmative Covenants
SECTION 5.01.
Financial Statements; Borrowing Base and Other Information    85
SECTION 5.02.
Notices of Material Events    88
SECTION 5.03.
Existence; Conduct of Business    89
SECTION 5.04.
Payment of Obligations    89
SECTION 5.05.
Maintenance of Properties    89
SECTION 5.06.
Books and Records; Inspection Rights    89
SECTION 5.07.
Compliance with Laws    90
SECTION 5.08.
Use of Proceeds    90
SECTION 5.09.
Insurance    91
SECTION 5.10.
Casualty and Condemnation    91
SECTION 5.11.
Appraisals    91
SECTION 5.12.
Depository Banks    92
SECTION 5.13.
Additional Collateral; Further Assurances        92
SECTION 5.14.
Borrowing Base Cash Collateral Accounts; Availability
Cash Collateral Accounts        92
ARTICLE VI

Negative Covenants
SECTION 6.01.
Indebtedness    93
SECTION 6.02.
Liens    96
SECTION 6.03.
Fundamental Changes    98
SECTION 6.04.
Investments, Loans, Advances, Guarantees and Acquisitions    99
SECTION 6.05.
Asset Sales    100
SECTION 6.06.
Sale and Leaseback Transactions    102

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SECTION 6.07.
Swap Agreements    102
SECTION 6.08.
Restricted Payments; Certain Payments of Indebtedness    102
SECTION 6.09.
Transactions with Affiliates    103
SECTION 6.10.
Restrictive Agreements    103
SECTION 6.11.
Amendment of Material Documents    104
SECTION 6.12.
Negative Pledges    104
SECTION 6.13.
Changes in Nature of Business; Fiscal Year    105
SECTION 6.14.
Financial Covenant    105
ARTICLE VII

Events of Default
ARTICLE VIII

The Administrative Agents
ARTICLE IX

Miscellaneous
SECTION 9.01.
Notices    110
SECTION 9.02.
Waivers; Amendments    112
SECTION 9.03.
Expenses; Indemnity; Damage Waiver    115
SECTION 9.04.
Successors and Assigns    117
SECTION 9.05.
Survival    121
SECTION 9.06.
Counterparts; Integration; Effectiveness    121
SECTION 9.07.
Severability    121
SECTION 9.08.
Right of Setoff    121
SECTION 9.09.
Governing Law; Jurisdiction; Consent to Service of Process    122
SECTION 9.10.
WAIVER OF JURY TRIAL    122
SECTION 9.11.
Headings    122
SECTION 9.12.
Confidentiality    123
SECTION 9.13.
Several Obligations; Nonreliance; Violation of Law    123
SECTION 9.14.
USA PATRIOT Act    123
SECTION 9.15.
Disclosure    123
SECTION 9.16.
Appointment for Perfection    124
SECTION 9.17.
Interest Rate Limitation    124
SECTION 9.18.
Lender Loss Sharing Agreement    124
SECTION 9.19.
Judgment Currency    126
SECTION 9.20.
Anti-Money Laundering Legislation    126
SECTION 9.21.
No Fiduciary Duty    127
ARTICLE X

U.S. Loan Guaranty
SECTION 10.01.
Guaranty    127
SECTION 10.02.
Guaranty of Payment    128
SECTION 10.03.
No Discharge or Diminishment of Loan Guaranty    128
SECTION 10.04.
Defenses Waived    129
SECTION 10.05.
Rights of Subrogation    129
SECTION 10.06.
Reinstatement; Stay of Acceleration    129
SECTION 10.07.
Information    129

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SECTION 10.08.
Release    130
SECTION 10.09.
[Reserved]    130
SECTION 10.10.
Maximum U.S. Liability    130
SECTION 10.11.
Contribution    130
SECTION 10.12.
Liability Cumulative    131
ARTICLE XI

Canadian Loan Guaranty
SECTION 11.01.
Guaranty    131
SECTION 11.02.
Guaranty of Payment    131
SECTION 11.03.
No Discharge or Diminishment of Loan Guaranty    132
SECTION 11.04.
Defenses Waived    132
SECTION 11.05.
Rights of Subrogation    133
SECTION 11.06.
Reinstatement; Stay of Acceleration    133
SECTION 11.07.
Information    133
SECTION 11.08.
Release    133
SECTION 11.09.
[Reserved].    133
SECTION 11.10.
Maximum Canadian Liability    133
SECTION 11.11.
Contribution    134
SECTION 11.12.
Liability Cumulative    134
ARTICLE XII

The Borrower Representative
SECTION 12.01.
Appointment; Nature of Relationship    135
SECTION 12.02.
Powers    135
SECTION 12.03.
Employment of Agents    135
SECTION 12.04.
Notices    135
SECTION 12.05.
Successor Borrower Representative    135
SECTION 12.06.
Execution of Loan Documents; Borrowing Base Certificate    135
SECTION 12.07.
Reporting    136



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SCHEDULES :
Commitment Schedule
Schedule 3.05(a)
–    Properties
Schedule 3.15
–    Insurance
Schedule 3.16
–    Capitalization and Subsidiaries
Schedule 5.13
–    Post-Closing Undertakings
Schedule 6.01
–    Existing Indebtedness
Schedule 6.02
–    Existing Liens
Schedule 6.04
–    Existing Investments
Schedule 6.12
–    Existing Negative Pledges
EXHIBITS :
Exhibit A
–    Form of Assignment and Assumption
Exhibit B-1
–    Form of Opinion of Borrowers’ U.S. Counsel
Exhibit B-2
–    Form of Opinion of Borrowers’ Canadian Counsel
Exhibit B-3
–    Form of Opinion of Global Finance and Governance Counsel for the Company
Exhibit C
–    Form of Borrowing Base Certificate
Exhibit D
–    Form of Compliance Certificate
Exhibit E-1
–    Form of U.S. Joinder Agreement
Exhibit E-2
–    Form of Canadian Joinder Agreement
Exhibit F-1
–    Form of U.S. Tax Certificate (for Non-U.S. Lenders That Are Not Partnerships)
Exhibit F-2
–    Form of U.S. Tax Certificate (for Non-U.S. Lenders That are Partnerships)
Exhibit F-3
–    Form of U.S. Tax Certificate (for Non-U.S. Participants That Are Not Partnerships)
Exhibit F-4
–    Form of U.S. Tax Certificate (for Non-U.S. Participants That are Partnerships)



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AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 21, 2014, (as it may be amended or modified from time to time, this “ Agreement ”), among LEVI STRAUSS & CO., a Delaware corporation (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC., an Ontario corporation (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party hereto, the Lenders party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, and JPMORGAN CHASE BANK, N.A. TORONTO BRANCH, as Multicurrency Administrative Agent.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Administrative Agent, the Multicurrency Administrative Agent, the other Loan Parties (as defined in the Existing Credit Agreement) and the Lenders (as defined in the Existing Credit Agreement) are parties to the Credit Agreement, dated as of September 30, 2011 (as amended or modified from time to time prior to the date hereof, the “ Existing Credit Agreement ”); and
WHEREAS, the parties to the Existing Credit Agreement have agreed to amend the Existing Credit Agreement in certain respects and to restate the Existing Credit Agreement as so amended as provided in this Agreement, effective upon satisfaction of certain conditions precedent set forth in Section 4.01 .
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that on the Amendment Effective Date, the Existing Credit Agreement shall be amended and restated in its entirety as follows:
ARTICLE I

Definitions
SECTION 1.01.      Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ ABR ” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
“ Account ” has the meaning assigned to such term in the U.S. Security Agreement.
“ Account Debtor ” means any Person obligated on an Account.
“ Adjusted LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period or for any ABR Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“ Administrative Agent ” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder, and its successors in such capacity.
“ Administrative Agents ” means the Administrative Agent and the Canadian Administrative Agent, collectively.


         


“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“ Affiliate ” means, as to any Person, any other Person which, directly or indirectly, is in Control of, is Controlled by, or is under common Control with, such Person.
“ Agents ” means, individually and collectively as the context may require, the Administrative Agent, the Multicurrency Administrative Agent, the Joint Lead Arrangers, the Joint Bookrunners, the Co-Syndication Agents and the Co-Documentation Agents.
“ Aggregate Credit Exposure ” means, at any time, the aggregate Credit Exposure of all Lenders.
“ Aggregate Revolving Exposure ” means, at any time, the aggregate Revolving Exposure of all the Lenders.
“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding). Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 hereof, then the Alternate Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above.
“ Amendment Effective Date ” means the date on which the conditions precedent in Section 4.01 are satisfied, which date is March 21, 2014.
“ AML Legislation ” has the meaning assigned to such term in Section 9.20 .
“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrowers or their respective Subsidiaries from time to time concerning or relating to bribery or corruption.
“ Applicable Administrative Agent ” means (i) with respect to the Multicurrency Facility and Multicurrency Letters of Credit, the Multicurrency Administrative Agent and (ii) otherwise, the Administrative Agent.
“ Applicable Pension Laws ” means the Pension Benefits Act (Ontario) or the similar pension standards statute of Canada or other applicable Canadian jurisdictions, and the ITA, and the regulations of each, as amended from time to time (or any successor statute).
“ Applicable Percentage ” means, for any Revolving Lender:
(a)    with respect to payments, computations and other matters relating to the U.S. Commitments or U.S. Revolving Loans, U.S. LC Exposure, Swingline Loans or U.S. Protective

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Advances, a percentage equal to a fraction, the numerator of which is (i) the U.S. Commitment of such Revolving Lender and the denominator of which is (ii) the aggregate U.S. Commitments of all the U.S. Revolving Lenders (or, if the U.S. Commitments have terminated or expired, the Applicable Percentage shall be determined based upon such Revolving Lender’s share of the aggregate U.S. Credit Exposure at that time); and
(b)    with respect to payments, computations and other matters relating to the Multicurrency Commitments or Multicurrency Revolving Loans, Multicurrency LC Exposure or Multicurrency Protective Advances, a percentage equal to a fraction, the numerator of which is the Multicurrency Commitment of such Revolving Lender and the denominator of which is the aggregate Multicurrency Commitments of all the Multicurrency Revolving Lenders (or, if the Multicurrency Commitments have terminated or expired, the Applicable Percentage shall be determined based upon such Revolving Lender’s share of the aggregate Multicurrency Credit Exposure at that time);
provided that, in accordance with Section 2.20 , so long as any Lender shall be a Defaulting Lender, such Defaulting Lender’s Commitment shall be disregarded in the calculations under clauses (a) and (b) above.
“ Applicable Rate ” means, for any day, with respect to any Loan, as the case may be, the applicable rate per annum set forth in the pricing grid below under the caption “Adjusted LIBO Rate/CDOR Rate Loans” or “ABR/Canadian Prime Rate Loans,” as the case may be, based upon the daily average Availability for the most recent Fiscal Quarter for which the Administrative Agent has received a Borrowing Base Certificate (the “ Average Availability ”):
 
APPLICABLE TO THE FIRST $350,000,000 OF AGGREGATE OUTSTANDING REVOLVING LOANS (EXCLUDING LETTERS OF CREDIT) WHILE THE LEVI’S TRADEMARK IS INCLUDED IN THE U.S. BORROWING BASE


APPLICABLE TO OTHER REVOLVING LOANS AND LETTERS OF CREDIT
LEVEL
AVERAGE AVAILABILITY
ADJUSTED LIBO RATE/CDOR RATE LOANS
ABR/ CANADIAN PRIME RATE LOANS
ADJUSTED LIBO RATE/CDOR LOANS
ABR /CANADIAN PRIME RATE LOANS
I
>  66-2/3% of the Line Cap
1.25
%
0.25
%
1.25
%
0.25
%
II
< 66-2/3% of the Line Cap but
≥ 33-1/3% of the Line Cap
1.50
%
0.50
%
1.50
%
0.50
%
III
< 33-1/3% of the Line Cap
2.00
%
1.00%
1.75
%
0.75%

; provided that until the end of the date that is five Business Days after the date the Administrative Agent has received a Borrowing Base Certificate as of the last day of the first full Fiscal Quarter ending after the Amendment Effective Date, the Applicable Rate will be determined based on Level II.
For purposes of the foregoing, except to the extent that Revolving Loans and Swingline Loans outstanding on any day exceed the Trademark Amount on such day, such Revolving Loans and Swingline Loans shall be deemed to be included in the “First $350,000,000 of Aggregate Outstanding

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Revolving Loans (Excluding Letters of Credit) While the Levi’s Trademark is Included in the U.S. Borrowing Base” for purposes of the Applicable Rate.
Adjustments, if any, to the Applicable Rate shall be made on a quarterly basis and shall be effective five Business Days after the Administrative Agent has received the applicable Borrowing Base Certificate. If the U.S. Borrower fails to deliver the Borrowing Base Certificate to the Administrative Agent at the time required pursuant to this Agreement (taking into account all applicable grace periods), then the Applicable Rate shall be based on Level III until five days after such Borrowing Base Certificate is so delivered.
“ AML Legislation ” has the meaning assigned to such term in Section 9.20(a) .
“ Approved Fund ” has the meaning assigned to such term in Section 9.04 .
“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04 ), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.
“ Attorney ” has the meaning assigned to such term in Article VIII .
“ Availability ” means, at any time, an amount equal to (i) the lesser of (x) the aggregate Commitments of all Lenders at such time and (y) the sum of (A) the U.S. Borrowing Base at such time plus (B) the lesser of (I) the Canadian Borrowing Base at such time and (II) the aggregate Multicurrency Commitments at such time (such lesser amount between clauses (x) and (y) above at any time, the “ Line Cap ”) minus (ii) the Aggregate Revolving Exposure on such date minus (iii) Reserves against Availability established by the Administrative Agent in its Permitted Discretion.
“ Availability Period ” means the period from and including the Amendment Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.
“ Average Availability ” has the meaning assigned to such term in the definition of “Applicable Rate”.
“ Banking Services ” means each and any of the following bank services provided to any Loan Party or LSIFCS by any Lender or any of its Affiliates (each, a “ Bank Product Provider ”): (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).
“ Banking Services Obligations ” of the Loan Parties or LSIFCS means any and all obligations of the Loan Parties or LSIFCS, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.
“ Banking Services Reserves ” means all Reserves which the Administrative Agent from time to time establishes in its Permitted Discretion for Banking Services then provided or outstanding.

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“ Bankruptcy Event ” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding under applicable laws or otherwise, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business, appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided , further , that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or Canada or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality), to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“ Banks ” has the meaning assigned to such term in Section 9.21 .
“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America.
“ Borrower ” or “ Borrowers ” means, individually or collectively, the U.S. Borrower and the Canadian Borrower.
“ Borrower Representative ” has the meaning assigned to such term in Section 12.01 .
“ Borrowing ” means (a) Revolving Loans of the same Class and Type, made, converted or continued on the same date and in the same currency and, in the case of Eurodollar Loans and CDOR Rate Loans, as to which a single Interest Period is in effect, (b) a Swingline Loan, (c) a U.S. Protective Advance and (d) a Multicurrency Protective Advance.
“ Borrowing Base ” means the Canadian Borrowing Base or the U.S. Borrowing Base, as applicable.
“ Borrowing Base Cash Collateral Account ” means each U.S. Borrowing Base Cash Collateral Account or Canadian Borrowing Base Cash Collateral Account.
“ Borrowing Base Certificate ” means a certificate, signed and certified as accurate and complete by a Financial Officer of the Borrower Representative, in substantially the form of Exhibit C or another form proposed by the Borrower Representative which is reasonably acceptable to the Administrative Agent in its sole discretion.
“ Borrowing Request ” means a request by the Borrower Representative for a Revolving Borrowing in accordance with Section 2.03 .
“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market and (b) when used in connection with any Multicurrency Loan or any Multicurrency Letter of Credit, the term “Business Day” shall also exclude any day in which commercial banks in Toronto, Canada are authorized or required by law to remain closed.

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“ CAM ” has the meaning assigned to such term in Section 9.18 .
“ CAM Exchange ” has the meaning assigned to such term in Section 9.18 .
“ CAM Exchange Date ” has the meaning assigned to such term in Section 9.18.
“ CAM Percentage ” has the meaning assigned to such term in Section 9.18 .
“ Canada ” means the country of Canada.
“ Canadian Availability Cash Collateral Account ” means an account of a Canadian Loan Party held with the Administrative Agent or Multicurrency Administrative Agent (or Bank of America, N.A., The Bank of Nova Scotia or one of their respective affiliates, or another financial institution approved by the Multicurrency Administrative Agent in its reasonable discretion) designated by the Borrower Representative as a “Canadian Availability Cash Collateral Account” and subject to a blocked account agreement in form and substance reasonably satisfactory to the Administrative Agent.
“ Canadian Benefit Plans ” means any plan, fund, program, or policy, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, providing employee benefits, including medical, hospital care, dental, sickness, accident, disability, life insurance, pension, retirement or savings benefits, under which any Canadian Loan Party or any Canadian Subsidiary of any Loan Party has any liability with respect to any employee or former employee, but excluding any Canadian Pension Plans.
“ Canadian Borrower ” has the meaning assigned to such term in the introductory paragraph of this Agreement.
“ Canadian Borrower Outstandings ” means, at any time, the sum of (i) the Dollar Amount of the Multicurrency Revolving Loans to the Canadian Borrower outstanding at such time plus (ii) the Multicurrency LC Exposure in respect of Letters of Credit issued for the account of the Canadian Borrower at such time plus (iii) the Dollar Amount of the Multicurrency Protective Advances to the Canadian Borrower outstanding at such time.
“ Canadian Borrower Shared Outstandings ” means, at any time, the amount by which the Canadian Borrower Outstandings at such time exceeds the Canadian Borrowing Base at such time.
“ Canadian Borrowing Base ” means, as of any date of determination (without duplication), a Dollar Amount equal to the sum of (i) 100% of cash and Cash Equivalent balances in Dollars or Canadian Dollars of the Canadian Loan Parties in the Canadian Borrowing Base Cash Collateral Account and the Canadian Availability Cash Collateral Account plus (ii) 90% of Eligible Credit Card Receivables of the Canadian Loan Parties plus (iii) 85% of Eligible Accounts of the Canadian Loan Parties plus (iv) following completion of a field examination and Inventory appraisal reasonably satisfactory to the Administrative Agent, (a) 90% of the Net Orderly Liquidation Value of Eligible Retail Finished Goods of the Canadian Loan Parties and (b) 85% of the Net Orderly Liquidation Value of Eligible Wholesale Finished Goods of the Canadian Loan Parties (which shall not exceed 100% of the cost of Eligible Wholesale Finished Goods of the Canadian Loan Parties) minus (v) without duplication, Reserves established by the Administrative Agent in its Permitted Discretion; provided that the Canadian Borrowing Base shall not exceed $10,000,000 until such time as the Loan Parties have provided supporting detail to the Administrative Agent reasonably satisfactory to the Administrative Agent in

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connection with the field examination of the Accounts and related working capital matters and financial information of the Canadian Loan Parties and of the related data processing and other systems.
“ Canadian Borrowing Base Cash Collateral Account ” means, collectively, one or more accounts of the Canadian Loan Parties, as designated from time to time by written notice from the Borrower Representative to the Administrative Agent, held with financial institutions and subject to control agreements in form and substance reasonably satisfactory to the Administrative Agent.
“ Canadian Collateral ” means any and all property owned, leased or operated by a Person covered by the Canadian Collateral Documents and any and all other property of any Canadian Loan Party, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of the Administrative Agent to secure the Canadian Secured Obligations.
“ Canadian Collateral Documents ” means, collectively, the Canadian Security Agreement and any other documents entered into guaranteeing payment of, or pursuant to which a Canadian Loan Party grants a Lien upon any property as security for payment of the Canadian Secured Obligations.
“ Canadian Collection Account ” means a “Collection Account” as defined in the Canadian Security Agreement.
“ Canadian Dollars ” and “ Cdn.$ ” means dollars in the lawful currency of Canada.
“ Canadian Guaranteed Obligations ” has the meaning assigned to such term in Section 11.01 .
“ Canadian Guarantors ” means the direct or indirect Canadian Subsidiaries of the U.S. Borrower (other than the Canadian Borrower and any Excluded Subsidiary) that become parties to this Agreement.
“ Canadian Joinder Agreement ” means a joinder agreement in substantially the form of Exhibit E-2 .
“ Canadian Loan Guaranty ” means Article XI of this Agreement.
“ Canadian Loan Parties ” means the Canadian Borrower and the Canadian Guarantors.
“ Canadian Obligated Party ” has the meaning assigned to such term in Section 11.02 .
“ Canadian Obligations ” means all unpaid principal of and accrued and unpaid interest on the Multicurrency Loans to the Canadian Borrower, all Multicurrency LC Exposure in respect of Multicurrency Letters of Credit issued for the account of the Canadian Borrower, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Canadian Loan Parties to the Multicurrency Revolving Lenders, the Administrative Agent, the Multicurrency Administrative Agent, the Multicurrency Issuing Banks or any indemnified party arising under the Loan Documents.
“ Canadian Pension Plans ” means any registered plan, program or arrangement that is a pension plan for the purposes of any applicable Canadian federal or provincial pension legislation, which is maintained or contributed to by, or to which there is or may be an obligation to contribute by, a Loan Party or Subsidiary of a Loan Party operating in Canada in respect of any Person’s employment in Canada with such Loan Party or Subsidiary, other than Plans established by statute, but does not include the

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Canadian Pension Plan maintained by the government of Canada or the Quebec Pension Plan maintained by the Province of Quebec.
“ Canadian Prime Rate ” means, for any date, the highest of (a) the annual rate of interest announced from time to time by the Multicurrency Administrative Agent as being its reference rate then in effect for determining interest rates on Canadian Dollar-denominated commercial loans made by it in Canada on such date and (b) the CDOR Rate for a 30 day term in effect on such date plus 1% per annum. “ Canadian Prime Rate ” when used with respect to a Loan or a Borrowing shall refer to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Canadian Prime Rate.
“ Canadian Secured Obligations ” means all Canadian Obligations, together with all (a) Banking Services Obligations owing by the Canadian Loan Parties to Bank Product Providers; and (b) Swap Obligations of the Canadian Loan Parties owing to one or more Hedge Providers; provided that not later than 30 days after such Hedge Provider becomes a Hedge Provider, the Lender or Affiliate of a Lender party thereto (other than Chase or any of its Affiliates) shall have delivered written notice to the Administrative Agent that such Person is a Hedge Provider; provided , further that the Canadian Secured Obligations with respect to any Guarantor shall not include Excluded Swap Obligations of such Guarantor.
“ Canadian Security Agreement ” means that certain Security Agreement, dated as of September 30, 2011, between the Canadian Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent, and the other Lender Parties, and any other pledge or security agreement entered into, after the Original Effective Date by any other Canadian Loan Party (as required by this Agreement or any other Loan Document).
“ Canadian Subsidiary ” means any Subsidiary of the U.S. Borrower that is organized under the laws of Canada or any province or territory thereof.
“ Capital Lease Obligations ” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP as in effect on the Original Effective Date, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with such GAAP.
“ Capital Markets Transaction ” means an issuance or sale of unsecured Indebtedness by the U.S. Borrower through a public offering or private placement or under any unsecured term facility.
“ Cash Collateral ” means cash, and any interest or other income earned thereon, that is delivered to the Administrative Agent to Cash Collateralize any Letter of Credit.
“ Cash Collateralize ” means the delivery of cash to the Administrative Agent, as security for the payment of Obligations in respect of any Letter of Credit, in an amount equal to 103% of the face amount of such Letter of Credit. “ Cash Collateralization ” has a correlative meaning.
“ Cash Collateralized Letter of Credit ” means a Letter of Credit requested to be issued as a Cash Collateralized Letter of Credit in accordance with Section 2.06(b) or converted into a Cash Collateralized Letter of Credit pursuant to Section 2.06(l) and otherwise issued in accordance with the conditions hereunder applicable to a Cash Collateralized Letter of Credit, provided that upon

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effectiveness of the conversion of any Cash Collateralized Letter of Credit in accordance with Section 2.06(l) , such Letter of Credit shall no longer be a “Cash Collateralized Letter of Credit” for purposes of this Agreement.
“ Cash Equivalents ” means, as of any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States government or, in the case of any Canadian Loan Party, the Canadian government or (ii) issued by any agency of the United States or, in the case of any Canadian Loan Party, Canada, in each case maturing within one year after such date; (b) taxable or tax-exempt marketable direct obligations issued by any state of the United States or, in the case of any Canadian Loan Party, any province, commonwealth or territory of Canada or any political subdivision of any such state, province, commonwealth or territory or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A‑ from S&P or the equivalent thereof from another nationally recognized rating agency; (c) commercial paper maturing no more than two hundred seventy (270) days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (d) time deposits, certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States, any state thereof or an OECD country having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the U.S. Borrower in a manner consistent with board-approved policy) or by a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (e) repurchase agreements with financial institutions organized under the laws of the United States, any state thereof or an OECD country having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the U.S. Borrower in a manner consistent with board-approved policy) or with a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (f) Dollar denominated fixed or floating rate notes and foreign currency denominated fixed or floating rate notes, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A or A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (g) variable rate demand notes with interest reset period and related put at par at 7-day intervals and having, at the time of the acquisition thereof, a rating of at least AA from S&P or the equivalent thereof from another nationally recognized rating agency; or (h) money market funds that (i) (x) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940 or (y) in the case of any Canadian Loan Party, are money market mutual funds (as defined in National Instrument 81-102 Mutual Funds) that are reporting issuers (as defined in Ontario securities law) in the Province of Ontario, (ii) are rated at least A- by S&P or the equivalent thereof from another nationally recognized ratings agency and (iii) have portfolio assets of at least $1,000,000,000.
“ CDOR Rate ” means, for the relevant Interest Period, the Canadian deposit offered rate which, in turn means on any day the annual rate of interest determined with reference to the arithmetic average of the discount rate quotations of all institutions listed in respect of the relevant Interest Period for Canadian Dollar-denominated bankers’ acceptances displayed and identified as such on the “Reuters Screen CDOR Page” as defined in the International Swaps and Derivatives Association definitions, as modified and amended from time to time, as of 10:00 a.m. Toronto local time on such day and, if such day is not a Business Day, then on the immediately preceding Business Day (as adjusted by the Administrative Agent after 10:00 a.m. Toronto local time to reflect any error in the posted rate of interest or in the posted average annual rate of interest); provided that if such rates are not available on the

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Reuters Screen CDOR Page on any particular day, then the Canadian deposit offered rate component of such rate on that day shall be calculated as the cost of funds quoted by the Administrative Agent to raise Canadian Dollars for the applicable Interest Period as of 10:00 a.m. Toronto local time on such day for commercial loans or other extensions of credit to businesses of comparable credit risk; or if such day is not a Business Day, then as quoted by the Administrative Agent on the immediately preceding Business Day. “ CDOR Rate ” when used with respect to a Loan or a Borrowing shall refer to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the CDOR Rate.
“ Change in Law ” means (a) the adoption of any law, rule, regulation or treaty (including any rules or regulations issued under or implementing any existing law) after the date of this Agreement; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority after the date of this Agreement; or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.
“ Change of Control ” means:
(a)    prior to the first Public Equity Offering that results in a Public Market, the Permitted Transferees cease to be the beneficial owners, directly or indirectly, of a majority of the total voting power of the voting stock of the U.S. Borrower, whether as a result of the issuance of securities of the U.S. Borrower, any merger, consolidation, liquidation or dissolution of the U.S. Borrower, any direct or indirect transfer of securities by the Permitted Transferee or otherwise;
(b)    on or after the first Public Equity Offering that results in a Public Market, if any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Transferees, becomes the beneficial owner, directly or indirectly, of thirty-five percent (35%) or more of the total voting power of the voting stock of the U.S. Borrower, provided , however , that the Permitted Transferees are the beneficial owners, directly or indirectly, in the aggregate of a lesser percentage of the total voting power of the voting stock of the U.S. Borrower than that other person or group;
(c)    an event or series of events by which during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the U.S. Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period or (ii) whose election or nomination to that board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or who were nominated by Permitted Transferees; or

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(d)    the occurrence of any “Change in Control” as defined in any indenture or agreement executed in connection with a Capital Markets Transaction.
For purposes of this definition (i) “ beneficial owner ” means a beneficial owner as defined in Rule 13d-3 under the Exchange Act, except that (A) a person shall be deemed to be the beneficial owner of all shares that the person has the right to acquire, whether that right is exercisable immediately or only after the passage of time and (B) Permitted Transferees shall be deemed to be the beneficial owners of any voting stock of a corporation or other legal entity held by any other corporation or other legal entity so long as the Permitted Transferees beneficially own, directly or indirectly, in the aggregate a majority of the total voting power of the voting stock of that corporation or other legal entity; and (ii) “ voting stock ” means all classes of Equity Interests then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors.
“ Chase ” means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors.
“ Class ” when used in reference to (i) any Commitment, refers to whether such Commitment is a U.S. Commitment or a Multicurrency Commitment and (ii) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are U.S. Revolving Loans, Multicurrency Revolving Loans, Swingline Loans, Multicurrency Protective Advances or U.S. Protective Advances.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Collateral ” means the U.S. Collateral and the Canadian Collateral.
“ Collateral Access Agreement ” has the meaning assigned to such term in the Security Agreements.
“ Collateral Documents ” means, collectively, the U.S. Collateral Documents and the Canadian Collateral Documents.
“ Collection Account ” means the Canadian Collection Account or the U.S. Collection Account.
“ Commitment ” means, with respect to each Lender, such Lender’s U.S. Commitment and/or Multicurrency Commitment from time to time.
“ Commitment Fee Rate ” means 0.30% per annum (decreasing to 0.25% per annum on any date if the corporate/family rating of the U.S. Borrower on such date is at least (x) Ba2 by Moody’s and (y) BB by S&P (in each case, with a stable or better outlook). Any change in the Commitment Fee Rate resulting from a change of a corporate/family rating shall become effective as of the first Business Day immediately following the date of the change in such corporate/family rating.
“ Commitment Schedule ” means the Schedule attached hereto identified as such.
“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

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“ Compliance Certificate ” means a certificate, signed and certified as accurate and complete by a Financial Officer of the Borrower Representative, in substantially the form of Exhibit D or another form which is mutually acceptable to the Administrative Agent and the Borrower Representative.
“ Compliance Period ” means each period commencing on the date (which was not part of a previously commenced Compliance Period) when Availability is less than the Minimum Excess Availability Amount and ending on the date when Availability has been at least the Minimum Excess Availability Amount for 30 consecutive days.
“ Consolidated Capital Expenditures ” means, for any period, the sum of the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including Capitalized Lease Obligations of the U.S. Borrower and its Subsidiaries) by the U.S. Borrower and its Subsidiaries during that period that, in conformity with GAAP, are included in “additions to property, plant or equipment” or comparable items reflected in the consolidated statement of cash flows of the U.S. Borrower and its Subsidiaries but excluding the aggregate of all expenditures by the U.S. Borrower and its Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Subsidiary of the U.S. Borrower. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be.
“ Consolidated EBITDA ” means, for any period, an amount equal to, for the U.S. Borrower and its consolidated Subsidiaries:
(a)      the sum of Consolidated Net Income for that period, plus the following to the extent reducing Consolidated Net Income for that period:
(1)      the provision for taxes based on income or profits or utilized in computing net loss,
(2)      Consolidated Interest Expense,
(3)      depreciation,
(4)      amortization of intangibles,
(5)      any non-recurring expenses relating to, or arising from, any closures of facilities; any restructuring costs; facilities relocation costs; and integration costs and fees (including cash severance payments) made in connection with acquisitions, in an aggregate amount for all such expenses pursuant to this clause (a)(5) not to exceed 15% of Consolidated EBITDA for such period prior to giving effect to this clause (a)(5),
(6)      any non-cash impairment charge or asset write-off (other than any such charge or write-off of Inventory) and the amortization of intangibles,
(7)      inventory purchase accounting adjustments and amortization and impairment charges resulting from other purchase accounting adjustments in connection with acquisitions,

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(8)      fees and expenses related to any offering of securities, Investments permitted hereby, acquisition and incurrence of Indebtedness permitted to be incurred hereunder (whether or not successful), and
(9)      any other non-cash items (other than any non-cash item to the extent that it represents an accrual of or reserve for cash expenditures in any future period), minus
(b)      all non-cash items increasing Consolidated Net Income for that period (other than any such non-cash item to the extent that it has resulted or will result in the receipt of cash payments in any period).
“ Consolidated Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio of (a)(i) Consolidated EBITDA for the twelve Fiscal Months most recently ended minus (ii) the sum of (A) the aggregate amount of all Consolidated Capital Expenditures made by the U.S. Borrower and its Subsidiaries during such period plus (B) federal, state, local and foreign income taxes paid in cash during such period, to (b) the sum, without duplication, of (i) Consolidated Interest Expense for such period, (ii) the amount of Restricted Payments made by the U.S. Borrower during such period in reliance on the proviso to Section 6.08(a) and (iii) the aggregate principal amount (or the equivalent thereto) of all scheduled repayments of Indebtedness (other than (x) intercompany Indebtedness, (y) payments of Existing Yen Notes and (z) payments of Existing Euro Notes) made by the U.S. Borrower and any other Loan Party during such period (other than to the extent such Indebtedness has been refinanced or defeased, or with respect to which restricted cash has been set aside to repay, during such period from the proceeds of new Indebtedness that is not secured by any Collateral).
“ Consolidated Interest Expense ” means, for any period, for the U.S. Borrower and its Subsidiaries on a consolidated basis, all interest (net of all interest income), premium, amortization, debt discount, fees, charges and related expenses of the U.S. Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest expense in accordance with GAAP.
“ Consolidated Net Income ” means, for any period, the net income (loss) of the U.S. Borrower and its consolidated Subsidiaries (excluding any net income (loss) attributable to noncontrolling interests), determined in accordance with GAAP; provided , however , that there shall not be included in such Consolidated Net Income:
(a)    any net income (loss) of any Person (other than the U.S. Borrower) if that Person is not a Subsidiary, except that the U.S. Borrower’s equity in the net income of any such Person for that period shall be included in such Consolidated Net Income up to the aggregate amount of cash distributed by that Person during that period to the U.S. Borrower or a Subsidiary as a dividend or other distribution,
(b)    any gain (or loss) realized upon the sale or other disposition of any Property of the U.S. Borrower or any of its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business,
(c)    any gain or loss attributable to the early extinguishment of Indebtedness,
(d)    any extraordinary gain or loss or cumulative effect of a change in accounting principles to the extent disclosed separately on the consolidated statement of income,

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(e)    any unrealized gains or losses of the U.S. Borrower or its consolidated Subsidiaries on any Swap Obligations, and
(f)    any non-cash compensation expense realized for grants of performance shares, stock options or other rights to officers, directors and employees of the U.S. Borrower or any Subsidiary, provided , however , that if any such shares, options or other rights are subsequently redeemed for Property other than Equity Interests of the U.S. Borrower that is not Disqualified Stock then the Fair Market Value of such Property shall be treated as a reduction in Consolidated Net Income during the period of such redemption.
“ Consolidated Net Tangible Assets ” means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than twelve (12) months from the date of the most recent consolidated balance sheet of the U.S. Borrower but which by its terms is renewable or extendable beyond twelve (12) months from such date at the option of the U.S. Borrower or any of its Subsidiaries), and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the U.S. Borrower and computed in accordance with GAAP.
“ Contaminant ” means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos in any form or condition, polychlorinated biphenyls (PCBs), or any constituent of any such substance or waste.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Credit Exposure ” means, as to any Lender at any time, the sum of (a) such Lender’s U.S. Credit Exposure, plus (b) such Lender’s Multicurrency Credit Exposure.
“ Credit Party ” means the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender.
“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“ Defaulting Lender ” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular Default, if any) has not been satisfied; (b) has notified any Borrower or any Credit Party in writing, or has made a public statement, to the effect that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent to funding a Loan under this Agreement (specifically identified and including the particular Default, if any) cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective

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Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of a Bankruptcy Event.
“ Designated Obligations ” has the meaning assigned to such term in Section 9.18 .
“ Dilution Factors ” means, without duplication, with respect to any period, the aggregate amount of all deductions, credit memos, returns, adjustments, allowances, bad debt write-offs and other non-cash credits which are recorded to reduce Accounts in a manner consistent with current and historical accounting practices of the Borrowers.
“ Dilution Ratio ” means, at any date, the amount (expressed as a percentage) equal to (a) the aggregate amount of the applicable Dilution Factors for the twelve (12) most recently ended fiscal months divided by (b) total gross sales for the twelve (12) most recently ended fiscal months.
“ Dilution Reserve ” means, at any date, the applicable Dilution Ratio multiplied by the Eligible Accounts.
“ Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or Accounts or any rights and claims associated therewith and any grant of any option or rights relating to any such property (other than any property to the extent that the aggregate value of such property sold, transferred, licensed, leased or otherwise disposed of in any single transaction or related series of transactions is less than $5,000,000, individually, and $15,000,000, collectively, during any Fiscal Year of the U.S. Borrower).
“ Disqualified Stock ” means, with respect to any Person, any Equity Interest that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in either case at the option of the holder thereof) or otherwise:
(a)    matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(b)    is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or
(c)    is convertible or exchangeable at the option of the holder thereof for Indebtedness or Disqualified Stock,
on or prior to, in the case of clause (a), (b) or (c), the first anniversary of the Maturity Date.
“ Document ” has the meaning assigned to such term in the U.S. Security Agreement.
“ Dollar Amount ” means (a) with regard to any Obligation or calculation denominated in Dollars, the amount thereof, and (b) with regard to any Obligation or calculation denominated in Canadian Dollars or an LC Alternative Currency, the amount of Dollars which is equivalent to the amount so expressed in Canadian Dollars or such LC Alternative Currency at the Spot Rate on the relevant date of determination.

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“ dollars ”, “ Dollars ” or “ $ ” refers to lawful money of the United States of America.
“ Domestic Subsidiary ” means any Subsidiary of the U.S. Borrower that is organized under the laws of the United States, any state thereof or the District of Columbia.
“ Eligible Accounts ” means, at any time, the Accounts of a Loan Party which the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), are eligible for inclusion in the applicable Borrowing Base. Without limiting the Administrative Agent’s discretion provided herein, Eligible Accounts shall not include any Account of a Loan Party:
(a)    which is not subject to a first priority perfected security interest in favor of the Administrative Agent (subject to any Permitted Encumbrance specified in subclause (b)(ii) below that has priority over the security interest in favor of the Administrative Agent by operation of applicable law);
(b)    which is subject to any Lien other than (i) a Lien in favor of the Administrative Agent, (ii) a Lien constituting a Permitted Encumbrance pursuant to clause (a), (b), (h) or (i) of the definition thereof and (iii) any other Permitted Encumbrance which does not have priority over the Lien in favor of the Administrative Agent;
(c)    (i) which is unpaid more than 97 days after the date of the original invoice therefor or more than 67 days after the original due date therefor, or (ii) which has been written off the books of such Loan Party or otherwise designated as uncollectible;
(d)    which is owing by an Account Debtor for which more than 50% of the Accounts owing from such Account Debtor and its Affiliates are ineligible under clause (c) of this definition of “Eligible Accounts”;
(e)    (i) which is owing by an Account Debtor whose corporate credit ratings are the higher of BBB- or better by S&P or Baa3 or better by Moody’s to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to (x) such Loan Party exceeds 35% of the aggregate Eligible Accounts of such Loan Party or (y) all Loan Parties exceed 35% of the aggregate amount of Eligible Accounts of all Loan Parties, or (ii) which is owing by an Account Debtor not described in clause (i) above whose corporate credit ratings are the higher of BB- or better by S&P or Ba3 or better by Moody’s to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to (x) such Loan Party exceeds 25% of the aggregate Eligible Accounts of such Loan Party or (y) all Loan Parties exceed 25% of the aggregate amount of Eligible Accounts of all Loan Parties or (iii) which is owing by any other Account Debtor not described in clause (i) or (ii) above to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to (x) such Loan Party exceeds 20% of the aggregate Eligible Accounts of such Loan Party or (y) all Loan Parties exceed 20% of the aggregate amount of Eligible Accounts of all Loan Parties;
(f)    with respect to which any covenant contained in this Agreement or in the applicable Security Agreement has been breached or any representation or warranty contained in this Agreement or in the applicable Security Agreement is not true in any material respect (or with respect to any representation or warranty that is already qualified by materiality, such representation or warranty is not true);

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(g)    which (i) does not arise from the sale of goods or performance of services in the ordinary course of business, (ii) is not evidenced by an invoice or other documentation satisfactory to the Administrative Agent which has been sent to the Account Debtor, (iii) represents a progress billing, (iv) is contingent upon such Loan Party’s completion of any further performance, (v) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-delivery or any other repurchase or return basis or (vi) relates solely to payments of interest;
(h)    for which the goods giving rise to such Account have not been shipped to the Account Debtor or for which the services giving rise to such Account have not been performed by such Loan Party;
(i)    with respect to which any check or other instrument of payment has been returned uncollected for any reason;
(j)    which is owed by an Account Debtor which has (i) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets or, in the case of any Account Debtor of a Canadian Loan Party, any equivalent of the foregoing in any applicable jurisdiction, (ii) had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator or, in the case of any Account Debtor of a Canadian Loan Party, any equivalent of the foregoing in any applicable jurisdiction, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state or federal bankruptcy laws or other Insolvency Laws (other than post-petition accounts payable of an Account Debtor that is a debtor-in-possession under the Bankruptcy Code and reasonably acceptable to the Administrative Agent), (iv) admitted in writing its inability to pay its debts as they become due, or (v) ceased operation of its business as a going concern;
(k)    which is owed by any Account Debtor which has sold all or a substantially all of its assets;
(l)    which is owed by an Account Debtor which (i) does not maintain its chief executive office in the U.S. or Canada or (ii) is not organized under applicable law of the U.S., any state of the U.S., Canada, or any province or territory of Canada unless, in either case, such Account is backed by a Letter of Credit acceptable to the Administrative Agent; provided that the Administrative Agent may make up to $10,000,000 of such Accounts eligible in its discretion;
(m)    which is owed in any currency other than Dollars or Canadian Dollars;
(n)    which is owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the U.S. or Canada unless such Account is backed by a Letter of Credit acceptable to the Administrative Agent which is in the possession of, and is directly drawable by, the Administrative Agent, or (ii) (1) the government of the U.S., or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq . and 41 U.S.C. § 15 et seq .), or (2) the federal government of Canada, unless the Financial Administration Act (Canada), as amended, and any other steps necessary to ensure the enforceability of the Lien of the Administrative Agent in such Account have been complied with to the Administrative Agent’s satisfaction; provided that the Administrative Agent may make up to $10,000,000 of such Accounts eligible in its discretion;

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(o)    which is owed by any Affiliate of any Loan Party or any employee, officer, director, or stockholder of any Loan Party;
(p)    which is owed by an Account Debtor or any Affiliate of such Account Debtor to which any Loan Party is indebted, but only to the extent of such indebtedness, or is subject to any security, deposit, progress payment, retainage or other similar advance made by or for the benefit of an Account Debtor, in each case to the extent thereof;
(q)    which is subject to any counterclaim, deduction, defense, setoff or dispute (but only to the extent of any such counterclaim, deduction, defense, setoff or dispute);
(r)    which is evidenced by any promissory note, chattel paper or instrument;
(s)    which is owed by an Account Debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report in order to permit such Loan Party to seek judicial enforcement in such jurisdiction of payment of such Account, unless (i) such Loan Party has filed such report or qualified to do business in such jurisdiction or (ii) the Administrative Agent is satisfied in its Permitted Discretion that the failure to file such report and inability to seek judicial enforcement can be remedied without material delay or material cost;
(t)    with respect to which such Loan Party has made any agreement with the Account Debtor for any reduction thereof, but only to the extent of such reduction, other than discounts and adjustments given in the ordinary course of business, and any Account which was partially paid and such Loan Party created a new receivable for the unpaid portion of such Account;
(u)    which the Administrative Agent determines may not be paid by reason of the Account Debtor’s inability to pay or which the Administrative Agent otherwise determines is unacceptable for any reason whatsoever; or
(v)    which the applicable Loan Party has transferred to a third party pursuant to Section 6.05(g) or which such Loan Party expects to transfer to a third party pursuant to Section 6.05(g) .
In determining the amount of an Eligible Account of a Loan Party, the face amount of an Account may, in the Administrative Agent’s Permitted Discretion, be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that such Loan Party may be obligated to rebate to an Account Debtor pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by such Loan Party to reduce the amount of such Account.
“ Eligible Assignee ” has the meaning assigned to such term in Section 9.04.
“ Eligible Credit Card Receivables ” means, at any time, Accounts due to a Loan Party from major credit card processors (including, but not limited to, VISA, Mastercard, American Express, Diners Club and DiscoverCard) as arise in the ordinary course of business and which have been earned by performance, which the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), are

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eligible for inclusion in the applicable Borrowing Base. Without limiting the Administrative Agent’s discretion provided herein, none of the following shall be deemed to be Eligible Credit Card Receivables:
(a)    Accounts due from major credit card processors that have been outstanding for more than five Business Days from the date of sale or for such longer period as may approved by the Administrative Agent;
(b)    Accounts due from major credit card processors with respect to which a Loan Party does not have good, valid and marketable title thereto;
(c)    Accounts due from major credit card processors that are not subject to a first priority perfected Lien in favor of the Administrative Agent (subject to any Permitted Encumbrance specified in subclause (b)(ii) of the definition of Eligible Accounts that has priority over the security interest in favor of the Administrative Agent by operation of applicable law);
(d)    Accounts due from major credit card processors which are disputed, or with respect to which a claim, counterclaim, offset or chargeback has been asserted, by the related credit card processor (but only to the extent of such dispute, counterclaim, offset or chargeback) (it being the intent that chargebacks in the ordinary course by the credit card processors shall not be deemed violative of this clause);
(e)    Accounts due from major credit card processors (other than VISA, Mastercard, American Express, Diners Club and DiscoverCard) which the Administrative Agent determines in its commercially reasonable discretion acting in good faith to be unlikely to be collected; or
(f)    with respect to which any covenant contained in this Agreement or in the applicable Security Agreement has been breached or any representation or warranty contained in this Agreement or in the applicable Security Agreement is not true in any material respect (or with respect to any representation or warranty that is already qualified by materiality, such representation or warranty is not true).
“ Eligible Finished Goods ” means, at any time, Eligible Inventory consisting of finished goods (other than Eligible Third Party Logistics Goods) which the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), is eligible for inclusion in the applicable Borrowing Base.
“ Eligible Inventory ” means, at any time, the Inventory of a Loan Party which the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), is eligible for inclusion in the applicable Borrowing Base. Without limiting the Administrative Agent’s discretion provided herein, Eligible Inventory of a Loan Party shall not include any Inventory:
(a)    which is not subject to a first priority perfected security interest in favor of the Administrative Agent (subject to any Permitted Encumbrance specified in subclause (b)(ii) below that has priority over the security interest in favor of the Administrative Agent by operation of applicable law);
(b)    which is subject to any Lien other than (i) a Lien in favor of the Administrative Agent, (ii) a Lien constituting a Permitted Encumbrance pursuant to clause (a), (b), (f), (h) or (i)

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of the definition thereof and (iii) any other Permitted Encumbrance which does not have priority over the Lien in favor of the Administrative Agent;
(c)    which is, in the Administrative Agent’s opinion, slow moving, obsolete, unmerchantable, defective, used, unfit for sale, or not salable at prices approximating at least the cost of such Inventory in the ordinary course of business;
(d)    with respect to which any covenant contained in this Agreement or in a Security Agreement has been breached or any representation or warranty contained in this Agreement or in a Security Agreement is not true in any material respect (or with respect to any representation or warranty that is already qualified by materiality, such representation or warranty is untrue) and which does not conform to all standards imposed by any Governmental Authority;
(e)    which is not finished goods or raw materials or which constitutes work-in-process, spare or replacement parts, packaging and shipping material, manufacturing supplies, samples, prototypes, bill-and-hold or ship-in-place goods, goods that are returned or marked for return, repossessed goods, defective or damaged goods, or goods held or sold on consignment;
(f)    which, in respect of
(1)    a U.S. Loan Party. is not located in the U.S. and is in transit with a common carrier from vendors and suppliers, provided that Inventory in transit from vendors and suppliers may be included as Eligible Inventory despite the foregoing provision of this clause (f)(1) so long as:
(i)    title to such Inventory has not passed to a third party;
(ii)    the U.S. Borrower or a U.S. Guarantor controls the documents of title representing such Inventory;
(iii)    the Inventory is in transit within the United States to the U.S. Borrower or any U.S. Guarantor for receipt by the U.S. Borrower or a U.S. Guarantor within sixty (60) days of the date of determination that has not yet been received into a distribution center or store of such Person; and
(iv)    such Inventory would otherwise constitute Eligible Inventory;
(2)    a Canadian Loan Party, is not located in a province or territory in Canada in which the Administrative Agent has a perfected Lien in such eligible Inventory and is in transit with a common carrier from vendors and suppliers, provided that Inventory in transit from vendors and suppliers may be included as Eligible Inventory despite the foregoing provision of this clause (f)(2) so long as:
(i)    title to such Inventory has not passed to a third party;
(ii)    the applicable Canadian Loan Party controls the documents of title representing such Inventory;

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(iii)    the Inventory is in transit within Canada to a Canadian Loan Party for receipt by the Canadian Loan Party within sixty (60) days of the date of determination that has not yet been received into a distribution center or store of such Person; and
(iv)    such Inventory would otherwise constitute Eligible Inventory;
(g)    which is located in any location leased by such Loan Party unless (i) the lessor has delivered to the Administrative Agent a Collateral Access Agreement or (ii) a Reserve for rent, charges and other amounts due or to become due with respect to such facility has been established by the Administrative Agent in its Permitted Discretion;
(h)    which is located in any third party warehouse or is in the possession of a bailee (other than a third party processor) and is not evidenced by a Document, unless (i) such warehouseman or bailee has delivered to the Administrative Agent a Collateral Access Agreement and such other documentation as the Administrative Agent may require or (ii) an appropriate Reserve has been established by the Administrative Agent in its Permitted Discretion;
(i)    which contains or bears any intellectual property rights licensed to such Loan Party unless the Administrative Agent is satisfied that it may sell or otherwise dispose of such Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement; or
(j)    which is not reflected in a current perpetual inventory report of such Loan Party (unless such Inventory is reflected in a report to the Administrative Agent as “in transit” Inventory).
“ Eligible Raw Materials ” means, at any time, Eligible Inventory consisting of raw materials which the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), is eligible for inclusion in the applicable Borrowing Base.
“ Eligible Retail Finished Goods ” means, at any time, Eligible Inventory consisting of finished retail goods which the Administrative Agent determines in its Permitted Discretion, following consultation with the applicable Borrower (but without any requirement for the applicable Borrower’s consent), is eligible for inclusion in the applicable Borrowing Base.
“ Eligible Third Party Logistics Goods ” means, at any time, finished goods consisting of returns, irregulars, closeouts, seconds, samples and other similar goods owned by the U.S. Borrower or a U.S. Guarantor and held by GENCO I, Inc., a third party logistics provider, or any of its Affiliates or successors or third party logistics providers acceptable to the Administrative Agent providing similar products and services which finished goods the Administrative Agent determines in its Permitted Discretion, following consultation with the U.S. Borrower (but without any requirement for the U.S. Borrower’s consent), are eligible for inclusion in the applicable Borrowing Base.
“ Eligible Trademark Collateral ” means the U.S. Levi’s Trademarks, U.S. Levi’s Patents, U.S. Levi’s Copyrights and Licenses (each as defined in the U.S. Security Agreement) held by the U.S. Borrower.

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“ Eligible Wholesale Finished Goods ” means, at any time, Eligible Inventory consisting of finished wholesale goods (other than Eligible Third Party Logistics Goods) which the Administrative Agent determines in its Permitted Discretion, following consultation with the applicable Borrower (but without any requirement for the applicable Borrower’s consent), is eligible for inclusion in the applicable Borrowing Base.
“ Environmental Laws ” means all laws, rules, regulations, codes, ordinances, orders, orders-in-council, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, presence, release or threatened release of any Hazardous Material or to health and safety matters.
“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower or Subsidiary directly or indirectly resulting from or based upon (a) any violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) the presence of any exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“ Environmental Lien ” means a Lien in favor of any Governmental Authority for (a) any liability under Environmental Laws, or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment.
“ Equipment ” means all now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (except Inventory) of the U.S. Borrower or any of its Subsidiaries, including embedded software, dies, tools, jigs, molds and office equipment, as well as all of such types of property leased by the U.S. Borrower or any of its Subsidiaries and all rights and interests of the U.S. Borrower or any of its Subsidiaries with respect thereto under such leases (including, without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.
“ Equipment Financing Transaction ” means any financing with any Person of Equipment which will be treated as Indebtedness.
“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that, together with a Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

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“ ERISA Event ” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) any failure to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, whether or not waived; (c) the filing pursuant to Section 412 of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) a determination that any Plan is, or is expected to be, in “at risk” status (as defined in Section 430(i)(4) of the Code or Section 303(i)(4) of ERISA; (e) the incurrence by any Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the receipt by any Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the incurrence by any Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by any Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, or in “endangered” or “critical” status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (i) the withdrawal of any Borrower or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; or (j) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to any Borrower or ERISA Affiliate.
“ Eurodollar ,” when used in reference to any Loan or Borrowing denominated in Dollars and, when so used, refers to whether such Loan bears, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
“ Euro Notes Indenture ” means the Indenture, dated as of May 6, 2010, by and between the U.S. Borrower, as issuer, and Wells Fargo Bank, National Association, as trustee.
“ Event of Default ” has the meaning assigned to such term in Article VII .
“ Excluded Subsidiaries ” means (i) The Great Western Garment Company Limited and (ii) The Great Western Garment Company (N.B.) Limited.
“ Excluded Swap Obligation ” means, with respect to any Guarantor, (a) any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the applicable or official interpretation of any thereof) (i) by virtue of such Guarantor’s failure to constitute an “eligible contract participant,” as defined in the Commodity Exchange Act and the regulations thereunder (determined after giving effect to any applicable keepwell, support, or other agreement for the benefit of such Guarantor and any and all applicable guarantees of such Guarantor’s Swap Obligations by other Loan Parties), at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap Obligation or (ii) in the case of a Swap Obligation that is subject to a clearing requirement pursuant to section 2(h) of the Commodity Exchange Act, because such Guarantor is a “financial entity,” as defined in section 2(h)(7)(C) of the Commodity Exchange Act, at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect

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to such Swap Obligation or (b) any other Swap Obligation designated as an “Excluded Swap Obligation” of such Guarantor as specified in any agreement between the relevant Loan Parties and Hedge Provider applicable to such Swap Obligation.
“ Excluded Taxes ” means, with respect to any payment made by any Loan Party under any Loan Document, any of the following Taxes: (a) income or franchise Taxes imposed on (or measured by) net income or net profits (i) as a result of the recipient being organized in, or having its principal office or, in the case of any Lender, its applicable lending office in, the taxing jurisdiction or (ii) that are Other Connection Taxes; (b) any branch profits Taxes imposed under Section 884(a) of the Code, or any similar Taxes, imposed as a result of the recipient conducting business in the taxing jurisdiction (other than a business arising (or deemed to arise) solely as a result of the Loan Documents or any transactions contemplated thereby); (c) in the case of a Non-U.S. Lender (other than an assignee pursuant to a request by a Borrower under Section 2.19(b) ), any U.S. federal withholding Taxes resulting from any law in effect on the date such Non U.S.-Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Non U.S.-Lender (or its assignor, if any) was entitled, immediately prior to the designation of a new lending office (or assignment), to receive additional amounts from the Borrowers with respect to such withholding Taxes pursuant to Section 2.17(a) ; (d) any withholding Tax attributable to a Lender’s failure to comply with Section 2.17(f) ; (e) any U.S. federal withholding taxes imposed pursuant to FATCA; and (f) in the case of any payment made by a Canadian Loan Party any (i) Canadian federal withholding Taxes imposed on a payment to a Lender, Issuing Bank, recipient or agent thereof who does not deal at arm’s length with the relevant Canadian Loan Party for purposes of the ITA and (ii) any Taxes imposed by Canada (or a jurisdiction within Canada) on the capital of any recipient of such payment.
“ Existing Credit Agreement ” shall have the meaning provided in the recitals hereto.
“ Existing Euro Notes ” means the 7.75% Senior Notes due 2018 issued under the Euro Notes Indenture.
“ Existing Loan Documents ” shall have the meaning provided in the Section 1.06 hereto.
“ Existing Yen Notes ” means the 4.25% Senior Notes due 2016 issued under the Fiscal Agency Agreement, dated as of November 22, 1996, by and between the U.S. Borrower, as issuer, and Citibank, N.A., as fiscal agent.
“ Facility ” means each of the U.S. Facility and the Multicurrency Facility.
“ FATCA ” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(2) of the Code as of the date of this Agreement (or any amended or successor version described above).
“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

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“ Financial Officer ” means the chief financial officer, principal accounting officer, treasurer, controller or assistant treasurer of the U.S. Borrower, or any other officer or duly delegated employee identified to the Administrative Agent by written notice from time to time having substantially the same authority and responsibility.
“ Fiscal Month ” means, with respect to the U.S. Borrower or any of its Subsidiaries, the approximately one-month period ending around the end of each month or such other applicable period, as determined from time to time by the U.S. Borrower in the ordinary course of its business, as the context may require, or, if any such Subsidiary was not in existence on the first day of any such period, the period commencing on the date on which such Subsidiary is incorporated, organized, formed or otherwise created and ending on the last day of such period.
“ Fiscal Quarter ” means, with respect to the U.S. Borrower or any of its Subsidiaries, the approximately three-month period ending on (a) a day at the end of February or the beginning of March, (b) a day at the end of May or the beginning of June, (c) a day at the end of August or the beginning of September or (d) a day at the end of November or the beginning of December, as the case may be, as determined from time to time by the U.S. Borrower in the ordinary course of its business, as the context may require, or, if any such Subsidiary was not in existence on the first day of any such period, the period commencing on the date on which such Subsidiary is incorporated, organized, formed or otherwise created and ending on the last day of such period.
“ Fiscal Year ” means, with respect to the U.S. Borrower or any of its Subsidiaries, the approximately twelve-month period ending on the last Sunday in November in each year (or, with respect to certain Foreign Subsidiaries due to local statutory requirements, November 30 of each year) or, if any such Subsidiary was not in existence on such day in November in any calendar year, the period commencing on the date on which such Subsidiary is incorporated, organized, formed or otherwise created and ending on the last Sunday (or, if applicable, November 30) of the next succeeding November.
“ Foreign Inventory Transaction ” means any financing with any Person of Inventory owned by a Foreign Subsidiary (other than a Canadian Subsidiary) which is, upon completion of such financing, treated as Indebtedness.
“ Foreign Receivables ” means all obligations of any obligor (whether now existing or hereafter arising) under a contract for sale of goods or services by Foreign Subsidiaries (other than a Canadian Subsidiary), which includes any obligation of such obligor (whether now existing or hereafter arising) to pay interest, finance charges or amounts with respect thereto, and, with respect to any of the foregoing receivables or obligations, (a) all of the interest of Foreign Subsidiaries (other than a Canadian Subsidiary) in the goods (including returned goods) the sale of which gave rise to such receivable or obligation after the passage of title thereto to any obligor, (b) all other Liens and property of Foreign Subsidiaries (other than a Canadian Subsidiary) subject thereto from time to time purporting to secure payment of such receivables or obligations, (c) all guaranties, insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such receivables or obligations, (d) all books and records relating to the foregoing, lockbox accounts containing primarily proceeds of the foregoing, and other similar related assets of Foreign Subsidiaries (other than a Canadian Subsidiary) customarily transferred (or in which security interests are customarily granted) to purchasers in receivables purchase transactions that are treated as sales under GAAP, (e) all rights of Foreign Subsidiaries (other than a Canadian Subsidiary) to refunds on account of value added tax in respect of goods sold to an obligor, any receivable from whom is or becomes a defaulted receivable,

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and (f) proceeds of or judgments relating to any of the foregoing, any debts represented thereby and all rights of action against any Person in connection therewith.
“ Foreign Subsidiary ” means any Subsidiary of the U.S. Borrower, other than a Domestic Subsidiary.
“ Funding Accounts ” has the meaning assigned to such term in Section 4.01(g) .
“ GAAP ” means generally accepted accounting principles in the United States of America.
“ Governmental Authority ” means the government of the United States of America, Canada, any other nation or any political subdivision thereof, whether provincial, territorial, state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“ Guarantee ” of or by any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided , that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.
“ Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“ Hedge Provider ” means a Lender or an Affiliate of a Lender and that enters into a Swap Agreement, in each case, in its capacity as a party to such Swap Agreement.
“ Impacted Interest Period ” has the meaning assigned to such term in the definition of “LIBO Rate”.
“ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby

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has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (k) all obligations of such Person under any liquidated earn-out. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by any Loan Party under any Loan Document and (b) Other Taxes.
“ Insolvency Laws ” means each of the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), and the Winding-Up and Restructuring Act (Canada), each as now and hereafter in effect, any successors to such statutes and any other applicable insolvency or other similar law of any jurisdiction, including any law of any jurisdiction permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it.
“ Insolvent ” means, when used with respect to any Person, that at the time of determination:
(a)    the assets of such Person, at a fair valuation, are less than the total amount of its debts (including contingent liabilities);
(b)    the present fair saleable value of its assets is less than its probable liability on its existing debts as such debts become absolute and matured;
(c)    it is then unable and does not expect to be able to pay its debts (including contingent debts and other commitments) as they mature; and
(d)    it has capital insufficient to carry on its business as conducted and as proposed to be conducted.
For purposes of determining whether a Person is Insolvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“ Interest Election Request ” means a request by the Borrower Representative to convert or continue a Revolving Borrowing in accordance with Section 2.07 .
“ Interest Payment Date ” means (a) with respect to any ABR Loan (other than a Swingline Loan) or Canadian Prime Rate Loan, the first Business Day of each calendar quarter and the Maturity Date, (b) with respect to any Eurodollar Loan or CDOR Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part (and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period) and the Maturity Date and (c) with respect to any Swingline Loan, the day that such Swingline Loan is required to be repaid and the Maturity Date.

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“ Interest Period ” means, (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Eurodollar Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, if available to each applicable Lender, twelve months or fourteen days) thereafter and (b) with respect to any CDOR Rate Borrowing, the period commencing on the date of such Borrowing and ending on the date which is 30, 60 or 90 days thereafter, in each case, as the Borrower Representative may elect; provided , that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“ Interpolated Rate ” means, at any time, for any Interest Period, the rate per annum (rounded upward to four decimal places) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time.
“ Inventory ” has the meaning assigned to such term in the U.S. Security Agreement.
“ Inventory Reserves ” shall mean reserves against Inventory equal to the sum of the following:
(a)    a reserve for shrink, or discrepancies that arise pertaining to inventory quantities;
(b)    a reserve determined by the Administrative Agent in its Permitted Discretion for Inventory that is discontinued or slow-moving;
(c)    a reserve for Inventory which is designated to be returned to vendor or which is recognized as damaged or off quality by a Loan Party;
(d)    a lower of the cost or market reserve for any differences between a Borrower’s actual cost to produce versus its selling price to third parties, determined on a product line basis; and
(e)    any other reserve as deemed appropriate by the Administrative Agent in its Permitted Discretion, from time to time.
“ Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a

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business unit; provided that customary trade credit extended and paid in the ordinary course of business shall not constitute Investments. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment (other than adjustments for the repayment of, or the refund of capital with respect to, the original principal amount of any such Investment).
“ Investment Policies ” means the U.S. Borrower’s Investment Policies, as adopted by the U.S. Borrower and set forth in a writing delivered to the Administrative Agent by a Financial Officer of the U.S. Borrower from time to time.
“ IRS ” means the United States Internal Revenue Service.
“ Issuing Banks ” means, individually and collectively as the context may require, each U.S. Issuing Bank and Multicurrency Issuing Bank.
“ ITA ” means the Income Tax Act (Canada), as amended.
“ Joinder Agreement ” means a Canadian Joinder Agreement or a U.S. Joinder Agreement.
“ LC Alternative Currency ” means (a) Sterling, (b) Euro or (c) any other lawful currency (other than Dollars) acceptable to the Administrative Agent and the applicable U.S. Issuing Bank (in the case of U.S. Letters of Credit) or the applicable Multicurrency Issuing Bank (in the case of Multicurrency Letters of Credit) or which, in the case of this clause (c), is freely transferable and convertible into Dollars and is freely available to the applicable U.S. Issuing Bank or Multicurrency Issuing Bank.
“ LC Disbursement ” means a payment made by an Issuing Bank pursuant to a Letter of Credit, including in respect of a time draft presented thereunder; provided that, with respect to any component of any such amount in an LC Alternative Currency under a U.S. Letter of Credit, such amount shall be the Dollar Amount thereof. The date of an LC Disbursement shall be the date of payment by the applicable Issuing Bank under a Letter of Credit or a time draft presented thereunder, as the case may be.
“ LC Exposure ” means, at any time, the sum of the U.S. LC Exposure and the Multicurrency LC Exposure.
“ Lender Parties ” means, individually and collectively as the context may require, the U.S. Lender Parties and the Multicurrency Lender Parties.
“ Lenders ” means the Persons listed on the Commitment Schedule and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.
“ Letter of Credit ” means (i) any letter of credit (or, to the extent agreed by the relevant Issuing Bank and the Administrative Agent, any other credit support or other credit enhancement instrument or similar document or agreement that an Issuing Bank may from time enter into, including, without limitation, any guaranty, “exposure transmittal memorandum” or other instrument, document or agreement issued or entered into for the purpose of indemnifying any credit exposure of a department, branch or Affiliate of such Issuing Bank or any third party) and or (ii) to provide credit support or other credit enhancement to an Issuing Bank that issues any letter of credit or other instrument described in clause (i) above, in each case, issued (or deemed issued) in accordance with Section 2.06 .

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“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any applicable Interest Period, the London interbank offered rate administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars) for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion (the “ LIBO Screen Rate ”) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; provided that, (x) if any LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement and (y) if the LIBO Screen Rate shall not be available at such time for a period equal in length to such Interest Period (an “ Impacted Interest Period ”), then the LIBO Rate shall be the Interpolated Rate at such time, subject to Section 2.14 in the event that the Administrative Agent shall conclude that it shall not be possible to determine such Interpolated Rate (which conclusion shall be conclusive and binding absent manifest error); provided, that, if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. Notwithstanding the above, to the extent that “LIBO Rate” or “Adjusted LIBO Rate” is used in connection with an ABR Borrowing, such rate shall be determined as modified by the definition of “Alternate Base Rate”.
“ LIBO Screen Rate ” has the meaning assigned to such term in the definition of “LIBO Rate”.
“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
“ Line Cap ” has the meaning set forth in the definition of “Availability.”
“ Loan Documents ” means this Agreement, any promissory notes issued pursuant to this Agreement, any Letter of Credit applications, the Collateral Documents and all other agreements, instruments, documents and certificates identified in Section 4.01 executed and delivered to, or in favor of, the Administrative Agent, the Multicurrency Administrative Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts and letter of credit agreements whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Administrative Agent, the Multicurrency Administrative Agent or any Lender in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.
“ Loan Guarantor ” or “ Guarantor ” means each Canadian Guarantor or U.S. Guarantor.
“ Loan Guaranty ” means the Canadian Loan Guaranty and the U.S. Loan Guaranty.
“ Loan Parties ” means the Canadian Loan Parties and the U.S. Loan Parties.

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“ Loans ” means the loans and advances made by the Lenders pursuant to this Agreement, including Swingline Loans and Protective Advances.
“ LOS Business ” means the ownership and operation by the U.S. Borrower or a Subsidiary of the U.S. Borrower, whether directly or through joint ventures with third parties in partnership, corporate or other form, of businesses engaged solely in selling apparel and accessories and related products including, without limitation, selling through retail stores, outlet stores, telephone sales, catalog or other mail orders, and electronic sales. LOS Business shall not include any business engaging in manufacturing or in selling and in manufacturing.
“ LS&Co. Deferred Compensation Plan ” has the meaning specified in Section 6.05(h).
“ LS&Co. Trust ” has the meaning specified in Section 6.05(h) .
“ LS&Co. Trust Agreement ” has the meaning specified in Section 6.05(h).
“ LSIFCS ” means Levi Strauss International Group Finance Coordination Services C.V.A./S.C.A., a Belgian corporation, and/or any other Affiliate of the U.S. Borrower providing services similar to the services provided by such entity to the U.S. Borrower in the ordinary course of business, and any of their respective successors.
“ Material Adverse Effect ” means any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (a) the business, assets, operations or financial condition, of the U.S. Borrower and its Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any of its obligations under the Loan Documents to which it is a party as and when due, (c) the Collateral, or the Administrative Agent’s Liens (on behalf of itself and the Lenders) on the Collateral or the priority of such Liens, or (d) the rights of or benefits available to the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks or the Lenders under any of the Loan Documents.
“ Material Domestic Subsidiary ” means any domestic or Canadian Subsidiary of the U.S. Borrower, (i) the net book value of which is $5,000,000 or more or (ii) the annual gross revenue of which is $15,000,000 or more.
“ Material Indebtedness ” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the U.S. Borrower and its Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the “obligations” of any Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
“ Maturity Date ” means the fifth anniversary of the Amendment Effective Date or any earlier date on which the Commitments are reduced to zero or otherwise terminated pursuant to the terms hereof; provided that if any Existing Euro Notes are still outstanding on February 13, 2018 (the “ Trigger Date ”), the Maturity Date shall be automatically amended to be the Trigger Date except to the extent that prior to the repayment in full of the Existing Euro Notes (which may, subject to compliance with the Payment Conditions and delivery by the Loan Parties to the Administrative Agent of either a certificate of a Financial Officer (with reasonably detailed calculations) certifying satisfaction of the Payment Conditions or other evidence of the same reasonably satisfactory to the Administrative Agent, occur after

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the Trigger Date but prior to the maturity date of the Existing Euro Notes), the U.S. Borrower would be permitted to repay in full the Existing Euro Notes in reliance on the Payment Conditions; provided , further that, if on any date after the Trigger Date and prior to repayment in full of the Existing Euro Notes the U.S. Borrower would no longer be permitted to repay in full the Existing Euro Notes in reliance on the Payment Conditions then the Maturity Date shall be automatically amended to be such date.
“ Maximum Canadian Liability ” has the meaning assigned to such term in Section 11.10 .
“ Maximum U.S. Liability ” has the meaning assigned to such term in Section 10.10 .
“ Minimum Excess Availability Amount ” means the greater of (x) $65,000,000 and (y) 10% of the Line Cap.
“ Minimum Intercompany Transaction Requirement ” means that after giving effect to any proposed intercompany Investment, intercompany Indebtedness or intercompany Disposition and all other intercompany Investments, intercompany Indebtedness and intercompany Dispositions occurring during each period commencing when Availability falls below the greater of (x) $75,000,000 and (y) 10% of the Line Cap and ending when Availability is at least the greater of (x) $75,000,000 and (y) 10% of the Line Cap, no net transfer of cash and/or property (i) from the U.S. Loan Parties to any Subsidiary that is not a U.S. Loan Party or (ii) from the Canadian Loan Parties to any Subsidiary that is not a Loan Party in excess of $30,000,000 in the aggregate for all such transfers during such period shall have occurred.
“ Moody’s ” means Moody’s Investors Service, Inc.
“ Multicurrency Administrative Agent ” means JPMorgan Chase Bank, N.A., Toronto Branch, in its capacity as administrative agent under the Multicurrency Facility, and its successors in such capacity.
“ Multicurrency Commitment ” means, with respect to each Multicurrency Revolving Lender, the commitment of such Multicurrency Revolving Lender to make Multicurrency Revolving Loans and to acquire participations in Multicurrency Letters of Credit and Multicurrency Protective Advances hereunder, expressed as an amount representing the maximum possible aggregate amount of such Multicurrency Revolving Lender’s Multicurrency Revolving Exposure hereunder, as such commitment may be reduced or increased from time to time pursuant to (a) Section 2.09 and (b) assignments by or to such Multicurrency Revolving Lender pursuant to Section 9.04 . The initial amount of each Multicurrency Revolving Lender’s Multicurrency Commitment is set forth on the Commitment Schedule, or in the Assignment and Assumption pursuant to which such Multicurrency Revolving Lender shall have assumed its Multicurrency Commitment, as applicable. The aggregate initial amount of the Multicurrency Commitments is $50,000,000.
“ Multicurrency Credit Exposure ” means, as to any Multicurrency Revolving Lender at any time, the sum of (a) such Lender’s Multicurrency Revolving Exposure plus (b) a Dollar Amount equal to such Lender’s Applicable Percentage of the aggregate amount of Multicurrency Protective Advances outstanding.
“ Multicurrency Facility ” means, collectively, the Multicurrency Commitments and the extensions of credit made thereunder.
“ Multicurrency Issuing Banks ” means, individually and collectively as the context may require, JPMorgan Chase Bank, N.A., Toronto Branch, Bank of America, N.A. (acting through its Canada

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Branch) and any other Lender that has agreed to act as a Multicurrency Issuing Bank and is reasonably acceptable to the Administrative Agent and the Borrower Representative, each in its capacity as an issuer of Multicurrency Letters of Credit hereunder, and its successors and assigns in such capacity as provided in Section 2.06(j) . Each Multicurrency Issuing Bank may, in its sole discretion, arrange for one or more Multicurrency Letters of Credit to be issued by Affiliates of such Multicurrency Issuing Bank, in which case the term “Multicurrency Issuing Bank” shall include any such Affiliate with respect to Multicurrency Letters of Credit issued by such Affiliate.
“ Multicurrency LC Exposure ” means, at any time, the sum of (a) the Dollar Amount of the aggregate undrawn amount of all outstanding Multicurrency Letters of Credit plus (b) the aggregate Dollar Amount of all LC Disbursements relating to Multicurrency Letters of Credit that have not yet been reimbursed by or on behalf of the Borrowers. The Multicurrency LC Exposure of any Multicurrency Revolving Lender at any time shall be its Applicable Percentage of the aggregate Multicurrency LC Exposure at such time.
“ Multicurrency Lender Parties ” means, individually and collectively as the context may require, the Multicurrency Administrative Agent, the Multicurrency Revolving Lenders, the Bank Product Providers, the Hedge Providers and the Multicurrency Issuing Banks.
“ Multicurrency Letter of Credit ” means any Letter of Credit issued pursuant to the Multicurrency Facility.
“ Multicurrency Loans ” means, individually and collectively as the context may require, the Multicurrency Revolving Loans and the Multicurrency Protective Advances.
“ Multicurrency Protective Advance ” has the meaning assigned to such term in Section 2.04(a).
“ Multicurrency Revolving Exposure ” means, with respect to any Multicurrency Revolving Lender at any time, the sum of (a) the outstanding Dollar Amount of Multicurrency Revolving Loans of such Multicurrency Revolving Lender at such time, plus (b) an amount equal to such Multicurrency Revolving Lender’s Applicable Percentage of the Multicurrency LC Exposure at such time
“ Multicurrency Revolving Lenders ” means the Persons listed on the Commitment Schedule (or an Affiliate or branch of any such Person that is acting on behalf of such Person, in which case the term “Multicurrency Revolving Lenders” shall include any such Affiliate or branch with respect to the Multicurrency Revolving Loans made by such Affiliate or branch) as having a Multicurrency Commitment and any other Person that shall acquire a Multicurrency Commitment, other than any such Person that ceases to be a Multicurrency Revolving Lender pursuant to an Assignment and Assumption.
“ Multicurrency Revolving Loan ” means a Revolving Loan made by the Multicurrency Revolving Lenders to the Canadian Borrower or U.S. Borrower pursuant to the Multicurrency Commitments.
“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“ Net Orderly Liquidation Value ” means, with respect to Inventory or intangibles of any Person, the orderly liquidation value thereof as determined in a manner acceptable to the Administrative Agent by an appraiser acceptable to the Administrative Agent, net of all costs of liquidation thereof.

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“ Non-Consenting Lender ” has the meaning assigned to such term in Section 9.02(d) .
“ Non-Paying Canadian Guarantor ” has the meaning assigned to such term in Section 11.11 .
“ Non-Paying U.S. Guarantor ” has the meaning assigned to such term in Section 10.11 .
“ Non-U.S. Lender ” means a Lender that is not a U.S. Person.
“ Obligations ” means, individually and collectively as the context may require, the U.S. Obligations and the Canadian Obligations.
“ Ordinary Course Swap Agreements ” means any and all Swap Agreements (including any options to enter into any Swap Agreement), in each case that are (or were) entered into by any Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated to be held by such Person and not for purposes of speculation; provided that Ordinary Course Swap Agreements shall not include customary spot foreign exchange transactions engaged in solely for the purpose of settling foreign currency denominated trade payables and receivables in the ordinary course of business.
“ Organizational Documents ” means, as to any Person, the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person.
“ Original Currency ” has the meaning assigned to such term in Section 9.19 .
“ Original Effective Date ” means the date of the Existing Credit Agreement, which was September 30, 2011.
“ Original Transactions ” means the “Transactions” as defined in the Existing Credit Agreement.
“ Other Connection Taxes ” means, with respect to any Person, Taxes imposed as a result of a present or former connection between such Person and the jurisdiction imposing such Taxes (other than a connection arising solely from any Loan Documents or any transactions contemplated thereby).
“ Other Excluded Taxes ” means any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, this Agreement that are Other Connection Taxes imposed with respect to an assignment (other than an assignment under Section 2.19(b) ).
“ Other Taxes ” means any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property taxes , except for Other Excluded Taxes.
“ Outstanding Receivables Amount ” shall mean, at any time of determination, the excess of (i) the face amount of all Accounts and other payment obligations disposed of pursuant to Section 6.05(g) prior to such time minus (ii) any amount included in clause (i) above that is attributable to Accounts and other payment obligations with a stated due date prior to such time.

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“ Parent ” means, with respect to any Lender, the Person as to which such Lender is, directly or indirectly, a subsidiary.
“ Participant ” has the meaning assigned to such term in Section 9.04(c) .
“ Participant Register ” has the meaning assigned to such term in Section 9.04(c) .
“ Patriot Act ” has the meaning assigned to such term in Section 9.14 .
“ Paying Canadian Guarantor ” has the meaning assigned to such term in Section 11.11 .
“ Paying U.S. Guarantor ” has the meaning assigned to such term in Section 10.11 .
“ Payment Conditions ” means, at the time of determination with respect to a specified transaction or payment (or declaration of payment), that (a) no Default then exists or would arise as a result of the entering into of such transaction or the making of such payment, and (b) on a pro forma basis after giving effect to such transaction or payment, average Availability for the 30-day period immediately preceding the date of such transaction or payment (or declaration of payment) is equal to or greater than the greater of (x) $125,000,000 and (y) 17.5% of the Line Cap.
“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“ Permitted Discretion ” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.
“ Permitted Encumbrances ” means:
(a)    Liens created pursuant to any Loan Document;
(b)    Liens for taxes which are not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted so long as (i) adequate reserves in accordance with GAAP are being maintained on the books of the applicable Person or (ii) if the applicable Person has not yet determined whether reserves are required to be maintained in accordance with GAAP, the amount of all such reserves that may be required if this subclause (ii) is applicable do not exceed $10,000,000 in the aggregate;
(c)    Liens consisting of assignments, pledges or deposits in the ordinary course of business in connection with, or securing obligations under, workers’ compensation laws, unemployment insurance and similar legislation, or securing surety bonds or other similar bonds which, in turn, secure obligations under the aforementioned laws, insurance and legislation;
(d)    Liens consisting of assignments, pledges or deposits in the ordinary course of business, securing the performance of, or payment in respect of, bids, tenders, leases (including a sale-leaseback and associated operating lease) and contracts including rental agreements (other than for the repayment of Indebtedness) or securing guarantees, standby letters of credit, indemnity, performance or other similar bonds which, in turn, secure obligations in respect of bids, tenders, leases and contracts;

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(e)    Liens consisting of assignments, pledges or deposits securing the performance of, or payment in respect of, statutory obligations (other than Liens arising under ERISA or Environmental Liens), surety and appeal bonds (other than bonds related to judgments or litigation) or indemnity or performance bonds or guarantees or standby letters of credit which, in turn, secure such statutory obligations or bonds;
(f)    materialmen’s, mechanics’, workmen’s and repairmen’s Liens securing obligations which are not overdue for more than sixty (60) days and carriers’ and warehousemen’s Liens and other similar Liens arising in the ordinary course of business securing obligations which are not overdue more than sixty (60) days or, in each case, which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves as required by GAAP with respect thereto are maintained on the books of the applicable Person;
(g)    easements, rights-of-way, zoning restrictions and other similar encumbrances on title to real property that were not incurred in connection with and do not secure Indebtedness and do not, either individually or in the aggregate, materially interfere with the ordinary conduct of the U.S. Borrower and its Subsidiaries, taken as a whole;
(h)    Liens arising from judgments, awards and attachments in connection with court proceedings, provided that the attachment or enforcement of such Liens would not result in an Event of Default under clause (k) of Article VII , such Liens are being contested in good faith by appropriate proceedings, such contested proceedings conclusively operate to stay the sale of any property subject to such Liens and adequate reserves in accordance with GAAP have been set aside;
(i)    undetermined or inchoate Liens incidental to current operations which have not yet been filed pursuant to applicable law or which relate to obligations not yet due or delinquent; and
(j)    the reservations, limitations, provisos and conditions expressed in any original grants from the Crown of real or immoveable property, which do not materially impair the use of the affected land for the purpose used or intended to be used by that Person;
provided , that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness, except with respect to clauses (a) and (h) above.
“ Permitted Foreign Receivables Transaction ” means any arrangement of Foreign Subsidiaries (other than Canadian Subsidiaries) providing for sales, transfers or conveyances of, or granting of security interests in, Foreign Receivables that do not provide, directly or indirectly, for recourse against the seller of such Foreign Receivables (or against any of such seller’s Affiliates) by way of a guarantee or any other support arrangement, with respect to the amount of such Foreign Receivables (based on the financial condition or circumstances of the obligor thereunder), other than such limited recourse as is reasonable given market standards for receivables purchase transactions that are treated as sales under GAAP, taking into account such factors as historical bad debt loss experience and obligor concentration levels.
“ Permitted Refinancing Indebtedness ” means, with respect to any Person, any modification, refinancing, refunding, renewal, replacement or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the original principal amount (or accreted value, if applicable) of the Indebtedness so modified,

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refinanced, refunded, renewed, replaced or extended except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension, (b) such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the earlier of (x) the final maturity date of the Indebtedness so modified, refinanced, refunded, renewed or extended and (y) the date which is six months after the Maturity Date, (c) such modification, refinancing, refunding, renewal or extension has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (d) to the extent such Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended and (e) such Indebtedness is not secured by Liens on any assets of the Loan Parties other than the assets securing the Indebtedness being modified, refinanced, refunded, renewed or extended and the proceeds thereof.
“ Permitted Transferees ” has the meaning specified in the Stockholders Agreement dated as of April 15, 1996 between the U.S. Borrower and the stockholders of the U.S. Borrower party thereto as in effect as of the Original Effective Date, except that transferees pursuant to Section 2.2(a)(x) thereof shall not be deemed to be Permitted Transferees for purposes of this Agreement.
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“ PPSA ” means the Personal Property Security Act (Ontario), including the regulations thereto, provided that, if perfection or the effect of perfection or non-perfection or the priority of any Lien created hereunder on the Canadian Collateral is governed by the personal property security legislation or other applicable legislation with respect to personal property security in effect in a jurisdiction other than Ontario, “PPSA” means the Personal Property Security Act or such other applicable legislation in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by Chase as its prime rate at its principal offices in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
“ Prior Claims ” means all Liens created by applicable law (in contrast with Liens voluntarily granted) which rank or are capable of ranking prior or pari passu with the Liens created by the Collateral Documents (or interests similar thereto under applicable law) including for amounts owing for employee source deductions, vacation pay, goods and services taxes, sales taxes, harmonized sales taxes, municipal taxes, workers’ compensation, pension fund obligations in respect of Canadian Pension Plans, overdue rents and amounts that may become due under the Wage Earner Protection Program Act (Canada), as amended, with respect to the employees of any Loan Party that are employed in Canada, which would give rise to a Lien with priority under applicable law over the Lien granted by the Canadian

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Loan Parties in favor of the Administrative Agent (for the benefit of the Canadian Loan Parties, securing the Canadian Secured Obligations).
“ Projections ” has the meaning assigned to such term in Section 5.01(e) .
“ Protective Advance ” means a U.S. Protective Advance or a Multicurrency Protective Advance.
“ Public Equity Offering ” means an underwritten public offering of common stock of the U.S. Borrower under an effective registration statement under the Securities Act of 1933, as amended.
“ Public Market ” means any time after a Public Equity Offering has been consummated and at least fifteen percent (15%) of the total issued and outstanding common stock of the U.S. Borrower has been distributed by means of an effective registration statement under the Securities Act of 1933, as amended.
“ Real Estate ” means all now or hereafter owned or leased estates in real property of the U.S. Borrower, including, without limitation, all fees, leaseholds and future interests, together with all of the U.S. Borrower’s now or hereafter owned or leased interests in the improvements thereon, the fixtures attached thereto and the easements appurtenant thereto.
“ Real Estate Financing Transactions ” means any arrangement with any Person pursuant to which the U.S. Borrower or any of its Subsidiaries incurs Indebtedness secured by a Lien on real property of the U.S. Borrower or any of its Subsidiaries and related personal property (but excluding Collateral).
“ Register ” has the meaning assigned to such term in Section 9.04 .
“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, partners, employees, agents and advisors of such Person and such Person’s Affiliates.
“ Release ” means a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment or into or out of any Real Estate or other property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Real Estate or other property.
“ Rent Reserve ” means, with respect to any store, warehouse distribution center, regional distribution center or depot where any Inventory subject to Liens arising by operation of law is located, a reserve equal to two (2) months’ rent at such store, warehouse distribution center, regional distribution center or depot.
“ Report ” means reports prepared by the Administrative Agent or another Person showing the results of appraisals, field examinations or audits pertaining to the assets of the Loan Parties from information furnished by or on behalf of the Borrowers, after the Administrative Agent has exercised its rights of inspection pursuant to this Agreement, which Reports may be distributed to the Lenders by the Administrative Agent.

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“ Required Lenders ” means, at any time, Lenders (other than Defaulting Lenders) having Credit Exposure and unused Commitments representing more than 50% of the sum of the Aggregate Credit Exposure and unused Commitments.
“ Requirement of Law ” means, as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“ Reserves ” means Dilution Reserves, Inventory Reserves, Rent Reserves and any other reserves which the Administrative Agent deems necessary, in its Permitted Discretion, to maintain (including, without limitation, an availability reserve, reserves for accrued and unpaid interest on the Secured Obligations, Banking Services Reserves, reserves for consignee’s, warehousemen’s and bailee’s charges, reserves for Swap Obligations, reserves for contingent liabilities of any Loan Party, reserves for uninsured losses of any Loan Party, reserves for uninsured, underinsured, un-indemnified or under-indemnified liabilities or potential liabilities with respect to any litigation and reserves for taxes, fees, assessments, and other governmental charges and Prior Claims) with respect to the Collateral or any Loan Party. For purposes of this Agreement, the parties hereto hereby agree that no Reserve shall be established against the U.S. Borrowing Base in respect of obligations of the Canadian Loan Parties under Canadian Benefit Plans and/or Canadian Pension Plans.
“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the U.S. Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the U.S. Borrower or any option, warrant or other right to acquire any such Equity Interests in the U.S. Borrower.
“ Revolving Exposure ” means the Multicurrency Revolving Exposure and the U.S. Revolving Exposure.
“ Revolving Exposure Limitations ” has the meaning assigned to such term in Section 2.01 .
“ Revolving Lender ” means a U.S. Revolving Lender or Multicurrency Revolving Lender.
“ Revolving Loan ” means a U.S. Revolving Loan or a Multicurrency Revolving Loan.
“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom or (c) the Canadian government or any agency thereof.
“ Sanctioned Country ” means, at any time, a country or territory which is the subject or target of any Sanctions.

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“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union or any EU member state or by the Canadian government or any agency thereof, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
“ Second Currency ” has the meaning assigned to such term in Section 9.19 .
“ Secured Leverage Ratio ” means, on any date, the ratio of (a) Total Secured Indebtedness on such date to (b) Consolidated EBITDA for the most recent four Fiscal Quarters ending prior to such date for which financial statements have been delivered pursuant to Section 5.01(a) or (b) . In addition, for purposes of calculating the ratio, the aggregate Commitments shall be deemed to be fully drawn at all times for purposes of determining the ratio. In addition to and without limitation of the foregoing, for purposes of this definition, this ratio shall be calculated after giving effect to the following:
(a)    if since the beginning of that period the U.S. Borrower or any Subsidiary shall have made any Disposition outside the ordinary course of business or an Investment (by merger or otherwise) in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition of property which constitutes all or substantially all of an operating unit of a business,
(b)    if the transaction giving rise to the need to calculate the Secured Leverage Ratio involves a Disposition, Investment or acquisition, or
(c)    since the beginning of that period any Person (that subsequently became a Subsidiary or was merged with or into the U.S. Borrower or any Restricted Subsidiary since the beginning of the Four Quarter Period) shall have made such a Disposition, Investment or acquisition,
Consolidated EBITDA for that period shall be calculated after giving pro forma effect to the Asset Sale, Investment or acquisition as if the Asset Sale, Investment or acquisition occurred on the first day of the applicable period in accordance with Regulation S-X promulgated under the United States Securities Act of 1933, as amended.
“ Secured Obligations ” means, individually and collectively as the context may require, the U.S. Secured Obligations and the Canadian Secured Obligations.
“ Security Agreements ” means, individually and collectively as the context may require, the U.S. Security Agreement and the Canadian Security Agreement.
“ Settlement ” has the meaning assigned to such term in Section 2.05(c) .
“ Settlement Date ” has the meaning assigned to such term in Section 2.05(c) .
“ Short-term Investments ” means, as of any date of determination, (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States government or, in the case of a Canadian Loan Party, the Canadian government or (ii) issued by any agency of the United States or, in the case of a Canadian Loan Party, Canada, in each case maturing within one year after such date; (b) taxable or tax-exempt marketable direct obligations issued by any state of the United States or, in the case of a Canadian Loan Party, any province, commonwealth or territory or any political subdivision of any such state, province, commonwealth or territory or any public

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instrumentality thereof, in each case having, at the time of the acquisition thereof, a rating of at least A‑ from S&P or the equivalent thereof from another nationally recognized rating agency; (c) commercial paper maturing no more than two hundred seventy (270) days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (d) time deposits, certificates of deposit or bankers’ acceptances issued or accepted by any Lender or by any commercial bank organized under the laws of the United States, any state thereof or an OECD country, having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the U.S. Borrower in a manner consistent with board-approved policy) or by a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (e) repurchase agreements with financial institutions organized under the laws of the United States, any state thereof or an OECD country, having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the U.S. Borrower in a manner consistent with board-approved policy) or with a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (f) Dollar denominated fixed or floating rate notes and foreign currency denominated fixed or floating rate notes, in each case having, at the time of the acquisition thereof, a rating of at least A or A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (g) variable rate demand notes with interest reset period and related put at par at 7-day intervals and having, at the time of the acquisition thereof, a rating of at least AA from S&P or the equivalent thereof from another nationally recognized rating agency; (h) money market preferred funds with dividend reset period and related put at par at a maximum of 60-day intervals and having, at the time of the acquisition thereof, a rating of at least AA from S&P or the equivalent thereof from another nationally recognized rating agency; and (i) (x) money market funds that (i) (x) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940 or (y) in the case of any Canadian Loan Party, are money market mutual funds (as defined in National Instrument 81-102 Mutual Funds) that are reporting issuers (as defined under Ontario securities law) in the Province of Ontario, (ii) are rated at least A- by S&P or the equivalent thereof from another nationally recognized ratings agency and (iii) have portfolio assets of at least $1,000,000,000.
“ Solvent ” means, when used with respect to
(A)    any Person (other than a Canadian Loan Party), that at the time of determination:
(a)    its assets, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities);
(b)    the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured;
(c)    it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and
(d)    has capital sufficient to carry on its business as conducted and as proposed to be conducted; and
(B)    any Canadian Loan Party, means
(a)    the property of such Person, at a fair valuation, is greater than the total amount of its debts and liabilities, subordinated, contingent or otherwise;

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(b)    such Person’s property is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due;
(c)    such Person will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities generally become due; and
(d)    such Person has not ceased paying its current obligations in the ordinary course of business as they generally become due.
For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“ Spot Rate ” means, on any date, as determined by the Administrative Agent, the spot selling rate posted by Reuters on its website for the sale of the applicable currency for Dollars at approximately 9:00 a.m., Pacific time, on such date (the “ Applicable Quotation Date ”); provided , that if, for any reason, no such spot rate is being quoted, the spot selling rate shall be determined by reference to such publicly available service for displaying exchange rates as may be reasonably selected by the Administrative Agent, or, in the event no such service is selected, such spot selling rate shall instead be the rate reasonably determined by the Administrative Agent as the spot rate of exchange in the market where its foreign currency exchange operations in respect of the applicable currency are then being conducted, at or about 9:00 a.m., Pacific time, on the Applicable Quotation Date for the purchase of the relevant currency for delivery two Business Days later.
“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“ Subordinated Indebtedness ” of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Administrative Agent in its reasonable discretion.
“ subsidiary ” means, with respect to any Person (the “ parent ”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

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“ Subsidiary ” means any direct or indirect subsidiary of the U.S. Borrower.
“ Supermajority Revolving Lenders ” means, at any time, Lenders (other than Defaulting Lenders) having Credit Exposure and unused Commitments representing at least 66-2/3% of the sum of the Aggregate Credit Exposure and unused Commitments.
“ Swap Agreement ” means any agreement with respect to any swap, forward, spot, future, credit default or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrowers or the Subsidiaries shall be a Swap Agreement.
“ Swap Obligations ” of a Loan Party or LSIFCS means any and all obligations of such Loan Party or LSIFCS, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements, (b) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction and (c) any “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“ Swingline Exposure ” means, at any time, the sum of the aggregate outstanding amount of all outstanding Swingline Loans. The Swingline Exposure of any U.S. Revolving Lender at any time shall be its Applicable Percentage of the aggregate Swingline Exposure.
“ Swingline Lender ” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder.
“ Swingline Loan ” has the meaning assigned to such term in Section 2.05(a) .
“ Taxes ” means any present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, and other similar fees or charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“ Taxing Authority ” means any Governmental Authority responsible for the administration or collection of any Tax.
“ Third Party Logistics Goods ” means finished goods consisting of returns, irregulars, closeouts, seconds, samples and other similar goods owned by the U.S. Loan Parties and held by a third party logistics provider.
“ Total Commitment ” means the sum of the Commitments of all the Lenders.
“ Total Indebtedness ” means, at any date, the aggregate principal amount of all Indebtedness of the U.S. Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.
“ Total Leverage Ratio ” means, on any date, the ratio of (a) Total Indebtedness on such date to (b) Consolidated EBITDA with adjustments (calculated in a manner consistent with the calculation of Consolidated EBITDA set forth in the definition of Secured Leverage Ratio for the most recent four

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Fiscal Quarters ending prior to such date for which financial statements have been delivered pursuant to Section 5.01(a) or (b) ).
“ Total Secured Indebtedness ” means, at any date, the aggregate principal amount of all Indebtedness of the U.S. Borrower and its Subsidiaries at such date that is secured by a Lien on any assets of the U.S. Borrower or any of its Subsidiaries, determined on a consolidated basis in accordance with GAAP.
“ Trademark Amount ” means on any day, the Trademark Component of the U.S. Borrowing Base on such day.
“ Trademark Component ” means (i) prior to the Trademark Release Date, (x) initially $350,000,000 and (y) to the extent an appraisal is required to be obtained for the Eligible Trademark Collateral following the Amendment Effective Date pursuant to Section 5.11(a) the lesser of (I) $350,000,000 and (II) 65% of the Net Orderly Liquidation Value of the Eligible Trademark Collateral and (ii) from and after the Trademark Release Date, $0.
“ Trademark Release Date ” means the date on which the Administrative Agent's Lien on the Eligible Trademark Collateral is released in accordance with Section 9.02(c).
“ Transactions ” means the execution, delivery and performance by the Borrowers of this Agreement, the borrowing of Loans and other credit extensions hereunder, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
“ Type ,” when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate, the Canadian Prime Rate or the CDOR Rate.
“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection of security interests.
“ Unliquidated Obligations ” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.
“ U.S. Availability Cash Collateral Account ” means an account of a U.S. Loan Party held with the Administrative Agent (or Bank of America, N.A. or one of its affiliates) designated by the Borrower Representative as a “U.S. Availability Cash Collateral Account” and, from and after the tenth Business Day following the Original Effective Date, subject to a blocked account agreement in form and substance reasonably satisfactory to the Administrative Agent.
“ U.S. Borrower ” has the meaning assigned to such term by the introductory paragraph to this Agreement.
“ U.S. Borrower Multicurrency Facility Outstandings ” means, at any time, the Multicurrency Revolving Exposure at such time minus the Canadian Borrower Outstandings at such time.

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“ U.S. Borrowing Base ” means, as of any date of determination (without duplication), the sum of (i) 100% of cash and Cash Equivalent balances in Dollars of the U.S. Loan Parties in the U.S. Borrowing Base Cash Collateral Account and the U.S. Availability Cash Collateral Account plus (ii) 90% of Eligible Credit Card Receivables of the U.S. Loan Parties plus (iii) 85% of Eligible Accounts of the U.S. Loan Parties plus (iv) 50% of the value of Eligible Raw Materials of the U.S. Loan Parties plus (v) the Trademark Component plus (vi) the lesser of (A)(I) 95% of the lower of cost or market value of Eligible Finished Goods of the U.S. Loan Parties plus (II) 50% of the lower of cost or market value of Eligible Third Party Logistics Goods of the U.S. Loan Parties and (B)(I) 90% of the Net Orderly Liquidation Value of Eligible Retail Finished Goods of the U.S. Loan Parties plus (II) 85% of the Net Orderly Liquidation Value of Eligible Wholesale Finished Goods and Eligible Third Party Logistics Goods of the U.S. Loan Parties (which shall not exceed 100% of the cost of Eligible Wholesale Finished Goods and Eligible Third Party Logistics Goods of the U.S. Loan Parties) minus (vii) without duplication, Reserves established by the Administrative Agent in its Permitted Discretion.
“ U.S. Borrowing Base Cash Collateral Account ” means, collectively, one or more accounts of the U.S. Loan Parties, as designated from time to time by written notice from the Borrower Representative to the Administrative Agent, held with financial institutions, from and after the tenth Business Day following the Original Effective Date, and subject to control agreements in form and substance reasonably satisfactory to the Administrative Agent.
“ U.S. Collateral ” means any and all property owned, leased or operated by a Person covered by the U.S. Collateral Documents and any and all other property of any U.S. Loan Party, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of the Administrative Agent to secure the Secured Obligations.
“ U.S. Collateral Documents ” means, collectively, the U.S. Security Agreement and any other documents pursuant to which any U.S. Loan Party grants a Lien upon any property as security for payment of the U.S. Secured Obligations.
“ U.S. Collection Account ” means a “Collection Account” as defined in the U.S. Security Agreement.
“ U.S. Commitment ” means, with respect to each U.S. Revolving Lender, the commitment, if any, of such U.S. Revolving Lender to make U.S. Revolving Loans and to acquire participations in U.S. Letters of Credit, Swingline Loans and U.S. Protective Advances hereunder, expressed as an amount representing the maximum possible aggregate amount of such U.S. Revolving Lender’s U.S. Revolving Exposure hereunder, as such commitment may be reduced or increased from time to time pursuant to (a) Section 2.09 and (b) assignments by or to such U.S. Revolving Lender pursuant to Section 9.04 . The initial amount of each U.S. Revolving Lender’s U.S. Commitment is set forth on the Commitment Schedule, or in the Assignment and Assumption pursuant to which such U.S. Revolving Lender shall have assumed its U.S. Commitment, as applicable. The aggregate initial amount of the U.S. Commitments is $800,000,000.
“ U.S. Credit Exposure ” means, as to any U.S. Revolving Lender at any time, the sum of (a) such Lender’s U.S. Revolving Exposure plus (b) such Lender’s Applicable Percentage of the aggregate amount of U.S. Protective Advances outstanding.
“ U.S. Facility ” means, collectively, the U.S. Commitments and the extensions of credit made thereunder.

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“ U.S. Guaranteed Obligations ” has the meaning assigned to such term in Section 10.01 .
“ U.S. Guarantor ” means each U.S. Loan Party.
“ U.S. Issuing Bank ” means individually and collectively as the context may require, Chase, Bank of America, N.A. or any other Lender that has agreed to act as U.S. Issuing Bank and is reasonably acceptable to the Administrative Agent and the U.S. Borrower, each in its capacity as an issuer of U.S. Letters of Credit hereunder, and its successors and assigns in such capacity as provided in Section 2.06(i) . Each U.S. Issuing Bank may, in its sole discretion, arrange for one or more U.S. Letters of Credit to be issued by Affiliates of such U.S. Issuing Bank, in which case the term “U.S. Issuing Bank” shall include any such Affiliate with respect to U.S. Letters of Credit issued by such Affiliate.
“ U.S. Joinder Agreement ” means a joinder agreement in substantially the form of Exhibit E-1 .
“ U.S. LC Exposure ” means, at any time, the sum of (a) the Dollar Amount of the aggregate undrawn amount of all outstanding U.S. Letters of Credit plus (b) the aggregate Dollar Amount of all LC Disbursements relating to U.S. Letters of Credit that have not yet been reimbursed by or on behalf of the U.S. Borrower. The U.S. LC Exposure of any U.S. Revolving Lender at any time shall be its Applicable Percentage of the aggregate U.S. LC Exposure at such time.
“ U.S. Lender Parties ” means, individually and collectively as the context may require, the Administrative Agent, the U.S. Revolving Lenders, the U.S. Issuing Banks, the Bank Product Providers, the Hedge Providers and the other Agents.
“ U.S. Letter of Credit ” means any Letter of Credit issued under the U.S. Facility.
“ U.S. Loan Guaranty ” means the provisions of Article X of this Agreement.
“ U.S. Loan Parties ” means, individually and collectively as the context may require, the U.S. Borrower and any direct or indirect Domestic Subsidiary of the U.S. Borrower who becomes a party to a Loan Document.
“ U.S. Loans ” means, individually and collectively as the context may require, the U.S. Revolving Loans, the Swingline Loans and the U.S. Protective Advances.
“ U.S. Obligated Party ” has the meaning assigned to such term in Section 10.02 .
“ U.S. Obligations ” means, with respect to the U.S. Loan Parties, all unpaid principal of and accrued and unpaid interest on the U.S. Loans, all U.S. LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the U.S. Loan Parties to the Lenders or to any Lender, the Administrative Agent, any U.S. Issuing Bank or any indemnified party arising under the Loan Documents.
“ U.S. Person ” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“ U.S. Protective Advance ” has the meaning assigned to such term in Section 2.04(a) .

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“ U.S. Revolving Exposure ” means, with respect to any U.S. Revolving Lender at any time, the sum of (a) the outstanding principal amount of U.S. Revolving Loans of such U.S. Revolving Lender at such time, plus (b) an amount equal to such U.S. Revolving Lender’s Applicable Percentage of the aggregate principal amount of the Swingline Loans at such time, plus (c) an amount equal to such U.S. Revolving Lender’s Applicable Percentage of the U.S. LC Exposure at such time.
“ U.S. Revolving Lenders ” means the Persons listed on the Commitment Schedule as having a U.S. Commitment and any other Person that shall acquire a U.S. Commitment pursuant to an Assignment and Assumption, other than any such Person that ceases to be such a Person hereto pursuant to an Assignment and Assumption.
“ U.S. Revolving Loan ” means a Revolving Loan made to the U.S. Borrower by the U.S. Revolving Lenders.
“ U.S. Secured Obligations ” means all U.S. Obligations, together with all (a) Banking Services Obligations owing by a U.S. Loan Party or LSIFCS; and (b) Swap Obligations of the U.S. Loan Parties and LSIFCS owing to one or more Hedge Providers; provided that not later than 30 days after such Hedge Provider becomes a Hedge Provider, the Lender or Affiliate of a Lender party thereto (other than Chase or any of its Affiliates) shall have delivered written notice to the Administrative Agent that such Person is a Hedge Provider; provided , further that the U.S. Secured Obligations with respect to any Guarantor shall not include Excluded Swap Obligations of such Guarantor.
“ U.S. Security Agreement ” means that certain Security Agreement, dated as of September 30, 2011, between the U.S. Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent, and the other Lender Parties, and any other pledge or security agreement entered into, after the Original Effective Date by any other U.S. Loan Party (as required by this Agreement or any other Loan Document.
“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining scheduled installment, sinking fund, serial maturity or other required payment of principal including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment.
“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02.      Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class ( e.g ., a “Revolving Loan”) or by Type ( e.g ., a “Eurodollar Loan”) or by Class and Type ( e.g ., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class ( e.g ., a “Revolving Borrowing”) or by Type ( e.g ., a “Eurodollar Borrowing”) or by Class and Type ( e.g ., a “Eurodollar Revolving Borrowing”).
SECTION 1.03.      Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase

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“without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference in any definition to the phrase “at any time” or “for any period” shall refer to the same time or period for all calculations or determinations within such definition, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
SECTION 1.04.      Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if after the Amendment Effective Date there occurs any change in GAAP or in the application thereof on the operation of any provision hereof and the Borrower Representative notifies the Administrative Agent that the Borrowers request an amendment to any provision hereof to eliminate the effect of, or to account for, such change in GAAP or in the application thereof (or if the Administrative Agent notifies the Borrower Representative that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the U.S. Borrower or any Subsidiary at “fair value,” as defined therein. In the event that historical accounting practices, systems or reserves relating to the components of the U.S. Borrowing Base or Canadian Borrowing Base are modified in a manner that is adverse to the Lenders in any material respect, without limitation of the Administrative Agent’s right to establish Reserves as otherwise provided hereunder, the Administrative Agent may maintain additional reserves in respect of the components of the U.S. Borrowing Base or Canadian Borrowing Base, as applicable, and make such other adjustments (which may include maintaining additional reserves, modifying the advance rates or modifying the eligibility criteria for the components of the U.S. Borrowing Base or Canadian Borrowing Base, as applicable) as may be required to eliminate the effects of such changes.
SECTION 1.05.      Currency Matters. For purposes of this Agreement and the other Loan Documents, where the permissibility of a transaction or determinations of required actions or circumstances depend upon compliance with, or are determined by reference to amounts stated in Dollars, such amounts shall be deemed to refer to the amount in Dollars or the equivalent at par Dollar Amount. For purposes of any determination under

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Section 6.04 or 6.08, the amount of each Investment, disposition or other applicable transaction denominated in a currency other than Dollars shall be converted into Dollars at par Dollar Amount on the date such Investment, disposition or other transaction is consummated. Principal, interest, reimbursement obligations, fees and all other amounts payable under this Agreement or any Loan Document to any Lender Parties shall be payable in the currency in which such Obligations are denominated, unless expressly stated otherwise.
SECTION 1.06.      Effect of this Agreement on the Existing Credit Agreement and the Other Existing Loan Documents.
(a)      Upon satisfaction of the conditions precedent to the effectiveness of this Agreement set forth in Section 4.01 , this Agreement shall be binding on the Borrowers, the other Loan Parties party hereto, the Administrative Agent, the Multicurrency Administrative Agent, the Lenders and the other parties hereto, and the Existing Credit Agreement and the provisions thereof shall be replaced in their entirety by this Agreement and the provisions hereof; provided that for the avoidance of doubt (a) the Obligations (as defined in the Existing Credit Agreement) of the Borrowers and the other Loan Parties under the Existing Credit Agreement and the other Loan Documents that remain unpaid and outstanding as of the Amendment Effective Date shall continue to exist under and be evidenced by this Agreement and the other Loan Documents, (b) all Letters of Credit under and as defined in the Existing Credit Agreement shall continue as Letters of Credit under this Agreement and (c) the Collateral and the Loan Documents shall continue to secure, guarantee, support and otherwise benefit the Obligations on the same terms as prior to the effectiveness hereof. Upon the effectiveness of this Agreement, each Loan Document that was in effect immediately prior to the date of this Agreement shall continue to be effective on its terms unless otherwise expressly stated herein.
(b)      Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Existing Credit Agreement, the other Existing Loan Documents (as defined below) or instruments securing the same, which shall remain in full force and effect, except as modified hereby or by instruments executed concurrently herewith.  Nothing expressed or implied in this Agreement shall be construed as a release or other discharge of any Borrower or any Guarantor from any of its obligations or liabilities under the Existing Credit Agreement or any of the security agreements, pledge agreements, mortgages, guaranties or other loan documents executed in connection therewith (the “ Existing Loan Documents ”).  Each Loan Party hereby (a) confirms and agrees that each Existing Loan Documents to which it is a party that is not being amended and restated concurrently herewith is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that on and after the Amendment Effective Date, all references in any such Existing Loan Document to “the Credit Agreement,” “thereto,” “thereof,” “thereunder” or words of like import referring to the Existing Credit Agreement shall mean the Existing Credit Agreement as amended and restated by this Agreement, and (b) confirms and agrees that to the extent that any such Existing Loan Document purports to assign or pledge to any of the Agent or the Lenders or the Issuing Bank or the Bank Product Providers or to grant to any of the Agents or the Lenders or the Issuing Bank or the Bank Product Providers a security interest in or lien on, any collateral as security for all or any portion of any of the Obligations of any Borrower or any other Loan Party, as the case may be, from time to time existing in respect of the Existing Credit Agreement or the Existing Loan Document, such pledge or assignment or grant of the security interest or lien is hereby ratified and confirmed in all respects with respect to this Agreement and the Loan Documents.

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ARTICLE II     

The Credits
SECTION 2.01.      Commitments. Subject to the terms and conditions set forth herein, each U.S. Revolving Lender severally agrees to make U.S. Revolving Loans to the U.S. Borrower from time to time during the Availability Period and each Multicurrency Revolving Lender severally agrees to make Multicurrency Revolving Loans to either of the Borrowers from time to time during the Availability Period in an aggregate principal amount that will not result in:
(i)    the U.S. Revolving Exposure of any U.S. Revolving Lender exceeding such U.S. Revolving Lender’s U.S. Commitment;
(ii)    the Multicurrency Revolving Exposure of any Multicurrency Revolving Lender exceeding such Multicurrency Revolving Lender’s Multicurrency Commitment;
(iii)    the sum of (x) the U.S. Revolving Exposure plus (y) the U.S. Borrower Multicurrency Facility Outstandings plus (z) the Canadian Borrower Shared Outstandings exceeding the U.S. Borrowing Base; or
(iv)    the Aggregate Revolving Exposure exceeding the sum of (x) the U.S. Borrowing Base plus (y) the lesser of (I) the aggregate Multicurrency Commitment and (II) the Canadian Borrowing Base;
subject to the Administrative Agent’s and Multicurrency Administrative Agent’s authority, in their sole discretion, to make Protective Advances pursuant to the terms of Section 2.04 . The limitations on Borrowings referred to in clauses (i) through (iv) are referred to collectively as the “ Revolving Exposure Limitations .” Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02.      Loans and Borrowings.
(a)      Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. Any Protective Advance and any Swingline Loan shall be made in accordance with the procedures set forth in Sections 2.04 and 2.05 .
(b)      All Borrowings under the U.S. Commitment shall be denominated in Dollars. Borrowings under the Multicurrency Commitment may be in Dollars or Canadian Dollars. Subject to Section 2.14 , (i) each Borrowing that is denominated in Dollars shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower Representative may request in accordance herewith, provided that all Borrowings made on the Amendment Effective Date must be made as ABR Borrowings but may be converted into Eurodollar Borrowings in accordance with Section 2.08 and (ii) each Borrowing that is denominated in Canadian Dollars shall be comprised entirely of Canadian Prime Rate Loans or CDOR Rate Loans as the Borrower Representative may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in accordance with the terms of this Agreement.

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(c)      At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the commencement of each Interest Period for any CDOR Rate Borrowing, such Borrowing shall be in an aggregate that is an integral multiple of Cdn.$1,000,000 and not less than Cdn.$5,000,000. ABR Revolving Borrowings shall be in an integral multiple of $1,000,000 and not less than $2,000,000. Canadian Prime Rate Borrowings shall be in an integral multiple of Cdn.$1,000,000 and not less than Cdn.$2,000,000. Each Swingline Loan shall be in an amount that is an integral multiple of $25,000 and not less than $100,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 15 Eurodollar Borrowings and/or CDOR Rate Borrowings outstanding.
(d)      Notwithstanding any other provision of this Agreement, the Borrower Representative shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
SECTION 2.03.      Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower Representative shall notify the Administrative Agent (in the case of a requested Borrowing under the U.S. Facility) or the Multicurrency Administrative Agent with a copy to the Administrative Agent (in the case of a requested Borrowing under the Multicurrency Facility), of such request either in writing (delivered by hand or facsimile) in a form approved by the Applicable Administrative Agent and signed by the Borrower Representative or by telephone (i) with respect to U.S. Revolving Loans, not later than (a) in the case of a Eurodollar Borrowing, 12:00 noon, Pacific time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, 10:00 a.m., Pacific time (or, in the case of a request for a Swingline Loan, 12:00 noon Pacific time), on the date of the proposed Borrowing and (ii) with respect to Multicurrency Revolving Loans, not later than (a) in the case of CDOR Rate Borrowings, 1:00 p.m., Toronto time, three Business Days prior to the date of the proposed Borrowing and (b) in the case of Canadian Prime Rate Borrowings or ABR Borrowings, 1:00 p.m., Toronto time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent (if a U.S. Revolving Loan) or the Multicurrency Administrative Agent with a copy to the Administrative Agent (if a Multicurrency Revolving Loan), of a written Borrowing Request in a form approved by the Applicable Administrative Agent and signed by the Borrower Representative. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.01 :
(i)      the name of the applicable Borrower;
(ii)      whether such Borrowing is to be a Borrowing under the U.S. Facility or the Multicurrency Facility;
(iii)      the aggregate amount of the requested Borrowing and a breakdown of the separate wires comprising such Borrowing;
(iv)      the date of such Borrowing, which shall be a Business Day;
(v)      whether such Borrowing is to be an ABR Borrowing, a Eurodollar Borrowing, a Canadian Prime Rate Borrowing or a CDOR Rate Borrowing; and

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(vi)      in the case of a Eurodollar Borrowing or CDOR Rate Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period.”
If no election as to the Type of Borrowing is specified, then (A) a Borrowing of U.S. Revolving Loans or Multicurrency Revolving Loans requested in Dollars shall be an ABR Borrowing and (B) a Borrowing of Multicurrency Revolving Loans requested in Canadian Dollars shall be a Canadian Prime Rate Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing or CDOR Rate Borrowing, then the applicable Borrower shall be deemed to have selected an Interest Period of one month’s or 30 days’, as applicable, duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Applicable Administrative Agent shall advise each applicable Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
SECTION 2.04.      Protective Advances.
(a)      Subject to the limitations set forth below, the Applicable Administrative Agent is authorized by the Borrowers and the Lenders, from time to time in the Applicable Administrative Agent’s sole discretion (but shall have absolutely no obligation), to make (i) in the case of the Administrative Agent, Loans to the U.S. Borrower in Dollars on behalf of the U.S. Revolving Lenders (each such Loan, a “ U.S. Protective Advance ”) or (ii) in the case of the Multicurrency Administrative Agent, Loans to either of the Borrowers in Canadian Dollars or Dollars on behalf of the Multicurrency Revolving Lenders (each such Loan, a “ Multicurrency Protective Advance ”) which the Applicable Administrative Agent, in its Permitted Discretion, deems necessary or desirable (i) to preserve or protect the Collateral, or any portion thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (iii) to pay any other amount chargeable to or required to be paid by the applicable Borrower pursuant to the terms of this Agreement, including payments of reimbursable expenses (including costs, fees, and expenses as described in Section 9.03 ) and other sums payable under the Loan Documents; provided that (1) the aggregate amount of outstanding U.S. Protective Advances shall not, at any time, exceed $50,000,000; provided further that the aggregate amount of outstanding U.S. Protective Advances plus the U.S. Revolving Exposure shall not exceed the aggregate U.S. Commitments; and (2) the aggregate Dollar Amount of outstanding Multicurrency Protective Advances shall not, at any time, exceed $5,000,000; provided further that the aggregate amount of outstanding Multicurrency Protective Advances plus the Multicurrency Revolving Exposure shall not exceed the aggregate Multicurrency Commitments. Protective Advances may be made even if the conditions precedent set forth in Section 4.02 have not been satisfied. The Protective Advances shall be secured by the Liens in favor of the Administrative Agent in and to the applicable Collateral and shall constitute Obligations hereunder. All Protective Advances shall be ABR Borrowings (in the case of Dollar denominated amounts) or Canadian Prime Rate Borrowings (in the case of Canadian Dollar denominated amounts). The Applicable Administrative Agent’s authorization to make Protective Advances may be revoked at any time by the Required Lenders. Any such revocation must be in writing and shall become effective prospectively upon the Applicable Administrative Agent’s receipt thereof. At any time that the making of such U.S. Revolving Loan would not violate the Revolving Exposure Limitations and the conditions precedent set forth in Section 4.02 have been satisfied, the Administrative Agent may request the U.S. Revolving Lenders to make a U.S. Revolving Loan in Dollars to repay a U.S. Protective Advance. At any other time the Administrative Agent may require the U.S. Revolving Lenders to fund in Dollars their risk participations described in Section 2.04(b) . At any time the making of such Multicurrency Revolving Loan would not violate the Revolving Exposure Limitations and the conditions precedent set forth in Section 4.02 have been satisfied, the Multicurrency Administrative Agent may request the Multicurrency

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Revolving Lenders to make a Multicurrency Revolving Loan in the currency in which any Multicurrency Protective Advance is denominated to repay such Multicurrency Protective Advance. At any other time the Multicurrency Administrative Agent may require the Multicurrency Revolving Lenders to fund their risk participations described in Section 2.04(b) in any Multicurrency Protective Advance in the currency in which such Multicurrency Protective Advance is denominated.
(b)      Upon the making of a U.S. Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default), each U.S. Revolving Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Administrative Agent, without recourse or warranty, an undivided interest and participation in such U.S. Protective Advance in proportion to its Applicable Percentage. Upon the making of a Multicurrency Protective Advance by the Multicurrency Administrative Agent (whether before or after the occurrence of a Default), each Multicurrency Revolving Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Multicurrency Administrative Agent, without recourse or warranty, an undivided interest and participation in such Multicurrency Protective Advance in proportion to its Applicable Percentage. From and after the date, if any, on which any Lender is required to fund its participation in any Protective Advance purchased hereunder, the Applicable Administrative Agent shall promptly distribute to such Lender, such Lender’s Applicable Percentage of all payments of principal and interest and all proceeds of Collateral received by the Applicable Administrative Agent in respect of such Protective Advance.
SECTION 2.05.      Swingline Loans.
(a)      The Administrative Agent, the Swingline Lender and the U.S. Revolving Lenders agree that in order to facilitate the administration of this Agreement and the other Loan Documents, promptly after the Borrower Representative requests an ABR Borrowing under the U.S. Facility, the Swingline Lender may elect to have the terms of this Section 2.05(a) apply to such Borrowing Request by advancing, on behalf of the U.S. Revolving Lenders and in the amount requested, same day funds to the U.S. Borrower, on the applicable Borrowing date to the Funding Account(s) (each such Loan made solely by the Swingline Lender pursuant to this Section 2.05(a) is referred to in this Agreement as a “ Swingline Loan ”), with settlement among them as to the Swingline Loans to take place on a periodic basis as set forth in Section 2.05(c) . Each Swingline Loan shall be subject to all the terms and conditions applicable to other ABR Revolving Loans funded by the U.S. Revolving Lenders, except that all payments thereon shall be payable to the Swingline Lender solely for its own account. The aggregate amount of Swingline Loans outstanding at any time shall not exceed $35,000,000. The Swingline Lender shall not make any Swingline Loan if the requested Swingline Loan would result in a violation of the Revolving Exposure Limitations. All Swingline Loans shall be ABR Borrowings.
(b)      Upon the making of a Swingline Loan (whether before or after the occurrence of a Default (unless the Administrative Agent shall have received written notice thereof from the Borrower Representative or any Lender) and regardless of whether a Settlement has been requested with respect to such Swingline Loan), each U.S. Revolving Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Swingline Lender, without recourse or warranty, an undivided interest and participation in such Swingline Loan in proportion to its Applicable Percentage. The Swingline Lender may, at any time, require the U.S. Revolving Lenders to fund their participations. From and after the date, if any, on which any U.S. Revolving Lender is required to fund its participation in any Swingline Loan purchased hereunder, the Administrative Agent shall promptly distribute to such Lender, such Lender’s Applicable Percentage of all payments of principal and interest

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and all proceeds of Collateral received by the Administrative Agent or Swingline Lender in respect of such Loan.
(c)      The Administrative Agent, on behalf of the Swingline Lender, shall request settlement (a “ Settlement ”) with the U.S. Revolving Lenders on at least a weekly basis or on any more frequent date that the Administrative Agent elects, by notifying the U.S. Revolving Lenders of such requested Settlement by facsimile, telephone, or e-mail no later than 11:00 a.m., Pacific time on the date of such requested Settlement (the “ Settlement Date ”). Each U.S. Revolving Lender (other than the Swingline Lender, in the case of the Swingline Loans) shall transfer the amount of such U.S. Revolving Lender’s Applicable Percentage of the outstanding principal amount of the applicable Loan with respect to which Settlement is requested to the Administrative Agent, to such account of the Administrative Agent as the Administrative Agent may designate, not later than 1:00 p.m., Pacific time, on such Settlement Date. Settlements may occur during the existence of a Default and whether or not the applicable conditions precedent set forth in Section 4.02 have then been satisfied. Such amounts transferred to the Administrative Agent shall be applied against the amounts of the Swingline Lender’s Swingline Loans and, together with the Swingline Lender’s Applicable Percentage of such Swingline Loan, shall constitute U.S. Revolving Loans of such U.S. Revolving Lenders, respectively. If any such amount is not transferred to the Administrative Agent by any U.S. Revolving Lender on such Settlement Date, the Swingline Lender shall be entitled to recover from such Lender on demand such amount, together with interest thereon, as specified in Section 2.07 .
SECTION 2.06.      Letters of Credit.
(a)      General . Subject to the terms and conditions set forth herein, the Borrower Representative may request the issuance of Letters of Credit denominated in Dollars (in the case of U.S. Letters of Credit), denominated in Dollars or Canadian Dollars (in the case of Multicurrency Letters of Credit) or denominated in an LC Alternative Currency (in the case of any Letter of Credit) for its own account or for the account of any Subsidiary, in a form reasonably acceptable to the Administrative Agent and the applicable U.S. Issuing Bank (in the case of U.S. Letters of Credit) or the applicable Multicurrency Issuing Bank (in the case of Multicurrency Letters of Credit), at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by any Borrower to, or entered into by any Borrower or any Subsidiary with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(b)      Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower Representative shall deliver by hand or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable U.S. Issuing Bank (in the case of U.S. Letters of Credit) or the applicable Multicurrency Issuing Bank (in the case of Multicurrency Letters of Credit)) to (1) the applicable U.S. Issuing Bank (in the case of U.S. Letters of Credit) or the applicable Multicurrency Issuing Bank (in the case of Multicurrency Letters of Credit) and (2) the Administrative Agent (in the case of U.S. Letters of Credit) or the Multicurrency Administrative Agent with a copy to the Administrative Agent (in the case of Multicurrency Letters of Credit) (in each case, prior to 9:00 am, Pacific time, at least two Business Days prior to the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying whether such Letter of Credit is to be a U.S. Letter of Credit or a Multicurrency Letter of Credit (and, if such Letter of Credit is to be a Multicurrency Letter of Credit, whether such Letter of Credit is to be issued for the account of the U.S.

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Borrower or for the account of the Canadian Borrower), whether such Letter of Credit is to be a Cash Collateralized Letter of Credit, the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof the currency in which such Letter of Credit will be denominated (which (x) shall be Dollars or an LC Alternative Currency in the case of U.S. Letters of Credit and (y) shall be Dollars, Canadian Dollars or an LC Alternative Currency in the case of Multicurrency Letters of Credit) and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the applicable Borrower also shall submit a letter of credit application on the applicable Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrowers shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $350,000,000, (ii) the Revolving Exposure Limitations shall not be exceeded and (iii) in the case of a Cash Collateralized Letter of Credit (I) issued for the account of the U.S. Borrower, the aggregate amount of all Cash Collateralized Letters of Credit issued for the account of the U.S. Borrower does not exceed the amount of cash and Cash Equivalents in the U.S. Availability Cash Collateral Account or (II) issued for the account of the Canadian Borrower, the aggregate amount of all Cash Collateralized Letters of Credit issued for the account of the Canadian Borrower does not exceed the amount of cash and Cash Equivalents in the Canadian Availability Cash Collateral Account.
(c)      Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date that is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date.
(d)      Evergreen Letters of Credit . If the Borrower Representative so requests in any Letter of Credit application, the applicable U.S. Issuing Bank (in the case of U.S. Letters of Credit) or the applicable Multicurrency Issuing Bank (in the case of Multicurrency Letters of Credit) agrees to issue a Letter of Credit that has automatic renewal provisions (each, an “ Evergreen Letter of Credit ”); provided that (i) any such Evergreen Letter of Credit must permit the Issuing Bank to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a date (the “ Non-Renewal Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued and no such Evergreen Letter of Credit shall have an expiry date later than the earlier to occur of (i) the date that is one year after the date of the issuance of such Evergreen Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date; provided , however , that, notwithstanding clause (ii) above the expiry date of an Evergreen Letter of Credit may be up to one year later than the fifth Business Day prior to the Maturity Date if the Borrower Cash Collateralizes such Evergreen Letter of Credit on or before the fifth Business Day prior to the Maturity Date (in which case the Revolving Lenders shall cease to have risk participation therein following the Maturity Date). Unless otherwise directed by the applicable Issuing Bank, the Borrower Representative shall not be required to make a specific request to such Issuing Bank for any such renewal.
(e)      Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of any Issuing Bank or the Revolving Lenders, each U.S. Issuing Bank hereby grants to each U.S. Revolving Lender (with respect to each U.S. Letter of Credit) and each Multicurrency Issuing Bank hereby grants to each

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Multicurrency Revolving Lender (with respect to each Multicurrency Letter of Credit), and each U.S. Revolving Lender hereby acquires from each U.S. Issuing Bank, a participation in such U.S. Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such U.S. Letter of Credit and each Multicurrency Revolving Lender hereby acquires from each Multicurrency Issuing Bank, a participation in such Multicurrency Letter of Credit equal to such Multicurrency Revolving Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Multicurrency Letter of Credit. In consideration and in furtherance of the foregoing, (i) each U.S. Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable U.S. Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the applicable U.S. Issuing Bank and not reimbursed by the U.S. Borrower on the date due as provided in paragraph (f) of this Section, or of any reimbursement payment required to be refunded to the U.S. Borrower for any reason and (ii) each Multicurrency Revolving Lender hereby absolutely and unconditionally agrees to pay to the Multicurrency Administrative Agent, for the account of the applicable Multicurrency Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the applicable Multicurrency Issuing Bank and not reimbursed by the Borrowers; in each case, on the date due as provided in paragraph (f) of this Section, or of any reimbursement payment required to be refunded to either Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(f)      Reimbursement . If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit issued for the account of any Borrower, such Borrower shall reimburse such LC Disbursement by paying to (x) the Administrative Agent (in the case of any U.S. Letter of Credit) in Dollars or (y) the Multicurrency Administrative Agent (in the case of any Multicurrency Letters of Credit) in the same currency as the applicable LC Disbursement in each case in an amount equal to the applicable LC Disbursement (i) not later than (A) in the case of any U.S. Letter of Credit, 11:00 a.m., Pacific time, on the date that such LC Disbursement is made, if the Borrower Representative shall have received notice of such LC Disbursement prior to 9:00 a.m., Pacific time, on such date, or (B) in the case of any Multicurrency Letter of Credit, 11:00 a.m. Pacific time, on the day following the day that such LC Disbursement is made, if the Borrower Representative shall have received notice of such LC Disbursement prior to 9:00 a.m., Pacific time, on the date that such LC Disbursement was made, or, (ii) if such notice has not been received by the Borrower Representative prior to such time on such date, then not later than 11:00 a.m., Pacific time, on (A) the Business Day that the Borrower Representative receives such notice, if such notice is received prior to 9:00 a.m., Pacific time, on the day of receipt, or (B) the Business Day immediately following the day that the Borrower Representative receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, (x) in the case of an LC Disbursement in respect of a U.S. Letter of Credit, the U.S. Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.05 that such payment be financed with an ABR Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the U.S. Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing or Swingline Loan and (y) in the case of an LC Disbursement in respect of a Multicurrency Letter of Credit, the Canadian Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Canadian Prime Rate Borrowing in an equivalent amount and, to the extent so financed, the Canadian Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Canadian Prime Rate Borrowing. If the applicable Borrower fails to make such payment when due, the Applicable Administrative Agent shall

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notify each applicable Revolving Lender of the applicable LC Disbursement, the payment and currency then due from the applicable Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each applicable Revolving Lender shall pay to (x) the Administrative Agent in Dollars (in the case of U.S. Letters of Credit) or (y) the Multicurrency Administrative Agent in the same currency as the applicable LC Disbursement (in the case of Multicurrency Letters of Credit) its Applicable Percentage of the payment then due from the applicable Borrower, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis , to the payment obligations of the Revolving Lenders), and the Applicable Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Applicable Administrative Agent of any payment from a Borrower pursuant to this paragraph in respect of an LC Disbursement, the Applicable Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the applicable Issuing Bank for such LC Disbursement, then to such Lenders and the applicable Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans, a Swingline Loan or Canadian Prime Rate Loans as contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of its obligation to reimburse such LC Disbursement.
(g)      Obligations Absolute . The Borrowers’ obligations to reimburse LC Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein or herein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers’ obligations hereunder. Neither the Administrative Agent, the Multicurrency Administrative Agent, the Revolving Lenders nor any Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of an Issuing Bank; provided that the foregoing shall not be construed to excuse an Issuing Bank from liability to any Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by such Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility

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for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(h)      Disbursement Procedures . Each Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Issuing Bank shall promptly notify the Applicable Administrative Agent and the applicable Borrower by telephone (confirmed by facsimile) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve any Borrower of its obligation to reimburse such Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement.
(i)      Interim Interest . If an Issuing Bank shall make any LC Disbursement, then, unless the applicable Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrowers reimburse such LC Disbursement, at (i) in the case of U.S. Letters of Credit, the rate per annum then applicable to ABR Revolving Loans and (ii) in the case of Multicurrency Letters of Credit, the rate per annum then applicable to Canadian Prime Rate Loans; provided that, if a Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(f) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the applicable Issuing Bank shall be for the account of such Lender to the extent of such payment.
(j)      Replacement of an Issuing Bank . Any Issuing Bank may be replaced at any time by written agreement among the Borrower Representative, the Applicable Administrative Agent, the replaced Issuing Bank and a successor Issuing Bank. The Applicable Administrative Agent shall notify the Revolving Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the applicable Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b) . From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.
(k)      Cash Collateralization . If any Event of Default shall occur and be continuing, on the Business Day that the Borrower Representative receives notice from the Applicable Administrative Agent or the Required Lenders demanding the deposit of Cash Collateral pursuant to this paragraph, (i) the U.S. Borrower shall deposit in the U.S. Availability Cash Collateral Account, an amount in cash equal to the excess of (x) 103% of the LC Exposure in respect of Letters of Credit issued for the account of the U.S. Borrower as of such date plus accrued and unpaid fees thereon over (y) the amount of cash and Cash Equivalents on deposit in the U.S. Availability Cash Collateral Account on such date and (ii) the Canadian Borrower shall deposit in the Canadian Availability Cash Collateral Account, an amount in cash equal to the excess of (x) 103% of the LC Exposure in respect of Letters of Credit issued for the account of the Canadian Borrower as of such date plus accrued and unpaid fees thereon over (y) the amount of cash and

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Cash Equivalents on deposit in the Canadian Availability Cash Collateral Account on such date; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Borrower described in clause (h) or (i) of Article VII . Such deposits (A) if made into the U.S. Availability Cash Collateral Account shall be held by the Administrative Agent as collateral for the payment and performance of the Secured Obligations and (B) if made into the Canadian Availability Cash Collateral Account, such deposit shall be held by the Multicurrency Administrative Agent as collateral for the payment and performance of the Canadian Secured Obligations. The U.S. Borrower hereby authorizes the Administrative Agent to apply any amount in the U.S. Availability Cash Collateral Account to reimburse LC Disbursements in respect of Letters of Credit issued for the account of either Borrower and the Canadian Borrower hereby authorizes the Administrative Agent and the Multicurrency Administrative Agent to apply any amount in the Canadian Availability Cash Collateral Account to reimburse LC Disbursements in respect of Letters of Credit issued for the account of the Canadian Borrower.
(l)      Conversion of Cash Collateralized Letter of Credit or Non-Cash Collateralized Letter of Credit . Either Borrower may convert any Cash Collateralized Letter of Credit into a Letter of Credit that is not a Cash Collateralized Letter of Credit or any Letter of Credit that is not a Cash Collateralized Letter of Credit into a Cash Collateralized Letter of Credit by providing the Administrative Agent (in the case of a U.S. Letter of Credit) or the Multicurrency Administrative Agent with a copy to the Administrative Agent (in the case of a Multicurrency Letter of Credit), at least one Business Day prior to the effective date of such conversion, written notice identifying the relevant Cash Collateralized Letter of Credit or non-Cash Collateralized Letter of Credit, as the case may be, to be converted and the date upon which such conversion shall be effective.
SECTION 2.07.      Funding of Borrowings.
(a)      Each Lender shall make each Loan to be made by such Lender hereunder on the proposed date thereof by wire transfer of immediately available funds by (i) with respect to Eurodollar Borrowings, 10:00 a.m., Pacific time and (ii) with respect to ABR Borrowings, 12:00 noon, Pacific time, in each case to the account of the Applicable Administrative Agent most recently designated by it for such purpose by notice to the Lenders in an amount equal to such Lender’s Applicable Percentage; provided that, Swingline Loans shall be made as provided in Section 2.05 . The Applicable Administrative Agent will make such Loans available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to the Funding Account; provided that (I) ABR Revolving Loans made to finance the reimbursement of (i) an LC Disbursement as provided in Section 2.06(f) shall be remitted by the Administrative Agent to the applicable U.S. Issuing Bank and (ii) a U.S. Protective Advance shall be retained by the Administrative Agent and (II) ABR Loans or Canadian Prime Rate Loans made to finance the reimbursement of (i) a Canadian LC Disbursement as provided in Section 2.06(f) shall be remitted by the Multicurrency Administrative Agent to the applicable Multicurrency Issuing Bank and (ii) a Multicurrency Protective Advance shall be retained by the Multicurrency Administrative Agent.
(b)      Unless the Applicable Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Applicable Administrative Agent such Lender’s share of such Borrowing, the Applicable Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Applicable Administrative Agent, then the applicable Lender and

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the applicable Borrower severally agree to pay to the Applicable Administrative Agent promptly on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the applicable Borrower to but excluding the date of payment to the Applicable Administrative Agent, at (i) in the case of such Lender, the greater of either the Federal Funds Effective Rate (in the case of Dollar-denominated amounts) or the Applicable Administrative Agent’s cost of funds (in the case of Canadian Dollar-denominated amounts) and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of Loans denominated in Dollars, the interest rate applicable to ABR Loans and in the case of Loans denominated in Canadian Dollars, the interest rate applicable to Canadian Prime Rate Loans. If such Lender pays such amount to the Applicable Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.
SECTION 2.08.      Interest Elections.
(a)      Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Revolving Borrowing or CDOR Rate Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower Representative may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing or CDOR Rate Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower Representative may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings or Protective Advances, which may not be converted or continued.
(b)      To make an election pursuant to this Section, the Borrower Representative shall notify (i) the Administrative Agent with respect to each U.S. Revolving Borrowing and (ii) the Multicurrency Administrative Agent (with a copy to the Administrative Agent), with respect to each Canadian Revolving Borrowing, in each case of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrowers were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Applicable Administrative Agent of a written Interest Election Request in a form approved by the Applicable Administrative Agent and signed by the Borrower Representative.
(c)      Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03 :
(i)      the name of the applicable Borrower and the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii)      the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii)      whether the resulting Borrowing is to be an ABR Borrowing, a Eurodollar Borrowing, a Canadian Prime Rate Borrowing or a CDOR Rate Borrowing; and

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(iv)      if the resulting Borrowing is a Eurodollar Borrowing or CDOR Rate Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period.”
If any such Interest Election Request requests a Eurodollar Borrowing or CDOR Rate Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month’s duration, in the case of a Eurodollar Borrowing or 30 days, in the case of a CDOR Rate Borrowing.
(d)      Promptly following receipt of an Interest Election Request, the Applicable Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e)      If the Borrower Representative fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. If the Borrower Representative fails to deliver a timely Interest Election Request with respect to a CDOR Rate Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to a Canadian Prime Rate Borrowing. Notwithstanding any contrary provision hereof, if a Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower Representative, then, so long as a Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing or CDOR Rate Borrowing, (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (iii) unless repaid, each CDOR Rate Borrowing shall be converted to a Canadian Prime Rate Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.09.      Termination and Reduction of Commitments; Increase in Commitments.
(a)      Unless previously terminated, all Commitments shall terminate on the Maturity Date.
(b)      The Borrower Representative may at any time terminate the Commitments under the U.S. Facility and/or the Multicurrency Facility upon (i) the payment in full in cash in the applicable currencies of all outstanding Loans, together with accrued and unpaid interest thereon and on any Letters of Credit, in each case, under the applicable Facility, (ii) the cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit (or at the discretion of the Applicable Administrative Agent a back up standby letter of credit reasonably satisfactory to the Applicable Administrative Agent) equal to 103% of the LC Exposure as of such date in respect of all Letters of Credit under such Facility (which shall be the Dollar Amount of such LC Exposure or denominated in the currency of the applicable Letters of Credit, as determined by the applicable Issuing Banks), (iii) the payment in full of the accrued and unpaid fees owing in respect of such Facility, and (iv) the payment in full of all reimbursable expenses and other Obligations, together with accrued and unpaid interest thereon in respect of such Facility.
(c)      The Borrower Representative may from time to time reduce the Commitments under the U.S. Facility and/or the Multicurrency Facility; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than

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$10,000,000 and (ii) the Borrower Representative shall not reduce the Commitments under any Facility if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10 , the Revolving Exposure Limitations would be exceeded.
(d)      The Borrower Representative shall notify the Administrative Agent of any election to terminate or reduce the Commitments under any Facility under paragraph (b) or (c) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower Representative pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments in full delivered by the Borrower Representative may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower Representative (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments under any Facility shall be permanent. Each partial reduction of the Commitments under any Facility shall be made ratably among the applicable Lenders in accordance with their respective Applicable Percentages.
(e)      The Borrowers shall have the right to increase the Commitments under either Facility by obtaining additional U.S. Commitments or additional Multicurrency Commitments, either from one or more of the Lenders or another lending institution (it being understood that no Lender shall be under any obligation to agree to provide any increased Commitment pursuant to this Section 2.09(e) ) provided that (i) any such request for an increase shall be in a minimum amount of $25,000,000, (ii) the aggregate amount of increases in the Commitments pursuant to this clause (e) shall not exceed $150,000,000, (iii) any consent that would be required for an assignment of a Commitment to such Lender or other lending institution in connection with an assignment to such institution shall have been obtained, such approval not to be unreasonably withheld, conditioned or delayed, (iv) any such new Lender assumes all of the rights and obligations of a “Lender” hereunder, (v) the procedures described in Section 2.09(f) have been satisfied and (vi) on a pro forma basis after giving effect to such increases in Commitments the Total Commitment then in effect (including such increases in Commitments) when aggregated with the aggregate amount of Indebtedness secured by Liens in reliance on Section 6.02(o) does not exceed the greater of (x) $1,600,000,000 and (y) an amount that would not cause the Secured Leverage Ratio of the U.S. Borrower (calculated assuming all Commitments were fully drawn) as of the most recent date for which financial statements have been delivered pursuant to Section 5.01(a) or (b) prior to the establishment of such additional Commitments to exceed 3.25 to 1.00.
(f)      Any amendment hereto for such an increase or addition shall be in form and substance reasonably satisfactory to the Administrative Agent and shall only require the written signatures of the Administrative Agent, the Multicurrency Administrative Agent, the Borrowers and each Lender being added or increasing its Commitment. As a condition precedent to such an increase, the Borrowers shall deliver to the Administrative Agent a certificate of each Loan Party signed by an authorized officer of such Loan Party certifying that the conditions set forth in clauses (i), (ii) and (vi) of paragraph (e) above are satisfied and (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (ii) in the case of the Borrowers, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article III and the other Loan Documents are true and correct in all material respects with the same effect as though made on and as of the date of such increase (it being understood and agreed that any representation or warranty which is by its terms made as of a specified date shall be required to be true and correct in all material respects

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only as of such specified date, and that any representation or warranty which is subject to any materiality qualifier shall be required to be true and correct in all respects), and (B) no Default exists.
(g)      Within a reasonable time after the effective date of any increase, the Administrative Agent shall, and is hereby authorized and directed to, revise the Commitment Schedule to reflect such increase and shall distribute such revised Commitment Schedule to each of the Lenders and the Borrowers, whereupon such revised Commitment Schedule shall replace the old Commitment Schedule and become part of this Agreement. On the Business Day following any such increase, all outstanding ABR Loans and Canadian Prime Rate Loans under the applicable Facility shall be reallocated among the Lenders (including any newly added Lenders) in accordance with the Lenders’ respective revised Applicable Percentages and the Lenders shall make adjustments among themselves with respect to such Loans then outstanding and amounts of principal, interest, commitment fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of the Administrative Agent, in order to effect such reallocation. Eurodollar Loans and CDOR Rate Loans shall not be reallocated among the Lenders until the expiration of the applicable Interest Period in effect at the time of any such increase, at which time any such Eurodollar Loan or CDOR Rate Loan being continued shall be reallocated, and any such Eurodollar Loans being converted to ABR Loans or CDOR Rate Loans being converted to Canadian Prime Rate Loans shall be converted and allocated, among the applicable Lenders (including the newly added Lenders) at such time.
SECTION 2.10.      Repayment of Loans; Evidence of Debt.
(a)      Each Borrower hereby unconditionally promises to pay to the Applicable Administrative Agent for the account of the applicable Lenders the then unpaid principal amount of each Loan made to such Borrower on the Maturity Date (or, if earlier, in the case of Protective Advances to such Borrower, upon demand by the Applicable Administrative Agent).
(b)      (i) At all times that full cash dominion is in effect pursuant to Section 7.1 of the U.S. Security Agreement, on each Business Day, the Administrative Agent shall cause all funds credited to the U.S. Collection Account on such Business Day or the immediately preceding Business Day (at the discretion of the Administrative Agent, whether or not immediately available) first to prepay any Protective Advances to the U.S. Borrower that may be outstanding, pro rata, second to prepay the Revolving Loans (including Swing Line Loans) to the U.S. Borrower and to Cash Collateralize outstanding LC Exposure in respect of Letters of Credit issued for the account of the U.S. Borrower, third , to prepay any Multicurrency Protective Advances to the Canadian Borrower, pro rata, and fourth , to prepay Multicurrency Revolving Loans to the Canadian Borrower and to Cash Collateralize outstanding LC Exposure in respect of Multicurrency Letters of Credit issued for the account of the Canadian Borrower and (ii) at all times that full cash dominion is in effect pursuant to Section 7.1 of the Canadian Security Agreement, on each Business Day, the Administrative Agent shall apply all funds credited to the Canadian Collection Account on such Business Day or the immediately preceding Business Day (at the discretion of the Administrative Agent, whether or not immediately available) first to prepay any Multicurrency Protective Advances to the Canadian Borrower that may be outstanding, pro rata, and second to prepay the Multicurrency Revolving Loans to the Canadian Borrower and to Cash Collateralize outstanding Multicurrency LC Exposure in respect of Multicurrency Letters of Credit issued for the account of the Canadian Borrower.
(c)      Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by

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such Lender to such Borrower, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(d)      The Applicable Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder to each Borrower, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by such Applicable Administrative Agent hereunder from each Borrower for the account of the applicable Lenders and each Lender’s applicable share thereof.
(e)      The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or any Applicable Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement.
(f)      Any Lender may request that Loans made by it to any Borrower be evidenced by a promissory note. In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender or its registered assigns and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04 ) be represented by one or more promissory notes in such form payable to the payee named therein or its registered assigns.
SECTION 2.11.      Prepayment of Loans.
(a)      Each Borrower shall have the right at any time and from time to time to prepay any Borrowing by such Borrower in whole or in part, subject to prior notice in accordance with paragraph (c) of this Section.
(b)      In the event and on such occasion that on any Business Day the Revolving Exposure Limitations are exceeded for any reason, each Borrower shall immediately repay such of its outstanding Loans and/or Cash Collateralize such of the outstanding Letters of Credit issued for the account of such Borrower as shall be required to ensure that the Revolving Exposure Limitations would be satisfied on such date after giving effect to such prepayment and/or Cash Collateralization.
(c)      The Borrower Representative shall notify the Applicable Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender and in the case of a prepayment of Multicurrency Loans, with a copy to the Administrative Agent) by telephone (confirmed by facsimile) of any prepayment pursuant to paragraph (a) above not later than (i) 12:00 noon, Pacific time, (A) in the case of prepayment of a Eurodollar Revolving Borrowing or CDOR Rate Borrowing, three Business Days before the date of prepayment, or (B) in the case of prepayment of an ABR Revolving Borrowing or a Canadian Prime Rate Borrowing, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09 , then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09 . Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Class and Type as provided in

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Section 2.02 . Each prepayment of a Revolving Borrowing shall be applied ratably to the Revolving Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 .
SECTION 2.12.      Fees.
(a)      The U.S. Borrower agrees to pay to the Administrative Agent for the account of each U.S. Revolving Lender a commitment fee equal to a rate per annum equal to the Commitment Fee Rate multiplied by the amount by which such Lender’s U.S. Commitment on each day exceeds the sum of such Lender’s U.S. Revolving Loans and U.S. LC Exposure on such day during the period from and including the Amendment Effective Date to but excluding the date on which the Lenders’ U.S. Commitments terminate. The Borrowers jointly and severally agree to pay to the Multicurrency Administrative Agent for the account of each Multicurrency Revolving Lender a commitment fee at a rate per annum equal to the Commitment Fee Rate multiplied by the amount by which such Lender’s Multicurrency Commitment on each day exceeds the sum of such Lender’s Multicurrency Revolving Loans and Multicurrency LC Exposure on such day during the period from and including the Amendment Effective Date to but excluding the date on which the Lenders’ Multicurrency Commitments terminate. Accrued commitment fees shall be payable in arrears on the first Business Day of each January, April, July and October and on the date on which the Commitments of the applicable Class terminate, commencing on April 1, 2014. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.
(b)      Each Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit issued for the account of such Borrower, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans in the case of U.S. Letters of Credit and the interest rate applicable to CDOR Rate Loans in the case of Multicurrency Letters of Credit (or, in the case of Cash Collateralized Letters of Credit, at a rate equal to the Applicable Rate used to determine the interest rate for Eurodollar revolving Loans minus 75 basis points) on the average daily maximum amount of such Lender’s LC Exposure in respect of Letters of Credit issued for such Borrower (excluding any portion thereof attributable to LC Disbursements that are not reimbursed on the date on which such LC Disbursements arise) during the period from and including the Amendment Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure in respect of Letters of Credit issued for the account of such Borrower, and (ii) to each applicable Issuing Bank a fronting fee, which shall accrue at a rate separately agreed between the applicable Borrower and such Issuing Bank on the average daily amount of the LC Exposure in respect of Letters of Credit issued by such Issuing Bank for the account of such Borrower (excluding any portion thereof attributable to LC Disbursements that are not reimbursed on the date on which such LC Disbursements arise) during the period from and including the Amendment Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure in respect of Letters of Credit issued by such Issuing Bank for the account of such Borrower, as well as the applicable Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of each calendar month shall be payable on the first Business Day of each calendar month following such last day, commencing on the first such date to occur after the Amendment Effective Date; provided that all such fees shall be payable on the date on which the Commitments of any Class terminate in full (with respect to the LC Exposure under such Commitments) and any such fees accruing after the date on which the Commitments of any Class terminate shall be payable on demand. Any other fees payable to an Issuing Bank pursuant

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to this paragraph shall be payable within 10 Business Days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.
(c)      Each of the Borrowers agrees to pay to each Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between such Borrower and such Agent.
(d)      Subject to Section 2.17, all fees payable hereunder shall be paid on the dates due in Dollars, in immediately available funds, to each Applicable Administrative Agent (or to the applicable Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the applicable Lenders. Fees paid shall not be refundable under any circumstances.
SECTION 2.13.      Interest.
(a)      The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.
(b)      The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(c)      The Loans comprising each Canadian Prime Rate Borrowing shall bear interest at the Canadian Prime Rate plus the Applicable Rate.
(d)      The Loans comprising each CDOR Rate Borrowing shall bear interest at the CDOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(e)      Each (i) U.S. Protective Advance and Multicurrency Protective Advance denominated in Dollars shall bear interest at the Alternate Base Rate plus the Applicable Rate and (ii) each Multicurrency Protective Advance denominated in Canadian Dollars shall bear interest at the Canadian Prime Rate plus the Applicable Rate.
(f)      Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default under paragraph (a), (b), (h) or (i) of Article VII , (i) all Loans shall bear interest at 2% plus the rate otherwise applicable to such Loans as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount outstanding hereunder, such amount shall accrue at 2% plus the rate applicable to such fee or other obligation as provided hereunder.
(g)      Accrued interest on each Loan (for ABR Loans and Canadian Prime Rate Loans, accrued through the last day of the prior calendar month) shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments of the applicable Class; provided that (i) interest accrued pursuant to paragraph (f) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or Canadian Prime Rate Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan or CDOR Rate Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(h)      All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate, CDOR Rate or Canadian Prime

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Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed. The applicable Alternate Base Rate, Adjusted LIBO Rate, LIBO Rate, Canadian Prime Rate or CDOR Rate shall be determined by the Applicable Administrative Agent, and such determination shall be conclusive absent manifest error.
(i)      Interest Act (Canada) . For purposes of disclosure pursuant to the Interest Act (Canada), the annual rates of interest or fees to which the rates of interest or fees provided in this Agreement and the other Loan Documents (and stated herein or therein, as applicable, to be computed on the basis of 360 days or any other period of time less than a calendar year) are equivalent are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by 360 or such other period of time, respectively.
(j)      Limitation on Interest . If any provision of this Agreement or of any of the other Loan Documents would obligate any Loan Party to make any payment of interest or other amount payable to the Lenders in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Lenders of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by the Lenders of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (1) firstly , by reducing the amount or rate of interest required to be paid to the Lenders under this Section 2.13 , and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the Lenders which would constitute “interest” for purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if the Lenders shall have received an amount in excess of the maximum permitted by that section of the Criminal Code (Canada), the Loan Parties shall be entitled, by notice in writing to the Administrative Agent, to obtain reimbursement from the Lenders in an amount equal to such excess and, pending such reimbursement, such amount shall be deemed to be an amount payable by the Lenders to the Borrowers. Any amount or rate of interest referred to in this Section 2.13(j) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the applicable Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the Amendment Effective Date to the Maturity Date and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Administrative Agent shall be conclusive for the purposes of such determination.
SECTION 2.14.      Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing or CDOR Rate Borrowing:
(a)      the Applicable Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining (including, without limitation, by means of an Interpolated Rate) the Adjusted LIBO Rate, the LIBO Rate or the CDOR Rate, as applicable, for such Interest Period; or
(b)      the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate, the LIBO Rate or the CDOR Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

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then the Administrative Agent shall give notice thereof to the Borrower Representative and the Lenders by telephone or facsimile as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower Representative and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing or CDOR Rate Borrowing, as applicable, shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing or CDOR Rate Borrowing, such Borrowing shall be made as an ABR Borrowing or Canadian Prime Rate Borrowing, as applicable.
SECTION 2.15.      Increased Costs.
(a)      If (x) any Change in Law shall:
(i)      impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;
(ii)      impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; or
(iii)      subject any Lender or Issuing Bank to any Taxes on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto other than (A) Indemnified Taxes, (B) Other Taxes, (C) Excluded Taxes and (D) Other Excluded Taxes;
or (y) there shall be (A) the addition of any new Borrower located outside of the United States or Canada, (B) the re-domestication or other reorganization of any existing Borrower to a jurisdiction located outside of the United States or Canada, or (C) the occurrence of any Change in Law related to any Borrower located outside of the United States or Canada;
and the result of any of the foregoing shall be to increase the cost to such Lender or Issuing Bank of making or maintaining any Eurodollar Loan or CDOR Rate Loan (or of maintaining its obligation to make any such Eurodollar Loan or CDOR Rate Loan, as applicable) or to increase the cost to such Lender or Issuing Bank participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank (whether of principal, interest or otherwise), then the Borrower to which such Loan was made or for whose account such Letter of Credit was issued (or, if such increased cost does not relate to a specific Loan or Letter of Credit, the U.S. Borrower) will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts, as interest, as will compensate such Lender or Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b)      If any Lender or any Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing

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Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower to which such Loan was made or for whose account such Letter of Credit was issued (or, if such reduction in return does not relate to a specific Loan or Letter of Credit, the U.S. Borrower) will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts, as interest, as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.
(c)      A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower Representative and shall be conclusive absent manifest error. The applicable Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 Business Days after receipt thereof.
(d)      Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that no Borrower shall be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower Representative of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
(e)      If any Lender reasonably determines that (i) the addition of any new Borrower located outside of the United States or Canada, (ii) the re-domestication or other reorganization of any existing Borrower to a jurisdiction located outside of the United States or Canada, or (iii) the occurrence of any Change in Law related to any Borrower located outside of the United States or Canada, has made it unlawful, or that any Governmental Authority has asserted after the Amendment Effective Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Loans to or conduct business with the applicable Borrower, then, on notice thereof by such Lender to the Borrower Representative through the Administrative Agent, any obligations of such Lender to make or continue to make Loans to such Borrower or to convert any Loans to such Borrower from one Type to another, shall be suspended until such lender notifies the Borrower Representative through the Administrative Agent that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrower Representative shall upon demand from such Lender (with a copy to the Administrative Agent), either (i) convert all of such Lender’s Loans to such Borrower to a Type of Loans that may lawfully be held, if such Lender may lawfully continue to maintain such Loans of such Borrower in another Type, (ii) prepay such Loans to such Borrower in the manner provided for in Section 2.11 , if such Lender may not lawfully continue to maintain any such Loans of any Type but may continue to do business with such Borrower, or (iii) prepay such Loans to such Borrower in the manner provided for in Section 2.11 and terminate the Commitments of such Lender in the manner provided for in Section 2.09 , if such Lender may not lawfully continue to do business with such Borrower.  Upon any such conversion, prepayment or termination, the Borrower Representative shall also pay accrued interest on the amount so prepaid or converted.
SECTION 2.16.      Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan or CDOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the

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conversion of any Eurodollar Loan or CDOR Rate Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan or CDOR Rate Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan or CDOR Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower Representative pursuant to Section 2.19 , then, in any such event, the Borrower to which such Loan was made or was to be made shall compensate each Lender, in the case of any such payment by the Canadian Borrower, as a prepayment penalty or bonus (in the case of a payment pursuant to paragraph (a) or (b)), for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan or CDOR Rate Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Eurodollar Loan or CDOR Rate Loan had such event not occurred, at the Adjusted LIBO Rate or CDOR Rate, as applicable, that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan or CDOR Rate Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market or Canadian Dollar deposits of a comparable amount and period from other banks in the CDOR Rate market, as applicable. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower Representative and shall be conclusive absent manifest error. The applicable Borrower shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof.
SECTION 2.17.      Taxes.
(a)      Withholding of Taxes; Gross-Up . Each payment by any Loan Party under any Loan Document shall be made without withholding for any Taxes, unless such withholding is required by any law or applicable practice of any Taxing Authority. If any applicable withholding agent determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such withholding agent may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Taxing Authority in accordance with applicable law. If any such Taxes are Indemnified Taxes, then the amount payable by the applicable Loan Party shall be increased as necessary so that, net of such withholding (including any such withholding applicable to additional amounts payable under this Section 2.17 ), the Applicable Administrative Agent or applicable Lender (or, in the case of a payment secured by an Applicable Administrative Agent for its own account, the Applicable Administrative Agent) receives the amount it would have received had no such withholding been made.
(b)      Payment of Other Taxes by the Borrowers . The Borrowers shall timely pay any Other Taxes with respect to any Loans or any Loan Documents to the relevant Taxing Authority in accordance with applicable law; provided that the Canadian Borrower shall not be required to pay any Other Taxes attributable to the U.S. Facility.
(c)      Evidence of Payments . As soon as practicable after any payment of Indemnified Taxes by the Borrowers to a Taxing Authority, the Borrower Representative shall deliver to the Applicable

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Administrative Agent the original or a certified copy of a receipt issued by such Taxing Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Applicable Administrative Agent.
(d)      Indemnification by the Borrowers . The U.S. Borrower shall indemnify each Administrative Agent and each Lender for any Indemnified Taxes with respect to any Loans that are paid or payable by such Administrative Agent or Lender (including with respect to any amounts paid or payable under this Section 2.17(d)) , and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The Canadian Borrower shall indemnify each Administrative Agent and each Lender for any Indemnified Taxes with respect to the Multicurrency Loans that are paid or payable by such Administrative Agent or Lender (including with respect to any amounts paid or payable under this Section 2.17(d) ), and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. For the avoidance of doubt, the Canadian Borrower shall not be required to indemnify for any Indemnified Taxes (or related expenses) attributable to the U.S. Facility. The indemnity under this Section 2.17(d) shall be paid within 10 Business Days after the indemnitee delivers to the Borrower Representative a certificate stating the amount of any Indemnified Taxes so paid or payable by such indemnitee and describing the basis for the indemnification claim in reasonable detail. Such certificate shall be conclusive of the amount so paid or payable absent manifest error. Such indemnitee shall deliver a copy of such certificate to the Applicable Administrative Agent.
(e)      Indemnification by the Lenders . Each Lender shall severally indemnify the Applicable Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes, only to the extent that the Loan Parties have not already indemnified such Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so) attributable to such Lender that are paid or payable by such Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 2.17(e) shall be paid within 10 days after the Applicable Administrative Agent delivers to the applicable Lender a certificate stating the amount of Taxes so paid or payable by such Administrative Agent. Such certificate shall be conclusive of the amount so paid or payable absent manifest error. Each Lender hereby authorizes the Administrative Agent to setoff and apply any amounts due and owing to such Lender under any Loan Document against any amount due the Administrative Agent under this Section 2.17(e) .
(f)      Status of Lenders . Any Lender that is entitled to an exemption from, or reduction of, any applicable withholding Tax with respect to any payments under this Agreement shall deliver to the Borrower Representative and the Applicable Administrative Agent, at the time or times reasonably requested by the Borrower Representative or such Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower Representative or such Administrative Agent as will permit such payments to be made without, or at a reduced rate of, withholding. In addition, any Lender, if requested by the Borrower Representative or the Applicable Administrative Agent, shall deliver such other documentation prescribed by law or reasonably requested by the Borrower Representative or such Administrative Agent as will enable the Borrower Representative or such Administrative Agent to determine whether or not such Lender is subject to any withholding (including backup withholding) or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(f)(i)(A) through (E) below) shall not be required if in the

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Lender’s judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. Upon the reasonable request of the Borrower Representative or the Applicable Administrative Agent, any Lender shall update any form or certification previously delivered pursuant to this Section 2.17(f) . If any form or certification previously delivered pursuant to this Section 2.17(f) expires or becomes obsolete or inaccurate in any respect with respect to a Lender, such Lender shall promptly (and in any event within 10 days after such expiration, obsolescence or inaccuracy) notify the Borrower Representative and the Applicable Administrative Agent in writing of such expiration, obsolescence or inaccuracy and provide an updated form or certification if it is legally eligible to do so.
(i)      Without limiting the generality of the foregoing, any Lender with respect to the U.S. Borrower shall, if it is legally eligible to do so, deliver to the Borrower Representative and the Administrative Agent (in such number of copies reasonably requested by the Borrower Representative and the Administrative Agent) on or prior to the date on which such Lender becomes a party hereto, duly completed and executed copies of whichever of the following is applicable:
(A)      in the case of a Lender that is a U.S. Person, IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B)      in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a party (1) with respect to payments of interest under this Agreement, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “ interest ” article of such tax treaty and (2) with respect to any other applicable payments under this Agreement, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(C)      in the case of a Non-U.S. Lender for whom payments under this Agreement constitute income that is effectively connected with such Lender’s conduct of a trade or business in the United States, IRS Form W-8ECI;
(D)      in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and (2) a tax certificate substantially in the form of Exhibit F-1 to the effect that such Lender is not (a) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of such Borrower within the meaning of Section 881(c)(3)(B) of the Code or (c) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code;
(E)      in the case of a Non-U.S. Lender that is not the beneficial owner of payments made under this Agreement (including a partnership or a participating Lender) (1) an IRS Form W-8IMY on behalf of itself and (2) the relevant forms prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that would be required of each such beneficial owner or partner of such partnership if such beneficial owner or partner were a Lender; provided , however , that if the Lender is a partnership and one or more of its partners are claiming the exemption for portfolio interest under Section 881(c) of the Code, such Lender may provide a tax certificate substantially in the form of Exhibit F-2 on behalf of such partners; or
(F)      any other form prescribed by law as a basis for claiming exemption from, or a reduction of, U.S. federal withholding Tax together with such supplementary documentation

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necessary to enable the Borrower Representative or the Administrative Agent to determine the amount of Tax (if any) required by law to be withheld.
(ii)      If a payment made to a Lender under this Agreement would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the applicable withholding agent, at the time or times prescribed by law and at such time or times reasonably requested by such withholding agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by such withholding agent as may be necessary for such withholding agent to comply with its obligations under FATCA, to determine whether such Lender has complied with such Lender’s obligations under FATCA and to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this Section 2.17(f)(ii) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(iii)      Without limiting the generality of the foregoing, a Lender with respect to a Canadian Loan Party shall, if it is legally eligible to do so, deliver to the Borrower Representative and the Multicurrency Administrative Agent (in such number of copies reasonably requested by the Borrower Representative and the Multicurrency Administrative Agent) on or prior to the date on which such Lender becomes a party hereto or, where the Canadian Loan Party is a Guarantor, the date when the Guarantee is called upon, duly completed and executed copies of Form NR301, NR302 or NR303 (whichever is applicable) to the extent the Lender is for purposes of the ITA a non-resident of Canada, or a partnership that is not a “Canadian partnership”, and is, or whose partners are, claiming benefits of an income tax treaty to which Canada is a party.
(g)      Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund (or applied as an offset against other Taxes payable) of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including additional amounts paid pursuant to this Section 2.17 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Taxing Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid to such indemnified party pursuant to the previous sentence (plus any penalties, interest or other charges imposed by the relevant Taxing Authority) in the event such indemnified party is required to repay such refund to such Taxing Authority. Notwithstanding anything to the contrary in this Section 2.17(g) , in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to this Section 2.17(g) to the extent that such payment would place such indemnified party in a less favorable position (on a net after-Tax basis) than such indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 2.17(g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the indemnifying party or any other Person.
(h)      Issuing Bank . For purposes of this Section 2.17 , the term “ Lender ” includes any Issuing Bank.

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(i)      Survival . The agreements in this Section 2.17 shall survive the resignation and/or replacement of the Applicable Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations.
SECTION 2.18.      Payments Generally; Allocation of Proceeds; Sharing of Setoffs.
(a)      Each Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15 , 2.16 or 2.17 , or otherwise) prior to 1:00 p.m., Pacific time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 10 South Dearborn Street, 22nd Floor, Chicago, Illinois, except (i) payments to be made directly to an Issuing Bank or the Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15 , 2.16 , 2.17 and 9.03 shall be made directly to the Persons entitled thereto and (ii) payments of Multicurrency Loans and Canadian LC Disbursements or commitment fees and fronting fees that are payable to any Multicurrency Issuing Bank or Multicurrency Revolving Lender, shall be made to the Multicurrency Administrative Agent at its offices at 200 Bay Street, Royal Bank Plaza, Floor 18, Toronto M57 2J2 Canada. The Applicable Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars except (i) as otherwise expressly provided herein and (ii) that all payments in respect of Canadian Dollar denominated Loans (including interest thereon) shall be made in Canadian Dollars.
(b)      Any proceeds of U.S. Collateral received by the Administrative Agent (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrower Representative), (B) a mandatory prepayment (which shall be applied in accordance with Section 2.11 ) or (C) amounts to be applied from a Collection Account when full cash dominion is in effect (which shall be applied in accordance with Section 2.10(b) ) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, such funds shall be applied ratably first , to pay any fees, indemnities, or expense reimbursements including amounts then due to the Administrative Agent, the Multicurrency Administrative Agent and each Issuing Bank from the U.S. Borrower (other than in connection with Banking Services or Swap Obligations or the U.S. Borrower’s Canadian Loan Guaranty), second , to pay any fees or expense reimbursements then due to the Lenders from the U.S. Borrower (other than in connection with Banking Services or Swap Obligations or the U.S. Borrower’s Canadian Loan Guaranty), including fees payable by the U.S. Borrower pursuant to Section 2.12 , third , to pay interest due in respect of the Protective Advances to the U.S. Borrower, fourth , to pay the principal of all Protective Advances to the U.S. Borrower, fifth , to pay interest then due and payable on all Loans (other than the Protective Advances) to the U.S. Borrower ratably, sixth , to prepay principal on the Loans (other than the Protective Advances) to the U.S. Borrower and unreimbursed LC Disbursements in respect of Letters of Credit issued for the account of the U.S. Borrower ratably, seventh , to pay an amount to the Administrative Agent equal to one hundred three percent (103%) of the aggregate undrawn face amount of all outstanding Letters of Credit issued for the account of the U.S. Borrower and the aggregate amount

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of any related unpaid LC Disbursements, to be held as Cash Collateral for such U.S. Obligations, eighth , to pay any fees, indemnities, or expense reimbursements including amounts then due to the Administrative Agent, the Multicurrency Administrative Agent and each Issuing Bank from the Canadian Borrower (other than in connection with Banking Services or Swap Obligations), ninth , to pay any fees or expense reimbursements then due to the Lenders from the Canadian Borrower (other than in connection with Banking Services or Swap Obligations), including fees payable by the Canadian Borrower pursuant to Section 2.12 , tenth , to pay interest due in respect of the Protective Advances to the Canadian Borrower, eleventh , to pay the principal of all Protective Advances to the Canadian Borrower, twelfth , to pay interest then due and payable on all Loans (other than the Protective Advances) to the Canadian Borrower ratably, thirteenth , to prepay principal on the Loans (other than the Protective Advances) to the Canadian Borrower and unreimbursed LC Disbursements in respect of Letters of Credit issued for the account of the Canadian Borrower ratably, fourteenth , to pay an amount to the Administrative Agent equal to one hundred three percent (103%) of the aggregate undrawn face amount of all outstanding Letters of Credit issued for the account of the Canadian Borrower and the aggregate amount of any related unpaid LC Disbursements, to be held as Cash Collateral for such Canadian Obligations, fifteenth , to payment of any amounts owing with respect to Banking Services and Swap Obligations of the U.S. Loan Parties and LSIFCS (other than pursuant to the Canadian Guaranty) up to and including the amount most recently provided to the Administrative Agent pursuant to Section 2.22 , sixteenth , to payment of any amounts owing with respect to Banking Services and Swap Obligations of the Canadian Loan Parties up to and including the amount most recently provided to the Administrative Agent pursuant to Section 2.22 , seventeenth , to the payment of any other U.S. Secured Obligation due to the Administrative Agent, Multicurrency Administrative Agent, any Issuing Bank or any Lender (other than pursuant to the Canadian Loan Guaranty) and eighteenth , to the payment of any other Canadian Secured Obligations due to the Administrative Agent, Multicurrency Administrative Agent, any Issuing Bank or any Lender. Any proceeds of Canadian Collateral received by the Administrative Agent or Multicurrency Administrative Agent (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrower Representative), (B) a mandatory prepayment (which shall be applied in accordance with Section 2.11 ) or (C) amounts to be applied from a Collection Account when full cash dominion is in effect (which shall be applied in accordance with Section 2.10(b) ) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, shall be applied ratably in the order specified in clauses eighth through fourteenth , sixteenth and eighteenth above; provided that no amounts received from any Guarantor shall be applied to Excluded Swap Obligations of such Guarantor. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower Representative, or unless a Default is in existence, neither the Administrative Agent nor any Lender shall apply any payment which it receives to any Eurodollar Loan or CDOR Rate Loan of a Class, except (a) on the expiration date of the Interest Period applicable thereto or (b) in the event, and only to the extent, that there are no outstanding ABR Loans or Canadian Prime Rate Loans, as applicable, of the same Class and, in any such event, the applicable Borrower shall pay the break funding payment required in accordance with Section 2.16 . The Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Secured Obligations.
(c)      At the election of the Administrative Agent, to the extent any such amount is not paid by the applicable Borrower when due (after taking into account all applicable grace periods), all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees and expenses pursuant to Section 9.03 ), and other sums payable under the Loan Documents by any Borrower, may be paid from the proceeds of Borrowings of such Borrower made hereunder whether made following a request by the Borrower Representative

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pursuant to Section 2.03 or a deemed request as provided in this Section or may be deducted from any deposit account of such Borrower maintained with or under the control of the Administrative Agent. Each Borrower hereby irrevocably authorizes (i) the Administrative Agent to make a Borrowing for the purpose of paying each payment of principal, interest and fees due from such Borrower as it becomes due hereunder or any other amount due under the Loan Documents and agrees that all such amounts charged shall constitute Loans (including Swingline Loans, but such a Borrowing may only constitute a Protective Advance if it is to reimburse costs, fees and expenses as described in Section 9.03 ) to such Borrower and that all such Borrowings shall be deemed to have been requested pursuant to Sections 2.03 , 2.04 or 2.05 , as applicable, and (ii) the Administrative Agent to charge any deposit account of such Borrower maintained with, or subject to the control of, the Administrative Agent for each payment of principal, interest and fees due from such Borrower as it becomes due hereunder or any other amount due under the Loan Documents.
(d)      If, except as otherwise expressly provided herein, any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than such Lender would have received had such amounts been applied in accordance with paragraph (a) above, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be provided to the Lenders that would have been entitled to such payments pursuant to paragraph (a) above; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by a Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.
(e)      Unless the Administrative Agent shall have received notice from the Borrower Representative prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or an Issuing Bank hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of either (i) the Federal Funds Effective Rate (in the case of Dollar-denominated amounts) and the Administrative Agent’s cost of funds (in case of Canadian Dollar-denominated amounts) and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

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(f)      If any Lender shall fail to make any payment required to be made by it hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations hereunder until all such unsatisfied obligations are fully paid and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender hereunder; application of amounts pursuant to clauses (i) and (ii) above shall be made in such order as may be determined by the Administrative Agent in its discretion.
SECTION 2.19.      Mitigation Obligations; Replacement of Lenders.
(a)      If any Lender requests compensation under Section 2.15 , or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17 , then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17 , as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment (but in the case of the Canadian Borrower, only to the extent relating to the Multicurrency Commitments and the extensions of credit to the Canadian Borrower thereunder).
(b)      If any Lender requests compensation under Section 2.15 , or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17 , or if any Lender becomes a Defaulting Lender, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04 ), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrowers shall have received the prior written consent of the Administrative Agent, each applicable Issuing Bank and, in the case of the U.S. Facility, the Swingline Lender, which consent shall not unreasonably be withheld, conditioned or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and funded participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the applicable Borrower(s) (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17 , such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.
SECTION 2.20.      Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a)      fees shall cease to accrue on the unfunded portion of the Commitments of such Defaulting Lender pursuant to Section 2.12(a) ;

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(b)      such Defaulting Lender shall not have the right to vote on any issue on which voting is required (other than to the extent expressly provided in Section 9.02(b)) and the Commitment and Revolving Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders or the Supermajority Revolving Lenders have taken or may take any action hereunder;
(c)      if any Swingline Exposure or LC Exposure exists at the time a Lender becomes a Defaulting Lender then:
(i)      all or any part of the Swingline Exposure and LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders of the applicable Class in accordance with their respective Applicable Percentages but only to the extent (x) the sum of all non-Defaulting Lenders’ Revolving Exposures under such Class of Commitments plus such Defaulting Lender’s Swingline Exposure and LC Exposure under such Class of Commitments does not exceed the total of all non-Defaulting Lenders’ Commitments of such Class, (y) no non-Defaulting Lender’s Revolving Exposure under such Class of Commitments is increased above such Lender’s Commitment of such Class as a result thereof and (z) no Event of Default has then occurred and is continuing;
(ii)      if the reallocation described in clause (i) above cannot, or can only partially, be effected, the applicable Borrower shall within one Business Day following notice by the Administrative Agent (x) first , in the case of the U.S. Borrower, prepay such Swingline Exposure and (y) second , Cash Collateralize, for the benefit of the applicable Issuing Bank, such Borrowers’ obligations corresponding to such Defaulting Lender’s LC Exposure under the applicable Class of Commitments (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;
(iii)      if a Borrower Cash Collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, such Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is Cash Collateralized;
(iv)      if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Sections 2.12(a) and 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and
(v)      if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor Cash Collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any Lender hereunder, all letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the applicable Issuing Bank until such LC Exposure is reallocated and/or Cash Collateralized; and
(d)      so long as such Lender is a Defaulting Lender, the applicable Issuing Bank under the applicable Facility shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or Cash Collateral will be provided by the applicable Borrower(s) in accordance with Section 2.20(c) , and participating interests in any such newly made Swingline Loan or newly issued or increased

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Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.20(c)(i) (and such Defaulting Lender shall not participate therein).
If (i) a Bankruptcy Event with respect to the Parent of any Lender shall occur following the Amendment Effective Date and for so long as such event shall continue or (ii) any Issuing Bank or the Swingline Lender has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, such Issuing Bank shall not be required to issue, amend or increase any Letter of Credit and the Swingline Lender shall not be required to fund any Swingline Loan, unless such Issuing Bank or the Swingline Lender, as the case may be, shall have entered into arrangements with the Borrowers or such Lender, satisfactory to such Issuing Bank or the Swingline Lender, as the case may be, to defease any risk in respect of such Lender hereunder.
In the event that each of the Administrative Agent, the Borrowers, the applicable Issuing Banks and, in the case of the U.S. Facility, the Swingline Lender agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swingline Exposure and/or LC Exposure of the Lenders under the applicable Facility shall be readjusted to reflect the inclusion of such Lender’s Commitment and on the date of such readjustment such Lender shall purchase at par such of the Loans of the other Lenders (other than Swingline Loans) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.
SECTION 2.21.      Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Administrative Agent, the Multicurrency Administrative Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Administrative Agent, the Multicurrency Administrative Agent or such Lender. The provisions of this Section 2.21 shall be and remain effective notwithstanding any contrary action which may have been taken by the Administrative Agent, the Multicurrency Administrative Agent or any Lender in reliance upon such payment or application of proceeds. The provisions of this Section 2.21 shall survive the termination of this Agreement.
SECTION 2.22.      Banking Services and Swap Agreements. Each Lender or Affiliate thereof providing Banking Services for, or having Swap Agreements with, any Loan Party or LSIFCS shall deliver to the Administrative Agent within 30 days after it commences providing any such Banking Services or Swap Agreements, written notice thereof. In furtherance of that requirement, each such Lender or Affiliate thereof shall furnish to the Administrative Agent, either (x) following the end of each calendar month, a summary of the amounts due or to become due in respect of any Swap Obligations owing to it or (y) pursuant to such other arrangements as are reasonably acceptable to the Administrative Agent. The most recent information provided to the Administrative Agent shall be used in determining which tier of the waterfall, contained in Section 2.18(b) , such Banking Services Obligations and/or Swap Obligations will be placed and the Administrative Agent shall be under no obligation to enquire as to the existence of any Banking Services Obligations or Swap Obligations of which it has not been specifically advised.

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ARTICLE III     

Representations and Warranties
Each Loan Party represents and warrants to the Lenders that:
SECTION 3.01.      Organization; Powers. Each Loan Party and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted and (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except, in the case of (x) clause (a) with respect to the Subsidiaries of each Loan Party and (y) clauses (b) and (c), where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02.      Authorization; Enforceability. The Transactions are within each Loan Party’s organizational powers and have been duly authorized by all necessary organizational actions and, if required, actions by equity holders. The Loan Documents to which each Loan Party is a party have been duly executed and delivered by such Loan Party and constitute a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03.      Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any Requirement of Law applicable to any Loan Party or the Organizational Documents of any Loan Party, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or the assets of any Loan Party, or give rise to a right thereunder to require any material payment to be made by any Loan Party, and (d) will not result in the creation or imposition of any Lien on any Collateral of any Loan Party, except Liens created pursuant to the Loan Documents.
SECTION 3.04.      Financial Condition; No Material Adverse Change.
(a)      The U.S. Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the Fiscal Year ended November 24, 2013, reported on by PricewaterhouseCoopers LLP, independent public accountants. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the U.S. Borrower and its consolidated Subsidiaries as of such date and for such period in accordance with GAAP. The U.S. Borrower shall be deemed to have furnished such financial statements upon the filing of such financial statements by the U.S. Borrower through the SEC’s EDGAR system (or any successor electronic gathering system) or the publication by the U.S. Borrower of such financial statements on its website.
(b)      No event, change or condition has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect, since November 24, 2013.

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SECTION 3.05.      Properties.
(a)      As of the date of this Agreement, Schedule 3.05(a) sets forth the address of each parcel of real property that is owned or leased by each Loan Party. Except as would not have a Material Adverse Effect, each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and no default by any party to any such lease or sublease exists. Each of the Loan Parties has good and indefeasible title to, or valid leasehold interests in, all of its real and personal property, free of all Liens other than those permitted by Section 6.02 .
(b)      Each Loan Party owns, or is licensed to use, all trademarks, tradenames, copyrights, patents, industrial designs and other intellectual property necessary to its business as currently conducted, the use of all trademarks, tradenames, copyrights, patents, industrial designs and other intellectual property owned by each Loan Party does not infringe in any respect upon the rights of any other Person, except to the extent that such infringement could not reasonably be expected to have a Material Adverse Effect, and each Loan Party’s rights to all trademarks, tradenames, copyrights, patents, industrial designs and other intellectual property necessary to conduct its business as currently conducted are not subject to any material restrictions under any licensing agreement or similar arrangement (other than (i) restrictions relating to software licenses that may limit such Loan Party’s ability to transfer or assign any such agreement to a third party and (ii) licensing agreements or similar agreements that do not materially impair the ability of the Applicable Administrative Agent or the Lenders to avail themselves of their rights of disposal and other rights granted under the Collateral Documents in respect of the Inventory).
SECTION 3.06.      Litigation and Environmental Matters.
(a)      There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting any Loan Party or any of its Subsidiaries as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(b)      (i) No Loan Party or any of its Subsidiaries has received notice of any claim with respect to any Environmental Liability or knows of any basis for any Environmental Liability that could reasonably be expected to have a Material Adverse Effect and (ii) and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, no Loan Party nor any of its Subsidiaries (1) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law or (2) has become subject to any Environmental Liability that could reasonably be expected to have a Material Adverse Effect.
SECTION 3.07.      Compliance with Laws and Agreements. Each Loan Party is in compliance with all Requirements of Law applicable to it or its property, its Organizational Documents and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08.      Investment Company Status; Margin Stock. No Loan Party or any of its Subsidiaries is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) engaged (principally or as one of

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its important activities) in the business of extending credit for the purpose of buying “margin stock” (as defined in Regulation U).
SECTION 3.09.      Taxes. Except as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect: (a) each Loan Party and each of their respective Subsidiaries has timely filed or caused to be timely filed all Tax returns and reports required to have been filed by it and has paid or caused to be paid all Taxes required to have been paid by it (including in its capacity as a withholding agent), except Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP and (b) there are no Tax audits, assessments or other Tax claims or proceedings with respect to any Loan Party or any of their respective Subsidiaries.
SECTION 3.10.      ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.11.      Canadian Pension Plan and Benefit Plans. The Canadian Pension Plans are duly registered under the ITA and all other applicable laws which require registration, except as could not reasonably be expected to result in a Material Adverse Effect. Each Loan Party and each of their Subsidiaries has complied with and performed all of its obligations under and in respect of the Canadian Pension Plans and Canadian Benefit Plans under the terms thereof, any funding agreements and all applicable laws (including any fiduciary, funding, investment and administration obligations), except as could not reasonably be expected to result in a Material Adverse Effect. All employer and employee payments, contributions or premiums to be remitted, paid to or in respect of each Canadian Pension Plan or Canadian Benefit Plan have been paid in a timely fashion in accordance with the terms thereof, any funding agreement and all applicable laws. There have been no improper withdrawals or applications of the assets of the Canadian Pension Plans or the Canadian Benefit Plans, except as could not reasonably be expected to result in a Material Adverse Effect. No promises of benefit improvements under the Canadian Pension Plans or the Canadian Benefit Plans have been made except where such improvement could not be reasonably expected to have a Material Adverse Effect. All material reports and disclosures relating to the Canadian Pension Plans required by such plans and any Requirement of Law to be filed or distributed have been filed or distributed, except as could not reasonably be expected to result in a Material Adverse Effect. There has been no termination of any Canadian Pension Plan (except as permitted under Section 5.07(b) ) and, to the knowledge of the Borrower, no facts or circumstances have occurred or existed that could result, or be reasonably anticipated to result, in the declaration of a termination of any Canadian Pension Plan by any Governmental Authority under Applicable Pension Laws. Each of the Canadian Pension Plans is funded in accordance with the most recent actuarial valuations filed under Applicable Pension Laws, as disclosed to the Administrative Agent.
SECTION 3.12.      Disclosure. Each Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of any Loan

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Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document (as modified or supplemented by other information so furnished), taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, forward-looking statements and information of a general economic or industry nature, the Borrowers each represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Amendment Effective Date, as of the Amendment Effective Date.
SECTION 3.13.      Material Agreements. Except as would not have a Material Adverse Effect, no Loan Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any material agreement to which it is a party or (ii) any agreement or instrument evidencing or governing Indebtedness.
SECTION 3.14.      Solvency. Each Borrower individually, the U.S. Borrower together with the U.S. Loan Guarantors (taken as a whole) and the Canadian Borrower together with the Multicurrency Loan Guarantors (taken as a whole), is Solvent prior to and after giving effect to the Borrowings to be made on the Amendment Effective Date and the issuance of the Letters of Credit to be issued on the Amendment Effective Date, and shall remain Solvent during the term of this Agreement.
SECTION 3.15.      Insurance. Schedule 3.15 lists all insurance maintained by or on behalf of the Loan Parties and the other Subsidiaries of the U.S. Borrower as of the Amendment Effective Date. As of the Amendment Effective Date, all premiums in respect of such insurance have been paid. The Borrowers believe that the insurance maintained by or on behalf of the U.S. Borrower and its Subsidiaries is adequate.
SECTION 3.16.      Capitalization and Subsidiaries. Schedule 3.16 sets forth (a) a correct and complete list of the name and relationship to the U.S. Borrower of each and all of the U.S. Borrower’s Subsidiaries, (b) a true and complete listing of each class of each Loan Party’s authorized Equity Interests, of which all of such issued shares are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 3.16 , and (c) the type of entity of the U.S. Borrower and each of its Subsidiaries. All of the issued and outstanding Equity Interests owned by any Loan Party has been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and is fully paid and non-assessable.
SECTION 3.17.      Security Interest in Collateral. The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all the Collateral granted by (a) the U.S. Loan Parties in favor of the Administrative Agent (for the benefit of the Lender Parties), securing the Secured Obligations and (b) the Canadian Loan Parties in favor of the Administrative Agent (for the benefit of the Multicurrency Lender Parties), securing the Canadian Secured Obligations, constitute perfected and continuing Liens on the Collateral (to the extent such Liens can be perfected by possession, by filing a UCC financing statement or a PPSA financing statement or equivalent under each applicable jurisdiction, by filing a mortgage, deed of trust, deed to secure debt, assignment or similar instruments with the

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appropriate real property office, by recording an appropriate document with the United States Patent and Trademark Office or by a control agreement), securing the applicable Secured Obligations, enforceable against the applicable Loan Party and having priority over all other Liens on the Collateral except in the case of (x) Liens permitted by Section 6.02 , to the extent any such Liens would have priority over the Liens in favor of the Administrative Agent pursuant to any applicable law or agreement and (y) Liens perfected only by possession (including possession of any certificate of title) to the extent the Administrative Agent has not obtained or does not maintain possession of such Collateral.
SECTION 3.18.      Employment Matters. As of the Amendment Effective Date, there are no strikes, lockouts or slowdowns against any Loan Party pending or, to the knowledge of the Borrowers, threatened. The hours worked by and payments made to employees of the Loan Parties have not been in violation in any material respect of the Fair Labor Standards Act, the Employee Standards Act (Ontario) or any other applicable Federal, state, provincial, territorial, local or foreign law dealing with such matters. All material payments due from any Loan Party or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, including with respect to the Canada Pension Plans and Canada Benefit Plans have been paid or accrued as a liability on the books of the Loan Party.
SECTION 3.19.      OFAC and Patriot Act. The U.S. Borrower and each of its Subsidiaries is: (i) not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (the “ Annex ”); (ii) in compliance in all material respects with the requirements of the USA Patriot Act Title III of 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and 150 offices, related to the subject matter of the Act, including Executive Order 13224 effective September 24, 2001 (the “ Patriot Act ”) and all other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“ OFAC ”); (iii) not in receipt of any notice from the Secretary of State of the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; (iv) not listed as a Specially Designated Terrorist (as defined in the Patriot Act) or as a “blocked” person on any publicly available lists maintained by the OFAC pursuant to the Patriot Act or any other publicly available list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other publicly available list of terrorists or terrorist organizations maintained pursuant to the Patriot Act; (v) not a Person who has been determined by competent authority to be subject to any of the prohibitions contained in the Patriot Act; and (vi) not owned or controlled by any Person named in the Annex.
SECTION 3.20.      Anti-Corruption Laws and Sanctions. Each of the U.S. Borrower and its Subsidiaries has implemented and maintains in effect policies and procedures designed to ensure compliance by the U.S. Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the U.S. Borrower, its Subsidiaries and their respective officers and, to the knowledge of the U.S. Borrower, its directors, employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the U.S. Borrower, any Subsidiary of the U.S. Borrower or, to the knowledge of the U.S. Borrower or any of its Subsidiaries, any of their respective directors, officers, employees or any agent of the U.S.

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Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of the proceeds hereof or other Transaction will violate Anti-Corruption Laws or applicable Sanctions.
ARTICLE IV     

Conditions
SECTION 4.01.      Amendment Effective Date. The amendment and restatement of the Existing Credit Agreement contemplated by this Agreement and the obligations of the Lenders to make Loans and of each Issuing Bank to issue Letters of Credit hereunder (other than any Letter of Credit outstanding under the Existing Credit Agreement on the Amendment Effective Date) shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02 ):
(a)      Credit Agreement and Loan Documents . The Administrative Agent (or its counsel) shall have received (i) from each party hereto either (A) a counterpart of this Agreement signed on behalf of such party (including executed counterparts of this Agreement signed on behalf of (x) “Lenders” (as defined in the Existing Credit Agreement) constituting “Required Lenders” (as defined in the Existing Credit Agreement) under the Existing Credit Agreement and (y) each of the parties named on the Commitment Schedule) or (B) written evidence satisfactory to the Administrative Agent (which may include facsimile or other electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of such other certificates, documents, instruments and agreements as the Administrative Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including any promissory notes requested by a Lender pursuant to Section 2.10 at least three Business Days prior to the Amendment Effective Date payable to the order of each such requesting Lender and (x) a written opinion of the Loan Parties’ U.S. counsel, addressed to the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Lenders in substantially the form of Exhibit B-1 , (y) a written opinion of the Loan Parties’ Canadian counsel, addressed to the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Lenders in substantially the form of Exhibit B-2 and (z) a written opinion of the U.S. Borrower’s Global Finance and Governance Counsel, addressed to the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Lenders in substantially the form of Exhibit B-3 .
(b)      Financial Statements and Projections . The Lenders shall have received (i) satisfactory audited annual consolidated financial statements of the U.S. Borrower for the most recent Fiscal Year ending at least 90 days prior to the Amendment Effective Date and (ii) U.S. Borrower’s projected consolidated income statement, balance sheet and cash flows for the period beginning after the most recently ended Fiscal Quarter for which financial statements have been delivered and ending on the last day of the U.S. Borrower’s 2018 Fiscal Year (prepared on a quarterly basis through the end of the U.S. Borrower’s 2014 Fiscal Year) and satisfactory to the Administrative Agent.
(c)      Closing Certificates; Certified Certificate of Incorporation; Good Standing Certificates . The Administrative Agent shall have received (i) a certificate of each Loan Party, dated the Amendment Effective Date and executed by its Secretary or Assistant Secretary, which shall (A) certify the resolutions of its Board of Directors, members or other body authorizing the execution, delivery and performance of the Loan Documents to which it is a party, (B) identify by name and title and bear the

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signatures of the Financial Officers and any other officers of such Loan Party authorized to sign the Loan Documents to which it is a party, and (C) contain appropriate attachments, including the certificate or articles of incorporation or organization of each Loan Party certified by the relevant authority of the jurisdiction of organization of such Loan Party (other than the certificate of incorporation of Levi Strauss International, which are certified by the secretary of Levi Strauss International) and a true and correct copy of its bylaws or operating, management or partnership agreement, and (ii) a certificate of compliance/status/good standing, as applicable, for each Loan Party from its jurisdiction of organization and each other jurisdiction in which it carries on business as may be reasonably requested by the Administrative Agent at least five (5) Business Days prior to the Amendment Effective Date.
(d)      No Default Certificate . The Administrative Agent shall have received a certificate, signed by a Financial Officer of each Borrower, on the initial Borrowing date (i) stating that no Default has occurred and is continuing, (ii) stating that the representations and warranties contained in Article III are true and correct as of such date, and (iii) certifying any other factual matters as may be reasonably requested by the Administrative Agent.
(e)      Fees . The Lenders and the Agents shall have received all fees required to be paid, and all expenses for which reasonably detailed invoices have been presented (including the reasonable fees and expenses of legal counsel to the Administrative Agent and Multicurrency Administrative Agent), on or before one Business Day prior to the Amendment Effective Date.
(f)      Lien Searches . The Administrative Agent shall have received the results of a recent lien search in such jurisdictions as it may have requested, and such search shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 6.02 or discharged on or prior to the Amendment Effective Date pursuant to a pay-off letter or other documentation reasonably satisfactory to the Administrative Agent
(g)      Funding Accounts . The Administrative Agent shall have received a notice setting forth the deposit account(s) of the Borrowers (the “ Funding Accounts ”) to which the Lender is authorized by the Borrowers to transfer the proceeds of any Borrowings requested or authorized pursuant to this Agreement.
(h)      Solvency . The Administrative Agent shall have received a solvency certificate from a Financial Officer of each Borrower.
(i)      Appraisal(s) . The Administrative Agent shall have received appraisals of the Borrowers’ Eligible Trademark Collateral from firms satisfactory to the Administrative Agent, which appraisals shall be satisfactory to the Administrative Agent in its reasonable discretion.
(j)      Borrowing Base Certificate . The Administrative Agent shall have received a Borrowing Base Certificate which calculates the U.S. Borrowing Base and the Canadian Borrowing Base as of February 23, 2014.    
(k)      Closing Availability . After giving effect to all Borrowings to be made on the Amendment Effective Date and the issuance of any Letters of Credit on the Amendment Effective Date and payment of all fees and expenses due hereunder, and with all of the Loan Parties’ indebtedness, liabilities, and obligations current, Availability shall not be less than $400,000,000.

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(l)      Other Documents . The Administrative Agent shall have received such other documents as the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank, any Lender or their respective counsel may have reasonably requested.
(m)      Filings, Registrations and Recordings . Each document (including any Uniform Commercial Code and PPSA financing statements) required by the Collateral Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 6.02 ), shall be in proper form for filing, registration or recordation.
The Administrative Agent shall notify the Borrowers and the Lenders of the Amendment Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the effectiveness of the amendment and restatement contemplated by this Agreement and the obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02 ) at or prior to 2:00 p.m., New York City time, on March 31, 2014 (and, in the event such conditions are not so satisfied or waived, the Existing Credit Agreement shall remain in effect and the Commitments hereunder shall terminate at such time).
SECTION 4.02.      Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:
(a)      The representations and warranties of the Borrowers set forth in this Agreement (other than, in the case of a requested credit extension by the U.S. Borrower at a time when there are no Canadian Borrower Shared Outstandings, the representations and warranties of the Borrowers set forth in Section 3.11 ) shall be true and correct in all material respects with the same effect as though made on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date, and that any representation or warranty which is subject to any materiality qualifier shall be required to be true and correct in all respects).
(b)      At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing.
(c)      After giving effect to any Borrowing or the issuance, amendment, renewal or extension of any Letter of Credit, the Revolving Exposure Limitations shall be satisfied.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.
ARTICLE V     

Affirmative Covenants

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Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, each Loan Party executing this Agreement covenants and agrees with the Lenders that:
SECTION 5.01.      Financial Statements; Borrowing Base and Other Information. The Borrowers will furnish to the Administrative Agent and each Lender:
(a)      within 120 days after the end of each Fiscal Year of the U.S. Borrower (or, if earlier, the date provided to the holders of the U.S. Borrower’s equity or debt securities generally), its audited consolidated and consolidating balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the U.S. Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied. The U.S. Borrower shall be deemed to have delivered the financial statements required to be delivered pursuant to this Section 5.01(a) upon the filing of such financial statements by the U.S. Borrower through the SEC’s EDGAR system (or any successor electronic gathering system) or the publication by the U.S. Borrower of such financial statements on its website;
(b)      (i) within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the U.S. Borrower, its consolidated and consolidating balance sheet (including a summary of stockholders’ equity as customarily shown on a balance sheet) and related statements of operations and cash flows, and, (ii) if Availability during any Fiscal Month is at any time less than the Minimum Excess Availability Amount, within 30 days after the end of such Fiscal Month, its consolidated and consolidating balance sheet and related statements of operations, in each case, as of the end of and for such Fiscal Quarter or Fiscal Month, as the case may be, and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of the Financial Officers of the Borrower Representative as presenting fairly in all material respects the financial condition and results of operations of the U.S. Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it being acknowledged and agreed that such quarterly and monthly financial statements will not be subsequently audited on a quarterly or monthly basis). The U.S. Borrower shall be deemed to have delivered the financial statements required to be delivered pursuant to this Section 5.01(b) upon the filing of such financial statements by the U.S. Borrower through the SEC’s EDGAR system (or any successor electronic gathering system) or the publication by the U.S. Borrower of such financial statements on its website;
(c)      concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower Representative in substantially the form of Exhibit D (i) certifying, in the case of the financial statements delivered under clause (b), as presenting fairly in all material respects the financial condition and results of operations of the U.S. Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it being acknowledged and agreed that such quarterly and monthly financial statements will not be subsequently audited on a quarterly or monthly basis), (ii) certifying as to whether a Default has occurred and, if a Default has occurred,

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specifying the details thereof and any action taken or proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.14 and (iv) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(d)      as soon as available but in any event no later than 75 days following the commencement of each Fiscal Year of the U.S. Borrower, a copy of the plan and forecast (including a projected consolidated and consolidating balance sheet, income statement and funds flow statement) of the U.S. Borrower for each month of the upcoming Fiscal Year (the “ Projections ”) in form reasonably satisfactory to the Administrative Agent;
(e)      as soon as available but in any event within 20 days of the end of each Fiscal Quarter, and at such other times as may be necessary to redetermine availability of Loans and Letters of Credit to either Borrower hereunder or as may be requested by the Administrative Agent, as of the period then ended, a Borrowing Base Certificate which calculates the U.S. Borrowing Base and the Canadian Borrowing Base, and supporting information in connection therewith, together with any additional reports with respect to either such Borrowing Base as the Administrative Agent may reasonably request; provided that, the Borrowing Base Certificates will also be (i) prepared as of the last day of each Fiscal Month of the U.S. Borrower (x) during any period commencing when the aggregate Dollar Amount of outstanding Loans exceeds $350,000,000 at any time and ending at such time as the aggregate Dollar Amount of outstanding Loans has been less than or equal to $350,000,000 for 30 consecutive days and (y) after the Trademark Release Date has occurred, during any period commencing when the aggregate Dollar Amount of outstanding Loans (but excluding outstanding Letters of Credit) exceeds $15,000,000 at any time and ending at such time as the aggregate Dollar Amount of outstanding Loans (but excluding outstanding Letters of Credit) has been less than or equal to $15,000,000 for 30 consecutive days and (ii) prepared as of the last day of each fiscal week of the U.S. Borrower during any period commencing on the date that Availability is less than the Minimum Excess Availability Amount for five consecutive Business Days and continuing until such time as Availability is no longer less than the Minimum Excess Availability Amount for five consecutive Business Days. If the Borrowers are required to deliver a monthly Borrowing Base Certificate or weekly Borrowing Base Certificate as a result of the proviso to the foregoing sentence, such Borrowing Base Certificate shall be delivered (i) no later than seven Business Days after the date the obligation to deliver such Borrowing Base Certificate arises (in the case of monthly Borrowing Base Certificates) based on the most recent Fiscal Month ended at least 20 days prior to such date of delivery and thereafter no later than the 20th day following the last day of each subsequent Fiscal Month ending during the period when monthly Borrowing Base Certificates are required to be delivered and (ii) no later than three Business Days after the date the obligation to deliver such Borrowing Base Certificate arises (in the case of weekly Borrowing Base Certificates) based on the most recent fiscal week ended at least three Business Days prior to such date of delivery and thereafter no later the third Business Day following the last day of each subsequent fiscal week ending during the period when weekly Borrowing Base Certificates are required to be delivered;
(f)      concurrently with the delivery of each Borrowing Base Certificate pursuant to paragraph (e) above, as of the period covered thereby, all delivered electronically in a text formatted file reasonably acceptable to the Administrative Agent:
(i)      a detailed aging of the Loan Parties’ Accounts, including all invoices aged by invoice date and due date, prepared in a manner reasonably acceptable to the

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Administrative Agent, together with a summary specifying the name and balance due for each Account Debtor;
(ii)      a schedule detailing the Loan Parties’ Inventory, in form reasonably satisfactory to the Administrative Agent, (1) by location (showing Inventory in transit, any Inventory located with a third party under any consignment, bailee arrangement, or warehouse agreement), by class (raw material, work-in-process and finished goods), by product type, and by volume on hand, which Inventory shall be valued at the lower of cost (determined on a first-in, first-out basis) or market and adjusted for Reserves as the Administrative Agent has previously indicated to the Borrower Representative are deemed by the Administrative Agent to be appropriate, and (2) including a report of any variances or other results of Inventory counts performed by the Borrowers since the last Inventory schedule (including information regarding sales or other reductions, additions, returns, credits issued by Borrowers and complaints and claims made against the Borrowers);
(iii)      a worksheet of calculations prepared by the Borrowers to determine Eligible Accounts and Eligible Inventory, such worksheets detailing the Accounts and Inventory excluded from Eligible Accounts and Eligible Inventory and the reason for such exclusion;
(iv)      a reconciliation of the Loan Parties’ Accounts and Inventory between (A) the amounts shown in the Loan Parties’ general ledger and financial statements and the reports delivered pursuant to clauses (i) and (ii) above and (B) the amounts and dates shown in the reports delivered pursuant to clauses (i) and (ii) above and the Borrowing Base Certificate delivered pursuant to clause (f) above as of such date; and
(v)      a reconciliation of the loan balance per the Loan Parties’ general ledger to the loan balance under this Agreement;
(g)      upon the request of the Administrative Agent during any period when the Borrowers are required to deliver weekly Borrowing Base Certificates, the Loan Parties’ sales journal, cash receipts journal (identifying trade and non-trade cash receipts) and debit memo/credit memo journal;
(h)      concurrently with the delivery of any Borrowing Base Certificate pursuant to paragraph (e) above, as of the period covered thereby, a schedule and aging of the Loan Parties’ accounts payable, delivered electronically in a text formatted file reasonably acceptable to the Administrative Agent;
(i)      within 30 days of each March 31 and September 30 an updated customer list for each Borrower and its Subsidiaries, which list shall state the customer’s name, mailing address and phone number, delivered electronically in a text formatted file reasonably acceptable to the Administrative Agent and certified as true and correct by a Financial Officer of the Borrower Representative;
(j)      promptly upon the Administrative Agent’s request:
(i)      copies of invoices in connection with the invoices issued by the Loan Parties in connection with any Accounts, credit memos, shipping and delivery documents, and other information related thereto;
(ii)      copies of purchase orders, invoices, and shipping and delivery documents in connection with any Inventory purchased by any Loan Party; and

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(iii)      a schedule detailing the balance of all intercompany accounts of the Loan Parties;
(k)      promptly after the filing thereof with any Governmental Authority, a copy of each actuarial valuation report and, upon request of the Multicurrency Administrative Agent, Annual Information Return in respect of any Canadian Pension Plan;
(l)      promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Borrower or any Subsidiary with any U.S. or Canadian federal or provincial securities commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by any Borrower to its shareholders generally, as the case may be. The applicable Borrower shall be deemed to have delivered the reports, statements and other materials required to be delivered pursuant to this Section 5.01(l) upon the filing of such reports, statements and other materials by the applicable Borrower through the SEC’s EDGAR system (or any successor electronic gathering system) or the publication by the applicable Borrower of such reports, statements and other materials on its website;
(m)      promptly following the Disposition of accounts receivable and other payment obligations in the ordinary course pursuant to Section 6.05(g) , written notice to the Administrative Agent regarding such Dispositions including reasonably detailed information regarding each such Disposition; and
(n)      promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent, the Multicurrency Administrative Agent or any Lender may reasonably request.
SECTION 5.02.      Notices of Material Events. The Borrowers will furnish to the Administrative Agent, the Multicurrency Administrative Agent and each Lender prompt (but in any event within any time period that may be specified below) written notice of the following:
(a)      the occurrence of any Default;
(b)      receipt of any notice of any governmental investigation or any litigation or proceeding commenced or threatened against any Loan Party that could reasonably be expected to have a Material Adverse Effect;
(c)      any Lien (other than Permitted Encumbrances) or claim made or asserted against any material portion of the Collateral;
(d)      any loss, damage, or destruction to or Disposition outside the ordinary course of business of the Collateral in the amount of $15,000,000 or more, whether or not covered by insurance;
(e)      within five Business Days of receipt thereof and no earlier than after passage of any applicable cure period, any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located having a value in excess of $500,000 in respect of an individual leased location or public warehouse or holding Collateral having a value in excess of $1,000,000 in the aggregate across all such leased locations or public warehouses;

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(f)      simultaneously with the delivery of any Borrowing Base Certificate pursuant to Section 5.01(e) , a list of counterparties under each Swap Agreement entered into by any Loan Party and a listing of the aggregate mark-to-market position of the Loan Parties as provided by each such counterparty with respect to all Swap Agreements then outstanding with each such counterparty;
(g)      the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrowers and their Subsidiaries in an aggregate amount exceeding $20,000,000; and
(h)      any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower Representative setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03.      Existence; Conduct of Business. Each Loan Party will, and will cause each Subsidiary to, (a) do or cause to be done all things reasonably necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, licenses, permits, franchises, governmental authorizations, intellectual property rights, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted in all material respects, except to the extent that the failure to maintain such existence and qualification or good standing could not reasonably be expected to have a Material Adverse Effect, provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 , and (b) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted or in other fields of enterprise reasonably related thereto.
SECTION 5.04.      Payment of Obligations. Each Loan Party will pay or discharge all of its respective Material Indebtedness and all other material liabilities and obligations, including material Taxes, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Loan Party or Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; provided , however , each Loan Party will, and will cause each Subsidiary to, remit material withholding taxes and other material payroll taxes to appropriate Governmental Authorities as and when claimed to be due, notwithstanding the foregoing exceptions.
SECTION 5.05.      Maintenance of Properties. Each Loan Party will, and will cause each Subsidiary to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.
SECTION 5.06.      Books and Records; Inspection Rights. Each Loan Party will, and will cause each Subsidiary to, (a) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities, in an ordinary course manner as determined by the applicable Loan Party, and (b) permit any representatives designated by the Administrative Agent, the Multicurrency

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Administrative Agent or any Lender (including employees of the Administrative Agent, the Multicurrency Administrative Agent, any Lender or any consultants, accountants, lawyers and appraisers retained by the Administrative Agent), upon reasonable prior notice, to visit and inspect its properties, conduct at the Loan Party’s premises, field examinations of the Loan Party’s assets, liabilities, books and records, including examining and making extracts from its books and records, environmental assessment reports, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times as reasonably requested; provided that, except for inspections during the continuance of a Default (i) if Availability is less than the greater of (x) $125,000,000 or (y) 20% of the Line Cap, in each case, at any time during any Fiscal Year, no more than two such inspections shall be at the U.S. Borrowers’ expense and (ii) otherwise, no more than one such inspection during such Fiscal Year shall be permitted and such inspection shall be at the Borrower’s expense. The Loan Parties acknowledge that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain Reports pertaining to the Loan Parties’ assets for internal use by the Administrative Agent, the Multicurrency Administrative Agent and the Lenders.
SECTION 5.07.      Compliance with Laws.
(a)      Each Loan Party will, and will cause each Subsidiary to, comply with all Requirements of Law applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(b)      In addition to and without limiting the generality of clause (a), each Canadian Loan Party will, and will cause each Subsidiary to, (i) comply with all applicable provisions of Applicable Pension Laws and the regulations thereunder with respect to all Canadian Pension Plans, except where the failure to so comply could not reasonably be expected to result in a Material Adverse Effect; (ii) not: (A) contribute to or assume an obligation to contribute to any new defined benefit Canadian Pension Plan to which the Canadian Loan Party is not already contributing on the Original Effective Date, without the prior written consent of the Administrative Agent, which consent shall be granted unless otherwise determined by the Administrative Agent in its Permitted Discretion, or (B) unless required by a Governmental Authority, wind-up any defined benefit Canadian Pension Plan, in whole or in part, unless the Canadian Loan Party has obtained written advice from the actuary for such plan that the plan (or part thereof in the case of a partial windup) is fully funded or has a wind-up deficiency of no more than $10,000,000 at the effective date of the windup, without the prior written consent of the Administrative Agent, which consent shall be granted unless otherwise determined by the Administrative Agent in its Permitted Discretion. All employer or employee payments, contributions or premiums required to be remitted, paid to or in respect of each Canadian Pension Plan or Canadian Benefit Plan shall be paid or remitted by each Canadian Loan Party and each Subsidiary of each Canadian Loan Party in a timely fashion in accordance with the terms thereof, any funding agreements and all applicable laws. The Canadian Loan Parties shall deliver to the Administrative Agent notification within 30 days of (w) any increases in the benefits of any existing Canadian Pension Plan or Canadian Benefit Plan, which increases have a cost to one or more of the Canadian Loan Parties and their Subsidiaries in excess of $250,000 per annum in the aggregate, or (x) the establishment of any new Canadian Pension Plan or Canadian Benefit Plan, or (y) the commencement of contributions to any such plan to which any Canadian Loan Party was not previously contributing, or (z) any voluntary or involuntary termination of, or termination of participation in, a Canadian Pension Plan.

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(c)      The Loan Parties and each Subsidiary (1) shall be at all times in material compliance with all Environmental Laws, and (2) shall similarly ensure that the assets and operations are in material compliance with all Environmental Laws and that no Hazardous Materials are, contrary to any Environmental Laws, discharged, emitted, released, generated, used, stored, managed, transported or otherwise dealt with.
(d)      The Loan Parties and each Subsidiary of the Loan Parties will maintain in effect and enforce policies and procedures designed to ensure compliance in all material respects by the Loan Parties and each Subsidiary of the Loan Parties and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
SECTION 5.08.      Use of Proceeds. The proceeds of the Loans will be used for general corporate purposes. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrowers will not request any Borrowing or Letter of Credit, and each Borrower shall not use the proceeds of any Borrowing or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
SECTION 5.09.      Insurance. Each Loan Party will, and will cause each Subsidiary to, maintain with carriers that are financially sound and reputable (as determined in good faith by the Loan Parties) (a) insurance in such amounts (with no greater risk retention) and against such risks (including loss or damage by fire and loss in transit; theft, burglary, pilferage, larceny, embezzlement, and other criminal activities; business interruption; and general liability) and such other hazards, as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (b) all insurance required pursuant to the Collateral Documents. The Borrowers will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained.
SECTION 5.10.      Casualty and Condemnation. The Borrowers will furnish to the Administrative Agent, the Multicurrency Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding.
SECTION 5.11.      Appraisals.
(a)      (A) If Availability is less than the greater of (x) $125,000,000 or (y) 20% of the Line Cap, in each case, at any time during any Fiscal Year, no more than two (2) times during such Fiscal Year, or (B) otherwise, no more than one (1) time during such Fiscal Year, the Administrative Agent may, at the Borrowers’ expense, arrange for appraisals or updates thereof of all of the Inventory constituting finished goods from an appraiser selected and engaged by the Administrative Agent, and prepared on a basis, reasonably satisfactory to the Administrative Agent, such appraisals and updates to include, without

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limitation, information required by applicable law and regulation and by the internal policies of the Lenders. In addition, if at any time prior to the Trademark Release Date, the Total Leverage Ratio, as of the last day of any Fiscal Year of the U.S. Borrower exceeds 4.25 to 1.0, the Administrative Agent shall have the right at the expense of the U.S. Loan Parties and at the Administrative Agent’s discretion, to arrange for an additional appraisal of the Eligible Trademark Collateral from an appraiser selected and engaged by the Administrative Agent ( provided that the Administrative Agent shall not have the right to request an additional appraisal for the U.S. Borrower’s Fiscal Year 2014), such appraisals and updates to include, without limitation, information required by applicable law and regulation.
(b)      In addition to the appraisals provided for above, whenever a Default or Event of Default exists, the Administrative Agent may, at the U.S. Borrower’s expense and at the Administrative Agent’s discretion, arrange for additional appraisals or updates thereof of any or all of the Collateral from an appraiser, and prepared on a basis, reasonably satisfactory to the Administrative Agent, such appraisals and updates to include, without limitation, information required by applicable law and regulation and by the internal policies of the Lenders.
SECTION 5.12.      Depository Banks. Each of the Loan Parties will maintain the Administrative Agent, Bank of America, N.A., The Bank of Nova Scotia (for any Canadian Loan Party) or such other financial institution reasonably acceptable to the Administrative Agent (at the U.S. Borrower’s discretion) as its principal depository bank, including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of its business.
SECTION 5.13.      Additional Collateral; Further Assurances.
(a)      Subject to applicable law, each Borrower and each Loan Party will cause each of its Domestic Subsidiaries and Canadian Subsidiaries formed or acquired after the date of this Agreement in accordance with the terms of this Agreement to become a Loan Party by executing (i) in the case of a Domestic Subsidiary, a U.S. Joinder Agreement and (ii) in the case of a Canadian Subsidiary, a Canadian Joinder Agreement ( provided that, without limiting the provisions thereof, any Canadian Collateral of such Canadian Subsidiary shall be excluded from the Collateral securing the U.S. Secured Obligations). Upon execution and delivery thereof, each such Person (i) shall automatically become a Loan Guarantor hereunder and thereupon shall have all of the rights, benefits, duties, and obligations in such capacity under the Loan Documents and (ii) will grant Liens to the Administrative Agent, for the benefit of the Administrative Agent and the applicable Lender Parties, in any property of such Loan Party which constitutes Collateral, under the applicable Security Agreement.
(b)      Without limiting the foregoing, each Loan Party will, and will cause each Subsidiary to, execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements and other documents and such other actions or deliveries of the type required by Section 4.01 , as applicable), which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Loan Parties.
(c)      The Borrowers agree that they will, or will cause their relevant Subsidiaries to, complete each of the actions described on Schedule 5.13 as soon as commercially reasonable and by no

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later than the date set forth on Schedule 5.13 with respect to such action or such later date as the Administrative Agent (acting in its sole discretion) may reasonably agree.
SECTION 5.14.      Borrowing Base Cash Collateral Accounts; Availability Cash Collateral Accounts.
(a)      Cash or Cash Equivalents in the U.S. Borrowing Base Cash Collateral Account and Canadian Borrowing Base Cash Collateral Account shall only be included in the applicable Borrowing Base on any day to the extent that the Administrative Agent has received from the bank with respect to which such account is maintained or the Borrower Representative, in such detail as the Administrative Agent shall request, information identifying the amounts of cash and Cash Equivalents held as of the end of the immediately preceding Business Day in each account included in the U.S. Borrowing Base Cash Collateral Account or Canadian Borrowing Base Cash Collateral Account, as applicable.
(b)      No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, withdraw any cash or Cash Equivalents from the U.S. Borrowing Base Cash Collateral Account or the Canadian Borrowing Base Cash Collateral Account unless:
(i)      the U.S. Borrower has provided the Administrative Agent with at least one Business Day prior notice of such withdrawal; and
(ii)      after giving effect to such withdrawal, the Revolving Exposure Limitations would not be exceeded.
(c)      No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, withdraw any cash or Cash Equivalents from the U.S. Availability Cash Collateral Account or the Canadian Availability Cash Collateral Account unless:
(i)      the Borrower Representative has provided the Administrative Agent with at least one Business Day prior notice of such withdrawal;
(ii)      after giving effect to such withdrawal (x) in the case of the U.S. Availability Cash Collateral Account (i) the sum of the aggregate undrawn amount of all outstanding Cash Collateralized Letters of Credit issued for the Account of the U.S. Borrower plus , without duplication, the aggregate unpaid reimbursement obligations with respect to all Cash Collateralized Letters of Credit issued for the account of the U.S. Borrower, does not exceed (ii) the aggregate amount of cash and Cash Equivalents held in the U.S. Availability Cash Collateral Account and designated by the Borrower Representative as being allocated to Cash Collateralized Letters of Credit or (y) in the case of the Canadian Availability Cash Collateral Account (i) the sum of the aggregate undrawn amount of all outstanding Cash Collateralized Letters of Credit issued for the Account of the Canadian Borrower plus , without duplication, the aggregate unpaid reimbursement obligations with respect to all Cash Collateralized Letters of Credit issued for the account of the Canadian Borrower, does not exceed (ii) the aggregate amount of cash and Cash Equivalents held in the Canadian Availability Cash Collateral Account and designated by the Borrower Representative as being allocated to Cash Collateralized Letters of Credit; and
(iii)      after giving effect to such withdrawal, the Revolving Exposure Limitations would not be exceeded.

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ARTICLE VI     

Negative Covenants
Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, each Loan Party executing this Agreement covenants and agrees with the Lenders that:
SECTION 6.01.      Indebtedness. No Loan Party shall, nor shall it permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except:
(a)      Indebtedness owed by the U.S. Borrower or any of its Subsidiaries to the U.S. Borrower or any of its Subsidiaries; provided that (x) any Indebtedness owed by a Loan Party to a Subsidiary that is not a Loan Party shall be subordinated to the Obligations (in the case of Indebtedness of any U.S. Loan Party) or the Canadian Obligations (in the case of Indebtedness of any Canadian Loan Party) and (y) any Indebtedness owed by a U.S. Loan Party to a Canadian Loan Party shall be subordinated to the Obligations;
(b)      Indebtedness of the U.S. Loan Parties issued in a Capital Markets Transaction, provided such Indebtedness is unsecured and such Indebtedness does not have a stated maturity date or required principal payments earlier than six months after the Maturity Date;
(c)      Guarantees of the U.S. Borrower under the LS&Co. Trust Agreement; provided that the investment activities of the LS&Co. Trust are in compliance with the Investment Policies;
(d)      Guarantees of (i) the U.S. Loan Parties in respect of the obligations of Loan Parties, (ii) the Canadian Loan Parties in respect of the obligations of Canadian Loan Parties and (iii) Foreign Subsidiaries that are not Loan Parties in respect of the obligations of Foreign Subsidiaries that are not Loan Parties, in each case, arising under or in connection with Banking Services in the ordinary course of business;
(e)      Indebtedness of the U.S. Borrower and its Subsidiaries outstanding on the Amendment Effective Date and listed on Schedule 6.01 and any Permitted Refinancing Indebtedness in respect thereof; provided that intercompany Indebtedness set forth on Schedule 6.01 may not be refinanced pursuant to Section 6.01(e) with third-party Indebtedness;
(f)      Indebtedness of the Loan Parties under the Loan Documents;
(g)      Indebtedness of the U.S. Borrower and its Subsidiaries secured by Liens permitted by Section 6.02(c) not to exceed in the aggregate $200,000,000 at any time outstanding;
(h)      Indebtedness of the U.S. Borrower or any Subsidiary in respect of Ordinary Course Swap Agreements;
(i)      so long as the Minimum Intercompany Transaction Requirement is met (unless pro forma Availability is not less than the greater of (x) $75.0 million and (y) 10% of the Line Cap, in which case, the Minimum Intercompany Transaction Requirement need not be met), Indebtedness (in the case of Indebtedness of (A) any U.S. Loan Party to any Subsidiary that is not a U.S. Loan Party or (B)

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any Canadian Loan Party to any Subsidiary that is not a Loan Party, maturing at least six months after the Maturity Date) of the U.S. Borrower and its Subsidiaries to LSIFCS or any other Affiliate of the U.S. Borrower providing services similar to the services provided by LSIFCS in the ordinary course of business and Indebtedness (in the case of Indebtedness of (A) any U.S. Loan Party to any Subsidiary that is not a U.S. Loan Party or (B) any Canadian Loan Party to any Subsidiary that is not a Loan Party, maturing at least six months after the Maturity Date) of LSIFCS or any other Affiliate of the U.S. Borrower providing services similar to the services provided by LSIFCS to the U.S. Borrower and any of its other Subsidiaries in the ordinary course of business;
(j)      Indebtedness of the U.S. Borrower and its Subsidiaries in the form of Real Estate Financing Transactions and any Permitted Refinancing Indebtedness in respect thereof, provided the aggregate principal amount of all Indebtedness permitted under this Section 6.01(j) and Section 6.01(k) (including all such Indebtedness existing on the Amendment Effective Date and listed on Schedule 6.01 ) does not exceed in the aggregate $350,000,000 at any time outstanding;
(k)      Indebtedness of the U.S. Borrower and its Subsidiaries in the form of Equipment Financing Transactions and any Permitted Refinancing Indebtedness in respect thereof, provided the aggregate principal amount of all Indebtedness permitted under this Section 6.01(k) and Section 6.01(j) (including all such Indebtedness existing on the Amendment Effective Date and listed on Schedule 6.01 ) does not exceed in the aggregate $350,000,000 at any time outstanding;
(l)      Indebtedness arising from agreements of the U.S. Borrower or any of its Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any business, assets or Equity Interests of a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Equity Interests of a Subsidiary; provided , however , that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the U.S. Borrower or such Subsidiary in connection with such disposition;
(m)      customary unsecured indemnification obligations and other unsecured Guarantees of the U.S. Borrower incurred in connection with any Permitted Foreign Receivables Transaction or any Foreign Inventory Transaction;
(n)      Indebtedness of the U.S. Borrower to any of its Subsidiaries or of any of its Subsidiaries to any of its Subsidiaries in connection with transactions incurred in the ordinary course of business in an amount not to exceed the value thereof and any related servicing fees;
(o)      Indebtedness of the U.S. Borrower and its Subsidiaries arising from the honoring of a check, draft, wire transfer or similar instrument against insufficient funds; provided that such Indebtedness is unsecured other than by a Lien permitted pursuant to Section 6.02(l) or is supported by a Letter of Credit;
(p)      Indebtedness of any Foreign Subsidiary (other than a Canadian Subsidiary) to any Person other than the U.S. Borrower or any of its Subsidiaries and any related unsecured Guarantees issued by the U.S. Borrower or any other Loan Party, including, without limitation, Indebtedness incurred in connection with any Permitted Foreign Receivables Transaction or any Foreign Inventory Transaction;
(q)      Indebtedness of the U.S. Loan Parties secured by assets not constituting Collateral in reliance on Section 6.02(o) ; provided that such Indebtedness has a final maturity that is at least six months after the Maturity Date and does not have scheduled amortization in excess of 1% per

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annum of the original principal amount thereof in any four Fiscal Quarter Period prior to that date that is six months after the Maturity Date;
(r)      in addition to the foregoing Sections 6.01(a)-(q) and without duplication, Indebtedness of the U.S. Borrower and its Subsidiaries, provided that the aggregate principal amount of all Indebtedness outstanding at any time under this Section 6.01(r) shall not exceed the greater of (x) $200,000,000 and (y) 10% of the Consolidated Net Tangible Assets of the U.S. Borrower, in each case at any time outstanding;
(s)      Capital Lease Obligations of the U.S. Borrower or any of its Subsidiaries not exceeding $100,000,000 in aggregate principal amount at any time outstanding;
(t)      obligations of the U.S. Borrower to purchase Equity Interests from present or former employees, directors or other recipients (and their beneficiaries) of such Equity Interests under the U.S. Borrower’s incentive compensation plans and agreements as provided under such plans and agreements;
(u)      Indebtedness of a Subsidiary of the U.S. Borrower acquired after the Amendment Effective Date outstanding on the date on which that Subsidiary was acquired by the U.S. Borrower (other than Indebtedness incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which that Subsidiary became a Subsidiary of the U.S. Borrower); provided that at the time that such Subsidiary became a Subsidiary of the U.S. Borrower and after giving effect to the incurrence of that Indebtedness, (i) the U.S. Borrower would be in compliance with the Consolidated Fixed Charge Coverage Ratio test set forth in Section 6.14(a) (whether or not such covenant is otherwise then applicable) or (ii) such Consolidated Fixed Charge Coverage Ratio would have been greater than such ratio immediately prior to such transaction; and
(v)      Indebtedness in connection with one or more standby letters of credit or performance bonds issued by the U.S. Borrower or any of its Subsidiaries in the ordinary course of business or pursuant to self-insurance obligations and not in connection with the borrowing of money or the obtaining of advances or credit.
SECTION 6.02.      Liens. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
(a)      Permitted Encumbrances;
(b)      Liens existing on the Amendment Effective Date and listed on Schedule 6.02 and any renewals or extensions thereof, provided that the property covered thereby is not increased (except as contemplated thereby) and any renewal or extension of the obligations secured or benefited thereby constitutes Permitted Refinancing Indebtedness;
(c)      purchase money Liens upon or in real property or Equipment acquired or held by the U.S. Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing the acquisition or improvement of any such property to be subject to such Liens and any Permitted Refinancing Indebtedness in respect thereof, or Liens existing on any such property at the time of

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acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), any Permitted Refinancing Indebtedness in respect thereof; provided , however , that no such Lien shall extend to or cover any property other than the property being acquired or improved; and provided , further , that the aggregate principal amount of the Indebtedness secured by Liens permitted by this Section 6.02(c) shall not exceed the amount permitted under Section 6.01(g) ;
(d)      Liens consisting of assignments, pledges or deposits securing the performance of, or payment in respect of, the customs duties owed to customs and revenue authorities arising in the ordinary course of business and as a matter of law in connection with the importation of goods, or securing guarantees, standby letters of credit, performance bonds or other similar bonds which, in turn, secure the payment of such customs duties to customs or revenue authorities;
(e)      Liens arising in connection with Capital Lease Obligations permitted under Section 6.01(s) ; provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capital Lease Obligations and the proceeds thereof;
(f)      Liens (other than Liens on assets of LSIFCS) attaching to ownership interests in joint ventures (whether in partnership, corporate or other form) or attaching to intellectual property rights relating to such joint ventures;
(g)      Liens (other than Liens on assets of LSIFCS) created in connection with (A) Equipment Financing Transactions and Permitted Refinancing Indebtedness in respect thereof permitted under Section 6.01(k) and (B) Real Estate Financing Transactions and Permitted Refinancing Indebtedness in respect thereof permitted under Section 6.01(j) ; provided , however , that no such Lien shall extend to or cover property (other than the property subject to such Equipment Financing Transaction or Real Estate Financing Transaction) or Collateral;
(h)      Liens created pursuant to applications or reimbursement agreements pertaining to documentary letters of credit which encumber documents and goods of the U.S. Borrower or any of its Subsidiaries (other than LSIFCS or the LS&Co. Trust) constituting part of the goods covered by the applicable letter of credit and the products and proceeds thereof;
(i)      Liens in favor of the counterparty to a repurchase agreement entered into in the ordinary course of business and permitted under Section 6.04(d) on the Cash Equivalents that are the subject of such repurchase agreement;
(j)      any interest or title of a lessor or a sublessor and any restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject that is incurred in the ordinary course of business and, either individually or when aggregated with all other permitted Liens in effect on any date of determination, could not be reasonably expected to have a Material Adverse Effect;
(k)      leases or subleases granted to others not interfering with the ordinary conduct of the business of the grantor thereof;
(l)      Liens arising solely by virtue of any statutory or common law provision relating to banker’s Liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, or by virtue of the terms of a customary account agreement relating to a deposit account; provided that (i) such deposit account is not a U.S. Borrowing Base Cash Collateral Account or Canadian Borrowing Base Cash Collateral Account and is not subject to restrictions against access by the U.S. Borrower or any of its Subsidiaries owning the affected deposit

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account or other funds maintained with a creditor depository institution in excess of those set forth by regulations promulgated by the Federal Reserve Board or any foreign regulatory agency performing an equivalent function, and (ii) such deposit account is not intended by the U.S. Borrower or any of its Subsidiaries to provide collateral (other than such as is ancillary to the establishment of such deposit account) to the depository institution;
(m)      Liens, assignments and pledges of rights to receive premiums, interest or loss payments or otherwise arising in connection with any insurance or reinsurance agreements pertaining to losses covered by insurance, and Liens (including, without limitation and to the extent constituting Liens, negative pledges) in favor of insurers or reinsurers on pledges or deposits by the U.S. Borrower or any of its Subsidiaries under workmens’ compensation laws, unemployment insurance laws or similar legislation;
(n)      Liens on property of any Foreign Subsidiary (other than a Canadian Loan Party) securing obligations of Foreign Subsidiaries (other than a Canadian Loan Party);
(o)      In addition to the foregoing Sections 6.02(a)-(n) , Liens on assets other than Collateral securing Indebtedness permitted by Section 6.01 in an aggregate principal amount not to exceed the greater of (x) an amount equal to $1,600,000,000 minus the aggregate amount of the Commitments then in effect and (y) the amount that, on a pro forma basis assuming all Commitments then in effect were fully drawn, would not cause the Secured Leverage Ratio of the U.S. Borrower to exceed 3.25 to 1.00 as of the most recent date for which financial statements have been delivered pursuant to Section 5.01(a) or (b) prior to the date of incurrence of such Liens; provided that in the case of each of clauses (x) and (y), the trustee or agent, as applicable, for the holders of the Indebtedness secured by such Liens enter into a customary intercreditor agreement with the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent and the Lenders;
(p)      Liens on cash, Cash Equivalents or other assets of the U.S. Borrower or any of its Subsidiaries deposited in a margin account securing Ordinary Course Swap Agreements permitted under Section 6.01(l) ;
(q)      In addition to the foregoing Sections 6.02(a)-(p) , other Liens on assets other than Collateral securing Indebtedness outstanding of the U.S. Borrower or any of its Subsidiaries (other than the LS&Co. Trust) permitted by Section 6.01 in an aggregate principal amount not to exceed 5.0% of the Consolidated Net Tangible Assets of the U.S. Borrower as of the most recent date for which financial statements have been delivered pursuant to Section 5.01(a) or (b) prior to the date of incurrence of such Liens;
(r)      Liens (including, without limitation and to the extent constituting Liens, negative pledges) on intellectual property arising from intellectual property licenses entered into in the ordinary course of business; and
(s)      Liens on cash or Cash Equivalents held as proceeds of Permitted Refinancing Indebtedness pending the payment, purchase, defeasance or other retirement of the Indebtedness being refinanced.
SECTION 6.03.      Fundamental Changes. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, merge, amalgamate, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets

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(whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom:
(a)      any Domestic Subsidiary may merge into or consolidate with, or may be liquidated, wound-up or dissolved into, the U.S. Borrower or any other Domestic Subsidiary; provided that (i) the Person formed by such merger or consolidation, or into which such Domestic Subsidiary is liquidated, wound-up or dissolved (A) in the case of any such transaction involving the U.S. Borrower, shall be the U.S. Borrower and (B) in the case of any such transaction involving a U.S. Guarantor and not the U.S. Borrower, shall be a U.S. Guarantor and (ii) concurrently with or prior to the consummation of such transaction, the U.S. Borrower shall have or caused to be delivered to the Administrative Agent such instruments, agreements or other documents as the Administrative Agent may reasonably request;
(b)      any Canadian Subsidiary may merge into, amalgamate or consolidate with, or may be liquidated, wound-up or dissolved into, the Canadian Borrower or any other Canadian Subsidiary; provided that (i) the Person formed by such merger, amalgamation or consolidation, or into which such Canadian Subsidiary is liquidated, wound-up or dissolved (A) in the case of any such transaction involving the Canadian Borrower, shall be the Canadian Borrower and (B) in the case of any such transaction involving a Multicurrency Loan Guarantor and not the Canadian Borrower, shall be a Multicurrency Loan Guarantor and (ii) concurrently with or prior to the consummation of such transaction, the Canadian Borrower shall have or caused to be delivered to the Administrative Agent such instruments, agreements or other documents as the Administrative Agent may reasonably request;
(c)      any Foreign Subsidiary (other than a Canadian Loan Party) may merge into or consolidate with, or may be liquidated, wound-up or dissolved into, the U.S. Borrower or any Subsidiary; provided that the Person formed by such merger or consolidation, or into which such Foreign Subsidiary is liquidated, wound-up or dissolved (i) in the case of any such transaction involving the U.S. Borrower shall be the U.S. Borrower, (ii) in the case of any such transaction involving the Canadian Borrower shall be the Canadian Borrower and (iii) in the case of any such transaction involving a Loan Guarantor and not the U.S. Borrower or the Canadian Borrower, shall be a Loan Guarantor;
(d)      the LS&Co. Trust may merge into or consolidate with any other trust adopted and maintained by the U.S. Borrower for a similar purpose pursuant to a trust agreement in form and substance reasonably satisfactory to the Administrative Agent;
(e)      the U.S. Borrower and any of its Subsidiaries may make any Disposition permitted pursuant to Section 6.05(k) or 6.05(m) ; and
(f)      Dispositions permitted by Section 6.05(p) .
SECTION 6.04.      Investments, Loans, Advances, Guarantees and Acquisitions. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, make or hold any Investments, except:
(a)      loan Investments existing on the Amendment Effective Date and described on Schedule 6.04 and any extensions or renewals thereof or conversions of any such loan Investments to equity Investments;
(b)      equity Investments by the U.S. Borrower and its Subsidiaries in their Subsidiaries existing on the Amendment Effective Date and described on Schedule 6.04 ;

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(c)      advances by the U.S. Borrower or any of its Subsidiaries to officers, directors and employees of the U.S. Borrower or any of its Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes;
(d)      Investments by the U.S. Borrower or any Domestic Subsidiary in Short-term Investments held either (i) in an account subject to a control agreement or (ii) in an account not subject to a control agreement, provided that the aggregate amount of assets of all Loan Parties in all accounts of all such Persons not subject to control agreements in favor of the Administrative Agent at no time exceeds $10,000,000;
(e)      Investments by the U.S. Borrower or any of its Domestic Subsidiaries in the form of extensions of credit to customers or direct or indirect suppliers of the U.S. Borrower or any of its Domestic Subsidiaries in the ordinary course of business;
(f)      Investments by (i) any U.S. Loan Party in any other U.S. Loan Party, (ii) any Canadian Loan Party in any Loan Party and (iii) any Subsidiary of the U.S. Borrower that is not a Loan Party in the U.S. Borrower or any of its Subsidiaries;
(g)      Investments by any Foreign Subsidiary (other than a Canadian Loan Party);
(h)      Investments consisting of mergers and consolidations permitted under Section 6.03 and Restricted Payments and payments of other Indebtedness permitted under Section 6.08 ;
(i)      so long as the Minimum Intercompany Transaction Requirement is met (unless pro forma Availability is not less than the greater of (x) $75.0 million and (y) 10% of the Line Cap, in which case, the Minimum Intercompany Transaction Requirement need not be met), Investments among the U.S. Borrower and any of its Subsidiaries;
(j)      other Investments by the U.S. Borrower and its Subsidiaries in any Subsidiary of the U.S. Borrower not otherwise permitted under this Section 6.04 , provided that (i) no Default or Event of Default shall have occurred and be continuing at the time such Investment is made or after giving effect thereto and (ii) after giving effect thereto, pro forma Availability is not less than the greater of (x) $100.0 million and (y) 15% of the Line Cap;
(k)      other Investments by the U.S. Borrower and its Subsidiaries not otherwise permitted under this Section 6.04 , provided that (i) no Default shall have occurred and be continuing at the time such Investment is made or after giving effect thereto and (ii) after giving effect thereto, (1) such other Investments by the U.S. Borrower and its Subsidiaries pursuant to this clause (k) shall not exceed $40,000,000 in the aggregate and (2) the Consolidated Fixed Charge Coverage Ratio for the period of four consecutive Fiscal Quarters ended on the last day of the Fiscal Quarter most recently reported is not less than 1.00 to 1.00;
(l)      Investments by the U.S. Borrower into the LS&Co. Trust and by the LS&Co. Trust permitted by the LS&Co. Trust Agreement; and
(m)      any Investment made in a Person to the extent the Investment represents the non-cash portion of the consideration received in connection with a Disposition consummated in compliance with clause (l) of Section 6.05 ;

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provided further , that (i) the requirements of this Section 6.04 (other than the requirements of Section 6.04(d) ) shall not apply to any Investment when the Payment Conditions with respect thereto are satisfied and the Loan Parties shall have delivered to the Administrative Agent either a certificate of a Financial Officer (with reasonably detailed calculations) certifying satisfaction of the Payment Conditions or other evidence of the same reasonably satisfactory to the Administrative Agent and (ii) no Default or Event of Default shall be deemed to have occurred if the Payment Conditions with respect to any Investment cease to be satisfied based solely on any Investments made when the Payment Conditions with respect thereto were satisfied.
SECTION 6.05.      Asset Sales. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, make any Disposition or enter into any agreement to make any Disposition, except:
(a)      Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business, including any property no longer used in the business;
(b)      Dispositions of Inventory (i) in the ordinary course of business or (ii) by the U.S. Borrower or any of its Subsidiaries to the U.S. Borrower or any of its Subsidiaries in arm’s-length transactions in the ordinary course of business;
(c)      Dispositions of past due accounts receivable to collection agencies in connection with the collection thereof in the ordinary course of business;
(d)      Dispositions by any Foreign Subsidiary (other than a Canadian Loan Party);
(e)      Dispositions permitted by Section 6.03 ;
(f)      Dispositions of real property pursuant to Real Estate Financing Transactions permitted under Section 6.01(j) ;
(g)      Dispositions of accounts receivable and other payment obligations owing to Loan Parties in the ordinary course so long as the Outstanding Receivables Amount (i) does not exceed $75,000,000 at any time and (ii) does not consist of Accounts and other payment obligations of more than two Account Debtors at any time;
(h)      Transfers and contributions of funds from time to time (i) by the U.S. Borrower to trusts adopted and maintained by the U.S. Borrower in connection with the deferred compensation plans adopted by the U.S. Borrower (collectively, the “ LS&Co. Deferred Compensation Plan ”) for the purpose of contributing funds to be held until paid to participants in the LS&Co. Deferred Compensation Plan and their beneficiaries (together with any successors, collectively, the “ LS&Co. Trust ”) pursuant to the related trust agreements (collectively, the “ LS&Co. Trust Agreement ”) and (ii) by the LS&Co. Trust to plan participants or the U.S. Borrower in accordance with the LS&Co. Trust Agreement;
(i)      Licenses of intellectual property rights (other than, prior to the Trademark Release Date, the Eligible Trademark Collateral) other than in the ordinary course of business or other Dispositions of all right, title and interest in any intellectual property (other than, prior to the Trademark Release Date, licenses of the Eligible Trademark Collateral), provided that each such Disposition is for fair market value (in the case of any material Disposition, as determined in good faith by the board of directors of the U.S. Borrower), provided further that, with respect to the intellectual property subject to any such Disposition, the sales in the applicable jurisdictions for the prior twelve-month period of

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Inventory using such intellectual property in the production thereof do not in the aggregate (A) with respect to any single Disposition (or series of Dispositions) account for more than five percent (5%) of the consolidated net sales of the U.S. Borrower and its Subsidiaries for the prior twelve-month period and (B) with respect to all such Dispositions account for more than ten percent (10%) of the consolidated net sales of the U.S. Borrower and its Subsidiaries for the prior twelve-month period;
(j)      Dispositions of equipment pursuant to Equipment Financing Transactions permitted under Section 6.01(k) ;
(k)      so long as the Minimum Intercompany Transaction Requirement is met (unless pro forma Availability is not less than the greater of (x) $75.0 million and (y) 10% of the Line Cap, in which case, the Minimum Intercompany Transaction Requirement need not be met), Dispositions by the U.S. Borrower or any of its Subsidiaries to the U.S. Borrower or any of its Subsidiaries of property other than Inventory, Accounts and, on or prior to the Trademark Release Date, the Eligible Trademark Collateral; provided that nothing in this Agreement or the other Loan Documents shall prohibit Dispositions by any of the U.S. Loan Parties to any of the other U.S. Loan Parties;
(l)      other Dispositions by the U.S. Borrower and its Subsidiaries of property other than Inventory, Accounts and intellectual property (other than following the Trademark Release Date, the Eligible Trademark Collateral); provided that (i) at the time of any such Disposition, no Default or Event of Default shall exist or shall result from such Disposition; (ii) the consideration received for such Disposition shall be in an amount at least equal to the fair market value of the assets sold, transferred, licensed or otherwise disposed of; (iii) at least seventy-five percent (75%) of the consideration received for such Disposition shall be cash; and (iv) the aggregate fair market value of all assets so sold, transferred, licensed or otherwise disposed of by the U.S. Borrower and its Subsidiaries shall not exceed $50,000,000 in any Fiscal Year;
(m)      Dispositions constituting leases or subleases granted to others in the ordinary course of business not interfering with the ordinary conduct of the business of the grantor thereof;
(n)      Dispositions involving the liquidation of any Foreign Subsidiary (other than a Canadian Loan Party) held directly by any Borrower or any Guarantor, provided that such Disposition is for the purpose of converting the U.S. Borrower’s business in such foreign region into licensee operations;
(o)      Dispositions of Short-term Investments in exchange for cash or other Short-term Investments;
(p)      Dispositions by the U.S. Borrower and its Subsidiaries of art and archived materials (as reasonably determined in good faith by the U.S. Borrower) with the fair market value (as reasonably determined in good faith by the U.S. Borrower) not to exceed $15,000,000 in the aggregate during the term of this Agreement; provided that (i) such art or archived materials do not constitute Inventory, Accounts or, on or prior to the Trademark Release Date, Eligible Trademark Collateral; (ii) such art or archived materials do not constitute a productive asset of the general type used in the business of the U.S. Borrower and its Subsidiaries; and (iii) at the time of any such Disposition, no Default or Event of Default shall exist or result from such Disposition; and
(q)      licenses of intellectual property in the ordinary course of business.

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SECTION 6.06.      Sale and Leaseback Transactions. Except as otherwise permitted pursuant to Section 6.01 and Section 6.05 , no Loan Party shall, nor shall it permit any of its Subsidiaries or the LS&Co. Trust to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred.
SECTION 6.07.      Swap Agreements. No Loan Party shall, nor shall it permit any of its Subsidiaries or the LS&Co. Trust to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which any Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of any Borrower or any of its Subsidiaries), (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of any Borrower or any Subsidiary, and (c) Ordinary Course Swap Agreements.
SECTION 6.08.      Restricted Payments; Certain Payments of Indebtedness.
(a)      No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, pay or make, directly or indirectly, any Restricted Payments, except that, so long as no Default or Event of Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (i) the U.S. Borrower may declare and pay dividends and distributions payable only in Equity Interests (other than Disqualified Stock) of the U.S. Borrower, (ii) the U.S. Borrower may purchase Equity Interests from present or former employees, directors or other recipients (and their beneficiaries) of such Equity Interests under the U.S. Borrower’s incentive compensation plans and agreements as provided under such plans and agreements for aggregate consideration not to exceed $20.0 million in any twelve (12) Fiscal Month period, (iii) Restricted Payments to a U.S. Loan Party, (iv) Restricted Payments by any Foreign Subsidiary to any Canadian Loan Party and (v) Restricted Payments by any Foreign Subsidiary (other than a Canadian Loan Party) to any Foreign Subsidiary; provided that (i) the requirements of this Section 6.08(a) shall not apply to any Restricted Payment when the Payment Conditions with respect thereto are satisfied and the Loan Parties shall have delivered to the Administrative Agent either a certificate of a Financial Officer (with reasonably detailed calculations) certifying satisfaction of the Payment Conditions or other evidence of the same reasonably satisfactory to the Administrative Agent and (ii) no Default or Event of Default shall be deemed to have occurred if the Payment Conditions with respect to any Restricted Payment cease to be satisfied based solely on any Restricted Payments made when the Payment Conditions with respect thereto were satisfied.
(b)      No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (collectively, a “ prepayment ”) any Indebtedness, except (i) the prepayment of the Loans in accordance with the terms of this Agreement, (ii) the prepayment of Indebtedness payable to a U.S. Loan Party, (iii) the prepayment of Indebtedness payable to a Canadian Loan Party by any Foreign Subsidiary, (iv) the prepayment of Indebtedness owed to any Foreign Subsidiary by any Foreign Subsidiary (other than a Canadian Loan Party), (v) the prepayment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of a permitted Disposition, (vi) the prepayment of Indebtedness, in whole or in part, from the net cash proceeds of (or in exchange for) Permitted Refinancing Indebtedness,

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(vii) the close out of Ordinary Course Swap Agreements, (viii) the prepayment of Indebtedness of the U.S. Borrower to any of its Subsidiaries and Indebtedness of any of its Subsidiaries to the U.S. Borrower or any of its other Subsidiaries to the extent such Indebtedness to be prepaid is permitted pursuant to Section 6.01 , in each case, in accordance with any subordination terms thereof; provided in the case of a prepayment of Indebtedness of a Loan Party, at the time of such prepayment, such Loan Party would have been permitted to make an Investment in the Person to whom such prepayment is made in the amount of such prepayment, and (ix) prepayment, redemption, defeasance, repurchase or other acquisition or retirement for value of the Existing Yen Notes and the Existing Euro Notes, in each case required pursuant to the terms thereof as in effect on the Amendment Effective Date; provided that (i) the requirements of this Section 6.08(b) shall not apply to any payment in respect of any Indebtedness when the Payment Conditions with respect to such payment are satisfied and the Loan Parties shall have delivered to the Administrative Agent either a certificate of a Financial Officer (with reasonably detailed calculations) certifying satisfaction of the Payment Conditions or other evidence of the same reasonably satisfactory to the Administrative Agent and (ii) no Default or Event of Default shall be deemed to have occurred if the Payment Conditions with respect to any such payment in respect of Indebtedness cease to be satisfied based solely on any payments in respect of Indebtedness made when the Payment Conditions with respect thereto were satisfied.
SECTION 6.09.      Transactions with Affiliates. Except as permitted by Section 6.08(a ), no Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, enter into any transaction of any kind with any Affiliate of any Loan Party, whether or not in the ordinary course of business, other than on terms substantially as favorable to the U.S. Borrower or such Subsidiary or the LS&Co. Trust as would be obtainable by the U.S. Borrower or such Subsidiary or the LS&Co. Trust at the time in a comparable arm’s-length transaction with a Person other than an Affiliate; provided that Dispositions permitted by Section 6.05(p) shall not be subject to these limitations.
SECTION 6.10.      Restrictive Agreements. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, enter into or suffer to exist any agreement or arrangement limiting the ability of any of such Subsidiaries or the LS&Co. Trust to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Indebtedness owed to, make loans or advances to, or otherwise transfer assets to or invest in, the U.S. Borrower or any of such Subsidiaries or the LS&Co. Trust (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (a) the Loan Documents, (b) restrictions on the declaration or payment or other distributions in respect of such Equity Interests contained in documentation for any Indebtedness permitted under Section 6.01(b) , provided such restrictions are not more restrictive than the restrictions contained in the unsecured Indebtedness listed on Schedule 6.01 as in effect on the Amendment Effective Date, (c) restrictions on the transfer of the property subject to Equipment Financing Transactions permitted under Section 6.01(k) and Real Estate Financing Transactions permitted under Section 6.01(j) and Dispositions permitted under Section 6.05 , (d) restrictions placed on the transfer by a Subsidiary of intellectual property rights granted by the U.S. Borrower in connection with the terms of licenses between the U.S. Borrower and any of its Subsidiaries relating to such intellectual property rights, (e) restrictions required to be placed on the transfer of property pursuant to a Lien permitted under Section 6.02 , and (f) restrictions contained in the documentation for Indebtedness secured by a Lien permitted under Section 6.02(o) that are customary for financings of that type as determined in good faith by the board of directors of the U.S. Borrower.

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SECTION 6.11.      Amendment of Material Documents.
(a)      No Loan Party shall, nor shall it permit any of its Subsidiaries or the LS&Co. Trust to, amend, modify or waive any of its rights under (i) any agreement relating to any Subordinated Indebtedness or (ii) its certificate of incorporation, by-laws, operating, management or partnership agreement or other organizational documents to the extent any such amendment, modification or waiver would be materially adverse to the Lenders.
(b)      No Loan Party shall, nor shall it permit any of its Subsidiaries or the LS&Co. Trust to, amend or otherwise change the terms of any Indebtedness (including without limitation any terms of any security agreement relating to any Indebtedness) in a manner that is materially adverse to the Lenders.
SECTION 6.12.      Negative Pledges. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries or the LS&Co. Trust to, directly or indirectly, enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets except:
(a)      negative pledges existing on property of the U.S. Borrower and its Subsidiaries on the Amendment Effective Date and listed on Schedule 6.12 ;
(b)      negative pledges in favor of the Administrative Agent, the Multicurrency Administrative Agent and the Lenders pursuant to the Loan Documents;
(c)      negative pledges in connection with any purchase money Indebtedness permitted under Section 6.01(g) solely to the extent that the agreement or instrument governing such Indebtedness prohibits a Lien on the property acquired with the proceeds of such Indebtedness;
(d)      negative pledges in connection with any Capital Lease Obligation permitted under Section 6.01(t) solely to the extent that such Capital Lease Obligation prohibits a Lien on the property subject thereto;
(e)      negative pledges on the property subject to Equipment Financing Transactions permitted under Section 6.01(k) and Real Estate Financing Transactions permitted under Section 6.01(j) , and negative pledges on the property subject to Liens permitted under Section 6.02 ;
(f)      negative pledges on intellectual property rights (other than, prior to the Trademark Release Date, Eligible Trademark Collateral) licensed from third parties;
(g)      negative pledges with respect to Indebtedness of Foreign Subsidiaries (other than Canadian Loan Parties) that only apply to the assets of such Foreign Subsidiaries; and
(h)      negative pledges in Indebtedness permitted by Section 6.01 ; provided that such negative pledges do not restrict the Loan Parties from securing the Obligations with Liens on any of their assets (except for restrictions contained in Indebtedness secured by Liens permitted by Section 6.02 which Liens apply only to the assets securing such Indebtedness).
SECTION 6.13.      Changes in Nature of Business; Fiscal Year. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, directly or indirectly engage in any material line of business not related, incidental or complementary to the

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manufacture and sale of clothing and accessories. The LOS Business is a business that is related to, complementary to, or incidental to the manufacture and sale of clothing within the meaning of the preceding sentence. No Loan Party shall change its fiscal year-end to a date other than the date specified (as of the Amendment Effective Date) in the definition of Fiscal Year.
SECTION 6.14.      Financial Covenant.
(a)      Consolidated Fixed Charge Coverage Ratio . During any Compliance Period, the Borrower will not permit the Consolidated Fixed Charge Coverage Ratio for any twelve Fiscal Month period ending on the last day of each Fiscal Month, commencing with the Fiscal Month most recently ended prior to the commencement of such Compliance Period for which financial statements have been delivered pursuant to this Agreement or as of the last day of any subsequent Fiscal Month thereafter until the end of such Compliance Period, to be less than 1.0 to 1.0.
ARTICLE VII     

Events of Default
If any of the following events (“ Events of Default ”) shall occur:
(a)      any Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
(b)      any Borrower shall fail to pay (i) any interest on any Loan payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days or (ii) any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days after written notice thereof from the Administrative Agent (which written notice shall be given at the request of any Lender);
(c)      any representation or warranty made or deemed made by or on behalf of any Loan Party or any Subsidiary in, or in connection with, this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been materially incorrect when made or deemed made;
(d)      any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a) , 5.03 (with respect to a Loan Party’s existence), 5.08 , 5.11 or in Article VI ;
(e)      any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those which constitute a default under another Section of this Article) or any other Loan Document, and such failure shall continue unremedied for a period of (i) 5 Business Days after the earlier of any Loan Party’s knowledge of such breach or written notice thereof from the Administrative Agent (which written notice will be given at the request of any Lender) if such breach relates to terms or provisions of Section 5.01(e) , (f) , (g) or (h) (or 2 Business Days if subclause (ii)

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of the proviso in Section 5.01(e) shall apply), or (ii) 30 days after the earlier of any Loan Party’s knowledge of such breach or written notice thereof from the Administrative Agent (which written notice will be given at the request of any Lender) if such breach relates to terms or provisions of any other Section of this Agreement or any other Loan Document;
(f)      any Loan Party or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, including the passage of any notice and cure periods for such Material Indebtedness;
(g)      any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;
(h)      an involuntary case or proceeding shall be commenced or an involuntary petition shall be filed seeking (i) bankruptcy, liquidation, winding up, dissolution, reorganization or other relief in respect of a Loan Party or any Material Domestic Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) the appointment of a receiver, receiver and manager, interim receiver, trustee, custodian, sequestrator, monitor, administrator, liquidator, conservator or similar official for any Loan Party or any Material Domestic Subsidiary or for a substantial part of its assets, (iii) possession, foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or any substantial part of the assets, of such Loan Party or any Material Domestic Subsidiary, or (iv) the composition, rescheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of its debts or obligations of any Loan Party or any Material Domestic Subsidiary, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(i)      any Loan Party or any Material Domestic Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Loan Party or any Material Domestic Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(j)      any Loan Party or any Material Domestic Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(k)      (i) one or more judgments for the payment of money in an aggregate amount in excess of $50,000,000 shall be rendered against any Loan Party, any Subsidiary of any Loan Party or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor

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to attach or levy upon any assets of any Loan Party or any Subsidiary of any Loan Party to enforce any such judgment; or (ii) any Loan Party or any Subsidiary of any Loan Party shall fail within 30 days to discharge one or more non-monetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgments or orders, in any such case, are not stayed on appeal or otherwise being appropriately contested in good faith by proper proceedings diligently pursued;
(l)      an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrowers and their Subsidiaries in an aggregate amount exceeding $50,000,000 in any year for all periods;
(m)      a Change of Control shall occur;
(n)      any Loan Guaranty shall fail to remain in full force or effect or any action shall be taken by any Loan Party to discontinue or to assert the invalidity or unenforceability of any Loan Guaranty or any Loan Guarantor shall deny that it has any further liability under any Loan Guaranty to which it is a party, or shall give notice to such effect, except where due to such Loan Party’s permitted liquidation or dissolution under the terms of this Agreement;
(o)      except as permitted by the terms of any Collateral Document, for any reason other than the failure of the Administrative Agent to take any action available to it to maintain perfection of the Administrative Agent’s Liens pursuant to the Loan Documents, (i) any Collateral Document shall for any reason fail to create a valid security interest in any Collateral purported to be covered thereby, or (ii) any Lien securing any Secured Obligation shall cease to be a perfected, first priority Lien; or
(p)      any Loan Document for any reason ceases to be valid, binding and enforceable against any applicable Loan Party in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms);
then, and in every such event (other than an event with respect to the Borrowers described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower Representative, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; and in case of any event with respect to the Borrowers described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers. Upon the occurrence and the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and remedies provided to the Administrative Agent under the Loan

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Documents or at law or equity, including all remedies provided under the UCC or the PPSA, as applicable.
ARTICLE VIII     

The Administrative Agents
Each of the Lenders and each of the Issuing Banks hereby irrevocably appoints the Administrative Agent and, as applicable, the Canadian Administrative Agent, as its agent and authorizes each of the Administrative Agents to take such actions on its behalf, including execution of the other Loan Documents, and to exercise such powers as are delegated to the Applicable Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.
Each bank serving as the Administrative Agent or Canadian Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent or Canadian Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Loan Parties or any Subsidiary of a Loan Party or other Affiliate thereof as if it were not the Administrative Agent or Canadian Administrative Agent hereunder.
Neither of the Administrative Agents shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither of the Administrative Agents shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither of the Administrative Agents shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Applicable Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 ), and (c) except as expressly set forth in the Loan Documents, neither of the Administrative Agents shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any of its Subsidiaries that is communicated to or obtained by such bank serving as the Administrative Agent of Canadian Administrative Agent or any of its Affiliates in any capacity. Neither of the Administrative Agents shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 ) or in the absence of its own gross negligence or willful misconduct. Neither of the Administrative Agents shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Person by the Borrower Representative or a Lender, and such Person shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Applicable Administrative Agent.
Each of the Administrative Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or

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other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each of the Administrative Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each of the Administrative Agents may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Each of the Administrative Agents may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Person. Each of the Administrative Agents and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each of the Administrative Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Administrative Agent or Canadian Administrative Agent.
Subject to the appointment and acceptance of a successor Applicable Administrative Agent as provided in this paragraph, each of the Administrative Agents may resign at any time by notifying the Lenders, the Issuing Banks and the Borrower Representative. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrowers (unless an Event of Default shall have occurred and be continuing), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and consented to by the Borrower (unless an Event of Default shall have occurred and be continuing) and shall have accepted such appointment within 30 days after the retiring agent gives notice of its resignation, then the retiring agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent or Canadian Administrative Agent, as applicable, which shall be a commercial bank or an Affiliate of any such commercial bank. Upon the acceptance of its appointment as an Administrative Agent or Canadian Administrative Agent, as applicable, hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent or Canadian Administrative Agent, as applicable,, and the retiring Administrative Agent or Canadian Administrative Agent, as applicable, shall be discharged from its duties and obligations hereunder. The fees payable by the Borrowers to a successor Administrative Agent or Canadian Administrative Agent, as applicable, shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After an Administrative Agent or Canadian Administrative Agent, as applicable, resigns hereunder, the provisions of this Article, Section 2.17(d) and Section 9.03 shall continue in effect for the benefit of such retiring Person, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as an Applicable Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon either of the Administrative Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon either of the Administrative Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.
Each Lender hereby agrees that (a) it has requested a copy of each Report prepared by or on behalf of the Administrative Agent; (b) the Administrative Agent (i) makes no representation or

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warranty, express or implied, as to the completeness or accuracy of any Report or any of the information contained therein or any inaccuracy or omission contained in or relating to a Report and (ii) shall not be liable for any information contained in any Report; (c) the Reports are not comprehensive audits or examinations, and that any Person performing any field examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel and that the Administrative Agent undertakes no obligation to update, correct or supplement the Reports; (d) it will keep all Reports confidential and strictly for its internal use, not share the Report with any Loan Party or any other Person except as otherwise permitted pursuant to this Agreement; and (e) without limiting the generality of any other indemnification provision contained in this Agreement, it will pay and protect, and indemnify, defend, and hold the Administrative Agent and any such other Person preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including reasonable attorney fees) incurred by each Applicable Administrative Agent or such other Person as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.
Each Co-Syndication Agent, each Co-Documentation Agent and each Joint Lead Arranger and Joint Bookrunner shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such.
ARTICLE IX     

Miscellaneous
SECTION 9.01.      Notices.
(a)      Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:
(i)
if to any Loan Party, to the Borrower Representative at:

Levi Strauss & Co.
1155 Battery Street
San Francisco, CA 94111
Attention: Treasurer
Facsimile No: (415) 501-1342

with a copy to:

Levi Strauss & Co.
1155 Battery Street
San Francisco, CA 94111
Attention: Assistant Treasurer
Facsimile No: (415) 501-1342

and

Levi Strauss & Co.

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1155 Battery Street
San Francisco, CA 94111
Attention: Manager of Treasury Operations
Facsimile No: (415) 501-1342

and

Levi Strauss & Co.
1155 Battery Street
San Francisco, CA 94111
Attention: Office of the General Counsel
Facsimile No: (415) 501-7650
(ii)
if to the Administrative Agent, JPMorgan Chase Bank, N.A., in its capacity as Issuing Bank or the Swingline Lender, to JPMorgan Chase Bank, N.A. at:

3 Park Plaza, Suite 900
Irvine, CA 92614
Attention: Annaliese Fisher
Facsimile No: (949) 471-9872
(iii)
if to the Multicurrency Administrative Agent, to JPMorgan Chase Bank, N.A., Toronto Branch at:
3 Park Plaza, Suite 900
Irvine, CA 92614
Attention: Annaliese Fisher
Facsimile No: (949) 471-9872
McMillan LLP
Brookfield Place
181 Bay Street, Suite 4400
Toronto, Ontario M5J 2T3
Canada
Attention: Jeff Rogers
Facsimile No: (647) 722-6742
(iv)
if to any other Lender, or any other Issuing Bank, to it at its address or facsimile number set forth in its Administrative Questionnaire.
All such notices and other communications (i) sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received or (ii) sent by facsimile shall be deemed to have been given when sent, provided that if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient.
(b)      Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II or to compliance and no Default certificates delivered pursuant to Section 5.01(c)

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unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower Representative (on behalf of the Loan Parties) may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. All such notices and other communications (i) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if not given during the normal business hours of the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (b)(i) of notification that such notice or communication is available and identifying the website address therefor.
(c)      Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
SECTION 9.02.      Waivers; Amendments.
(a)      No failure or delay by the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank and the Lenders hereunder and under any other Loan Document are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, the Multicurrency Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.
(b)      Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or (ii) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent, the Multicurrency Administrative Agent and the Loan Party or Loan Parties that are parties thereto, with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender (including any such Lender that is a Defaulting Lender), (ii) reduce or forgive the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce or forgive any interest or fees payable hereunder, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby, (iii) postpone any scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any date for the payment of any interest, fees or other Obligations payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby, (iv) change Section 2.10(b) that would alter the manner in which payments are shared under such section, without the written consent of

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each Lender (including any such Lender that is a Defaulting Lender), (v) change Section 2.18(b) or (d) in a manner that would alter the manner in which payments are shared or proceeds from enforcement are applied, without the written consent of each Lender (including any such Lender that is a Defaulting Lender), (vi) modify the eligibility criteria used in the definitions contained in the definition of “U.S. Borrowing Base” or in the definition of “Canadian Borrowing Base”, without the written consent of the Supermajority Revolving Lenders, (vii) increase the advance rates set forth in the definition of “U.S. Borrowing Base” or “Canadian Borrowing Base” without the consent of each Lender, (viii) change any of the provisions of this Section or the definition of “Required Lenders”, “Supermajority Revolving Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby, (ix) change Section 2.20 , without the consent of each Lender (other than any Defaulting Lender), (x) release any Loan Guarantor from its obligation under its Loan Guaranty or release any Borrower from its payment obligations with respect to principal and interest on the Loans, fees pursuant to Section 2.12 and reimbursement obligations with respect to any Letter of Credit (except as otherwise permitted herein or in the other Loan Documents), without the written consent of each Lender (other than any Defaulting Lender), or (xi) except as provided in clauses (c) and (d) of this Section or in any Collateral Document, release all or substantially all of the Collateral (or subordinate the Liens of the Administrative Agent under the Collateral Documents with respect to all or substantially all of the Collateral), without the written consent of each Lender (other than any Defaulting Lender); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Multicurrency Administrative Agent, an Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, such Issuing Bank or the Swingline Lender, as the case may be (it being understood that any change to Section 2.20 shall require the consent of the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Swingline Lender). The Administrative Agent may also amend the Commitment Schedule to reflect assignments entered into pursuant to Section 9.04 .
(c)      The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its sole discretion, to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon the termination of the Commitments, payment and satisfaction in full in cash of all Secured Obligations (other than Unliquidated Obligations), and the cash collateralization of all Unliquidated Obligations in a manner satisfactory to each affected Lender, (ii) constituting property being sold or disposed of if the Loan Party disposing of such property certifies to the Administrative Agent that the sale or disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry), and to the extent that the property being sold or disposed of constitutes 100% of the Equity Interest of a Subsidiary, the Administrative Agent is authorized to release any Loan Guaranty provided by such Subsidiary, (iii) constituting property leased to a Loan Party under a lease which has expired or been terminated in a transaction permitted under this Agreement, (iv) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and the Lenders pursuant to Article VII or (v) in the case of the Eligible Trademark Collateral, so long as no Default has occurred and is continuing and on a pro forma basis after excluding the Trademark Amount from the U.S. Borrowing Base, the Revolving Exposure Limitations would not be exceeded. Except as provided in the preceding sentence, the Administrative Agent will not release any Liens on Collateral without the prior written authorization of the Required Lenders (or other percentage as specified in Section 9.02(b) above); provided that, the Administrative Agent may in its discretion, release its Liens on Collateral valued in the aggregate not in excess of $10,000,000 during any calendar year without the prior written authorization of the Required Lenders. Any such release shall not in any manner discharge, affect or impair the

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Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral. The Lenders hereby further authorize the Administrative Agent, at its option and in its sole discretion, to release any Guarantor (other than a Borrower) from its obligations under the Loan Documents upon any Disposition of Equity Interests of such Guarantor made in compliance with Section 6.05 following which such Guarantor ceases to be a Subsidiary of the U.S. Borrower.
(d)      If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “ Non-Consenting Lender ”), then the Borrowers may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrowers and the Administrative Agent shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 9.04 , and (ii) the Borrowers shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrowers hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.15 and 2.17 , and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.
(e)      Notwithstanding anything in this Section 9.02 to the contrary, upon prior written notice to the Lenders (which shall in no event be later than 7 Business Days prior to the proposed effectiveness thereof) this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrowers to add additional borrowers organized in the United Kingdom, the French Republic, the Federal Republic of Germany and/or the Kingdom of Belgium and to include an additional subfacility for such borrowers hereunder and to include the Accounts and/or Inventory of such subsidiaries in a “borrowing base” available to such borrowers hereunder (it being understood that (i) obligations in respect of any such subfacility shall rank junior to the Obligations under the U.S. Facility and Canadian Facility in respect of rights to receive payments from U.S. Collateral and junior to the Obligations under the Canadian Facility in respect of rights to receive payments from Canadian Collateral), (ii) no Lender hereunder shall be required to extend any commitment to lend to any such additional borrower or such additional subfacility unless otherwise agreed by such Lender, (iii) the commitments and extensions of credit under any such subfacility shall be included for voting purposes in a manner substantially identical to the manner the commitments and extensions of credit under the U.S. Facility and Canadian Facility are included, and (iv) the Loan Documents shall be amended (or amended and restated) as mutually agreed by the Administrative Agent, the Borrowers and each Lender with respect to such additional borrowers or additional subfacilities (including, without limitation, with respect to (x) conditions precedent regarding any AML Legislation and (y) the definition of “Excluded Taxes” and whether a carve-out from the gross-up for withholding taxes for day-one taxes imposed by the jurisdiction of such additional borrower is necessary).
SECTION 9.03.      Expenses; Indemnity; Damage Waiver.

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(a)      The Borrowers shall pay (i) all reasonable and documented out of pocket expenses incurred by each Applicable Administrative Agent and its Affiliates, including the reasonable and documented fees, charges and disbursements of counsel for such Applicable Administrative Agent, in connection with the syndication and distribution (including, without limitation, via the internet or through a service such as Intralinks) of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all documented out-of-pocket expenses incurred by the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender, including the reasonable and documented fees, charges and disbursements of any counsel for the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender, in connection with the enforcement, collection or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable and documented out-of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. Expenses being reimbursed to the Administrative Agent by the Borrowers under this Section include, without limiting the generality of the foregoing, reasonable and documented costs and expenses incurred in connection with:
(i)      appraisals and insurance reviews;
(ii)      field examinations and the preparation of Reports based on the fees charged by a third party retained by the Administrative Agent or the internally allocated fees for each Person employed by the Administrative Agent with respect to each field examination, together with the reasonable fees and expenses associated with collateral monitoring services performed by the Administrative Agent (and the Borrowers agree to modify or adjust the computation of the U.S. Borrowing Base or Canadian Borrowing Base, as applicable — which may include maintaining additional Reserves, modifying the advance rates or modifying the eligibility criteria for the components of the U.S. Borrowing Base or Canadian Borrowing Base — to the extent required by the Administrative Agent as a result of any such evaluation, appraisal or monitoring);
(iii)      taxes, fees and other charges for (A) lien and title searches and title insurance and (B) recording the Mortgages, filing financing statements and continuations, and other actions to perfect, protect, and continue the Administrative Agent’s Liens;
(iv)      sums paid or incurred to take any action required of any Loan Party under the Loan Documents that such Loan Party fails to pay or take after notice thereof to such Loan Party; and
(v)      forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining the accounts and lock boxes, and costs and expenses of preserving and protecting the Collateral.
All of the foregoing costs and expenses may be charged to the Borrowers as Revolving Loans or to another deposit account, all as described in Section 2.18(c) .
(b)      The U.S. Borrower shall indemnify the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and each Lender, and each Related Party of any of the foregoing

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Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of the Loan Documents or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or the Original Transactions or any other transactions contemplated hereby or by the Existing Credit Agreement, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Borrower or any of their Subsidiaries, or any Environmental Liability related in any way to any Borrower or any of its Subsidiaries, (iv) the failure of the Borrowers to deliver to the Administrative Agent the required receipts or other required documentary evidence with respect to a payment made by the Borrowers for Taxes pursuant to Section 2.17 , or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, penalties, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. This Section 9.03(b) (except for clause (iv) above) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages etc. arising from any non-Tax claim.
(c)      The Canadian Borrower shall indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of the Loan Documents or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or the Original Transactions or any other transactions contemplated hereby or by the Existing Credit Agreement, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Borrower or any of their Subsidiaries, or any Environmental Liability related in any way to any Borrower or any of its Subsidiaries, (iv) the failure of the Borrowers to deliver to the Administrative Agent the required receipts or other required documentary evidence with respect to a payment made by the Borrowers for Taxes pursuant to Section 2.17 , or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto, in each case, as such losses, claims, damages, penalties, liabilities, related expenses, fees, charges and disbursements of counsel relate to the assets or actions of the Canadian Loan Parties or the Loans or Letters of Credit made to or for the account of the Canadian Borrower; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, penalties, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. This Section 9.03(c) (except for clause (iv) above) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

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(d)      To the extent that the Borrowers fail to pay any amount required to be paid by it to the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or the Swingline Lender under paragraph (a), (b) or (c) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank or the Swingline Lender, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, penalty, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or the Swingline Lender in its capacity as such.
(e)      To the extent permitted by applicable law, no Loan Party shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, the Original Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(f)      All amounts due under this Section shall be payable promptly after written demand therefor.
SECTION 9.04.      Successors and Assigns.
(a)      The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)      (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A)      the Borrower Representative, provided that, as long as the Borrower Representative shall have received the materials required by Section 2.17(f)(i)(A) through (E) (as applicable), or written notice that a potential assignee is not eligible to deliver such materials, the Borrower Representative shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 5 Business Days after having received notice of the proposed assignment and the materials required by Section 2.17(f)(i)(A) through (E) (as applicable), or written notice that a potential assignee is not eligible to deliver such materials, (it being understood that the Borrower Representative’s determination to withhold its consent to an assignment pursuant to this subclause (A) due to the delivery of materials required by Section 2.17(f)(i)(A) through (E) (as applicable) that, other than as a result

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of a Change in Law, do not establish a complete exemption from U.S. Federal withholding tax with respect to payments of interest under this Agreement, or the failure to provide any such materials, shall not be deemed unreasonable), and provided further that no consent of the Borrower Representative shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee;
(B)      the Administrative Agent (such consent not to be unreasonably withheld or delayed); and
(C)      each Issuing Bank (such consent not to be unreasonably withheld or delayed).
(ii)      Assignments shall be subject to the following additional conditions:
(A)      except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower Representative and the Administrative Agent otherwise consent, provided that no such consent of the Borrower Representative shall be required if an Event of Default has occurred and is continuing;
(B)      each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;
(C)      the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and
(D)      the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more Credit Contacts to whom all syndicate-level information (which may contain material non-public information about the U.S. Borrower, the other Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including federal, provincial, territorial and state securities laws.
For the purposes of this Section 9.04(b) , the terms “Approved Fund” and “Eligible Assignees” have the following meaning:
“ Approved Fund ” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

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“ Eligible Assignee ” means (a) a commercial bank, commercial finance company or other asset-based lender, having total assets (or total assets under management) in excess of $1,000,000,000; (b) any Lender listed on the signature page of this Agreement; (c) any Affiliate of any Lender; (d) any Approved Fund; and (e) if an Event of Default has occurred and is continuing, any Person reasonably acceptable to the Administrative Agent; provided that notwithstanding anything to the contrary herein, no assignment may be made or participations sold to (x) any Defaulting Lender or any of its subsidiaries or (z) a natural person.
(iii)      Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15 , 2.16 , 2.17 and 9.03 ). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv)      The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amounts of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Borrowers, the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers, each Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v)      Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided that if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.05 , 2.06(d) or (e) , 2.07(b) , 2.18(d) or 9.03(c) , the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c)      Any Lender may, without the consent of the Borrowers, the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a “ Participant ”) in all or a portion of such Lender’s

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rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged; (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (C) the Borrowers, the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. The Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.15 , 2.16 and 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) shall be subject to the provisions of Sections 2.18 and 2.19 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.17 , with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.
To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.
(d)      Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05.      Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto (with respect to the representations and warranties, on each date made) and shall (subject to the limitations set forth in Section 4.02(a) ) survive the execution and delivery of the Loan

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Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15 , 2.16 , 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06.      Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01 , this Agreement shall become effective when it shall have been executed by the U.S. and Multicurrency Administrative Agents and when the U.S. and Multicurrency Administrative Agents shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07.      Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.08.      Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrowers or any Loan Guarantor against any of and all the Secured Obligations held by such Lender, irrespective of whether or not such Lender shall have made any demand under the Loan Documents and although such obligations may be unmatured. The applicable Lender shall notify the Borrower Representative and the Administrative Agent of such setoff or application, provided that any failure to give or any delay in giving such notice shall not affect the validity of any such setoff or application under this Section. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. NOTWITHSTANDING THE

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FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SETOFF, BANKER’S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT.
SECTION 9.09.      Governing Law; Jurisdiction; Consent to Service of Process.
(a)      The Loan Documents (other than those containing a contrary express choice of law provision) shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of New York, but giving effect to federal laws applicable to national banks.
(b)      Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any U.S. Federal or New York State court sitting in New York, New York in any action or proceeding arising out of or relating to any Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.
(c)      Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d)      Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01 . Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10.      WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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SECTION 9.11.      Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 9.12.      Confidentiality. Each of the Administrative Agent, the Multicurrency Administrative Agent, each Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by Requirement of Law or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Loan Parties and their obligations, (g) with the consent of the Borrower Representative, (h) to holders of Equity Interests in any Borrower, (i) to the extent necessary or customary for inclusion in league table measurements or in any tombstone or other advertising materials (and the Loan Parties consent to the publication of such tombstone or other advertising materials by any Administrative Agent, any Lender, any Issuing Bank or any of their Related Parties), or (j) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis from a source other than the Borrowers. For the purposes of this Section, “ Information ” means all information received from the Borrowers relating to the Borrowers or their business, other than any such information that is available to the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the Borrowers; provided that, in the case of information received from the Borrowers after the Amendment Effective Date, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
SECTION 9.13.      Several Obligations; Nonreliance; Violation of Law. The respective obligations of the Lenders hereunder are several and not joint and the failure of any Lender to make any Loan or perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. Each Lender hereby represents that it is not relying on or looking to any margin stock for the repayment of the Borrowings provided for herein. Anything contained in this Agreement to the contrary notwithstanding, neither any Issuing Bank nor any Lender shall be obligated to extend credit to the Borrowers in violation of any Requirement of Law.

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SECTION 9.14.      USA PATRIOT Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”) hereby notifies the Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the names and addresses of the Borrowers and other information that will allow such Lender to identify the Loan Parties in accordance with the Patriot Act.
SECTION 9.15.      Disclosure. Each Loan Party and each Lender hereby acknowledges and agrees that the Administrative Agent and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with any of the Loan Parties and their respective Affiliates.
SECTION 9.16.      Appointment for Perfection. Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the Lenders, in assets which, in accordance with Article 9 of the UCC, the PPSA or any other applicable law can be perfected only by possession. Should any Lender (other than the Administrative Agent) obtain possession of any such Collateral, such Lender shall notify the Administrative Agent thereof and, promptly upon the Administrative Agent’s request therefor, shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent’s instructions.
SECTION 9.17.      Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “ Charges ”), shall exceed the maximum lawful rate (the “ Maximum Rate ”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
SECTION 9.18.      Lender Loss Sharing Agreement.
(a)      Definitions . As used in this Section 9.18, the following terms shall have the following meanings:
(i)      “ CAM ” means the mechanism for the allocation and exchange of interests in the Loans, participations in Letters of Credit and collections thereunder established under Section 9.18(b) .
(ii)      “ CAM Exchange ” means the exchange of the U.S. Revolving Lenders’ interests and the Multicurrency Revolving Lenders’ interests provided for in Section 9.18(b) .
(iii)      “ CAM Exchange Date ” means the first date after the Amendment Effective Date on which there shall occur (a) any event described in paragraphs (h) or (i) of

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Article VII with respect to any Borrower or (b) an acceleration of Loans and termination of the Commitment pursuant to Article VII.
(iv)      “ CAM Percentage ” means, as to each Revolving Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Amount of the Credit Exposure owed to such Revolving Lender (whether or not at the time due and payable) and (b) the denominator shall be the aggregate Dollar Amount (as so determined) of the Credit Exposure owed to all the Revolving Lenders (whether or not at the time due and payable).
(v)      “ Designated Obligations ” means all Obligations of the Borrowers with respect to (a) principal and interest under the Loans, (b) unreimbursed drawings under Letters of Credit and interest thereon and (c) fees under Section 2.12 .
(b)      CAM Exchange.
(i)      On the CAM Exchange Date,
(w)    the Multicurrency Commitments and the U.S. Commitments shall terminate in accordance with Article VII;
(x)    each U.S. Revolving Lender shall fund in Dollars at par Dollar Amount its participation in any outstanding U.S. Protective Advances and Swingline Loans in accordance with Section 2.04 and Section 2.05 of this Agreement, and each Multicurrency Revolving Lender shall fund in Dollars at par Dollar Amount its participation in any outstanding Multicurrency Protective Advances and Swingline Loans in accordance with Section 2.04 and Section 2.05 ;
(y)    each U.S. Revolving Lender shall fund in Dollars at par the Dollar Amount its participation in any unreimbursed LC Disbursements made under the U.S. Letters of Credit in accordance with Section 2.06(f) , and each Multicurrency Revolving Lender shall fund the Dollar Amount its participation in any unreimbursed LC Disbursements made under the Multicurrency Letters of Credit in the currency in which such LC Disbursement was made in accordance with Section 2.06(f) , and
(z)    the Lenders shall purchase in Dollars at par Dollar Amount interests in the Designated Obligations under each Facility (pro rata in respect of the obligations of each Borrower in the case of the Multicurrency Facility) (and shall make payments in Dollars to the Administrative Agent for reallocation to other Lenders to the extent necessary to give effect to such purchases) and shall assume the obligations to reimburse the applicable Issuing Banks for unreimbursed LC Disbursements under outstanding Letters of Credit under such Facility (pro rata in respect of the obligations of each Borrower in the case of the Multicurrency Facility) such that, in lieu of the interests of each Lender in the Designated Obligations of each Borrower under the U.S. Facility and the Multicurrency Facility in which it shall have participated immediately prior to the CAM Exchange Date, such Lender shall own an interest equal to such Lender’s CAM Percentage in each component of the Designated Obligations of each Borrower immediately following the CAM Exchange.
(ii)      Each Lender and each Person acquiring a participation from any Lender as contemplated by this Section 9.18 hereby consents and agrees to the CAM Exchange. Each

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Borrower agrees from time to time to execute and deliver to the Lenders all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests and obligations of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans under this Agreement to the Applicable Administrative Agent against delivery of any promissory notes so executed and delivered; provided that the failure of any Lender to deliver or accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.
(iii)      As a result of the CAM Exchange, from and after the CAM Exchange Date, each payment received by the Administrative Agent pursuant to any Loan Document in respect of any of the Designated Obligations shall be distributed to the Lenders, pro rata in accordance with their respective CAM Percentages.
(iv)      In the event that on or after the CAM Exchange Date, the aggregate amount of the Designated Obligations shall change as a result of the making of a disbursement under a Letter of Credit by an Issuing Bank that is not reimbursed by the Borrowers, then each Lender shall promptly reimburse such Issuing Bank for its CAM Percentage of such unreimbursed payment in the Dollar Amount thereof.
(c)      Notwithstanding any other provision of this Section 9.18 , each Applicable Administrative Agent and each Lender agree that if any Applicable Administrative Agent or a Lender is required under applicable law or practice of a Governmental Authority to withhold or deduct any taxes or other amounts from payments made by it hereunder or as a result hereof, such Person shall be entitled to withhold or deduct such amounts and pay over such taxes or other amounts to the applicable Governmental Authority imposing such tax without any obligation to indemnify each Applicable Administrative Agent or any Lender with respect to such amounts and without any other obligation of gross up or offset with respect thereto and there shall be no recourse whatsoever by any Applicable Administrative Agent or any Lender subject to such withholding to any Applicable Administrative Agent or any other Lender making such withholding and paying over such amounts, but without diminution of the rights of each Applicable Administrative Agent or such Lender subject to such withholding as against the Borrowers and the other Loan Parties to the extent (if any) provided in this Agreement and the other Loan Documents. Any amounts so withheld or deducted shall be treated, for the purpose of this Section 9.18 , as having been paid to each Applicable Administrative Agent or such Lender with respect to which such withholding or deduction was made. The parties hereto do not intend for a CAM Exchange to result in a settlement, extinguishment or substitution of indebtedness by the relevant Borrower.
SECTION 9.19.      Judgment Currency. If for the purpose of obtaining judgment in any court it is necessary to convert an amount due hereunder in the currency in which it is due (the “ Original Currency ”) into another currency (the “ Second Currency ”), the rate of exchange applied shall be that at which, in accordance with normal banking procedures, the Administrative Agent could purchase the Original Currency with the Second Currency at the Spot Rate on the date two Business Days preceding that on which judgment is given. Each Loan Party agrees that its obligation in respect of any Original Currency due from it hereunder shall, notwithstanding any judgment or payment in such other currency, be discharged only to the extent that, on the Business Day following the date the Administrative Agent receives payment of any sum so adjudged to be due hereunder in the Second Currency, the Administrative Agent may, in accordance with normal banking procedures, purchase, in the New York foreign exchange market, the Original Currency with the amount of the Second

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Currency so paid; and if the amount of the Original Currency so purchased or could have been so purchased is less than the amount originally due in the Original Currency, each Loan Party agrees as a separate obligation and notwithstanding any such payment or judgment to indemnify the Administrative Agent against such loss. The term “rate of exchange” in this Section 9.19 means the Spot Rate at which the Administrative Agent, in accordance with normal practices, is able on the relevant date to purchase the Original Currency with the Second Currency, and includes any premium and costs of exchange payable in connection with such purchase.
SECTION 9.20.      Anti-Money Laundering Legislation.
(a)      Each Borrower acknowledges that, pursuant to the Proceeds of Crime Act and other applicable anti-money laundering, anti-terrorist financing, government sanction and “know your client” laws in each relevant jurisdiction (collectively, including any guidelines or orders thereunder, “ AML Legislation ”), the Administrative Agent, the Multicurrency Administrative Agent, the Lenders and the Issuing Banks may be required to obtain, verify and record information regarding the Borrowers and their respective directors, authorized signing officers and the transactions contemplated hereby. Each Borrower shall promptly provide all such information, including supporting documentation and other evidence, as may be reasonably requested by any Lender or any prospective assignee or participant of a Lender, any Issuing Bank, the Administrative Agent or the Multicurrency Administrative Agent, in order to comply with any applicable AML Legislation, whether now or hereafter in existence.
(b)      If the Administrative Agent has ascertained the identity of any Borrower or any authorized signatories of the Borrower for the purposes of applicable AML Legislation, then the Administrative Agent:
(i)      shall be deemed to have done so as an agent for each Issuing Bank and each Lender, and this Agreement shall constitute a “written agreement” in such regard between such Issuing Bank or such Lender and the Administrative within the meaning of the applicable AML Legislation; and
(ii)      shall provide to each Issuing Bank and each Lender copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.
Notwithstanding the preceding sentence and except as may otherwise be agreed in writing, each Lender and each Issuing Bank agrees that neither the Administrative Agent nor the Multicurrency Administrative Agent have any obligation to ascertain the identity of the Borrowers or any authorized signatories of the Borrowers on behalf of any Lender or Issuing Bank, or to confirm the completeness or accuracy of any information it obtains from any Borrower or any such authorized signatory in doing so.
SECTION 9.21.      No Fiduciary Duty. Each Agent, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “ Banks ”), may have economic interests that conflict with those of the Loan Parties, their stockholders and/or their affiliates. Each Loan Party agrees that nothing in the Agreement or the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Bank, on the one hand, and such Loan Party, its stockholders or its affiliates, on the other. The Loan Parties acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder

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and thereunder) are arm’s-length commercial transactions between the Banks, on the one hand, and the Loan Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Bank has assumed an advisory or fiduciary responsibility in favor of any Loan Party, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Bank has advised, is currently advising or will advise any Loan Party, its stockholders or its Affiliates on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in the Loan Documents and (y) each Bank is acting solely as principal and not as the agent or fiduciary of any Loan Party, its management, stockholders, creditors or any other Person. Each Loan Party acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Loan Party agrees that it will not claim that any Bank has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Loan Party, in connection with such transaction or the process leading thereto.
ARTICLE X     

U.S. Loan Guaranty
SECTION 10.01.      Guaranty. Each U.S. Guarantor (other than those that have delivered a separate Guaranty) hereby agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to the Lenders, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the U.S. Secured Obligations and all costs and expenses, including, without limitation, all court costs and attorneys’ fees and expenses paid or incurred by the Administrative Agent, any Issuing Bank and any Lender in endeavoring to collect all or any part of the U.S. Secured Obligations from, or in prosecuting any action against, any Borrower, any U.S. Guarantor or any other guarantor of all or any part of the U.S. Secured Obligations (such costs and expenses, together with the U.S. Secured Obligations, collectively the “ U.S. Guaranteed Obligations ”). Each U.S. Guarantor further agrees that the U.S. Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of any Lender that extended any portion of the U.S. Guaranteed Obligations.
SECTION 10.02.      Guaranty of Payment. This Loan Guaranty is a guaranty of payment and not of collection. Each U.S. Guarantor waives any right to require the Administrative Agent, any Issuing Bank or any Lender to sue any Borrower, any U.S. Guarantor, any other guarantor, or any other Person obligated for all or any part of the U.S. Guaranteed Obligations (each, a “ U.S. Obligated Party ”), or otherwise to enforce its payment against any collateral securing all or any part of the U.S. Guaranteed Obligations.
SECTION 10.03.      No Discharge or Diminishment of Loan Guaranty.
(a)      Except as otherwise provided for herein, the obligations of each U.S. Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or

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termination for any reason (other than the indefeasible payment in full in cash of the U.S. Guaranteed Obligations), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration or compromise of any of the U.S. Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the corporate existence, structure or ownership of any Borrower or any other U.S. Obligated Party liable for any of the U.S. Guaranteed Obligations; (iii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting any U.S. Obligated Party or their assets or any resulting release or discharge of any obligation of any U.S. Obligated Party; or (iv) the existence of any claim, setoff or other rights which any Loan Guarantor may have at any time against any U.S. Obligated Party, the Administrative Agent, any Issuing Bank, any Lender or any other person, whether in connection herewith or in any unrelated transactions.
(b)      The obligations of each U.S. Guarantor hereunder are not subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the U.S. Guaranteed Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by any U.S. Obligated Party, of the U.S. Guaranteed Obligations or any part thereof.
(c)      Further, the obligations of any U.S. Guarantor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of the Administrative Agent, any Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the U.S. Guaranteed Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the U.S. Guaranteed Obligations; (iii) any release, non-perfection or invalidity of any indirect or direct security for the obligations of any Borrower for all or any part of the U.S. Guaranteed Obligations or any obligations of any other U.S. Obligated Party liable for any of the U.S. Guaranteed Obligations; (iv) any action or failure to act by the Administrative Agent, any Issuing Bank or any Lender with respect to any collateral securing any part of the U.S. Guaranteed Obligations; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the U.S. Guaranteed Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such U.S. Guarantor or that would otherwise operate as a discharge of any U.S. Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the U.S. Guaranteed Obligations).
SECTION 10.04.      Defenses Waived. To the fullest extent permitted by applicable law, each U.S. Guarantor hereby waives any defense based on or arising out of any defense of any Borrower or any U.S. Guarantor or the unenforceability of all or any part of the U.S. Guaranteed Obligations from any cause, or the cessation from any cause of the liability of any Borrower or any Loan Guarantor, other than the indefeasible payment in full in cash of the U.S. Guaranteed Obligations. Without limiting the generality of the foregoing, each U.S. Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any U.S. Obligated Party, or any other Person. Each U.S. Guarantor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. The Administrative Agent may, at its election, foreclose on any U.S. Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such U.S. Collateral in lieu of foreclosure or otherwise act or fail to act with respect to any collateral securing all or a part of the U.S. Guaranteed Obligations, compromise or adjust any part of the U.S. Guaranteed Obligations, make any other accommodation with any U.S. Obligated Party or exercise any other right or remedy available to it against any U.S. Obligated Party, without affecting or impairing in any

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way the liability of such U.S. Guarantor under this Loan Guaranty except to the extent the U.S. Guaranteed Obligations have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law, each U.S. Guarantor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any U.S. Guarantor against any U.S. Obligated Party or any security.
SECTION 10.05.      Rights of Subrogation. No U.S. Guarantor will assert any right, claim or cause of action, including, without limitation, a claim of subrogation, contribution or indemnification, that it has against any U.S. Obligated Party, or any collateral, until the Loan Parties and the U.S. Guarantors have fully performed all their obligations to the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks and the Lenders.
SECTION 10.06.      Reinstatement; Stay of Acceleration. If at any time any payment of any portion of the U.S. Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise, each U.S. Guarantor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not the Administrative Agent, any Issuing Bank and any Lenders is in possession of this Loan Guaranty. If acceleration of the time for payment of any of the U.S. Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of any Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the U.S. Guaranteed Obligations shall nonetheless be payable by the Loan Guarantors promptly on demand by the Administrative Agent.
SECTION 10.07.      Information. Each U.S. Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers’ financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the U.S. Guaranteed Obligations and the nature, scope and extent of the risks that each U.S. Guarantor assumes and incurs under this Loan Guaranty, and agrees that neither the Administrative Agent, any Issuing Bank nor any Lender shall have any duty to advise any U.S. Guarantor of information known to it regarding those circumstances or risks.
SECTION 10.08.      Release. The Loan Guaranty of any U.S. Guarantor (other than the U.S. Borrower) shall be automatically released upon any Disposition of Equity Interests of such U.S. Guarantor in accordance with Section 6.05 following which such U.S. Guarantor ceases to be a Subsidiary of the U.S. Borrower.
SECTION 10.09.      [Reserved].
SECTION 10.10.      Maximum U.S. Liability. The provisions of this Loan Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any U.S. Guarantor under this Loan Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such U.S. Guarantor’s liability under this Loan Guaranty, then, notwithstanding any other provision of this Loan Guaranty to the contrary, the amount of such liability shall, without any further action by the U.S. Guarantors or the Administrative Agent, any Issuing

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Bank or any Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant U.S. Guarantor’s “ Maximum U.S. Liability .” This Section with respect to the Maximum U.S. Liability of each U.S. Guarantor is intended solely to preserve the rights of the Administrative Agent, each Issuing Bank and the Lenders to the maximum extent not subject to avoidance under applicable law, and no U.S. Guarantor nor any other Person shall have any right or claim under this Section with respect to such Maximum U.S. Liability, except to the extent necessary so that the obligations of any U.S. Guarantor hereunder shall not be rendered voidable under applicable law. Each U.S. Guarantor agrees that the U.S. Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of each U.S. Guarantor without impairing this Loan Guaranty or affecting the rights and remedies of the Administrative Agent, the Issuing Banks or the Lenders hereunder, provided that, nothing in this sentence shall be construed to increase any U.S. Guarantor’s obligations hereunder beyond its Maximum Liability.
SECTION 10.11.      Contribution. In the event any U.S. Guarantor (a “ Paying U.S. Guarantor ”) shall make any payment or payments under this Loan Guaranty or shall suffer any loss as a result of any realization upon any collateral granted by it to secure its obligations under this Loan Guaranty, each other U.S. Guarantor (each a “ Non-Paying U.S. Guarantor ”) shall contribute to such Paying U.S. Guarantor an amount equal to such Non-Paying U.S. Guarantor’s “Applicable Percentage” of such payment or payments made, or losses suffered, by such Paying U.S. Guarantor. For purposes of this Article X , each Non-Paying U.S. Guarantor’s “Applicable Percentage” with respect to any such payment or loss by a Paying U.S. Guarantor shall be determined as of the date on which such payment or loss was made by reference to the ratio of (i) such Non-Paying U.S. Guarantor’s Maximum U.S. Liability as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder) or, if such Non-Paying U.S. Guarantor’s Maximum U.S. Liability has not been determined, the aggregate amount of all monies received by such Non-Paying U.S. Guarantor from the Borrowers after the Amendment Effective Date (whether by loan, capital infusion or by other means) to (ii) the aggregate Maximum U.S. Liability of all U.S. Guarantors hereunder (including such Paying U.S. Guarantor) as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder), or to the extent that a Maximum U.S. Liability has not been determined for any U.S. Guarantor, the aggregate amount of all monies received by such U.S. Guarantors from the Borrowers after the Amendment Effective Date (whether by loan, capital infusion or by other means). Nothing in this provision shall affect any Loan Guarantor’s several liability for the entire amount of the U.S. Guaranteed Obligations (up to such U.S. Guarantor’s Maximum U.S. Liability). Each of the U.S. Guarantors covenants and agrees that its right to receive any contribution under this Loan Guaranty from a Non-Paying U.S. Guarantor shall be subordinate and junior in right of payment to the payment in full in cash of the U.S. Guaranteed Obligations. This provision is for the benefit of all of the Administrative Agent, the Issuing Banks, the Lenders and the U.S. Guarantors and may be enforced by any one, or more, or all of them in accordance with the terms hereof.
SECTION 10.12.      Liability Cumulative. The liability of each U.S. Loan Party as a U.S. Guarantor under this Article X is in addition to and shall be cumulative with all liabilities of each U.S. Loan Party to the Administrative Agent, each Issuing Bank and the Lenders under this Agreement and the other Loan Documents to which such U.S. Loan Party is a party or in respect of any obligations or liabilities of the other U.S. Loan Parties, without any

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limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
ARTICLE XI     

Canadian Loan Guaranty
SECTION 11.01.      Guaranty. Each Loan Guarantor (other than those that have delivered a separate Guaranty) hereby agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to the Lenders, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Canadian Secured Obligations and all costs and expenses, including, without limitation, all court costs and attorneys’ fees and expenses paid or incurred by the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank and any Lender in endeavoring to collect all or any part of the Canadian Secured Obligations from, or in prosecuting any action against, the Canadian Borrower, any Loan Guarantor or any other guarantor of all or any part of the Canadian Secured Obligations (such costs and expenses, together with the Canadian Secured Obligations, collectively the “ Canadian Guaranteed Obligations ”). Each Loan Guarantor further agrees that the Canadian Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of any Multicurrency Revolving Lender that extended any portion of the Canadian Guaranteed Obligations.
SECTION 11.02.      Guaranty of Payment.
This Loan Guaranty is a guaranty of payment and not of collection. Each Loan Guarantor waives any right to require the Multicurrency Administrative Agent, any Multicurrency Issuing Bank or any Multicurrency Revolving Lender to sue the Canadian Borrower, any Loan Guarantor, any other guarantor, or any other Person obligated for all or any part of the Canadian Guaranteed Obligations (each, a “ Canadian Obligated Party ”), or otherwise to enforce its payment against any collateral securing all or any part of the Canadian Guaranteed Obligations. In addition, as an original and independent obligation under this Loan Guaranty, each Loan Guarantor shall:
(i)      indemnify each Canadian Obligated Party and its successors, endorsees, transferees and assigns and keep the Canadian Obligated Parties indemnified against all costs, losses, expenses and liabilities of whatever kind resulting from the failure by the Loan Parties or any of them, to make due and punctual payment of any of the Secured Obligations or resulting from any of the Secured Obligations being or becoming void, voidable, unenforceable or ineffective against any Loan Party (including, but without limitation, all legal and other costs, charges and expenses incurred by each Canadian Obligated Party, or any of them, in connection with preserving or enforcing, or attempting to preserve or enforce, its rights under this Loan Guaranty); and
(ii)      pay on demand the amount of such costs, losses, expenses and liabilities whether or not any of the Canadian Obligated Parties has attempted to enforce any rights against any Loan Party or any other Person or otherwise.
SECTION 11.03.      No Discharge or Diminishment of Loan Guaranty.

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(a)      Except as otherwise provided for herein, the obligations of each Loan Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Canadian Guaranteed Obligations), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration or compromise of any of the Canadian Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the corporate existence, structure or ownership of the Canadian Borrower or any other Canadian Obligated Party liable for any of the Canadian Guaranteed Obligations; (iii) any insolvency, bankruptcy, winding-up, liquidation, reorganization or other similar proceeding affecting any Canadian Obligated Party or their assets or any resulting release or discharge of any obligation of any Canadian Obligated Party; or (iv) the existence of any claim, setoff or other rights which any Loan Guarantor may have at any time against any Canadian Obligated Party, the Multicurrency Administrative Agent, each Multicurrency Issuing Bank, any Lender or any other person, whether in connection herewith or in any unrelated transactions.
(b)      The obligations of each Loan Guarantor hereunder are not subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Canadian Guaranteed Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by any Canadian Obligated Party, of the Canadian Guaranteed Obligations or any part thereof.
(c)      Further, the obligations of any Loan Guarantor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of the Administrative Agent, any Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the Canadian Guaranteed Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the Canadian Guaranteed Obligations; (iii) any release, non-perfection or invalidity of any indirect or direct security for the obligations of the Canadian Borrower for all or any part of the Canadian Guaranteed Obligations or any obligations of any other Canadian Obligated Party liable for any of the Canadian Guaranteed Obligations; (iv) any action or failure to act by the Administrative Agent, any Issuing Bank or any Lender with respect to any collateral securing any part of the Canadian Guaranteed Obligations; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the Canadian Guaranteed Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such Loan Guarantor or that would otherwise operate as a discharge of any Loan Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Canadian Guaranteed Obligations).
SECTION 11.04.      Defenses Waived. To the fullest extent permitted by applicable law, each Loan Guarantor hereby waives any defense based on or arising out of any defense of the Canadian Borrower or any Loan Guarantor or the unenforceability of all or any part of the Canadian Guaranteed Obligations from any cause, or the cessation from any cause of the liability of the Canadian Borrower or any Loan Guarantor, other than the indefeasible payment in full in cash of the Canadian Guaranteed Obligations. Without limiting the generality of the foregoing, each Loan Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Canadian Obligated Party, or any other Person. Each Loan Guarantor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. The Administrative Agent may, at its election, foreclose on any Canadian Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such Canadian Collateral in lieu of foreclosure or otherwise act or fail to act

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with respect to any collateral securing all or a part of the Canadian Guaranteed Obligations, compromise or adjust any part of the Canadian Guaranteed Obligations, make any other accommodation with any Canadian Obligated Party or exercise any other right or remedy available to it against any Canadian Obligated Party, without affecting or impairing in any way the liability of such Loan Guarantor under this Loan Guaranty except to the extent the Canadian Guaranteed Obligations have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law, each Loan Guarantor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Loan Guarantor against any Canadian Obligated Party or any security.
SECTION 11.05.      Rights of Subrogation. No Loan Guarantor will assert any right, claim or cause of action, including, without limitation, a claim of subrogation, contribution or indemnification, that it has against any Canadian Obligated Party, or any collateral, until the Loan Parties and the Loan Guarantors have fully performed all their obligations to the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks and the Lenders.
SECTION 11.06.      Reinstatement; Stay of Acceleration. If at any time any payment of any portion of the Canadian Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of the Canadian Borrower or otherwise, each Loan Guarantor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank and the Lenders are in possession of this Loan Guaranty. If acceleration of the time for payment of any of the Canadian Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Canadian Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the Canadian Guaranteed Obligations shall nonetheless be payable by the Loan Guarantors promptly on demand by the Administrative Agent.
SECTION 11.07.      Information. Each Loan Guarantor assumes all responsibility for being and keeping itself informed of the Canadian Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Canadian Guaranteed Obligations and the nature, scope and extent of the risks that each Loan Guarantor assumes and incurs under this Loan Guaranty, and agrees that neither the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank nor any Lender shall have any duty to advise any Loan Guarantor of information known to it regarding those circumstances or risks.
SECTION 11.08.      Release. The Loan Guaranty of any Loan Guarantor (other than any Borrower) shall be automatically released upon any Disposition of Equity Interests of such Loan Guarantor in accordance with Section 6.05 following which such Loan Guarantor ceases to be a Subsidiary of the U.S. Borrower.
SECTION 11.09.      [Reserved].
SECTION 11.10.      Maximum Canadian Liability. In any action or proceeding involving any corporate law, or any provincial, territorial, state, federal or foreign

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bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Loan Guarantor under this Loan Guaranty would otherwise be held or determined to be void, voidable, avoidable, invalid or unenforceable on account of the amount of such Loan Guarantor’s liability under this Loan Guaranty, then, notwithstanding any other provision of this Loan Guaranty to the contrary, the amount of such liability shall, without any further action by the Loan Guarantors or the Administrative Agent, the Multicurrency Administrative Agent, any Issuing Bank or any Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant Loan Guarantor’s “ Maximum Canadian Liability .” This Section with respect to the Maximum Canadian Liability of each Loan Guarantor is intended solely to preserve the rights of the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks and the Lenders to the maximum extent not subject to avoidance under applicable law, and no Loan Guarantor nor any other Person shall have any right or claim under this Section with respect to such Maximum Canadian Liability, except to the extent necessary so that the obligations of any Loan Guarantor hereunder shall not be rendered voidable under applicable law. Each Loan Guarantor agrees that the Canadian Guaranteed Obligations may at any time and from time to time exceed the Maximum Canadian Liability of each Loan Guarantor without impairing this Loan Guaranty or affecting the rights and remedies of the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks or the Lenders hereunder, provided that, nothing in this sentence shall be construed to increase any Loan Guarantor’s obligations hereunder beyond its Maximum Canadian Liability.
SECTION 11.11.      Contribution. In the event any Loan Guarantor (a “ Paying Canadian Guarantor ”) shall make any payment or payments under this Loan Guaranty or shall suffer any loss as a result of any realization upon any collateral granted by it to secure its obligations under this Loan Guaranty, each other Loan Guarantor (each a “ Non-Paying Canadian Guarantor ”) shall contribute to such Paying Canadian Guarantor an amount equal to such Non-Paying Canadian Guarantor’s “Applicable Percentage” of such payment or payments made, or losses suffered, by such Paying Canadian Guarantor. For purposes of this Article XI , each Non-Paying Canadian Guarantor’s “Applicable Percentage” with respect to any such payment or loss by a Paying Canadian Guarantor shall be determined as of the date on which such payment or loss was made by reference to the ratio of (i) such Non-Paying Canadian Guarantor’s Maximum Canadian Liability as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder) or, if such Non-Paying Canadian Guarantor’s Maximum Canadian Liability has not been determined, the aggregate amount of all monies received by such Non-Paying Canadian Guarantor from the Canadian Borrower after the Amendment Effective Date (whether by loan, capital infusion or by other means) to (ii) the aggregate Maximum Canadian Liability of all Loan Guarantors hereunder (including such Paying Canadian Guarantor) as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder), or to the extent that a Maximum Canadian Liability has not been determined for any Loan Guarantor, the aggregate amount of all monies received by such Loan Guarantors from the Canadian Borrower after the Amendment Effective Date (whether by loan, capital infusion or by other means). Nothing in this provision shall affect any Loan Guarantor’s several liability for the entire amount of the Canadian Guaranteed Obligations (up to such Loan Guarantor’s Maximum Canadian Liability). Each of the Loan Guarantors covenants and agrees that its right to receive any contribution under this Loan Guaranty from a Non-Paying Canadian Guarantor shall be subordinate and junior in right of payment to the payment in full in cash of the Canadian

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Guaranteed Obligations. This provision is for the benefit of all of the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks, the Lenders and the Loan Guarantors and may be enforced by any one, or more, or all of them in accordance with the terms hereof.
SECTION 11.12.      Liability Cumulative. The liability of each Loan Party as a Loan Guarantor under this Article XI is in addition to and shall be cumulative with all liabilities of each Loan Party to the Administrative Agent, the Multicurrency Administrative Agent, the Issuing Banks and the Lenders under this Agreement and the other Loan Documents to which such Loan Party is a party or in respect of any obligations or liabilities of the other Loan Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
ARTICLE XII     

The Borrower Representative
SECTION 12.01.      Appointment; Nature of Relationship. The U.S. Borrower is hereby appointed by each of the Borrowers as its contractual representative (herein referred to as the “ Borrower Representative ” hereunder and under each other Loan Document, and each of the Borrowers irrevocably authorizes the Borrower Representative to act as the contractual representative of such Borrower with the rights and duties expressly set forth herein and in the other Loan Documents. The Borrower Representative agrees to act as such contractual representative upon the express conditions contained in this Article XII . Additionally, the Borrowers hereby appoint the Borrower Representative as their agent to receive all of the proceeds of the Loans in the Funding Account(s), at which time the Borrower Representative shall promptly disburse such Loans to the appropriate Borrower(s), provided that, in the case of a Revolving Loan, such amount shall not exceed Availability. The Administrative Agent, the Multicurrency Administrative Agent and the Lenders, and their respective officers, directors, agents or employees, shall not be liable to the Borrower Representative or any Borrower for any action taken or omitted to be taken by the Borrower Representative or the Borrowers pursuant to this Section 12.01 .
SECTION 12.02.      Powers. The Borrower Representative shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Borrower Representative by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Borrower Representative shall have no implied duties to the Borrowers, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Borrower Representative.
SECTION 12.03.      Employment of Agents. The Borrower Representative may execute any of its duties as the Borrower Representative hereunder and under any other Loan Document by or through authorized officers.
SECTION 12.04.      Notices. Each Borrower shall immediately notify the Borrower Representative of the occurrence of any Default or Unmatured Default hereunder referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a “ notice of default .” In the event that the Borrower Representative receives such a notice, the Borrower Representative shall give prompt notice thereof to the

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Administrative Agent and the Lenders. Any notice provided to the Borrower Representative hereunder shall constitute notice to each Borrower on the date received by the Borrower Representative.
SECTION 12.05.      Successor Borrower Representative. Upon the prior written consent of the Administrative Agent, the Borrower Representative may resign at any time, such resignation to be effective upon the appointment of a successor Borrower Representative. The Administrative Agent shall give prompt written notice of such resignation to the Lenders.
SECTION 12.06.      Execution of Loan Documents; Borrowing Base Certificate. The Borrowers hereby empower and authorize the Borrower Representative, on behalf of the Borrowers, to execute and deliver to the Administrative Agent, the Multicurrency Administrative Agent and the Lenders the Loan Documents and all related agreements, certificates, documents, or instruments as shall be necessary or appropriate to effect the purposes of the Loan Documents, including, without limitation, the Borrowing Base Certificates and the Compliance Certificates. Each Borrower agrees that any action taken by the Borrower Representative or the Borrowers in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Borrower Representative of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Borrowers.
SECTION 12.07.      Reporting. Each Borrower hereby agrees that such Borrower shall furnish to the Borrower Representative a copy of its Borrowing Base Certificate and any other certificate or report required hereunder or requested by the Borrower Representative on which the Borrower Representative shall rely to prepare the Borrowing Base Certificates and Compliance Certificate required pursuant to the provisions of this Agreement promptly after such Borrowing Base Certificate or other certificate or report is required to be delivered hereunder.



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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
LEVI STRAUSS & CO., as U.S. Borrower
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Vice President and Global Treasurer
LEVI STRAUSS & CO. (CANADA) INC.,
as Canadian Borrower
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Treasurer
OTHER LOAN PARTIES:

LEVI’S ONLY STORES, INC.
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Treasurer and Vice President
LEVI STRAUSS INTERNATIONAL, INC.
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Vice President and Treasurer
LVC, LLC
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Treasurer

    

S-1
         


LEVI’S ONLY STORES GEORGETOWN, LLC
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Treasurer
LEVI STRAUSS, U.S.A., LLC
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Vice President and Treasurer
LEVI STRAUSS-ARGENTINA, LLC
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Vice President and Treasurer

LEVI STRAUSS INTERNATIONAL
By:
/s/ Johan Nystedt    
Name:    Johan Nystedt
Title:    Vice President and Treasurer
JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent, an Issuing Bank and the Swingline Lender
By:
/s/ Annaliese Fisher    
Name:    Annaliese Fisher
Title:    Authorized Officer
JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, individually and as Multicurrency Administrative Agent
By:
/s/ Auggie Marchetti    
Name:    Auggie Marchetti
Title:    Authorized Officer

S-2
         


JPMORGAN CHASE BANK, N.A., as Lender
By:
/s/ Annaliese Fisher    
Name:    Annaliese Fisher
Title:    Authorized Officer
JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Lender
By:
/s/ Auggie Marchetti    
Name:    Auggie Marchetti
Title:    Authorized Officer
BANK OF AMERICA, N.A., as Lender
By:
/s/ Monirah J. Masud    
Name:    Monirah J. Masud
Title:    Senior Vice President
BANK OF AMERICA, N.A. (CANADA BRANCH), as Lender
By:
/s/ Medina Sales de Andrade    
Name:    Medina Sales de Andrade
Title:    Vice President
WELLS FARGO BANK, N.A., as Lender
By:
/s/ Krista Mize    
Name:    Krista Mize
Title:    Authorized Signatory
WELLS FARGO CAPITAL FINANCE CORPORATION CANADA, as Lender
By:
/s/ Domenic Consentino    
Name:    Domenic Consentino
Title:    Vice President

S-3
         


HSBC BANK USA, N.A., as Lender
By:
/s/ Mark Gibbs    
Name:    Mark Gibbs
Title:    Vice President
HSBC BANK CANADA, as Lender
By:
/s/ Grant McFarlane    
Name:    Grant McFarlane
Title:    Assistant Vice President
By:
/s/ Michael Chung    
Name:    Michael Chung
Title:    Senior Corporate Banking Manager
GOLDMAN SACHS BANK USA, as Lender
By:
/s/ Rebecca Kratz    
Name:    Rebecca Kratz
Title:    Authorized Signatory
GOLDMAN SACHS LENDING PARTNERS LLC, as Lender
By:
/s/ Rebecca Kratz    
Name:    Rebecca Kratz
Title:    Authorized Signatory
DEUTSCHE BANK AG NEW YORK BRANCH, as Lender
By:
/s/ Peter Cucchiara    
Name:    Peter Cucchiara
Title:    Vice President
By:
/s/ Michael Winters_____________
Name:    Michael Winters
Title:    Vice President

S-4
         


DEUTSCHE BANK AG CANADA BRANCH, as Lender
By:
/s/ Peter Uffelmann    
Name:    Peter Uffelmann
Title:    Vice President
By:
/s/ David Gynn_____________
Name:    David Gynn
Title:    Chief Financial Officer
UNION BANK, N.A., as Lender
By:
/s/ Nadia Mitevska    
Name:    Nadia Mitevska
Title:    Vice President
UNION BANK, CANADA BRANCH, as Lender
By:
/s/ Anne Collins    
Name:    Anne Collins
Title:    Vice President
PNC BANK, N.A., as Lender
By:
/s/ Steve Roberts    
Name:    Steve Roberts
Title:    Vice President
BNP PARIBAS, as Lender
By:
/s/ Guelay Mese    
Name:    Guelay Mese
Title:    Director
By:
/s/ Pierre Francois Chequet    
Name:    Pierre Francois Chequet
Title:    Managing Director

S-5
         


SUNTRUST BANK, as Lender
By:
/s/ Angela Leake    
Name:    Angela Leake
Title:    Director
ROYAL BANK OF CANADA, as Multicurrency Revolving Lender
By:
/s/ Stuart Coulter    
Name:    Stuart Coulter
Title:    Attorney in Fact
By:
/s/ Francois Thibaudeau_________
Name:    Francois Thibaudeau
Title:    Attorney in Fact
ROYAL BANK OF CANADA, as U.S. Revolving Lender
By:
/s/ Daniel Gioia    
Name:    Daniel Gioia
Title:    Authorized Signatory
By:
/s/ Philippe Pepin_________
Name:    Philippe Pepin
Title:    Authorized Signatory
THE BANK OF NOVA SCOTIA, as Lender
By:
/s/ Diane Emanuel    
Name:    Diane Emanuel
Title:    Managing Director
BANK OF THE WEST, as Lender
By:
/s/ Rochelle Dineen    
Name:    Rochelle Dineen
Title:    Director

S-6
         


COMMITMENT SCHEDULE
Lender
U.S. Commitment
Multicurrency Commitment
Commitment
JPMorgan Chase Bank, N.A.
$148,235,000
$0
$148,235,000
JPMorgan Chase Bank, N.A., Toronto Branch
$0
$11,765,000
$11,765,000
Bank of America, N.A.
$136,471,000
$0
$136,471,000
Bank of America, N.A. (Canada Branch)
$0
$8,529,000
$8,529,000
Wells Fargo Bank, N.A.
$89,412,000
$0
$89,412,000
Wells Fargo Capital Finance Corporation Canada
$0
$5,588,000
$5,588,000
HSBC Bank USA, N.A.
$84,706,000
$0
$84,706,000
HSBC Bank Canada
$0
$5,294,000
$5,294,000
Goldman Sachs Bank USA
$44,706,000
$0
$44,706,000
Goldman Sachs Lending Partners LLC
$0
$2,794,000
$2,794,000
Deutsche Bank AG New York Branch
$44,706,000
$0
$44,706,000
Deutsche Bank AG Canada Branch
$0
$2,794,000
$2,794,000
Union Bank, N.A.
$37,647,000
$0
$37,647,000
Union Bank, Canada Branch
$0
$2,353,000
$2,353,000
PNC Bank, N.A.
$40,000,000
$0
$40,000,000
BNP Paribas
$37,647,000
$2,353,000
$40,000,000
SunTrust Bank
$37,647,000
$2,353,000
$40,000,000
Royal Bank of Canada
$37,647,000
$2,353,000
$40,000,000
The Bank of Nova Scotia
$37,647,000
$2,353,000
$40,000,000
Bank of the West
$23,529,000
$1,471,000
$25,000,000
Total
$800,000,000
$50,000,000
$850,000,000




         


Exhibit 10.16

EXHIBIT A
[FORM OF] ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the “ Assignor ”) and [ Insert name of Assignee ] (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and other rights of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
1.
Assignor:    ______________________________
2.
Assignee:    ______________________________
[and is an Affiliate/Approved Fund of [ identify Lender ] 1 ]
3.
Borrowers:    LEVI STRAUSS & CO. (the U.S. Borrower) and LEVI STRAUSS & CO. (CANADA) INC. (the Canadian Borrower)
____________________
1    Select as applicable.

Exhibit A-1
         

4.
Administrative Agents:    JPMORGAN CHASE BANK, N.A., as the administrative agent under the Credit Agreement and JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as the multicurrency administrative agent under the Credit Agreement
5.
Credit Agreement:    The $850,000,000 Amended and Restated Credit Agreement dated as of March 21, 2014, among LEVI STRAUSS & CO. (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC. (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Multicurrency Administrative Agent, and the other agents parties thereto
6.
Assigned Interest:
Facility Assigned 2
Aggregate Amount of Commitment/Loans for all Lenders
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/Loans 3
 
$
$
%
 
$
$
%
 
$
$
%

Effective Date: [_____________ ___, 20___] [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more Credit Contacts to whom all syndicate-level information (which may contain material non-public information about the Borrowers, the Loan Parties and their Related Parties or their respective securities, so long as the Assignee agrees to keep such information confidential) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.
The terms set forth in this Assignment and Assumption are hereby agreed to:
____________________
2
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., “U.S. Commitment,” “Multicurrency Commitment,” etc.)
3    Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.


Exhibit A-2
         

ASSIGNOR

[NAME OF ASSIGNOR]
By:    _____________________________
Title:    
ASSIGNEE

[NAME OF ASSIGNEE]
By:    ______________________________
Title:
Consented to and Accepted:

JPMORGAN CHASE BANK, N.A., as
Administrative Agent
By: __________________________________
Title:        
Consented to and Accepted:

LEVI STRAUSS & CO.
By: ____________________________________
Title:    
Consented to and Accepted:

[NAME OF EACH ISSUING BANK]
By: ____________________________________
Title:    




Exhibit A-3
         


ANNEX 1
LEVI STRAUSS & CO.
SENIOR SECURED REVOLVING CREDIT FACILITY

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.     Representations and Warranties .
1.1     Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of any Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by any Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
1.2.     Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Non-U.S. Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

Annex I-1
         


2.     Payments . From and after the Effective Date, the Applicable Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3.     General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.
Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or other electronic transmission (including portable document format (“. pdf ”) or similar format) shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.



Annex I-2
         


EXHIBIT D
[FORM OF] COMPLIANCE CERTIFICATE
To:
The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Amended and Restated Credit Agreement dated as of March 21, 2014 (as amended, modified, renewed or extended from time to time, the “ Agreement ”), among Levi Strauss & Co. and Levi Strauss & Co. (Canada) Inc . (the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders and as an Issuing Bank and JPMorgan Chase Bank, N.A., Toronto Branch, as Multicurrency Administrative Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES, IN [HIS/HER] CAPACITY AS AN OFFICER OF THE BORROWER REPRESENTATIVE, AND NOT INDIVIDUALLY, THAT:
1.    I am the duly elected [____________] 1 of the Borrower Representative;
2.    I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the U.S. Borrower and its Subsidiaries during the accounting period covered by the financial statements identified on Schedule I attached hereto [for quarterly or monthly financial statements add: and such financial statements present fairly in all material respects the financial condition and results of operations of the U.S. Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it being acknowledged and agreed that such financial statements will not be subsequently audited on a quarterly or monthly basis)];
3.    The examinations described in paragraph 2 did not disclose, except as set forth below, and I have no knowledge of (i) the existence of any condition or event which constitutes a Default during or at the end of the accounting period covered by the financial statements identified on Schedule I attached hereto or as of the date of this Certificate or (ii) any change in GAAP or in the application thereof that has occurred since the date of the audited financial statements referred to in Section 3.04 of the Agreement;
___________________________
1    Fill in appropriate officer (e.g., chief financial officer, principal accounting officer, treasurer, controller or assistant treasurer of the U.S. Borrower).


Exhibit D-1
         


4.    I hereby certify that no Loan Party has changed (i) its name, (ii) its chief executive office, (iii) principal place of business, (iv) the type of entity it is or (v) its state of incorporation or organization without having given the Administrative Agent the notice required by Section 4.15 of the U.S. Security Agreement and by Section 4.15 of the Canadian Security Agreement;
5.     Schedule II attached hereto sets forth financial data and computations evidencing the Borrowers’ compliance with Section 6.14 of the Agreement, all of which data and computations are true, complete and correct; and
6.    [ Schedule III hereto sets forth the computations necessary to determine the Applicable Rate commencing on the Business Day this certificate is delivered.]
Described below are the exceptions, if any, to paragraph 3 by listing, in reasonable detail, the (i) nature of the condition or event, the period during which it has existed and the action which the Borrowers have taken, are taking, or propose to take with respect to each such condition or event or (ii) the change in GAAP or the application thereof and the effect of such change on the financial statements identified on Schedule I attached hereto:
 
 
 
The foregoing certifications, together with the computations set forth in Schedule II [and Schedule III hereto] delivered with this Certificate in support hereof, are made and delivered this [____ day of _________, ______].
LEVI STRAUSS & CO., as
Borrower Representative
By:    ________________________________
Name:
Title:



Exhibit D-2
         


SCHEDULE I
Financial Statements

Schedule II-1
         


SCHEDULE II
Compliance as of [_________, ____] with
Provisions of Section 6.14 of the Agreement
A.    Consolidated EBITDA for the twelve Fiscal Months most recently ended (the “ Measurement Period ”)”

1. Consolidated Net Income for the Measurement Period
$_____________
2. The provision for taxes based on income or profits or utilized in computing net loss for the Measurement Period
$_____________
3. Consolidated Interest Expense for the Measurement Period
$_____________
4. Depreciation for the Measurement Period
$_____________
5. Amortization of intangibles for the Measurement Period
$_____________
6. For the Measurement Period, any non-recurring expenses relating to, or arising from, any closures of facilities; any restructuring costs; facilities relocation costs; and integration costs and fees (including cash severance payments) made in connection with acquisitions, in an aggregate amount for all such expenses pursuant to item 6 not to exceed 15% of Consolidated EBITDA for such Measurement Period prior to giving effect to this item 6
$_____________
7. Any non-cash impairment charge or asset write-off (other than any such charge or write-off of Inventory) and the amortization of intangibles for the Measurement Period
$_____________
8. Inventory purchase accounting adjustments and amortization and impairment charges resulting from other purchase accounting adjustments in connection with acquisitions for the Measurement Period
$_____________
9. Fees and expenses related to any offering of securities, Investments permitted hereby, acquisition and incurrence of Indebtedness permitted to be incurred hereunder (whether or not successful) for the Measurement Period
$_____________
10. Any other non-cash items (other than any non-cash item to the extent that it represents an accrual of or reserve for cash expenditures in any future period) for the Measurement Period
$_____________
11. All non-cash items increasing Consolidated Net Income for the Measurement Period (other than any such non-cash item to the extent that it has resulted or will result in the receipt of cash payments in any period).
$_____________
 
 
12. Consolidated EBITDA [A.1+A.2+A.3+A.4+A.5+A.6+A.7+A.8+A.9+A.10-A.11]
$_____________

B. Consolidated Fixed Charge Coverage Ratio (Section 6.14)


Schedule II-2
         


1. Consolidated EBITDA for the Measurement Period (A.12)
$_____________
2. Aggregate amount of all Consolidated Capital Expenditures made by the U.S. Borrower and is Subsidiaries during the Measurement Period
$_____________
3. Federal, state, local and foreign income taxes paid in cash during the Measurement Period
$_____________
4. Consolidated Interest Expense for the Measurement Period
$_____________
5. Amount of Restricted Payments made by the U.S. Borrower during the Measurement Period in reliance on the proviso to Section 6.08(a)
$_____________
6. Aggregate principal amount (or the equivalent thereto) of all scheduled repayments of Indebtedness (other than (x) intercompany Indebtedness, (y) payments of Existing Yen Notes and (z) payments of Existing Euro Notes) made by the U.S. Borrower and any other Loan Party during the Measurement Period (other than to the extent such Indebtedness has been refinanced or defeased, or with respect to which restricted cash has been set aside to repay, during such period from the proceeds of new Indebtedness that is not secured by any Collateral)
$_____________
 
 
7. Consolidated Fixed Charge Coverage Ratio [B1-(B2+B3)] : [B4+B5+B6]
___ to 1.00
 
 
8. Minimum required Consolidated Fixed Charge Coverage Ratio
1.00 to 1.00



Schedule II-3
         


SCHEDULE III
Borrowers’ Applicable Rate Calculation
Requirement : The computations necessary to determine the Applicable Rate commencing on the Business Day this certificate is delivered.

Response : As of [           ], 201[  ], for the Fiscal Quarter ended [             ], 201[  ], Average Availability was $[     ], which was [   ]% of the Line Cap as of such date. Accordingly, as of the date hereof, the Applicable Rate shall be based on Level [  ] in the grid set forth in the definition of “Applicable Rate” in the Credit Agreement.



Schedule III-1
         


EXHIBIT E-1
[FORM OF] U.S. JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this “ Agreement ”), dated as of __________, ____, 20__, is entered into between ________________________________, a _________________ (the “ New Subsidiary ”) and JPMORGAN CHASE BANK, N.A., in its capacity as administrative agent (the “ Administrative Agent ”) under that certain Amended and Restated Credit Agreement dated as of March 21, 2014 (as the same may be amended, modified, extended or restated from time to time, the “ Credit Agreement ”) among Levi Strauss & Co. and Levi Strauss & Co. (Canada) Inc. (the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, the Administrative Agent for the Lenders and JPMorgan Chase Bank, N.A., Toronto Branch, as Multicurrency Administrative Agent for the Lenders. All capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.
The New Subsidiary and the Administrative Agent, for the benefit of the Lenders, hereby agree as follows:
1.    The New Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the New Subsidiary will become (i) a U.S. Loan Party under the Credit Agreement and a “U.S. Loan Guarantor” for all purposes of the Credit Agreement and shall have all of the obligations of a U.S. Loan Party and a U.S. Loan Guarantor thereunder as if it had executed the Credit Agreement and (ii) a Grantor under the U.S. Security Agreement and shall have all of the obligations of a Grantor thereunder as if it had executed the U.S. Security Agreement. The New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Agreement and the U.S. Security Agreement, including without limitation (a) all of the representations and warranties of the Loan Parties set forth in Article III of the Credit Agreement and in the U.S. Security Agreement, (b) all of the covenants set forth in Articles V and VI of the Credit Agreement and all of the covenants and grants of security interests in the U.S. Security Agreement, (c) all of the guaranty obligations set forth in Article X and Article XI of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary (1) subject to the limitations set forth in Sections 10.10 and 11.10 of the Credit Agreement, hereby guarantees, jointly and severally with the other U.S. Loan Guarantors, to the U.S. Lender Parties, as provided in Article X and Article XI of the Credit Agreement, the prompt payment and performance of the U.S. Guaranteed Obligations and the Canadian Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and agrees that if any of the U.S. Guaranteed Obligations or Canadian Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the New Subsidiary will, jointly and severally together with the other U.S. Loan Guarantors and, in the case of the Canadian Secured Obligations, the Canadian Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the U.S. Guaranteed Obligations and

Exhibit E-1-1
         


Canadian Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal and (2) grants a security interest to the Administrative Agent for the benefit of the U.S. Lender Parties in all of the Collateral (as defined in the U.S. Security Agreement) now or hereinafter owned by such New Subsidiary to secure the Secured Obligations.
2.    If required, the New Subsidiary is, simultaneously with the execution of this Agreement, executing and delivering such Collateral Documents (and such other documents and instruments) as requested by the Administrative Agent in accordance with the Credit Agreement.
3.    The address of the New Subsidiary for purposes of Section 9.01 of the Credit Agreement is as follows:
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
4.    The New Subsidiary hereby waives acceptance by the Administrative Agent and the U.S. Lender Parties of the guarantee and grant of security interest hereunder by the New Subsidiary upon the execution of this Agreement by the New Subsidiary.
5.    This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.
6.    THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by its authorized officer, and the Administrative Agent, for the benefit of the U.S. Lender Parties, has caused the same to be accepted by its authorized officer, as of the day and year first above written.
[NEW SUBSIDIARY]
By:    ________________________________
Name:    
Title:

Acknowledged and accepted:

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

Exhibit E-1-2
         


By:    ________________________________
Name:
Title:


Exhibit E-1-3
         



EXHIBIT E-2
[FORM OF] CANADIAN JOINDER AGREEMENT

THIS JOINDER AGREEMENT (this “ Agreement ”), dated as of __________, ____, 20__, is entered into between ________________________________, a _________________ (the “ New Subsidiary ”) and JPMORGAN CHASE BANK, N.A., Toronto Branch, in its capacity as multicurrency administrative agent (the “ Multicurrency Administrative Agent ”) under that certain Amended and Restated Credit Agreement, dated as of March 21, 2014 (as the same may be amended, modified, extended or restated from time to time, the “ Credit Agreement ”) among Levi Strauss & Co. and Levi Strauss & Co. (Canada) Inc. (the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, the Multicurrency Administrative Agent and JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders. All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement.
The New Subsidiary and the Multicurrency Administrative Agent, for the benefit of the Lenders, hereby agree as follows:
1. The New Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the New Subsidiary will become (i) a Canadian Loan Party under the Credit Agreement and a “ Canadian Guarantor ” for all purposes of the Credit Agreement and shall have all of the obligations of a Canadian Loan Party and a Canadian Guarantor thereunder as if it had executed the Credit Agreement and (ii) a “Grantor” for all purposes of the Canadian Security Agreement and shall have all of the obligations of a Grantor thereunder as if it had executed the Canadian Security Agreement. The New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Agreement and the Canadian Security Agreement, including without limitation (a) all of the representations and warranties of the Loan Parties set forth in Article III of the Credit Agreement and in the Canadian Security Agreement, (b) all of the covenants set forth in Articles V and VI of the Credit Agreement and in the Canadian Security Agreement and (c) all of the guarantee obligations set forth in Article XI of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary (1) subject to the limitations set forth in Section 11.10 of the Credit Agreement, hereby guarantees, jointly and severally with the other Loan Guarantors, to the Canadian Administrative Agent and the Multicurrency Lender Parties, as provided in Article XI of the Credit Agreement, the prompt payment and performance of the Canadian Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and agrees that if any of the Canadian Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the New Subsidiary will, jointly and severally together with the other Loan Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Canadian Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal and (2) grants a security interest to the Administrative Agent for the benefit of the Multicurrency Lender Parties in all of the Collateral (as defined in the Canadian Security Agreement) now or hereinafter owned by such New Subsidiary to secure the Canadian Secured Obligations.

Exhibit E-2-1
         


2.      If required, the New Subsidiary is, simultaneously with the execution of this Agreement, executing and delivering such Collateral Documents (and such other documents and instruments) as requested by the Multicurrency Administrative Agent in accordance with the Credit Agreement.
3.      The address of the New Subsidiary for purposes of Section 9.01 of the Credit Agreement is as follows:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

4.      The New Subsidiary hereby waives acceptance by the Multicurrency Administrative Agent and the Multicurrency Lender Parties of the guarantee and grant of security interest hereunder by the New Subsidiary upon the execution of this Agreement by the New Subsidiary.
5.      This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.
6.      THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by its authorized officer, and the Multicurrency Administrative Agent, for the benefit of the Multicurrency Lender Parties, has caused the same to be accepted by its authorized officer, as of the day and year first above written.
[NEW SUBSIDIARY]

By:__________________________________________
Name:________________________________________
Title:_________________________________________


Acknowledged and accepted:

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Multicurrency Administrative Agent

By:__________________________________________
Name:________________________________________
Title:_________________________________________




Exhibit E-2-2
         


EXHIBIT F-1
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to that certain Amended and Restated Credit Agreement, dated as of March 21, 2014 (as it may be amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ,”) among LEVI STRAUSS & CO., a Delaware corporation (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC., an Ontario corporation (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMORGAN CHASE BANK, N.A., as the Administrative Agent, and JPMORGAN CHASE BANK, N.A.. TORONTO BRANCH, as the Multicurrency Administrative Agent. Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 2.17(f) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the U.S. Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the U.S. Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments on the Loan(s) are not effectively connected with the undersigned’s conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Borrower Representative with a certificate of its non-U.S. person status on Internal Revenue Service Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, or if a lapse in time or change in circumstances renders the information on this certificate obsolete, expired or inaccurate in any material respect, the undersigned shall promptly so inform the Borrower Representative and the Administrative Agent in writing and deliver promptly to the Borrower Representative and the Administrative Agent an updated certificate or other appropriate documentation (including any new documentation reasonably requested by the Borrower Representative or the Administrative Agent) or promptly notify the Borrower Representative and the Administrative Agent in writing of its inability to do so, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned or at such times as are reasonably requested by the Borrower Representative and the Administrative Agent.
[NAME OF LENDER]
By:   ______________________________________
Name:
Title:
Date: ________ __, 20[ ]


Exhibit F-1-1
         


EXHIBIT F-2
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to that certain Amended and Restated Credit Agreement, dated as of March 21, 2014 (as it may be amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ,”) among LEVI STRAUSS & CO., a Delaware corporation (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC., an Ontario corporation (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMORGAN CHASE BANK, N.A., as the Administrative Agent, and JPMORGAN CHASE BANK, N.A.. TORONTO BRANCH, as the Multicurrency Administrative Agent. Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of 2.17(f) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the U.S. Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the U.S. Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments on the Loan(s) are not effectively connected with the conduct of a U.S. trade or business of the undersigned or any of its direct or indirect partners/members that is claiming the portfolio interest exemption.
The undersigned has furnished the Administrative Agent and the Borrower Representative with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, or if a lapse in time or change in circumstances renders the information on this certificate obsolete, expired or inaccurate in any material respect, the undersigned shall promptly so inform the Borrower Representative and the Administrative Agent in writing and deliver promptly to the Borrower Representative and the Administrative Agent an updated certificate or other appropriate documentation (including any new documentation reasonably requested by the Borrower Representative or the Administrative Agent) or promptly notify the Borrower Representative and the Administrative Agent in writing of its inability to do so, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned or

Exhibit F-2-1
         


at such times as are reasonably requested by the Borrower Representative and the Administrative Agent.
[NAME OF LENDER]
By: ______________________________________
Name:
Title:
Date: ________ __, 20[ ]


Exhibit F-2-2
         


EXHIBIT F-3
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to that certain Amended and Restated Credit Agreement, dated as of March 21, 2014 (as it may be amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ,”) among LEVI STRAUSS & CO., a Delaware corporation (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC., an Ontario corporation (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMORGAN CHASE BANK, N.A., as the Administrative Agent, and JPMORGAN CHASE BANK, N.A.. TORONTO BRANCH, as the Multicurrency Administrative Agent. Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 2.17(f) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the U.S. Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the U.S. Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments with respect to such participation are not effectively connected with the undersigned’s conduct of a U.S. trade or business.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. person status on an Internal Revenue Service Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, or if a lapse in time or change in circumstances renders the information on this certificate obsolete, expired or inaccurate in any material respect, the undersigned shall promptly so inform such Lender in writing and deliver promptly to such Lender an updated certificate or other appropriate documentation (including any new documentation reasonably requested by such Lender) or promptly notify such Lender in writing of its inability to do so, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned or at such times as are reasonably requested by such Lender.

[NAME OF PARTICIPANT]
By: ______________________________________
Name:
Title:
Date: ________ __, 20[ ]


Exhibit F-3-1
         


EXHIBIT F-4
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to that certain Amended and Restated Credit Agreement, dated as of March 21, 2014 (as it may be amended, supplemented, restated or otherwise modified from time to time, the “ Credit Agreement ,”) among LEVI STRAUSS & CO., a Delaware corporation (the “ U.S. Borrower ”), LEVI STRAUSS & CO. (CANADA) INC., an Ontario corporation (the “ Canadian Borrower ” and together with the U.S. Borrower, the “ Borrowers ”), the other Loan Parties party thereto, the Lenders party thereto, JPMORGAN CHASE BANK, N.A., as the Administrative Agent, and JPMORGAN CHASE BANK, N.A.. TORONTO BRANCH, as the Multicurrency Administrative Agent. Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of 2.17(f) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the U.S. Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the U.S. Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments with respect to such participation are not effectively connected with the conduct or a U.S. trade or business by the undersigned or any of its direct or indirect partners/members that is claiming the portfolio interest exemption.
The undersigned has furnished its participating Lender with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, or if a lapse in time or change in circumstances renders the information on this certificate obsolete, expired or inaccurate in any material respect, the undersigned shall promptly so inform such Lender in writing and deliver promptly to such Lender an updated certificate or other appropriate documentation (including any new documentation reasonably requested by such Lender) or promptly notify such Lender in writing of its inability to do so, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned or at such times as are reasonably requested by such Lender.


Exhibit F-4-1
         


[NAME OF PARTICIPANT]
By: ______________________________________
Name:
Title:
Date: ________ __, 20[ ]


Exhibit F-4-2
         


Exhibit 10.22



January 6, 2014

Craig Nomura

Dear Craig,

I am delighted to confirm our offer of employment to join Levi Strauss & Co. (LS&Co.) as EVP & President, Global Retail, reporting to me. Please Note : This offer is contingent upon successful completion of a background screen. You should not take any steps in reliance on this offer until you have successfully completed the background screen. The details of our offer are as follows:

Start Date

Your start date is February 3, 2014.

Salary

Your starting annual salary will be $580,000.

Signing Bonus

You will receive a signing bonus in the amount of $880,000 (less applicable taxes and withholdings) paid in two installments. The first installment in the amount of $580,000 paid within 30 days of your Start Date and the remaining $300,000 will be paid on the one year anniversary of your Start Date.

The signing bonus is offered in anticipation of the contributions you will make to our business over time. Your entitlement to retain the full amount of the signing bonus is contingent on the following terms and conditions:

•
For the first payment of $580,000, in the event that you resign your employment or you are terminated For Cause at any time before completing at least twelve (12) months of employment, you will be required to repay 100% of this bonus or $580,000. In the event that you resign or are terminated For Cause after completing twelve (12) months of employment but before completing twenty-four (24) months of employment, you will be required to pay back 50% or $290,000 of this bonus. Any repayment will be due within ninety (90) days of your last day of employment.

•
In addition to the above, for the second installment of $300,000, in the event that you resign your employment or are terminated For Cause anytime within one year after this payment is made, you will be required to repay 100% of this bonus installment within ninety (90) days of your last day of employment.




Nomura - 2


Any bonus repayment owed by you to LS&Co. may be deducted in whole or in part from any final payments due to you, to the fullest extent allowed by law. For Cause is defined as: (1) insubordination and/or failure to follow specific directions from your leadership team; (2) theft, fiscal mismanagement, or related improper conduct; (3) misrepresentation; (4) criminal activity of any type; (5) breach of the LS&Co. Worldwide Code of Business Conduct; or (6) gross negligence related to the performance of your work, and related reasons.

We will provide you with our standard Signing Bonus Acknowledgment and Payback Agreement. Please sign and return the Payback Agreement.

Annual Incentive Plan

Your target participation in the Annual Incentive Program (AIP) is 70% of your base salary, with a 2014 target value of $406,000. For fiscal 2014 only, you will be guaranteed to receive at least a target bonus. Bonuses for fiscal 2014 are scheduled for payment in February 2015 and you must be employed by LS&Co. on the payment date. LS&Co. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Long-Term Incentives

Your offer includes long-term incentive award(s), which give you the opportunity to share in LS&Co.’s success over time. Subject to Board approval and the provisions of the LS&Co.’s equity incentive plan for fiscal 2014, you will receive an initial grant of Stock Appreciation Rights (SARs) with a grant date target value of $550,000. In addition, you will also receive a special one-time SAR grant with a grant date target value of $400,000. The strike price will be equal to the fair market value of LS&Co. stock as determined by a third party valuation firm and approved by the Board of Directors in February 2014. 60% of both awards will vest 25% after the first year and monthly thereafter for years two through four. Subject to achievement of performance goals, the remaining 40% of both awards will vest 100% after the end of year three. In any event, you must be employed on the vesting dates.

You may also be eligible for additional long-term incentives in effect during your employment with LS&Co. The Company has the right to modify the program at any time including, but not limited to the target grant value.

Benefits

Our offer also includes participation in our flexible benefits program. There are a number of benefit options available to you in the areas of health care and life insurance, as well as our long-term savings programs which provide important tax advantages for your savings.

You are eligible to participate in the executive perquisite programs associated with a position at your level. The total benefit of these programs, including parking and the perquisite cash allowance, is approximately $15,000 annually.

You are eligible to accrue four (4) weeks of TOPP (Time Off with Pay Program) during your first year of employment.

Worldwide Code of Business Conduct




Nomura - 3


LS&Co.'s Worldwide Code of Business Conduct (WCOBC) sets out basic principles to guide all employees of the Company on how LS&Co. conducts business, while at the same time provides helpful guideposts for behavior while on the job. Compliance with the WCOBC is a fundamental condition of employment, and employees are required to sign a Statement of Commitment agreeing to abide by the principles
set forth in the document. LS&Co.'s WCOBC is available for review on our website at
http://www.levistrauss.com/careers/culture .

Non-Solicitation of Employees

In order to protect Confidential Information (as defined in the enclosed “Employee Invention and Confidentiality Agreement”), you agree that so long as you are employed by LS&Co., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of LS&Co.’s employees or in any way encourage any LS&Co. employee to leave their employment with LS&Co. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with LS&Co.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with LS&Co.

Non-Disparagement

You agree now, and after your employment with the LS&Co. terminates not to, directly or indirectly, disparage LS&Co. in any way or to make negative, derogatory or untrue statements about LS&Co., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.

Other

You will need to provide evidence that you are legally authorized to work in the United States. Please refer to the attached sheet for the type of evidence required according to the government’s I-9 regulations. Your employment is specifically conditioned upon your providing this information within 72 hours of your start date.

At-Will Employment

LS&Co. expects your association with the company will be mutually beneficial. Nonetheless, LS&Co. is an “at-will employer,” which means you or LS&Co. can terminate your employment at LS&Co. at any time with or without cause, and with or without notice. Only the President & CEO or Senior Vice President & CHRO can authorize an employment agreement to the contrary and then such employment agreement must be in writing.

Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer of employment. Please review and sign this letter and the attached Employee Invention and Confidentiality Agreement. We must receive your signed letter and Agreement before or on your first day of employment. You may keep one original for your personal records. This offer is valid only until January 13, 2014 and may be withdrawn at any time prior to your acceptance.




Nomura - 4


Craig, we are very excited about you joining the company. We are confident that you will make a valuable contribution to LS&Co.’s business.

Sincerely,




Chip Bergh President & CEO




Signed:



_______________________________         _______________________________
Craig Nomura    Date

Attached:
Employee Invention and Confidentiality Agreement
Signing Bonus Acknowledgment and Payback Agreement






Initial Bonus Acknowledgement & Payback Agreement



_______________________________________________________________________________________________

The purpose of this agreement is to acknowledge that I received a bonus as part of my employment offer from Levi Strauss & Co. (LS&Co.)

If I resign from LS&Co. prior to completing two years of service, or if my employment is terminated For Cause before two years of service, I agree to repay all or a portion of the initial bonus I received per the terms and conditions described in my offer letter. For Cause is defined as: (1) insubordination and/or failure to follow specific directions from your leadership team; (2) theft, fiscal mismanagement, or related improper conduct; (3) misrepresentation; (4) criminal activity of any type; (5) breach of the LS&Co. Worldwide Code of Business Conduct; or (6) gross negligence related to the performance of your work, and related reasons.

I agree that any sum I owe may be deducted from any expense reimbursement due to me, but that if that deduction is insufficient to repay the initial bonus I received, or the agreed upon portion thereof, I will repay the balance to the Company within ninety days of my last day of employment. If I fail to timely pay the amount due, I understand that I will owe interest to LS&Co. at the legal rate, and that the Company may take action to collect the amount due and that I will be liable for collection costs, including any court costs and reasonable attorneys’ fees.





Employee Signature      Date     




Employee Name (printed)     








_________________________________________________________________________

EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT

In exchange for my employment and the wages or salary paid to me for my services during my employment with Levi Strauss & Co., or its parent companies, subsidiaries, or affiliates (collectively “the Company”), I agree:


1.
I will promptly disclose to the company all inventions, improvements, technical developments, copyrightable material, designs, drawings, data, ideas or other discoveries (collectively “Inventions”) which I may conceive or make solely, or which I may conceive or make jointly or in common with others, during the scope and course of my employment, and which pertain to (a) garment, fabric, sundry, product, label, accessory, fixture, store or website designs, (b) garment or textile methods, supplies and equipment, sources, vendors, or products, (c) facilities, machines, distribution methods, inventory control methods, or other know-how pertaining to the manufacture or treatment of garments or fabrics, or the distribution of finished goods, (d) other business of the Company, and (e) Inventions, improvements or technical developments which are made or developed or reduced to practice at the Company’s expense or pursuant to a Company research or development project. I agree that all such Inventions are and shall be the sole property of the Company.


(a)
I assign to the Company complete ownership of all the Inventions specified in this paragraph, together with ownership to all patent applications and patents (United States and foreign) which the Company may desire to secure with respect to the same, and all copyrights, trade or service marks, work rights or other intellectual property rights relating to these Inventions.

(b)
I will cooperate with the Company to secure the Company’s rights to the Inventions and to procurements of United States and foreign patents, copyrights, and trade or service marks on such Inventions, and particularly to disclose to the Company all pertinent information and data with respect thereto and execute all applications, specifications, oaths, assignments and all other instruments which the Company deems necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to these Inventions.

(c)
If, during my employment with the Company, I incorporate into any Invention under this Agreement any other invention, improvement, development, concept, discovery or other proprietary information owned by me or in which I have an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such Invention.

________________________________________________________________________________________






______________________________________________________________________________________________________________________________


2.
“Confidential Information” is any proprietary information, data, or trade secrets of the Company including, but not limited to, research, designs, product and business plans, forecasts, products, services, advertising, customers, customers lists, sourcing agreements, licensing agreements, vendor agreements, personnel information, markets, financial information, projections, software, developments, inventions, processes, formulas, technology, drawings, hardware, or other business information disclosed to me or made accessible to me by the Company to me directly or indirectly in writing, orally, electronically or by drawings, samples, parts or equipment, or in any other manner, I understand and agree that all Confidential Information pertaining to any aspect of the Company’s business made available, directly or indirectly, to me in my employment is proprietary information to be held in strict confidence and I will not disclose such information to third parties or use it for myself or for others without the prior written consent of the Company. I understand and agree that my obligation of confidentiality remains in effect both during and after the period of my employment with the Company, until this information becomes part of the public domain through no direct or indirect action by me.


3.
As soon as my employment with the Company ends, I will promptly deliver
to the Company all copies or other embodiments of Confidential Information in written or electronic form and all other drawings, blueprints, samples, manuals, letters, notes, notebooks, reports, electronic data, and all other materials relating to the Company’s business which are in my possession or under my control.


4.
This Agreement cannot be terminated or altered by changes in other terms of my employment, such as changes in duties, position or compensation, and will apply to the entire term of my employment, regardless of when I sign this Agreement, and will in no way alter the “at-will” nature of my employment. My employment may be terminated at any time by me or the Company with or without cause.


5.
I do not have any Invention, patented or unpatented, which I conceived or made before this date of my employment by the Company, whichever is later, except those I have described on Appendix A of this Agreement, which is an integral part of this Agreement. This Agreement does not apply
to any Invention that is covered fully by the provisions of Section 2870 of the
California Labor Code, the language of which is included in Appendix A.









________________________________________________________________________________________







______________________________________________________________________________________________________________________________

6. I understand that the Company is a private company. During my employment, I will make no public statements, to the press or otherwise, concerning the Company, its vendors, contractors, products, finances, practices, personnel, any of its plans or strategies, or any other aspect of its business without first obtaining the written permission of the head of corporate communications.


7. I understand and agree that a violation of the provisions of this Agreement will cause irreparable damage to the Company, and that it will be impossible to estimate or determine the damage that will be suffered by the Company in the event I breach any of its provision. Therefore, I agree that in the event of any violation or threatened violation of my obligations hereunder, the Company will be entitled, as a matter of course, to an injunction from any court of competent jurisdiction, restraining any violation or threatened violation by me, and that the Company’s right to an injunction is in addition to other remedies the Company may have.


8. If any provision of this Agreement is unenforceable, then the balance of all of its terms will nonetheless be enforceable.








EMPLOYEE:


Signature:      _



Name Printed:     





________________________________________________________________________________________




Exhibit 10.23

LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

SERVICE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “Stock Appreciation Rights” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein and in the Award Agreement, and the Plan.
Participant:
 
Date of Grant:
 
Vesting Commencement Date:
 
Number of Stock Appreciation Rights:
 
Strike Price (Fair Market Value Per Stock Appreciation Right on Date of Grant):


Expiration Date:
 
SAR Grant Number:
 

Vesting Schedule :
25% vesting on [DATE]; with the remaining 75% balance vesting at a rate of 2.08% per month beginning [DATE] and ending [DATE], all subject to the Continuous Service by Participant through the respective vesting dates.

Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: _____.

LEVI STRAUSS & CO.







By:  _______________________________________________________
         


Date: _________________________________

PARTICIPANT







__________________________________________________________



Date: _________________________________



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1.      VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time in accordance with Section 11(a) of the Plan.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)      immediately upon the termination of your Continuous Service for Cause;
(b)      three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;


(c)      eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)      eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)      the Expiration Date indicated in your Grant Notice; or
(f)      the day before the tenth (10th) anniversary of the Date of Grant.
6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)      You may exercise the vested portion of your Award during its term by delivering a Notice of Exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed Notice of Exercise is received by the Company. If the Notice of Exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)      As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)      By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in


this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.
12.      WITHHOLDING OBLIGATIONS.
(a)      At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.
(b)      Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).


(c)      You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a)      The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)      You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c)      You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in


whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)      This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)      All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)      Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)      The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)      This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)      All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)      The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)      The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)      In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)      In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may, in accordance with Section 7(c)(xi) of the Plan, rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the


amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)      The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)      No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)      The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.


LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

PERFORMANCE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “SARs” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein and in the Award Agreement, the Plan, and the resolutions of the Board of Directors of the Company dated [DATE] (the “Board Resolutions”).

Participant:
 
Date of Grant:
 
Performance Period:
 
Number of SARs at Threshold Performance:
 
Number of SARs at Base Case Performance:
 
Maximum Number of SARs:
 
Strike Price (Fair Market Value Per SAR on Date of Grant):


Expiration Date:
 
SAR Grant Number:
 


Performance Goals: The actual number of SARs under this Award that will vest at the end of a three-year period will be determined based on (1) the Company's average earnings before interest and taxes (“EBIT”) margin percentage; (2) the compound annual growth rate of the Company's net revenues over the three-year period; and (3) three-year TSR performance over the three-year period. In each case, the goals and the extent to which they have been achieved will be determined by the Board of Directors, in its sole discretion.

Performance Vesting: To the extent that the Performance Goals described above are achieved and SARs vest, as determined by the Board of Directors, then 100% of the earned SARs (which may range from the threshold number above to the maximum number above depending on achievement of the Performance Goals) shall vest on the date in [YEAR] that the Board of Directors certifies attainment (the “Certification Date”), all subject to Continuous Service by Participant through the Certification Date.

Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: _____.


    
LEVI STRAUSS & CO.

By:  _______________________________________________________
         


Date: _________________________________
PARTICIPANT
__________________________________________________________



Date: _________________________________



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1. VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time in accordance with Section 11(a) of the Plan.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)      immediately upon the termination of your Continuous Service for Cause;
(b)      three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;


(c)      eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)      eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)      the Expiration Date indicated in your Grant Notice; or
(f)      the day before the tenth (10th) anniversary of the Date of Grant.
6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)      You may exercise the vested portion of your Award during its term by delivering a notice of exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed notice of exercise is received by the Company. If the notice of exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)      As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)      By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in


this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.
12.      WITHHOLDING OBLIGATIONS.
(a)      At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.
(b)      Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).


(c)      You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a) The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)      You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c)      You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in


whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)      This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)      All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)      Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)      The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)      This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)      All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)      The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)      The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)      In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)      In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may, in accordance with Section 7(c)(xi) of the Plan, rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the


amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)      The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)      No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)      The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.


LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

PERFORMANCE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “Stock Appreciation Rights” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein and in the Award Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
Participant:
 
Date of Grant:
 
Performance Period:
Three-Year Period comprised of the Company’s Fiscal Years ending in 2013, 2014 and 2015
Number of Stock Appreciation Rights:
 
Strike Price (Fair Market Value Per Stock Appreciation Right on Date of Grant):


Expiration Date:
 
SAR Grant Number:
 

Performance Vesting: The Stock Appreciation Rights shall be subject to the following performance vesting matrix, with the performance to be determined by the Board of Directors on or before March 1, 2016, all subject to Continuous Service by Participant through the date of the determination of the performance by the Board of Directors.

 
Performance SAR Vesting Matrix -
Vested Percentage of Performance SARs Following Performance Period
 
3-Year Average EBIT Margin % Performance
Stretch Case
≥10.60%

0%
100%
100%
100%
100%
100%
 
 
10.05
%
0%
90%
100%
100%
100%
100%
 
Base Case

9.50%
0%
80%
90%
100%
100%
100%
 
 
9.25
%
0%
70%
80%
90%
100%
100%
 
Threshold Case
9.00
%
0%
50%
70%
80%
90%
100%
 
 
<9.00%

0%
0%
0%
0%
0%
0%
 
 
<1.80%
1.80%
2.55%
3.30%
4.55%
≥5.40%
 
 
Threshold Case
 
Base Case
 
Stretch Case
 
3-Year Average Net Revenue CAGR Performance
 

Both scales assume interpolation between performance levels and vested percentages listed above.


Any portion of the Stock Appreciation Rights that is not determined by the Board of Directors to have become vested based on performance during the Performance Period shall automatically terminate and become forfeited.
Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: None.
    
LEVI STRAUSS & CO.


By:  _______________________________________________________
         


Date: ____________________________________________________
PARTICIPANT










__________________________________________________________


Date: _________________________________


















LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1. VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time for Capitalization Adjustments.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)      immediately upon the termination of your Continuous Service for Cause;
(b)      three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that


prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;
(c)      eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)      eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)      the Expiration Date indicated in your Grant Notice; or
(f)      the day before the tenth (10th) anniversary of the Date of Grant.
6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)      You may exercise the vested portion of your Award during its term by delivering a Notice of Exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed Notice of Exercise is received by the Company. If the Notice of Exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)      As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)      By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any


hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.
12.      WITHHOLDING OBLIGATIONS.
(a)      At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.


(b)      Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).
(c)      You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a) The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)      You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.


(c)      You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)      This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)      All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)      Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)      The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)      This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)      All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)      The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)      The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part


of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)      In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)      In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)      The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)      No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)      The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect


to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

SERVICE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “Stock Appreciation Rights” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein and in the Award Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
Participant:
 
Date of Grant:
 
Vesting Commencement Date:
 
Number of Stock Appreciation Rights:
 
Strike Price (Fair Market Value Per Stock Appreciation Right on Date of Grant):


Expiration Date:
 
SAR Grant Number:
 
Vesting Schedule :
25% vesting on <<insert date>>; with the remaining 75% balance vesting at a rate of 2.08% per month beginning <<insert date>> and ending <<insert date>>, all subject to the Continuous Service by Participant through the respective vesting dates.
Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: None.
LEVI STRAUSS & CO.


By:  _______________________________________________________

Date: ____________________________________________________
PARTICIPANT










__________________________________________________________


Date: _________________________________



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1.      VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time for Capitalization Adjustments.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)      immediately upon the termination of your Continuous Service for Cause;
(b)      three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that


prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;
(c)      eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)      eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)      the Expiration Date indicated in your Grant Notice; or
(f)      the day before the tenth (10th) anniversary of the Date of Grant.
6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)      You may exercise the vested portion of your Award during its term by delivering a Notice of Exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed Notice of Exercise is received by the Company. If the Notice of Exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)      As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)      By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any


hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.
12.      WITHHOLDING OBLIGATIONS.
(a)      At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.


(b)      Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).
(c)      You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a)      The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)      You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.


(c)      You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)      This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)      All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)      Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)      The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)      This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)      All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)      The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)      The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part


of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)      In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)      In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)      The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)      No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)      The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect


to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.






LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

PERFORMANCE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “Stock Appreciation Rights” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein and in the Award Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
Participant:
 
Date of Grant:
 
Performance Period:
Three-Year Period comprised of the Company’s Fiscal Years ending in 2013, 2014 and 2015
Number of Stock Appreciation Rights:
 
Strike Price (Fair Market Value Per Stock Appreciation Right on Date of Grant):


Expiration Date:
 
SAR Grant Number:
 

Performance Vesting: The Stock Appreciation Rights shall be subject to the performance vesting matrix set forth below, with the performance determined by the Board of Directors on or before March 1, 2016, all subject to Continuous Service by Participant through the date of the determination of the performance by the Board of Directors, and, provided, that as a condition for any vesting of the Stock Appreciation Rights, the Company’s common stock must have a Fair Market Value (as such term is defined in the Plan) of not less than Fifty Dollars ($50) per share.

Performance SAR Vesting Matrix – Vested Percentage of Performance SARs
3-Year Average EBIT Margin % Performance
Stretch Case
≥10.60%
0%
20%
40%
60%
100%
 
10.05%
0%
0%
20%
40%
60%
Base Case
9.50%
0%
0%
0%
20%
40%
 
9.25%
0%
0%
0%
0%
20%
Threshold Case
≤9.00%
0%
0%
0%
0%
0%
 
≤1.80%
2.55%
3.30%
4.55%
≥5.40%
Threshold Case
 
Base Case
 
Stretch Case
3-Year Average Net Revenue CAGR Performance

Both scales assume interpolation between performance levels and vested percentages listed above.


Any portion of the Stock Appreciation Rights that is not determined by the Board of Directors to have become vested based on performance during the Performance Period shall automatically terminate and become forfeited.    
Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: None.

LEVI STRAUSS & CO.


By:  _______________________________________________________


Date: ____________________________________________________
PARTICIPANT










__________________________________________________________


Date: _________________________________

    















LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1.      VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time for Capitalization Adjustments.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)      immediately upon the termination of your Continuous Service for Cause;
(b)      three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that


prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;
(c)      eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)      eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)      the Expiration Date indicated in your Grant Notice; or
(f)      the day before the tenth (10th) anniversary of the Date of Grant.
6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)      You may exercise the vested portion of your Award during its term by delivering a Notice of Exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed Notice of Exercise is received by the Company. If the Notice of Exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)      As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)      By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any


hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.
12.      WITHHOLDING OBLIGATIONS.
(a)      At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.


(b)      Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).
(c)      You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a)      The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)      You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.


(c)      You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)      You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)      This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)      All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)      Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)      The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)      This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)      All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)      The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)      The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part


of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)      In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)      In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)      The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)      No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)      The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect


to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN

PERFORMANCE VESTED
STOCK APPRECIATION RIGHT GRANT NOTICE

Levi Strauss & Co. (the “Company” ), pursuant to its 2006 Equity Incentive Plan (the “Plan” ), hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock equivalents (the “SARs” ) set forth below (the “Award” ). This Award is evidenced by a Stock Appreciation Right Agreement (the “Award Agreement” ). The Award is subject to all of the terms and conditions as set forth herein including those set forth in Exhibit A, and in the Award Agreement, the Plan, and the resolutions of the Board of Directors of the Company dated February 5, 2014 (the “Board Resolutions”).
Participant:
 
Date of Grant:
 
Performance Period:
 
Number of SARs at Target Performance:
 
Maximum Number of SARs:
 
Strike Price (Fair Market Value on Date of Grant):
 
Expiration Date:
 
SAR Grant Number:
 


Performance Goals: The actual number of SARs under this Award that will vest at the end of a three-year period will be determined based on (1) the Company's average earnings before interest and taxes (“EBIT”) margin percentage set forth on Exhibit A; (2) the compound annual growth rate of the Company's net revenues over the three-year period set forth on Exhibit A; and (3) three-year TSR performance over the three-year period. In each case, the goals and the extent to which they have been achieved will be determined by the Board of Directors, in its sole discretion.

Performance Vesting: To the extent that the Performance Goals described above are achieved and SARs vest, as determined by the Board of Directors, then 100% of the earned SARs (which may range from zero to the maximum number above depending on achievement of the Performance Goals) shall vest on the date in <<20XX>> that the Board of Directors certifies attainment (the “Certification Date”), all subject to Continuous Service by Participant through the Certification Date.

Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all prior oral and written agreements on that subject with the exception of (i) awards previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: none.
    
LEVI STRAUSS & CO.
       



By:  _______________________________________________________
         

Date: ___________________________________________________
PARTICIPANT

____________________________________________



Date: _________________________________



LEVI STRAUSS & CO.
2006 EQUITY INCENTIVE PLAN
STOCK APPRECIATION RIGHT AGREEMENT
Pursuant to your Stock Appreciation Right Grant Notice ( “Grant Notice” ) and this Stock Appreciation Right Agreement (the “Award Agreement” ), Levi Strauss & Co. (the “Company” ) has granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the “Plan” ) covering the number of Common Stock equivalents ( “Stock Appreciation Rights” ) as indicated in your Grant Notice (collectively, the “Award” ). Defined terms not explicitly defined in this Award Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1. VESTING. Subject to the conditions and limitations contained herein, your Award shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination of your Continuous Service.
2.      NUMBER OF SHARES AND STRIKE PRICE. The number of Common Stock equivalents subject to your Award and your strike price per share are set forth in your Grant Notice and may be adjusted from time to time in accordance with Section 11(a) of the Plan.
3.      CALCULATION OF APPRECIATION . The amount payable upon exercise of each vested Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of the Award (as indicated in your Grant Notice).
4.      PAYMENT. Subject to Section 12, the amount payable upon exercise of your Award shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on the Fair Market Value of such shares at the time of exercise.
5.      TERM. You may not exercise your Award before the commencement or after the expiration of its term. The term of your Award commences on the Date of Grant and expires upon the earliest of the following:
(a)     immediately upon the termination of your Continuous Service for Cause;
(b)     three (3) months after the termination of your Continuous Service for any reason other than Cause or your Retirement, Disability, or death; provided, however, (i) that if during any part of such three (3) month period your Award is not exercisable solely because of a condition set forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or (B) the date it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and (ii) that prior to an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of either limiting or extending the period during which exercise is permitted, depending upon the date on which the termination of your Continuous Services occurs;
(c)     eighteen (18) months after the termination of your Continuous Service due to your Retirement or Disability; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(ix) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)     eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates; provided, however, that prior to an IPO Date, the provisions of Sections 7(c)(x) and 8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(e)     the Expiration Date indicated in your Grant Notice; or
(f)     the day before the seventh (7th) anniversary of the Date of Grant.


6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or (ii) the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Award also must comply with other applicable laws and regulations governing your Award, and you may not exercise your Award if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7.      EXERCISE.
(a)     You may exercise the vested portion of your Award during its term by delivering a notice of exercise to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. The exercise date shall be the business day on which your signed notice of exercise is received by the Company. If the notice of exercise is received after normal business hours for a given day, then the exercise date shall be considered to be the following business day. Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)     As a condition of exercise of the vested portion of your Award for shares of Common Stock, you will be required to enter into the Stockholders’ Agreement (or any successor to that agreement) and such other agreements as the Company may require pursuant to Section 8(f) of the Plan.
(c)     By exercising your Award you agree that you shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, for a period of time specified by the managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Securities Act (the “Lock Up Period” ) in connection with an initial public offering of Common Stock, if any; provided, however , that nothing contained in this section shall prevent the exercise of a repurchase right, if any, in favor of the Company during the Lock Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
8.      TRANSFERABILITY. Your Award is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Award.
9.      PUT RIGHT. Prior to an IPO Date, you, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.      CALL RIGHT. Upon and after any termination of your Continuous Service but prior to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or thereafter acquired pursuant to the exercise of your Award.
11.      AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or any Affiliate, or of the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or any Affiliate.


12.      WITHHOLDING OBLIGATIONS.
(a)     At the time you exercise your Award, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Award.
(b)     Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting).
(c)     You may not exercise your Award unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when desired even though your Award is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
13.      PERSONAL DATA . You understand that your employer, the Company, or an Affiliate hold certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, national social insurance number, salary, nationality, job title, and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the “Personal Data” ). Certain Personal Data may also constitute “Sensitive Personal Data” within the meaning of applicable local law. Such data include but are not limited to Personal Data and any changes thereto, and other appropriate personal and financial data about you. You hereby provide express consent to the Company or an Affiliate to process any such Personal Data and Sensitive Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to transfer any such Personal Data and Sensitive Personal Data outside the country in which you are employed or retained, including the United States. The legal persons for whom such Personal Data are intended are the Company and any broker company providing services to the Company in connection with the administration of the Plan. You have been informed of your right to access and correct your Personal Data by applying to the Company representative identified on the Grant Notice.
14.      ADDITIONAL AGREEMENTS AND ACKNOWLEDGEMENTS. You hereby agree and acknowledge that:
(a) The rights and obligations of the Company with respect to your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)     You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c)     You have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d)     You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Board’s determination of the Fair Market Value of Common Stock, whether for purposes of determining the strike price of your Award, the number of shares of Common Stock payable on exercise of your Award, or the amount payable on exercise of your put right or the Company’s call right pursuant to Section 8 of the Plan.
(e)     You will not question or contest in any way, whether pursuant to legal proceedings or otherwise, the Company’s determination, pursuant to Section 8(e) of the Plan, to (i) reject, in whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the Company’s call right.
(f)     This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.


(g)     All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(h)     Participation in the Plan is voluntary, and therefore, you must accept the terms and conditions of the Plan and this Award as a condition to participate in the Plan and receive this Award.
(i)     The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at any time.
(j)     This Award and any other awards under the Plan are voluntary and occasional and do not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted repeatedly in the past.
(k)     All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the number of shares of Common Stock, and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)     The value of the shares of Common Stock and this Award is an extraordinary item of compensation, which is outside the scope of your employment or service contract, if any.
(m)     The shares of Common Stock, this Award, or any income derived therefrom are a potential bonus payment not paid in lieu of any cash salary compensation and not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)     In the event of the termination of your Continuous Service, your eligibility to receive shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective as of the date that you are no longer actively employed or retained regardless of any reasonable notice period mandated under local law, except as expressly provided in this Award.
(o)     In the event of the termination of your Continuous Service for Cause, the Company, in its sole discretion, may, in accordance with Section 7(c)(xi) of the Plan, rescind any transfer of Common Stock to you that occurred within six (6) months prior to such termination of Continuous Service or demand that you pay over to the Company the proceeds received by you upon the sale, transfer or other transaction involving the Common Stock in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off against the amount of such proceeds any amount you owe to the Company to the fullest extent permitted by law.
(p)     The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.
(q)     No claim or entitlement to compensation or damages arises from the termination of this Award or diminution in value of the shares of Common Stock and you irrevocably release the Company and its Affiliates, from any such claim that may arise.
(r)     The Plan and this Award set forth the entire understanding between you, the Company and any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral and written agreements pertaining to this Award.
15.      NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five


(5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
16.      HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
17.      SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.      GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.




CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY
C ONFIDENTIAL
E XECUTION V ERSION

Exhibit 10.24
MASTER SERVICES AGREEMENT ∗  

BY AND BETWEEN

LEVI STRAUSS & CO.

AND

WIPRO LIMITED

NOVEMBER 7, 2014







 
* Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions marked with [****]* .



CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY
C ONFIDENTIAL
E XECUTION V ERSION

TABLE OF CONTENTS
1.
Definitions and Interpretation
1
 
1.1
Definitions
1
 
1.2
Interpretation
1
 
1.3
Order of Precedence
2
2.
Term
2
 
2.1
Initial Agreement Term
2
 
2.2
Renewal and Extension
2
3.
Services
2
 
3.1
Scope of Services
2
 
3.2
Commencement of Services
3
 
3.3
Increase or Decrease in Services
3
 
3.4
Non-Exclusivity
3
 
3.5
Affiliates and Service Recipients
3
 
3.6
Resources
3
 
3.7
Standards and Policies
4
 
3.8
Supplier Consents
4
 
3.9
LS&Co. Consents
4
4.
Compliance
4
 
4.1
Governmental Approvals
4
 
4.2
Compliance with Laws
4
 
4.3
Changes in Law
4
 
4.4
Cooperation with Regulators
5
 
4.5
Business Conduct and Anti-Bribery
5
 
4.6
Performance Under Third Party Contracts
6
5.
Transition; Acquisitions and Divestitures; Cooperation
6
 
5.1
Transition Services
6
 
5.2
Transition Managers
7
 
5.3
Transition Milestones
7
 
5.4
Employee Transfers
7
 
5.5
New Entities and Divestitures.
7
 
5.6
Cooperation with Third Parties
8
6.
New Services
9
 
6.1
New Services
9
 
6.2
Charges for New Services
9
 
6.3
Terms for New Services
10
 
7
LS&Co. Resources and Facilities.
10
 
7.1
Systems
10
 
7.2
LS&Co. Equipment
10
 
7.3
LS&Co. Facilities; Permitted Areas
10
8.
Service Levels and Reports
11
 
8.1
Service Levels
11
 
8.2
Knowledge Sharing
11
 
8.3
Service Reports
11
9.
Service Locations
11
 
9.1
Service Locations
11

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9.2
Safety and Security Procedures
12
10.
Governance
12
 
10.1
LS&Co. Governance Executive
12
 
10.2
Supplier Governance Executive
12
 
10.3
Governance Meetings
12
 
10.4
Operations Manual
13
 
10.5
Changes; Change Management Process
13
 
10.6
Contract Change Process
13
11.
Supplier Delivery Organization
13
 
11.1
Key Supplier Personnel
13
 
11.2
Supplier Staff; Training and Skills; Removal; Confidentiality
14
 
11.3
Background Checks
15
 
11.4
Blocked Person Certification
15
 
11.5
Conduct of Supplier Personnel
15
 
11.6
Assignment to Competitors
15
 
11.7
Subcontractors
16
 
11.8
Non-Solicitation
16
 
11.9
Co-Employment.
16
12.
Proprietary Rights
17
 
12.1
Ownership of Background Technology and Derivative Works
17
 
12.2
LS&Co. Software
17
 
12.3
LS&Co. Data
17
 
12.4
Supplier Software
17
 
12.5
Commissioned Materials
18
 
12.6
LS&Co.-Owned Materials
18
 
12.7
Further Assurances
19
 
12.8
LS&Co. Marks
19
13.
Data
19
 
13.1
Correction and Reconstruction
19
 
13.2
Provision of Data
20
 
13.3
Data Privacy
20
 
13.4
Processing of Personal Data
20
 
13.5
Data Security
21
 
13.6
Breach or Potential Breach; Notification Requirements
21
 
13.7
Protection of LS&Co. Data
22
 
13.8
Overseas transfers of LS&Co. Personal Data
22
 
13.9
Supplier Agents
22
14.
Continued Provision of Services
22
 
14.1
Disaster Recovery Plan
22
 
14.2
Force Majeure
23
 
14.3
Alternate Source
23
 
14.4
Allocation of Resources
24
 
14.5
Step-in Rights
24
15.
Payments
25
 
15.1
Charges
25
 
15.2
Invoices
25

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15.3
Timeliness of Invoices
25
 
15.4
Payment
25
 
15.5
Fee Disputes
25
 
15.6
Unanticipated Changes
26
 
15.7
Due Diligence
26
 
15.8
No Other Charges
26
 
15.9
No Payment for Unperformed Services
26
 
15.1
Local Country Agreements
26
16.
Taxes
27
 
16.1
Taxes
27
 
16.2
Certain Service Taxes
27
 
16.3
Relocation of Services
28
 
16.4
Segregation of Charges
28
17.
Benchmarking
28
 
17.1
Benchmarking Process
28
 
17.2
Benchmarker
28
 
17.3
Benchmark Results Review
29
 
17.4
Adjustments
29
 
17.5
Benchmarking Disputes
29
18.
Audits
30
 
18.1
Services
30
 
18.2
Fee Records
30
 
18.3
Service Auditor’s Report; Certain Audits.
30
 
18.4
Record Retention
32
 
18.5
Facilities
32
 
18.6
General Audit Procedures
32
 
18.7
Supplier Audits
33
19.
Confidentiality
33
 
19.1
General Obligations
33
 
19.2
Unauthorized Acts
34
 
19.3
Injunctive Relief
34
 
19.4
Return of Confidential Information
34
 
19.5
Maintenance of Records in the United States
34
20.
Representations and Warranties
35
 
20.1
By LS&Co.
35
 
20.2
By Supplier
35
 
20.3
Disclaimer
35
21.
Additional Covenants
36
 
21.1
By LS&Co.
36
 
21.2
By Supplier
36
22.
Dispute Resolution
37
 
22.1
Resolution Procedures
37
 
22.2
Exclusions
38
 
22.3
Continuity of Services
38
23.
Termination
38
 
23.1
Termination for Convenience
38

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23.2
Termination for Change in Control of LS&Co.
38
 
23.3
Termination for Change in Control of Supplier
38
 
23.4
Termination for Cause.
38
 
23.5
Termination in Case of Insolvency
39
 
23.6
Service Level Failures
39
 
23.7
Termination for Failure to Replenish Damages Cap
40
 
23.8
Termination for Failure to Agree on final Statements of Work or Service Levels
40
24.
Termination Charges
40
 
24.1
Termination Charges
40
 
24.2
No Other Termination Charges
40
25.
Termination Assistance and Exit Rights
40
 
25.1
Termination Assistance
40
 
25.2
Payment
41
 
25.3
Exit Rights.
41
26.
Indemnities
42
 
26.1
Indemnity by LS&Co.
42
 
26.2
Indemnity by Supplier
43
 
26.3
Obligation to Replace
45
 
26.4
Indemnification Procedures
45
27.
Damages
45
 
27.1
Consequential Damages
45
 
27.2
Direct Damages.
46
 
27.3
Exclusions
46
28.
Insurance
47
 
28.1
Documentation
47
 
28.2
Types and Amounts
47
 
28.3
Policy Requirements
48
 
28.4
Risk of Loss
49
 
28.5
Subrogation
49
29.
Miscellaneous Provisions
49
 
29.1
Assignment
49
 
29.2
Notices
49
 
29.3
Counterparts
50
 
29.4
Relationship
50
 
29.5
Severability
50
 
29.6
Waivers
50
 
29.7
Timing and Cumulative Remedies
50
 
29.8
Entire Agreement
51
 
29.9
Amendments
51
 
29.1
Survival
51
 
29.11
Third Party Beneficiaries
51
 
29.12
Governing Law and Venue
51
 
29.13
Covenant of Further Assurances
51
 
29.14
Export
51
 
29.15
Conflict of Interest
52

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29.16
Publicity
52
 
29.17
LS&Co. Reporting Hotline
52
 
29.18
Language Requirements
52


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TABLE OF EXHIBITS
Exhibit 1      Definitions
Exhibit 2      Description of Services
Attachment 2.1      Human Resource Services Description
Attachment 2.2      Finance Services Description
Attachment 2.3      Information Technology Services Description
Attachment 2.3.1      Network Services
Attachment 2.3.2      Deskside Support Services
Attachment 2.3.3      Cross-Functional Services
Attachment 2.3.4      Service Operations Center Services
Attachment 2.3.5      Service Desk Services
Attachment 2.3.6      Global Information Security Services
Attachment 2.3.7      IT Applications Services
Attachment 2.3.7-A      IT Applications Services - Applications in Scope
Attachment 2.3.8      Test Center of Excellence Services
Attachment 2.4      Customer Service Services Description
Attachment 2.5      Consumer Relations Services Description
Exhibit 3      Service Level Methodology
Attachment 3.1      Service Level Definitions - Human Resource Services
Attachment 3.2      Service Level Definitions - Finance Services
Attachment 3.3      Service Level Definitions - Information Technology Services
Attachment 3.3.1
Service Level Definitions - Network Services
Attachment 3.3.2
Service Level Definitions - Deskside Support Services
Attachment 3.3.3
[ Reserved ]
Attachment 3.3.4
Service Level Definitions - Service Operations Center Services
Attachment 3.3.5
Service Level Definitions - Service Desk Services
Attachment 3.3.6
Service Level Definitions - Global Information Security Services
Attachment 3.3.7
Service Level Definitions - IT Applications Services
Attachment 3.3.8
Service Level Definitions - Test Center of Excellence Services
Attachment 3.4      Service Level Definitions - Customer Service Services
Attachment 3.5      Service Level Definitions - Consumer Relations Services
Exhibit 4      Pricing Methodology
Attachment 4.1.1      Pricing Tables - Human Resource Services
Attachment 4.1.2      Pricing Tables - Finance Services
Attachment 4.1.3      Pricing Tables - Information Technology Services
Attachment 4.1.4      Pricing Tables - Customer Service Services
Attachment 4.1.5      Pricing Tables - Consumer Relations Services
Attachment 4.1.6      Pricing Tables - Termination Charges
Exhibit 5      Governance
Exhibit 6      Reports
Exhibit 7      Service Locations
Exhibit 8      Transition Framework
Attachment 8.1      Detailed Transition Plan

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Attachment 8.2      In-Flight Projects
Attachment 8.3      Employee Transfer Provisions
Exhibit 9      LS&Co. Policies
Exhibit 10      LS&Co. Agent NDA
Exhibit 11      Approved Benchmarkers
Exhibit 12      Supplier Competitors
Exhibit 13      Key Supplier Personnel
Exhibit 14      Approved Supplier Agents
Exhibit 15      New Service Proposal Form
Exhibit 16      Form of Local Country Agreement
Exhibit 17      Disaster Recovery Plan Requirements


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MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT (this “ Agreement ”), dated as of the Effective Date, is by and between Levi Strauss & Co., a Delaware corporation (“ LS&Co. ”), and Wipro Limited, a company formed under the laws of the Republic of India (“ Supplier ”).
Recitals
WHEREAS , Supplier desires to provide to LS&Co., and LS&Co. desires to obtain from Supplier, the technology, operations, capabilities and related services described in this Agreement on the terms and conditions set forth in this Agreement;
WHEREAS , LS&Co. and Supplier have engaged in extensive discussions and negotiations that have culminated in the formation of the relationship described in this Agreement.
NOW, THEREFORE , for and in consideration of the agreements set forth below, LS&Co. and Supplier agree as follows:
1.
DEFINITIONS AND INTERPRETATION.
1.1      Definitions . The terms used in this Agreement with initial capital letters that are not defined herein have the meanings set forth in Exhibit 1 . Other terms used in this Agreement are defined where they are used and have the meanings there indicated.
1.2      Interpretation . The Exhibits, as amended from time to time, attached to this Agreement are hereby incorporated into and deemed part of this Agreement. All references to “Agreement” herein include the Exhibits to this Agreement. All references to “Exhibits” herein include the attachments and appendices to such Exhibits. Any reference to an “Article,” “Section,” “Exhibit,” and “Attachments” shall be to such Article, Section, Exhibit or Attachment of this Agreement, unless otherwise expressly provided. The headings preceding the text of Articles and Sections and the headings to Exhibits and Attachments, the table of contents, and other portions of this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. The use of the terms “including,” “include” or “includes” shall in all cases mean “including without limitation,” “include without limitation” or “includes without limitation,” respectively. The words “shall” and “will” are used interchangeably and have the same meaning. Except as specifically set forth in this Agreement: (a) consents and approvals to be given by a Party under this Agreement shall not be unreasonably withheld or delayed; (b) each Party shall make only reasonable requests under this Agreement; and (c) all notices, requests, consents, approvals, agreements, authorizations, acknowledgements, waivers, elections and other communications required or permitted under this Agreement must be made in writing in order to be binding. The Parties acknowledge and agree that they have negotiated the terms and conditions of this Agreement and that any provision contained herein with respect to which an issue of interpretation or construction arises shall not be construed to the detriment of the drafter on the basis that such Party or its professional advisor was the drafter, but shall be construed according to the intent of the Parties as evidenced by the entire Agreement.

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1.3      Order of Precedence . Except as otherwise expressly set forth in the body of this Agreement or in an Exhibit, in the event of a conflict, ambiguity or inconsistency between the provisions in the body of this Agreement, any Exhibit, any attachment or any document incorporated by reference, then such conflict, ambiguity or inconsistency shall be resolved by giving precedence to the document higher in the following order of priority (a) first, the provisions in the body of this Agreement; (b) second, the provisions in the Exhibit; (c) third, the provisions in any attachment or appendices to the Exhibit; and (d) fourth, any other documents incorporated by reference.
2.
TERM.
2.1      Initial Agreement Term . The initial term of this Agreement shall commence on the Effective Date and continue until 23:59 (Pacific Time) on either the Initial Agreement Expiration Date, the last day of the final Extension Period, or such earlier date upon which this Agreement is terminated in accordance with its terms (the “ Initial Agreement Term ”).
2.2      Renewal and Extension . At least 12 months prior to the Initial Agreement Expiration Date, Supplier shall provide to LS&Co. the terms, conditions and pricing that Supplier proposes would apply to any renewal term of this Agreement. If LS&Co. desires to renew this Agreement, but the Parties are unable to agree on the terms, conditions and pricing for a renewal term 120 days before the Initial Agreement Expiration Date, LS&Co. may elect to extend the Initial Agreement Term for a period of up to 12 months, to be determined in LS&Co.’s sole discretion, from the Initial Agreement Expiration Date, on the terms and conditions in effect as of the Initial Agreement Expiration Date and the pricing set forth in Exhibit 4 . If the Parties are unable to reach agreement on the terms, conditions and pricing applicable to the renewal of this Agreement 60 days before the end of the initial Extension Period, LS&Co. may: (a) allow this Agreement to expire at the end of such Extension Period; or (b) extend the Initial Agreement Term for up to 2 additional periods of up to 12 months each; provided that LS&Co. notifies Supplier of LS&Co.’s election to extend the Initial Agreement Term 60 days before the end of the then-current Extension Period and such further extension shall be on the terms and conditions in effect as of the end of the then-current Extension Period and the pricing set forth in Exhibit 4 .
3.
SERVICES.
3.1      Scope of Services . The term “ Services ” means: (a) the services, functions, and responsibilities described in the Statements of Work and this Agreement, as amended from time to time during the Term; (b) the services, functions and responsibilities reasonably related to or associated with the services, functions and responsibilities described in sub-clauses (a) and (c) that were routinely performed in the 12 month-period prior to the Effective Date by the Affected Employees and the Affected Contractors, which services, functions or responsibilities were displaced or transitioned as a result of this Agreement, even if such service, function or responsibility is not specifically described in this Agreement, provided that, any service, function or responsibility expressly identified in this Agreement as a retained responsibility of LS&Co. shall not be included as part of the Services; and (c) any services, functions or responsibilities required for the proper performance and delivery of the Services or that are inherent or necessary for the proper performance of the Services, whether or not expressly identified or described in

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this Agreement, as each of these services, functions or responsibilities may evolve during the Term and as they may be supplemented, enhanced, modified or replaced (e.g., to keep pace with technological advancements and improvements in the methods of delivering these services, functions or responsibilities) pursuant to the terms of this Agreement and including any supplement, enhancement, modification or replacement that arises from the exercise of LS&Co.’s rights under this Agreement.
3.2      Commencement of Services. The obligations of the Parties under this Agreement shall commence on the Effective Date. Beginning on the date specified in an applicable Transition Plan, Supplier shall provide the Transition Services specified in such Transition Plan. Beginning on an applicable Commencement Date, Supplier shall provide the Services specified in the applicable Statement of Work or Statements of Work; except that, to the extent that any Services are to be provided to an Affiliate of LS&Co. within a member state of the European Economic Area, the provision of any such Services to that Affiliate shall first be subject to a determination by LS&Co. to obtain such Services for that Affiliate and with respect to such Services, Supplier shall not assume the responsibility for either the Transition or the provision of such Services to that Affiliate of LS&Co. until such time as LS&Co. notifies Supplier of LS&Co.’s decision to transfer the responsibility for the provision of Services for that Affiliate of LS&Co. to Supplier following LS&Co.’s full and final compliance with all applicable local Laws (including rules and regulations with regard to employees’ and employee representatives’ rights related to information and consultation).
3.3      Increase or Decrease in Services. Supplier shall increase or decrease the amount of the Services provided hereunder according to LS&Co.’s demand for the Services. Increases in the volume of Services shall not be considered New Services.
3.4      Non-Exclusivity. This Agreement is non-exclusive and without any minimum commitment by LS&Co. as to volume, scope or value. Nothing herein shall be construed as a requirements contract, or be interpreted to prevent LS&Co. from obtaining from third parties, or providing to itself, any of the Services described in this Agreement (whether Services, New Services, or otherwise) or services similar thereto.
3.5      Affiliates and Service Recipients. Supplier shall provide the Services in accordance with this Agreement to LS&Co. and, as directed by LS&Co., to LS&Co.’s Affiliates and Service Recipients. With respect to Supplier’s obligations and license grants contained in this Agreement, the term “ LS&Co. ” shall include LS&Co., its Affiliates and Service Recipients. LS&Co. shall add Service Recipients or LS&Co. Affiliates at its sole discretion, but LS&Co. shall not be obligated to obtain the Services from Supplier in respect of any of the Service Recipients or LS&Co. Affiliates.
3.6      Resources. Except as expressly provided otherwise in this Agreement, Supplier shall provide all facilities, assets, and resources (including personnel, Equipment, services and Software) necessary to provide the Services and otherwise meet its obligations under this Agreement, including those facilities, assets, and resources (including personnel, Equipment, services and Software) listed as the responsibility of Supplier elsewhere in this Agreement.

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3.7      Standards and Policies . Without limiting Supplier’s other obligations under this Agreement, in performing the Services Supplier shall comply with: (a) the policies and procedures contained in the Operations Manual; (b) all LS&Co. Policies; and (c) LS&Co.’s Business Partner Terms of Engagement, as such policies and procedures are made available to Supplier by LS&Co. from time to time.
3.8      Supplier Consents . Supplier shall, at its own cost and expense, obtain, maintain and comply with all Supplier Consents. If Supplier is unable to acquire a Supplier Consent despite using its best efforts to do so, Supplier shall implement, at its cost and expense, and subject to LS&Co.’s prior approval, alternative methods as necessary to provide the Services in accordance with this Agreement without such Supplier Consent.
3.9      LS&Co. Consents . LS&Co. shall, at its own cost and expense, obtain and maintain all LS&Co. Consents. Supplier shall, at LS&Co.’s request: (a) provide such assistance as is reasonably requested by LS&Co. with respect to the LS&Co. Consents; and (b) comply with any terms and conditions of the LS&Co. Consents. If LS&Co. is unable to acquire an LS&Co. Consent despite using its best efforts to do so, Supplier shall, upon LS&Co.’s request, implement alternative methods as necessary to provide the Services in accordance with this Agreement without such LS&Co. Consent; except that, to the extent that such alternative methods would require that Supplier incur material additional costs or increase in a material manner the Supplier Staff beyond, in each case, that which is ordinarily used or incurred by Supplier to provide the Services, then Supplier may, in accordance with the Contract Change Process, request that LS&Co. pay the incremental costs related to such material increase.
4.
COMPLIANCE.
4.1      Governmental Approvals . LS&Co. shall, at its cost and expense, obtain and maintain the LS&Co. Governmental Approvals. Supplier shall, at its cost and expense, obtain and maintain the Supplier Governmental Approvals. Upon request by either Party, the other Party shall provide to the requesting Party reasonable cooperation and assistance in obtaining Governmental Approvals hereunder.
4.2      Compliance with Laws . Supplier shall comply with all Laws applicable to Supplier in the performance of this Agreement, including anti-bribery (such as the U.S. Foreign Corrupt Practices Act and the UK Bribery Act), employment, worker health and safety, environmental protection, product liability, packaging liability, data protection, and privacy and consumer protection laws, shall perform the Services in compliance with Laws (including the administration of the LS&Co. Policies) and as necessary to keep LS&Co. in compliance with all Laws and shall obtain all applicable permits and licenses required of Supplier in connection with its obligations hereunder.
4.3      Changes in Law .
(a)      Notification of Changes in Laws. LS&Co. shall monitor and promptly identify and notify Supplier of all LS&Co. Change in Law. Supplier shall monitor and promptly identify and notify LS&Co. of all Supplier Change in Law. Supplier and LS&Co. shall work together to identify the effect of changes in Laws on the provision or receipt of the Services. The

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Parties acknowledge that a change in Law may be a Supplier Change in Law and a LS&Co. Change in Law and, in such case, each Party’s obligations under this Agreement with respect to such Law shall continue to apply, except that the costs necessary to implement changes to the Services necessary to comply with changes in such Law shall be allocated equitably between the Parties.
(b)      LS&Co. Change in Law. With respect to an LS&Co. Change in Law, the Parties shall discuss modifications to the Services, if any, necessary to comply with such changes. Supplier shall promptly thereafter propose any adjustment to the applicable Charges associated with such modifications; provided that any such adjustment shall be based solely upon Supplier’s incremental costs associated with the implementation of such modifications; provided that, if Supplier is providing to other customers services that are subject to the same LS&Co. Change in Law, Supplier shall develop and present to LS&Co. a plan to allocate such costs such that LS&Co. and each such customer pays only its equitable share of such costs. Upon LS&Co.’s consent, Supplier shall implement such modifications to the Services in a timely manner.
(c)      Supplier Change in Law. With respect to a Supplier Change in Law, Supplier shall implement in a timely manner, at its own cost and expense, any changes in the Services required to comply with such Supplier Change in Law; provided, that if such changes have a material effect on the provision or receipt of the Services, Supplier shall obtain LS&Co.’s consent before implementing such changes.
(d)      Reduction in Services. Notwithstanding any LS&Co. consent obtained under Sections 4.3(b) or 4.3(d) , if any change in Law, change in the Services required to conform to any change in Law, or failure of Supplier to obtain any Supplier Governmental Approval, results in a reduction in the Services or in the level or quality of the Services, or in a substantial increase in the Charges, then LS&Co. may elect either: (i) to negotiate and implement an equitable reduction to the applicable Charges (in the case of a reduction of the Services or in the level or quality of the Services); or (ii) to terminate the affected portion of the Services as of the date specified by LS&Co. in its notice of termination and (y) in the case of a Supplier Change in Law without payment of any Termination Charges; and (z) in the case of an LS&Co. Change in Law, with payment of the applicable Stranded Costs.
4.4      Cooperation with Regulators . As directed by LS&Co., Supplier shall work with those Governmental Authorities that regulate LS&Co. in an open and co-operative way, including: (a) meeting with such Governmental Authorities; (b) coordinating with LS&Co. to provide to representatives or appointees of such Governmental Authorities any applicable materials, records and information relating to the Services or allowing any such representatives or appointees access to such materials, records and information relating to the Services and providing such facilities as such representatives or appointees may reasonably require; and (c) permitting representatives or appointees of such Governmental Authorities to have access on demand to any of its premises to the extent relating to the Services.
4.5      Business Conduct and Anti-Bribery. Supplier shall comply, and shall ensure that Supplier Agents comply, with all applicable U.S. and international anti-corruption Laws, including the U.S. Foreign Corrupt Practices Act and the UK Bribery Act). Supplier shall

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conduct its activities under this Agreement in accordance with the highest standards of business ethics and in compliance with LS&Co.’s Anti-Bribery and Anti-Corruption Policy (“ ABAC Policy ”), and Supplier shall not make any payments that could cause LS&Co. to violate the ABAC Policy. Supplier shall ensure that its senior management and other relevant employees participate in any training sessions provided by LS&Co. on the ABAC Policy. Supplier and Supplier Agents have not and shall not, directly or indirectly, make, authorize, offer, or promise to make, authorize or offer, any payments or gifts or things of value, to: (a) any official or employee of any Governmental Authority; (b) any candidate for public office; or (c) any political party or any officer or employee thereof (the individuals mentioned in clauses (a), (b) and (c) hereinafter collectively called “ Government Officials ”), or to any other party in violation of anti-bribery laws or the ABAC Policy. Supplier shall provide prompt notice to LS&Co. if Supplier or any Supplier Agent is or becomes an official or employee of any Governmental Authority during the Term. If LS&Co. has reason to believe that a breach of this Section 4.5 has occurred or may occur, LS&Co. may withhold payments due under this Agreement until such time as it has received confirmation to its satisfaction that no breach of this Section 4.5 has occurred or will occur. Supplier covenants and agrees that it has not been convicted of or pleaded guilty to a criminal offence, including one involving fraud, corruption, or moral turpitude, that it is not now, to the best of its knowledge, the subject of any government investigation for such offences, and that it is not now listed by any Governmental Authority as debarred, suspended, proposed for suspension or debarment, or otherwise ineligible for government programs. Supplier shall provide to LS&Co. an annual certification stating that it did not make payments that would cause LS&CO. to violate the ABAC Policy (“ Annual Certification ”). The Annual Certification must be in the form required by LS&Co and returned to LS&Co. by February 1 following the end of the preceding calendar year. During the Term and for a period of 24 months following the End Date, LS&Co. shall have the right to conduct an audit of Supplier’s books and records that reasonably relate to compliance with this Section 4.5 . Such audit shall include the right to interview Supplier Agents with respect to such records. Supplier shall fully cooperate in any investigation, including making Supplier Agents available for interviews.
4.6      Performance Under Third Party Contracts . Supplier shall promptly notify LS&Co. of any breach of, or misuse or fraud in connection with any Third Party Contracts of which Supplier becomes aware and shall cooperate with LS&Co. to prevent or stay any such breach, misuse or fraud. Supplier shall pay all amounts due for any penalties or charges (including amounts due to a third party as a result of Supplier’s failure to promptly notify LS&Co. pursuant to the preceding sentence), and other expenses incurred by LS&Co. as a result of Supplier’s non-performance of its obligations under this Agreement with respect to the Third Party Contracts.
5.
TRANSITION; ACQUISITIONS AND DIVESTITURES; COOPERATION.
5.1      Transition Services . Supplier shall perform all services, functions, and responsibilities necessary to accomplish the transition of LS&Co.’s technology, operations and capabilities to Supplier (the “ Transition Services ”). Supplier shall perform the Transition Services in accordance with the Transition Plan and without causing material disruptions to LS&Co.’s business operations. Supplier shall be excused from a failure to perform the Transition Services to the extent, and during the time, that Supplier is directly precluded from

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performing those Transition Services as a result of LS&Co.’s or an LS&Co. Agent’s failure to perform LS&Co.’s or an LS&Co.’s Agents specified and written obligations set forth in the Transition Plan (each a “ LS&CO. Transition Responsibility ”) and provided that Supplier: (a) promptly provides LS&Co. with advance notice identifying in detail the LS&Co. Transition Responsibility in question, the nature of LS&Co.’s or the LS&Co. Agent’s failure to perform such LS&Co. Transition Responsibility and the relevant Transition Service that is at risk; (b) continues without interruption to use commercially reasonable efforts to perform its obligation notwithstanding LS&Co.’s or the LS&Co. Agent’s non-performance of the LS&Co. Transition Responsibility; and (c) re-commences performance of the affected Transition Service in accordance with the Transition Plan, immediately upon LS&Co. curing its non-performance.
5.2      Transition Managers . Supplier shall designate an individual who shall be responsible for managing and implementing the Transition Services (the “ Supplier Transition Director ”), as well as individuals for each of the agreed upon LS&Co.’s facilities and functions affected by the transition (“ Individual Transition Managers ”) who shall be responsible for managing and implementing the Transition Services specific to such facilities and functions. Unless otherwise expressly specified in the Transition Plan, there shall be no charges for the Transition Services other than the Transition Charges. Until the completion of the applicable Transition Services, the Supplier Transition Director and each Individual Transition Manager shall review with the LS&Co. Governance Executive the status of the Transition Services as requested by the LS&Co. Governance Executive.
5.3      Transition Milestones . The Transition Plan includes a list of milestones relating to Supplier’s obligations under the Transition Plan. If Supplier fails to achieve any milestone by the completion date specified for such milestone in the Transition Plan, LS&Co. shall not be responsible for any portion of the Transition Charge associated with the Transition Milestone unless and until Supplier’s completion of the milestone is approved by LS&Co. If Supplier fails to achieve any Critical Transition Milestone by the completion date specified for such milestone in the Transition Plan, and such failure is caused by Supplier, LS&Co. may elect to terminate this Agreement as of the date specified by LS&Co. in its notice of termination without payment of any Termination Charge. In addition to any Transition Credit payable by Supplier in accordance with this Agreement, if Supplier fails to meet the date specified for any Transition Milestone, Supplier shall not be entitled to any further compensation beyond the applicable Transition Charges for the additional work associated with achieving such Transition Milestone after such date.
5.4      Employee Transfers . The provisions applicable to employee transfers, if any, are set forth in Attachment 8.3 .
5.5      New Entities and Divestitures.
(a)      New Entities . With respect to LS&Co.’s acquisition of other entities, or LS&Co.’s inclusion of additional Affiliates or Service Recipients (each a “New Entity” and, collectively, “ New Entities ”), Supplier shall provide, at LS&Co.’s request and at no additional cost (except with respect to any one-time transition charges agreed to in advance by the Parties): (i) support services as necessary to assist LS&Co. with its assessment of the New Entity and the impact of a New Entity’s technology, operations

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and capabilities on the technology, operations and capabilities of LS&Co.; except that to the extent that such support services would require that Supplier incur material additional costs or increase, in a material manner, the Supplier Staff beyond, in each case, that which is ordinarily used or incurred by Supplier to provide the Services, then Supplier may, in accordance with the Contract Change Process, request that LS&Co. pay the incremental costs related to such material increase; and (ii) the Services, whether all or a portion specified by LS&Co., to the New Entities in accordance with, and under the then-current terms, conditions and pricing of, this Agreement, including performing those Services specified in the Statements of Work. Supplier shall, at the request of LS&Co. (and at the one-time charges agreed to in advance by the Parties) perform assessments of a New Entity’s technology, operations and capabilities, and complete any plans and designs necessary to accomplish the transition of the New Entities technology, operations and capabilities to the Services and provide support services as necessary to integrate and incorporate a New Entity’s technology, operations and capabilities into the technology, operations and capabilities of LS&Co.
(b)      Divestitures. If LS&Co. divests itself of a business unit or entity, or removes Affiliates or Service Recipients from the scope of this Agreement (collectively, “ Divested Entities ”), Supplier shall continue to provide, at LS&Co.’s request (where possible such request to be provided to Supplier at least 30 days in advance) and at no additional cost, the Services in accordance with this Agreement to the Divested Entity for up to 24 months from the effective date of such divestiture or removal, as the case may be, under the then-current terms, conditions and pricing of this Agreement. In addition, Supplier shall provide at LS&Co.’s request and at no additional cost (except with respect to any one-time transition charges agreed to in advance by the Parties) support services to LS&Co., the Divested Entity, and, as applicable, the acquiring entity as may be necessary to transfer the Divested Entities’ technology, operations and capabilities to a third party or enable such entity to provide the technology, operations and capabilities to itself, including those services specified in the Statements of Work.
5.6      Cooperation with Third Parties . LS&Co. may from time to time hire subcontractors, consultants, or other third parties (“ LS&Co. Third Party Contractors ”) to perform services or provide products to LS&Co. Supplier shall cooperate with and work in good faith with any LS&Co. Third Party Contractors as requested by LS&Co., as necessary for Supplier to perform the Services or for LS&Co. Third Party Contractors to perform services or provide products to LS&Co. Without limiting the foregoing, Supplier shall provide the following: (a) in writing, to the extent available, applicable requirements, standards and policies applicable to the Services so that the goods and services provided by the LS&Co. Third Party Contractor may work in conjunction with or be integrated with the Services; (b) in writing, the System requirements applicable to any required interfaces for the LS&Co. Third Party Contractor’s work product; (c) in writing, the applicable requirements of any necessary modifications to the Systems required in connection with the LS&Co. Third Party Contractor’s work product; (d) Supplier’s quality assurance, and its development and performance acceptance testing, for the LS&Co. Third Party Contractor’s work product; (e) assistance and support services to LS&Co., the LS&Co. Third Party Contractor or any other third party, including Supplier’s participation as required to permit Supplier, LS&Co., LS&Co. Third Party Contractors or any other third party to acquire the knowledge necessary to efficiently integrate, operate and maintain the LS&Co. Third Party Contractor’s work product as part of the Systems; (f) access to the Systems and facilities used to provide the Services, to the extent that such access

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is required for the services provided by the LS&Co. Third Party Contractor; (g) collaborating with LS&Co. and LS&Co. Third Party Contractors in addressing service-related issues that may cross over from one service area or provider to another and related to the Services, including as necessary to co-ordinate the performance by each LS&Co. Third Party Contractor of its obligations with the performance of the obligations of Supplier; and (h) such other assistance and cooperation as is reasonably required by LS&Co.
6.
NEW SERVICES.
6.1      New Services . LS&Co. may from time to time during the Term and the Termination Assistance Period request that Supplier perform a New Service. Within 10 days after receipt of such a request from LS&Co. (or such other time as LS&Co. and Supplier may agree depending on the nature and scope of the New Service), Supplier shall provide LS&Co. with a written proposal for such New Service which shall be in the form set forth in Exhibit 15 (a “ New Service Proposal ”). Supplier shall not begin performing any New Service until LS&Co. and Supplier have agreed upon the terms for such New Service and the LS&Co. Governance Executive has provided Supplier with written authorization by executing the New Service Proposal to perform the New Service. Any New Service performed by Supplier without such advance agreement to terms and written authorization shall be deemed part of the Services without incremental charge then or in the future. Each New Service Proposal shall include at a minimum: (a) a detailed description of the services, functions and responsibilities Supplier anticipates performing in connection with such New Service, including any services, functions and responsibilities required to transition to the New Service, any transformed or future state Services; (b) a schedule for commencing and completing such New Service; (c) Supplier’s fees for such New Service, including a detailed breakdown of such fees; (d) when appropriate, a description of any new Software or Equipment to be provided by Supplier in connection with such New Service; (e) when appropriate, the Software and Equipment and run-time requirements necessary to develop and operate any new Software; (f) a description of the human resources necessary to provide the New Service, the facilities required to provide the New Services and the location of such facilities; (g) a description of proposed service levels and associated measurement and monitoring tools for the New Service; (h) when appropriate, a list of any existing Software or Equipment included in or to be used in connection with such New Service; (i) when appropriate, acceptance test criteria and procedures for any new Software or any products, packages or services; (j) the detailed technical, functional, physical, design, environmental, operational, performance or other relevant specifications and requirements that the Services, Software, Equipment, Systems or facilities must meet (including any specifications, representations, warranties or covenants applicable to the foregoing); and (k) such other information requested by LS&Co.
6.2      Charges for New Services . Supplier’s charges and fees specified in any New Service Proposal shall be, to the extent possible, determined in a manner consistent with the applicable pricing formulas and methodologies utilized in establishing the Charges. The charges and fees for any such New Service shall take into account resources and expenses of Supplier for then-existing Services that would no longer be required if the New Service were performed by Supplier.

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6.3      Terms for New Services . Any New Services authorized by LS&Co. in accordance with this Article 6 shall become part of the Services and shall be subject to the terms and conditions of this Agreement unless and only to the extent the Parties agree otherwise.
7.
LS&CO. RESOURCES AND FACILITIES.
7.1      Systems. If LS&Co. grants Supplier access to any LS&Co. Systems, such access shall be solely for purposes of performing the Services, and Supplier’s access shall be limited to those specific Systems identified in this Agreement and the time periods and personnel designated by Supplier and agreed to by LS&Co. and Supplier. Supplier’s access shall be subject to the LS&Co. Policies. Any other use by Supplier of any other LS&Co. assets or property or Systems is prohibited.
7.2      LS&Co. Equipment . With respect to Equipment that is owned or leased by LS&Co. (collectively, “ LS&Co. Equipment ”), LS&Co. grants to Supplier during the Term the right to access and use the LS&Co. Equipment solely to the extent necessary to perform the Services. Supplier acknowledges that it has no legal or equitable claim to the LS&Co. Equipment and agrees not to contest ownership of such Equipment. Throughout the Term, and thereafter for the purposes of Termination Assistance Services, Supplier shall keep any LS&Co. Equipment that is removed from LS&Co. premises or is stored along with Supplier Equipment separate from the property of Supplier and of third parties, and shall properly identify such Equipment as LS&Co.’s property. Supplier shall not purport to pledge, or in any way charge by way of security, permit any lien to be placed on, or otherwise encumber or permit the encumbrance in any way of, any of the LS&Co. Equipment which shall at all times remain LS&Co.’s or the applicable third party lessor’s property and shall irrevocably waive any rights which may arise under Law to take a lien over the LS&Co. Equipment for any sums due to Supplier pursuant to this Agreement.
7.3      LS&Co. Facilities; Permitted Areas . Beginning on the Effective Date and continuing only as long as Supplier requires the same for the performance of the Services, LS&Co. shall provide to Supplier, at no charge to Supplier and subject to this Article 7 , the use of space designated by LS&Co. in certain LS&Co. Service Locations (“ Permitted Areas ”) for Supplier’s use in performing the Services, together with reasonable office furnishings, janitorial services, fixed-line telephones (excluding applicable call charges to the extent that these are separately charged), parking, and utilities, in each case to the same extent that LS&Co. otherwise provides such supplies and services to subcontractors performing similar services for LS&Co. at such LS&Co. Service Locations. LS&Co. shall not provide personal productivity tools to Supplier, including computers, local printers, mobile-type devices, tablets, smartphones, cell phones or similar items. Supplier shall use the Permitted Areas for the sole and exclusive purpose of providing the Services. Use of Permitted Areas by Supplier does not constitute a leasehold interest in favor of Supplier or any Supplier Agents. Supplier and Supplier Agents shall comply with the requirements related to Permitted Areas contained in this Agreement and such other requirements made available to Supplier by LS&Co. from time to time. Supplier and Supplier Agents shall use the Permitted Areas in an efficient manner and to the extent that Supplier or Supplier Agents operate in such areas in a manner that unnecessarily increases facility costs incurred by LS&Co., LS&Co. reserves the right to set-off such increased costs against the Charges. Supplier and Supplier Agents shall keep the Permitted Areas in good order,

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not commit or permit waste or damage to such facilities, not use such facilities for any unlawful purpose or act. Supplier and Supplier Agents shall not make any improvements or changes involving structural, mechanical or electrical alterations to the LS&Co. Service Locations without LS&Co.’s written approval and any such improvements or changes shall become the property of LS&Co. or its lessors. Supplier and Supplier Agents shall permit LS&Co. and LS&Co. Agents to enter the Permitted Areas at any time to perform facilities-related services, conduct audits in accordance with Article 18 , and as otherwise requested by LS&Co. When the Permitted Areas are no longer required for performance of the Services, Supplier shall return such areas to LS&Co. in substantially the same condition as when Supplier began using such locations, subject to ordinary wear and tear. While at any LS&Co. Service Location, Supplier and Supplier Agents shall: (a) comply with all of the LS&Co. Policies and all of LS&Co.’s standard and site-specific policies and procedures in effect from time to time at the LS&Co. Service Locations, including procedures for the physical security of the LS&Co. Service Locations; (b) comply with the requests, rules and regulations of LS&Co. regarding safety and health, personal and professional conduct (including adhering to the general LS&Co. safety practices or procedures) generally applicable to such LS&Co. Service Locations; and (c) otherwise conduct themselves in a businesslike manner.
8.
SERVICE LEVELS AND REPORTS.
8.1      Service Levels . Supplier shall be responsible for and shall perform the Services in accordance with the Service Levels described in Exhibit 3 and otherwise in accordance with this Agreement. Supplier shall perform all Services that do not have defined Service Levels in a manner and at levels that equal or exceed the level of service being provided internally by LS&Co. or through a third party prior to the Effective Date, including with respect to accuracy, quality, completeness, timeliness, and responsiveness.
8.2      Knowledge Sharing . At least once in every 90-day period, and upon LS&Co.’s request, Supplier shall meet with representatives of LS&Co. in order to: (a) explain how the Systems work and are operated; (b) explain how the Services are provided; and (c) provide such training and documentation that LS&Co. may require for LS&Co. to understand and operate the Systems and provide the Services (i) after the expiration or termination of this Agreement; or (ii) as required upon exercise of the step-in rights pursuant to Section 14.5 .
8.3      Service Reports . Supplier shall provide to LS&Co., in a form and format acceptable to LS&Co., the reports set forth in Exhibit 6 , any other reports identified in this Agreement, and any other reports LS&Co. requests from time to time. The delivery schedule of the reports shall be as specified in Exhibit 6 , and where no such schedule is specified, as required by LS&Co.
9.
SERVICE LOCATIONS.
9.1      Service Locations . The Services shall be provided to LS&Co. solely from: (a) the LS&Co. Service Locations; (b) Supplier Service Locations; and (c) any other location for which Supplier has received LS&Co.’s approval, to be given in LS&Co.’s sole discretion. Exhibit 7 , which contains the list of Service Locations, will designate which Services may be provided from each Service Location. Supplier and Supplier Agents may not provide or market

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services to a third party or to itself from a LS&Co. Service Location without LS&Co.’s consent, to be given in LS&Co.’s sole discretion. If either Party requests the approval of a new location for the provision of the Services, Supplier shall provide to LS&Co. a written relocation proposal that sets forth a description of the proposed new location, the process for completing the relocation and any other information reasonably requested by LS&Co. Any incremental costs incurred by LS&Co. as a result of a relocation to, or use of, any location other than the locations described with respect to designated Services in Exhibit 7 shall be paid by Supplier or reimbursed to LS&Co. by Supplier, except that LS&Co. shall reimburse the reasonable costs incurred by Supplier as a result of a relocation to, or use of, any location other than the locations described with respect to the designated Services in Exhibit 7 where such relocation or use of such other location is requested by LS&Co. for its convenience (and without regard to Supplier’s performance or solution or issues associated therewith); and provided that such costs have been agreed upon by LS&Co. prior to Supplier commencing the relocation to or use of such other location.
9.2      Safety and Security Procedures . Supplier shall maintain and enforce at all Supplier Service Locations safety and security procedures that are at least equal to the most stringent of the following: (a) industry standards for locations similar to the applicable Service Locations; (b) the procedures in effect at locations of other Supplier customers receiving services similar to the Services; (c) any higher standard required by Law.
10.
GOVERNANCE.
10.1      LS&Co. Governance Executive . LS&Co. shall appoint an individual (the “ LS&Co. Governance Executive ”) who from the Effective Date of this Agreement shall serve as the primary LS&Co. representative under this Agreement. The LS&Co. Governance Executive shall: (a) have overall responsibility for managing and coordinating the performance of LS&Co.’s obligations under this Agreement; and (b) be authorized to act for and on behalf of LS&Co. with respect to all matters relating to this Agreement. Notwithstanding the foregoing, the LS&Co. Governance Executive may, upon notice to Supplier, delegate such of his or her responsibilities to other LS&Co. Agents, as the LS&Co. Governance Executive deems appropriate. LS&Co. may replace the LS&Co. Governance Executive upon notice to Supplier.
10.2      Supplier Governance Executive . Supplier shall appoint an individual (the “ Supplier Governance Executive ”) who from the date of this Agreement shall serve, on a full-time basis, as the primary Supplier representative under this Agreement. Supplier’s appointment of any Supplier Governance Executive shall be subject to LS&Co.’s prior approval. The Supplier Governance Executive shall: (a) have overall responsibility for managing and coordinating the performance of Supplier’s obligations under this Agreement; and (b) be authorized to act for and on behalf of Supplier with respect to all matters relating to this Agreement.
10.3      Governance Meetings . Supplier shall implement a governance structure and governance procedures as specified in Exhibit 5 . Supplier shall attend governance meetings as specified in Exhibit 5 . LS&Co. may replace or reassign its governance committee members upon notice to Supplier. Supplier shall not replace or reassign its governance committee members unless LS&Co. consents to such replacement or reassignment. Before assigning an

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individual to a governance committee, Supplier shall notify LS&Co. of the proposed assignment, introduce the individual to appropriate LS&Co. personnel, provide LS&Co. with any information regarding the individual that may be reasonably requested by LS&Co., and obtain LS&Co.’s approval for such assignment.
10.4      Operations Manual . Supplier shall develop and provide the Operations Manual to LS&Co. for LS&Co.’s review and approval in accordance with the requirements and delivery schedule specified in this Agreement. Thereafter Supplier shall update the Operations Manual as necessary and shall provide such updated manual to LS&Co. for its review and approval. The Operations Manual shall be provided to LS&Co. in hard copy as well as being made available to LS&Co. in electronic format through a web interface. The Operations Manual shall be suitable for use by LS&Co. to understand the Services.
10.5      Changes; Change Management Process . No Change shall be implemented without LS&Co.’s approval, except as may be necessary on a temporary basis to maintain the continuity of the Services and with respect to all Changes, Supplier shall, other than those Changes made on a temporary basis to maintain the continuity of the Services, schedule Changes so as not to unreasonably interrupt LS&Co.’s business operations. With respect to any Change made on a temporary basis to maintain the continuity of the Services, Supplier shall document and provide to LS&Co. notification of the Change no later than the next business day after the Change is made. LS&Co. shall have no liability for any activities of Supplier, including the provision of Systems or Services, that are undertaken pursuant to a Change unless such Change has been approved by LS&Co. in accordance with the Change Management Process.
10.6      Contract Change Process . All Contract Changes shall be documented in a change order prepared by Supplier, at its cost and expense. Where LS&Co. requires a Contract Change, Supplier shall prepare such change order in response to LS&Co.’s request for that Contract Change. Each change order prepared by Supplier shall be identified by a unique number, contain a detailed description of the Contract Change and a detailed analysis of the impact of the proposed Contract Change, including an analysis of the impact on the Systems, Software and Equipment used to provide the Services, the scope and nature of the Services, and the level and quality of the Services. Each such change order shall specify the adjustments to the Charges, if any. Any Contract Change approved by LS&Co. shall be executed by LS&Co. and Supplier in accordance with the requirements in Section 29.9 . No Contract Change shall be implemented without LS&Co.’s prior approval. LS&Co. shall have no liability for any activities of Supplier, including the provision of Systems or Services, that are undertaken pursuant to a Contract Change unless such Contract Change has been approved by LS&Co. in accordance with the Contract Change Process.
11.
SUPPLIER DELIVERY ORGANIZATION.
11.1      Key Supplier Personnel . With respect to the Key Supplier Personnel, the Parties agree as follows:
(a)      All Key Supplier Personnel shall be dedicated to the LS&Co. account on a full-time basis unless otherwise specified on Exhibit 13 .

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(b)      Before assigning an individual to a Key Supplier Personnel position, whether as an initial assignment or as replacement, Supplier shall: (i) notify LS&Co. of the proposed assignment within a reasonable period of time prior to the proposed assignment; (ii) introduce the individual to appropriate representatives of LS&Co.; (iii) provide LS&Co. with a resume and any information regarding the individual that may be reasonably requested by LS&Co.; and provide LS&Co. with an opportunity to interview the individual; (iv) provide LS&Co. with a plan that details the education and handover process to be completed by Supplier; and (v) obtain LS&Co.’s written approval for such assignment.
(c)      Supplier shall not replace or reassign: (i) the Supplier Governance Executive for 36 months from the date such individual begins his or her tenure in that position; (ii) the Supplier Transition Director until 30 days after the completion of all Transition Services; or (iii) any other Key Supplier Personnel for 24 months from the date such individual begins his or her tenure in that position (and, without limiting the foregoing 24 month-obligation, if any of the Key Supplier Personnel has duties in connection with a particular discrete Project, until the completion of such Project), unless, in each case, LS&Co. consents in its sole discretion to such replacement or reassignment, or such individual: (A) voluntarily resigns from Supplier; (B) is dismissed by Supplier for misconduct; (C) fails to perform his or her duties and responsibilities pursuant to this Agreement; or (D) is unable to work due to disability.
(d)      If LS&Co. determines that any Key Supplier Personnel should not continue in his or her position, LS&Co. may in its sole discretion and upon notice to Supplier require the immediate removal of such Key Supplier Personnel from the Supplier Staff.
(e)      Supplier shall maintain backup procedures and conduct replacement procedures for Key Supplier Personnel as necessary to assure an orderly succession for Key Supplier Personnel removed from the account for any reason. Upon LS&Co.’s request, Supplier shall make such procedures available to LS&Co.
(f)      Supplier shall make the Key Supplier Personnel available for meetings with LS&Co. personnel in accordance with Exhibit 5 and otherwise upon LS&Co.’s request.
11.2      Supplier Staff; Training and Skills; Removal; Confidentiality. Supplier shall appoint to the Supplier Staff only individuals with suitable training and skills to perform the Services. Supplier shall provide upon LS&Co.’s request a list of all Supplier Staff and other Supplier Agents dedicated full-time to the Supplier Staff and their respective job titles. Supplier shall notify LS&Co. as soon as possible after dismissing or reassigning any member of the Supplier Staff whose work location is at a LS&Co. Service Location. LS&Co. may in its sole discretion from time to time to require Supplier to remove any member of the Supplier Staff from working on the LS&Co. account, with or without cause (provided that such requirement shall not be based on legally prohibited reasons), and Supplier shall complete such removal within 24 hours and replace such individual as soon as practicable at no cost to LS&Co. Each member of the Supplier Staff who performs work under this Agreement shall be informed of Supplier’s confidentiality obligations under this Agreement and shall agree in writing to and shall comply with such obligations. With respect to Supplier Staff assigned to the account at or in advance of the Commencement Date, at least 20% of those Supplier Staff shall have recent

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prior experience with clients that are similar to LS&Co., or on accounts that are similar in nature, size and types of services to the LS&Co. account.
11.3      Background Checks. Supplier certifies that it has conducted a background check with respect to each member of the Supplier Staff prior to that Supplier Staff member working at a LS&Co. Service Location or accessing the Systems in accordance with the LS&Co. background screening requirements for non-employees made available by LS&Co. from time to time. At a minimum such background check shall include verification of name, work eligibility status, current address, educational background, work history, and court records for area of residence over the prior 5 years, including felony violations or other acts involving breach of trust or act of dishonesty. In addition, if requested by LS&Co. (and at the cost agreed to in advance by the Parties), Supplier shall conduct enhanced security screening and background checks of Supplier Staff, including additional background checks that LS&Co. requires in a particular jurisdiction. LS&Co. shall provide its requirements to Supplier for such enhanced security screening and background checks. Notwithstanding the foregoing, LS&Co. may conduct such enhanced security screening and background checks itself (and not through Supplier) to the extent required by applicable Law, and, upon request from LS&Co., Supplier shall support and assist LS&Co. in carrying out such enhanced security screening and background checks. LS&Co. reserves the right to refuse to allow any of the Supplier Staff admittance to LS&Co. Service Locations or to perform Services where such individual does not meet LS&Co.’s background and security requirements.
11.4      Blocked Person Certification . At LS&Co.’s request, Supplier shall certify that each Supplier Agent is not and has never been: (a) a Blocked Person; and (b) acting directly or indirectly for any Blocked Person. Supplier shall immediately notify LS&Co. if any Supplier Agent is or becomes a Blocked Person and Supplier shall cease using such Supplier Agent to provide the Services.
11.5      Conduct of Supplier Personnel. If LS&Co. notifies Supplier that a particular member of the Supplier Staff is not conducting himself or herself in accordance with Section 7.3 , Supplier shall promptly investigate the matter and take appropriate action which may include: (a) removing the applicable person from the Supplier Staff and providing LS&Co. with prompt notice of such removal and replacing the applicable person with a similarly qualified individual; or (b) taking other appropriate disciplinary action to prevent a recurrence. In the event of multiple violations of Section 7.3 by a particular member of the Supplier Staff, Supplier shall promptly remove the individual from the Supplier Staff. LS&Co. reserves the right to remove any Supplier Staff from any LS&Co. Service Location and restrict access to any System in its sole discretion.
11.6      Assignment to Competitors . Supplier shall not assign any Key Supplier Personnel to the account of any LS&Co. Competitor without LS&Co.’s prior consent (which consent will not be unreasonably held by LS&Co., except that such consent may be subject to such conditions as LS&Co. deems necessary to protect the interests of LS&Co.): (a) while such Key Supplier Personnel is assigned to the LS&Co. account; and (b) for a period of 12 months following the date that such Key Supplier Personnel ceases providing Services.

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11.7      Subcontractors. Supplier shall directly render all Services exclusively through its employees and Supplier Agents under its control who are authorized in accordance with this Agreement. Except with respect to those Supplier Agents set forth on Exhibit 14 , prior to subcontracting any of the Services, Supplier shall notify LS&Co. of the proposed subcontractor and shall obtain LS&Co.’s approval of such subcontractor, which approval may be given in LS&Co.’s sole discretion. Prior to making any material modification to any subcontract relating to the Services including material changes to the volume or type of services provided under such subcontract, Supplier shall notify LS&Co. of the proposed modification and shall obtain LS&Co.’s approval thereof. Subcontracting the provision of any portion of the Services in accordance with this Agreement shall not relieve Supplier of any of its obligations under this Agreement. Supplier shall be responsible for the work and activities of each of the Supplier Agents, including such agent’s compliance with the terms of this Agreement. Supplier shall be responsible for all payments to Supplier Agent in connection with the provision of Services. For Non-Critical Services (defined below) for which Supplier wishes to engage a Supplier Agent, Supplier may comply with this Section 11.7 with respect to such Supplier Agent by providing LS&Co. with notice as soon as practicable after engaging such Supplier Agent, provided that all other provisions of this Section 11.7 shall apply to such Supplier Agent. “ Non-Critical Services ” means services performed by a Supplier Agent that do not require interaction between Service Recipients and such Supplier Agent (including its personnel), that are administrative in nature and that do not entail access on the part of such Supplier Agent to any LS&Co. Data or Systems. LS&Co. may request, by notice, that Supplier replace any Supplier Agent for the reasons stated in such notice. After receipt of such notice, Supplier shall have 5 days in which to investigate the matters stated and discuss its findings with LS&Co. In the event that, following that 5 day-period, LS&Co. still requests replacement of the Supplier Agent, Supplier shall cease using such Supplier Agent to provide the Services. In the event that, in its discretion, LS&Co. believes that any Supplier Agent (or individual retained by such Supplier Agent) is a threat to the health, safety or security of any of LS&Co.’s, an Affiliate’s or a third party’s personnel, data or property, or threatens to be, or is in breach of the terms of this Agreement or any LS&Co. Policy, then Supplier shall remove that Supplier Agent from the provision of the Services immediately and, without limiting the foregoing, LS&Co. shall have the right to restrict such Supplier Agent’s access to any LS&Co. Service Location or System in its sole discretion.
11.8      Non-Solicitation . During the Term and Termination Assistance Period and for 1 year thereafter, neither Party nor their respective agents shall solicit the employment of any employee of the other Party without the prior written consent of such Party. It shall not be a violation of this Section 11.8 for: (a) a Party to advertise for personnel in generally available media, including through newspaper advertising, the internet, job fairs, recruiters and similar methods, and to hire the other Parties personnel that contact that Party as a consequence of such advertising; or (b) a Party to solicit or employ any person who approaches that Party solely on his or her own initiative with no direct or indirect solicitation or encouragement on the part of that Party.
11.9      Co-Employment. Supplier agrees and acknowledges, for itself and for the Supplier Staff, that the members of the Supplier Staff shall not be entitled to any benefits provided to employees of LS&Co. or its Affiliates, whether consisting of participation in an employee retirement, pension, supplemental compensation, defined contribution or similar plan; workers’ compensation; disability or other similar benefits; unemployment or other similar

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insurance or otherwise. Supplier agrees and acknowledges, for itself and for the Supplier Staff, that Supplier shall at all times remain the employer of all of its employees (and remain liable for all Supplier Staff) performing the Services and Supplier shall perform all of the responsibilities of an employer under applicable Laws. Supplier acknowledges and agrees that LS&Co. shall have no responsibility for verifying the work authorization status of any of the members of Supplier Staff. For clarity, and without limiting LS&Co.’s rights under this Article 11 to require the removal of individuals from the Supplier Staff, LS&Co. will not have the right under this Article 11 to require Supplier, or any Supplier Agent, to terminate any individual’s employment relationship with Supplier or any Supplier Agent.
12.
PROPRIETARY RIGHTS.
12.1      Ownership of Background Technology and Derivative Works . Each Party shall have and retain exclusive ownership of its Background Technology, including any Intellectual Property Rights therein. LS&Co. shall have and retain exclusive ownership of all LS&Co. Derivative Works, LS&Co. Software, Commissioned Materials, and Work Product, in each case including any Intellectual Property Rights therein. Supplier shall have and retain exclusive ownership of all of Supplier Software and Supplier Derivative Works, including any Intellectual Property Rights therein. All rights not expressly granted in this Article 12 with respect to the software, works and materials described in this Section 12.1 are reserved to the owner thereof.
12.2      LS&Co. Software . LS&Co. hereby grants to Supplier, during the Term and Termination Assistance Period, a global, fully-paid up, non-exclusive, non-transferable, license to Use the LS&Co. Proprietary Software and, subject to the terms of the applicable third party agreements (including the confidentiality and use restrictions therein), the LS&Co. Third Party Software; in each case solely as necessary to provide the Services. Supplier may permit, subject to the terms of the applicable third party agreements (including the confidentiality and use restrictions therein), Supplier Agents to Use the LS&Co. Software solely to provide those Services that such Supplier Agents are responsible for providing.
12.3      LS&Co. Data . All LS&Co. Data shall remain the property of LS&Co. Absent LS&Co.’s approval, to be given or withheld in LS&Co.’s sole discretion, LS&Co. Data shall not be: (a) used by Supplier or Supplier Agents other than as required to provide the Services; (b) disclosed, sold, assigned, leased or otherwise provided to third parties by Supplier or Supplier Agents; or (c) commercially exploited in any form (including any individualized, anonymized, or aggregated form) by or on behalf of Supplier or Supplier Agents. Supplier hereby irrevocably assigns, transfers and conveys all of its right, title and interest (if any) in and to LS&Co. Data to LS&Co.
12.4      Supplier Software. Supplier shall provide LS&Co. with access to Supplier Software during the Term and Termination Assistance Period. Prior to using any Supplier Software to provide the Services, Supplier shall: (a) identify and provide LS&Co. with notice of such Software and submit to LS&Co. such information and materials that is necessary for LS&Co.’s review and approval, including the Software; (b) with respect to Supplier Third Party Software, use all reasonable efforts to obtain from the applicable vendor the right to assign to LS&Co. or Successor at no cost the applicable software license agreement; and (c) if Supplier is

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unable to obtain such right, prior to using such Software, notify LS&Co. of the approximate cost of obtaining such right or obtaining a separate license to such Software. Upon LS&Co.’s request, Supplier shall provide LS&Co. with a list of all Supplier Software being used to provide the Services as of the date of such request. Supplier hereby grants to LS&Co. during the Term and Termination Assistance Period a global, fully paid-up, non-exclusive, non-transferable license to Use the Supplier Software in connection with the receipt and use of the Services, and to permit Service Recipients to Use the Supplier Software in connection with the receipt and use of the Services.
12.5      Commissioned Materials . Supplier shall provide to LS&Co. all Commissioned Materials promptly after the completion thereof, including the complete source code and object code of the Software therein. LS&Co. hereby grants to Supplier during the Term and Termination Assistance Period a global, fully-paid up, non-exclusive, non-transferable license to Use the Commissioned Materials solely to provide the Services. Supplier may permit Supplier Agents to Use the Commissioned Materials solely to provide those Services that such Supplier Agents are responsible for providing.
12.6      LS&Co.-Owned Materials . Supplier hereby does, and shall cause all Supplier Agents to, irrevocably and unconditionally assign to LS&Co. upon creation without further consideration all right, title, and interest in any LS&Co. Derivative Works, Commissioned Materials, and Work Product and any Derivative Works of the foregoing (collectively, “ LS&Co.-Owned Materials ”), and all Intellectual Property Rights therein. If any Intellectual Property Rights, including artists’ rights and moral rights, in LS&Co.-Owned Materials, cannot (as a matter of law) be assigned by Supplier or Supplier Agents to LS&Co. as provided above, then: (a) Supplier unconditionally and irrevocably does, and shall cause all Supplier Agents to, waive the enforcement of such rights and all claims and causes of action of any kind against LS&Co. with respect to such rights; and (b) to the extent Supplier or Supplier Agents cannot (as a matter of law) make such waiver, Supplier unconditionally grants, and shall cause all Supplier Agents to grant, to LS&Co. an exclusive (without reservation), perpetual, irrevocable, worldwide, fully-paid, royalty-free, transferable license, with the right to sublicense through multiple levels of sublicensees, under any and all such rights: (i) to reproduce, create Derivative Works of, distribute, publicly perform, publicly display, and digitally perform, and otherwise use and exploit the LS&Co.-Owned Materials in any medium or format, whether now known or hereafter discovered; (ii) to use, make, have made, sell, offer to sell, import, and otherwise exploit any product or service based on, embodying, incorporating, or derived from such Derivative Works; and (iii) to exercise any and all other present or future rights not yet known in the LS&Co.-Owned Materials. Supplier shall not include any of Supplier’s Background Technology in any LS&Co.-Owned Materials unless: (x) Supplier identifies such Background Technology to LS&Co. in advance and in writing; and (y) LS&Co. agrees to such inclusion. Notwithstanding the foregoing, to the extent that Supplier embeds any of Supplier’s Background Technology into any LS&Co.-Owned Materials, Supplier hereby grants to LS&Co. a global, perpetual, irrevocable, fully-paid, royalty-free, non-exclusive, sublicensable license to exercise all Intellectual Property Rights in any of Supplier’s Background Technology included in any LS&Co.-Owned Materials. Supplier hereby assigns, and shall cause all Supplier Agents to assign, to LS&Co. any and all claims, past, present, or future, of any nature whatsoever, Supplier or Supplier Agents may have for infringement, misappropriation, or violation of any Intellectual Property Right assigned to LS&Co. pursuant to this Agreement.

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12.7      Further Assurances . Supplier shall, and shall cause all Supplier employees, Supplier Agents and employees and contractors of Supplier Agents (in each case, whether former or current) to: (a) cooperate with and assist LS&Co. and its designees, both during and after the Term, in perfecting, maintaining, and enforcing LS&Co.’s or its designees’ rights in all right, title, and interest in any LS&Co.-Owned Materials, including all Intellectual Property Rights thereto; and (b) execute and deliver to LS&Co. any documents or take any other actions as may reasonably be necessary, or as LS&Co. may reasonably request, to perfect, maintain, protect, or enforce LS&Co.’s or its designees’ rights in such materials or otherwise carry out the purpose of this Article 12 .
12.8      LS&Co. Marks . Supplier recognizes the validity of all trademarks, service marks, trade names, logos and other indicia of LS&Co. and its Affiliates (and any and all intellectual property rights therein) (collectively, the “ LS&Co. Marks ”), and the ownership thereof by LS&Co. or the applicable Affiliate, and shall not at any time take any action or fail to act such that the validity of the LS&Co. Marks or LS&Co.’s or any Affiliate’s ownership thereof is called into question. Supplier shall not place any of the LS&Co. Marks on materials developed or produced by Supplier, except with respect to materials delivered solely to LS&Co., without the prior consent of the LS&Co. Governance Executive. Any such use of the LS&Co. Marks shall be limited to the specific consent granted by the LS&Co. Governance Executive hereunder, and shall not be deemed or considered the grant of a license to use such LS&Co. Marks in any other manner or for any other purpose whatsoever. Supplier shall not claim to own or acquire any right, title or interest in any of the LS&Co. Marks or other forms of intellectual property belonging to LS&Co., and all uses of the LS&Co. Marks shall inure to the benefit of LS&Co. Supplier shall immediately discontinue all use of the LS&Co. Marks upon the End Date, and shall not thereafter make any further use thereof. Supplier shall not register or attempt to register the LS&Co. Marks or any other trademark that may be confusingly similar to the LS&Co. Marks. Supplier shall not dispute or contest the validity, enforceability or ownership of the LS&Co. Marks and shall notify LS&Co. promptly of any attempt by any unauthorized person to use the LS&Co. Marks of which Supplier becomes aware.
13.
DATA.
13.1      Correction and Reconstruction . Supplier shall, at its cost and expense, promptly correct any errors or inaccuracies in the reports and other deliverables provided to LS&Co. under this Agreement. Supplier shall, at its cost and expense: (a) develop and maintain procedures for the reconstruction of lost, corrupted, altered or destroyed LS&Co. Data; (b) promptly notify LS&Co. of any errors in, or destruction, loss, or accidental, unauthorized or unlawful alteration of, any LS&Co. Data caused by Supplier or Supplier Agents; (c) promptly correct errors in, or destruction, loss or alteration of, any LS&Co. Data caused by Supplier or Supplier Agents (including correcting or reconstructing such LS&Co. Data); provided that Supplier’s obligation shall be limited to the extent that LS&Co. would have, in the ordinary course of business, reasonably incurred the cost of comparable internal and external resources to correct and/or reconstruct such LS&Co. Data taking into account all the relevant facts and circumstances (including the LS&Co. Data at issue and the potential to complete the correction and/or reconstruction of that LS&Co. Data (for example, the extent to which the applicable LS&Co. Data is captured in transaction logs, offline formats or in the memory of LS&Co. personnel)). At LS&Co.’s request and expense, Supplier shall promptly correct, to the extent

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possible in light of all the facts and circumstances, any errors in, or destruction, loss, or accidental, unauthorized or unlawful alteration of, LS&Co. Data caused by LS&Co or LS&Co. Agents.
13.2      Provision of Data . Upon request by LS&Co. for any reason and at any time during the Term and Termination Assistance Period, Supplier shall: (a) promptly provide to LS&Co., in the format and on the media requested by LS&Co., all or any part of LS&Co. Data; and (b) erase or destroy all or any part of LS&Co. Data in Supplier’s possession, in each case to the extent so requested by LS&Co. Any archival tapes containing LS&Co. Data shall be used by Supplier and Supplier Agents solely for back-up purposes. Supplier shall not withhold any LS&Co. Data for any reason, including as a means of resolving any dispute.
13.3      Data Privacy . Supplier shall comply with all applicable Data Protection Laws. To the extent necessary to comply with any Data Protection Laws, the Parties shall, or as appropriate cause their respective Affiliates to, execute a data privacy agreement substantially in the form required by LS&Co. and to make such amendments to such agreement as may be required under applicable Data Protection Laws from time-to-time. Supplier shall: (a) not do, or omit to do, anything that would cause, or may reasonably be expected to cause LS&Co. to breach any Data Protection Laws; (b) only process LS&Co. Personal Data as necessary to perform its obligations under this Agreement and as specifically permitted by this Agreement, or as otherwise expressly instructed by LS&Co.; (c) comply with all instructions of LS&Co. related to the processing of LS&Co. Personal Data; and (d) process LS&Co. Personal Data at the Service Locations specified in Exhibit 7 for such Processing and not transfer LS&Co. Personal Data across country borders unless expressly authorized by LS&Co. and with respect to the LS&Co. Personal Data collected within the European Economic Area (“ EEA ”) or otherwise subject to the Data Protection Laws in the EEA, only in accordance with Section 13.8 .
13.4      Processing of Personal Data . Where, in performing obligations under this Agreement, Supplier processes LS&Co. Personal Data on behalf of LS&Co., Supplier shall: (a) not disclose such LS&Co. Personal Data to any person unless LS&Co. has given its prior consent to such disclosure; (b) promptly notify LS&Co. if it receives any request from an individual (being also identified as a “Data Subject”) to have access to, or rectification of, LS&Co. Personal Data or any request not to receive marketing material or any objection or complaint in respect of its data processing activities and at its own cost provide such assistance as may reasonably be requested including providing LS&Co. with a copy of any LS&Co. Personal Data processed in relation to the requesting individual; (c) promptly deal with inquiries from LS&Co. in relation to the processing of LS&Co. Personal Data; (d) restrict access to LS&Co. Personal Data to only those Supplier Staff who have a need to know for the purposes of providing the Services, and take all reasonable steps to ensure the reliability of Supplier Staff that will or may have access to LS&Co. Personal Data; and (e) permit LS&Co. to inspect any of the Supplier’s facilities (excluding portions of shared facilities occupied by other customers of Supplier, to the extent that LS&Co. access would jeopardize or infringe privacy rights of such other customers) where any LS&Co. Personal Data is held or processed, to enable LS&Co. to assess whether or not the Supplier is complying with its obligations with respect to LS&Co. Personal Data under this Agreement and the Data Protection Laws.

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13.5      Data Security . Supplier shall establish, implement and maintain appropriate technical, administrative, physical and organizational security measures and controls, and other safeguards to ensure against the unauthorized or unlawful processing of any LS&Co. Personal Data and the accidental or unauthorized destruction, loss, alteration, disclosure, unavailability or access to LS&Co. Data in the possession of or under the control of Supplier and during the electronic transmission, storage, and shipping thereof, that comply with the applicable LS&Co. Policies and Data Protection Laws and that are at least equal to the highest of the following: (a) industry standards for security management, including ISO 27001 ( Information technology -- Security techniques -- Information security management systems -- Requirements ), ISO 27002 ( Information technology - Security techniques - Code of practice for information security management ) and payment card industry (“ PCI ”) standards applicable to providers of services the same as or similar to the Services and the Service Locations; and (b) any higher standard required by Law. Supplier shall implement such technical, administrative, physical and organizational security controls, and other such safeguards prior to Supplier’s provision of a Service or part of a Service. Supplier shall notify LS&Co. prior to any change that is made with respect to such technical, administrative, physical and organizational security controls, and other such safeguards.
13.6      Breach or Potential Breach; Notification Requirements . In the event Supplier or Supplier Agents discovers or is notified of a breach or potential breach of security relating to LS&Co. Data or any breach or potential breach of this Article 13 or any Data Protection Laws, Supplier shall (a) immediately notify the LS&Co. Governance Executive of such breach or potential breach (including providing the LS&Co. Governance Executive with an initial security risk assessment); (b) investigate such breach or potential breach and prepare a report of the breach or potential breach and corrective action taken; (c) coordinate with LS&Co. with respect to any communication of such breach or potential breach; (d) take such steps as are deemed necessary by LS&Co. to protect those individuals and/or Data Subjects affected or potentially affected by the breach or potential breach, whether due to actual or potential fraud, identity theft or otherwise; (e) provide full, prompt and good-faith cooperation as requested by LS&Co. in investigating and addressing any such breach or potential breach, including making available personnel with sufficient knowledge to work with LS&Co. to resolve any breach or potential breach and determine the scope of the breach or potential breach; and (f) in the case of an actual breach remediate the effects of the breach. In the event of a breach attributable to an act or omission of Supplier, as part of such remediation, Supplier shall: (w) pay all cost and expense of LS&Co.’s compliance with any of LS&Co.’s notification obligations, including LS&Co.’s compliance with Laws relating to the notification of individuals and entities who information may have been disclosed in connection with the breach, as well as the costs of credit monitoring services for affected individuals; (x) provide LS&Co. with a root cause analysis on the breach; (y) provide LS&Co. with a corrective action plan acceptable to LS&Co.; and (z) provide LS&Co. with assurance satisfactory to LS&Co. that such breach shall not recur. If any security breach or a breach of this Article 13 or of any Data Protection Laws requires LS&Co. to make a disclosure to any third party, LS&Co. shall be solely responsible for making that disclosure and Supplier and Supplier Agents shall cooperate with LS&Co. in formulating the disclosure. Supplier and Supplier Agents shall not make any disclosure regarding a security breach, a breach of this Article 13 or of any Data Protection Laws without LS&Co.’s prior consent, which may be withheld at LS&Co.’s sole discretion. Supplier shall promptly provide to LS&Co. any

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information or records that are requested by any Governmental Authority or otherwise required to answer any inquiries from any Governmental Authority.
13.7      Protection of LS&Co. Data . Supplier shall develop and, subject to LS&Co.’s prior approval, implement policies to: (a) segregate all LS&Co. Data from that of any other Supplier client; and (b) restrict access to LS&Co. Data so that Supplier Agents providing services to any business that is competitive with LS&Co. do not have access to LS&Co. Confidential Information.
13.8      Overseas transfers of LS&Co. Personal Data . Supplier may only transfer LS&Co. Personal Data processed in circumstances where EEA Data Protection Laws apply to a country outside the EEA with the specific and prior written agreement of LS&Co. Where such LS&Co. Personal Data is transferred outside the EEA, the Parties agree that the transfer of such data shall be in accordance with the standard contractual clauses for the transfer of Personal Data to data processors established in third countries (Commission Decision 2010/87/EU) (the “ Data Protection Model Clauses ”). In order to give effect to this Section 13.8 , Supplier agrees to enter into the Data Protection Model Clauses in complete and un-amended form (except with respect to the completion of required content and non-substantive adjustments to give meaning to required content) with each relevant EEA-based LS&Co. Affiliate as LS&Co. may specify, and that each executed version of the Data Protection Model Clauses shall form part of this Agreement.
13.9      Supplier Agents . Supplier shall procure that Supplier Agents contractually agree in writing to comply with obligations in relation to the processing of LS&Co. Personal Data which are equivalent to those set out in this Article 13 . For the avoidance of doubt, this shall include an obligation on the Supplier to procure that each such Supplier Agent signs up to the Data Protection Model Clauses in accordance with Section 13.8 , where required by LS&Co.
14.
CONTINUED PROVISION OF SERVICES.
14.1      Disaster Recovery Plan . Without limiting Supplier’s other obligations and responsibilities in this Agreement, Supplier shall develop, for LS&Co.’s review and approval, advanced arrangements and procedures to respond to an event or occurrence that could suspend, delay, inhibit or prevent performance of the Services, which arrangements and procedures, at a minimum, address the requirements specified in Exhibit 17 (a “ Disaster Recovery Plan ”) for each Service Location. Supplier shall implement each such plan in accordance with the requirements in this Agreement and the applicable Disaster Recovery Plan. Notwithstanding the foregoing, Supplier shall be responsible for all disaster recovery activities at all of the Service Locations as of the Applicable Commencement Date. Subject to the terms of the applicable Disaster Recovery Plan and Statement of Work, Supplier’s disaster recovery obligations with respect to each Service Location shall be to use its best efforts to ensure that in the event of a disaster the Services continue unaffected, including any dependencies the Services may have on Supplier Agents and in accordance with the applicable Service Levels. Supplier shall: (a) continuously review and update each Disaster Recovery Plan, including as required to reflect any New Services, Changes or changes to the manner of performance or delivery of the Services, and provide LS&Co. with updated versions promptly upon any change. Supplier shall consult LS&Co. regarding updates to a Disaster Recovery Plan and shall not make any changes without

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obtaining the consent of LS&Co.; (b) test (and re-test as necessary) the operability of the Disaster Recovery Plan; (c) permit LS&Co., at its own expense, to observe any test or re-test of the operability of each Disaster Recovery Plan; (d) provide LS&Co. with any reports relating to any test or re-test of the operability of each Disaster Recovery Plan; and (e) certify to LS&Co. at least twice during every 12-month period that each Disaster Recovery Plan is fully operational. Supplier shall immediately notify LS&Co. of any disaster and implement the Disaster Recovery Plan upon the occurrence of a disaster. In the event of a disaster, Supplier shall not increase the Charges or charge LS&Co. usage or other variable fees. In the event of uncertainty or a dispute regarding whether an event constitutes a disaster under the Disaster Recovery Plan, LS&Co. shall be entitled to determine in its reasonable discretion whether such event constitutes a disaster and such determination shall be binding on Supplier. Supplier must provide, at LS&Co.’s request, evidence of Supplier’s capability to meet any Regulatory Requirements concerning business continuity. In addition, Supplier consents to LS&Co. providing any third party with access to a Disaster Recovery Plan to enable that third party to audit the Disaster Recovery Plan in accordance with the audit rights in any agreement between LS&Co. and that third party. Supplier shall consult and cooperate with LS&Co. and assist LS&Co. in its development and refinement of LS&Co.’s Disaster Recovery Plans and take all steps necessary to ensure that such Disaster Recovery Plans and Supplier’s Disaster Recovery Plans are compatible with each other, responsive to the changes in the Services and compliant with all Regulatory Requirements. Supplier shall participate to the extent required by LS&Co. in the implementation of LS&Co.’s Disaster Recovery Plans, cooperate with and participate in LS&Co.’s tests of its Disaster Recovery Plans and consult with LS&Co. and provide reasonable assistance to LS&Co. in connection with LS&Co.’s efforts to continually update and improve LS&Co.’s Disaster Recovery Plans.
14.2      Force Majeure . If and to the extent that a Party’s performance of any of its obligations pursuant to this Agreement is prevented, hindered or delayed by fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, or a similar cause beyond the reasonable control of such Party (but specifically excluding labor and union-related activities with respect to Supplier’s or Supplier Agents’ workforces, failures of Supplier Agents, and inability to obtain supplies) (each, a “ Force Majeure Event ”), and such non-performance, hindrance or delay could not have been prevented by reasonable precautions undertaken by the Party claiming a Force Majeure Event, then such Party shall be excused for such non-performance, hindrance or delay of those obligations affected by the Force Majeure Event for as long as such Force Majeure Event continues and such Party continues to use all reasonable efforts to recommence performance whenever and to whatever extent possible without delay, including through the use of alternate sources, workaround plans and other means. The Party whose performance is prevented, hindered or delayed by a Force Majeure Event shall immediately notify the other Party of the occurrence of the Force Majeure Event and describe in reasonable detail the nature of the Force Majeure Event. The occurrence of a Force Majeure Event does not excuse, limit or otherwise affect Supplier’s obligation to provide either normal recovery procedures or any other disaster recovery services described in Section 14.1 . Supplier shall not have the right to any additional payments from LS&Co. as a result of its efforts to provide Services during a Force Majeure Event.
14.3      Alternate Source . If the performance of all or a portion of the Services is prevented, hindered or delayed for more than 24 hours in the case of critical Services, or more

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than 2 calendar days in the case of all other Services, LS&Co. may procure the affected Services from an alternate source and LS&Co. shall not be required to pay the Charges associated with such Services during the period of any such nonperformance. If the performance of all or a portion of the Services is prevented, hindered or delayed for more than 15 calendar days, LS&Co., at its sole discretion, may: (a) terminate any portion of the Agreement affected by the nonperformance, hindrance or delay; or (b) terminate the entire Agreement, in each case as of the date specified by LS&Co. in a notice of termination to Supplier at least 5 calendar days prior to the termination and without payment of any Termination Charge.
14.4      Allocation of Resources . Whenever a Force Majeure Event or a disaster causes Supplier to allocate limited resources between or among Supplier’s customers, Supplier shall not provide to any other customers of Supplier priority over LS&Co. Supplier shall not redeploy or reassign any Key Supplier Personnel to another account in the event of a Force Majeure Event.
14.5      Step-in Rights . In the event (a) of a material disruption to a Service (including a disruption arising out of a Force Majeure Event), (b) of repeated Service performance failures (provided that LS&Co gives notice to Supplier of such repeated Service performance failures and LS&Co.’s intent to exercise its step in rights and provides Supplier with a reasonable period, not to exceed 30 days, to cure such Service performance failures) or (c) LS&Co. is directed, or required, by a Law or Governmental Authority to step in, LS&Co. may, in each case, step in and supervise or perform, or designate an LS&Co. Agent to step in and supervise or perform, Supplier’s performance of the impacted Services, until such time that Supplier can demonstrate the ability to resume the performance of such Services (the date LS&Co. steps-in, the “ Step-In Date ”). Supplier shall be liable for LS&Co.’s costs and expenses incurred as a result of exercising its rights under this Section. LS&Co.’s exercise of its rights under this Section shall not constitute a waiver by LS&Co. of any rights it may have (including LS&Co.’s rights to terminate this Agreement) before, on or after the Step-In Date. Supplier shall cooperate with LS&Co. in respect of such step-in including by providing access to Software, Equipment and Service Locations and any other assistance and information requested by LS&Co., including by providing LS&Co. space at the Supplier Service Locations. In the event LS&Co. exercises its right to terminate this Agreement in whole or in part in connection with the events giving rise to a step-in, LS&Co. may initiate or continue to exercise its step-in rights during the Termination Assistance Period. If LS&Co. exercised its step-in rights, LS&Co. may elect to cease exercising its right to step-in at any time by giving notice to Supplier (“ Step-Out Notice ”). Within 3 business days after the Step-In Date, Supplier shall develop a plan to demonstrate to LS&Co. how it shall resume the proper performance of the applicable Services (“ Step-Out Plan ”), and shall provide such Step-Out Plan to LS&Co. for approval. Approval by LS&Co. of the Step-Out Plan shall not constitute a waiver by LS&Co. of any rights it may have if Supplier is unable to perform any of its obligations in accordance with the terms of this Agreement after the Step-Out Date. The Step-Out Plan and delivery of the Services shall remain Supplier’s responsibility. Following receipt and review of any Step-Out Plan, LS&Co. shall either (a) confirm the date for resumption of the affected Services by Supplier as being the date set out in the Step-Out Notice or (b) revise the date to reflect the time to implement the Step-Out Plan and the state of readiness of Supplier; which date shall be no later than 30 days after the resumption of the Services by Supplier. The date notified by LS&Co. under clause (a) or clause (b) shall be the “ Step-Out Date ”. Once LS&Co. has notified Supplier of a Step-Out Date, Supplier shall devote all necessary resources to implement the Step-Out Plan such that delivery of the affected Services by Supplier is restored to the Service Levels, and that the affected Services

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are delivered in accordance with all other provisions of this Agreement and the applicable Statements of Work, from the Step-Out Date. During any step-in period, the Parties shall meet at least weekly to discuss progress toward remedying the event which gave rise to exercise of the step-in right, including deciding whether or not Supplier can resume performance of the affected Services. By exercising its right to step-in LS&Co. shall not, and shall not be deemed to, assume any obligation to resolve the event giving rise to its right to step-in or relieve Supplier of any obligation or liability in relation to that event or relieve Supplier of any of its other obligations or liabilities under this Agreement and any applicable Statements of Work.
15.
PAYMENTS.
15.1      Charges . In consideration of Supplier providing the Services, LS&Co. shall pay to Supplier the Charges as specified in this Agreement. Except as expressly set forth in this Agreement, there shall be no charges or fees payable by LS&Co. in respect of Supplier’s performance of its obligations pursuant to this Agreement. Periodic Charges under this Agreement are to be computed on a calendar month basis, and shall be prorated for any partial month.
15.2      Invoices . For each month after the first Commencement Date, Supplier shall invoice LS&Co. for the Charges applicable to the Services provided during such month. Supplier’s monthly invoices shall: (a) be provided within 10 days after the last day of the month; (b) be in a form and format requested by LS&Co.; and (c) contain detailed information regarding the Charges as is requested by LS&Co., including information necessary to determine the accuracy of the Charges in each such invoice.
15.3      Timeliness of Invoices . Supplier shall invoice all Charges within 90 days after the month in which the Services were rendered or the expense incurred. If Supplier fails to invoice such Charges within 90 days LS&Co. shall be under no obligation to pay and Supplier shall waive any right it may have to invoice for and collect such Charges.
15.4      Payment . Subject to Section 15.5 , the Charges for a month shall be due and payable to Supplier within [****] *  days after the date LS&Co. receives Supplier’s invoice. Nothing in this Agreement shall prevent Supplier from assigning the receivables due to Supplier in accordance with the terms and conditions in this Agreement; provided that the assignee shall obtain no right or cause of action under this Agreement and LS&Co. shall be under no obligation to deal with or respond to the assignee of such receivables, and provided further that, LS&Co. shall only be obligated to make a single payment in accordance with, and subject to, the terms and conditions of this Agreement and shall not be required to make separate payments to Supplier with respect to any invoice or invoiced amounts.
15.5      Fee Disputes . LS&Co. may withhold invoiced amounts that LS&Co. disputes in good faith, until such dispute is resolved in accordance with the terms of this Agreement, whereupon Supplier shall promptly implement the resolution of that dispute. LS&Co. shall notify Supplier of all such disputes by the date payment under such invoice would otherwise be due. In the event that the amount of disputed payments withheld by LS&Co. pursuant to this Section 15.5 exceeds an amount equal to 3 months of the Base Charges, LS&Co. shall pay such

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excess amounts into an escrow account. Upon resolution of the applicable dispute, the prevailing party in such dispute shall receive the sum of money subject to the dispute from the escrow agent.
15.6      Unanticipated Changes . In the event of a significant and unanticipated change in technology or business processes during the Term materially reduces Supplier’s cost of providing the Services, Supplier will reduce the Charges by an amount that reflects such reduction.
15.7      Due Diligence . Supplier hereby acknowledges and agrees that LS&Co. has delivered or made available to Supplier all information and documents Supplier has deemed necessary for Supplier to commit to its obligations under this Agreement in accordance with its terms. Supplier shall not be relieved of any of its obligations under this Agreement, or alter, increase or add any fees or charges related to this Agreement, as a result of its failure to review the foregoing information and documents or any documents referred to therein or its failure to request any information or documents from LS&Co.
15.8      No Other Charges . Except as otherwise expressly set forth in Exhibit 4 , or elsewhere in this Agreement, all costs and expenses relating to Supplier’s performance of the Services (including all costs and expenses related to the acquisition, maintenance and enhancement of Software and Equipment, travel and lodging, document reproduction and shipping, computers and office equipment used by Supplier Staff, and all telephone charges) are included in the Charges and shall not be charged to or reimbursed by LS&Co. Except as expressly provided in Exhibit 4 , there shall be no periodic adjustments to the Charges during the Term (e.g., cost-of-living increases or inflation indexes).
15.9      No Payment for Unperformed Services . If Supplier fails to provide any Services, the Charges shall be adjusted in a manner such that LS&Co. is not responsible for the payment of any Charges for Services that Supplier fails to provide.
15.10      Local Country Agreements . Where required, in LS&Co.’s judgment, under applicable local Law to fulfill the obligations of the Parties under this Agreement, each Party shall cause the applicable Supplier or Supplier Affiliate entity and the applicable LS&Co. or LS&Co. Affiliate entity to enter into a local country addendum in the form set forth in Exhibit 16 (a “ Local Country Agreement ”). Notwithstanding the foregoing, each of the Parties shall instruct their respective Affiliates receiving or providing Services in such countries to comply with the applicable terms of this Agreement.  With respect to each Local Country Agreement, unless otherwise provided in such Local Country Agreement, Supplier shall be fully responsible and liable for all obligations of itself or any Supplier Affiliate or Supplier Agent, as may be applicable.  LS&Co. shall have the right to enforce this Agreement (including the terms of all Local Country Agreements) on behalf of each LS&Co. Affiliate that enters into a Local Country Agreement, and to assert all rights and exercise and receive the benefits of all remedies (including monetary damages) of each such LS&Co. Affiliate, to the same extent as if LS&Co. were such LS&Co. Affiliate, subject to the provisions of Article 27 . Supplier shall have the right to enforce this Agreement (including the terms of all Local Country Agreements) on behalf of each Affiliate that enters into a Local Country Agreement, and to assert all rights and exercise and receive the benefits of all remedies (including monetary damages) of each such Affiliate

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hereunder, to the same extent as if Supplier were such Affiliate, subject to the provisions of Article 27 . Notwithstanding anything to the contrary in any Local Country Agreement, it is the intention of the Parties that any and all disputes arising under or relating to any Local Country Agreement shall be subject to the provisions of Article 22 .
16.
TAXES.
16.1      Taxes . LS&Co. and Supplier shall each bear sole responsibility for: (a)  its own Income Taxes; (b)  all taxes, assessments and other real property-related levies on its respective owned or leased real property; and (c) any sales, use, lease, service, value-added, excise, consumption, stamp duty, goods and services, transfer, or other similar tax, duty or surcharge that is assessed on Equipment, Software or property such Party owns or leases from a third party, or for which such Party is financially responsible under this Agreement. Supplier shall be responsible for any sales, use, lease, service, value-added, excise, consumption, stamp duty, goods and services, transfer, or other similar tax, duty or surcharge that is based upon Supplier’s cost in acquiring, using or providing any materials, supplies, facilities, or services furnished or used by Supplier or Supplier Agents in performing or furnishing the Services including all such taxes, duties and surcharges on Supplier Equipment and Supplier Software. In the event that LS&Co. is required by law to pay withholding taxes on any payment of Charges, then LS&Co. shall deduct such amounts as are necessary and pay the net amount to Supplier after such deduction for withholding taxes. Unless otherwise agreed to by LS&Co., Supplier shall provide all Software in intangible (e.g., electronic) form with no exchange of tangible personal property, and, at LS&Co.’s request, shall provide a certification of compliance with the foregoing requirement.
16.2      Certain Service Taxes . Supplier represents and warrants that, to the best of its knowledge, no sales, use, lease, service, value-added, excise, consumption, stamp duty, goods and services, transfer, or other similar tax, duty or surcharge are applicable to the Charges (collectively, “ Service Tax ”) in any jurisdiction as of the Effective Date. If at any time on or after the Effective Date, a Service Tax is imposed in any jurisdiction, Supplier shall, in consultation with and subject to LS&Co. approval, take all reasonable steps to mitigate the impact of such Service Tax (including, potentially, providing applicable tax credits to LS&Co. and submitting necessary tax certification forms). If the impact of such Service Tax cannot be fully mitigated, Supplier shall: (a) agree to bear such Service Tax; or (b) negotiate and implement a mutually agreed upon equitable reduction to the applicable Charges. In the event that Supplier does not agree to bear such Service Tax or the Parties cannot agree upon an equitable reduction to the applicable Charges within a reasonable time period, in any case not to exceed 30 days, LS&Co. may: (y) agree to bear such Service Tax; or (z) elect to terminate this Agreement, any Statement of Work or the affected Service in whole or in part as of the date specified by LS&Co. in its notice of termination and without payment of any Termination Charges. If LS&Co. agrees to bear such Service Tax then Supplier shall (subject to the provision of an exemption certificate by LS&Co.) collect and remit such Service Tax legally chargeable to LS&Co. under applicable Law and LS&Co. shall be financially responsible for such Service Tax; provided that Supplier does all things, including providing tax invoices and other documentation, that may be necessary or desirable to enable or assist LS&Co. in claiming any input tax credit, adjustment or refund in relation to any amount of such Service Tax.

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16.3      Relocation of Services . Any taxes assessed on the provision of the Services for a particular site resulting from Supplier’s relocating or rerouting the delivery of Services for Supplier’s convenience to, from or through a location other than the Service Location used to provide the Services as of the Effective Date shall be paid by Supplier.
16.4      Segregation of Charges . Supplier shall segregate the Charges into the following separate payment streams on a country-by-country basis: (a) those for taxable Services; (b) those for nontaxable Services; (c) those that relate to a capital expenditure versus an expense; (d) those for which a Service Tax has already been paid; and (e) those for which Supplier functions merely as a paying agent for LS&Co. in receiving goods, supplies or services (including leasing and licensing arrangements) that otherwise are nontaxable or have previously been subject to tax. In addition, LS&Co. and Supplier shall cooperate to more accurately determine a Party’s tax liability and to minimize such liability, to the extent legally permissible. Each Party shall provide and make available to the other Party any resale certificates, information regarding out-of-state sales or use of equipment, materials or services, and any other exemption certificates or information requested by a Party.
17.
BENCHMARKING.
17.1      Benchmarking Process . LS&Co. may in its sole discretion instruct the Benchmarker to conduct the Benchmarking Process at a time and with regard to any Service Category or combination of Service Categories; except that LS&Co. may not formally initiate a Benchmarking Process with respect to a Service Category more than once annually. As part of the Benchmarking Process, the Benchmarker shall compare the applicable fees to the fees of offerings of a like mix of volumes and types of services offered by other suppliers (including Supplier) to customers who are similarly situated to LS&Co. (“ Comparable Deals ”). The Benchmarker shall select a representative sample of Comparable Deals from one or more suppliers. The Benchmarker shall normalize the fees for the Comparable Deals utilizing factors suggested by the Parties and approved by the Benchmarker as part of the determination of the Benchmarking Process, which factors may include the scope and volume of the services, the service locations (including geography), the term of the agreement, service levels and the service delivery model.
17.2      Benchmarker . The Benchmarking Process shall be conducted by a Benchmarker chosen by LS&Co. from the list of Benchmarkers specified on Exhibit 11 , and LS&Co. shall pay the fees charged by the Benchmarker to conduct the Benchmarking Process. If the Benchmarkers are no longer providing the services required to conduct the Benchmarking Process or are otherwise unavailable at the time LS&Co. elects to conduct the Benchmarking Process, the Parties shall promptly designate a replacement Benchmarker. If the Parties do not agree within 15 days on a replacement Benchmarker, LS&Co. shall designate the Benchmarker in its sole discretion, provided that such Benchmarker shall not be a Supplier Competitor. Supplier shall at its expense cooperate with and assist the Benchmarker and any other third parties involved in the Benchmarking Process, including providing data relating to the provision of the Services, as requested by LS&Co. or the Benchmarker. For clarity, Supplier shall not be required to provide data that reveals its cost to provide the Services in connection with the Benchmark Process except in the case of Pass-Through Expenses.

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17.3      Benchmark Results Review . LS&Co. and Supplier shall review the Benchmark Results during the Benchmark Review Period. If either Party has reason to believe that the Benchmarker’s report contains material errors (each, a “ Claimed Error ”), such Party shall notify the Benchmarker during the Benchmark Review Period of such Claimed Error and shall provide any documentation and information necessary to support the Claimed Error and shall copy the other Party on all such correspondence. The Benchmarker shall review any Claimed Error and meet with the Parties for a time period determined by the Benchmarker to resolve the Claimed Error and make corresponding adjustments to the Benchmarker’s findings, if any, prior to issuing the final benchmarking report (“ Benchmarking Report ”). If either Party determines that any Claimed Error is not likely to be resolved through additional consultation with the Benchmarker, at such Party’s request, the Claimed Error will be resolved through the alternative dispute resolution process described in Section 17.5 and the resolution of the Claimed Error as set forth in the final report of CPR shall be incorporated into the Benchmarking Report and shall be binding on the Parties.
17.4      Adjustments . If any Charges paid by LS&Co. to Supplier with respect to a Service Category that is subject to the Benchmark Process are higher than the market price established by the Benchmarker in the Benchmark Results for such Service Category (or, to the extent a market price is not established in the Benchmark Results, the average price of all the pricing results provided by the Benchmarker in the Benchmark Results), Supplier shall then prospectively reduce the Charges in a manner that eliminates such variance. In the event that any Charges paid by LS&Co. to Supplier are more than 10% higher than the pricing contained in the Benchmark Results, Supplier shall reimburse LS&Co. for the cost of the applicable benchmarking. In no event will Supplier increase the Charges as a result of any benchmarking.
17.5      Benchmarking Disputes . If the Parties fail to agree on a replacement Benchmarker in accordance with Section 17.2 , or fail to agree to the Benchmarking Process within 30 days after LS&Co. notifies Supplier that it intends to initiate the Benchmarking Process, or if either Party disputes the Benchmark Results, the Parties shall immediately escalate the disputed issues (“ Issues ”) via the dispute resolution process set forth in Section 22.1 ; provided that if any unresolved Issues remain after each Party has considered the Issues in accordance with Section 22.1(c) , then either Party may submit such Issues to the International Institute for Conflict Prevention & Resolution (www.cpradr.org, “ CPR ”) and such Issues shall be finally resolved by arbitration in accordance with the CPR Rules for Non-Administered Arbitration by three independent and impartial arbitrators, of whom each Party shall designate one in accordance with the ‘screened’ appointment procedure provided in CPR Rule 5.4. The Parties shall use all reasonable efforts to resolve the Issues within 30 days after their submission to arbitration under this Section 17.5 and the decision of the arbitrators with respect to such Issues shall be binding on the Parties. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§1 et seq. and judgment upon the decision rendered by the arbitrator may be entered by any court having jurisdiction thereof. The place of arbitration shall be San Francisco, California. If a Party fails to participate in the dispute resolution procedures described in Article 22 , the other Party can commence arbitration prior to the expiration of the time periods set forth in Article 22 .

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18.
AUDITS.
18.1      Services . Upon reasonable notice from LS&Co., Supplier and Supplier Agents shall promptly provide LS&Co., LS&Co. Agents (including any external auditors of LS&Co., any internal LS&Co. Agents responsible for evaluating compliance, and any trustees, administrative agents, paying agents, and banks responsible for monitoring or managing LS&Co.’s compliance with its debt and other covenants), and any of LS&Co.’s regulators (collectively, “Auditors” ) with: (a) access to any facilities, personnel and information technology systems under Supplier or Supplier Agents’ control; and (b) any assistance and information the Auditors may require, in each case for the purpose of performing audits or inspections of the Services, the Service Locations, the Systems, and the business of LS&Co. relating to the Services (including to verify performance of the Services, the Charges, the use of LS&Co. resources, and regulatory compliance). If any audit by an Auditor designated by LS&Co., a LS&Co. Agent or a regulatory authority results in Supplier being notified that Supplier or Supplier Agents are not in compliance with any Law, this Agreement, or audit requirement, Supplier shall, and shall cause Supplier Agents to, promptly take actions to comply with this Agreement or such Law, or audit requirement. Supplier shall provide Auditors with such assistance as is requested by the Auditors or LS&Co.; except that to the extent that such assistance would require that Supplier increase, in a material manner, the Supplier Staff beyond that which is ordinarily used by Supplier to provide the Services, then Supplier may, in accordance with the Contract Change Process, request that LS&Co. pay the incremental costs related to such material increase.
18.2      Fee Records . Upon notice from LS&Co., Supplier shall promptly provide LS&Co. and Auditors with access to such financial records and supporting documentation as may be requested by LS&Co., and LS&Co. or Auditors may audit the Charges to determine if such Charges are accurate and in accordance with this Agreement. If any such audit reveals that Supplier has overcharged LS&Co., LS&Co. shall notify Supplier of the amount of such overcharge and Supplier shall promptly pay to LS&Co. the amount of the overcharge, plus Interest calculated from the date of receipt by Supplier of the overcharged amount until the date of payment to LS&Co. If any such audit reveals an overcharge to LS&Co. of an amount equal to 5% of the Charges associated with the audited Services for the audited period, Supplier shall reimburse LS&Co. for the cost of such audit.
18.3      Service Auditor’s Report; Certain Audits .
(a)      Supplier shall, at LS&Co.’s expense, provide non-qualified Type II service organization control (“ SOC ”) 1 and SOC 2 service auditor’s report or reports: (a) prepared by an independent third party and internationally recognized auditor; (b) prepared in accordance with the Service Audit Standards of the internal controls for financial, security, availability, process, integrity, confidentiality and privacy; and (c) covering the Systems in use at any time during the audit period in each Service Location (the “ SOC Reports ”). Each SOC Report shall be provided by no later than November 1 to LS&Co. and its Auditors for review and comment and shall cover a testing period from September 1 to August 31 of each calendar year. Each SOC Report shall include such matters as are requested by LS&Co. LS&Co. shall review and approve the scope of each SOC Report prior to the start of the audit. Supplier shall consult with LS&Co. regarding the inclusion of appropriate LS&Co.-specific transactions to be sampled

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in connection with the preparation of the SOC Reports in order to ensure that such reports shall meet LS&Co.’s requirements. Each such SOC Report shall be designed and conducted to facilitate periodic compliance reporting by LS&Co. under the Regulatory Requirements, Sarbanes-Oxley and PCI Standards (to the extent that the PCI Standards are applicable to the Services provided by Supplier). Supplier shall provide LS&Co. within 30 days of a request from LS&Co., a written statement by an officer of Supplier that there has been no change in the internal controls or the successful operation of such controls and systems since the date of the most recent SOC Reports.
(b)      Without limiting Supplier’s obligations under Section 18.1 , upon LS&Co.’s request, Supplier shall provide LS&Co. or LS&Co. Agents access to any facilities and personnel and equipment under Supplier or Supplier Agents’ control and any assistance and information LS&Co. or the Auditors may require in order to conduct an audit and test (collectively, “ Test ”) of the Services (including Tests at all LS&Co. Service Locations) for the purpose of determining LS&Co.’s compliance with Sarbanes-Oxley. If any Test reveals deficiencies in internal controls and procedures relating to the Services (as such deficiencies are characterized under the standards of the Public Company Accounting Oversight Board or the standards used by LS&Co. management or LS&Co.’s registered public accounting firm to evaluate LS&Co.’s internal control structure or any other applicable standards, collectively “ Standards ”), Supplier shall develop and submit to LS&Co. a plan to cure and remediate such deficiencies (the “ Cure Plan ”) within 10 business days after LS&Co.’s notice of the deficiencies and commence implementation of the Cure Plan immediately after LS&Co.’s approval of such plan, or within another time period agreed by the Parties. After Supplier has implemented the Cure Plan in accordance with this Section 18.3(b) , LS&Co. may conduct additional Tests of the Services (including Tests at all LS&Co. Service Locations) to determine LS&Co.’s compliance with Sarbanes-Oxley as such compliance relates to the Services. If such Tests reveal deficiencies in internal controls and procedures relating to the Services (as such deficiencies are characterized under the Standards), which deficiencies arise from Supplier’s failure to implement a Cure Plan properly or Supplier’s failure to perform any other obligations under the Agreement, Supplier shall promptly develop a plan to remedy such deficiencies and implement such plan upon LS&Co.’s approval as soon as reasonably practicable.
(c)      In addition to Supplier’s obligations under Section 18.3(b) , Supplier shall correct promptly any deficiencies in internal controls and procedures relating to the Services that are identified by LS&Co. during the Term in connection with any internal control assessment, audit or similar review conducted or report prepared by LS&Co. or a LS&Co. Agent. Without limiting the generality of the preceding sentence, if at any time LS&Co. determines that any matter identified in an audit conducted pursuant to this Article 18 would: (i) be considered a significant deficiency or a material weakness in LS&Co.’s internal control structure and procedures for financial reporting (as such deficiency is characterized under the Standards); (ii) require LS&Co. to disclose the risk of non-compliance to any regulatory body; (iii) prevent LS&Co. management from evaluating and affirming to the effectiveness of its internal control structure and procedures for financial reporting pursuant to Sarbanes-Oxley; or (iv) prevent LS&Co.’s registered public accounting firm from providing an affirmative attestation opinion with respect to LS&Co.’s evaluation described in Section 18.3(c)(iii) , then Supplier shall submit to LS&Co. within 10 business days after LS&Co.’s notice thereof a Cure Plan, such that LS&Co. is able to complete the management evaluation and attestation required by Sarbanes-Oxley and

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Supplier shall implement such plan immediately after LS&Co.’s approval of such Cure Plan, or within another time period agreed by the Parties.
18.4      Record Retention . Supplier shall retain records and supporting documentation: (a) sufficient to satisfy the requirements set forth in this Article 18 ; (b) as necessary to document the Services and the Charges paid or payable by LS&Co. under this Agreement, including all third party invoices with respect to Pass-Through Expenses; (c) in accordance with LS&Co.’s retention policies and procedures as in effect from time to time; (d) as required by Law; and (e) in any event for at least 7 years after the End Date (unless a shorter period is specified in LS&Co.’s retention policies and procedures).
18.5      Facilities . Supplier shall provide to LS&Co. and LS&Co. Agents, on Supplier’s premises (or, if the audit is being performed on a Supplier Agent, the Supplier Agent’s premises if necessary), space, office furnishings (including lockable cabinets), and utilities as LS&Co. or such LS&Co. Agents may reasonably require to perform the audits described in this Article 18 .
18.6      General Audit Procedures .
(a)      LS&Co. shall not be given access to: (i) the proprietary information of other Supplier customers; (ii) Supplier locations that are not related to LS&Co. or the Services; or (iii) Supplier’s internal costs.
(b)      In performing audits, the Auditors shall use commercially reasonable efforts to avoid unnecessary disruption of Supplier’s operations and unnecessary interference with Supplier’s ability to perform the Services in accordance with the Service Levels. Where an Auditor desires to install any audit Software within Supplier’s environment, the installation and operation of such Software shall be subject to Supplier’s approval through its change management process.
(c)      Following any audit, LS&Co. shall conduct (in the case of an internal audit), or request its external auditors or examiners to conduct, a conference with Supplier to review any issues identified in the audit that LS&Co. will request Supplier to remediate; provided that LS&Co. shall not be obligated to provide any information that in LS&Co.’s reasonable opinion relates to, or may relate to, a dispute between Supplier and LS&Co.
(d)      In performing audits, the Auditors and their internal and external auditors, inspectors, regulators or other representatives shall comply with Supplier’s standard, reasonable physical and information security procedures and shall cause external Auditors (other than government Auditors) to execute a confidentiality agreement substantially similar to the agreement set forth on Exhibit 10 (“ LS&Co. Agent NDA ”). External Auditors designated by LS&Co. shall not be Supplier Competitors; provided that if a Supplier Competitor is in LS&Co.’s reasonable judgment the only entity that can perform an audit effectively with respect to a portion of the Services (e.g., because such Supplier Competitor is the only party able to assess a technology platform competently), such Supplier Competitor may perform the audit so long as such Supplier Competitor executes the LS&Co. Agent NDA.
(e)      If the scope of any information revealed to LS&Co. during an audit must be limited in order to enable Supplier to adhere to its confidentiality obligations to other Supplier

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customers, Supplier shall notify LS&Co. of the scope of such limitation prior to the beginning of such audit and that limited portion of the audit shall be conducted by an independent third party auditor acceptable to Supplier and LS&Co. and such auditor shall conduct the audit without disclosing any confidential information of Supplier’s other customers to LS&Co. PricewaterhouseCoopers or any successor entity that serves as LS&Co.’s regular independent external auditor is conclusively presumed to be acceptable to Supplier for the purpose of this Section 18.6(e) .
18.7      Supplier Audits . Within 10 days following receipt, Supplier shall make available to LS&Co. the findings of any review or audit conducted on Supplier, Supplier Affiliates or Supplier Agents (including internal and external auditors), to the extent such findings reflect conditions and events which have an impact on the Agreement or the Services.
19.
CONFIDENTIALITY.
19.1      General Obligations . All Confidential Information relating to or obtained from LS&Co. or Supplier shall be protected from unauthorized use and disclosure by the receiving Party to the same extent and in at least the same manner as such Party protects its own confidential information of a similar nature (and in no event with less than reasonable care), and neither Party shall use the Confidential Information of the other Party except as necessary to provide, receive or use the Services. Neither LS&Co. nor Supplier shall disclose, publish, release, transfer or otherwise make available Confidential Information of, or obtained from, the other in any form to, or for the use or benefit of, any person or entity without the disclosing Party’s consent. Each Party shall, however, be permitted to disclose relevant aspects of the other Party’s Confidential Information to its officers, directors, agents, professional advisors, contractors (including the Benchmarker), subcontractors and employees and to the officers, directors, agents, professional advisors, contractors, subcontractors and employees of its Affiliates (collectively, “ Permitted Parties ”), to the extent such disclosure is not restricted under any Third Party Contract, any LS&Co. Consents or any Laws or Governmental Approvals and only to the extent that such disclosure is reasonably necessary for the performance of its duties and obligations or the determination, preservation or exercise of its rights and remedies under this Agreement; provided that such Permitted Parties that are employees, officers, or directors of a Party are under a duty to maintain the confidentiality of such information that is no less restrictive than the obligations contained in this Article 19 and all other Permitted Parties have previously executed a written confidentiality agreement with respect to Confidential Information that imposes confidentiality obligations no less restrictive than those contained in this Article 19 ; and provided further that the receiving Party shall take all reasonable measures to ensure that Confidential Information of the disclosing Party is not disclosed or duplicated in contravention of the provisions of this Agreement by any of the receiving Party’s Permitted Parties The receiving Party shall be liable for any act by a Permitted Party to whom it has disclosed the disclosing Party’s Confidential Information which act constitutes a breach of the obligations under this Article 19 . The obligations in this Article 19 shall not restrict any disclosure as required by any Law (provided that the recipient shall give prompt notice to the disclosing Party of such requirement and cooperate, upon the disclosing Party’s request, in obtaining a protective order with respect to such information).

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19.2      Unauthorized Acts . Without limiting a Party’s rights with respect to a breach of this Article 19 , each Party shall: (a) promptly notify the other Party of any unauthorized possession, use or knowledge, or attempt thereof, of the other Party’s Confidential Information by any person or entity that may become known to such Party; (b) promptly furnish to the other Party full details of the unauthorized possession, use or knowledge, or attempt thereof, and assist the other Party in investigating or preventing the recurrence of any unauthorized possession, use or knowledge, or attempt thereof, of Confidential Information; (c) cooperate with the other Party in any litigation and investigation against third parties deemed necessary by the other Party to protect its Intellectual Property Rights; and (e) promptly use its best efforts to prevent a recurrence of any such unauthorized possession, use or knowledge, or attempt thereof, of Confidential Information. Each Party shall bear the cost it incurs as a result of compliance with this Article 19 .
19.3      Injunctive Relief . The Parties acknowledge and agree that monetary damages may be inadequate to compensate for a breach of the provisions contained in this Article 19 or other confidentiality provisions of this Agreement. In the event of such breach, the injured Party may be entitled to seek injunctive relief and any and all other remedies available at law or in equity. This Section 19.3 in no way limits the liability or damages that may be assessed against a Party in the event of a breach by that Party of any of the provisions of this Article 19 .
19.4      Return of Confidential Information . Except as necessary for LS&Co. to receive the benefit of the Termination Assistance Services or the licenses granted under Article 25 or Article 12 , the receiving Party shall return or destroy (at the disclosing party’s option) Confidential Information of the disclosing party in the receiving party’s (or its agents’) possession: (a) upon the request of the disclosing party with respect to all or the requested portion of such Confidential Information (provided that such request would not hinder the delivery or receipt of the Services); and (b) on the End Date with respect to all such Confidential Information.
19.5      Maintenance of Records in the United States . All LS&Co. Confidential Information shall, at all times during the Term and any Termination Assistance Period, be physically located in, or on media that is physically stored in the United States, and shall not be stored outside of the United States or accessible from outside of the United States; provided, however, that Supplier may physically store LS&Co. Confidential Information outside of the United States under the following circumstances: (a) if storage outside of the United States is specifically called for in a particular Statement of Work, and then only to the extent and for the purposes specifically identified in the Statement of Work; (b) to the extent necessary for Supplier to monitor and manage its performance of the Services and to provide invoices to LS&Co. in accordance with this Agreement (but excluding, for greater certainty, any information regarding the business and operations of LS&Co.); and (c) on a temporary basis to the extent required to perform the Services in accordance with this Agreement and in compliance with any applicable security requirements set out in this Agreement, provided that Supplier destroys such LS&Co. Confidential Information as soon as it is no longer necessary to store such information outside of the United States in order to perform the Services.

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20.
REPRESENTATIONS AND WARRANTIES.
20.1      By LS&Co. . LS&Co. represents and warrants that: (a) LS&Co. is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware; (b) LS&Co. has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and the execution, delivery and performance of this Agreement by LS&Co. has been duly authorized by LS&Co.; (c) LS&Co. is duly licensed, authorized or qualified to do business and is in good standing in every jurisdiction in which a license, authorization or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it, except where the failure to be so licensed, authorized or qualified would not have a material adverse effect on LS&Co.’s ability to fulfill its obligations under this Agreement; and (d) LS&Co. is in compliance with all Laws applicable to LS&Co.’s obligations under this Agreement and has obtained all applicable material permits and licenses required of LS&Co. in connection with its obligations under this Agreement.
20.2      By Supplier . Supplier represents and warrants that: (a) Supplier is a limited liability company duly incorporated, validly existing and in good standing under the Laws of the Republic of India; (b) Supplier has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and the execution, delivery and performance of this Agreement by Supplier has been duly authorized by Supplier and shall not conflict with, result in a breach of, or constitute a default under any other agreement to which Supplier is a party or by which Supplier is bound; (c) Supplier is duly licensed, authorized or qualified to do business and is in good standing in every jurisdiction in which a license, authorization or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it, except where the failure to be so licensed, authorized or qualified would not have a material adverse effect on Supplier’s ability to fulfill its obligations under this Agreement; (d) Supplier is in compliance with all Laws applicable to Supplier’s obligations under this Agreement and has obtained all applicable permits and licenses required of Supplier in connection with its obligations under this Agreement; (e) there is no outstanding litigation, arbitrated matter or other dispute to which Supplier is a party which, if decided unfavorably to Supplier, would reasonably be expected to have a material adverse effect on Supplier’s ability to fulfill its obligations under this Agreement; and (f) Supplier and Supplier Agents have full power and authority to grant LS&Co. the rights granted herein without the consent of any other party and any materials developed or furnished by Supplier and Supplier Agents to LS&Co. are free of any and all restrictions, settlements, judgments or adverse claims.
20.3      DISCLAIMER . EXCEPT AS SPECIFIED IN SECTION 20.1 AND SECTION 20.2 , NEITHER LS&CO. NOR SUPPLIER MAKES ANY OTHER WARRANTIES WITH RESPECT TO THE SERVICES OR THE SYSTEMS OR EQUIPMENT AND EACH EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

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21.
ADDITIONAL COVENANTS.
21.1      By LS&Co. . LS&Co. covenants and agrees with Supplier that during the Term and the Termination Assistance Period LS&Co. shall comply with all Laws applicable to LS&Co. in the performance of this Agreement, and, except as otherwise provided in this Agreement, shall obtain all applicable material permits and licenses required of LS&Co. in connection with its obligations under this Agreement.
21.2      By Supplier . Supplier covenants and agrees with LS&Co. that during the Term and the Termination Assistance Period:
(a)      Supplier shall (i) provide the Services with promptness, diligence and in a professional manner, in accordance with the practices and professional standards used in well-managed operations performing services similar to the Services, (ii) use adequate numbers of qualified individuals with suitable training, education, experience and skill to perform the Services and (iii) implement service delivery practices that are stable, mature and well-managed;
(b)      Supplier shall comply with all Laws applicable to Supplier in the performance of this Agreement and shall obtain all applicable permits and licenses required of Supplier in connection with its obligations hereunder;
(c)      the Services, Supplier Software, Supplier Equipment, Commissioned Materials, Work Product and any other resources or items used by Supplier or furnished to LS&Co. by Supplier or Supplier Agents in providing the Services (“ Materials ”), or LS&Co.’s receipt or use of the Materials as contemplated under this Agreement shall not infringe upon the Intellectual Property Rights of any third party;
(d)      Supplier shall promptly notify LS&Co. if Supplier learns of any claim, pending or threatened, or any fact upon which a claim could be made, that asserts that the Materials, or LS&Co.’s receipt and use of the Materials as contemplated under this Agreement may infringe upon the Intellectual Property Rights of any third party;
(e)      without limiting Supplier’s obligations under the Statements of Work, Supplier shall not, and shall ensure the Supplier Agents shall not, code or introduce into the systems any viruses, trojan horses, worms, spyware, back doors, email bombs, malicious code or similar items (collectively, “ Malware ”), and shall use all reasonable efforts to prevent Malware from being introduced into the System by any third parties; provided that in the event that Malware is found to have been introduced into the Systems, Supplier shall use it best efforts to mitigate the effects of the Malware and, if the Malware causes a loss of operational efficiency or loss of data, mitigate and restore such losses;
(f)      Supplier shall not, and shall ensure that the Supplier Agents shall not, code or introduce Software or Equipment that would have the effect of disabling or otherwise shutting down all or any portion of the Services or the Systems. With respect to any disabling code that may be part of the Software, Supplier shall not invoke such disabling code at any time (whether during or after the Term) for any reason. If at any time the licensor of any Supplier Third Party Software

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shall invoke or threaten to invoke any disabling code in Supplier Third Party Software licensed to Supplier which could adversely affect the Services, Supplier shall use its best efforts to preclude such action on the part of such licensor;
(g)      Supplier and all Supplier Agents shall not make any unauthorized representations on LS&Co.’s behalf or about LS&Co., nor commit or bind LS&Co. other than as specifically authorized;
(h)      Supplier or Supplier Agents shall not include in any Commissioned Materials or LS&Co. Derivative Works any software that is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU Public License, Lesser GNU Public License, or Mozilla Public License) without LS&Co.’s prior written consent, and to the extent that Supplier uses open source software in the performance of the Services, Supplier shall ensure that such use does not: (i) require or condition the use or distribution of such software on the disclosure, licensing, or distribution of any source code for any portion of such software; or (ii) could otherwise impose any limitation, restriction, or condition on the right or ability of LS&Co. to use or distribute such software;
(i)      any Commissioned Materials and other deliverables provided by Supplier pursuant to this Agreement shall be: (i) free from material defects in materials, design and workmanship; (ii) in conformance with any applicable documentation, manuals, specifications or requirements; and (iii) free and clear of any liens, claims, charges, debts or other encumbrances; and
(j)      unless otherwise agreed by the Parties, with respect to any Commissioned Materials: (i) if there is any defect or nonconformity, upon notice from LS&Co., Supplier shall promptly, at its sole cost and expense, correct or replace any such defect or nonconformity; and (ii) if Supplier fails to do so within 15 days from receipt of notice (or other time period agreed by the Parties), LS&Co. may at its option either obtain from Supplier any amounts reasonably expended to correct or replace such defect or nonconformity, or terminate the applicable New Service Proposal and obtain a refund of amounts paid for such Commissioned Materials.
22.
DISPUTE RESOLUTION.
22.1      Resolution Procedures . Except as otherwise provided below, the Parties shall initially attempt to resolve any dispute arising under or related to this Agreement (a “ Dispute ”) in accordance with the procedures set forth in this Article 22 .
(k)      Account Managers. Within 5 business days after either Party furnishes to the other notice of a Dispute, the LS&Co. Governance Executive and the Supplier Governance Executive shall consider the Dispute in person or by telephone and shall attempt to resolve the Dispute for a period of 5 business days. If the Dispute is not resolved, as agreed by the Parties, within such 5 business day period, the Dispute shall be escalated in accordance with Section 22.1(b) .
(l)      Senior Executives. If a Dispute is not resolved in accordance with Section 22.1(a) , the Chief Information Officer (or equivalent position) of LS&Co. and the Vice-President of the Consumer Goods vertical of Supplier (or a Supplier executive at an equivalent

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level to LS&Co.’s executive) shall meet within 5 business days after a Party’s request to discuss the Dispute in person at a LS&Co. Service Location designated by LS&Co. (or by telephone if requested by LS&Co.) and shall attempt to resolve the Dispute for a period of 5 business days.
(m)      Supplier Chief Executive. If a Dispute is not resolved in accordance with Section 22.1(b) , Supplier shall make available within 5 business days after LS&Co.’s request Supplier’s Chief Executive to discuss the Dispute with LS&Co. by telephone, or if requested by LS&Co. at an LS&Co. Service Location designated by LS&Co. (in which case, LS&Co. shall provide sufficient notice to Supplier to enable Supplier’s Chief Executive to attend in person at the nominated LS&Co. Service Location) and the Parties shall attempt to resolve the Dispute for a period of 5 business days. Unless the Parties otherwise agree, either Party may pursue its rights and remedies under this Agreement after the expiration of such 5 business day period.
22.2      Exclusions . Notwithstanding the foregoing, no Dispute relating to Section 13.2 , Article 19 , or Article 25 shall be subject to Article 22 . In addition, nothing in this Agreement shall limit either Party’s right to seek immediate injunctive or other equitable relief whenever the facts or circumstances would permit a Party to seek such relief in a court of competent jurisdiction.
22.3      Continuity of Services . Supplier acknowledges that the timely and complete performance of its obligations pursuant to this Agreement is critical to the business and operations of LS&Co. Accordingly, in the event of a Dispute between LS&Co. and Supplier, Supplier shall continue to so perform its obligations under this Agreement in good faith during the resolution of such dispute unless and until this Agreement is terminated in accordance with the provisions hereof.
23.
TERMINATION.
23.1      Termination for Convenience . LS&Co. may terminate this Agreement, in whole or in part, for convenience by giving Supplier notice of the termination at least [****] * days prior to the termination date specified in the notice.
23.2      Termination for Change in Control of LS&Co. In the event of a Change in Control of LS&Co., LS&Co. may terminate this Agreement by giving Supplier notice of the termination at least [****] * days prior to the termination date specified in the notice.
23.3      Termination for Change in Control of Supplier . In the event of a Change in Control of Supplier, Supplier shall promptly notify LS&Co. of such Change in Control and LS&Co. may terminate this Agreement by giving Supplier notice of the termination at least [****] * days prior to the termination date specified in the notice.
23.4      Termination for Cause.
(a)      If: (i) Supplier fails to perform any of its obligations under this Agreement in any material respect or repeatedly fails to perform any of its obligations under this Agreement and the cumulative effect thereof could reasonably be considered material, and does not cure such breach within [****] * days after receipt (the “ Supplier Default Cure Period ”) of a

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notice of breach from LS&Co. (the “ Supplier Default Notice ”); or (ii) an audit conducted under Section 18.3 identifies a material weakness or deficiency in the controls of Supplier and Supplier does not develop and submit a Cure Plan, and implement that Cure Plan within the timeframes specified in Section 18.3 , then in each case, LS&Co. may, without limiting LS&Co.’s other rights or remedies under this Agreement, by giving notice to Supplier, terminate this Agreement, in whole or in part, as of the termination date specified in the notice and without payment of any Termination Charge.
(b)      If LS&Co. fails to make undisputed material payments due to Supplier and does not cure such default within [****] * days after receipt (the “ LS&Co. Default Cure Period ”) of a notice of default from Supplier (the “ LS&Co. Default Notice ”), then Supplier may, by giving notice to LS&Co., terminate this Agreement in whole, as of the termination date specified in the notice of termination. The foregoing is the only circumstance in which Supplier may terminate this Agreement.
23.5      Termination in Case of Insolvency . LS&Co. may, by giving notice thereof to Supplier, terminate this Agreement as of the date specified in such termination notice without payment of any Termination Charge, if: (a) Supplier: (i) shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (ii) shall: (A) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its property or assets; (B) make a general assignment for the benefit of its creditors; (C) commence a voluntary case under the U.S. Bankruptcy Code; (D) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts; (E) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code; or (F) take any corporate, partnership or other action for the purpose of effecting any of the foregoing; or (b) a proceeding or case shall be commenced, without the application or consent of Supplier, in any court of competent jurisdiction seeking: (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts; (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of Supplier or of all or any substantial part of its property or assets; or (iii) similar relief with respect to Supplier under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or (c) an order for relief against Supplier shall be entered in an involuntary case under the Bankruptcy Code. In addition, if Supplier’s credit rating is lowered to “B1” or lower by Moody’s Investor Services, or “B+” or lower by Standard & Poors, then LS&Co. may, by giving notice thereof to Supplier, terminate this Agreement as of the date specified in such termination notice without payment of any Termination Charge.
23.6      Service Level Failures . LS&Co. may, without limiting LS&Co.’s other rights or remedies under this Agreement, by giving [****] * days prior notice to Supplier, terminate this Agreement, in whole or in part, as of the termination date specified in the notice and without payment of any Termination Charge, if: (a) there are [****] * Service Level Failures with respect to the

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same Critical Service Level within any rolling [****] * -month period; or (b) there are [****] * Service Level Failures with respect to any Critical Service Level within any rolling [****] * -month period.
23.7      Termination for Failure to Replenish Damages Cap . LS&Co. may, without limiting LS&Co.’s other rights or remedies under this Agreement, by giving notice to Supplier, terminate this Agreement, in whole or in part, as of the termination date specified in the notice and without payment of any Termination Charge, if the amount available under a damages cap set forth in Section 27.2 is reduced by [****] * or more as a result of Supplier’s payment of Losses to LS&Co. under Section 27.2 and the Parties are unable after 30 days to renegotiate an adjustment to that damages cap.
23.8      Termination for Failure to Agree on final Statements of Work or Service Levels . LS&Co. may by giving notice to Supplier, and without limiting LS&Co.’s other rights or remedies under this Agreement, terminate the applicable Service Category, in whole or in part, as of the termination date specified in the notice and without payment of any Termination Charge, if the Parties are unable to agree, in accordance with process set forth in Section 2.7 of Exhibit 8 , to final Statements of Work and/or Service Levels for the Services in the applicable Service Category that are satisfactory to LS&Co. by the applicable Commencement Date.
24.
TERMINATION CHARGES.
24.1      Termination Charges . Exhibit 4 sets forth the amounts that may be payable to Supplier if this Agreement is terminated pursuant to Section 23.1 or Section 23.2 (“ Termination Charges ”); except that no Termination Charges shall apply with respect to a termination of the Benefits Services, where (a) the effective date of such termination occurs at any time after the expiration of the 24 month period following the Commencement Date applicable to the Human Resource Services; or (b) the Benefits Services are terminated for the purpose of LS&Co. transferring the performance of those Services to a health exchange (and irrespective of when the effective date of termination occurs). Any Termination Charges payable in accordance with Exhibit 4 shall be due and payable on the End Date. Termination Charges to be recovered by Supplier shall be reduced to the extent LS&Co. or its designees assume financial obligations that Supplier would otherwise have incurred as a result of a termination of this Agreement by LS&Co.
24.2      No Other Termination Charges . Except for the Termination Charges specified in Exhibit 4 and the Stranded Costs payable in the event of a termination pursuant to Section 4.3(d) as a result of an LS&Co. Change in Law, no termination fee or other charge shall be payable by LS&Co. in connection with the termination of this Agreement. In addition, Supplier shall not charge LS&Co. more than once for any amount included in any fee owed pursuant to Exhibit 4 that relates to any resource for which Supplier has already received or shall receive payment.
25.
TERMINATION ASSISTANCE AND EXIT RIGHTS.
25.1      Termination Assistance . Upon LS&Co.’s request at any time during the Termination Assistance Period, Supplier shall provide, and shall cause Supplier Agents to provide, all necessary assistance to allow the Services to continue without interruption or adverse

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effect and to facilitate the orderly transfer of the Services to LS&Co. or its designee (the “ Successor ”) during the Termination Assistance Period, including the Termination Assistance Services, regardless of the reason for the termination, expiration or cessation of Services. The quality and level of performance of the Services during the Termination Assistance Period shall be consistent with the general quality and level of performance of the Services during the Term. Supplier shall not terminate or assign to another job position any of its Supplier Staff working on the LS&Co. account during any Termination Assistance Period. Supplier shall use commercially reasonable efforts to provide assistance in order to ensure that any know-how with regard to the Services is being duly transferred to LS&Co. or a Successor.
25.2      Payment . The Base Charges include all Termination Assistance Services provided by Supplier during the Term, and Supplier shall not charge LS&Co. any variable or other fees for such services. For Termination Assistance Services provided by Supplier after the last day of the Term, Supplier shall provide such services: (a) in the case of Termination Assistance Services that are Services, at the rates in effect for such Services immediately prior to termination or expiration of the Agreement; and (b) for Termination Assistance Services for which no rates exist immediately prior to such termination or expiration, at Supplier’s standard commercial rates then in effect, subject to discounts consistent with the discounts applied under this Agreement. Termination Assistance Services provided after the last day of the Term shall be subject to the provisions of the Agreement as such provisions would have been applicable to the Services prior to the effective date of termination or expiration. Notwithstanding the foregoing, if LS&Co. terminates this Agreement pursuant to Section 23.4(a) , Supplier shall provide all Termination Assistance Services to LS&Co. without charge. After the expiration of the Termination Assistance Period, Supplier shall: (y) answer questions from Successors regarding the Services at the applicable time and materials rates for such services set forth in the Agreement; and (z) deliver to LS&Co. or Successor any remaining LS&Co.-owned reports and documentation still in Supplier’s possession.
25.3      Exit Rights .
(a)      Provision of LS&Co. Materials. At LS&Co.’s request, Supplier shall, and shall cause Supplier Agents to, deliver to LS&Co., at no cost to LS&Co., a current copy of the LS&Co.-Owned Materials and any other materials in Supplier’s possession to which LS&Co. obtains a license pursuant to this Agreement or otherwise has the right to possess a copy of, in the form used to provide the Services as of the time of LS&Co.’s request (including in object code and source code form in the case of any of the foregoing that are Software). The rights granted to Supplier and Supplier Agents in Article 12 shall immediately terminate on the End Date, and Supplier shall, and shall cause Supplier Agents to, destroy or erase all copies of the LS&Co.-Owned Materials then in Supplier’s or Supplier Agents’ possession. Supplier shall, upon LS&Co.’s request, certify to LS&Co. that all such copies have been destroyed or erased.
(b)      Supplier Proprietary Software. Upon LS&Co.’s request at any time during the Termination Assistance Period, Supplier shall grant to LS&Co. or Successor, at no cost to LS&Co. or Successor, a global, perpetual, irrevocable, fully paid-up, non-exclusive, non-transferable license to Use, and sublicense to third parties to Use, in connection with LS&Co.’s use, provision (to itself) or receipt from Successor and its agents of services similar to the Services, any or all Supplier Proprietary Software used to provide the Services as of the time of

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LS&Co.’s request, or, if such request is made after the last day of the Term, used to provide the Services as of the last day of the Term, in each case as requested by LS&Co. Supplier shall deliver to LS&Co. a copy of the foregoing upon LS&Co.’s request. Upon LS&Co.’s request, Supplier shall provide to LS&Co. or Successor support and maintenance services for any Supplier Proprietary Software licensed under this Section 25.3(b) on terms, conditions, and prices agreed upon by Supplier and LS&Co. or Successor, as applicable, which shall in no event be less favorable to LS&Co. or Successor than Supplier’s usual and customary terms, conditions and prices.
(c)      Supplier Third Party Software. Upon LS&Co.’s request at any time during the Termination Assistance Period, with respect to Supplier Third Party Software used to provide the Services as of the time of LS&Co.’s request, or, if such request is made after the last day of the Term, then used to provide the Services as of the last day of the Term, Supplier shall, and shall cause Supplier Agents to: (i) assign to LS&Co. or Successor, at LS&Co.’s option, the license agreements for which Supplier obtained assignment rights pursuant to Section 12.4 applicable to such Software; and (ii) use best efforts to transfer, assign or sublicense all Supplier Third Party Software not subject to assigned agreements under Section 25.3(c)(i) to LS&Co. or Successor at no cost such that: (A) LS&Co. may Use, and sublicense to third parties the right to Use, such Software in connection with LS&Co.’s use, provision (to itself) or receipt from Successor of services similar to the Services; or (B) Successor may Use, and sublicense to third parties the right to Use, such Software in connection with the provision of services similar to the Services to LS&Co. Upon LS&Co.’s request, Supplier shall assist LS&Co. or Successor in obtaining directly from third parties any Software or substitute therefor for which LS&Co. or Successor does not assume the applicable third party agreements.
(d)      Leases, Service Agreements, and Equipment. Upon LS&Co.’s request at any time during the Termination Assistance Period, Supplier shall, and shall cause Supplier Agents to: (i) assign to LS&Co. or its designee leases for the Equipment used primarily to provide the Services as of the last day of the Term; (ii) assign to LS&Co. any contracts for services provided by third parties and used primarily to provide the Services; and (iii) sell to LS&Co., at the lesser of Supplier’s then-current book value or fair market value, some or all of the Equipment owned by Supplier or Supplier Agents and used primarily to provide the Services (and all user and other documentation in its possession that relates to such Equipment) free and clear of all liens, security interests or other encumbrances and grant to LS&Co. a warranty of title with respect to all such Equipment. Supplier shall also represent and warrant that any leases associated with any such Equipment are not in default and that all payments thereunder have been made through the date of transfer to LS&Co. Upon LS&Co.’s request, Supplier shall, and shall cause Supplier Agents to, assist LS&Co. or Successor in obtaining directly from third parties any third party services for which LS&Co. or Successor does not elect to assume the applicable third party agreements.
26.
INDEMNITIES.
26.1      Indemnity by LS&Co. LS&Co. shall indemnify Supplier, its Affiliates and their respective directors, officers and employees from, and defend and hold Supplier harmless from and against, any Losses suffered, incurred or sustained by Supplier or to which Supplier becomes subject, resulting from, arising out of or relating to any claim:

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(c)      that the LS&Co. Proprietary Software infringes upon the Intellectual Property Rights of any third party (except to the extent caused by a modification by Supplier or Supplier Agents);
(d)      relating to the material inaccuracy, untruthfulness or breach of any representation or warranty made by LS&Co. in Article 20 ;
(e)      relating to: (i) a violation of Law for the protection of persons or members of a protected class or category of persons by LS&Co. or LS&Co. Agents, including unlawful discrimination; (ii) accrued employee benefits not expressly assumed by Supplier; (iii) any representations, oral or written, made by LS&Co. or LS&Co. Agents to the Affected Employees or Affected Contractors; and (iv) any other aspect of the Affected Employees’ or Affected Contractors’ employment or other relationship with LS&Co. or termination thereof by LS&Co. (including claims for breach of an express or implied contract of employment);
(f)      relating to LS&Co.’s or LS&Co. Agents’ failure to obtain, maintain or comply with the LS&Co. Consents and LS&Co. Governmental Approvals;
(g)      relating to any amounts, including taxes, interest and penalties, assessed against Supplier which are the obligation of LS&Co. pursuant to Article 16 ;
(h)      relating to personal injury (including death) or property loss or damage resulting from LS&Co.’s acts or omissions;
(i)      relating to a breach of Article 19 ;
(j)      relating to a breach of any of the covenants in Section 21.1 ; and
(k)      relating to a breach of a Managed Agreement by LS&Co.
LS&Co. shall indemnify Supplier from any costs and expenses incurred in connection with the enforcement of this Section 26.1 .
26.2      Indemnity by Supplier . Supplier shall indemnify LS&Co., its Affiliates, the Service Recipients and their respective directors, officers and employees from, and defend and hold LS&Co. harmless from and against, any Losses suffered, incurred or sustained by LS&Co. or to which LS&Co. becomes subject, resulting from, arising out of or relating to any claim:
(e)      that the Materials, or LS&Co.’s receipt and use of the Materials as contemplated under this Agreement infringe upon the Intellectual Property Rights or other rights of any third party (except to the extent caused by (i) a modification by LS&Co. or LS&Co. Agents; (ii) Supplier’s incorporation of open source software within any Commissioned Materials, the incorporation of which is specifically and directly mandated by LS&Co. in writing, and provided that the forgoing exclusion shall not apply in the event that Supplier or Supplier Agents knew, or ought reasonably to have known, that such Materials infringed upon the Intellectual Property Rights of a third party);

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(f)      relating to the Services or this Agreement brought by a Supplier Agent or personnel thereof, including any disputes between Supplier and Supplier Agents;
(g)      by a Supplier customer to whom Supplier provides services from a Supplier Service Location, which claim relates to any LS&Co. Data at such location or Supplier’s provision of Services to LS&Co. from such location;
(h)      relating to the inaccuracy, untruthfulness or breach of any certification made by Supplier pursuant to Sections 4.5 or  11.4 ;
(i)      relating to the inaccuracy, untruthfulness or breach of any representation or warranty made by Supplier in Article 20 ;
(j)      relating to Supplier’s or Supplier Agents’ failure to obtain, maintain or comply with the Supplier Consents and Supplier Governmental Approvals, or Supplier’s or Supplier’s Agents failure to comply with the LS&Co. Consents;
(k)      relating to: (i) a violation of Law for the protection of persons or members of a protected class or category of persons by Supplier or Supplier Agents, including unlawful discrimination; (ii) accrued employee benefits not expressly retained by LS&Co.; (iii) any representations, oral or written, made by Supplier or Supplier Agents to LS&Co. employees or contractors, including the Affected Employees and Affected Contractors; and (iv) any other aspect of the Affected Employees’ or Affected Contractors’ employment or other relationship with Supplier or termination thereof by Supplier (including claims for breach of an express or implied contract of employment);
(l)      relating to any amounts, including taxes, interest and penalties, assessed against LS&Co. that are the obligation of Supplier pursuant to Article 16 ;
(m)      relating to personal injury (including death) or property loss or damage resulting from Supplier’s or Supplier Agents’ acts or omissions;
(n)      relating to a breach of Supplier’s obligations with respect to LS&Co. Data (including Article 13 );
(o)      relating to any fine or other penalty imposed by Law arising as a result of a breach of any of Supplier’s obligations under this Agreement;
(p)      relating to a breach of Article 19 ;
(q)      relating to a breach of any of the covenants in Section 21.2 ; and
(r)      relating to a breach of Supplier’s obligation to comply with the Applicable Terms.
Supplier shall indemnify LS&Co. from any costs and expenses incurred in connection with the enforcement of this Section 26.2 .

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26.3      Obligation to Replace . In the event that any Materials, or LS&Co.’s receipt and use of the Materials as contemplated under this Agreement is, or in LS&Co.’s opinion is likely to be found to infringe upon or misappropriate the Intellectual Property Rights of any third party or enjoined, Supplier shall, with LS&Co.’s consent and at Supplier’s own cost and expense and in such a manner as to minimize disturbance to LS&Co.’s business activities: (a) obtain for LS&Co. the right to continue using the Materials; or (b) modify or replace the Materials, so that it is no longer infringing (provided that such modification or replacement does not degrade the functionality, performance or quality of the affected Materials). In addition to the remedies set forth above, Supplier shall remain responsible for providing Services in accordance with this Agreement. If Supplier is unable, after using all reasonable efforts, to promptly implement the measures described in this Section 26.3 LS&Co. may, upon notice to Supplier: (x) obtain from a third party or itself provide those Services which Supplier failed to provide, and adjust the Charges to account for the corresponding reduction in Services after good faith discussions with Supplier regarding such adjustment; or (y) terminate this Agreement, in whole or in part, without payment of any Termination Charge, as of the date specified by LS&Co. in its notice of termination.
26.4      Indemnification Procedures . If any third party claim is commenced against a person or entity entitled to indemnification under Section 26.1 or Section 26.2 (the “ Indemnified Party ”), notice thereof shall be given to the Party that is obligated to provide indemnification (the “ Indemnifying Party ”) as promptly as practicable. If, after such notice, the Indemnifying Party acknowledges that this Agreement applies with respect to such claim, then the Indemnifying Party shall be entitled, if it so elects, in a notice promptly delivered to the Indemnified Party, but in no event less than 10 days prior to the date on which a response to such claim is due, to immediately take control of the defense and investigation of such claim and to employ and engage attorneys reasonably acceptable to the Indemnified Party to handle and defend the same, at the Indemnifying Party’s sole cost and expense. The Indemnified Party shall cooperate, at the cost of the Indemnifying Party, in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial and defense of such claim and any appeal arising therefrom; except that the Indemnified Party may, at its own cost and expense, participate, through its attorneys or otherwise, in such investigation, trial and defense of such claim and any appeal arising therefrom. No settlement of a claim that involves a remedy other than the payment of money by the Indemnifying Party shall be entered into without the consent of the Indemnified Party. After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that claim. If the Indemnifying Party does not assume full control over the defense of a claim subject to such defense as provided in this Section 26.4 , the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party shall have the right to defend the claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party.
27.
DAMAGES.
27.1      Consequential Damages . Neither LS&Co. nor Supplier shall be liable for any indirect, incidental, special, or consequential damages, arising out of or relating to its

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performance or failure to perform under this Agreement, even if advised of the possibility of such damages.
27.2      Direct Damages .
(a)      Definition of Direct Damages. Notwithstanding the provisions of Section 27.1 , Supplier shall be liable to LS&Co. for any direct damages arising out of or relating to Supplier’s performance or failure to perform under this Agreement. For the purposes of this Agreement, the Parties agree that direct damages shall include the reasonable: (i) costs of reconstructing or reloading data (including such reconstruction costs as are allocated pursuant to Section 13.1 ); (ii) costs of implementing and performing work-arounds regarding a service failure; (iii) costs of replacing lost, stolen or damaged goods or materials; (iv) costs to procure replacement services from an alternate source as a result of a failure to perform, to the extent in excess of the applicable Charges; (v) overtime, straight time and other related expenses as a result of a failure to perform; (vi) payments or penalties imposed by a governmental or regulatory body as a result of a failure to comply; (vii) costs incurred by LS&Co. in transitioning the Services to another supplier or to LS&Co.’s internal staff in connection with LS&Co.’s termination of this Agreement in whole or in part in accordance with Section 23.4(a) ; and (viii) attorney’s fees.
(b)      Cap on Direct Damages. Notwithstanding Section 27.2(a) , the liability of LS&Co. and Supplier, whether based on an action or claim in contract, equity, negligence, tort or otherwise, for any event, act or omission shall not exceed an amount equal to the sum of the aggregate of Charges paid for the [****] * consecutive month-period immediately preceding the date of the first occurrence of the applicable event, act, or omission giving rise to such damages (or if less than [****] * months have elapsed since the Effective Date, then [****] * times the average monthly Charges paid during the elapsed time since the Effective Date).
27.3      Exclusions . The limitations or exculpations of liability set forth in Section 27.1 (Consequential Damages) and Section 27.2(b) (Cap on Direct Damages) shall not apply to: (a) the failure of: (i) LS&Co. to make payments of undisputed Charges; or (ii) Supplier to issue credits (including Reduced Resource Credits and Service Level Credits) or otherwise make payments due under this Agreement; (b) a Party’s indemnification obligations, as set forth in Article 26 (Indemnities); (c) breaches of Article 4 (Compliance) (excluding breaches of Section 4.6 (Performance Under Third Party Contracts)), Article 12 (Proprietary Rights) and Article 19 (Confidentiality); (d) Supplier obligations with respect to LS&Co. Data (including Article 13 (Data)) including such reconstruction costs as are allocated pursuant to Section 13.1 (Correction and Reconstruction); provided however that Supplier shall not be liable for any lost profits, lost revenue, lost savings and reputational harm (to the extent that the foregoing are consequential damages) to LS&Co. where the foregoing arise directly as a result of an error in, or destruction, loss or alteration of, LS&Co. Data caused by Supplier or Supplier Agents and despite the requirements of Section 13.1 (Correction and Reconstruction) there is no way to actually correct and/or reconstruct the particular LS&Co. Data; (e) liability resulting from the fraud, gross negligence, recklessness, or intentional or willful misconduct of a Party; (f) damages occasioned by Supplier’s wrongful termination of this Agreement, abandonment of work performed or to be performed which work Supplier is otherwise obligated to perform under this Agreement, or willful refusal to provide the Services in a manner not permitted by this

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Agreement (excluding in connection with a valid termination of this Agreement by Supplier pursuant to Section 23.4(b) ); (g) claims arising out of a breach of Supplier’s obligations under or the inaccuracy of a covenant by Supplier in Section 21.2 ; (h) claims relating to personal injury (including death) or property loss or damage resulting from the acts or omissions of a Party or its Affiliates or, in the case of LS&Co., the LS&Co. Agents and in the case of Supplier, the Supplier Agents; (i) fines, sanctions, damages, judgments or other penalties imposed on a Party by a Governmental Authority in connection with such Party’s breach of applicable Law; (j) any amounts, including taxes, interest and penalties, assessed against a Party that are the obligation of the other Party pursuant to Article 16 (Taxes); and (k) otherwise to the extent that such limitation is not permitted by applicable Law.
28.
INSURANCE.
28.1      Documentation . Supplier shall provide to LS&Co. within 10 business days after the Effective Date evidence of all insurance required hereunder, and thereafter at any time any insurance policy covered in this Article 28 is renewed, or upon request by LS&Co., during the Term and the Termination Assistance Period (except with respect to “claims made” policies for which Supplier shall provide evidence of insurance for 3 years after the End Date). The insurance companies providing such insurance must have an A.M. Best rating of A - VIII or better and be licensed or authorized to conduct business in all states in which LS&Co. does business. LS&Co. shall have the right to require Supplier to obtain the insurance required under this Article 28 from another insurance carrier in the event that Supplier’s then current insurance carrier does not have an A.M. Best rating of A - VIII or better or is not licensed or authorized to conduct business in all states in which LS&Co. does business. All policies and certificates of insurance shall be written as primary policies with respect to Services performed and products supplied by Supplier and Supplier Agents and not written as policies contributing to, or to be used in excess of the LS&Co. insurance policies or any self-insurance program in which LS&Co. may participate with respect to such Services and products. The provisions of this Article 28 shall in no way limit the liability of Supplier. The obligations under this Article 28 are mandatory; failure of LS&Co. to request certificates of insurance or insurance policies shall not constitute a waiver of Supplier’s obligations and requirements to maintain the minimal coverage specified. Supplier shall maintain, in its files, evidence of all subcontractors’ insurance coverage.
28.2      Types and Amounts . During the Term and the Termination Assistance Period, and at its own cost and expense, Supplier shall, and shall cause all Supplier Agents to, obtain and maintain the following insurance coverage:
(a)      Commercial General liability insurance covering all operations by or on behalf of LS&Co. and Supplier with a combined single annual aggregate limit of not less than [****] * and a limit of [****] * for each occurrence covering liability arising from premises, operation, independent contractors, products/completed operations, property (including loss of use thereof) personal injury, advertising injury and liability assumed under an insured contract.
(b)      Professional liability insurance with a combined single annual aggregate limit of not less than [****] * and a limit of [****] * for each occurrence. Such

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insurance shall cover any and all errors, omissions or negligent acts in the delivery of Systems, Services, Software and/or Equipment under this Agreement. Such errors and omissions insurance shall include coverage for claims and losses with respect to network risks (such as data breaches, unauthorized access/use, unauthorized access to systems/data by third parties, virus transmission, failure to protect, or wrongful disclosure, of confidential or sensitive information, identity theft, invasion of privacy, damage/loss/theft of data, degradation, downtime, etc.) and intellectual property infringement, such as copyrights, trademarks, service marks and trade dress. The Professional Liability Insurance retroactive coverage date shall be no later than the Effective Date.
(c)      Errors and Omission insurance in an amount not less than [****] * for each occurrence and in the aggregate.
(d)      Umbrella/Excess Coverage with respect to Commercial General Liability insurance, Workers’ compensation insurance, and Automobile Liability insurance with a minimum combined single limit of [****] * for each occurrence and in the aggregate.
(e)      Workers’ compensation insurance and other insurance as required by statute in the state in which the work shall be performed. Coverage shall include Employers Liability with a limit not less than [****] * for each accident involving bodily injury, [****] * for bodily injury by disease for each employee and [****] * in the aggregate for bodily injury by disease.
(f)      Automobile Liability insurance covering owned and unowned vehicles with a combined single limit of not less than [****] * for each occurrence. Such policy shall name LS&Co., LS&Co. Agents and Service Recipients as additional insured.
(g)      All risk property insurance covering all risk of physical loss or damage, including as a result of flood or earthquake, for the replacement value of any LS&Co.-owned property and papers on Supplier’s premises.
(h)      If Supplier purchases “claims made” insurance, all acts and omissions of Supplier and its representatives and agents, shall be, during the Term and the Termination Assistance Period, “continually covered” notwithstanding the termination of this Agreement. In order for the acts and omissions of Supplier and its representatives and agents to be “continually covered” there must be insurance coverage for the entire period commencing on or prior to the Effective Date of this Agreement and ending on the date that is at a minimum three years after the End Date. Such insurance must satisfy the liability coverage requirements provided for in this Agreement. Supplier acknowledges and agrees that the provisions of this Article 28 may require Supplier to purchase “tail insurance” if its coverage lapses or if Supplier changes insurance carriers, even after this Agreement is terminated.
28.3      Policy Requirements . LS&Co. and LS&Co. Agents shall be listed on all such insurance policies (except workers’ compensation insurance) obtained by Supplier and Supplier Agents as “Additional Insureds” up to the amount required of Supplier under this Agreement. Such policies shall expressly reference this Agreement with respect to LS&Co.’s status as “Additional Insured”. If a “claims made” policy is purchased, then Supplier shall also purchase

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adequate “tail coverage” for claims made against LS&Co. after such policy has lapsed or been canceled or this Agreement is no longer in effect. The provisions of Section 28.2 shall not be deemed to limit the liability of Supplier hereunder, or limit any rights that LS&Co. may have including, without limitation, rights of indemnity or contribution.
28.4      Risk of Loss . Supplier is responsible for the risk of loss of, or damage to, any property of LS&Co. in the possession or control of Supplier, unless such loss or damage was caused by the acts or omissions of LS&Co. or a LS&Co. Agent. Supplier is responsible for the risk of loss of, or damage to, any property of Supplier and Supplier Agents at a LS&Co. Location, unless such loss or damage was caused by the acts or omissions of LS&Co.
28.5      Subrogation . Supplier, on behalf of Supplier and Supplier’s insurers, waives subrogation against LS&Co. and its Affiliates under the insurance coverage maintained by Supplier pursuant to this Agreement for losses or claims arising out of the insured party’s acts or omissions. Evidence of such waiver reasonable satisfactory in form and substance to LS&Co. shall be exhibited on the Certificates of Insurance required by this Agreement.
29.
MISCELLANEOUS PROVISIONS.
29.1      Assignment . Neither Party shall, without the consent of the other Party, assign this Agreement or any amounts payable pursuant to this Agreement, except that LS&Co. may assign this Agreement, in whole or in part, to: (a) an Affiliate or another entity or business unit of LS&Co.; or (b) pursuant to a Change in Control of LS&Co., a reorganization of LS&Co., or a transfer or sale of any business unit, line of business, product line, or substantial portion of its assets, without such consent. Upon LS&Co.’s assignment of this Agreement, LS&Co. shall be released from any obligation or liability under this Agreement. The consent of a Party to any assignment of this Agreement shall not constitute such Party’s consent to further assignment. This Agreement shall be binding on the Parties and their respective successors and permitted assigns. Any assignment in contravention of this Section 29.1 shall be void.
29.2      Notices . Wherever under this Agreement one Party is required to give notice to the other, such notice shall be deemed effective: (a) 3 calendar days after deposit in the United States Mail, postage prepaid, certified or registered mail, return receipt requested; (b) 1 business day after deposit with a national overnight courier; (c) if given by email, that day such email is sent, provided confirmation of such notice is also sent by national overnight courier or delivered in person; or (d) upon delivery if delivered in person or by messenger, in each case, addressed to the following addresses (or such other address as either party may be notified of as described above):
For LS&Co.:
Attention: LS&Co. Governance Executive
Levi Strauss & Co.,
1155 Battery Street San Francisco, CA 94111

with copies to


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Attention: Chief Financial Officer
Levi Strauss & Co.,
1155 Battery Street San Francisco, CA 94111

and

Attention: General Counsel
Levi Strauss & Co.,
1155 Battery Street San Francisco, CA 94111
For Supplier:
Attention: Head of Legal - Americas
Wipro Limited
2 Tower Center Boulevard, Suite 2200
East Brunswick, NJ
Email: generalcounsel.office@wipro.com
Either Party may change its address or facsimile number for notification purposes by giving the other Party 10 days’ notice of the new address or facsimile number and the date upon which it shall become effective.
29.3      Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one single agreement between the Parties.
29.4      Relationship . The Parties intend to create an independent contractor relationship and nothing contained in this Agreement shall be construed to make either LS&Co. or Supplier partners, joint venturers, principals, agents (except as expressly provided to permit Supplier to manage the Managed Agreements) or employees of the other. No officer, director, employee, agent, Affiliate or contractor retained by Supplier to perform work on LS&Co.’s behalf under this Agreement shall be deemed to be an employee, agent or contractor of LS&Co. Neither Party shall have any right, power or authority, express or implied, to bind the other.
29.5      Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be contrary to Law, then the remaining provisions of this Agreement, if capable of substantial performance, shall remain in full force and effect.
29.6      Waivers . No delay or omission by either Party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by any Party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be signed by the Party waiving its rights.
29.7      Timing and Cumulative Remedies . No right or remedy herein conferred upon or reserved to either Party is exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy under this Agreement, or under applicable law, whether now or hereafter existing.

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29.8      Entire Agreement . This Agreement and the Exhibits to this Agreement represent the entire agreement between the Parties with respect to its subject matter, and there are no other representations, understandings or agreements between the Parties relative to such subject matter.
29.9      Amendments . No amendment to, or change, waiver or discharge of, any provision of this Agreement shall be valid unless in writing and signed by, in the case of LS&Co., the LS&Co. Governance Executive, and in the case of Supplier, the Supplier Governance Executive.
29.10      Survival . Any provision of this Agreement which contemplates performance or observance subsequent to termination or expiration of this Agreement shall survive termination or expiration of this Agreement and continue in full force and effect. Without limiting the foregoing, the terms of Sections 1 , 12 , 13 , 15.1 , 15.2 , 15.3 , 16.1 , 18.4 , 19 , 20.3 , 25 , 26 , 27 and 29 shall survive the expiration or termination of this Agreement.
29.11      Third Party Beneficiaries . Except with respect to Affiliates and Service Recipients and, with respect to Article 26 , an Indemnified Party, each Party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than the Parties.
29.12      Governing Law and Venue . The rights and obligations of the parties under this Agreement shall be governed in all respects by the Laws of the United States and the State of California, without regard to conflicts of laws principles that would require the application of the laws of any other jurisdiction. Supplier agrees that it shall only bring any action or proceeding arising from or relating to this Agreement in the state and federal courts sitting and having jurisdiction in the City and County of San Francisco, California (and all appellate courts therefrom), and Supplier irrevocably submits to the personal jurisdiction and venue of any such court in any such action or proceeding or in any action or proceeding brought in such courts by LS&Co. Supplier further irrevocably consents to the service of process from any of the aforesaid courts by mailing copies thereof by registered or certified mail, postage prepaid, to Supplier at its address designated pursuant to this Agreement, with such service of process to become effective 30 days after such mailing.
29.13      Covenant of Further Assurances . LS&Co. and Supplier covenant and agree that, subsequent to the execution and delivery of this Agreement and, without any additional consideration, each of LS&Co. and Supplier shall execute and deliver any further legal instruments and perform any acts that are or may become necessary to effectuate the purposes of this Agreement.
29.14      Export . Supplier shall comply with all Export Controls, at its own expense and legal direction, and shall implement and maintain internal procedures to comply with Export Controls. Supplier shall obtain and maintain in effect all licenses, permits and authorizations required for the performance of its obligations hereunder and shall provide LS&Co. with all applicable information to enable LS&Co.’s compliance with all Export Controls, including providing applicable U.S. Export Control Classification Numbers and other information as LS&Co. may reasonably request. Supplier shall not access any LS&Co. Data from a country

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embargoed by the U.S. Without limit, Supplier shall not export or re-export any Software, personal computer system, part, technology, technical data, information or sub-elements under this Agreement ( “Technical Data” ), directly or indirectly, in violation of Export Controls, and, furthermore, shall not distribute Technical Data to any country, firm or person that is prohibited for export or re-export. Supplier agrees to notify LS&Co. of any Technical Data that it will provide to LS&Co. pursuant to this Agreement that is subject to control under applicable export regulations under any classification other than EAR99 (or its non-U.S. equivalent) and, in such event, shall: (a) identify the Export Controls (e.g. EAR or ITAR) and classifications (e.g. ECCN) applicable to such Technical Data, including any required third party licenses, consents or authorizations; (b) notify LS&Co. of such Export Controls; (c) obtain any such required third party licenses, consents or authorizations or, if and as requested by LS&Co., cooperate with and assist LS&Co. in obtaining such third party licenses, consents or authorizations; and (d) provide any copies of such licenses, consents or authorizations requested by LS&Co. to demonstrate compliance with the Export Controls.
29.15      Conflict of Interest . Supplier shall not pay any salaries, commissions, fees or make any payments or rebates to any employee or agent of LS&Co., or to any designee of such employee or agent, or favor any employee or agent of LS&Co., or any designee of such employee or agent, or otherwise provide any gifts, entertainment, services or goods to such employees or agents that are of a value in excess of that which is reasonable and customary in LS&Co.’s industry, which might unduly influence LS&Co.’s actions with respect to Supplier, which might embarrass LS&Co. if revealed publicly, or which might violate any Law (collectively, “Gratuities” ). Supplier agrees that its obligation to LS&Co. under this Section 29.15 shall also be binding upon Supplier Agents. Supplier further agrees to insert the provisions of this Section 29.15 in each contract with a Supplier Agent. If LS&Co. has a reasonable cause to believe that Supplier has, before or after the Effective Date, provided any Gratuities in violation of this Section 29.15 , LS&Co. may, upon notice to Supplier, terminate this Agreement, in whole or in part, without payment of any Termination Charge, as of the date specified by LS&Co. in its notice of termination.
29.16      Publicity . Supplier will not use or make any direct or implied reference to LS&Co.’s trade name, brands, or company logo in any manner whatsoever, except with the specific prior approval of LS&Co. in each instance. Supplier shall not make any statement, advertisement or publicity, nor issue any marketing letter disclosing the existence, terms or the subject matter of this Agreement without the specific prior approval of LS&Co.
29.17      LS&Co. Reporting Hotline. As of the Effective Date, LS&Co. maintains a reporting hotline for its vendors and other interested parties to anonymously report any matters free of discrimination or retaliation pertaining to: (a) accounting, auditing or other financial reporting irregularities; (b) unethical business conduct (including safety, environment, conflicts of interest, theft and fraud); or (c) violations of applicable Law. The reporting hotline may be accessed by telephone or by Internet. LS&Co. reserves the right to investigate all reports made to the hotline in compliance with applicable Laws or as it otherwise deems necessary in accordance with LS&Co.’s policies and procedures.
29.18      Language Requirements. Supplier shall provide any and all documentation or Services that Supplier is required to provide pursuant to this Agreement (including all training

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documentation) in English and, if required by LS&Co. in connection with LS&Co.’s business operations in regions where English is not the predominately-spoken language, or where the requirements of local law may require communications in certain languages in addition to English, in such other languages identified by LS&Co.
[The next page is the signature page.]


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IN WITNESS WHEREOF , each of LS&Co. and Supplier has caused this Agreement to be signed and delivered by its duly authorized representative.
Levi Strauss & Co.
 
Wipro Limited

 
 
 
Signature
 
Signature
 
 
 
Name
 
Name
 
 
 
Title
 
Title



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MASTER SERVICES AGREEMENT

BY AND BETWEEN

LEVI STRAUSS & CO.,

AND

WIPRO LIMITED

NOVEMBER 7, 2014


EXHIBIT 1
DEFINITIONS


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“ABAC Policy” has the meaning given in Section 4.5 of the Agreement.
“Acceptance Testing Period” has the meaning given in Exhibit 5 .
“Actual RUs” has the meaning given in Exhibit 4 .
“Additional Criteria” has the meaning given in Exhibit 3 .
“Additional Resource Charge” or “ARC” has the meaning given in Exhibit 4 .
“ARC Rate” has the meaning given in Exhibit 4 .
“Affected Contractors” means those contractors of LS&Co. (or certain Affiliates) and LS&Co. Agents performing services related to the Services for LS&Co. (or certain Affiliates) prior to the Effective Date.
“Affected Employees” means those employees of LS&Co. (or certain Affiliates) and LS&Co. Agents performing services related to the Services for LS&Co. (or certain Affiliates) prior to the Effective Date.
“Affiliate” means, with respect to any entity, any other entity that now or in the future is Controlling, Controlled by, or under common Control with the entity, and in the case of LS&Co., includes any other entity that now or in the future: (a) is managed or operated by LS&Co., or (b) is owned through stock ownership by a shareholder of LS&Co.
“Agreement” has the meaning given in the Preamble of the Agreement.
“Annual Certification” has the meaning given in Section 4.5 of the Agreement.
“Annual Review” has the meaning given in Exhibit 5 .
“Annual Productivity Gains” has the meaning given in Exhibit 4 .
“Applicable Terms” means all terms of the Managed Agreements applicable to Supplier’s provision of the Services and Supplier’s use of the goods and services provided under the Managed Agreements.
“At Risk Amount” means for any month during the Term, [****] * percent of the Charges paid or payable by LS&Co. in such month.
“Assigned Agreements” has the meaning given in Exhibit 2 .
“Assignment Date” has the meaning given in Exhibit 2 .
“Auditors” has the meaning given in Section 18 of the Agreement.
“Background Technology” of a Party means all Intellectual Property that (a) is (i) owned or licensed by such Party or its Affiliates, or by third parties under contract to such Party or its Affiliates; and (ii) is in existence in electronic or written form on or prior to the Effective Date or

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(b) is developed, acquired, or licensed by such Party after the Effective Date independently of the work undertaken pursuant to the Agreement.
“Base Charges” means the monthly charges associated with the Resource Baselines, which charges are subject to adjustment pursuant to ARCs and RRCs.
“Base Workforce” has the meaning given in Exhibit 4 .
“Benchmark Results” means the final results of the Benchmarking Process delivered by the Benchmarker in a written report to LS&Co. and Supplier, including any supporting documentation requested by LS&Co. or Supplier to analyze the results of the Benchmarking Process.
“Benchmark Review Period” means the 30-day period following receipt by LS&Co. and Supplier of the Benchmark Results.
“Benchmarker” means a third party specified on Exhibit 11 that shall conduct the Benchmarking Process.
“Benchmarking Process” means the objective measurement and comparison process that measures the performance and cost to LS&Co. of the Services against the performance and cost of similar services in the industry.
“Benchmarking Report” has the meaning given in Section 17.3 of the Agreement.
“Benefits Services” means the benefit and related services set forth in Attachment 2.1 .
“Billing Region” has the meaning given in Exhibit 4 .
“Blocked Person” means any person or transaction: (a) named or listed by any Governmental Authority on a list maintained by such Governmental Authority as a known or suspected terrorist, terrorist organization, prohibited person or a special designated national; (b) subject to any economic, trade, or transactional sanctions imposed by any Governmental Authority on a list maintained by such Governmental Authority; or (c) otherwise banned or blocked pursuant to any Law.
“Change Management Process” means the process and procedures applicable to all Changes, as such process is set forth in the Operations Manual.
“Change in Control” means any event or series of events that result directly or indirectly in a change in the management or Control of a Party. Without limiting the generality of the foregoing, the following shall be considered a Change in Control: the (a) consolidation or merger of a Party with or into any entity; (b) sale, transfer or other disposition of all or substantially all of the assets of a Party; or (c) any change in the beneficial ownership of 20% or more (or such lesser percentage that constitutes Control) of the outstanding voting securities or other ownership interests of a Party.

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“Change(s)” means any change to the Services, including change to the Software, Systems or Equipment used to provide the Services, if such change would alter in any material respect: (a) the functionality, performance standards or technical environment of the Software, Systems or Equipment used to provide the Services; (b) the manner in which the Services are provided; or (c) the composition of the Services.
“Chargeable Project Support” has the meaning given in Exhibit 4 .
“Charges” means amounts payable by LS&Co. to Supplier pursuant to the Agreement.
“Claimed Error” has the meaning given in Section 17.3 of the Agreement.
“Commencement Date” means, with respect to a Service Category or specified part thereof, the date on which Supplier assumes responsibility for the provision of the applicable Services, as such date is specified in the Transition Plan.
“Commissioned Materials” means any Software, associated Documentation, or other materials developed by or on behalf of Supplier and Supplier Agents: (a) pursuant to Article 6 ; (b) pursuant to specifications or other directions provided by LS&Co. or LS&Co. Agents, whether such specifications or directions are developed alone by such Parties or jointly with the Supplier (regardless of whether or not developed pursuant to Article 6 ); or (c) pursuant to a Project that is part of the Services; in each case whether developed independently or jointly with LS&Co. or LS&Co. Agents.
“Comparable Deals” has the meaning given in Section 17.1 of the Agreement.
“Confidential Information” of LS&Co. or Supplier means all information and documentation of LS&Co. and Supplier, respectively, whether disclosed to or accessed by LS&Co. or Supplier in connection with the Agreement, including: (a) with respect to LS&Co., all LS&Co. Data and all information of LS&Co. or its respective customers, suppliers, contractors and other third parties doing business with LS&Co., including (i) information regarding its business, projects, operations, finances, activities, affairs, research, development, products, technology, network architecture, internal procedures, business models, business plans, business processes, marketing and sales plans, customers, finances, personnel data, computer system and program designs, processing techniques and generated outputs, procurement processes or strategies or suppliers, and any LS&Co. ideas, trade secrets, inventions (whether or not patentable), patent applications, proposals, techniques, formulas, methods of operation and other intellectual property, and (ii) any information that LS&Co. is required by Law or company policy to maintain as confidential, including personnel and payroll records, and any other information that relates to or is about, an identified or identifiable person (including LS&Co. Personal Data) ; (b) with respect to LS&Co. and Supplier, the terms of the Agreement; and (c) any information developed by reference to or use of LS&Co.’s or Supplier’s Confidential Information; except that apart from LS&Co. Personal Data or to the extent otherwise provided by Law, the term “Confidential Information” shall not include information that: (w) is independently developed by the recipient, as demonstrated by the recipient’s written records, without violating the disclosing Party’s proprietary rights; (x) is or becomes publicly known (other than through

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unauthorized disclosure); (y) is already known by the recipient at the time of disclosure (other than through unauthorized disclosure), as demonstrated by the recipient’s written records, and the recipient has no obligation of confidentiality other than pursuant to the Agreement or any confidentiality agreements between LS&Co. and Supplier entered into before the Effective Date; or (z) is rightfully received by a Party free of any obligation of confidentiality.
“Consumption Pricing” has the meaning given in Exhibit 4 .
“Contract Change” means any change that would: (a) alter the cost of the Services to LS&Co.; or (b) modify any term or condition in the Agreement.
“Contract Change Log” has the meaning given in Exhibit 5 .
“Contract Change Process” means the procedures and requirements set forth in Exhibit 5 applicable to a Contract Change.
“Contract Change Request” has the meaning given in Exhibit 5 .
“Contract Year” means one of a series of consecutive 12-month periods during the Term, the first of which begins on June 1, 2015.
“Contractor Facilitation Meeting” has the meaning given in Exhibit 5 .
“Control” means, with respect to any entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities (or other ownership interest), by contract, or otherwise.
“CPR” has the meaning given in Section 17.5 of the Agreement.
“Critical Deliverable” has the meaning given in Exhibit 2 .
“Critical Service Level” means a Service Level for which a Service Level Credit may be payable. Critical Service Levels are identified as “critical” in Exhibit 3 .
“Critical Service Level Failure” has the meaning given in Exhibit 3 .
“Critical Transition Milestone” means any milestone in the Transition Plan designated as a “critical” milestone.
“Cure Plan” has the meaning given in Section 18.3(b) of the Agreement.
“Data Protection Laws” means all Laws regarding data protection, privacy, data security or the handling of information about individuals in any jurisdiction where the Services are provided or received or where any processing of Personal Data relating to the provision or receipt of the Services takes place.
“Data Protection Model Clauses” has the meaning given in Section 13.8 of the Agreement.
“Deadband” has the meaning given in Exhibit 4 .

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“Deliverable Credit” has the meaning given in Exhibit 2 .
“Deliverable” has the meaning given in Exhibit 2 .
“Derivative Works” means works based upon one or more preexisting works, or any other form in which work is recast, transformed, revised, adapted or otherwise changed.
“Disaster Recovery Plan” has the meaning given in Section 14.1 of the Agreement.
“Dispute” has the meaning given in Section 22.1 of the Agreement.
“Divested Entity” has the meaning given in Section 5.5(b) of the Agreement.
“Documentation” means, with respect to Software and tools, all materials, documentation, specifications, technical manuals, user manuals, flow diagrams, file descriptions and other written information that describes the function and use of such Software or tools.
“EEA” had the meaning given in Section 13.3 of the Agreement.
“Effective Date” means November 7, 2014.
“End Date” means the last day of the Termination Assistance Period.
“Equipment” means computers and related equipment, including central processing units and other processors, controllers, modems, communications and telecommunications equipment (voice, data and video), cables, storage devices, printers, terminals, other peripherals and input and output devices, and other tangible mechanical and electronic equipment intended for the processing, input, output, storage, manipulation, communication, transmission and retrieval of information and data.
“Executive Steering Committee” means a committee established by the Parties pursuant to Exhibit 5 with an equal number of members from LS&Co. and Supplier.
“Existing Performance” has the meaning given in Exhibit 3 .
“Export Controls” means all export control and national security laws or regulations of the United States, other countries and all other applicable Governmental Authorities, including the United States Department of Commence Denial and Probation Orders and sanctions administered by the Office of Foreign Assets Control.
“Extension Period” means any extension by LS&Co. of the Initial Agreement Term in accordance with Section 2.2 of the Agreement.
“Fixed Fee” has the meaning given in Exhibit 4 .
“Force Majeure Event” has the meaning given in Section 14.2 of the Agreement.
“FTE” has the meaning given in Exhibit 4 .

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“FTE Increment” has the meaning given in Exhibit 4 .
“Government Officials” has the meaning given in Section 4.5 of the Agreement.
“Governmental Approvals” means all licenses, consents, permits, approvals and authorizations of any Governmental Authority, or any notice to any Governmental Authority, the granting of which is required by Law, including Regulatory Requirements, for the consummation and performance of the transactions contemplated by the Agreement or the provision of Services under the Agreement.
“Governmental Authority” means any Federal, state, municipal, local, territorial, or other governmental department, regulatory authority, or judicial or administrative body, whether domestic, foreign, or international.
“Gratuities” has the meaning given in Section 29.15 of the Agreement.
“Income Tax” means any tax on or measured by the net income of a corporation, partnership, joint venture, trust, limited liability company, limited liability partnership, association or other organization or entity (including taxes on capital or net worth that are imposed as an alternative to a tax based on net or gross income), or taxes which are of the nature of excess profits tax, gross receipts tax, minimum tax on tax preferences, alternative minimum tax, accumulated earnings tax, personal holding company tax, capital gains tax or franchise tax for the privilege of doing business.
“Indemnified Party” has the meaning given in Section 26.4 of the Agreement.
“Indemnifying Party” has the meaning given in Section 26.4 of the Agreement.
“Individual Transition Managers” has the meaning given in Section 5.1 of the Agreement.
“Initial Agreement Expiration Date” means May 31, 2020.
“Initial Agreement Term” has the meaning given in Section 2.1 of the Agreement.
“Initial Review Period” has the meaning given in Exhibit 3 .
“Intellectual Property Rights” means all past, present, and future rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patents and industrial property rights; (e) other proprietary rights in intellectual property of every kind and nature; and (f) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in subsections (a) through (e) of this sentence.
“Intellectual Property” means all algorithms, APIs, apparatus, circuit designs and assemblies, Confidential Information, databases and data collections, designs, diagrams, documentation, drawings, flow charts, formulae, ideas and inventions (whether or not patentable or reduced to

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practice), know-how, materials, marketing and development plans, marks (including brand names, product names, logos, and slogans), methods, models, network configurations and architectures, procedures, processes, protocols, schematics, software code (in any form including source code and executable or object code), specifications, subroutines, techniques, tools, uniform resource identifiers, user interfaces, web sites, works of authorship, and other forms of technology and intellectual property.
“Interest” means the lesser of (a) the Wall Street Journal Prime Rate as published in the Wall Street Journal on the first business day of the month in which the undisputed amount was invoiced or (b) the maximum rate of interest allowed by Law.
“Issue” has the meaning given in Section 17.5 of the Agreement.
“Key Supplier Personnel” means the Supplier Governance Executive and such other members of the Supplier Staff designated as Key Supplier Personnel on Exhibit 13 .
“Law” means any declaration, decree, directive, legislative enactment, order, ordinance, regulation, rule, requirement or other binding restriction of or by any Governmental Authority, including any modified or supplemented version of the foregoing and any newly adopted Law replacing a previous Law.
“Losses” means any and all damages, fines, penalties, deficiencies, losses, liabilities (including settlements and judgments) and expenses (including interest, court costs, reasonable fees and expenses of attorneys, accountants and other experts and professionals or other reasonable fees and expenses of litigation or other proceedings or of any claim, default or assessment).
“ LS&Co. ” has the meaning given in the preamble to the Agreement.
“ LS&Co. Agents ” means the employees, officers, directors, agents, contractors, personnel and representatives of LS&Co., other than Supplier and Supplier Agents, exercising any of LS&Co.’s rights or performing any of LS&Co.’s obligations under the Agreement.
“LS&Co. Agent NDA” has the meaning given in Section 18.6(d) of the Agreement.
“LS&Co. Change in Law” means a change in a Law applicable to LS&Co. and its business (i.e., LS&Co. would be liable to a Governmental Authority in the case of non-compliance with the Law) that affect the receipt of the Services, other than Supplier Change in Law.
“LS&Co. Competitor” means the companies identified as competitors of LS&Co. and listed on Exhibit 12, as such list of competitors of LS&Co. may be updated by LS&Co. from time to time upon notice to Supplier; except that LS&Co. may provide such a notice no more than once in each calendar quarter.
“LS&Co. Consents” means all licenses, consents, permits, approvals and authorizations that are necessary to allow: (a) Supplier and Supplier Agents to use: (i) LS&Co.’s owned and leased assets; (ii) the services provided for the benefit of LS&Co. under LS&Co.’s third party services contracts; (iii) the LS&Co. Software; and (b) LS&Co. to assign the Assigned Agreements to

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Supplier and Supplier to manage and administer the Managed Agreements, if any, pursuant to the terms of the Agreement.
“LS&Co. Data” means: (a) all data and information (i) submitted or made available to Supplier or Supplier Agents by or on behalf of LS&Co.; (ii) obtained, developed or produced by Supplier or Supplier Agents in connection with the Agreement; or (iii) to which Supplier or Supplier Agents have access in connection with the provision of the Services; and (b) all derivatives of any of the foregoing. LS&Co. Data includes any LS&Co. Personal Data contained therein.
“LS&Co. Default Cure Period” has the meaning given in Section 23.4(b) of the Agreement.
“LS&Co. Default Notice” has the meaning given in Section 23.4(b) of the Agreement.
“LS&Co. Derivative Works” means any Derivative Works of LS&Co. Software or LS&Co. Background Technology and any associated Documentation developed by or on behalf of LS&Co., including where developed by Supplier or Supplier Agents.
“LS&Co. Equipment” has the meaning given in Section 7.2 of the Agreement.
“LS&Co. Global Lead ” means, with respect to a particular Service Category, the individual LS&Co. personnel with overall responsibility for that Service Category on a global basis. For clarity, the LS&Co. Global Lead does not include any regional lead with respect to the applicable Service Category.
“LS&Co. Governance Executive” has the meaning given in Section 10.1 of the Agreement.
“LS&Co. Governmental Approvals” means all Governmental Approvals that LS&Co. is required by Law to obtain, maintain, or provide, other than Supplier Governmental Approvals.
“LS&Co. Marks” has the meaning given in Section 12.8 of the Agreement.
“LS&Co.-Owned Materials” has the meaning given in Section 12.6 of the Agreement.
“LS&Co. Personal Data” means any LS&Co. Data which is Personal Data.
“LS&Co. Policies” means: (a) the policies and standards of LS&Co. applicable to the Services (such as LS&Co.’s Worldwide Code of Business Conduct, the ABAC Policy, the LS&Co. Terms of Engagement and policies covering information and physical security, professional conduct, health and safety, access to physical locations, access to and use of information systems) as may be made available to Supplier by LS&Co. from time to time, including any such policies and standards applicable at an individual LS&Co. Service Location; (b) the business control and information protection policies and standards as may be made available to Supplier by LS&Co. from time to time (including the Global Information Security Policies and Standards); (c) the policies and standards listed on Exhibit 9 , as amended by LS&Co. from time to time; and (d) any related LS&Co. procedures that implement the policies and standards in clauses (a) through (c) (inclusive), as such procedures may be made available to Supplier by LS&Co. from time to time.

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“LS&Co. Proprietary Software” means Software and any associated Documentation that is owned, acquired or developed by LS&Co. and used in connection with the provision of the Services.
“LS&Co. Service Location(s)” means the locations of LS&Co. at which Services are provided to LS&Co. by Supplier and Supplier Agents.
“LS&Co. Software” means the LS&Co. Proprietary Software, the LS&Co. Third Party Software, and the LS&Co. Derivative Works, collectively.
“LS&Co. Terms of Engagement” means LS&Co.’s Business Partner Terms of Engagement, as amended from time to time. At the Effective Date, LS&Co.’s Business Partner Terms of Engagement are included within LS&Co.’s Sustainability Guidebook.
“LS&Co. Third Party Contractors” has the meaning given in Section 5.6 of the Agreement.
“LS&Co. Third Party Software” means the Software and Documentation that is licensed or leased by LS&Co. from a third party and used in connection with the provision of the Services.
“LS&Co. Tools” has the meaning given in Exhibit 4 .
“ LS&Co. Transition Responsibility ” has the meaning given in Section 5.1 of the Agreement.
“Malware” has the meaning given in Section 21.2(e) of the Agreement.
“Managed Agreement” has the meaning given in Exhibit 2 .
“Managed Agreement Invoice” has the meaning given in Exhibit 2 .
“Materials” has the meaning specified in Section 21.2(c) of the Agreement.
“Measuring Tools” has the meaning given in Exhibit 3 .
“Measurement Interval” has the meaning given in Exhibit 3 .
“Milestone Amount” has the meaning given in Exhibit 4 .
“Minimum Service Level” means the minimum level of performance for a Service Level as set forth in Exhibit 3 .
“Monthly Workforce Charge” has the meaning given in Exhibit 4 .
“New Entity” and “New Entities” has the meaning given in Section 5.5(a) of the Agreement.
“New Service” means any new service or significant change to the Services requested by LS&Co.: (a) that is materially different from the Services; (b) that requires materially different levels of effort or resources from Supplier; and (c) for which there is no current Resource Baseline or charging methodology. New Services shall not include (y) increases in the volume

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of Services, or (z) the disaggregation of an existing Service from a category of Services (or other functional service area).
“New Service Proposal” has the meaning given in Section 6.1 of the Agreement.
“Nonconformity” has the meaning given in Exhibit 5 .
“Non-Critical Services” has the meaning given in Section 11.7 of the Agreement.
“Objection Notice” has the meaning given in Exhibit 3 .
“Operations Manual” means the manual prepared by Supplier in accordance with the schedule set forth in the Transition Plan and the requirements in Exhibit 5 that contains the Change Management Process and related procedures that Supplier must follow in connection with changes to the Services, the Systems and LS&Co.’s technology environment.
“Overhead Functions” has the meaning given in Exhibit 4 .
“Parties” means LS&Co. and Supplier, collectively.
“Party” means either LS&Co. or Supplier, as applicable.
“Pass-Through Expense” means a third party expense that the Parties have agreed shall be paid directly by LS&Co. without markup, commission or rebate and administered by the Supplier. All pass-through expenses are designated in Exhibit 4 .
“Payment Based Milestone” has the meaning given in Exhibit 4 .
“Performance Target” has the meaning given in Exhibit 3 .
“Personnel Projection Matrix” has the meaning given in Exhibit 4 .
“Permitted Areas” has the meaning given in Section 7.3 of the Agreement.
“Permitted Parties” has the meaning given in Section 19.1 of the Agreement.
“Personal Data” means any (a) information or data which identifies or is capable of identifying an individual, or is otherwise defined as “personal information” or “personal data” by applicable Laws including: (i) an individual’s name, address, phone number, e-mail address, initials, social security number, ID number or credit card information; and (ii) information, data and materials, including demographic, medical and financial information, that relate to the past, present, or future physical or mental health or condition of an individual or the provision of health care to an individual, and (b) other information or data which relates to a living individual who can be identified from that information or data, or from that data and information and other data or information which is in the possession of, or is likely to come into the possession of, the data controller or a third party, and includes any expression of opinion about the individual and any indication of the intentions of the data controller or any other person in respect of the individual.
“Pricing Table” has the meaning given in Exhibit 4 .

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“Processing” means, in relation to information or data, obtaining, recording or holding the information or data or carrying out any operation or set of operations on the information or data, including organization, adaptation or alteration of the information or data; retrieval, consultation or use of the information or data; disclosure of the information or data by transmission, dissemination or otherwise making it available; or alignment, combination, blocking, erasure or destruction of the information or data, and “ process / processes / processed” shall be interpreted accordingly.
“Process Improvement Team” has the meaning given in Exhibit 5 .
“Productive Hours” has the meaning given in Exhibit 4 .
“ Project ” means any discrete amount of work undertaken in accordance with Exhibit 2 that is not a Service, New Service or Change. Each Project must be carried out pursuant to the approval process in Exhibit 2 and the Operations Manual. In no event will any of the following activities be considered Projects for purposes of the Agreement: (a) any activity that is already within the scope of the Services; and (b) any activities that were not approved by LS&Co. pursuant to the Agreement.
“Rates” has the meaning given in Exhibit 4 .
“Reduced Resource Credit” or “RRC” has the meaning given in Exhibit 4 .
“Region” has the meaning given in Exhibit 3 .
“Regional Service Delivery Manager” has the meaning given in Exhibit 5 .
“Regulatory Requirements” means the Laws to which LS&Co. is required to submit, or voluntarily submits, from time to time.
“Relief Event” has the meaning given in Exhibit 3 .
“Resource” has the meaning given in Exhibit 4 .
“Resource Baseline” has the meaning given in Exhibit 4 .
“Resource Unit” or “RU” has the meaning given in Exhibit 4 .
“RRC Rate” has the meaning given in Exhibit 4 .
“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder or any successor or similar Laws.
“Service Audit Standards” means the standards applicable to the provision of a service audit by a service auditor (e.g., a SOC Report), including any applicable auditing standards, including any modified or supplemented version of the foregoing and any newly adopted standard replacing a previous standard. At the Effective Date the applicable Service Audit Standards are the

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International Standard on Assurance Engagements No. 3402 and the Statement on Standards Attestation Engagements No. 16.
“Service Category ” means a grouping of elements of the Services, as provided in Exhibit 2 .
“Service Category Regional Tower Lead Committee” has the meaning given in Exhibit 5 .
“Service Level” means a component of the Services that is measured in accordance with the criteria given in Exhibit 3 .
“Service Level Credit” means an amount credited to LS&Co. as a result of a Service Level Failure.
“Service Level Definitions Document” has the meaning given in Exhibit 3 .
“Service Level Failure” has the meaning given in Exhibit 3 .
“Service Level Improvement Plan” has the meaning given in Exhibit 3 .
“Service Level Report” has the meaning given in Exhibit 3 .
“Service Location(s)” means any LS&Co. Service Location or Supplier Service Location, as applicable.
“Service Recipients” means LS&Co., LS&Co. Agents and customers, business partners, vendors and joint venture partners whose relationship with LS&Co. involves the use of or interaction with the Services, including LS&Co. Third Party Contractors (to the extent that such LS&Co. Third Party Contractors are performing services for LS&Co. and need access to LS&Co. systems).
“Service Tax” has the meaning given in Section 16.2 of the Agreement.
“Services” has the meaning given in Section 3.1 of the Agreement.
“SOC” has the meaning given in Section 18.3(a) of the Agreement.
“SOC Reports” has the meaning given in Section 18.3(a) of the Agreement.
“Software” means: (a) the source code and object code versions of any applications, operating system software, computer software languages, utilities, other computer programs, in whatever form or media, including the tangible media upon which the foregoing are recorded, together with all corrections, improvements, updates and releases thereof; (b) any software development and performance testing tools, and related know-how, methodologies, processes, technologies or algorithms; and (c) any Documentation related to any of the foregoing.
“Spike Notice” has the meaning given in Exhibit 4 .
“Standards” has the meaning given in Section 18.3(b) of the Agreement.

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“Statement of Work” means the description of certain Services and Supplier obligations specified in Exhibit 2 .
“Step-In Date” has the meaning given in Section 14.5 of the Agreement.
“Step-Out Date” has the meaning given in Section 14.5 of the Agreement.
“Step-Out Notice” has the meaning given in Section 14.5 of the Agreement.
“Step-Out Plan” has the meaning given in Section 14.5 of the Agreement.
“Stranded Costs” means: (a) the reasonable and actual severance cost incurred by Supplier to terminate dedicated (as of the time of the termination of the Agreement) Supplier Staff providing Services exclusively in the terminated Service Category whose employment with Supplier cannot reasonably be continued; provided that: (i) LS&Co. shall only be liable to reimburse termination benefits which Supplier is obligated to provide by applicable Law and/or by Supplier’s policies applicable to all employees of Supplier providing services similar to the Services; (ii) Supplier shall not be entitled to recover such expenses that are associated with any dedicated Supplier Staff transitioned to LS&Co. in connection with the termination of a Service Category; (iii) Supplier shall not be entitled to recover such expenses that are associated with any dedicated Supplier Staff that have been re-deployed at the effective date of termination; and (iv) Supplier shall not be entitled to recover such expenses to the extent that they exceed 2 calendar months of actual demonstrated salaries, and related expenses previously paid to such dedicated member of the Supplier Staff; (b) costs associated with early termination of third party service agreements exclusively dedicated to LS&Co. (at the time of the termination of the Agreement), to the extent that such third party service agreements cannot reasonably be redeployed; and (c) unamortized investments in tools, hardware, pre-paid software and other operations infrastructure used by Supplier primarily to provide the Services in the applicable Service Category (such investments to be amortized over a standard 36-month period with the exception of pre-paid software which will be amortized over no more than a 12-month period). In connection with the recovery of any Stranded Costs under the Agreement, Supplier shall submit a detailed estimate of the anticipated Stranded Costs, together with a description of the manner in which such expenses may be mitigated or reduced, within 30 days of the determination that such expenses will be payable under the Agreement. Stranded Costs to be recovered by Supplier shall be reduced to the extent LS&Co. or its designees assume financial obligations that Supplier would otherwise have incurred as a result of a termination of the Agreement by LS&Co. In addition, Supplier shall, in all cases, use all reasonable efforts to minimize the amount of any Stranded Costs.
“Substantial Change” has the meaning given in Exhibit 4 .
“Substantial Workforce Change” has the meaning given in Exhibit 4 .
“Successor” has the meaning given in Section 25.1 of the Agreement.
“Supplier” has the meaning given in the preamble to the Agreement.

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“Supplier Agents” means the employees, officers, directors, agents, contractors, personnel and representatives of Supplier performing any of Supplier’s obligations under the Agreement.
“Supplier Change in Law” means a change in a Law applicable to Supplier and Supplier’s business (i.e., Supplier would be liable to a Governmental Authority in the case of non-compliance with the Law) that affect the provision or receipt of the Services, together with any change in a Law that applies to LS&Co. as a result of the consummation of the transactions contemplated by the Agreement.
“Supplier Competitor” means those competitors specified on Exhibit 12 .
“Supplier Consents” means all licenses, consents, permits, approvals and authorizations that are necessary to allow: (a) Supplier and Supplier Agents to use: (i) the Supplier Software and Supplier tools, (ii) any assets owned or leased by Supplier; and (iii) any other Software or Equipment used in connection with the Services; (b) Supplier and Supplier Agents to: (i) use any third party services retained by Supplier to provide the Services during the Term and the Termination Assistance Period; and (ii) grant to LS&Co. the rights (including assignments of Intellectual Property Rights) in the LS&Co.-Owned Materials and other Intellectual Property transferred or licensed to LS&Co. hereunder; and (d) Supplier to fulfill its obligations under Article 25 of the Agreement.
“Supplier Default Cure Period” has the meaning given in Section 23.4(a) of the Agreement.
“Supplier Default Notice” has the meaning given in Section 23.4(a) of the Agreement.
“Supplier Delivery Processes” has the meaning given in Exhibit 5 .
“Supplier Derivative Works” means Derivative Works of Supplier Software, Supplier Background Technology, and any associated Documentation developed by or on behalf of Supplier or Supplier Agents, excluding in all cases, Commissioned Materials.
“Supplier Equipment” means that Equipment leased or owned by Supplier and Supplier Agents that is used by Supplier and Supplier Agents to provide the Services.
“Supplier Global Lead ” means, with respect to a particular Service Category, the individual Supplier Staff member with overall responsibility for that Service Category on a global basis. For clarity, the Supplier Global Lead does not include any regional lead with respect to the applicable Service Category.
“Supplier Governance Executive” has the meaning given in Section 10.2 of the Agreement.
“Supplier Governmental Approvals” means all Governmental Approvals that Supplier is required by Law to obtain, maintain, or provide, together with any Governmental Approvals that either Party is required by Law to obtain, maintain or provide as a result of the Agreement.
“Supplier Parent” means Wipro Limited, an India registered company with its head office in Bangalore.

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“Supplier Proprietary Software” means the Software owned by or on behalf of Supplier and used in connection with the Services.
“Supplier Service Location” means a location of Supplier or Supplier Agent approved by LS&Co. and listed on Exhibit 7 .
“Supplier Software” means the Supplier Proprietary Software, the Supplier Third Party Software and the Supplier Derivative Works, collectively.
“Supplier Staff” means the personnel of Supplier and Supplier Agents who provide the Services.
“Supplier Third Party Software” means the Software and Documentation licensed, leased or otherwise obtained by Supplier from a third party that is used in connection with the Services or with any Supplier Software or LS&Co. Software.
“Supplier Tools” has the meaning given in Exhibit 4 .
“Supplier Transition Director” has the meaning given in Section 5.1 of the Agreement.
“Systems” means the Software, tools and the Equipment, collectively, used in connection with the Services.
“Technical Data” has the meaning given in Section 29.14 of the Agreement.
“Term” means the Initial Agreement Term and any renewal terms agreed to by the Parties in accordance with Section 2.2 of the Agreement.
“Termination Assistance Period” means a period of time designated by LS&Co., commencing on a date designated by LS&Co., after LS&Co. has determined that there shall be a termination or expiration of the Agreement or any other cessation of all or any part of the Services (including due to a divestiture or partial termination by LS&Co.), in each case as requested by LS&Co. and continuing for up to 18 months after the last day of the Term, and which may be extended by LS&Co. for up to an additional 6 months, during which Supplier shall provide the Termination Assistance Services with respect to any part of the Services being terminated in accordance with Article 25 of the Agreement.
“Termination Assistance Services” means Supplier’s (and Supplier Agents’) provision of: (a) the Services (and any replacements thereof or substitutions therefore); (b) cooperation with LS&Co. and Successor as necessary to facilitate the smooth and orderly transition of the Services to Successor; (c) information relating to the number and function of each of the Supplier Staff; (d) subject to the approval of LS&Co., a plan for the smooth and orderly transition of the performance of the Services from Supplier to LS&Co. or Successor; (e) training for personnel of LS&Co. and/or Successor in the performance of the Services being transitioned to Successor; (f) access to the Supplier Staff so that LS&Co. or its designees may extend offers of employment to such staff; waivers of Section 11.8 of the Agreement with respect to Supplier Staff; waivers of any prohibitions in any employment agreements with such individuals that may restrict such individuals from accepting offers from LS&Co. or Successor; cooperation with

LS&Co. – Exhibit 1 – Definitions
Page 15
CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY
C ONFIDENTIAL
E XECUTION V ERSION

Successors efforts to hire such staff, including not making counter offers; (g) information related to the Services that will assist LS&Co. in drafting requests for proposals relating to the Services, and cooperation with, and due diligence information for, recipients of such requests for proposals; and (h) other services requested by LS&Co. necessary to facilitate the transfer of Services.
“Termination Charge ” has the meaning given in Section 24.1 of the Agreement.
“Test” has the meaning given in Section 18.3(b) of the Agreement.
“Third Party Contracts” means: (a) the third party agreements, if any, that are assigned to Supplier in connection with the Agreement; and (b) and the Managed Agreements, collectively.
“Transition Charge” means a charge for the Transition Services. The Transition Charge is specified by Transition Milestone in Exhibit 8 , with each such payment due and payable in accordance with the terms in Exhibit 4 and the Agreement.
“Transition Credit” means a credit applied against the Charges as a result of Supplier’s failure to meet a Transition Milestone, which credit is specified in the Transition Plan.
“Transition Milestones” means milestones, including Critical Transition Milestones, relating to Supplier’s obligations to complete certain Transition Services on certain dates in accordance with the Transition Plan. The Transition Milestones are specified in the Transition Plan.
“Transition Period” means the period after the Effective Date during which Supplier is providing Transition Services with respect to a portion of the Services (as such portion of the Services is identified in the Transition Plan) prior to the Commencement Date for such portion of such Services.
“Transition Plan” means the high-level transition plan set forth in Exhibit 8 and any more detailed transition plan developed by Supplier and approved by LS&Co. after the Effective Date.
“Transition Services” has the meaning given in Section 5.1 of the Agreement.
“Undertakings” has the meaning given in Exhibit 2 .
“Unit Rate” has the meaning given in Exhibit 4 .
“Use” means the right to use, execute, reproduce, perform, display, maintain, modify, enhance, create Derivative Works of, make and have made.
“Validated Average” has the meaning given in Exhibit 3 .
“Validation Period” has the meaning given in Exhibit 3 .
“Validation Service Level” has the meaning given in Exhibit 3 .
“Volume Band” has the meaning given in Exhibit 4 .

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“Wave” has the meaning given in Exhibit 8 .
“Weighting Factor” has the meaning given in Exhibit 3 .
“Work Order” has the meaning given in Exhibit 2 .
“Work Product” means any manuals, reports, diagrams, data models, schematics, training materials and similar items created by Supplier or Supplier Agents in the course of performing the Services.

LS&Co. – Exhibit 1 – Definitions
Page 17


Exhibit 12
LEVI STRAUSS & CO. AND SUBSIDIARIES
 
 
 
 
Statements re: Computation of Ratio of Earnings to Fixed Charges
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
 
November 30, 2014
 
November 24, 2013
 
November 25, 2012
 
November 27, 2011
 
November 28, 2010
 
 
(Dollars in thousands)
 
Earnings:
 
 
 
 
 
 
 
 
 
 
Income before income taxes
$
153,854

 
$
322,613

 
$
195,881

 
$
202,827

 
$
235,598

 
Add: Fixed charges
182,831

 
195,071

 
197,771

 
192,256

 
190,425

 
Add: Amortization of capitalized interest
1,040

 
876

 
571

 
334

 
152

 
Subtract: Capitalized interest
905

 
1,201

 
1,028

 
2,009

 
881

 
Total earnings
$
336,820

 
$
517,359

 
$
393,195

 
$
393,408

 
$
425,294

 
Fixed Charges:
 
 
 
 
 
 
 
 
 
 
Interest expense (includes amortization of debt discount and costs)
$
117,597

 
$
129,024

 
$
134,694

 
$
132,043

 
$
135,823

 
Capitalized interest
905

 
1,201

 
1,028

 
2,009

 
881

 
Interest factor in rental expense (1)
64,329

 
64,846

 
62,049

 
58,204

 
53,721

 
Total fixed charges
$
182,831

 
$
195,071

 
$
197,771

 
$
192,256

 
$
190,425

 
Ratio of earnings to fixed charges
1.8

x
2.7

x
2.0

x
2.0

x
2.2

x
______________
(1)
Utilized an assumed interest factor of 33% in rental expense.
.





Exhibit 21

Subsidiaries of the Registrant

LEVI STRAUSS & CO.
Subsidiary
Jurisdiction of Formation
Levi Strauss (Australia) Pty. Ltd.
Australia
Levi Strauss & Co. Europe SCA
Belgium
Levi Strauss Benelux Retail BVBA
Belgium
Levi Strauss Continental, S.A.
Belgium
Levi Strauss International Group Finance Coordination Services
Belgium
Majestic Insurance International, Ltd.
Bermuda
Levi Strauss do Brasil Franqueadora Ltda.
Brazil
Levi Strauss do Brasil Industria e Comercio Ltda.
Brazil
Levi Strauss & Co. (Canada) Inc.
Canada
Levi Strauss Commerce (Shanghai) Limited
China
Levi's Footwear & Accessories (China) Ltd
China
Levi Strauss Praha, spol. s.r.o.
Czech Republic
Levi's Footwear & Accessories France S.A.S.
France
Paris - O.L.S. S.A.R.L.
France
Levi Strauss Germany GmbH
Germany
Levi Strauss Hellas S.A.
Greece
Levi Strauss (Hong Kong) Limited
Hong Kong
Levi Strauss Global Trading Company II, Limited
Hong Kong
Levi Strauss Global Trading Company Limited
Hong Kong
Levi's Footwear & Accessories HK Limited
Hong Kong
Levi Strauss Hungary Trading Limited Liability Company
Hungary
Levi Strauss (India) Private Limited
India
PT Levi Strauss Indonesia
Indonesia
Levi Strauss Italia S.R.L.
Italy
Levi's Footwear & Accessories Italy SpA
Italy
World Wide Logistics S.R.L.
Italy
Levi Strauss Japan Kabushiki Kaisha
Japan
Levi Strauss Korea Ltd.
Korea, Republic of
Levi Strauss (Malaysia) Sdn. Bhd.
Malaysia
LS Retail (Malaysia) Sdn. Bhd.
Malaysia
Levi Strauss Mauritius Limited
Mauritius
Administradora Levi Strauss Mexico, S.A. de C.V.
Mexico
Distribuidora Levi Strauss Mexico, S.A. de C.V.
Mexico
Levi Strauss de Mexico, S.A. de C.V.
Mexico
Levi Strauss Nederland B.V.
Netherlands
Levi Strauss Nederland Holding B.V.
Netherlands
LVC B.V.
Netherlands
Levi Strauss New Zealand Limited
New Zealand
Levi Strauss Pakistan (Private) Limited
Pakistan
Levi Strauss Philippines, Inc.
Philippines
Levi Strauss Philippines, Inc. II
Philippines




Levi Strauss Poland SP z.o.o.
Poland
“Levi Strauss Moscow” Limited Liability Company
Russian Federation
Levi Strauss Asia Pacific Division, PTE. LTD.
Singapore
Levi Strauss South Africa (Proprietary) Limited
South Africa
Levi Strauss de Espana, S.A.
Spain
Levi's Footwear & Accessories Spain S.A.
Spain
Levi Strauss (Suisse) SA
Switzerland
Levi's Footwear & Accessories (Switzerland) S.A.
Switzerland
Levi Strauss Istanbul Konfekslyon Sanayi ve Ticaret A.S.
Turkey
Levi Strauss Dis Ticaret Limited Sirketi
Turkey
Levi Strauss (U.K.) Limited
United Kingdom
Levi Strauss Pension Trustee Ltd.
United Kingdom
Levi's Footwear & Accessories UK Limited
United Kingdom
Industrie Denim, LLC
United States (California)
Levi Strauss International
United States (California)
Levi Strauss International, Inc.
United States (Delaware)
Levi Strauss, U.S.A., LLC
United States (Delaware)
Levi Strauss-Argentina, LLC
United States (Delaware)
Levi's Only Stores Georgetown, LLC
United States (Delaware)
Levi's Only Stores, Inc.
United States (Delaware)
LVC, LLC
United States (Delaware)
Levi Strauss Vietnam Co. Ltd
Vietnam





Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Charles V. Bergh, certify that:
1. I have reviewed this annual report on Form  10-K of Levi Strauss & Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
 
/ S /    C HARLES V . B ERGH
 
 
Charles V. Bergh
 
 
President and Chief Executive Officer
Date: February 12, 2015




Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Harmit Singh, certify that:
1. I have reviewed this annual report on Form  10-K of Levi Strauss & Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
 
/ S /    H ARMIT  S INGH
 
 
Harmit Singh
 
 
Executive Vice President and Chief Financial Officer
Date: February 12, 2015





Exhibit 32

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification is not to be deemed filed pursuant to the Securities Exchange Act of 1934, as amended, and does not constitute a part of the Annual Report of Levi Strauss & Co., a Delaware corporation (the "Company"), on Form  10-K for the period ended November 30, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the "Report").
In connection with the Report, each of the undersigned officers of the Company does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.
 
 
 
/ S /    C HARLES  V. B ERGH
 
 
Charles V. Bergh
 
 
President and Chief Executive Officer
 
 
February 12, 2015
 
 
/ S /    H ARMIT  S INGH
 
 
Harmit Singh
 
 
Executive Vice President and Chief Financial Officer
 
 
February 12, 2015