Document:

EX-10.22

 

EXECUTION COPY

TAX SHARING AGREEMENT

by and among

SARA LEE CORPORATION

AND ITS AFFILIATES

and

HANESBRANDS INC.

AND ITS AFFILIATES

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I	 	 	 	 
	     DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE II	 	 	 	 
	     RESPONSIBILITY FOR TAXES	 	 	8	 
	     2.1
	 	Responsibility and Indemnification for Taxes	 	 	8	 
	     2.2
	 	Income Taxes	 	 	8	 
	     2.3
	 	Other Taxes	 	 	9	 
	     2.4
	 	Allocation of Certain Income Taxes and Income Tax Items	 	 	9	 
	     2.5
	 	Tax Refunds	 	 	10	 
	     2.6
	 	Carrybacks	 	 	11	 
	     2.7
	 	Audit Adjustments	 	 	11	 
	     2.8
	 	Timing of Certain Payments	 	 	12	 
	     2.9
	 	Treatment of Restricted Stock, Stock Options, and Deferred Compensation	 	 	12	 
	     2.10
	 	True-Up Payment for Deferred Taxes	 	 	13	 
	     2.11
	 	Successor Employer Status	 	 	14	 
	     2.12
	 	Subpart F Income	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE III	 	 	 	 
	     TAX RETURNS AND INFORMATION EXCHANGE	 	 	14	 
	     3.1
	 	Tax Return Preparation Responsibility; Payment of Taxes Shown Thereon	 	 	14	 
	     3.2
	 	Review of Tax Returns	 	 	15	 
	     3.3
	 	Certain Items Related to Tax Return Preparation	 	 	16	 
	     3.4
	 	Tax Information Exchanges and Tax Services	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE IV	 	 	 	 
	     TAX TREATMENT OF THE DISTRIBUTION	 	 	17	 
	     4.1
	 	Representations	 	 	18	 
	     4.2
	 	Covenants	 	 	18	 
	     4.3
	 	Supplemental Rulings and Restrictions on HBI	 	 	21	 
	     4.4
	 	Liability for Undertaking Certain Actions	 	 	22	 
	     4.5
	 	Cooperation	 	 	22	 
	     4.6
	 	Enforcement	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE V	 	 	 	 
	     COOPERATION AND EXCHANGE OF INFORMATION	 	 	23	 
	     5.1
	 	Cooperation	 	 	23	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	     5.2
	 	Contest Provisions	 	 	25	 
	     5.3
	 	Information for Shareholders	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE VI	 	 	 	 
	     DISPUTE RESOLUTION	 	 	26	 
	     6.1
	 	Amicable Resolution	 	 	26	 
	     6.2
	 	Arbitration	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE VII	 	 	 	 
	     MISCELLANEOUS	 	 	27	 
	     7.1
	 	Effectiveness	 	 	27	 
	     7.2
	 	Indemnification for Inaccurate, Incomplete or Untimely Information	 	 	27	 
	     7.3
	 	Breach	 	 	27	 
	     7.4
	 	Disclaimers	 	 	27	 
	     7.5
	 	Payments	 	 	27	 
	     7.6
	 	Changes in Law	 	 	28	 
	     7.7
	 	Notices	 	 	29	 
	     7.8
	 	Entire Agreement; Incorporation of Schedules and Exhibits	 	 	29	 
	     7.9
	 	Authority	 	 	29	 
	     7.10
	 	Governing Law	 	 	30	 
	     7.11
	 	Successors and Assigns	 	 	30	 
	     7.12
	 	Joint and Several Liability	 	 	30	 
	     7.13
	 	Parties in Interest	 	 	30	 
	     7.14
	 	Legal Enforceability; Waiver of Default	 	 	30	 
	     7.15
	 	Action by Affiliates	 	 	31	 
	     7.16
	 	Expenses	 	 	31	 
	     7.17
	 	Confidentiality	 	 	31	 
	     7.18
	 	Amendments and Waiver	 	 	31	 
	     7.19
	 	No Implied Waivers; Cumulative Remedies; Writing Required	 	 	31	 
	     7.20
	 	Limitation on Damages	 	 	32	 
	     7.21
	 	Severability	 	 	32	 
	     7.22
	 	SUBMISSION TO JURISDICTION	 	 	32	 
	     7.23
	 	WAIVER OF JURY TRIAL	 	 	33	 
	     7.24
	 	Construction	 	 	33	 
	     7.25
	 	Counterparts	 	 	33	 
	     7.26
	 	Delivery by Facsimile and Other Electronic Means	 	 	33	 
	     7.27
	 	Consent by Affiliates	 	 	33	 

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TAX SHARING AGREEMENT

          THIS TAX SHARING AGREEMENT, dated as of this 31th day of August, 2006, by and among Sara Lee
Corporation (“Sara Lee”), a Maryland corporation, by and on behalf of itself and each
Affiliate of Sara Lee, and Hanesbrands Inc. (“HBI”), a Maryland corporation and currently a
direct, wholly owned subsidiary of Sara Lee, by and on behalf of itself and each Affiliate of HBI.
Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such
terms in Article I hereof.

RECITALS

          WHEREAS, as of the date of this Agreement, Sara Lee and its direct and indirect domestic
corporate subsidiaries are members of the Sara Lee Consolidated Group;

          WHEREAS, the boards of directors of Sara Lee and HBI have each determined that it is
appropriate and desirable for Sara Lee to contribute and transfer to HBI, and for HBI to receive
and assume, directly or indirectly, assets and liabilities currently held directly or indirectly by
Sara Lee and associated with the HBI Business (the “Restructuring”);

          WHEREAS, as set forth in the Master Separation Agreement dated as of August 31, 2006 (the
“Separation Agreement”), and subject to the terms and conditions thereof, Sara Lee intends
to distribute all of its shares of HBI to Sara Lee shareholders pursuant to the Distribution;

          WHEREAS, the Restructuring and Distribution are intended to qualify as a tax-free
reorganization and distribution under Sections 368(a)(1)(D) and 355 of the Code; and

          WHEREAS, in contemplation of the Distribution, Sara Lee and HBI desire to set forth their
agreement on the rights and obligations of Sara Lee and HBI and their respective Affiliates with
respect to the responsibility, handling and allocation of federal, state, local, and foreign Taxes,
and various other Tax matters.

          NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants, and
provisions of this Agreement, Sara Lee, HBI, and their respective Affiliates mutually covenant and
agree as follows:

 

 

ARTICLE I

DEFINITIONS

          “959 Dividend Exclusion” has the meaning prescribed in Section 2.12.

          “Affiliate” means any corporation, partnership, limited liability company, or other
entity directly or indirectly Controlled by the entity in question. For purposes of this
Agreement, an Affiliate of Sara Lee shall not include any entity that is, or is also, an Affiliate
of HBI.

          “After Tax Amount” means any additional amount necessary to reflect (through a
gross-up mechanism) the hypothetical Tax consequences of the receipt or accrual of any payment
required to be made under this Agreement (including payment of an additional amount or amounts
hereunder and the effect of the deductions available for interest paid or accrued and for Taxes
such as state and local Income Taxes), determined by using the highest marginal corporate Tax rate
(or rates, in the case of an item that affects more than one Tax) for the relevant taxable period
(or portion thereof).

          “Agreement” means this Tax Sharing Agreement, including any schedules, exhibits, and
appendices attached hereto.

          “Ancillary Agreements” has the meaning prescribed in the Separation Agreement.

          “Cash Acquisition Merger” means a merger of a newly-formed subsidiary of HBI with a
corporation, limited liability company, limited partnership, general partnership or joint venture
(in each case, not previously owned, directly or indirectly, by HBI) solely for cash pursuant to
which HBI acquires such corporation, limited liability company, limited partnership, general
partnership or joint venture and no Equity Securities of HBI or any HBI Affiliate are issued, sold,
redeemed, or acquired, directly or indirectly.

          “CFC” means a “controlled foreign corporation” as defined in Section 957(a) of the
Code.

          “Code” means the Internal Revenue Code of 1986 (or, if relevant, the Internal Revenue
Code of 1954), as amended, or any successor thereto, as in effect for the taxable period in
question.

          “Combined Jurisdiction” means, for any taxable period, any jurisdiction in which HBI
or an HBI Affiliate is included in a consolidated, combined, or unitary return with Sara Lee or a
Sara Lee Affiliate for state Income Tax or Other Tax purposes.

          “Combined Return” means any combined, unitary, or consolidated return or report used
in the determination of a state Income Tax or Other Tax liability.

          “Control” means the ownership of stock or other securities possessing at least 50
percent of the total combined voting power of all classes of securities entitled to vote.

 

 

          “Deferred Tax Assets” means, as of a given date, the amount of deferred tax benefits
(including deferred tax consequences attributable to deductible temporary differences and
carryforwards) that would be recognized as assets on a business enterprise’s balance sheet computed
in accordance with GAAP, but without regard to valuation allowances.

          “Deferred Tax Liabilities” means, as of a given date, the amount of deferred tax
liabilities (including deferred tax consequences attributable to deductible temporary differences)
that would be recognized as liabilities on a business enterprise’s balance sheet computed in
accordance with GAAP, but without regard to valuation allowances.

          “Deferred Taxes” means, as of a given date, the amount of Deferred Tax Assets, less
the amount of Deferred Tax Liabilities. Deferred Taxes may be a net negative or positive amount,
and shall be computed without regard to any payments to be made pursuant to Section 2.10.

          “Distribution” has the meaning prescribed to that term in the Separation Agreement.

          “Distribution Date” means the date on which the HBI stock is distributed by Sara Lee
to its shareholders in a transaction intended to qualify as a tax-free distribution under Sections
355 and 368(a)(1)(D) of the Code.

          “Employee Restricted Stock” means either Sara Lee Restricted Stock or HBI Restricted
Stock.

          “Employee Stock Option” means either a Sara Lee Stock Option or an HBI Stock Option.

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

          “Estimated Deferred Taxes” has the meaning prescribed in Section 2.10(a).

          “Filing Party” has the meaning prescribed in Section 3.2(b).

          “Final Deferred Taxes” has the meaning prescribed in Section 2.10(b).

          “Final Determination” shall mean the final resolution of liability for any Tax for a
taxable period, including any related interest, penalties or other additions to tax, (i) by
Internal Revenue Service Form 870 or 870-AD (or any successor forms thereto), on the date of
acceptance by or on behalf of the IRS, or by a comparable form under the laws of other
jurisdictions; except that a Form 870 or 870-AD or comparable form that reserves (whether by its
terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right
of the Taxing Authority to assert a further deficiency with respect to a Tax Item shall not
constitute a Final Determination with respect to such Tax Item; (ii) by a decision, judgment,
decree, or other order by a court of competent jurisdiction, which has become final and

2

 

unappealable; (iii) by a closing agreement or accepted offer in compromise under Section 7121
or Section 7122 of the Code, or comparable agreements under the laws of other jurisdictions; (iv)
by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be recovered (including by way of offset) by
the jurisdiction imposing such Tax; or (v) by any other final disposition, including by reason of
the expiration of the applicable statute of limitations.

          “GAAP” means United States generally accepted accounting principles as in effect on
the Distribution Date, and to the extent permissible, consistent with the preparation of the June
30, 2005 audited consolidated financial statements of Sara Lee and its Affiliates.

          “Gain Recognition Agreement” means any agreement to recognize gain described in
Treasury Regulation Section 1.367(a)-8 to which Sara Lee or any Sara Lee Affiliate is a party.

          “HBI” has the meaning prescribed in the preamble to this Agreement.

          “HBI Business” has the meaning prescribed to the term “Branded Apparel Business” in
the Separation Agreement.

          “HBI Employee” means an employee of HBI or any HBI Affiliate immediately after the
Distribution.

          “HBI Group” means the group of corporations that, immediately after the Distribution
Date, will be members of the affiliated group of corporations of which HBI is the common parent
(within the meaning of Section 1504 of the Code). For purposes of this definition, it is assumed
that HBI will elect to file consolidated federal income tax returns with HBI as the common parent
for the taxable year beginning immediately after the Distribution.

          “HBI Opening Balance Sheet” means the opening GAAP balance sheet for the consolidated
financial statements for HBI and its Affiliates for the period which begins immediately after the
Distribution.

          “HBI Representation Letter” means an officer’s certificate in which certain
representations, warranties and covenants are made on behalf of HBI and its Affiliates in
connection with the issuance of a Tax Opinion or Tax Ruling.

          “HBI Restricted Stock” means HBI common stock received by an HBI Employee or Sara Lee
Employee in connection with his or her employment, which stock has not yet been included in the
income of such Employee as of the Distribution Date.

          “HBI Stock Option” means an Option to acquire HBI common stock received by an HBI
Employee or Sara Lee Employee in connection with his or her employment, which Option has not yet
been exercised as of the Distribution Date.

          “Income Taxes” means all federal, state, local, and foreign income Taxes or other
Taxes based on income or net worth including, without limitation, the Michigan “single business
tax” set forth at MCL sections 208.1 to 208.145, the Ohio “Commercial Activity Tax” set forth in
Ohio Rev. Code Ann. §§ 5751.01 through 5751.99, the Ohio “personal property tax” set forth

3

 

in Ohio Rev. Code Ann. §§ 319, 323, 5701, 5705, 5709, 5711, and 5719, the New Jersey
“alternative minimum assessment” on corporations set forth in N.J. Rev. Stat. § 54:10A-5, the New
Jersey “litter-generating products tax” set forth in N.J. Rev. Stat. § 13:1E-216(a), the Texas
“franchise tax” set forth in Title 2, Subtitle F, Chapter 171 of the Texas Tax Code Annotated, the
California “franchise tax” set forth in Cal. Rev. & Tax Code § 23151, the “Business Privilege Tax”
set forth in Tennessee Code section 67-4-709, the Philadelphia “business privilege tax” set forth
in Philadelphia Code section 19-2604, the North Carolina “Franchise Tax” set forth in N.C. Gen.
Stat. §§ 105-122, and any other franchise or similar Taxes.

          “IRS” means the United States Internal Revenue Service or any successor thereto,
including, but not limited to its agents, representatives, and attorneys.

          “Liability Issue” has the meaning prescribed in Section 5.1(c).

          “Non-filing Party” has the meaning prescribed in Section 3.2(b).

          “Option” means an option to acquire common stock, or other equity-based incentives the
economic value of which is designed to mirror that of an option, including non-qualified stock
options, discounted non-qualified stock options, cliff options to the extent stock is issued or
issuable (as opposed to cash compensation), and tandem stock options to the extent stock is issued
or issuable (as opposed to cash compensation).

          “Other Taxes” means all taxes other than Income Taxes, including (but not limited to)
transfer, sales, use, payroll, property, and unemployment Taxes.

          “Owed Party” has the meaning prescribed in Section 7.5.

          “Owing Party” has the meaning prescribed in Section 7.5.

          “Permitted Transaction” means any transaction that satisfies the requirements of
Section 4.2(j).

          “Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, limited liability partnership, proprietorship, trust,
association, union, governmental authority or other entity, enterprise, authority or organization.

          “Post-Distribution Tax Period” means, with respect to a given entity, any taxable
period (or portion thereof) for which a Tax Return is filed, if such period begins after the
Distribution Date. By way of example, if the Distribution Date were to occur on July 31, 2006,
then for federal Income Tax purposes the taxable year beginning August 1, 2006 would constitute a
Post-Distribution Tax Period with respect to the members of the HBI Group immediately after the
Distribution Date.

          “Pre-Distribution Tax Period” means, with respect to a given entity, any taxable
period (or portion thereof) for which a Tax Return is filed, if such period ends on or before the
Distribution Date. By way of example, if the Distribution Date were to occur on July 31, 2006,
then for federal Income Tax purposes the period from July 1, 2006 through July 31, 2006 would
constitute a Pre-Distribution Tax Period with respect to the members of the HBI Group

4

 

immediately after the Distribution Date, even though the taxable income of those corporations
for such period is includable on the Sara Lee Consolidated Group’s Tax Return for that Group’s
taxable year ending June 30, 2007.

          “Reportable Transaction” means a reportable or listed transaction as defined in
Section 6011 of the Code or Treasury Regulations thereunder.

          “Representation Letter” means the HBI Representation Letter and the Sara Lee
Representation Letter.

          “Responsible Party” has the meaning prescribed in Section 5.2.

          “Restriction Period” means the period beginning on the date hereof and ending on the
second anniversary of the Distribution Date.

          “Restructuring” has the meaning prescribed in the recitals to this Agreement.

          “Ruling Documents” means the Ruling Request, the appendices, attachments and exhibits
thereto, and any additional or supplemental information submitted to the IRS in connection with the
Ruling Request.

          “Ruling Request” means the private letter ruling request filed by Sara Lee with the
IRS dated March 31, 2006 pertaining to certain Tax aspects of the Restructuring and the
Distribution.

          “Sara Lee” has the meaning prescribed in the preamble to this Agreement.

          “Sara Lee Businesses” means the present and future businesses of Sara Lee and any Sara
Lee Affiliate, other than the HBI Business.

          “Sara Lee Consolidated Group” means the affiliated group of corporations (within the
meaning of Section 1504 of the Code) of which Sara Lee is the common parent prior to the
Distribution Date.

          “Sara Lee Employee” means an employee of Sara Lee or any Sara Lee Affiliate
immediately after the Distribution.

          “Sara Lee Group” means the group of corporations that, immediately after the
Distribution Date, are members of the affiliated group of corporations of which Sara Lee is the
common parent (within the meaning of Section 1504 of the Code).

          “Sara Lee Representation Letter” means an officer’s certificate in which certain
representations, warranties and covenants are made on behalf of Sara Lee and its Affiliates in
connection with the issuance of a Tax Opinion or Tax Ruling.

          “Sara Lee Restricted Stock” means Sara Lee common stock received by a Sara Lee or HBI
Employee in connection with his or her employment, which stock has not yet been included in the
income of such Employee as of the Distribution Date.

5

 

          “Sara Lee Shareholder Tax Indemnity Payment” has the meaning prescribed in Section 4.2
hereof.

          “Sara Lee Stock Option” means an Option to acquire Sara Lee common stock received by a
Sara Lee or HBI Employee in connection with his or her employment, which Option has not yet been
exercised as of the Distribution Date.

          “Separation Agreement” has the meaning prescribed in the recitals to this Agreement.

          “Straddle Period” means, with respect to a given entity, any state, local, or foreign
taxable period beginning on or before the Distribution Date and ending after the Distribution Date;
provided, however, that for the avoidance of doubt, the term “Straddle Period”
shall not include any federal income taxable period of the Sara Lee Consolidated Group or Sara Lee
Group. By way of example, if the Distribution Date were to occur on July 31, 2006, then for North
Carolina franchise tax purposes, the period from July 1, 2006 through June 30, 2007 would
constitute a Straddle Period with respect to the North Carolina franchise tax return.

          “Subpart F Pre-Distribution Inclusion” has the meaning prescribed in Section 2.12.

          “Supplemental Ruling” means any IRS private letter ruling issued in connection with
the Restructuring and/or the Distribution other than the Ruling Request.

          “Supplemental Ruling Documents” means the Supplemental Ruling Request, the appendices,
attachments and exhibits thereto, and any additional or supplemental information submitted to the
IRS in connection with the Supplemental Ruling Request.

          “Supplemental Ruling Request” means the Supplemental Ruling request filed by Sara Lee
with the IRS pertaining to certain Tax aspects of the Restructuring and/or the Distribution.

          “Tax” and “Taxes” mean any form of taxation, whenever created or imposed, and
whenever imposed by a Taxing Authority, and without limiting the generality of the foregoing, shall
include any net income, alternative or add-on minimum tax, gross income, sales, use, ad valorem,
gross receipts, value added, franchise, profits, license, transfer, recording, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit,
custom duty, annual report, or other tax, government fee, or other like assessment or charge, of
any kind whatsoever, together with any related interest, penalties, or other additions to tax, or
additional amount imposed by any such Taxing Authority; provided, however, that
“Tax” and “Taxes” shall not include any amount owed to a federal, state, local, or
foreign government under the laws governing unclaimed property or escheat.

          “Tax Asset” means any Tax Item that has accrued for Tax purposes (including a net
operating loss, net capital loss, investment tax credit, foreign tax credit, charitable
contribution deduction, credit related to alternative minimum tax and any other Tax credit), that
could reduce a Tax in the taxable period in which it accrued, but which is available to reduce a
Tax in a later taxable period.

6

 

          “Taxing Authority” means any national, municipal, governmental, state, federal,
foreign, or other body, or any quasi-governmental or private body, having jurisdiction over the
assessment, determination, collection or imposition of any Tax (including the IRS).

          “Tax Benefit” means, without double counting, the sum of (i) the amount of the
reduction in the Tax liability of an entity (or of the consolidated or combined group of which it
is a member), whether temporary or permanent, for any taxable period that arises, or may arise in
the future, as a result of any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Tax liability of the entity (or the consolidated or combined group of which it
is a member), and (ii) the amount by which the entity’s (or consolidated or combined group of which
it is a member) Deferred Taxes are decreased as a result of such adjustment, addition, or deletion.

          “Tax Controversy” has the meaning prescribed in Section 5.2(a).

          “Tax Detriment” means, without double counting, the sum of (i) the amount of the
increase in the Tax liability of an entity (or of the consolidated or combined group of which it is
a member), whether temporary or permanent, for any taxable period that arises, or may arise in the
future, as a result of any adjustment to, or addition or deletion of, a Tax Item in the computation
of the Tax liability of the entity (or the consolidated or combined group of which it is a member),
and (ii) the amount by which the entity’s (or consolidated or combined group of which it is a
member) Deferred Taxes are increased as a result of such adjustment, addition, or deletion.

          “Tax-Free Status” means the qualification of the Restructuring and the Distribution as
a tax-free reorganization (i) described in Sections 355(a) and 368(a)(1)(D) of the Code, (ii) in
which the stock distributed thereby is qualified property for purposes of Section 361(c) of the
Code, (iii) in which each of Sara Lee, the Sara Lee Affiliates, HBI, and the HBI Affiliates
recognize no income or gain other than intercompany items or excess loss accounts taken into
account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code, and
(iv) in which no gain or loss is recognized by (and no amount is included in the income of) holders
of Sara Lee common stock upon the receipt of HBI common stock pursuant to the Restructuring and
Distribution, other than cash in lieu of fractional shares.

          “Tax Item” means any item of income, gain, loss, deduction, credit, recapture of
credit, or any other item (including the basis or adjusted basis of property) which increases or
decreases Income Taxes paid or payable in any taxable period.

          “Tax Opinion” means an opinion issued to Sara Lee by a law firm or an accounting firm
with respect to the qualification of the Restructuring and the Distribution for treatment under
Sections 355 and 368(a)(1)(D) of the Code.

          “Tax Package” means the information and documents in the possession of HBI and its
Affiliates that are reasonably necessary for the preparation of a Tax Return by Sara Lee, the Sara
Lee Group, the Sara Lee Consolidated Group, or a Sara Lee Affiliate with respect to a
Pre-Distribution Tax Period or a Straddle Period, assembled in all material respects in

7

 

accordance with the standards that Sara Lee has heretofore applied to divisions and Affiliates
of Sara Lee.

          “Tax Return” means any return, filing, questionnaire or other document required to be
filed, including requests for extensions of time, filings made with estimated Tax payments, claims
for refund or amended returns, that may be filed for any taxable period with any Taxing Authority
in connection with any Tax or Taxes (whether or not a payment is required to be made with respect
to such filing).

          “Tax Ruling” means the IRS private letter ruling issued to Sara Lee on August 7, 2006
in connection with the Ruling Request.

          “Transitional Services Agreement” means the Master Transition Services Agreement
between Sara Lee and HBI dated as of August 31, 2006, and any appendices attached thereto.

          “Treasury Regulations” means the final and temporary (but not proposed) income tax
regulations promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

ARTICLE II

RESPONSIBILITY FOR TAXES

     2.1 Responsibility and Indemnification for Taxes.

          (a) From and after the Distribution Date, without duplication, each of Sara Lee and HBI shall
be responsible for, and shall pay its respective share of, the liability for Taxes of Sara Lee, HBI
and their respective Affiliates, as provided in this Agreement. Sara Lee and its Affiliates shall
indemnify and hold harmless HBI and its Affiliates from any Taxes for which Sara Lee is responsible
pursuant to this Agreement. HBI and its Affiliates shall indemnify and hold harmless Sara Lee and
its Affiliates from any Taxes for which HBI is responsible pursuant to this Agreement.

          (b) Payments to Taxing Authorities and between the parties, as the case may be, shall be made
in accordance with the provisions of this Agreement.

     2.2 Income Taxes.

          (a) Sara Lee shall be responsible for all Income Taxes (i) for any Pre-Distribution Tax Period
of HBI and its Affiliates; (ii) for any Straddle Period of HBI and its Affiliates, but only to the
extent allocated to Sara Lee pursuant to Section 2.4; and (iii) imposed under Treasury Regulation
Section 1.1502-6 or under any comparable or similar provision of state, local or foreign laws or
regulations on HBI or an Affiliate as a result of such company

8

 

being a member of a consolidated, combined, or unitary group with Sara Lee or any Sara Lee
Affiliate during any Tax period.

          (b) HBI shall be responsible for all Income Taxes (i) of HBI and its Affiliates which are not
the responsibility of Sara Lee pursuant to Section 2.2(a) (including, without limitation, Income
Taxes for Post-Distribution Tax Periods of HBI and its Affiliates); and (ii) of Sara Lee and its
Affiliates attributable to acts or omissions of HBI or its Affiliates taken after the Distribution
(other than acts or omissions in the ordinary course of business or otherwise contemplated by the
Separation Agreement and Ancillary Agreements).

     2.3 Other Taxes.

          (a) HBI shall be responsible for all Other Taxes attributable to HBI and its Affiliates or to
the HBI Business, or resulting from the Restructuring and Distribution for all Pre-Distribution Tax
Periods, Straddle Periods, and Post-Distribution Tax Periods.

          (b) Sara Lee shall be responsible for all Other Taxes attributable to Sara Lee and its
Affiliates (other than HBI and its Affiliates) and to its business activities other than the HBI
Business for all Pre-Distribution Tax Periods, Straddle Periods, and Post-Distribution Tax Periods.

     2.4 Allocation of Certain Income Taxes and Income Tax Items.

          (a) If Sara Lee, HBI or any of their respective Affiliates is permitted but not required under
applicable United States Federal, state, local or foreign Tax laws to treat the Distribution Date
as the last day of a taxable period, then the parties shall treat such day as the last day of a
taxable period under such applicable Tax law, and shall file any elections necessary or appropriate
to such treatment; provided that this Section 2.4(a) shall not be construed to require Sara
Lee to change its taxable year.

          (b) Transactions occurring, or actions taken, on the Distribution Date but after the
Distribution outside the ordinary course of business by, or with respect to, HBI or any of its
Affiliates shall be deemed subject to the “next day rule” of Treasury Regulation Section
1.1502-76(b)(1)(ii)(B) (and under any comparable or similar provision under state, local or foreign
laws or regulations, provided that if there is no comparable or similar provision under
state, local or foreign laws or regulations, then the transaction will be deemed subject to the
“next day rule” of Treasury Regulation Section 1.1502-76(b)(1)(ii)(B)) and as such shall for
purposes of this Agreement be treated (and consistently reported by the parties) as occurring in a
Post-Distribution Tax Period of HBI or an HBI Affiliate, as appropriate.

          (c) Any Taxes for a Straddle Period with respect to HBI and/or its Affiliates (or entities in
which HBI and/or one of its Affiliates has an ownership interest) shall, for purposes of this
Agreement, be apportioned between Sara Lee and HBI based on the portion of the period ending on and
including the Distribution Date and the portion of the period beginning after the Distribution
Date, and each such portion of such period shall be deemed to be a taxable period (whether or not
it is in fact a taxable period). Any allocation of income or deductions required to determine any
Income Taxes for a Straddle Period shall be made by means of a closing of the books and records of
HBI and its Affiliates as of the close of business on the

9

 

Distribution Date; provided that (i) Sara Lee may elect to allocate Tax Items (other
than any extraordinary Tax Items) ratably in the month in which the Distribution occurs (and if
Sara Lee so elects, HBI shall so elect) as described in Treasury Regulation Section
1.1502-76(b)(2)(iii) and corresponding provisions of state, local, and foreign Tax laws; and (ii)
subject to (i), exemptions, allowances or deductions that are calculated on an annual basis, and
not on a closing of the books method, (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on and including the Distribution Date and
the period beginning after the Distribution Date based on the number of days for the portion of the
Straddle Period ending on and including the Distribution Date, on the one hand, and the number of
days for the portion of the Straddle Period beginning after the Distribution Date, on the other
hand.

          (d) Tax attributes determined on a consolidated or combined basis for taxable periods ending
before or including the Distribution Date shall be allocated to Sara Lee and its Affiliates, and
HBI and its Affiliates, in accordance with the Code and the Treasury Regulations (and any
applicable state, local, or foreign law or regulation). Sara Lee shall reasonably determine the
amounts and proper allocation of such attributes, and the Tax basis of the assets and liabilities
transferred to HBI in connection with the Restructuring and Distribution, as of the Distribution
Date; provided that HBI shall be entitled to participate in such determination. Sara Lee
and HBI agree to compute their Tax liabilities for taxable periods after the Distribution Date
consistent with that determination and allocation, and treat the Tax Assets and Tax Items as
reflected on any federal (or applicable state, local or foreign) Income Tax Return filed by the
parties as presumptively correct.

     2.5 Tax Refunds. Except as provided in Section 2.6:

          (a) Sara Lee shall be entitled to all refunds (including refunds paid by means of a credit
against other or future Tax liabilities) and credits with respect to any Tax for which Sara Lee is
responsible under Section 2.1. HBI shall be entitled to all refunds (including refunds paid by
means of a credit against other or future Tax liabilities) and credits with respect to any Tax for
which HBI is responsible under Section 2.1.

          (b) HBI and Sara Lee shall each forward to the other party, or reimburse such other party for,
any refunds received by the first party and due to such other party pursuant to this Section.
Where a refund is received in the form of a credit against other or future Tax liabilities,
reimbursement with respect to such refund shall be due in each case on the due date for payment of
the Tax against which such refund has been credited. All payments made pursuant to this Section
2.5 shall describe in reasonable detail the basis for the calculation of the amount being paid.

          (c) If one party reasonably so requests, the other party (at the first party’s expense) shall
file for and pursue any refund to which the first party is entitled under this Section;
provided that the other party need not pursue any refund on behalf of the first party
unless the first party provides the other party a certification by an appropriate officer of the
first party setting forth the first party’s belief (together with supporting analysis) that the Tax
treatment of the Tax Items on which the entitlement to such refund is based is more likely than not
correct, and is not a Tax Item arising from a Reportable Transaction.

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          (d) If the other party pays any amount to the first party under this Section 2.5 and, as a
result of a subsequent Final Determination, the first party is not entitled to some or all of such
amount, the other party shall notify the first party of the amount to be repaid to the other party,
and the first party shall then repay such amount to the other party, together with any interest,
fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating
thereto.

     2.6 Carrybacks.

          (a) Notwithstanding anything in this Agreement, HBI shall file (or cause to be filed) on a
timely basis any available election to waive the carryback of net operating losses, Tax credits or
other Tax Items by HBI or any Affiliate from a Post-Distribution Tax Period to a Straddle Period or
Pre-Distribution Tax Period. Such elections shall include, but not be limited to, the election
described in Treasury Regulation Section 1.1502-21T(b)(3)(ii)(B), and any analogous election under
state, local, or foreign Income Tax laws, to waive the carryback of net operating losses for
federal Income Tax purposes.

          (b) If, notwithstanding the provisions of Section 2.6(a), HBI is required to carryback losses
or credits, HBI shall be entitled to any refund of any Tax obtained by Sara Lee or a Sara Lee
Affiliate as a result of the carryback of losses or credits of HBI or its Affiliate from any
Post-Distribution Tax Period to any Pre-Distribution Tax Period. Such refund is limited to the net
amount received by Sara Lee or a Sara Lee Affiliate (by refund, offset against other Taxes, or
otherwise), net of any Tax Detriment incurred by Sara Lee or such Affiliate resulting from such
refund. Upon request by HBI, Sara Lee shall advise HBI of an estimate of any Tax Detriment Sara
Lee projects will be associated with any carryback of losses or credits of HBI or its Affiliates as
provided in this Section 2.6(b).

          (c) If HBI has a Tax Item that must be carried back to any Pre-Distribution Tax Period, HBI
shall notify in writing Sara Lee that such Tax Item must be carried back. Such notification shall
include a description in reasonable detail of the ground for the refund and the amount thereof, and
a certification by an appropriate officer of HBI setting forth HBI’s belief (together with
supporting analysis) that the Tax treatment of such Tax Item is more likely than not correct, and
is not a Tax Item arising from a Reportable Transaction.

          (d) If Sara Lee pays any amount to HBI under Section 2.6(b) and, as a result of a subsequent
Final Determination, HBI is not entitled to some or all of such amount, Sara Lee shall notify HBI
of the amount to be repaid to Sara Lee, and HBI shall then repay such amount to Sara Lee, together
with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing
Authority relating thereto.

     2.7 Audit Adjustments.

          (a) If as a result of any Final Determination there is an adjustment to any Tax Return
relating, in whole or in part, to Tax for which Sara Lee is responsible under Section 2.1, and if
such adjustment results in both (i) a Tax Detriment to Sara Lee or one or more of its Affiliates
for any taxable period and (ii) a Tax Benefit to HBI or one or more of its Affiliates for

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any Post-Distribution Tax Period (or portion of a Straddle Period allocable to HBI), then HBI
shall pay to Sara Lee an amount equal to the lesser of such Tax Benefit and such Tax Detriment.

          (b) If as a result of any Final Determination there is an adjustment to any Tax Return
relating, in whole or in part, to Tax for which HBI is responsible under Section 2.1, and if such
adjustment results in both (i) a Tax Detriment to HBI or one or more of its Affiliates for any
Post-Distribution Tax Period (or portion of a Straddle Period allocable to HBI) and (ii) a Tax
Benefit to Sara Lee or one or more of its Affiliates for any taxable period, then Sara Lee shall
pay to HBI an amount equal to the lesser of such Tax Benefit and such Tax Detriment.

          (c) Payments provided for under this Section 2.7 shall be made the later of (i) the date of
the Final Determination giving rise to the adjustment, and (ii) at the earlier of such time or
times that (A) a party realizes the Tax Benefit, whether by way of a reduction in Taxes, refund,
offset against other Taxes, or otherwise, or (B) such Tax Benefit causes an increase in a party’s
Deferred Tax Assets. If a payment to be made pursuant to this Section 2.7 has been deferred
because the party entitled to a Tax Benefit has not yet realized such Tax Benefit or such Tax
Benefit has not yet increased that party’s Deferred Tax Assets, then such party shall provide the
other party on an annual basis a certification by an appropriate officer of such first party that
such Tax Benefit has not yet been realized and that such Tax Benefit has not yet increased that
party’s Deferred Tax Assets, or a computation of the amount of such Tax Benefit realized in the
prior year or the amount such Tax Benefit increased that party’s Deferred Tax Assets, together with
information reasonably necessary to support the statements contained in the certification. Failure
of such party to provide such certification within 30 days after receiving written notice
requesting such notification from the other party shall be deemed conclusive evidence that the
entire amount of such Tax Benefit has been realized as of such date.

     2.8 Timing of Certain Payments.

          (a) Any payment required to be made pursuant to Article II shall be made by the party
obligated to make such payment (i) in the case of a refund of Tax, within fourteen (14) days after
receipt (whether by way of payment, credit, or offset against any payments due or otherwise) of
such refund or (ii) in the case of a payment of Tax, the later of (x) fourteen (14) days prior to
the due date for payment of such Tax and (y) the delivery of written demand for the payment
hereunder to the party obligated to make such payment hereunder.

          (b) All payments and demands for payment shall be accompanied by a calculation setting forth
in reasonable detail the basis for the amount paid or demanded.

     2.9 Treatment of Restricted Stock, Stock Options, and Deferred Compensation.

          (a) To the extent permitted by law, Sara Lee (or the appropriate Sara Lee Affiliate) shall
claim all Tax deductions arising by reason of the grant or vesting of Employee Restricted Stock,
and by reason of exercises of Employee Stock Options, at the time such Tax deduction can be
claimed, provided that such Employee Restricted Stock or Employee Stock Option is then held by a
Sara Lee Employee. To the extent permitted by law, HBI (or the appropriate HBI Affiliate) shall
claim all Tax deductions arising by reason of the grant or vesting of Employee Restricted Stock,
and by reason of exercises of Employee Stock Options, at the

12

 

time such Tax deduction can be claimed, provided that such Employee Restricted Stock or
Employee Stock Option is then held by an HBI Employee. To the extent permitted by law, HBI (or the
appropriate HBI Affiliate) shall claim all Tax deductions arising by reason of the payment (or
inclusion in income) of compensation the receipt of which was deferred by an HBI Employee prior to
the Distribution Date, the payment of which will occur after the Distribution Date, and the
obligation to make such payment is assumed by HBI in connection with the Restructuring and
Distribution.

          (b) If, pursuant to a Final Determination, all or any part of a Tax deduction claimed by a
party (or Affiliate thereof) pursuant to Section 2.9(a) is disallowed, then, to the extent
permitted by law, the other party (or Affiliate thereof) shall claim such Tax deduction. If such
other party (or Affiliate thereof) realizes a Tax Benefit from the claiming of such Tax deduction,
such other party (or Affiliate) shall pay the amount of such Tax Benefit (net of any Tax Detriment
suffered by the payor) to the party who originally claimed the Tax deduction.

          (c) The party (or Affiliate thereof) initially claiming the Tax deduction described in Section
2.9(a) shall withhold applicable Taxes and satisfy applicable Tax reporting obligations with
respect to the taxation of the Employee Restricted Stock, Employee Stock Options, or deferred
compensation with respect to which the Tax deduction is claimed. The parties to this Agreement
shall cooperate so as to permit the party initially claiming such deduction to discharge any
applicable Tax withholding and Tax reporting obligations.

     2.10 True-Up Payment for Deferred Taxes.

          (a) On or before the Distribution Date, Sara Lee shall provide to HBI a computation of the
estimated Deferred Taxes attributable to the United States and Canadian operations of HBI and its
Affiliates that would be included on the HBI Opening Balance Sheet (“Estimated Deferred
Taxes”). HBI shall have the right to participate in the computation of the Estimated Deferred
Taxes.

          (b) Within 180 days following the filing of the final Tax Return for the Sara Lee Consolidated
Group that includes the Distribution Date, Sara Lee shall deliver to HBI a computation of the
amount of Deferred Taxes attributable to the United States and Canadian operations of HBI and its
Affiliates that would be included on the HBI Opening Balance Sheet, as finally determined by Sara
Lee in consultation with its independent financial auditors (“Final Deferred Taxes”). HBI
shall have the right to participate in the computation of the Final Deferred Taxes.

          (c) If the substitution of the amount of Final Deferred Taxes for Estimated Deferred Taxes on
the HBI Opening Balance sheet causes a decrease in the net book value of the HBI Opening Balance
Sheet, then Sara Lee shall pay HBI the amount of such decrease as provided in Section 2.8(a). If
the substitution of the amount of Final Deferred Taxes for Estimated Deferred Taxes on the HBI
Opening Balance sheet causes an increase in the net book value of the HBI Opening Balance Sheet,
then HBI shall pay Sara Lee the amount of such increase as provided in Section 2.8(a).

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          (d) No further payments with respect to Deferred Taxes shall be made beyond that provided for
in this Section 2.10.

     2.11 Successor Employer Status. Sara Lee and HBI shall, to the extent permitted by
law, (i) treat HBI and its Affiliates (as applicable) as a “successor employer” and Sara Lee and
its Affiliates (as applicable) as a “predecessor,” within the meaning of sections 3121(a)(1) and
3306(b)(1) of the Code, with respect to employees of the HBI Business that were employed by HBI and
its Affiliates starting on January 1, 2006 for purposes of Taxes imposed under the United States
Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act and (ii)
cooperate with each other to avoid the filing of more than one IRS Form W-2 with respect to each
such employee for the calendar year in which the Distribution occurs.

     2.12 Subpart F Income.

          (a) Notwithstanding anything to the contrary in this Agreement, if (i) HBI or any of its
Affiliates receive a distribution of cash or other property from any CFC during any Straddle Period
or Post-Distribution Tax Period of that CFC, (ii) some or all of that distribution is excluded from
the gross income of the HBI Group by operation of Section 959(a) of the Code (any amount so
excluded called the “959 Dividend Exclusion”), and (iii) some or all of the 959 Dividend
Exclusion occurred because the earnings and profits of the CFC supporting the distribution, if any,
were allocable (within the meaning of Section 959(c) of the Code) to earnings and profits that (a)
occurred during a Pre-Distribution Tax Period of that CFC, and (b) were included in the gross
income of the Sara Lee Consolidated Group by reason of its ownership of that CFC’s stock on the
last day of that Pre-Distribution Tax Period (any amounts so allocable called the “Subpart F
Pre-Distribution Inclusion”), then HBI shall pay an amount to Sara Lee equal to the lesser of
the Tax Detriment to Sara Lee of the Subpart F Pre-Distribution Inclusion and the Tax Benefit to
HBI of the 959 Dividend Exclusion.

          (b) Within 30 days after a Straddle Period Tax Return is filed for any HBI Affiliate that is a
CFC, Sara Lee shall provide to HBI a schedule (which may be amended from time to time) containing a
good faith estimate of the total amount of earnings and profits of that CFC that has been included
in the gross income of a United States shareholder (as that term is defined in Section 951(b) of
the Code) under Section 951(a) of the Code as of the last day of that Straddle Period, but has yet
to be allocated (within the meaning of Section 959(c) of the Code) to any distributed amounts.

ARTICLE III

TAX RETURNS AND INFORMATION EXCHANGE

     3.1 Tax Return Preparation Responsibility; Payment of Taxes Shown Thereon.

          (a) Sara Lee shall prepare and file all (i) Income Tax Returns for the Sara Lee Consolidated
Group and Sara Lee Group, and all Combined Returns in any Combined Jurisdiction, (ii) all other
United States federal, state, and local Income Tax Returns for Sara Lee and its Affiliates
(including HBI and its Affiliates) for Pre-Distribution Tax Periods, (iii)

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Canadian federal, provincial, and local Income Tax Returns for Sara Lee and its Affiliates
(including HBI and its Affiliates) for Pre-Distribution Tax Periods, (iv) Puerto Rican local Income
Tax Returns for Sara Lee and its Affiliates (including HBI and its Affiliates) for Pre-Distribution
Tax Periods, (v) Income Tax Returns for Sara Lee and its Affiliates for Post-Distribution Tax
Periods, and (vi) Tax Returns pertaining to Other Taxes for which Sara Lee is responsible pursuant
to Section 2.1.

          (b) HBI shall prepare and file all (i) Income Tax Returns for the HBI Group, (ii) Income Tax
Returns for HBI and its Affiliates for Pre-Distribution Tax Periods for all jurisdictions other
than those for which Sara Lee is responsible for preparation and filing under Section 3.1(a), (iii)
Income Tax Returns for HBI and its Affiliates for Post-Distribution Tax Periods, and (iv) Tax
Returns pertaining to Other Taxes for which HBI is responsible pursuant to Section 2.1. HBI shall
not file (or allow any HBI Affiliate to file) any amended Income Tax Return or refund claim for any
Pre-Distribution Tax Period or for any Straddle Period.

          (c) HBI shall prepare and file all Income Tax Returns for HBI and its Affiliates for Straddle
Periods of such companies; provided, however, that Sara Lee shall prepare and file
any Income Tax Returns for HBI and its Affiliates for Straddle Periods of such companies if Sara
Lee provides notice to HBI within 45 days after the end of such Straddle Period that Sara Lee is
exercising its right to prepare such Tax Return.

          (d) Sara Lee and its Affiliates shall be responsible for the remitting of payment of any Taxes
shown on a Tax Return for which it is responsible for the preparation and filing thereof pursuant
to Section 3.1(a), or has assumed the responsibility for the preparation and filing of pursuant to
Section 3.1(c). HBI and its Affiliates shall be responsible for the payment of any Taxes shown on
a Tax Return for which it is responsible for the preparation and filing thereof pursuant to Section
3.1(b) or 3.1(c).

          (e) If Sara Lee remits a Tax payment pursuant to Section 3.1(d), but HBI is responsible
pursuant to Article II for all or a portion of the Tax shown on the applicable Tax Return, then HBI
shall pay to Sara Lee that portion of the Tax shown on such Tax Return for which HBI is responsible
pursuant to Article II. If HBI remits a Tax payment pursuant to Section 3.1(d), but Sara Lee is
responsible pursuant to Article II for all or a portion of the Tax shown on the applicable Tax
Return, then Sara Lee shall pay to HBI that portion of the Tax shown on such Tax Return for which
Sara Lee is responsible pursuant to Article II. Nothing in this Section 3.1(e) shall affect the
allocation of responsibility for Taxes as set forth in Article II.

     3.2 Review of Tax Returns. Sara Lee, with respect to those Income Tax Returns
prepared by Sara Lee described in Sections 3.1(a)(ii), 3.1(a)(iii), and 3.1(a)(iv), HBI, with
respect to those Income Tax Returns prepared by HBI described in Section 3.1(b)(ii), and the party
responsible for preparing and filing Straddle Period Income Tax Returns pursuant to Section 3.1(c)
(in each case, the “Filing Party”, and such other party the “Non-filing Party”)
shall prepare and file such Tax Returns in a manner consistent with past Tax reporting practices
with respect to the HBI Business. The Filing Party shall provide the Non-Filing Party with a draft
of each Income Tax Return with respect to a Straddle Period at least 15 days prior to the due date
for filing thereof, if such draft shows Tax for which the Non-Filing Party is responsible pursuant
to this Agreement. The Non-Filing Party shall have the right to review and approve (which

15

 

approval shall not be unreasonably withheld) each such Income Tax Return within 7 days
following its receipt thereof. The Filing Party and Non-Filing Party shall attempt in good faith
mutually to resolve any disagreements regarding such Income Tax Returns prior to the due date for
filing thereof; provided, that the failure to resolve all disagreements prior to such date
shall not relieve the Filing Party of its obligation to file (or cause to be filed) any such Income
Tax Return. If the draft of any such Tax Return does not show Tax for which the Non-filing Party
is responsible pursuant to this Agreement, the Non-filing Party shall have the right to comment on
any such Tax Return within the 7 day period following receipt thereof; provided that the
Filing Party shall not be obligated to prepare the Tax Return in accordance with such comments.

     3.3
Certain Items Related to Tax Return Preparation.

          (a) Unless otherwise required by a Taxing Authority, the parties hereby agree to prepare and
file all Tax Returns, and to take all other actions, in a manner consistent with this Agreement and
the Separation Agreement and, to the extent not inconsistent with this Agreement, the Separation
Agreement or applicable law, any Tax Ruling, Ruling Documents, Tax Opinion, or Representation
Letter. All Tax Returns shall be filed on a timely basis (taking into account applicable
extensions) by the party responsible for filing such Tax Returns under this Agreement;
provided, that if a Tax Return is to be signed by an officer of a company different from
the party responsible for filing such Tax Return, each party hereto shall have (or cause its
Affiliate to have) the appropriate officer sign such Tax Return promptly after presentation thereof
for signature.

          (b) Except as otherwise specifically provided for in this Agreement, Sara Lee shall have the
exclusive right, in its reasonable discretion, with respect to any Tax Return for which it is (or
has elected to become) responsible for the filing thereof pursuant to this Agreement, to determine
(i) the manner in which such Tax Return shall be prepared and filed, including the accounting
methods, positions, conventions and principles of taxation to be used and the manner in which any
Tax Item shall be reported; (ii) whether any extensions may be requested; (iii) the election(s)
that will be made by Sara Lee, any Sara Lee Affiliate, HBI, or any HBI Affiliate on such Tax
Return; (iv) whether any amended Tax Return(s) shall be filed; (v) whether any claim(s) for refund
shall be made; (vi) whether any refund shall be paid by way of refund or credited against any
liability for the related Tax; and (vii) whether to retain outside firms to prepare or review such
Tax Returns; provided, that Sara Lee shall prepare all Tax Returns for which it has (or has
assumed) filing responsibility, to the extent such Tax Returns reflect activities of the HBI
Business, in a manner consistent with past Tax reporting practices with respect to the HBI
Business, except as required by law or regulation.

          (c) Within 90 days after filing the U.S. federal Income Tax Return for the Sara Lee
Consolidated Group for the tax year that includes the Distribution Date, at the written request of
HBI, Sara Lee shall notify HBI of the Tax attributes associated with HBI and each of its
Affiliates, and the Tax bases of the assets and liabilities, transferred to HBI in connection with
the Restructuring and Distribution. Any changes in such Tax attributes or Tax bases arising
thereafter shall be communicated by Sara Lee to HBI within 90 days after such change is made or
there is a Final Determination of such change.

16

 

          (d) Sara Lee and HBI agree to take (or refrain from taking) any action reasonably requested by the other that would reasonably be expected
to result in a Tax Benefit or avoid a Tax Detriment to the other, provided that such action does not result
in any additional cost not fully compensated for by the requesting party. The parties hereby acknowledge that the preceding sentence
is not intended to limit, and therefore shall not apply to, the rights
of the parties with respect to matters otherwise covered by this Agreement.

          (e) Nothing in this Agreement
shall be construed as a guarantee or representation of the existence or amount of any loss, credit, carryforward, basis or other Tax Item or Tax Asset, whether past, present or future, of Sara Lee, HBI, or their
respective Affiliates.

     3.4
Tax Information Exchanges and Tax Services.

          (a) In connection with each Tax Return required under this Agreement to be filed by Sara Lee
after the date hereof, HBI shall provide Sara Lee, no later than 90 days after the Distribution
Date (provided, however, in the case of any taxable period ending on June 30, 2006,
no later than September 15, 2006), a Tax Package for the purpose of preparing such Tax Return. HBI
shall timely furnish to Sara Lee such additional information and documents as Sara Lee may
reasonably request. The parties acknowledge that such information may include materials regarding
accounting, accounting records, income and expense, costs and cost production, background, research
and development, comparables, marketing, suppliers and customers, and other information regarding
the HBI Business related to the Tax treatment of such business. Upon request by Sara Lee, an
appropriate officer of HBI shall provide written certification that, to such officer’s best
knowledge and belief, all information provided pursuant to this Section 3.4 is accurate and
complete in all material respects. HBI shall also make available employees and officers of HBI and
its Affiliates as Sara Lee may reasonably request in connection with such Tax Return preparation by
Sara Lee. HBI shall be responsible for the cost (without reimbursement from Sara Lee) of
furnishing to Sara Lee the Tax Package, additional information, documents and employees and
officers provided for in this Section 3.4(a). HBI shall provide the relevant information contained
in the Tax Package in the format required by the IRS (or analogous state, local, or foreign agency)
for electronic filing.

          (b) If HBI fails to provide any information required by Section 3.4(a) within the time period
specified, Sara Lee (i) shall be permitted, upon 48 hours’ notice, to use its own employees or
agents to view or obtain the materials contemplated in Section 3.4(a) from HBI’s facilities, and
(ii) may file the applicable Tax Return based on the information available to Sara Lee at the time
such Tax Return is due. HBI and its Affiliates shall (i) reimburse Sara Lee for any internal or
incremental costs incurred by Sara Lee in having its employees or agents view or obtain such
material, and (ii) be responsible for and shall indemnify and hold harmless Sara Lee and its
Affiliates from Taxes or other costs imposed on Sara Lee or any of its Affiliates, to the extent
resulting from HBI’s failure to provide such information in a timely manner.

ARTICLE IV

TAX TREATMENT OF THE DISTRIBUTION

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     4.1 Representations. 

          (a) Ruling Documents. HBI hereby represents and warrants that (i) it has examined the
Ruling Documents (including, without limitation, the representations to the extent that they relate
to the plans, proposals, intentions, and policies of HBI, the HBI Affiliates, or the HBI Business),
and (ii) to the extent in reference to HBI, the HBI Affiliates, or the HBI Business, the facts
presented and the representations made therein are true, correct, and complete.

          (b) Tax-Free Status. HBI hereby represents and warrants that it has no plan or
intention of taking any action, or failing or omitting to take any action, or knows of any
circumstance, that could reasonably be expected to (i) cause the Restructuring and/or the
Distribution not to have Tax-Free Status or (ii) cause any representation or factual statement made
in this Agreement, the Separation Agreement and the other Ancillary Agreements, the Tax Ruling, the
Tax Opinion, or the HBI Representation Letter to be untrue in a manner that would have an adverse
effect on the Tax-Free Status of the Restructuring and/or the Distribution.

          (c) Plan or Series of Related Transactions. HBI hereby represents and warrants that,
to the knowledge of HBI and the management of HBI, neither the Restructuring nor the Distribution
are part of a plan (or series of related transactions) pursuant to which a Person will acquire
stock representing a fifty-percent or greater interest (within the meaning of Sections 355(d) and
(e) of the Code) in HBI or any successor to HBI.

     4.2 Covenants.

          (a) Actions Consistent with Representations and Covenants. HBI shall not (and shall
not permit any of its Affiliates or grant or permit any of its Affiliates to grant implicit or
explicit permission to any other person to) take any action, and HBI shall not (and shall not
permit any of its Affiliates or grant or permit any of its Affiliates to grant implicit or explicit
permission to any other person to) fail to take any action, where such action or failure to act
would be inconsistent with or cause to be untrue any material, information, covenant, or
representation in this Agreement, the Separation Agreement and the other Ancillary Agreements, the
Tax Ruling, the Ruling Documents (including, without limitation, the representations to the extent
that they relate to the plans, proposals, intentions, and policies of HBI, the HBI Affiliates, or
the HBI Business), the Tax Opinion, or the HBI Representation Letter.

          (b) Preservation of Tax-Free Status; HBI Business. HBI shall not take any action
(including, but not limited to, any cessation, transfer or disposition of all or any portion of the
HBI Business; payment of extraordinary dividends to shareholders; and acquisitions or issuances of
stock) or permit any HBI Affiliate to take any such action, and HBI shall not fail to take any such
action or permit any HBI Affiliate to fail to take any such action where such action or failure to
act would have an adverse effect on the Tax-Free Status of the Restructuring and/or the
Distribution.

          (c) Sales, Issuances and Redemptions of Equity Securities. Until the first day after
the Restriction Period, neither HBI nor any HBI Affiliate shall, or shall agree to, sell or
otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity

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Securities of HBI or any HBI Affiliate; provided, however, that (i) HBI may
repurchase such Equity Securities to the extent that such repurchases meet the requirements of
Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to its modification by Revenue
Procedure 2003-48), (ii) HBI may issue such Equity Securities to the extent such issuances satisfy
Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services)
or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury
Regulation Section 1.355-7(d), and (iii) HBI may issue Equity Securities provided that such
issuance does not, individually or when aggregated with other issuances and any transactions
occurring in the four-year period beginning on the date which is two years before the Distribution
Date, and with any other transaction which is part of a plan or series of related transactions
(within the meaning of Section 355(e) of the Code) that includes the Distribution (other than
issuances of Equity Securities described in clause (ii) above), result in one or more Persons
acquiring, directly or indirectly, (as determined under Section 355(e) of the Code, taking into
account applicable constructive ownership rules) stock representing a 35% or greater interest, by
vote or value, in HBI (or any successor thereto).

          (d) Tender Offers; Other Business Transactions. Until the first day after the
Restriction Period, neither HBI nor any HBI Affiliate shall (i) solicit any Person to make a tender
offer for, or otherwise acquire or sell, the Equity Securities of HBI, (ii) participate in or
support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the
Equity Securities of HBI, or (iii) approve or otherwise permit any proposed business combination or
merger or any transaction which, in the case of clauses (i), (ii) or (iii), individually or when
aggregated with any other transactions occurring within the four-year period beginning on the date
which is two years before the Distribution Date, and with any other transaction which is part of a
plan or series of related transactions (within the meaning of Section 355(e) of the Code) that
includes the Distribution (other than issuances of Equity Securities described in Section
4.2(c)(ii) above), results in one or more Persons acquiring, directly or indirectly, (as determined
under Section 355(e) of the Code, taking into account applicable constructive ownership rules)
stock representing a 35% or greater interest, by vote or value, in HBI (or any successor thereto).
In addition, neither HBI nor any HBI Affiliate shall at any time, whether before or subsequent to
the expiration of the Restriction Period, engage in any action described in clauses (i), (ii) or
(iii) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in
part) prior to the first anniversary of the Distribution, even if at the time of the Distribution
or thereafter such action is subject to various conditions.

          (e) Dispositions of Assets. Until the first day after the Restriction Period, neither
HBI nor any HBI Affiliate shall, or shall agree to, sell, transfer, or otherwise dispose of or
agree to dispose of assets (including, for such purpose, any shares of capital stock of a
subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that,
in the aggregate, constitute more than 50% of the gross assets of HBI, nor shall HBI or any HBI
Affiliate sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for
such purpose, any shares of capital stock of a subsidiary and any transaction treated for tax
purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 50% of
the consolidated gross assets of the HBI Group. The foregoing sentence shall not apply to sales,
transfers, or dispositions of assets in the ordinary course of business. The percentages of gross
assets or consolidated gross assets of HBI or the HBI Group, as the case may be, sold, transferred,
or otherwise disposed of, shall be based on the fair market value of the gross assets

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of HBI and the members of the HBI Group as of the Distribution Date. Notwithstanding the
foregoing, until the first day after the Restriction Period HBI shall not (and shall not agree to)
cease, transfer, or dispose of all or any portion of the Socks Business (as that term is defined in
the Ruling Request) other than sales, transfers, or dispositions of assets in the ordinary course
of business. For purposes of this Section 4.2(e), a merger of HBI or one of its subsidiaries with
and into any Person (other than HBI or one of its subsidiaries) shall constitute a disposition of
all of the assets of HBI or such subsidiary.

          (f) Liquidations, Mergers, Reorganizations. Until the first day after the Restriction
Period, neither HBI nor its subsidiaries shall, or shall agree to, voluntarily dissolve or
liquidate or engage in any merger (except for a Cash Acquisition Merger), consolidation or other
reorganization; provided, however, mergers of direct or indirect wholly-owned
subsidiaries of HBI solely with and into HBI or with other direct or indirect wholly-owned
subsidiaries of HBI, and liquidations of HBI’s subsidiaries, are not subject to this Section 4.2(f)
to the extent not inconsistent with the Tax-Free Status of the Restructuring and the Distribution;
provided further that nothing in this Section 4.2(f) shall prohibit any merger involving
HBI or an HBI Affiliate not otherwise prohibited by Section 4.2(d).

          (g) Gain Recognition Agreements. HBI shall not take any action (including, but not
limited to, the sale or disposition of any stock, securities, or other assets), or permit any HBI
Affiliate to take any such action, and HBI shall not fail to take any such action or permit any HBI
Affiliate to fail to take any such action that would cause Sara Lee or any Sara Lee Affiliate to
recognize gain under any Gain Recognition Agreement.

          (h) Changes to Voting Rights. Until the first day after the Restriction Period,
neither HBI nor any HBI Affiliate shall amend its certificate of incorporation (or other
organizational documents), or take any other action, whether through a stockholder vote or
otherwise, affecting the relative voting rights of its separate classes of stock (including,
without limitation, through the conversion of one class of stock into another class of stock), but
only to the extent such change, if treated as an issuance of Equity Securities, would be prohibited
by Section 4.2(c).

          (i) Permitted Transactions. Notwithstanding the restrictions otherwise imposed by
Sections 4.2(c) through 4.2(h), during the Restriction Period, HBI may (i) approve, participate in,
support or otherwise permit a proposed business combination or transaction that would otherwise
breach the covenant set forth in Section 4.2(d), (ii) sell or otherwise dispose of the assets of
the HBI Group in a transaction that would otherwise breach the covenant set forth in Section
4.2(e), (iii) merge HBI or any HBI Affiliate with another entity without regard to which party is
the surviving entity in a transaction that would otherwise breach the covenant set forth in Section
4.2(f), (iv) issue Equity Securities of HBI or any HBI Affiliate in a transaction that would
otherwise breach the covenant set forth in Section 4.2(c), or (v) take any action affecting the
relative voting rights of the separate classes of stock of HBI or any HBI Affiliate that would
otherwise breach the covenant set forth in Section 4.2(h), if and only if such transaction or
action would not violate Section 4.2(a) or Section 4.2(b) and Section 4.2(j) is satisfied.

          (j) Supplemental Ruling; Tax Opinion. Prior to entering into any agreement
contemplating a transaction or action described in clauses (i), (ii), (iii), (iv) or (v) of Section

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4.2(i) and prior to consummating any such transaction or action: (A) HBI shall request that
Sara Lee obtain a Supplemental Ruling in accordance with Section 4.3 of this Agreement to the
effect that such transaction will not affect the Tax-Free Status of the Restructuring and the
Distribution and Sara Lee shall have received such a Supplemental Ruling in form and substance
satisfactory to Sara Lee in its sole and absolute discretion or (B) HBI shall provide Sara Lee with
an unqualified Tax Opinion from a nationally recognized independent tax advisor in form and
substance satisfactory to Sara Lee in its sole and absolute discretion (and in determining whether
an opinion is satisfactory, Sara Lee may consider, among other factors, the appropriateness of any
underlying assumptions and management’s representations if used as a basis for the opinion)
providing that such transaction or action will not affect the Tax-Free Status of the Restructuring
and the Distribution.

     4.3 Supplemental Rulings and Restrictions on HBI. 

          (a) Supplemental Rulings at Sara Lee Request. Sara Lee shall have the right to obtain
a Supplemental Ruling in its sole and absolute discretion. If Sara Lee determines to obtain a
Supplemental Ruling, HBI shall (and shall cause each HBI Affiliate to) cooperate with Sara Lee and
take any and all actions reasonably requested by Sara Lee in connection with obtaining the
Supplemental Ruling (including, without limitation, by making any representation or covenant or
providing any materials or information requested by any Tax Authority; provided that HBI
shall not be required to make (or cause any HBI Affiliate to make) any representation or covenant
that is inconsistent with historical facts or as to future matters or events over which it has no
control). Sara Lee shall reimburse HBI for all reasonable costs and expenses incurred by HBI or
its Affiliates in obtaining a Supplemental Ruling requested by Sara Lee within ten (10) Business
Days after receiving an invoice from HBI therefor. In connection with obtaining a Supplemental
Ruling pursuant to this Section 4.3(a), (A) Sara Lee shall keep HBI informed in a timely manner of
all material actions taken or proposed to be taken by Sara Lee in connection therewith; (B) Sara
Lee shall (1) reasonably in advance of the submission of any Supplemental Ruling Request, provide
HBI with a draft copy thereof, (2) reasonably consider HBI’s comments on such draft copy, and (3)
provide HBI with a final copy of any Supplemental Ruling Request; and (C) Sara Lee shall provide
HBI with notice reasonably in advance of, and HBI shall have the right to attend, any formally
scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that
relate to such Supplemental Ruling.

          (b) Supplemental Rulings at HBI’s Request. Sara Lee agrees that at the reasonable
request of HBI pursuant to Section 4.2(j), Sara Lee shall (and shall cause each Sara Lee Affiliate
to) cooperate with HBI and use its reasonable best efforts to seek to obtain, as expeditiously as
possible, a Supplemental Ruling from the IRS for the purpose of confirming compliance on the part
of HBI or an HBI Affiliate with its obligations under Section 4.2 of this Agreement. Further, in
no event shall Sara Lee be required to file any Supplemental Ruling Request under this Section
4.3(a) unless HBI represents that (A) it has reviewed the Supplemental Ruling Documents and (B) all
information and representations, if any, relating to HBI or any HBI Affiliate, contained in the
Supplemental Ruling Documents are true, correct and complete in all material respects. HBI shall
reimburse Sara Lee for all reasonable costs and expenses incurred by Sara Lee or its Affiliates in
obtaining a Supplemental Ruling requested by HBI within ten (10) Business Days after receiving an
invoice from Sara Lee therefor. HBI hereby agrees that Sara Lee shall have sole and exclusive
control over the process of obtaining a

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Supplemental Ruling, and that only Sara Lee shall apply for a Supplemental Ruling. In
connection with obtaining a Supplemental Ruling pursuant to this Section 4.3(b), (A) Sara Lee shall
keep HBI informed in a timely manner of all material actions taken or proposed to be taken by Sara
Lee in connection therewith; (B) Sara Lee shall (1) reasonably in advance of the submission of any
Supplemental Ruling Request, provide HBI with a draft copy thereof, (2) reasonably consider HBI’s
comments on such draft copy, and (3) provide HBI with a final copy of any Supplemental Ruling
Request; and (C) Sara Lee shall provide HBI with notice reasonably in advance of, and HBI shall
have the right to attend, any formally scheduled meetings with any Tax Authority (subject to the
approval of the Tax Authority) that relate to such Supplemental Ruling.

          (c) Prohibition on HBI. HBI hereby agrees that neither it nor any HBI Affiliate shall
seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise)
concerning the Restructuring or the Distribution (or the impact of any transaction on the
Restructuring or the Distribution).

     4.4 Liability for Undertaking Certain Actions. Notwithstanding anything in this
Agreement to the contrary, HBI shall be responsible for, and shall indemnify and hold harmless Sara
Lee and each of its Affiliates from and against any liability for Taxes that are attributable to or
result from (i) any act or failure to act by HBI or any HBI Affiliate, which action or failure to
act breaches any of the representations or covenants contained in Article IV hereof (without regard
to the exceptions or provisos set forth in such provisions), expressly including, for this purpose,
any Permitted Transactions and any act or failure to act that breaches Section 4.2(a) or 4.2(b),
regardless of whether such act or failure to act is permitted by Section 4.2(c) through 4.2(h), and
(ii) Tax counsel withdrawing all or any portion of the Tax Opinion or any Tax Authority withdrawing
all or any portion of a private letter ruling issued to Sara Lee in connection with the
Restructuring and/or the Distribution because of a breach by HBI or any HBI Affiliate of a
representation made in this Agreement (or made in connection with the Tax Opinion or any
Supplemental Ruling contemplated by Section 4.3(e)).

     4.5 Cooperation. 

          (a) Without limiting the prohibition set forth in Section 4.3(c), until the first day after
the Restriction Period, HBI shall furnish Sara Lee with a copy of any ruling request that HBI or
any HBI Affiliate may file with the IRS or any other Tax Authority and any opinion received that in
any respect relates to, or otherwise reasonably could be expected to have any effect on, the
Tax-Free Status of any of the Restructuring and the Distribution.

          (b) Sara Lee shall reasonably cooperate with HBI in connection with any request by HBI for an
unqualified Tax Opinion pursuant to Section 4.2(j) and shall use its reasonable best efforts to
assist HBI in obtaining an unqualified Tax Opinion pursuant to Section 4.2(j).

          (c) Until the first day after the Restriction Period, HBI shall provide adequate advance
notice to Sara Lee in accordance with the terms of Section 4.5(d) of any action described in
Sections 4.2(a) through 4.2(h) within a period of time sufficient to enable Sara Lee to seek
injunctive relief pursuant to Section 4.6 in a court of competent jurisdiction.

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          (d) Each notice required by Section 4.5(c) shall set forth the terms and conditions of any
such proposed transaction, including, without limitation, (i) the nature of any related action
proposed to be taken by the board of directors of HBI, (ii) the approximate number of Equity
Securities (and their voting and economic rights) of HBI or any HBI Affiliate (if any) proposed to
be sold or otherwise issued, (iii) the approximate value of HBI’s assets (or assets of any HBI
Affiliate) proposed to be transferred, and (iv) the proposed timetable for such transaction, all
with sufficient particularity to enable Sara Lee to seek such injunctive relief. Promptly, but in
any event within 30 days, after Sara Lee receives such written notice from HBI, Sara Lee shall
notify HBI in writing of Sara Lee’s decision to seek injunctive relief pursuant to Section 4.6.

          (e) From and after the date Sara Lee first requests a Supplemental Ruling pursuant to Section
4.3 until the first day after the two-year anniversary of such date that Sara Lee receives such
Supplemental Ruling (pursuant to Section 4.3(a) or 4.3(b)), neither HBI nor any HBI Affiliate shall
take (or refrain from taking) any action to the extent that such action or inaction would have
caused a representation given by HBI in connection with any such request for a Supplemental Ruling
to have been untrue as of the relevant representation date, had HBI or any HBI Affiliate intended
to take (or refrain from taking) such action on the relevant representation date.

     4.6 Enforcement. The parties hereto acknowledge that irreparable harm would occur in
the event that any of the provisions of this Article IV were not performed in accordance with their
specific terms or were otherwise breached. The parties hereto agree that, in order to preserve the
Tax-Free Status of the Restructuring and the Distribution, injunctive relief is appropriate to
prevent any violation of the foregoing covenants; provided, however, that
injunctive relief shall not be the exclusive legal or equitable remedy for any such violation.

ARTICLE V

COOPERATION AND EXCHANGE OF INFORMATION

     5.1 Cooperation.

          (a) Notwithstanding anything to the contrary in the Separation Agreement and the Ancillary
Agreements, Sara Lee and HBI shall cooperate (and shall cause each of their respective Affiliates
to cooperate) fully at such time and to the extent reasonably requested by the other party in
connection with the preparation and filing of any Tax Return or the conduct of any audit, dispute,
proceeding, suit, or Tax action concerning any issues or any other matter contemplated hereunder.
Such cooperation shall include, without limitation:

               i) Compliance with the provisions of Section 3.4;

               ii) The retention and provision on demand of books, records, documentation, information, or
other materials relating to any Tax Return, or any supplemental information necessary or reasonably
helpful to support any position taken therein, until the later of (x) the expiration of the
applicable statute of limitation (giving effect to any extension, waiver, or mitigation thereof)
and (y) in the event any claim has been made under this Agreement for

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which such information is relevant, the occurrence of a Final Determination with respect to
such claim;

               iii) Unless otherwise agreed to by the parties, the retention and provision on demand, of any
books, records, documentation, information, or other materials necessary or reasonably helpful in
sustaining any position (including, without limitation, any transfer pricing position) taken with
any Taxing Authority including, without limitation, materials regarding accounting, income and
expense, costs and cost production, background, research and development, comparables, marketing,
suppliers and customers, and other information regarding the HBI Business related to the Tax
treatment of such business;

               iv) The retention and provision of additional information with respect to an explanation of
the manner in which any Tax Return or Tax Package was prepared and filed, and any additional
information reasonably helpful in explaining the materials provided under clauses (ii) and (iii) of
this Section 5.1 until the other party provides written notice that such material may be destroyed;

               v) The execution of any document that may be necessary or reasonably helpful in connection
with the filing of any Tax Return by Sara Lee or its Affiliates or HBI or its Affiliates, or in
connection with any audit, proceeding, refund claim, suit, or action for any such Tax Return;

               vi) The use of the parties’ reasonable best efforts to obtain any documentation from a
governmental authority or a third party that may be necessary or helpful in connection with the
foregoing; and

               vii) The retention in good working order, and maintenance, of all computer systems, computer
language, computer code, or any other computer or electronic data, or records necessary (including,
without limitation, the Lawson system) for the retrieval and classification of information that
could be requested pursuant to this Section 5.1 or Section 3.4 until the other party provides
written notice that such retention and maintenance is not longer required.

Each party shall make its employees and facilities available on a mutually convenient basis,
without cost to the other party, to facilitate such cooperation. In addition, upon 48 hours’
notice, each party shall have the option to use its own employees or agents to view or obtain the
materials contemplated in this Section 5.1 from the other party’s facilities.

          (b) Any materials contemplated under Section 5.1(a) and Section 3.4 shall be provided whether
or not such material is or may be confidential or proprietary. If, however, the providing party
determines in good faith that any materials are confidential or proprietary, the providing party
may require the requesting party to enter into a confidentiality agreement with respect to such
materials, not inconsistent with the purposes for which the party made the request for information.
Each party shall be deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it takes to preserve
confidentially for its own similar information.

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          (c) Any computer or electronic records or data required to be maintained pursuant to this
Section 5.1 must be kept in the accordance with federal, state, local, and foreign laws including,
without limitation, the IRS electronic filing laws.

          (d) Sara Lee shall advise HBI with respect to any Final Determination of Tax adjustments
relating to the Sara Lee Consolidated Group if such Final Determination of Tax adjustments may
affect any Tax attribute of any member of the HBI Group after the Distribution Date.

          (e) Notwithstanding anything to the contrary in this Agreement, if a party materially fails to
comply with any of its obligations set forth in this Section 5.1, upon reasonable request and
notice by the other party, the non-performing party shall (i) reimburse the other party for any
internal or incremental costs incurred by such other party in having its employees or agents view
or obtain such material, and (ii) to the extent such failure results in the imposition of
additional Taxes be liable in full for such additional Taxes.

     5.2 Contest Provisions.

          (a) The party responsible for the Taxes under Section 2.1 (the “Responsible Party”),
shall, with respect to a Tax Return, have the exclusive right to control, contest, and represent
the interests of Sara Lee, HBI and their respective Affiliates in any Tax controversy, including
(without limitation) any audit, protest, or claim for refund to the Appeals Division of the IRS,
competent authority proceeding and litigation in Tax Court or any other court of competent
jurisdiction (a “Tax Controversy”) related to such Tax Return. Subject to Section
5.2(d)(ii) hereof, such exclusive right shall include the right, in the Responsible Party’s
reasonable discretion, to resolve, settle or agree to any deficiency, claim or adjustment proposed,
asserted or assessed in connection with or as a result of any such Tax Controversy. Such control
rights shall extend to any matter pertaining to the management and control of a Tax Controversy,
including execution of waivers, choice of forum, scheduling of conferences and the resolution of
any Tax Item. Any costs incurred in the handling or contesting of a Tax Controversy shall be borne
by the Responsible Party.

          (b) Notwithstanding anything to the contrary in Section 5.2(a), Sara Lee shall be the
Responsible Party with respect to (i) all Tax Returns for the Sara Lee Consolidated Group and Sara
Lee Group, and (ii) all Straddle Period Tax Returns and Tax Returns for a Combined Jurisdiction
which include a tax period for which Sara Lee is responsible for the Taxes under Section 2.1.

          (c) Sara Lee shall use reasonable efforts to keep HBI advised as to the status of Tax audits
and litigation involving any issue that relates to a Tax of HBI or any HBI Affiliate or that could
give rise to a liability of HBI or any HBI Affiliate under this Agreement, and HBI shall use
reasonable efforts to keep Sara Lee advised as to the status of Tax audits and litigation involving
any issue that related to a Tax of Sara Lee or any Sara Lee Affiliate or could give rise to a
liability of Sara Lee or any Sara Lee Affiliate under this Agreement (in each case, a
“Liability Issue”). Sara Lee and HBI shall promptly furnish each other copies of any
inquiries or requests for information from any Taxing Authority or any other administrative,
judicial, or other governmental authority concerning any Liability Issue pertaining to the other
party. Without

25

 

limiting the foregoing, Sara Lee and HBI, as the case may be, shall each promptly furnish to
the other within 30 days of receipt a copy of the relevant section of the revenue agent’s report or
similar report, notice of proposed adjustment, or notice of deficiency received by Sara Lee or its
Affiliate or by HBI or its Affiliate, as the case may be, relating to any Liability Issue or any
adjustment referred to in this Section 5.2(c).

          (d) Notwithstanding Section 5.2(a),

               i) With respect to any Tax Controversy, to the extent a party may be responsible for Taxes
under Section 2.1 with respect to a given Tax Return or to the extent resolution of the Tax
Controversy could give rise to a material Tax Detriment or loss of a material Tax Benefit to such
party, but such party is not the Responsible Party, then the Responsible Party shall provide such
other party (at such other party’s expense) reasonable participation rights with respect to so much
of the Tax Controversy as relates to Taxes for which such other party may be responsible; and

               ii) A Responsible Party shall not settle or otherwise voluntarily resolve or disclose any Tax
Controversy which could give rise to a material Tax Detriment or loss of a material Tax Benefit to
the other party without such other party’s consent, not to be unreasonably withheld.

     5.3 Information for Shareholders. Sara Lee shall provide each shareholder that
receives stock of HBI pursuant to the Distribution with the information necessary for such
shareholder to comply with the requirements of Section 355 of the Code and the Treasury regulations
thereunder with respect to statements that such shareholders must file with their federal income
tax returns demonstrating the applicability of Section 355 to the Distribution.

ARTICLE VI

DISPUTE RESOLUTION

     6.1 Amicable Resolution. The parties desire that friendly collaboration will develop
between them. Accordingly, they will try to resolve in an amicable manner all disputes and
disagreements connected with their respective rights and obligations under this Agreement in
accordance with Section 6.12 of the Separation Agreement.

     6.2 Arbitration. In the event of any dispute, controversy, or claim arising under or
in connection with this Agreement (including any dispute, controversy, or claim relating to the
breach, termination, or validity thereof), the parties shall submit any such dispute, controversy,
or claim to binding arbitration in accordance with Section 6.13 of the Separation Agreement,
provided, however, that this Section 6.2 shall not apply to any (a) suits seeking
injunctive relief or specific performance, or (b) dispute, controversy, or claim arising under
Article IV of this Agreement (including any dispute, controversy, or claim relating to the breach,
termination, or validity thereof).

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ARTICLE VII

MISCELLANEOUS

     7.1 Effectiveness. This Agreement shall become effective on the Distribution Date.

     7.2 Indemnification for Inaccurate, Incomplete or Untimely Information.

          (a) HBI and each HBI Affiliate shall indemnify and hold harmless Sara Lee and each Sara Lee
Affiliate from and against any liability, cost or expenses, including, without limitation, any
fine, penalty, interest, charge or accountant’s fee, arising out of fraudulent or negligent
information, workpapers, documents and other items prepared by HBI or any HBI Affiliate used in the
preparation of any Tax Return or claim for refund filed by Sara Lee or any Sara Lee Affiliate for
any period during which HBI or any HBI Affiliate was or has been a member of the Sara Lee
Consolidated Group, or arising out of the untimely provision of information required to provided
under this Agreement.

          (b) Sara Lee and each Sara Lee Affiliate shall indemnify and hold harmless HBI and each HBI
Affiliate from and against any liability, cost or expense, including, without limitation, any fine,
penalty, interest, charge or accountant’s fee, arising out of fraudulent or negligent preparation
of any Tax Return or claim for refund filed by Sara Lee or a Sara Lee Affiliate for any period
during which HBI or any member of the HBI Group was or has been a member of the Sara Lee
Consolidated Group, or arising out of the untimely provision of information required to provided
under this Agreement.

     7.3 Breach. Sara Lee shall indemnify and hold harmless HBI and each HBI Affiliate,
and HBI shall indemnify and hold harmless Sara Lee and each Sara Lee Affiliate, from and against
any payment required to be made under this Agreement as a result of the breach by Sara Lee (or Sara
Lee Affiliate) or HBI (or HBI Affiliate), as the case may be, of any obligation under this
Agreement.

     7.4 Disclaimers.

          (a) Sara Lee disclaims all knowledge of or responsibility for the content or accuracy of any
separate returns or filings made by or on behalf of HBI or any HBI Affiliate for any taxable period
during which such company was not a member of the Sara Lee Consolidated Group.

          (b) HBI disclaims all knowledge of or responsibility for the content or accuracy of any Tax
Returns or filings made by or on behalf of the Sara Lee Consolidated Group or any member thereof
for any period except to the extent such Tax Returns or filings reflect items of the HBI Business.

     7.5 Payments. In the event that one party (the “Owing Party”) is required to
make a payment to another party (the “Owed Party”) pursuant to this Agreement, then to the
extent not otherwise provided for in this Agreement, such payment shall be made according to this
Section 7.5.

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          (a) All payments shall be made to the Owed Party or to the appropriate Taxing Authority as
specified by the Owed Party within the time prescribed for the payment in this Agreement, or if no
period is prescribed, within 20 days after delivery of written notice of payment owing together
with a computation of the amounts due.

          (b) Unless otherwise required by any Final Determination, the parties agree that any payment
made by one party to another party (other than payments of interest and payment of After Tax
Amounts pursuant to Section 7.5(d)) pursuant to this Agreement shall be treated for all Tax and
financial accounting purposes as payments with respect to stock (dividend distributions or capital
contributions, as the case may be) made immediately prior to the Distribution.

          (c) All actions required to be taken by any party under this Agreement shall be performed
within the time prescribed for performance in this Agreement, or if no period is prescribed, such
actions shall be performed promptly.

          (d) If, pursuant to a Final Determination, it is determined that the receipt or accrual of any
payment made under this Agreement (other than payments of interest) is subject to any Tax, the
party making such payment shall be liable for (i) the After Tax Amount with respect to such
payment, and (ii) interest at the rate described in 7.5(e) on the amount of such tax from the date
such Tax is due through the date of payment of such After Tax Amount. A party making a demand for
payment pursuant to this Agreement and for a payment of an After Tax Amount with respect to such
payment shall separately specify and compute such After Tax Amount. However, a party may choose
not to specify an After Tax Amount in a demand for payment pursuant to this Agreement without
thereby being deemed to have waived its right subsequently to demand an After Tax Amount with
respect to such payment.

          (e) Any payment that is required to be made pursuant to this Agreement (i) by HBI (or an HBI
Affiliate) to Sara Lee (or a Sara Lee Affiliate) or (ii) by Sara Lee (or a Sara Lee Affiliate) to
HBI (or an HBI Affiliate), that is not made on or prior to the date that such payment is required
to be made pursuant to this Agreement shall thereafter bear interest at the rate established for
underpayments pursuant to Section 6621(a) (2) of the Code.

          (f) Any payment that is required to be made pursuant to this Agreement (i) by HBI (or an HBI
Affiliate) to Sara Lee (or a Sara Lee Affiliate) or (ii) by Sara Lee (or a Sara Lee Affiliate) to
HBI (or an HBI Affiliate), shall be made by wire transfer of immediately available funds,
provided that if the amount of any payment is less than $10,000, such payment may be made
in a form other than a wire transfer.

     7.6 Changes in Law. Any reference to a provision of the Code, Treasury Regulations,
or a law of another jurisdiction shall include a reference to any applicable successor provision or
law. If, due to any change in applicable law or regulations or their interpretation by any court
of law or other governing body having jurisdiction subsequent to the date specified in the preamble
to this Agreement, performance of any provision of this Agreement or any transaction contemplated
hereby shall become impracticable or impossible, the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.

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     7.7 Notices. All notices, demands and other communications given under this Agreement
must be in writing and must be either personally delivered, telecopied (and confirmed by telecopy
answer back), mailed by first class mail (postage prepaid and return receipt requested), or sent by
reputable overnight courier service (charges prepaid) to the recipient at the address or telecopy
number indicated below or such other address or telecopy number or to the attention of such other
Person as the recipient party shall have specified by prior written notice to the sending party.
Any notice, demand or other communication under this Agreement shall be deemed to have been given
when so personally delivered or so telecopied and confirmed (if telecopied before 5:00 p.m. Eastern
Standard Time on a business day, and otherwise on the next business day), or if sent, one business
day after deposit with an overnight courier, or, if mailed, five business days after deposit in the
U.S. mail.

If to Sara Lee, at:

Sara Lee Corporation

Three First National Plaza

70 West Madison

Chicago, Illinois 60602-4260

Facsimile Number: 312-558-4956

Attention: Senior Vice-President – Taxes

If to HBI, at:

Hanesbrands Inc.

1000 East Hanes Mill Road

Winston-Salem, North Carolina 27105

Facsimile Number: 336-519-7441

Attention: Senior Vice-President – Taxes

     7.8 Entire Agreement; Incorporation of Schedules and Exhibits. This Agreement, the
Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached hereto
and thereto, constitute the entire agreement among the parties with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof. All schedules and
exhibits referred to herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein.

     7.9 Authority. Each of the parties hereto represents, on behalf of itself and its
affiliates, to the other that (a) it has the corporate power and authority to execute, deliver, and
perform this Agreement, (b) the execution, delivery, and performance of this Agreement by it have
been duly authorized by all necessary corporation or other action, (c) it has duly and validly
executed and delivered this Agreement, and (d) this Agreement is a legal, valid, and binding
obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights generally
and general equity principles.

29

 

     7.10 Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Illinois, without giving effect to any choice of law or conflict of law
provision (whether of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.

     7.11 Successors and Assigns.

          (a) Neither this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties, and any instrument purporting to
make such an assignment without prior written consent shall be void; provided,
however, either party may assign this Agreement to a successor entity in conjunction with a
merger effected solely for the purpose of changing such party’s state of incorporation (but subject
to any other applicable requirements of this Agreement, the Separation Agreement, and the Ancillary
Agreements). Subject to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors and permitted
assigns.

          (b) Notwithstanding Section 7.11(a), if it is contemplated that an HBI Affiliate may cease to
be such an Affiliate as a result of a transfer of its stock or other ownership interests to a third
party in exchange for consideration in an amount approximately equal to the fair market value of
the stock or other ownership interests transferred (other than consideration consisting of the
redemption of equity interests in the entity which is transferring the stock or ownership interests
of such Affiliate), and such consideration is not distributed to HBI shareholders, then HBI may
request in writing no later than thirty (30) days prior to such cessation that Sara Lee execute a
release of such HBI Affiliate from its obligations under this Agreement effective as of such
transfer, and Sara Lee shall promptly execute such release; provided that (i) HBI shall
have confirmed in writing the obligations of HBI and its remaining Affiliates with respect to their
own obligations and those of the departing HBI Affiliate and shall succeed to the rights of such
HBI Affiliate under this Agreement; and (ii) such departing HBI Affiliate shall have executed a
release of any rights it may have against Sara Lee or any Sara Lee Affiliate by reason of this
Agreement. A correlative process shall apply if it is contemplated that a Sara Lee Affiliate may
cease to be such an Affiliate under similar circumstances.

     7.12 Joint and Several Liability. HBI and each HBI Affiliate shall have joint and
several liability for any obligation of HBI or an HBI Affiliate arising pursuant to this Agreement.
Sara Lee and each Sara Lee Affiliate shall have joint and several liability for any obligation of
Sara Lee or a Sara Lee Affiliate arising pursuant to this Agreement.

     7.13 Parties in Interest. Nothing in this Agreement, express or implied, is intended
to confer on any Person other than the parties, their respective Affiliates, and their respective
successors and permitted assigns, any rights or remedies of any nature whatsoever under or by
virtue of this Agreement.

     7.14 Legal Enforceability; Waiver of Default.

30

 

          (a) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability
without invalidating the remaining provisions. Any prohibition or unenforceability of any
provision of this Agreement in any jurisdiction shall not invalidate or render unenforceable the
provision in any other jurisdiction.

          (b) Waiver by either party of any default by the other party of any provision of this
Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor
shall it prejudice the rights of the other party.

     7.15 Action by Affiliates. To the extent HBI is obligated to take any action under
this Agreement, and such action is more properly taken by an HBI Affiliate, then HBI shall cause
such Affiliate to take such action. To the extent HBI is obligated to refrain from taking any
action under this Agreement, HBI shall cause each of its Affiliates to refrain from taking such
action. Sara Lee shall be subject to similar rules regarding actions to be taken, or to be
refrained from being taken, by it and its Affiliates.

     7.16 Expenses. Unless otherwise expressly provided in this Agreement, each party
shall bear any and all expenses that arise from their respective obligations under this Agreement.

     7.17 Confidentiality. 

          (a) Each party shall hold and cause its consultants and advisors to hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information written or oral concerning the other parties
hereto furnished it by such other party or its representatives pursuant to this Agreement (except
to the extent that such information can be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party, or (c) later
lawfully acquired from other sources by the party to which it was furnished), and each party shall
not release or disclose such information to any other person, except its auditors, attorneys,
financial advisors, bankers and other consultants and advisors who shall be advised of the
provisions of this Section 7.17. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if its exercises the same
care as it takes to preserve confidentiality for its own similar information.

          (b) Notwithstanding Section 7.17(a), the provisions regarding confidentiality set forth in
Section 5.1 shall govern information required to be provided pursuant to Sections 3.4 and 5.1.

     7.18 Amendments and Waiver. This Agreement may be amended and any provision of this
Agreement may be waived, provided that any such amendment or waiver shall be binding upon a party
only if such amendment or waiver is set forth in a writing executed by such party. No course of
dealing between or among any Persons having any interest in this Agreement shall be deemed
effective to modify, amend or discharge any part of this Agreement or any rights or obligations of
any party hereto under or by reason of this Agreement.

     7.19 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure
in exercising any right, power or remedy hereunder shall affect or operate as a waiver

31

 

thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance
of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any
other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive
of any rights or remedies that any party hereto would otherwise have. Any waiver, permit, consent
or approval of any kind or character of any breach or default under this Agreement or any such
waiver of any provision of this Agreement must satisfy the conditions set forth in Section 7.18 and
shall be effective only to the extent in such writing specifically set forth.

     7.20 Limitation on Damages. Each party irrevocably waives, and no party shall be
entitled to seek or receive, consequential, special, indirect or incidental damages (including
without limitation damages for loss of profits) or punitive damages, regardless of how such damages
were caused and regardless of the theory of liability; provided that the foregoing shall
not limit each party’s indemnification obligations set forth in the Separation Agreement and the
Ancillary Agreements

     7.21 Severability. The parties agree that (a) the provisions of this Agreement shall
be severable in the event that for any reason whatsoever any of the provisions hereof are invalid,
void or otherwise unenforceable, (b) any such invalid, void or otherwise unenforceable provisions
shall be replaced by other provisions which are as similar as possible in terms to such invalid,
void or otherwise unenforceable provisions but are valid and enforceable, and (c) the remaining
provisions shall remain valid and enforceable to the fullest extent permitted by applicable law.

     7.22 SUBMISSION TO JURISDICTION. SUBJECT TO SECTION 6.2, EACH OF THE PARTIES
IRREVOCABLY SUBMITS (FOR ITSELF AND IN RESPECT OF ITS PROPERTY) TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN CHICAGO, ILLINOIS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT; PROVIDED THAT THE PARTIES MAY BRING ACTIONS OR
PROCEEDINGS AGAINST EACH OTHER IN OTHER JURISDICTIONS TO THE EXTENT NECESSARY TO IMPLEAD THE OTHER
PARTY IN ANY ACTION COMMENCED BY A THIRD PARTY THAT IS RELATED TO THIS AGREEMENT. EACH PARTY ALSO
AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
OTHER COURT OR IN OTHER JURISDICTIONS UNLESS SUCH ACTIONS OR PROCEEDINGS ARE NECESSARY TO IMPLEAD
THE OTHER PARTY IN ANY ACTION COMMENCED BY A THIRD PARTY THAT IS RELATED TO THIS AGREEMENT. EACH
OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY
OTHER PARTY WITH RESPECT THERETO. ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR
DELIVERING A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER
PROVIDED FOR THE GIVING OF NOTICES IN SECTION 7.7 ABOVE. NOTHING IN THIS SECTION 7.22, HOWEVER,
SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW

32

 

OR AT EQUITY. EACH PARTY AGREES THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY ACTION OR
PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW OR AT EQUITY.

     7.23 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE
PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL),
EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR
ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

     7.24 Construction. The descriptive headings herein are inserted for convenience of
reference only and are not intended to be a substantive part of or to affect the meaning or
interpretation of this Agreement. Whenever required by the context, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any
agreement, document, or instrument means such agreement, document, or instrument as amended or
otherwise modified from time to time in accordance with the terms thereof, and if applicable
hereof. The use of the words “include” or “including” in this Agreement shall be by way of example
rather than by limitation. The use of the words “or,” “either” or “any” shall not be exclusive.
The parties have participated jointly in the negotiation and drafting of this Agreement, the
Separation Agreement, and the Ancillary Agreements. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the
parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement. The parties agree that
prior drafts of this Agreement shall be deemed not to provide any evidence as to the meaning of any
provision hereof or the intent of the parties hereto with respect hereto.

     7.25 Counterparts. This Agreement may be executed in multiple counterparts (any one
of which need not contain the signatures of more than one party), each of which shall be deemed to
be an original but all of which taken together shall constitute one and the same agreement.

     7.26 Delivery by Facsimile and Other Electronic Means. This Agreement, and any
amendments hereto, to the extent signed and delivered by means of a facsimile machine or other
electronic transmission, shall be treated in all manner and respects as an original contract and
shall be considered to have the same binding legal effects as if it were the original signed
version thereof delivered in person. At the request of any party, each other party shall
re-execute original forms thereof and deliver them to all other parties. No party shall raise the
use of a facsimile machine or other electronic means to deliver a signature or the fact that any
signature was transmitted or communicated through the use of facsimile machine or other electronic
means as a defense to the formation of a contract and each such party forever waives any such
defense.

     7.27 Consent by Affiliates. Each of Sara Lee and HBI shall cause each of its
respective Affiliates (including any entity that becomes an Affiliate after the date hereof) to
consent to, and be bound by, the terms, conditions, covenants, and provisions of this Agreement.

33

 

     IN WITNESS WHEREOF, each of the Parties has caused this Tax Sharing Agreement to be executed
on its behalf by its officers hereunto duly authorized on the day and year first above written.

	 	 	 	 	 
	 	 	SARA LEE CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Marilyn K. Gerdes
	 

	 	 	 	 
	 

	 	 	 	Marilyn K. Gerdes

Vice President, Taxes
	 
	 	 	 	 
	 	 	HANESBRANDS INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Richard A. Noll
	 

	 	 	 	 
	 

	 	 	 	Richard A. Noll

Chief Executive Officer

 

 

EXHIBIT A

          The following examples illustrate the proper method of applying the provisions contained in
Section 2.7 of the Agreement.

Example 1

          In TYE 6/30/04, Sara Lee purchases Asset X for $100. In that same year, Sara Lee expenses the
cost of Asset X and recognizes a $100 deduction which is fully utilized by Sara Lee to offset Sara
Lee income. The corporate income tax rate in effect is 35%.

          On 8/14/06, during TYE 6/30/07, Sara Lee contributes Asset X to HBI with a tax basis of $0.
HBI is spun off from Sara Lee on 08/14/06.

          In TYE 6/30/08, HBI sells Asset X for $100, realizes $100 of income, and pays $35 in federal
income taxes.

          In TYE 6/30/09, as a result of an audit of Sara Lee’s TYE 6/30/04 Tax Return, Sara Lee’s $100
deduction with respect to Asset X is denied in full. As a result, Sara Lee has $100 of taxable
income in TYE 6/30/04, and is required to pay $35 in federal income tax, plus interest of $10.

          Because of this adjustment, HBI’s tax basis in Asset X is $100 instead of $0. HBI may amend
its TYE 6/30/08 Tax Return to reflect a $100 tax basis with respect to Asset X. Since HBI will
have no taxable gain with respect to its sale of Asset X, HBI is entitled to a tax refund of $35.

          Under Section 2.7 of the Agreement, HBI is required to pay $35 to Sara Lee (i.e., the lesser
of the Tax Detriment to Sara Lee ($35 + $10) and the Tax Benefit to HBI ($35) resulting from the
audit adjustment) at the time specified in Section 2.7.

Example 2

          The facts are the same as in Example 1, except that the corporate income tax is reduced to 15%
in TYE 6/30/08. In this scenario, HBI is required to pay $15 to Sara Lee as a result of the audit
adjustment (i.e., the lesser of the Tax Detriment to Sara Lee ($45), and the Tax Benefit to HBI
($15) resulting from the audit adjustment). Had the corporate income tax instead been increased to
50% in TYE 6/30/08, HBI would be required to pay $45 to Sara Lee (i.e., the lesser of the Tax
Detriment to Sara Lee ($45), and the Tax Benefit to HBI ($50) resulting from the audit adjustment).

Example 3

          The facts are the same as in Example 1, except that in TYE 6/30/08, HBI incurs net operating
losses which exceed the amount of HBI’s taxable income for that year. As a result, HBI’s amended
TYE 6/30/08 Tax Return reflecting the reversal of $100 of income does not entitle HBI to a tax
refund, but does increase HBI’s tax carryforwards. In TYE 6/30/09 HBI’s

 

 

financial statements
reflect an increase in its Deferred Tax Assets of $35. Under Section 2.7 of
the Agreement, HBI is required to pay $35 to Sara Lee at the time specified in Section 2.7EX-10.23

 

Employee Matters Agreement

between

SARA LEE CORPORATION

and

HANESBRANDS INC.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I    GENERAL PRINCIPLES	 	 	1	 
	     Section 1.1
	 	Assumption of HBI Liabilities	 	 	1	 
	     Section 1.2
	 	Establishment of HBI Plans	 	 	1	 
	     Section 1.3
	 	HBI Under No Obligation to Maintain Plans	 	 	2	 
	     Section 1.4
	 	HBI’s Participation in Sara Lee Plans	 	 	2	 
	     Section 1.5
	 	Terms of Participation by HBI Employees in HBI Plans	 	 	3	 
	     Section 1.6
	 	Foreign Plans	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE II    RETIREMENT PLANS	 	 	4	 
	     Section 2.1
	 	401(k) Plan	 	 	4	 
	     Section 2.2
	 	Pension Plan	 	 	5	 
	     Section 2.3
	 	Puerto Rico Plans	 	 	6	 
	     Section 2.4
	 	Canadian Pension Plans	 	 	6	 
	     Section 2.5
	 	Other HBI Retirement Plans	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE III    NON-QUALIFIED PLANS	 	 	7	 
	     Section 3.1
	 	Deferred Compensation Plan	 	 	7	 
	     Section 3.2
	 	SERP	 	 	7	 
	     Section 3.3
	 	Other Non-Qualified Plans	 	 	7	 
	     Section 3.4
	 	Administrative Services	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE IV    HEALTH AND WELFARE PLANS	 	 	8	 
	     Section 4.1
	 	Health Plans as of the Distribution Date	 	 	8	 
	     Section 4.2
	 	Section 125 Plan	 	 	9	 
	     Section 4.3
	 	Severance Plans	 	 	9	 
	     Section 4.4
	 	Disability Plans	 	 	10	 
	     Section 4.5
	 	Group Insurance Plan	 	 	10	 
	     Section 4.6
	 	Executive Plans	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE V    EQUITY AND OTHER COMPENSATION	 	 	10	 
	     Section 5.1
	 	Sara Lee Performance Shares	 	 	10	 
	     Section 5.2
	 	Sara Lee Restricted Stock Units	 	 	10	 
	     Section 5.3
	 	Sara Lee Options	 	 	11	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	     Section 5.4
	 	Sara Lee Stock Purchase Plan	 	 	11	 
	     Section 5.5
	 	Administrative Services	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE VI      FRINGE AND OTHER BENEFITS	 	 	11	 
	     Section 6.1
	 	Fringe Benefit Plans	 	 	11	 
	     Section 6.2
	 	Paid Time Off	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE VII      ADMINISTRATIVE PROVISIONS	 	 	12	 
	     Section 7.1
	 	Intercompany Transitional Services	 	 	12	 
	     Section 7.2
	 	Payment of Liabilities, Plan Expenses and Related Matters	 	 	12	 
	     Section 7.3
	 	Plan and Participant Information	 	 	14	 
	     Section 7.4
	 	Reporting and Disclosure Communications to Participants	 	 	14	 
	     Section 7.5
	 	Employee Identification Numbers	 	 	14	 
	     Section 7.6
	 	Beneficiary Designation	 	 	14	 
	     Section 7.7
	 	Requests for IRS and DOL Opinions	 	 	15	 
	     Section 7.8
	 	Fiduciary Matters	 	 	15	 
	     Section 7.9
	 	Consent of Third Parties	 	 	15	 
	     Section 7.10
	 	Financial Reporting Cooperation	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE VIII      EMPLOYMENT-RELATED MATTERS	 	 	15	 
	     Section 8.1
	 	Transfer of Employment to HBI	 	 	15	 
	     Section 8.2
	 	Terms of HBI Employment	 	 	15	 
	     Section 8.3
	 	Collective Bargaining Agreements	 	 	16	 
	     Section 8.4
	 	Post-Distribution Payroll Discrepancies	 	 	16	 
	     Section 8.5
	 	Employment of Employees with U.S. Work Visas	 	 	16	 
	     Section 8.6
	 	Confidentiality and Proprietary Information	 	 	16	 
	     Section 8.7
	 	Personnel Records	 	 	16	 
	     Section 8.8
	 	Medical Records	 	 	16	 
	     Section 8.9
	 	Unemployment Insurance Program	 	 	17	 
	     Section 8.10
	 	Non-Termination of Employment; No Third-Party Beneficiaries	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE IX      GENERAL PROVISIONS	 	 	17	 
	     Section 9.1
	 	Entire Agreement; Incorporation Of Schedules And Exhibits	 	 	17	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	     Section 9.2
	 	Amendments And Waivers	 	 	17	 
	     Section 9.3
	 	No Implied Waivers; Cumulative Remedies; Writing Required	 	 	18	 
	     Section 9.4
	 	Parties In Interest	 	 	18	 
	     Section 9.5
	 	Assignment; Binding Agreement	 	 	18	 
	     Section 9.6
	 	Notices	 	 	18	 
	     Section 9.7
	 	Severability	 	 	19	 
	     Section 9.8
	 	Governing Law	 	 	19	 
	     Section 9.9
	 	Submission To Jurisdiction	 	 	19	 
	     Section 9.10
	 	Waiver Of Jury Trial	 	 	20	 
	     Section 9.11
	 	Amicable Resolution	 	 	20	 
	     Section 9.12
	 	Arbitration	 	 	20	 
	     Section 9.13
	 	Construction	 	 	20	 
	     Section 9.14
	 	Counterparts	 	 	21	 
	     Section 9.15
	 	Limitation On Damages	 	 	21	 
	     Section 9.16
	 	Delivery By Facsimile Or Other Electronic Means	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE X    DEFINITIONS	 	 	21	 
	     Section 10.1
	 	401(k) Plan	 	 	21	 
	     Section 10.2
	 	Affiliated Company	 	 	22	 
	     Section 10.3
	 	Agreement	 	 	22	 
	     Section 10.4
	 	Ancillary Agreements	 	 	22	 
	     Section 10.5
	 	Assets	 	 	22	 
	     Section 10.6
	 	Branded Apparel Business	 	 	22	 
	     Section 10.7
	 	Canadian Designated Pension Plan	 	 	22	 
	     Section 10.8
	 	Canadian Main Pension Plan	 	 	22	 
	     Section 10.9
	 	Canadian Pension Plans	 	 	22	 
	     Section 10.10
	 	Canadian SERP	 	 	22	 
	     Section 10.11
	 	CMS	 	 	22	 
	     Section 10.12
	 	COBRA	 	 	22	 
	     Section 10.13
	 	Code	 	 	23	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	     Section 10.14
	 	Dedicated Employee Agreement	 	 	23	 
	     Section 10.15
	 	Deferred Compensation Plan	 	 	23	 
	     Section 10.16
	 	Disability Plans	 	 	23	 
	     Section 10.17
	 	Distribution	 	 	23	 
	     Section 10.18
	 	Distribution Date	 	 	23	 
	     Section 10.19
	 	DOL	 	 	23	 
	     Section 10.20
	 	ERISA	 	 	23	 
	     Section 10.21
	 	Executive Plans	 	 	23	 
	     Section 10.22
	 	FMLA	 	 	23	 
	     Section 10.23
	 	Foreign Plan	 	 	24	 
	     Section 10.24
	 	Fringe Benefit Plans	 	 	24	 
	     Section 10.25
	 	FSA Plan	 	 	24	 
	     Section 10.26
	 	Group Insurance Plan	 	 	24	 
	     Section 10.27
	 	HBI	 	 	24	 
	     Section 10.28
	 	HBI Employee	 	 	24	 
	     Section 10.29
	 	HBI Group	 	 	24	 
	     Section 10.30
	 	HBI Plans	 	 	25	 
	     Section 10.31
	 	HBI Terminated Employee	 	 	25	 
	     Section 10.32
	 	Health and Welfare Plans	 	 	25	 
	     Section 10.33
	 	Health Plans	 	 	25	 
	     Section 10.34
	 	HIPAA	 	 	25	 
	     Section 10.35
	 	HMO	 	 	25	 
	     Section 10.36
	 	IRS	 	 	25	 
	     Section 10.37
	 	Liabilities	 	 	25	 
	     Section 10.38
	 	Master Transition Services Agreement	 	 	25	 
	     Section 10.39
	 	Option	 	 	26	 
	     Section 10.40
	 	Participating Company	 	 	26	 
	     Section 10.41
	 	Parties	 	 	26	 
	     Section 10.42
	 	Pension Plan	 	 	26	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	     Section 10.43
	 	Performance Shares	 	 	26	 
	     Section 10.44
	 	Person	 	 	26	 
	     Section 10.45
	 	Plan	 	 	26	 
	     Section 10.46
	 	Puerto Rico Plans	 	 	26	 
	     Section 10.47
	 	QDRO	 	 	26	 
	     Section 10.48
	 	QMCSO	 	 	27	 
	     Section 10.49
	 	Restricted Stock Unit	 	 	27	 
	     Section 10.50
	 	Sara Lee	 	 	27	 
	     Section 10.51
	 	Sara Lee Employee	 	 	27	 
	     Section 10.52
	 	Sara Lee Group	 	 	27	 
	     Section 10.53
	 	Sara Lee Plans	 	 	27	 
	     Section 10.54
	 	Sara Lee Terminated Employee	 	 	27	 
	     Section 10.55
	 	Section 125 Plan	 	 	27	 
	     Section 10.56
	 	Separation	 	 	28	 
	     Section 10.57
	 	Separation Agreement	 	 	28	 
	     Section 10.58
	 	Separation Date	 	 	28	 
	     Section 10.59
	 	SERP	 	 	28	 
	     Section 10.60
	 	Severance Plans	 	 	28	 
	     Section 10.61
	 	Stock Plan	 	 	28	 
	     Section 10.62
	 	Subsidiary	 	 	28	 
	     Section 10.63
	 	Unemployment Insurance Program	 	 	28	 

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EMPLOYEE MATTERS AGREEMENT

     This Employee Matters Agreement (this “Agreement”) is dated as of August 31, 2006 between Sara
Lee Corporation, a Maryland corporation (“Sara Lee”), and Hanesbrands Inc., a Maryland corporation
(“HBI”). Capitalized terms used herein (other than the formal names of Sara Lee Plans (as defined
below) and related trusts of Sara Lee) and not otherwise defined herein, shall have the meanings
ascribed to them in Article X below.

     WHEREAS, the board of directors of Sara Lee has determined that it is appropriate and
desirable to separate Sara Lee’s branded apparel business from its other businesses; and

     WHEREAS, in order to effectuate the foregoing, Sara Lee and HBI have entered into a Master
Separation Agreement dated as of August 31, 2006 (as amended, modified and/or restated from time to
time, the “Separation Agreement”), which provides, among other things, subject to the terms and
conditions set forth therein, for the Separation and the Distribution, and the execution and
delivery of certain other agreements in order to facilitate and provide for the foregoing; and

     WHEREAS, the Parties desire to set forth certain agreements regarding employee benefit plans,
programs and arrangements, and certain employment matters as described herein.

     NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
herein, and subject to and on the terms and conditions herein set forth, the Parties hereby agree
as follows:

ARTICLE I

GENERAL PRINCIPLES

     Section 1.1 Assumption of HBI Liabilities. Except as specified otherwise in this Agreement or
as mutually agreed upon by HBI and Sara Lee from time to time and subject to the provisions of the
Dedicated Employee Agreement, effective as of the Distribution Date, HBI and the HBI Plans hereby
assume and agree to pay, perform, fulfill and discharge, in accordance with their respective terms,
with respect to HBI Employees all Liabilities relating to, arising out of, or resulting from
future, present or former employment with the Branded Apparel Business (including Liabilities
relating to, arising out of, or resulting from Sara Lee Plans and HBI Plans); (b) all Liabilities
relating to, arising out of, or resulting from any other actual or alleged employment relationship
with the HBI Group; and (c) all other Liabilities relating to, arising out of, or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by the HBI Group, or a
HBI Plan pursuant to this Agreement.

     Section 1.2 Establishment of HBI Plans.

     (a) Health and Welfare Plans and Fringe Benefit Plans. As further provided in Article
IV below, effective as of or before the Distribution Date, HBI shall adopt the HBI Health
and Welfare Plans and the HBI Fringe Benefit Plans.

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     (b) 401(k) Plan. As further provided in Section 2.1 below, effective as of or before
the Distribution Date, HBI shall adopt the HBI 401(k) Plan. Any service requirements
contained in the HBI 401(k) Plan with respect to eligibility to participate generally or
eligibility to share in any employer contributions thereunder shall be waived for HBI
Employees who, immediately prior to the Distribution Date, were eligible to participate in
the Sara Lee 401(k) Plan.

     (c) Pension Plan. As further provided in Section 2.2, effective as of or before the
Distribution Date, HBI shall adopt the HBI Pension Plan solely to receive the transfer of
Assets and Liabilities described in Section 2.2.

     (d) Equity and Incentive Compensation. Effective as of or before the Distribution
Date, HBI shall adopt (i) the Hanesbrands Inc. Annual Incentive Plan, (ii) the HBI Stock
Plan, and (iii) the Hanesbrands Inc. Performance Based Annual Incentive Plan. HBI shall
also establish the Hanesbrands Inc. Employee Stock Purchase Plan on or before the
Distribution Date, although employees may not be permitted to enroll in such plan for a
period of time following the Distribution Date.

     (e) Nonqualified Plans. As further provided in Article III, effective as of or before
the Distribution Date, HBI shall adopt (i) the HBI Deferred Compensation Plan, (ii) the HBI
Deferred Compensation Plan for Non-Employee Directors and (iii) the HBI SERP.

     (f) Assistance by Sara Lee. If HBI requests , Sara Lee shall use its commercially
reasonable best efforts for and on behalf of HBI to assist HBI in establishing the HBI Plans
set forth herein and in procuring such contracts (including, but not limited to, trust
agreements, insurance policies, service agreements, HMO agreements, vendor arrangements,
funding arrangements, and investment arrangements), either via Sara Lee’s existing
relationships under the Sara Lee Plans or with suitable new parties, as is necessary or
desirable for purposes of establishing and administering the HBI Plans.

     Section 1.3 HBI Under No Obligation to Maintain Plans. Except as specified otherwise in this
Agreement, nothing in this Agreement shall preclude HBI, at any time after the Distribution Date,
from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any
respect any HBI Plan, any benefit under any HBI Plan or any trust, insurance policy or funding
vehicle related to any HBI Plans, or any employment or other service arrangement with HBI
Employees, independent contractors or vendors (to the extent permitted by law).

     Section 1.4 HBI’s Participation in Sara Lee Plans.

     (a) Participation in Sara Lee Plans. Except as specified otherwise in this Agreement,
HBI shall, until the Distribution Date, continue to be a Participating

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Company in the Sara Lee Plans to the extent that HBI has not established a
corresponding Plan.

     (b) Sara Lee’s General Obligations as Plan Sponsor. To the extent that HBI is a
Participating Company in any Sara Lee Plan, Sara Lee shall continue to administer, or cause
to be administered, in accordance with its terms and applicable law, such Sara Lee Plan, and
shall have the sole and absolute discretion and authority to interpret the Sara Lee Plan, as
set forth therein. Effective as of the Distribution Date or such earlier date as HBI
establishes a corresponding Plan (as specified in Section 1.2 or otherwise in this
Agreement), HBI shall automatically cease to be a Participating Company in the corresponding
Sara Lee Plan.

     (c) HBI’s General Obligations as Participating Company. HBI shall perform, with
respect to its participation in the Sara Lee Plans, the duties of a Participating Company as
set forth in each such Plan or any procedures adopted pursuant thereto, including (without
limitation): (i) assistance in the administration of claims, to the extent requested by the
claims administrator of the applicable Sara Lee Plan; (ii) full cooperation with Sara Lee
Plan auditors, benefit personnel and benefit vendors; (iii) preservation of the
confidentiality of all financial arrangements Sara Lee has or may have with any vendors,
claims administrators, trustees, service providers or any other entity or individual with
whom Sara Lee has entered into an agreement relating to the Sara Lee Plans; and (iv)
preservation of the confidentiality of participant information (including, without
limitation, health information in relation to FMLA leaves) to the extent not specified
otherwise in this Agreement.

     Section 1.5 Terms of Participation by HBI Employees in HBI Plans.

     (a) Non-Duplication of Benefits. The HBI Plans shall not provide benefits that
duplicate benefits provided by the corresponding Sara Lee Plans. Sara Lee and HBI shall
agree on methods and procedures, including amending the respective Plan documents, to
prevent HBI Employees from receiving duplicate benefits from the Sara Lee Plans and the HBI
Plans; provided, that nothing shall prevent Sara Lee from unilaterally amending the Sara Lee
Plans to avoid any such duplication.

     (b) Service Credit. Except as specified otherwise in this Agreement, with respect to
HBI Employees, each HBI Plan shall provide that all service and compensation that, as of the
Distribution Date or earlier effective date of the HBI Plan, were recognized under the
corresponding Sara Lee Plan shall, as of the Distribution Date or earlier effective date of
the HBI Plan, receive full recognition and credit and be taken into account under such HBI
Plan to the same extent as if such items occurred under such HBI Plan, except to the extent
that duplication of benefits would result. The service crediting provisions shall be
subject to any applicable “service bridging,” “break in service,” “employment date,” or
“eligibility date” rules under the HBI Plans and the Sara Lee Plans.

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     Section 1.6 Foreign Plans. HBI and Sara Lee each intend that matters, issues, or Liabilities
relating to, arising out of, or resulting from Foreign Plans and non-U.S.-related employment
matters be handled in a manner that is consistent with comparable U.S. matters, issues, or
Liabilities as reflected in this Agreement (to the extent permitted by applicable law or as
otherwise specified in the applicable Section or Schedule thereto.

ARTICLE II

RETIREMENT PLANS

     Section 2.1 401(k) Plan.

     (a) 401(k) Plan Trust. Effective as of or before the Distribution Date, HBI shall
establish, or cause to be established, a separate trust, which is intended to be
tax-qualified under Code Section 401(a), to be exempt from taxation under Code Section
501(a), and to form a part of the HBI 401(k) Plan. To the extent permitted by law, the HBI
401(k) Plan shall accept rollover contributions that satisfy Section 402 of the Code
including, without limitations, rollover contributions from the Sara Lee 401(k) Plan.

     (b) 401(k) Plan: Assumption of Liabilities and Transfer of Assets. Effective as of or
before the Distribution Date: (i) the HBI 401(k) Plan shall assume and be solely
responsible for all Liabilities relating to, arising out of, or resulting from HBI Employees
under the Sara Lee 401(k) Plan including, without limitation, outstanding loans of HBI
Employees; (ii) Sara Lee shall cause the accounts of the HBI Employees under the Sara Lee
401(k) Plan that are held by its related trust, including promissory notes evidencing
outstanding loans of HBI Employees, to be transferred to the HBI 401(k) Plan and its related
trust in the form of mutual fund shares and other in-kind Assets held by the Sara Lee 401(k)
Plan (or, if otherwise agreed by Sara Lee and HBI, in cash); and HBI shall cause such
transferred accounts to be accepted by such Plan and its related trust. HBI shall take all
actions necessary and appropriate to provide that all amounts transferred to the accounts of
HBI Employees under this Subsection 2.1(b) shall continue to vest on and after the
Distribution Date. HBI and Sara Lee acknowledge and agree that such transfer of Assets and
Liabilities will comply with Sections 401(a)(12), 414(l) and 411(d)(6) of the Code and the
regulations thereunder. Following the Distribution Date, Sara Lee shall retain sole
responsibility for all benefit obligations under the Sara Lee 401(k) Plan, and HBI shall
have no obligation with respect thereto. Sara Lee shall provide HBI with at least sixty (60)
days written notice of the transfer of assets described above, unless HBI agrees to a
shorter notice period.

     (c) 2006 ESOP Allocation. On or before the Distribution, Sara Lee shall amend the Sara
Lee 401(k) Plan to provide that HBI employees who are actively employed on the Distribution
Date and who would have been eligible to receive an ESOP allocation under the terms of the
Sara Lee 401(k) Plan had they remained covered thereunder through December 31, 2006 shall be
eligible to receive an allocation under the

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Sara Lee 401(k) Plan equal to two percent (2%) of their eligible compensation from
January 1, 2006 through the Distribution Date. Any such allocation made on behalf of an HBI
employee shall be made at the same time and in the same manner as allocations are made to
eligible Sara Lee employees; provided, that in lieu of shares of Sara Lee common stock, such
allocation will be made in the form of shares of HBI common stock unless Internal Revenue
Service approval of the allocation of HBI common stock in lieu of Sara Lee common stock
cannot be obtained. The assets allocated to HBI employees pursuant to this provision shall
be transferred to the HBI 401(k) Plan as soon as administratively practicable following the
completion of the allocation for 2006 under the Sara Lee 401(k) Plan.

     (d) 401(k) Plan: Stock Considerations. As a result of the Distribution and the account
transfers provided in Section 2.1(c) above, participant accounts in each of the Sara Lee
401(k) Plan and the HBI 401(k) Plan may both contain, at least initially, Sara Lee and HBI
employer securities. HBI and Sara Lee each shall have complete discretion to determine the
terms and conditions pursuant to which their respective 401(k) Plans may (or may not)
continue to hold the stock of the other entity. Sara Lee and HBI shall assume sole
responsibility for ensuring that their respective company stock funds and underlying
employer securities held in each such fund, are maintained in compliance with all SEC
requirements including, without limitation, filing forms S-8 and 11-K and the prospectus
requirements for such funds.

     (e) No Distribution to HBI Employees. The Sara Lee 401(k) Plan and the HBI 401(k) Plan
shall provide that no distribution of account balances shall be made to any HBI Employee
solely on account of the Distribution.

     (f) Administration of HBI 401(k) Plan. Prior to the Distribution Date, HBI shall
contract with a third party administrator or make other arrangements to administer the HBI
401(k) Plan, which contract or other arrangement shall include the administration of
participant loans transferred from the Sara Lee 401(k) Plan to the HBI 401(k) Plan.

     Section 2.2 Pension Plan.

     (a) Pension Plan Trust. Effective as of or before the Distribution Date, HBI shall
establish, or cause to be established, a separate trust, which is intended to be
tax-qualified under Code Section 401(a), to be exempt from taxation under Code Section
501(a), and to form a part of the HBI Pension Plan.

     (b) Pension Plan: Assumption of Liabilities and Transfer of Assets. Effective as of or
before the Distribution Date, the HBI Pension Plan shall assume and be solely responsible
for all Liabilities relating to, arising out of, or resulting from HBI Employees and under
the Sara Lee Pension Plan. As soon as practicable following the Distribution Date, Sara Lee
shall cause Assets of the Sara Lee Pension Plan that are held by its related trust related
to the HBI Employees to be transferred to the HBI Pension

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Plan and its related trust in cash, or if mutually agreed by Sara Lee and HBI, other
property; and HBI shall cause such transferred amounts to be accepted by such Plan and its
related trust. HBI and Sara Lee acknowledge and agree that such transfer of Assets and
Liabilities will comply with Sections 401(a)(12), 414(l) and 411(d)(6) of the Code and the
regulations thereunder and that the value of the assets to be transferred as determined
under Section 414(l) of the Code shall be adjusted from January 1, 2006 to the transfer date
to reflect the investment experience under the Sara Lee Pension Plan, the HBI Pension Plan’s
allocable share of expenses and any benefit distributions made to HBI Employees. The HBI
Pension Plan will continue to participate in the Sara Lee Corporation Master Investment
Trust for Defined Benefit Plans (the “Master Trust”) subject to Sara Lee’s direction of the
assets of the Master Trust without distinction as to any particular participating plan for a
transition period not exceeding 270 days following the Distribution Date; provided, that HBI
holds Sara Lee harmless with respect to such continued participation.

     Section 2.3 Puerto Rico Plans. Effective as of or before the Distribution Date, Sara Lee
shall transfer sponsorship of the Puerto Rico Plans (and their related trusts) to HBI, so that
after the Distribution Date, the Puerto Rico Plans are maintained solely by HBI. Sara Lee and HBI
agree that the Sara Lee Personal Products Hourly Retirement Plan of Puerto Rico will continue to
participate in the Master Trust subject to Sara Lee’s direction of the assets of the Master Trust
without distinction as to any particular participating plan for a transition period not exceeding
270 days following the Distribution Date; provided, that HBI holds Sara Lee harmless with respect
to such continued participation.

     Section 2.4 Canadian Pension Plans. Effective as of or before the Distribution Date, Sara Lee
shall transfer sponsorship of the Canadian Main Pension Plan (and its related trust) to HBI and
Sara Lee shall become a Participating Company in such plan with respect to Sara Lee Employees who
are actively employed and covered thereunder on such date ( “Transferred SLC Canadian Employees”)
and Sara Lee shall retain liability for such employees’ benefits provided under the Canadian Main
Pension Plan until such time as all governmental approvals necessary to transfer that portion of
the Canadian Main Retirement Plan attributable to Transferred SLC Canadian Employee to a plan
maintain solely by Sara Lee are obtained at which time Sara Lee and HBI shall enter into an
agreement providing for such transfer. Notwithstanding the forgoing, Sara Lee shall retain
liability under the Canadian Main Pension Plan with respect to, and shall indemnify HBI for, any
increase in the liability under the Canadian Main Pension Plan that occurs as the consequence of
the March 6, 1987 closure of the Point-Claire, Ontario plant, the October 30, 1987 closure of the
Brockville, Ontario plant or the October 31, 1987 sale of Electrolux. As plan sponsor of the
Canadian Main Pension Plan, HBI shall administer, or cause to be administered, the Canadian Main
Pension Plan in accordance with its terms and applicable law and shall have the sole and absolute
discretion and authority to interpret the Canadian Main Pension Plan, as set forth therein. Sara
Lee shall perform, with respect to its participation in the Canadian Main Pension Plan, the duties
of a Participating Company as set forth in the Canadian Main Pension Plan or any procedures adopted
pursuant thereto, including (without limitation): (i) assistance in the administration of claims,
to the extent requested by the claims administrator of

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the Canadian Main Pension Plan; (ii) full cooperation with the Canadian Main Pension Plan
auditors, benefit personnel and benefit vendors; (iii) preservation of the confidentiality of all
financial arrangements HBI has or may have with any vendors, claims administrators, trustees,
service providers or any other entity or individual with whom HBI has entered into an agreement
relating to the Canadian Main Pension Plan; and (iv) preservation of the confidentiality of
participant information. After the Distribution Date the assets of Canadian Main Pension Plan will
continue to participate in the Sara Lee of Canada NS ULC Master Trust or any continuation thereof
(the “Canadian Master Trust”) subject to Sara Lee’s direction of the assets of the Canadian Master
Trust without distinction as to any particular participating plan for a transition period not
exceeding 270 days following the Distribution Date; provided, that HBI holds Sara Lee harmless with
respect to such continued participation.

     Section 2.5 Other HBI Retirement Plans. As of the Distribution Date, Sara Lee shall transfer
sponsorship of The Harwood Companies, Inc. 401(k) Plan to HBI. Following the Distribution Date,
HBI shall retain sole responsibility for all benefit obligations under The Harwood Companies, Inc.
401(k) Plan and Sara Lee shall have no obligation with respect thereto.

ARTICLE III

NON-QUALIFIED PLANS

     Section 3.1 Deferred Compensation Plan. As of December 31, 2005, HBI Employees ceased all
future contributions to the Sara Lee Deferred Compensation Plan. Sara Lee shall determine the
amount of Liabilities under the Sara Lee Deferred Compensation Plan attributable to HBI Employees
as of the Distribution Date. On or before the Distribution Date, Sara Lee shall transfer such
Liabilities to the HBI Deferred Compensation Plan, and coincident with the receipt of such
transfer, HBI, and specifically the HBI Deferred Compensation Plan shall assume all
responsibilities and obligations relating to, arising out of, or resulting from such Liabilities.
Such transferred Liabilities shall include any Sara Lee Restricted Stock Units, the payment of
which has been deferred under the Sara Lee Deferred Compensation Plan.

     Section 3.2 SERP. Effective on or before the Distribution Date, HBI shall establish the HBI
SERP and Sara Lee shall determine the amount of Liabilities under the Sara Lee SERP attributable to
HBI Employees and the amount of Liabilities under the Canadian SERP attributable to HBI Employees
who are participants in the Canadian Main Pension Plan. As soon as administratively practicable
thereafter, Sara Lee shall transfer such Liabilities to the HBI SERP and, coincident with the
receipt of such transfer, HBI, and specifically the HBI SERP, shall assume all responsibilities and
obligations relating to, arising out of, or resulting from such Liabilities. Sara Lee shall
determine such Liability in a manner that is consistent with the manner in which is has determined
such Liability for financial reporting purposes.

     Section 3.3 Other Non-Qualified Plans. Effective on or before the Distribution Date, Sara Lee
shall transfer sponsorship of the Hanesbrands Inc Intimate Apparel Key Management

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Cadre Retirement Plan and the Hanesbrands Inc Personal Products Supplemental Retirement Plan
to HBI, so that after the Distribution Date, the Hanesbrands Inc Intimate Apparel Key Management
Cadre Retirement Plan and the Hanesbrands Inc Personal Products Supplemental Retirement Plan are
maintained solely by HBI.

     Section 3.4 Administrative Services. Prior to the Distribution Date, HBI shall contract with
a third party administrator, bank or stock transfer agent or otherwise make arrangements to
administer the HBI Deferred Compensation Plan and the HBI SERP on or after the Distribution Date.
Sara Lee shall provide administrative assistance to HBI in connection with the HBI Deferred
Compensation Plan and the HBI SERP for a period of time in accordance with Schedule 5 of the Master
Transition Services Agreement.

ARTICLE IV

HEALTH AND WELFARE PLANS

     Section 4.1
Health Plans as of the Distribution Date.

     (a) HBI Health Plans. Not later than the Distribution Date, HBI shall establish the
HBI Health Plans and, correspondingly, HBI shall cease to be a Participating Company in the
Sara Lee Health Plans. After the Distribution Date, HBI shall be solely responsible for the
administration of the HBI Health Plans: provided that certain administrative functions shall
be performed or supported by Sara Lee pursuant to Schedule 5 to the Master Transition
Services Agreement.. HBI shall be solely responsible for the payment of all
employer-related costs in establishing and maintaining the HBI Health Plans, and for the
collection and remittance of participant contributions and premiums, subject to Section 7.2.
Following the Distribution Date, Sara Lee shall retain sole responsibility for all benefit
obligations under the Sara Lee Health Plans (except as provided in Sections 4.2), and HBI
shall have no obligation (except as provided in Sections 4.2) with respect thereto.

     (b) HBI as Participating Company. Except as otherwise agreed by Sara Lee and HBI,
until the date that HBI establishes the HBI Health Plans, HBI shall be a Participating
Company in the Sara Lee Health Plans and the Sara Lee Section 125 Plan. Sara Lee shall
administer claims incurred under the Sara Lee Health Plans and the Sara Lee Section 125 Plan
by HBI Employees for as long as HBI is a Participating Company in such plans. Any
determination made or settlements entered into by Sara Lee with respect to such claims shall
be final and binding. HBI shall retain financial and administrative (“run-out”) Liability
and all related obligations and responsibilities for all claims incurred by HBI Employees
while HBI is a Participating Company in the Sara Lee Health Plans and the Sara Lee Section
125 Plan, including any claims that were administered by Sara Lee as of, on, or after such
date. Any such run-out Liability and all related claims, charges, and expenses shall be
settled in a manner consistent with past practices and policies, including an interim
accounting and a final accounting between

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Sara Lee and HBI. As of the Distribution Date, the reserve included in Sara Lee’s
financial statements for “Incurred But Not Reported” medical and dental expenses
attributable to HBI Employees shall be transferred to HBI.

     (c) COBRA. HBI shall continue to be responsible through the date that it establishes
the HBI Health Plans for compliance with the health care continuation coverage requirements
of COBRA and the Sara Lee Health Plans with respect to HBI Employees, and qualified
beneficiaries (as such term is defined under COBRA). As of the date that HBI establishes
the HBI Health Plans, any COBRA Liabilities attributable to any HBI Employee, (or a
qualified beneficiary of such individuals) shall become an HBI Liability. Effective as of
the date HBI ceases to be a Participating Company in the Sara Lee Health Plans, HBI shall be
solely responsible for compliance with the health care continuation coverage requirements of
COBRA and the HBI Health Plans for HBI Employees and their qualified beneficiaries (as such
term is defined under COBRA).

     (d) Assumption of Retiree Medical Liabilities. Effective as of the Distribution Date,
the HBI Health Plans shall assume and be solely responsible for all retiree medical
Liabilities relating to, arising out of, or resulting from HBI Employees under the Sara Lee
Health Plans subject to the terms of the HBI Health Plans (including, without limitation,
HBI’s right to amend and/or terminate the HBI Health Plans).

     (e) Woolwine VEBA. Not later than the Distribution Date, Sara Lee shall transfer
sponsorship of the Woolwine VEBA ( a trust which is exempt from taxation under Code Section
501(c)(9)) to HBI, so that after the Distribution Date, the Woolwine VEBA is maintained
solely by HBI.

     (f) CMS. After the Distribution Date, HBI shall assume all Liabilities relating to,
arising out of, or resulting from claims, if any, under the CMS data match reports that
relate to HBI Employees or the HBI Terminated Employees.

     Section 4.2 Section 125 Plan. Effective on the date that HBI establishes the HBI Health
Plans, HBI shall establish, or cause to be established, the HBI Section 125 Plan and on and after
that date HBI shall be solely responsible for the HBI Section 125 Plan. HBI shall remain a
Participating Company in the Sara Lee Section 125 Plan until the date HBI establishes the HBI
Section 125 Plan. The existing elections for HBI Employees participating in the Sara Lee Section
125 Plan and for newly-eligible employees of HBI who elect to participate in the Sara Lee Section
125 Plan shall remain in effect in the HBI Section 125 Plan through the end of the applicable
Section 125 plan year (including any grace period) in which HBI ceases to be a Participating
Company in the Sara Lee Section 125 Plan. In the event that HBI establishes the HBI Section 125
Plan after the beginning of the Section 125 plan year under the Sara Lee FSA Plan, Sara Lee shall
cause the accounts of HBI Employees who are participating in the Sara Lee FSA Plan to be
transferred to the HBI Section 125 Plan.

     Section 4.3 Severance Plans. Effective as of or before the Distribution Date, Sara Lee shall
transfer sponsorship of the Sara Lee Branded Apparel Hourly Employee Separation

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Pay Benefits Plan, the Sara Lee Corporation Severance Pay Plan for Employees of SLBA, the
Hanesbrands Inc. Transformation Severance Pay Event Plan, the Sara Lee Branded Apparel Hourly
Employee 2006 Reorganization Separation Pay Benefits Plan for the Asheboro, North Carolina Plant’s
Refurbishing Department, the Sara Lee Branded Apparel Hourly Employee 2006 Reorganization
Separation Pay Benefits Plan for Galax Textiles and the Sara Lee Branded Apparel Hourly Employee
2006 Reorganization Separation Pay Benefits Plan for Eden Yarn to HBI and upon such transfer HBI
shall have sole responsibility for the Liabilities under such plans and Sara Lee shall have no
liability with respect thereto.

     Section 4.4 Disability Plans. Not later than the Distribution Date, HBI shall establish the
HBI Disability Plans. Until the earlier of the Distribution Date and the date HBI establishes the
HBI Disability Plans, HBI shall continue as a Participating Company in the Sara Lee Disability
Plans. As of the earlier of the Distribution Date and the date HBI establishes the HBI Disability
Plans, any Liabilities under the Sara Lee Disability Plans attributable to any HBI Employee (or
such individual’s eligible dependent) shall become an HBI Liability.

     Section 4.5 Group Insurance Plan. Not later than the Distribution Date, HBI may establish the
HBI Group Insurance Plan. Until the earlier of the Distribution Date or the date HBI establishes
the HBI Group Insurance Plan, HBI shall continue to be a Participating Company in the Sara Lee
Group Insurance Plan. Effective as of the earlier of the Distribution Date and the date HBI
establishes the HBI Group Insurance Plan, HBI shall be solely responsible for maintaining the HBI
Group Insurance Plan.

     Section 4.6 Executive Plans. As of the Distribution Date, HBI Employees who were participants
in the Sara Lee Executive Plans shall cease participation in such plans. HBI may establish the HBI
Executive Plans, in its sole discretion.

ARTICLE V

EQUITY AND OTHER COMPENSATION

     Section 5.1 Sara Lee Performance Shares. Performance Shares that an HBI Employee has been
awarded under a Sara Lee Stock Plan for a performance period beginning prior to the Distribution
Date shall continue to vest over the applicable performance period subject to the attainment of
Sara Lee performance measures and any other terms and conditions of the award and the Sara Lee
Stock Plan. Sara Lee shall charge HBI for the fair market value of awards earned by HBI Employees
under any such Sara Lee Stock Plan.

     Section 5.2 Sara Lee Restricted Stock Units. At the Distribution Date, each outstanding Sara
Lee Restricted Stock Unit held by an HBI Employee shall be fully vested and then paid by Sara Lee
to such HBI Employee as soon as practicable thereafter; provided, that if a deferral election is
in place with respect to such Sara Lee Restricted Stock Unit, such Sara Lee Restricted Stock Unit
shall be deferred as provided in Section 3.1 above. As a result of the Distribution, HBI Employees
holding Sara Lee Restricted Stock Units shall receive Sara Lee common stock equivalent in value to
the shares of HBI common stock that would have been

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received in the Distribution and such Sara Lee common stock shall be paid as soon as
practicable after the Distribution Date along with the Sara Lee common stock reflecting the Sara
Lee Restricted Stock Unit.

     Section 5.3 Sara Lee Options. At the Distribution Date, each outstanding Sara Lee Option held
by an HBI Employee, whether vested or unvested, shall become fully vested and the number of shares
subject to each vested option and the per-share exercise price shall be adjusted to reflect the
impact of the Distribution. Each Sara Lee Option issued under the Sara Lee Share 2000 or Share
2003 Programs will expire six months after the Distribution Date if it is not exercised prior to
that date, except to the extent that the terms of such option provide for an extension of the
exercise period beyond that six-month period. With respect to each other Sara Lee Option granted
under the Sara Lee Corporation 1998 Long-Term Incentive Stock Plan, the option shall expire six
months after the Distribution Date if it is not exercised prior to that date; provided, that in the
case of an HBI Employee who is receiving severance benefits under a Sara Lee Severance Plan, the
Sara Lee Options shall expire at the end of the HBI Employee’s severance period and in the case of
an HBI Employee who is eligible for early retirement under the Sara Lee Pension Plan (at the time
of the Distribution or, if later, at the end of the HBI Employee’s severance period), such HBI
Employee shall be treated as a retiree in determining when such options expire. In its
administration of the Sara Lee Stock Plan, Sara Lee shall continue to provide to HBI Employees who
remain participants in the Sara Lee Stock Plan the same recordkeeping, transaction, and other
services that it provides to similarly situated participants in the Sara Lee Stock Plan who are not
HBI Employees and shall remain responsible for all communications to such HBI Employees.

     Section 5.4 Sara Lee Stock Purchase Plan. HBI Employees will continue to participate in the
Sara Lee Corporation 2005 International Employee Stock Purchase Plan (the “Sara Lee 423 Plan”)
until the Distribution Date. Any contributions which cannot be used to purchase shares of Sara Lee
Common Stock under the Sara Lee 423 Plan shall be returned to HBI Employees in accordance with the
terms of the Sara Lee 423 Plan.

     Section 5.5 Administrative Services. Prior to the Distribution Date, HBI shall contract with
a third party administrator, bank or stock transfer agent to administer any awards granted under
the HBI Stock Plan on or after the Distribution Date. Until the Distribution Date, Sara Lee shall
provide administrative assistance to HBI in connection with the administration of awards granted
under the HBI Stock Plan in accordance with Schedule 5 of the Master Transition Services Agreement.

ARTICLE VI

FRINGE AND OTHER BENEFITS

     Section 6.1 Fringe Benefit Plans. Except as otherwise agreed by Sara Lee and HBI, until the
Distribution Date (or such other date that HBI is able to administer its own benefits accounting),
HBI shall be a Participating Company in the Sara Lee Fringe Benefit Plans. Sara

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Lee shall administer benefits accounting for the HBI Fringe Benefit Plans for 2006, but only
to the extent that HBI has not established and assumed administrative responsibility for a
corresponding Fringe Benefit Plan. Any determination made with respect to the Sara Lee Fringe
Benefit Plans shall be final and binding. HBI shall retain financial and administrative Liability
and all related obligations and responsibilities for all claims incurred by HBI Employees while HBI
was a Participating Company in the Sara Lee Fringe Benefit Plans, including any claims that were
administered by Sara Lee as of, on, or after the date HBI ceased to be a Participating Company.
Any such Liability and all related claims, charges, and expenses shall be settled in a manner
consistent with past practices and policies, including an interim accounting and a final accounting
between Sara Lee and HBI.

     Section 6.2 Paid Time Off. Effective as of the Distribution Date, HBI shall establish its own
paid time off policy and any earned but unused paid time off (including vacation pay) that an HBI
Employee is entitled to as of the Distribution Date under Sara Lee’s paid time off policy will be
rolled forward into the HBI paid time off policy and provided in accordance with the HBI paid time
off policy following the Distribution Date. On and after the Distribution Date, Sara Lee shall
have no liability for paid time off on behalf of any HBI Employee.

ARTICLE VII

ADMINISTRATIVE PROVISIONS

     Section 7.1 Intercompany Transitional Services. Effective as of the Separation Date, Sara Lee
and HBI shall enter into the Master Transition Services Agreement covering the provisions of
interim services, including financial, accounting, legal, benefits-related and other services by
Sara Lee to HBI or, in certain circumstances, vice versa. The provision of such interim services
by each of Sara Lee and HBI is intended to be covered exclusively by the terms and conditions of
the Master Transition Services Agreement. Accordingly, HBI and Sara Lee shall each be responsible
for their own internal fees, costs and expenses (e.g., salaries of personnel) incurred in
connection with the provision of services under this Agreement.

     Section 7.2 Payment of Liabilities, Plan Expenses and Related Matters.

     (a) Expenses and Costs Chargeable to a Trust. HBI shall pay its share of any
contributions made to any trust maintained in connection with a Sara Lee Plan while HBI is a
Participating Company in that Sara Lee Plan and Sara Lee shall pay its share of any
contributions made to any trust maintained in connection with a HBI Plan while Sara Lee is a
Participating Company in that HBI Plan. To the extent HBI continues to participate in a
Sara Lee Plan after the Distribution Date, the contributions described in this section shall
be directed to a separate, corresponding trust established by HBI and to the extent Sara Lee
continues to participate in a HBI Plan after the Distribution Date, the contributions
described in this section shall be directed to a separate, corresponding trust established
by Sara Lee.

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     (b) Expenses and Costs of Plan Not Chargeable to a Trust. HBI shall be responsible for
(through either direct payment or reimbursement to Sara Lee) Sara Lee’s costs and expenses
associated with HBI’s participation in each Sara Lee Plan while HBI is a Participating
Company in that Sara Lee Plan including, but not limited to, the cost of all claims incurred
under the Sara Lee Health and Welfare Plans, the cost of all claims incurred under the Sara
Lee Section 125 Plan (to the extent such claims are not -reimbursed by payroll deduction),
the cost of all payments or other distributions (including the fair market value of all Sara
Lee securities issued by Sara Lee) made under a Sara Lee Stock Plan, the cost of all
restricted stock awards made under a Sara Lee Stock Plan, the cost of all payments or other
distributions made under any other Sara Lee Stock Plan (excluding, for this purpose options
exercised under any Sara Lee Stock Plan) and the cost of any other benefit provided or
payment made under any Sara Lee Plan to the extent not otherwise specifically provided in
this Agreement. Any such payment or reimbursement shall be made within thirty (30) business
days after Sara Lee provides HBI with notice of such expenses or costs. Similarly, Sara Lee
shall be responsible (through either direct payment or reimbursement to HBI) for HBI’s costs
and expenses associated with Sara Lee’s participation in each HBI Plan while Sara Lee is a
Participating Company in that HBI Plan and any such payment or reimbursement shall be made
within thirty (30) business days after HBI provides Sara Lee with notice of such expenses or
costs.

     (c) Contributions to Trusts. With respect to Sara Lee Plans to which HBI Employees
make contributions, Sara Lee shall use reasonable procedures to determine HBI Assets and
Liabilities associated with each such Plan, taking into account such contributions,
settlements, refunds and similar payments. With respect to HBI Plans to which Sara Lee
Employees make contributions, HBI shall use reasonable procedures to determine Sara Lee’s
Assets and Liabilities associated with each such Plan, taking into account such
contributions, settlements, refunds and similar payments.

     (d) Administrative Expenses Not Chargeable to a Trust. To the extent not covered by
the Master Transition Services Agreement (as contemplated by Section 7.1) or another
Ancillary Agreement, and to the extent not otherwise agreed to in writing by Sara Lee and
HBI, and to the extent not chargeable to a trust established in connection with a Sara Lee
or a HBI Plan (as provided in paragraph (a)), (i) HBI shall be responsible, through either
direct payment or reimbursement to Sara Lee, for its allocable share of actual third party
and/or vendor costs and expenses incurred by Sara Lee and additional costs and expenses in
the administration of the Sara Lee Plans while HBI participates in such Sara Lee Plans, and
the HBI Plans, to the extent Sara Lee procures, prepares, implements and/or administers such
HBI Plans and (ii) Sara Lee shall be responsible, through either direct payment or
reimbursement to HBI, for its allocable share of actual third party and/or vendor costs and
expenses incurred by HBI and additional costs and expenses in the administration of the HBI
Plans while Sara Lee participates in such HBI Plans and the Sara Lee Plans, to the extent
HBI provides any administrative support to such Sara Lee Plans. An allocable share of any
such costs and expenses will be

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determined in a manner consistent with the manner in which the allocable share of such
costs and expenses was determined prior to the Separation Date.

     Section 7.3 Plan and Participant Information. Sara Lee and HBI shall share, or cause to be
shared, all participant information that is necessary or appropriate for the efficient and accurate
administration of each of the Sara Lee Plans and the HBI Plans during the respective periods
applicable to such Plans, including but not limited to, information on HBI Employees. Sara Lee and
HBI and their respective authorized agents shall, subject to applicable laws of confidentiality and
data protection (including, without limitation, HIPAA), be given reasonable and timely access to,
and may make copies of, all information relating to the subjects of this Agreement in the custody
of the other party or its agents, to the extent necessary or appropriate for such administration.
At HBI’s reasonable request, Sara Lee shall provide HBI with such financial, operational and other
information (including, in the case of a Plan’s Assets and Liabilities, detailed information on the
methods used to determine the value of such Assets and Liabilities) on each Plan listed on Schedule
7.3 at a level of detail reasonably acceptable to HBI; provided, that if such information cannot be
reasonably obtained by Sara Lee without additional cost, HBI shall reimburse Sara Lee for all
additional third-party costs and such other reasonable costs of obtaining the information.

     Section 7.4 Reporting and Disclosure Communications to Participants. For any period in which
HBI is a Participating Company in the Sara Lee Plans, and for any period in which Sara Lee is a
Participating Company in the HBI Plans, HBI and Sara Lee shall take, or cause to be taken, all
actions necessary or appropriate to facilitate the distribution of all Plan-related communications
and materials related to the other Party’s Plans to employees, participants and beneficiaries,
including (without limitation) summary plan descriptions and related summaries of material
modification(s), summary annual reports, investment information, prospectuses, certificates of
creditable coverage, notices and enrollment material for the Sara Lee Plans and HBI Plans. Sara
Lee and HBI each shall assist the other Party in complying with all reporting and disclosure
requirements of ERISA, including the preparation of Form Series 5500 annual reports for the Sara
Lee and HBI Plans, where applicable.

     Section 7.5 Employee Identification Numbers. Until the Distribution Date, Sara Lee and HBI
shall not change any employee identification numbers assigned by Sara Lee. Sara Lee and HBI
mutually agree to establish a policy pursuant to which employee identification numbers assigned to
either employees of Sara Lee or HBI shall not be duplicated between Sara Lee and HBI.

     Section 7.6 Beneficiary Designation. Subject to Section 7.10, all beneficiary designations
made by HBI Employees for the Sara Lee Plans shall be transferred to and be in full force and
effect under the corresponding HBI Plans, in accordance with the terms of each such applicable HBI
Plan and to the extent permissible under such Plan, until such beneficiary designations are
replaced or revoked by the HBI Employees who made the beneficiary designation.

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     Section 7.7 Requests for IRS and DOL Opinions. Sara Lee and HBI shall make such applications
to regulatory agencies, including the IRS, PBGC and DOL, as may be necessary or appropriate. HBI
and Sara Lee shall cooperate fully with one another on any issue relating to the transactions
contemplated by this Agreement for which Sara Lee and/or HBI elects to seek a determination letter
or private letter ruling from the IRS or an advisory opinion from the DOL.

     Section 7.8 Fiduciary Matters. Sara Lee and HBI each acknowledge that actions contemplated to
be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct
under ERISA or other applicable law, and that no party shall be deemed to be in violation of this
Agreement if such party fails to comply with any provisions hereof based upon such party’s good
faith determination that to do so would violate such a fiduciary duty or standard.

     Section 7.9 Consent of Third Parties. If any provision of this Agreement is dependent on the
consent of any third party (such as a vendor) and such consent is withheld, Sara Lee and HBI shall
use their commercially reasonable best efforts to implement the applicable provisions of this
Agreement. If any provision of this Agreement cannot be implemented due to the failure of such
third party to consent, Sara Lee and HBI shall negotiate in good faith to implement the provision
in a mutually satisfactory manner.

     Section 7.10 Financial Reporting Cooperation. HBI shall provide to Sara Lee such financial or
other information as Sara Lee shall reasonably request to allow Sara Lee to satisfy its financial
reporting obligations with respect to any period for which HBI impacts Sara Lee financial
reporting; provided, that if such information cannot be reasonably obtained by HBI without
additional cost, Sara Lee shall reimburse HBI for all additional third-party costs and such other
reasonable costs of obtaining the information. Sara Lee shall provide to HBI such financial or
other information as HBI shall reasonably request to allow HBI to satisfy its financial reporting
obligations with respect to any period for which Sara Lee impacts HBI financial reporting;
provided, that if such information cannot be reasonably obtained by Sara Lee without additional
cost, HBI shall reimburse Sara Lee for all additional third-party costs and such other reasonable
costs of obtaining the information.

ARTICLE VIII

EMPLOYMENT-RELATED MATTERS

     Section 8.1 Transfer of Employment to HBI. Effective January 1, 2006, pursuant to the
Dedicated Employee Agreement, all employees of the Branded Apparel Business as of December 31, 2005
were transferred to employment with HBI. Effective on the Distribution Date, each other HBI
Employee who was not transferred to HBI as of January 1, 2006 pursuant to the Dedicated Employee
Agreement shall be transferred to employment with HBI.

     Section 8.2 Terms of HBI Employment. Except as agreed to by the Parties, all basic terms and
conditions of employment for HBI Employees including, without limitation, their pay

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and benefits in the aggregate shall, to the extent legally and practicably possible, remain
substantially the same through the Distribution Date (other than reasonable raises and bonuses
provided in the ordinary course of business and consistent with past practice) as the terms and
conditions that were in place when the HBI Employee was employed by the Sara Lee Group, as
applicable. Nothing in the Separation Agreement, this Agreement, or any Ancillary Agreement should
be construed to change the at-will status of the employment of any of the employees of the Sara Lee
Group or the HBI Group or shall preclude HBI from making individual wage or salary adjustments in
the ordinary course of business to align pay to job responsibilities.

     Section 8.3 Collective Bargaining Agreements. Sara Lee is a party to the collective
bargaining agreements listed on Schedule 8.3 (the “Labor Agreements”). The Labor Agreements set
certain terms and conditions of employment for HBI Employees. HBI shall use reasonable best
efforts to ensure that, as of the Distribution Date, it assumes Sara Lee’s rights and obligations
under the Labor Agreements. Sara Lee shall provide such assistance as HBI may reasonably request
to accommodate such assumption. To the extent that any provision of this Agreement is inconsistent
with the Labor Agreements, the provisions of the Labor Agreements shall prevail.

     Section 8.4 Post-Distribution Payroll Discrepancies. If either HBI or Sara Lee determines
that any employee has been incorrectly classified as an HBI Employee or a Sara Lee Employee, the
Parties shall transfer such employee to the correct employer’s payroll and other systems. The
Party to which such employee is transferred shall reimburse the other Party for any Liabilities
that accrued in relation to such employee after the Distribution. The Parties shall use reasonable
best efforts to insure that payment of the employee’ compensation shall not be delayed except in
the ordinary course of business.

     Section 8.5 Employment of Employees with U.S. Work Visas. HBI will request amendments to the
nonimmigrant visa status of HBI Employees with U.S. work visas authorizing them to work for Sara
Lee, so as to allow them to work for HBI.

     Section 8.6 Confidentiality and Proprietary Information. No provision of the Separation
Agreement or any Ancillary Agreement shall be deemed to release any individual for any violation of
the Sara Lee non-competition guideline or any agreement or policy pertaining to confidential or
proprietary information of any member of the Sara Lee Group, or otherwise relieve any individual of
his or her obligations under such non-competition guideline, agreement, or policy.

     Section 8.7 Personnel Records. Subject to applicable laws on confidentiality and data
protection HBI and Sara Lee shall deliver to each other prior to the Distribution Date, personnel
records of the other entity’s employees on any electronic or other data system.

     Section 8.8 Medical Records. Subject to applicable laws on confidentiality and data
protection (including, without limitation, HIPAA), Sara Lee shall deliver to HBI prior to the
Distribution Date, medical records of HBI Employees to the extent such records (a) relate to HBI
Employees’ active employment by, leave of absence from, or termination of employment with

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HBI, and (b) are necessary to administer and maintain employee benefit plans, including but
not limited to Health Plans and for determining eligibility for paid and unpaid Leaves of Absence
for medical reasons.

     Section 8.9
Unemployment Insurance Program.

     (a) Claims Administration Through Distribution Date. Unless otherwise directed by HBI,
Sara Lee shall assist HBI in receiving service from Sara Lee’s third party unemployment
insurance administrator through the Distribution Date. HBI shall cooperate with the
unemployment insurance administrator by providing any and all necessary or appropriate
information reasonably available to HBI.

     (b) Claim Administration Post-Distribution Date. As of the Distribution Date, HBI
shall be responsible for complying with the unemployment insurance requirements of the
states in which the HBI Group conducts business and for obtaining and maintaining third
party insurance programs for its risk of loss.

     Section 8.10 Non-Termination of Employment; No Third-Party Beneficiaries. Except as specified
in Article V of this Agreement. no provision of this Agreement, the Separation Agreement, or any
Ancillary Agreement shall be construed to create any right or accelerate entitlement to any
compensation or benefit whatsoever on the part of any HBI Employee, or other former, present or
future employee of Sara Lee or HBI under any Sara Lee Plan or HBI Plan or otherwise. Without
limiting the generality of the foregoing: (a) neither the Distribution or Separation, nor the
termination of the Participating Company status of HBI or any member of the HBI Group shall cause
any employee to be deemed to have incurred a termination of employment; and (b) no transfer of
employment between Sara Lee and HBI before the Distribution Date shall be deemed a termination of
employment for any purpose hereunder.

ARTICLE IX

GENERAL PROVISIONS

     Section 9.1 Entire Agreement; Incorporation Of Schedules And Exhibits. This Agreement
(including all Schedules and Exhibits referred to herein), the Separation Agreement and the other
Ancillary Agreements constitute the entire agreement among the Parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and understandings, both written and
oral, among the Parties with respect to the subject matter hereof and thereof. All Schedules and
Exhibits referred to herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein.

     Section 9.2 Amendments And Waivers. This Agreement may be amended and any provision of this
Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party
only if such amendment or waiver is set forth in a writing executed by such Party. No course of
dealing between or among any Persons having any interest in this

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Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement
or any rights or obligations of any Party under or by reason of this Agreement.

     Section 9.3 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in
exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor
shall any single or partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights
or remedies that any Party hereto would otherwise have. Any waiver, permit, consent or approval of
any kind or character of any breach or default under this Agreement or any such waiver of any
provision of this Agreement must satisfy the conditions set forth in Section 9.2 and shall be
effective only to the extent in such writing specifically set forth.

     Section 9.4 Parties In Interest. Nothing in this Agreement, express or implied, is intended
to confer on any Person other than the Parties, their respective Groups, and their respective
successors and permitted assigns, any rights or remedies of any nature whatsoever under or by
virtue of this Agreement.

     Section 9.5 Assignment; Binding Agreement. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in part, by operation
of law or otherwise by any of the Parties without the prior written consent of the other Parties,
and any instrument purporting to make such an assignment without prior written consent shall be
void; provided, however, either Party may assign this Agreement to a successor entity in
conjunction with a merger effectuated solely for the purpose of changing such Party’s state of
incorporation (but subject to any applicable requirements of the Tax Sharing Agreement). Subject
to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the Parties and their respective successors and permitted assigns.

     Section 9.6 Notices. All notices, demands and other communications given under this Agreement
must be in writing and must be either personally delivered, telecopied (and confirmed by telecopy
answer back), mailed by first class mail (postage prepaid and return receipt requested), or sent by
reputable overnight courier service (charges prepaid) to the recipient at the address or telecopy
number indicated below or such other address or telecopy number or to the attention of such other
Person as the recipient party shall have specified by prior written notice to the sending party.
Any notice, demand or other communication under this Agreement shall be deemed to have been given
when so personally delivered or so telecopied and confirmed (if telecopied before 5:00 p.m. Eastern
Standard Time on a business day, and otherwise on the next business day), or if sent, one business
day after deposit with an overnight courier, or, if mailed, five business days after deposit in the
U. S. mail.

(a) if to Sara Lee:

Sara Lee Corporation

Three First National Plaza

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Chicago, Illinois 60602-4260

Attention: General Counsel

Facsimile Number: (312) 419-3187

(b) if to HBI:

Hanesbrands Inc.

1000 East Hanes Mill Road

Winston-Salem, North Carolina, 27105

Attention: General Counsel

Facsimile Number: (336) 714-7441

     Section 9.7 Severability. The Parties agree that (a) the provisions of this Agreement shall
be severable in the event that for any reason whatsoever any of the provisions hereof are invalid,
void or otherwise unenforceable, (b) any such invalid, void or otherwise unenforceable provisions
shall be replaced by other provisions which are as similar as possible in terms to such invalid,
void or otherwise unenforceable provisions but are valid and enforceable, and (c) the remaining
provisions shall remain valid and enforceable to the fullest extent permitted by applicable law.

     Section 9.8 Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Illinois, without giving effect to any choice of law or conflict of law
provision (whether of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.

     Section 9.9 Submission To Jurisdiction. SUBJECT TO SECTION 9.12, EACH OF THE PARTIES
IRREVOCABLY SUBMITS (FOR ITSELF AND IN RESPECT OF ITS PROPERTY) TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN CHICAGO, ILLINOIS, OR FORSYTH COUNTY, NORTH CAROLINA OR GUILFORD COUNTY,
NORTH CAROLINA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES
THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT; PROVIDED THAT THE PARTIES MAY BRING ACTIONS OR PROCEEDINGS AGAINST EACH OTHER IN OTHER
JURISDICTIONS TO THE EXTENT NECESSARY TO ENFORCE THEIR RIGHTS UNDER THIS AGREEMENT UNDER STATE LAW
OR TO IMPLEAD THE OTHER PARTY IN ANY ACTION COMMENCED BY A THIRD PARTY THAT IS RELATED TO THIS
AGREEMENT. EACH PARTY ALSO AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT IN ANY OTHER COURT OR IN OTHER JURISDICTIONS UNLESS SUCH ACTIONS OR PROCEEDINGS
ARE NECESSARY TO ENFORCE ITS RIGHTS UNDER THIS AGREEMENT UNDER STATE LAW OR IMPLEAD THE OTHER PARTY
IN ANY ACTION COMMENCED BY A THIRD THAT IS RELATED TO THIS AGREEMENT. EACH OF THE PARTIES WAIVES
ANY DEFENSE OF

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INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY
BOND, SURETY, OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO.
ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR DELIVERING A COPY OF THE PROCESS TO THE
PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION
9.6 ABOVE. NOTHING IN THIS SECTION 9.9, HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AT EQUITY. EACH PARTY AGREES THAT A FINAL
NONAPPEALABLE JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE
ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT EQUITY.

     Section 9.10 Waiver Of Jury Trial. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE
PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL),
EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR
ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

     Section 9.11 Amicable Resolution. The Parties desire that friendly collaboration will develop
between them. Accordingly, they will try to resolve in an amicable manner all disputes and
disagreements connected with their respective rights and obligations under this Agreement in
accordance with Section 6.12 of the Separation Agreement.

     Section 9.12 Arbitration. Except for suits seeking injunctive relief or specific performance,
or in the event of any interpleader action arising from any proceeding commenced by a third party
that relates to this Agreement, in the event of any dispute, controversy or claim arising under or
in connection with this Agreement (including any dispute, controversy or claim relating to the
breach, termination or validity thereof), the Parties shall submit any such dispute, controversy or
claim to binding arbitration in accordance with Section 6.13 of the Separation Agreement.

     Section 9.13 Construction. The descriptive headings herein are inserted for convenience of
reference only and are not intended to be a substantive part of or to affect the meaning or
interpretation of this Agreement. Whenever required by the context, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any
agreement, document, or instrument means such agreement, document, or instrument as amended or
otherwise modified from time to time in accordance with the terms thereof, and if applicable
hereof. The use of the words “include” or “including” in this Agreement shall be by way of example
rather than by limitation. The use of the words “or,” “either” or “any” shall not be exclusive.
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation

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arises, this Agreement shall be construed as if drafted jointly by the Parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. The Parties agree that prior drafts of this
Agreement shall be deemed not to provide any evidence as to the meaning of any provision hereof or
the intent of the Parties hereto with respect hereto.

     Section 9.14 Counterparts. This Agreement may be executed in multiple counterparts (any one
of which need not contain the signatures of more than one party), each of which shall be deemed to
be an original, but all of which taken together shall constitute one and the same agreement.

     Section 9.15 Limitation On Damages. Each Party irrevocably waives, and no Party shall be
entitled to seek or receive from the other Party, consequential, special, indirect or incidental
damages (including without limitation damages for loss of profits) or punitive damages, regardless
of how such damages were caused and regardless of the theory of liability; provided, however, that
to the extent a Party is required to pay any consequential, special, indirect or incidental damages
(including without limitation damages for loss of profits) or punitive damages to a third party in
connection with any claim, or any action or proceeding, by a Person (including any Governmental
Authority) who is not a member of the Sara Lee Group or the HBI Group, such damages shall
constitute direct damages and not be subject to the limitations set forth in this Section 9.15.

     Section 9.16 Delivery By Facsimile Or Other Electronic Means. This Agreement, and any
amendments hereto, to the extent signed and delivered by means of a facsimile machine or other
electronic transmission, shall be treated in all manner and respects as an original contract and
shall be considered to have the same binding legal effects as if it were the original signed
version thereof delivered in person. At the request of any Party, each other Party shall
re-execute original forms thereof and deliver them to all other Parties. No Party shall raise the
use of a facsimile machine or other electronic means to deliver a signature or the fact that any
signature was transmitted or communicated through the use of facsimile machine or other electronic
means as a defense to the formation of a contract and each such Party forever waives any such
defense.

ARTICLE X

DEFINITIONS

     Capitalized terms used herein and not otherwise defined herein shall have the meanings set
forth in the Separation Agreement. In addition, for purposes of this Agreement, the following
terms shall have the following meanings:

     Section 10.1 401(k) Plan. “401(k) Plan,” when immediately preceded by “Sara Lee,” means the
Sara Lee Corporation 401(k)Plan, a defined contribution plan. When immediately preceded by “HBI,”
“401(k) Plan” means the Hanesbrands Inc. Retirement Savings Plan to be established by HBI pursuant
to Section 1.2 and Article II.

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     Section 10.2 Affiliated Company. “Affiliated Company” of any Person means, any entity that
controls, is controlled by, or is under common control with such Person. As used herein ,
“control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through ownership of voting
securities or other interests, by contract , or otherwise.

     Section 10.3 Agreement. “Agreement” means this Employee Matters Agreement, including all the
Schedules hereto, and all amendments made hereto from time to time.

     Section 10.4 Ancillary Agreements. “Ancillary Agreements” means all of the agreements,
documents and instruments listed in Section 2.1 of the Separation Agreement.

     Section 10.5 Assets. “Assets” has the meaning set forth in the Separation Agreement.

     Section 10.6 Branded Apparel Business. “Branded Apparel Business” means the business
conducted prior to the Separation Date by the Branded Apparel Americas/Asia Division of Sara Lee of
manufacturing and marketing branded apparel in the intimates, underwear, leg wear and sportswear
categories as described in a registration statement on Form 10 filed under the Securities Exchange
Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

     Section 10.7 Canadian Designated Pension Plan. “Canadian Designated Pension Plan” means the
Sara Lee of Canada NS ULC Designated Employees’ Pension Plan.

     Section 10.8 Canadian Main Pension Plan. “Canadian Main Pension Plan” means the Sara Lee of
Canada NS ULC Employees’ Main Pension Plan.

     Section 10.9 Canadian Pension Plans. “Canadian Pension Plans” means the Sara Lee of Canada NS
ULC Designated Employees’ Pension Plan, the Sara Lee of Canada US ULC Pension Plan for Employees of
Kiwi Canada, the Sara Lee of Canada US ULC Pension Plan for Employees of Tana Canada, the Fuller
Brush Company, a Division of Sara Lee Corporation of Canada Ltd. Revised Retirement Plan Number 1
and the Fuller Brush Company, a Division of Sara Lee Corporation of Canada Ltd. Revised Retirement
Plan Number 2.

     Section 10.10 Canadian SERP. “Canadian SERP” means the Sara Lee Corporation Supplemental Plan
for Canadian Employees.

     Section 10.11 CMS. “CMS” means Centers for Medicare & Medicaid Services.

     Section 10.12 COBRA. “COBRA” means the continuation coverage requirements for “group health
plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from
time to time, and as codified in Code Section 4980B and ERISA Sections 601 through 608.

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     Section 10.13 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

     Section 10.14 Dedicated Employee Agreement. “Dedicated Employee Agreement” means that
certain agreement dated December 31, 2005 between Sara Lee and HBI pursuant to which (i) Sara Lee
transferred to the employ of HBI, effective as of January 1, 2006, those employees who were
employed by Sara Lee or the subsidiaries or divisions of Sara Lee identified therein and who were
performing services exclusively for the Branded Apparel Business, as such business was conducted on
December 31, 2005, and (ii) HBI agreed to continue to make such employees available to Sara Lee to
exclusively render services for the Branded Apparel Business until the Distribution Date, and Sara
Lee agreed to reimburse HBI for salary and other compensation paid to such employees.

     Section 10.15 Deferred Compensation Plan. “Deferred Compensation Plan,” when immediately
preceded by “Sara Lee,” means the Sara Lee Executive Deferred Compensation Plan. When immediately
preceded by “HBI,” “Deferred Compensation Plan” means the HBI Executive Deferred Compensation Plan.

     Section 10.16 Disability Plans. “Disability Plans,” when immediately preceded by “Sara Lee”
means the Sara Lee short term disability program and the Sara Lee Long-Term Disability Plan and
when immediately preceded by “HBI” means the short-term disability program and long-term disability
plan to be established by HBI pursuant to Section 4.5.

     Section 10.17 Distribution. “Distribution” means the distribution by Sara Lee on a pro rata
basis to the holders of the issued and outstanding shares of Sara Lee’s common stock of all of the
issued and outstanding shares of HBI common stock owned by Sara Lee as further described in the
Separation Agreement to the effect that HBI no longer constitutes a member of the Sara Lee
controlled group, as determined in accordance with Code Sections 414(b), 414(c) and 414(m).

     Section 10.18 Distribution Date. “Distribution Date” means the date that the Distribution is
consummated as provided in Section 3.2 of the Separation Agreement.

     Section 10.19 DOL. “DOL” means the United States Department of Labor.

     Section 10.20 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     Section 10.21 Executive Plans. “Executive Plans” when immediately preceded by “Sara Lee”
means the welfare plans maintained by Sara Lee on behalf of its key executives and when immediately
preceded by “HBI” means the welfare plans (if any) established by HBI on behalf of its executives.

     Section 10.22 FMLA. “FMLA” means the Family and Medical Leave Act of 1993, as amended from
time to time.

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     Section 10.23 Foreign Plan. “Foreign Plan,” means a Plan maintained by the Sara Lee Group or
the HBI Group for the benefit of their employees outside the U.S.

     Section 10.24 Fringe Benefit Plans. “Fringe Benefit Plans,” when immediately preceded by
“Sara Lee,” means the Sara Lee Employee Assistance Program, the Sara Lee Educational Assistance
Plan, the Sara Lee Adoption Assistance Program and other fringe benefit plans, programs and
arrangements, sponsored and maintained by Sara Lee. When immediately preceded by “HBI,” “Fringe
Benefit Plans” means the fringe benefit plans, programs and arrangements to be established by HBI
pursuant to Section 1.2 and Article VI.

     Section 10.25 FSA Plan. When preceded by “Sara Lee,” “FSA Plan” means the Sara Lee Flexible
Spending Account Plan.

     Section 10.26 Group Insurance Plan. “Group Insurance Plan,” when immediately preceded by
“Sara Lee,” means the Sara Lee Group Insurance Program. When immediately preceded by “HBI,” “Group
Insurance Plan” means the group insurance program to be established by HBI pursuant to Section
1.2. that will provide basic life insurance, dependent life insurance, optional life insurance,
accidental death and dismemberment insurance, business travel accident insurance and executive
group universal life insurance.

     Section 10.27 HBI. “HBI” means Hanesbrands Inc., a Maryland corporation. In all such
instances in which HBI is referred to in this Agreement, it shall also be deemed to include a
reference to each member of the HBI Group, unless it specifically provides otherwise; HBI shall be
solely responsible to Sara Lee for ensuring that each member of the HBI Group complies with the
applicable terms of this Agreement.

     Section 10.28 HBI Employee. “HBI Employee” means any individual who is: (a) either actively
employed by, or on leave of absence from, the HBI Group on the Distribution Date; (b) an HBI
Terminated Employee; (c) designated as an HBI Employee (as of the specified date) by Sara Lee and
HBI by mutual agreement; or (d) an alternate payee under a QDRO, alternate recipient under a QMCSO,
beneficiary, covered dependent, or qualified beneficiary (as such term is defined under COBRA), in
each case, of an employee or former employee, described in Subsections 10.28(a) through (c) next
above with respect to that employee’s or former employee’s benefit under the applicable Plan(s)
(unless specified otherwise in this Agreement, such an alternate payee, alternate recipient,
beneficiary, covered dependent, or qualified beneficiary shall not otherwise be considered an HBI
Employee with respect to any benefits he or she accrues or accrued under any applicable Plan(s),
unless he or she is an HBI Employee by virtue of Subsections 10.28(a) through (c) next above).
Notwithstanding the forgoing, “HBI Employee” shall include any employee covered by the Dedicated
Employee Agreement.

     Section 10.29 HBI Group. “HBI Group” means HBI and each Subsidiary and Affiliated Company of
HBI immediately after the Distribution Date, or that is contemplated to be a Subsidiary or
Affiliated Company of HBI and each Person that becomes a Subsidiary or Affiliated Company of HBI
after the Distribution Date.

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     Section 10.30 HBI Plans. “HBI Plans” means the plans, policies, programs, payroll practices,
and arrangements established or assumed by the HBI Group hereunder for the benefit of HBI
Employees.

     Section 10.31 HBI Terminated Employee. “HBI Terminated Employee” means any individual who is:
(a) a former employee of the Sara Lee Group who was terminated from the Branded Apparel Business on
or before the Distribution Date; or (b) an alternate payee under a QDRO, alternate recipient under
a QMCSO, beneficiary, covered dependent, or qualified beneficiary (as such term is defined under
COBRA), in each case, of a former employee, described in Subsection 10.28(a) next above with
respect to that former employee’s benefit under the applicable Plan(s). Notwithstanding the
foregoing, “HBI Terminated Employee” shall not, unless otherwise expressly provided to the contrary
in this Agreement, include an individual who is a Sara Lee Employee or an HBI Employee at the
Distribution Date or an individual who is otherwise an HBI Terminated Employee, but who is
subsequently employed by the Sara Lee Group or the HBI Group on or prior to the Distribution Date.

     Section 10.32 Health and Welfare Plans. “Health and Welfare Plans,” when immediately preceded
by “Sara Lee,” means the Sara Lee Health Plans, the Sara Lee Section 125 Plan, the Sara Lee Group
Insurance Plan, the Sara Lee Workers’ Compensation Plan and the health and welfare plans
established and maintained by Sara Lee for the benefit of eligible employees of the Sara Lee Group,
and such other welfare plans or programs as may apply to such employees as of the Distribution
Date. When immediately preceded by “HBI,” “Health and Welfare Plans” means the HBI Health Plans,
the HBI Section 125 Plan, and the health and welfare plans to be established by HBI pursuant to
Section 1.2 and Article IV.

     Section 10.33 Health Plans. “Health Plans,” when immediately preceded by “Sara Lee,” means
the Sara Lee Corporation Employee Health Benefit Plan, any other medical, HMO, vision, and dental
plans and any similar or successor Plans. When immediately preceded by “HBI,” “Health Plans” means
the Hanesbrands Inc. Employee Health Benefit Plan.

     Section 10.34 HIPAA. “HIPAA” means the Health Insurance Portability and Accountability Act of
1996, as amended from time to time.

     Section 10.35 HMO. “HMO” means a health maintenance organization that provides benefits under
the Sara Lee Health Plans or the HBI Health Plans.

     Section 10.36 IRS. “IRS” means the United States Internal Revenue Service.

     Section 10.37 Liabilities. “Liabilities” has the meaning set forth in the Separation
Agreement

     Section 10.38 Master Transition Services Agreement. “Master Transition Services Agreement”
means the Ancillary Agreement which is Exhibit C to the Separation Agreement.

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     Section 10.39 Option. “Option,” when immediately preceded by “Sara Lee,” means an option to
purchase Sara Lee common stock pursuant to a Stock Plan. When immediately preceded by “HBI,”
“Option” means an option to purchase HBI common stock pursuant to a Stock Plan.

     Section 10.40 Participating Company. “Participating Company” with respect to a Sara Lee Plan
means: Sara Lee; any Person (other than an individual) that Sara Lee has approved for
participation in, has accepted participation in, and which is participating in, a Plan sponsored by
Sara Lee; and any Person (other than an individual) which, by the terms of such Plan, participates
in such Plan or any employees of which, by the terms of such Plan, participate in or are covered by
such Plan. “Participating Company” with respect to an HBI Plan means HBI; and any Person (other
than an individual) that HBI has approved for participation in, has accepted participation in, and
which is participating in, a Plan sponsored by HBI; and any Person (other than an individual)
which, by the terms of such Plan, participates in such Plan or any employees of which, by the terms
of such Plan, participate in or are covered by such Plan.

     Section 10.41 Parties. “Parties” means the parties to this Agreement.

     Section 10.42 Pension Plan. “Pension Plan” when immediately preceded by “Sara Lee,” means the
Sara Lee Consolidated Pension and Retirement Plan. “Pension Plan” when immediately preceded by
“HBI,” means the Hanesbrands Inc. Pension and Retirement Plan.

     Section 10.43 Performance Shares. “Performance Shares” means shares of restricted stock or
restricted stock units awarded under a Sara Lee Stock Plan under which the employee’s vesting in
such restricted stock or restricted stock units is subject to certain performance measures rather
than the passage of time.

     Section 10.44 Person. “Person” means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, and a governmental entity or any department, agency or political
subdivision thereof.

     Section 10.45 Plan. “Plan” means any plan, policy, program, payroll practice, arrangement,
contract, trust, insurance policy, or any agreement or funding vehicle providing compensation or
benefits to employees, former employees, directors or consultants of Sara Lee or HBI.

     Section 10.46 Puerto Rico Plans. “Puerto Rico Plans” means the Sara Lee Personal Products
Retirement Savings Plan of Puerto Rico, the Sara Lee Personal Products Hourly Retirement Plan of
Puerto Rico, the Playtex Apparel Retirement Savings Plan for Hourly Puerto Rican Employees and the
Playtex Apparel Pension Plan.

     Section 10.47 QDRO. “QDRO” means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an alternate

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payee’s right to, or assigns to an alternate payee, all or a portion of the benefits payable
to a participant under the Sara Lee 401(k) Plan or the Sara Lee Pension Plan.

     Section 10.48 QMCSO. “QMCSO” means a medical child support order which qualifies under ERISA
Section 609(a) and which creates or recognizes the existence of an alternate recipient’s right to,
or assigns to an alternate recipient the right to, receive benefits for which a participant or
beneficiary is eligible under any of the Health Plans.

     Section 10.49 Restricted Stock Unit. “Restricted Stock Unit,” when immediately preceded by
“Sara Lee,” means a right to receive shares of Sara Lee common stock that are subject to transfer
restrictions or to employment and/or performance vesting conditions, pursuant to a Sara Lee Stock
Plan and when immediately preceded by “HBI,” means a right to receive shares of HBI common stock
pursuant to the HBI Deferred Compensation Plan or a Restricted Stock Unit grant under the HBI Stock
Plan.

     Section 10.50 Sara Lee. “Sara Lee” means Sara Lee Corporation, a Maryland corporation. In
all such instances in which Sara Lee is referenced in this Agreement, it shall also be deemed to
include a reference to each member of the Sara Lee Group, unless it specifically provides
otherwise; Sara Lee shall be solely responsible to HBI for ensuring that each member of the Sara
Lee Group complies with the applicable terms of this Agreement.

     Section 10.51 Sara Lee Employee. “Sara Lee Employee” means an individual who, on the
Distribution Date, is: (a) either actively employed by, or on leave of absence from, the Sara Lee
Group; (b) a Sara Lee Terminated Employee; or (c) an employee or group of employees designated as
Sara Lee Employees by Sara Lee and HBI, by mutual agreement.

     Section 10.52 Sara Lee Group. “Sara Lee Group” means Sara Lee and each Subsidiary and
Affiliated Company of Sara Lee (or any predecessor organization thereof).

     Section 10.53 Sara Lee Plans. “Sara Lee Plans” means the Plans maintained by Sara Lee and
shall include the Sara Lee Pension Plan, Sara Lee 401(k) Plan, Sara Lee Health and Welfare Plans,
Sara Lee Group Insurance Plan, Sara Lee Fringe Benefit Plans, the Canadian Pension Plans, and,
until they are assumed by HBI, the Canadian Main Pension Plan and the Puerto Rico Plans.

     Section 10.54 Sara Lee Terminated Employee. “Sara Lee Terminated Employee” means any
individual who is a former employee of the Sara Lee Group and who, on the Distribution Date, is not
an HBI Employee.

     Section 10.55 Section 125 Plan. “Section 125 Plan,” when immediately preceded by “Sara Lee,”
means the Sara Lee Corporation Flexible Compensation Plan and the Sara Lee FSA Plan. When
immediately preceded by “HBI,” “Section 125 Plan” means the Hanesbrands Inc. Flexible Benefit Plan
to be established by HBI pursuant to Sections 1.2 and 4.2.

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     Section 10.56 Separation. “Separation” shall have the meaning set forth in the preamble to
the Separation Agreement.

     Section 10.57 Separation Agreement. “Separation Agreement” means the Master Separation
Agreement as described in the preamble of this Agreement.

     Section 10.58 Separation Date. “Separation Date” shall have the meaning set forth in Section
1.1 of the Separation Agreement.

     Section 10.59 SERP. “SERP,” when immediately preceded by “Sara Lee,” means the Sara Lee
Supplemental Benefit Plan. When immediately preceded by “HBI,” “SERP” means the Hanesbrands Inc.
Supplemental Employee Retirement Plan.

     Section 10.60 Severance Plans. “Severance Plans,” when immediately preceded by “Sara Lee,”
means the Sara Lee Severance Pay Plan and the Sara Lee Severance Pay Plan for A&B Players.

     Section 10.61 Stock Plan. “Stock Plan,” when immediately preceded by “Sara Lee,” means the
Sara Lee Corporation 1998 Long-Term Incentive Stock Plan and the Sara Lee Corporation 2002
Long-Term Incentive Stock Plan and any other plan, program, or arrangement pursuant to which
employees and other service providers hold Options, Sara Lee Restricted Stock Units, or other Sara
Lee equity incentives. When immediately preceded by “HBI,” “Stock Plan” means the Hanesbrands Inc.
2006 Omnibus Incentive Plan to be established by HBI pursuant to Section 1.2.

     Section 10.62 Subsidiary. “Subsidiary” of any person means a corporation or other
organization, whether incorporated or unincorporated, of which at least a majority of the
securities or interest having by the terms thereof ordinary voting power to elect at least a
majority of the board of directors or others performing similar functions with respect to such
corporation or other organization, is directly or indirectly owned or controlled by such Person or
by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however that no Person that is not directly or indirectly wholly-owned by any other
Person shall be a Subsidiary of such other Person unless such other Person controls, or has the
right, power or ability to control that Person. Unless the context otherwise requires, reference
to Sara Lee and its Subsidiaries shall not include the subsidiaries of Sara Lee that will be
transferred to HBI after giving effect to the Separation

     Section 10.63 Unemployment Insurance Program. “Unemployment Insurance Program,” when
immediately preceded by “Sara Lee,” means the group unemployment insurance policies purchased by
Sara Lee from time to time. When immediately preceded by “HBI,” “Unemployment Insurance Program”
means any group unemployment insurance program to be established by HBI pursuant to Section 8.7.

[The remainder of this page is intentionally blank.]

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     IN WITNESS WHEREOF, each of the Parties has caused this Employee Matters Agreement to be
executed on its behalf by its officers hereunto duly authorized on the day and year first above
written.

	 	 	 	 	 
	 	 	SARA LEE CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Diana S. Ferguson
	 

	 	 	 	 
	 

	 	 	 	Diana S. Ferguson

Senior Vice President
	 
	 	 	 	 
	 	 	HANESBRANDS INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Richard A. Noll
	 

	 	 	 	 
	 

	 	 	 	Richard A. Noll

Chief Executive Officer

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SCHEDULE 7.3

EMPLOYEE BENEFIT PLANS

Sara Lee Branded Apparel Hourly Employee Separation Pay Benefits Plan

Sara Lee Corporation Severance Pay Plan for Employees of Sara Lee Branded Apparel

Sara Lee Corporation Voluntary Transition Severance Pay Plan for Sara Lee Branded Apparel Employees

Sara Lee Corporation Supplemental Benefit Plan (SERP)

Hanesbrands Inc Supplemental Employee Retirement Plan (SERP)

Hanesbrands Inc. Key Executive Long Term Disability Plan

Hanesbrands Inc. Key Executive Life Insurance Plan

Sara Lee Corporation Employee Health Benefit Plan

Sara Lee Corporation Group Insurance Program

Sara Lee Corporation Business Travel Accident Insurance Plan

Sara Lee Corporation Flexible Spending Account Plan

Sara Lee Corporation Employee Stock Purchase Plan

Sara Lee Corporation Long-Term Disability Plan

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SCHEDULE 8.3

COLLECTIVE BARGAINING AND LABOR AGREEMENTS

UNITED STATES

Agreement between Sara Lee Underwear/Sock and the Southern Regional Joint Board of UNITE HERE,
AFL-CIO, CLC.

(dated May 20, 2004, expires May 19, 2007)

Agreement between Associated Corset and Brassiere Manufacturers, Inc. and Local 62-32 and Local 10
of UNITE.

(dated July 1, 2003, expires June 30, 2006)

ARGENTINA

La Federacion Argentina de la Industria de la Indumentaria y Afines F.A.I.I.A. y el Sindicato de
Empleados Textiles de la Industria y Afines de la Republica Argentina — S.E.T.I.A.

(dated March 11, 1998)

Federacion Argentina De La Industria De La Indumentaria y Afines (F.A.I.I.A.) y La Union Cortadores
de la Indumentaria, (U.C.I.).

(dated August 31, 2005)

Federacion Argentina de la Industria de la Indumentaria y Afines F.A.I.I.A. y Federacion Obrera de
la Industria del Vestido y Afines, F.O.N.I.V.A.

(dated March 12, 1993 with amendments dated April 24, 1996)

BRAZIL

Agreement between Sinditextil and Sindicato does Mestres E Contramestres, Pessoal de Escritorio E
Cargos de Chefia NA Industria de Fiacao E Tecelagem No Estado de Sao Paulo.

(dated January 11, 2005, expires October 31, 2006 and currently being renegotiated).

Agreement between Sinditextil and Sindicato Dos Trabalhadores NA Industria de Fiacao E Tecelagem de
Sao Paolo.

(dated January 11, 2005, expires October 31, 2006 and currently being renegotiated).

CANADA

Agreement between Canadelle and L’Association des Employes de Canadelle Inc., Usine de Montreal.

(dated March 1, 2003, expired March 3, 2006 and currently being renegotiated).

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Agreement between Canadelle and L’Union des Employes de Canadelle, Centre de Distribution des
Grandes-Prairies.

(dated July 4, 2004, expires July 1, 2007 and currently being renegotiated).

MEXICO

Agreement between Industrias Internacionales de San Pedro, S.A. de C.V. and Sindicato de
Trabajadores de la Industria Manufacturera y Maquiladora de Coahuila, C.T.M.

(dated July 17, 2000, review scheduled for February 1, 2007).

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