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EXHIBIT 2.4
Employee Matters Agreement
between
SARA LEE CORPORATION
and
COACH, INC.
Effective as of the Effective Date
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ARTICLE I GENERAL PRINCIPLES......................................................................1
Section 1.1 Assumption of Coach Liabilities.....................................................1
Section 1.2 Establishment of Coach Plans........................................................2
Section 1.3 Coach Under No Obligation to Maintain Plans.........................................2
Section 1.4 Coach's Participation in Sara Lee Plans.............................................2
Section 1.5 Terms of Participation by Coach Employees and Coach Transferred Employees
in Coach 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 ESOP................................................................................5
Section 2.4 Puerto Rico Plans...................................................................6
Section 2.5 Other Coach Retirement Plans........................................................7
ARTICLE III NON-QUALIFIED PLANS.....................................................................7
Section 3.1 Deferred Compensation Plan..........................................................7
Section 3.2 SERP................................................................................7
ARTICLE IV HEALTH AND WELFARE PLANS................................................................8
Section 4.1 Health Plans as of the Distribution Date............................................8
Section 4.2 Health Plans from the Separation Date through the Distribution Date.................8
Section 4.3 Section 125 Plan....................................................................9
Section 4.4 Severance Plans.....................................................................9
Section 4.5 Disability Plans...................................................................10
Section 4.6 Business Travel Accident Insurance.................................................10
Section 4.7 Group Insurance Plan...............................................................10
Section 4.8 Workers' Compensation Plan.........................................................10
Section 4.9 Key Executive Plans................................................................10
ARTICLE V EQUITY AND OTHER COMPENSATION..........................................................11
Section 5.1 Coach Incentive Plans..............................................................11
Section 5.2 Sara Lee Long-Term Incentive Plan..................................................11
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Section 5.3 Executive Restricted Stock Plan....................................................11
Section 5.4 Sara Lee Options...................................................................13
Section 5.5 Administrative Services............................................................15
Section 5.6 Certification of Ownership.........................................................15
ARTICLE VI FRINGE AND OTHER BENEFITS..............................................................16
Section 6.1 Fringe Benefit Plans...............................................................16
ARTICLE VII ADMINISTRATIVE PROVISIONS..............................................................16
Section 7.1 Intercompany Transitional Services.................................................16
Section 7.2 Payment of Liabilities, Plan Expenses and Related Matters..........................16
Section 7.3 Sharing of Participant Information.................................................17
Section 7.4 Reporting and Disclosure Communications to Participants............................17
Section 7.5 Employee Identification Numbers....................................................18
Section 7.6 Beneficiary Designation............................................................18
Section 7.7 Requests for IRS and DOL Opinions..................................................18
Section 7.8 Fiduciary Matters..................................................................18
Section 7.9 Consent of Third Parties...........................................................18
Section 7.10 Tax Cooperation....................................................................18
Section 7.11 Financial Reporting Cooperation....................................................18
ARTICLE VIII EMPLOYMENT-RELATED MATTERS.............................................................19
Section 8.1 Terms of Coach Employment..........................................................19
Section 8.2 HR Data Support Systems............................................................19
Section 8.3 Employment of Employees with U.S. Work Visas.......................................19
Section 8.4 Confidentiality and Proprietary Information........................................19
Section 8.5 Personnel Records..................................................................19
Section 8.6 Medical Records....................................................................20
Section 8.7 Unemployment Insurance Program.....................................................20
Section 8.8 Non-Termination of Employment; No Third-Party Beneficiaries........................20
ARTICLE IX GENERAL PROVISIONS.....................................................................20
Section 9.1 Effect if Separation, IPO and/or Distribution Does Not Occur.......................20
Section 9.2 Relationship of Parties............................................................21
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Section 9.3 Affiliates.........................................................................21
Section 9.4 Incorporation of Separation Agreement Provisions...................................21
Section 9.5 Notices............................................................................21
Section 9.6 Governing Law and Jurisdiction.....................................................22
Section 9.7 Assignment.........................................................................22
Section 9.8 Severability.......................................................................22
Section 9.9 Interpretation.....................................................................22
Section 9.10 Amendment..........................................................................23
Section 9.11 Termination........................................................................23
Section 9.12 Conflict...........................................................................23
Section 9.13 Counterparts.......................................................................23
ARTICLE X DEFINITIONS............................................................................23
Section 10.1 401(k) Plan........................................................................24
Section 10.2 Affiliate..........................................................................24
Section 10.3 Agreement..........................................................................24
Section 10.4 Ancillary Agreements...............................................................24
Section 10.5 Assets.............................................................................24
Section 10.6 Business Travel Accident Insurance.................................................24
Section 10.7 Coach..............................................................................24
Section 10.8 Coach Business.....................................................................24
Section 10.9 Coach Claims.......................................................................25
Section 10.10 Coach Employee.....................................................................25
Section 10.11 Coach GIP..........................................................................25
Section 10.12 Coach Group........................................................................25
Section 10.13 Coach Stock Value..................................................................25
Section 10.14 Coach Terminated Employee..........................................................25
Section 10.15 Coach Transferred Employee.........................................................26
Section 10.16 COBRA..............................................................................26
Section 10.17 Code...............................................................................26
Section 10.18 Deferred Compensation Plan.........................................................26
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Section 10.19 Dispute............................................................................27
Section 10.20 Disability Plans...................................................................27
Section 10.21 Distribution.......................................................................27
Section 10.22 Distribution Date..................................................................27
Section 10.23 DOL................................................................................27
Section 10.24 Effective Date.....................................................................27
Section 10.25 Elective Option Assumption Ratio...................................................27
Section 10.26 ERISA..............................................................................27
Section 10.27 ESOP...............................................................................27
Section 10.28 Executive Bonus Plan...............................................................27
Section 10.29 Executive Restricted Stock Plan....................................................27
Section 10.30 FMLA...............................................................................27
Section 10.31 Foreign Plan.......................................................................27
Section 10.32 Fringe Benefit Plans...............................................................28
Section 10.33 FSA Plan...........................................................................28
Section 10.34 General Assignment and Assumption Agreement........................................28
Section 10.35 Group Insurance Plan...............................................................28
Section 10.36 HCFA...............................................................................28
Section 10.37 Health and Welfare Plans...........................................................28
Section 10.38 Health Plans.......................................................................28
Section 10.39 HMO................................................................................29
Section 10.40 IPO................................................................................29
Section 10.41 IPO Closing Date...................................................................29
Section 10.42 IPO Registration Statement.........................................................29
Section 10.43 IRS................................................................................29
Section 10.44 Key Executive Plans................................................................29
Section 10.45 Liabilities........................................................................29
Section 10.46 Long-Term Incentive Plan...........................................................29
Section 10.47 Master Transitional Services Agreement.............................................29
Section 10.48 NYSE...............................................................................29
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Section 10.49 Option.............................................................................29
Section 10.50 Outsource..........................................................................30
Section 10.51 Participating Company..............................................................30
Section 10.52 Pension Plan.......................................................................30
Section 10.53 Person.............................................................................30
Section 10.54 Plan...............................................................................30
Section 10.55 Post-Distribution Period...........................................................30
Section 10.56 Premium Plan.......................................................................30
Section 10.57 Puerto Rico Plans..................................................................30
Section 10.58 QDRO...............................................................................30
Section 10.59 QMCSO..............................................................................30
Section 10.60 Ratio..............................................................................31
Section 10.61 Record Date........................................................................31
Section 10.62 Restricted Stock Unit..............................................................31
Section 10.63 Revenue............................................................................31
Section 10.64 Sara Lee...........................................................................31
Section 10.65 Sara Lee Employee..................................................................31
Section 10.66 Sara Lee Group.....................................................................31
Section 10.67 Sara Lee Plans.....................................................................31
Section 10.68 Sara Lee Stock Value...............................................................31
Section 10.69 Sara Lee Terminated Employee.......................................................32
Section 10.70 SEC................................................................................32
Section 10.71 Section 125 Plan...................................................................32
Section 10.72 Separation.........................................................................32
Section 10.73 Separation Agreement...............................................................32
Section 10.74 Separation Date....................................................................32
Section 10.75 SERP...............................................................................32
Section 10.76 Severance Plans....................................................................32
Section 10.77 Stock Plan.........................................................................32
Section 10.78 Subsidiary.........................................................................32
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Section 10.79 Unemployment Insurance Program.....................................................33
Section 10.80 Workers' Compensation Plan.........................................................33
SCHEDULE 1.6 FOREIGN PLANS..........................................................................35
SCHEDULE 4.1(a) COACH HEALTH PLANS.....................................................................36
SCHEDULE 4.2 SARA LEE HEALTH PLANS..................................................................37
SCHEDULE 5.4 SARA LEE RESTRICTED STOCK HELD BY NON-U.S. COACH TRANSFERRED EMPLOYEES.................38
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EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT is signed on August 24, 2000, to be
effective on the Effective Date, between Sara Lee Corporation, a Maryland
corporation ("Sara Lee"), and Coach, Inc., a Maryland corporation ("Coach").
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, shall
have the respective meanings assigned to them in Article X hereof.
WHEREAS, the Board of Directors of Sara Lee has determined that it is
in the best interests of Sara Lee and its shareholders to disaggregate Sara
Lee's existing Coach division into a wholly-owned Subsidiary; and
WHEREAS, in furtherance of the foregoing, Sara Lee and Coach have
agreed to enter into this Agreement to allocate between them Assets, Liabilities
and responsibilities with respect to certain employee compensation, benefit
plans, programs and arrangements, and certain employment matters.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
GENERAL PRINCIPLES
Section 1.1 Assumption of Coach Liabilities. Except as specified
otherwise in this Agreement or as mutually agreed upon by Coach and Sara Lee
from time to time, Coach and the Coach Plans hereby assume and agree to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
of the following: (a) effective as of the Separation Date with respect to the
Coach Employees: (i) all Liabilities relating to, arising out of, or resulting
from future, present or former employment with the Coach Business (including
Liabilities relating to, arising out of, or resulting from Sara Lee Plans and
Coach Plans); (ii) all Liabilities relating to, arising out of, or resulting
from any other actual or alleged employment relationship with the Coach Group;
and (iii) all other Liabilities relating to, arising out of, or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by
the Coach Group, or a Coach Plan pursuant to this Agreement; and (b) effective
as of the Distribution Date with respect to the Coach Transferred Employees: (i)
all Liabilities relating to, arising out of, or resulting from future, present
or former employment with the Coach Business (including Liabilities relating to,
arising out of, or resulting from Sara Lee Plans and Coach Plans); (ii) all
Liabilities relating to, arising out of, or resulting from any other actual or
alleged employment relationship with the Coach Group; and (iii) all other
Liabilities relating to, arising out of, or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by the Coach
Group, or
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a Coach Plan pursuant to this Agreement.
Section 1.2 Establishment of Coach Plans.
(a) Health and Welfare Plans and Fringe Benefit Plans.
Effective as of or before the Distribution Date, Coach shall adopt the
Coach Health and Welfare Plans and the Coach Fringe Benefit Plans.
(b) 401(k) Plan. Effective as of or before the Distribution
Date, Coach shall adopt the Coach 401(k) Plan.
(c) Equity and Other Compensation. Effective as of or before
the IPO Closing Date, Coach shall adopt (i) the Coach Stock Plans and
(ii) the Coach Executive Bonus Plan.
(d) Nonqualified Plan. Effective as of June 1, 2000, Coach
adopted the Coach Deferred Compensation Plan.
(e) Assistance by Sara Lee. If Coach so elects, Sara Lee shall
use its commercially reasonable best efforts for and on behalf of Coach
to assist Coach in establishing the Coach 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 Coach
Plans.
Section 1.3 Coach Under No Obligation to Maintain Plans. Except as
specified otherwise in this Agreement, nothing in this Agreement shall preclude
Coach, at any time after Coach establishes any Plan, from amending, merging,
modifying, terminating, eliminating, reducing, or otherwise altering in any
respect any Coach Plan, any benefit under any Coach Plan or any trust, insurance
policy or funding vehicle related to any Coach Plans, or any employment or other
service arrangement with Coach Employees, independent contractors or vendors (to
the extent permitted by law).
Section 1.4 Coach's Participation in Sara Lee Plans.
(a) Participation in Sara Lee Plans. Except as specified
otherwise in this Agreement, Coach shall, until the Distribution Date,
continue to be a Participating Company in the Sara Lee Plans to the
extent that Coach has not established a corresponding Plan.
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(b) Sara Lee's General Obligations as Plan Sponsor. To the
extent that Coach 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 Coach establishes a
corresponding Plan (as specified in Section 1.2 or otherwise in this
Agreement), Coach shall automatically cease to be a Participating
Company in the corresponding Sara Lee Plan (regardless of whether,
prior to the Distribution Date, Coach terminates or otherwise modifies
its Plans).
(c) Coach's General Obligations as Participating Company.
Coach 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 Coach Employees and Coach Transferred
Employees in Coach Plans.
(a) Non-Duplication of Benefits. Except as specified otherwise
in this Agreement, as of the Separation Date, or other later date that
applies to the particular Coach Plan established thereafter, the Coach
Plans shall not provide benefits that duplicate benefits provided by
the corresponding Sara Lee Plans. Sara Lee and Coach shall agree on
methods and procedures, including amending the respective Plan
documents, to prevent Coach Employees from receiving duplicate benefits
from the Sara Lee Plans and the Coach 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 Coach Transferred Employees, each Coach Plan
shall provide that all service and compensation that, as of the
Distribution Date, were recognized under the corresponding Sara Lee
Plan shall, as of the Distribution Date, receive full recognition and
credit and be taken into account under such Coach Plan to the same
extent as if such items occurred under such Coach Plan, except to the
extent that duplication of benefits would result. The service crediting
provisions shall be subject to any respectively
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applicable "service bridging," "break in service," "employment date,"
or "eligibility date" rules under the Coach Plans and the Sara Lee
Plans.
Section 1.6 Foreign Plans. Coach 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 or Schedule 1.6). The
Foreign Plans are to be listed in Schedule 1.6.
ARTICLE II
RETIREMENT PLANS
Section 2.1 401(k) Plan.
(a) 401(k) Plan Trust. Effective as of or before the
Distribution Date, Coach 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)(1), and to form a part of the Coach 401(k) Plan. To the extent
permitted by law, the Coach 401(k) Plan shall (i) accept rollover
contributions that satisfy Section 402 of the Code from the Sara Lee
ESOP, Sara Lee Pension Plan, and Sara Lee Puerto Rico Plans, and (ii)
be capable of covering Puerto Rico employees.
(b) 401(k) Plan: Assumption of Liabilities and Transfer of
Assets. Effective as of or before the Distribution Date: (i) the Coach
401(k) Plan shall assume and be solely responsible for all Liabilities
relating to, arising out of, or resulting from Coach Transferred
Employees under the Sara Lee 401(k) Plan including, without limitation,
outstanding loans of Coach Transferred Employees; and (ii) Sara Lee
shall cause the accounts of the Coach Transferred Employees under the
Sara Lee 401(k) Plan that are held by its related trust, including
promissory notes evidencing outstanding loans of Coach Transferred
Employees, to be transferred to the Coach 401(k) Plan and its related
trust in cash (or, if mutually agreed by Sara Lee and Coach, other
property), and Coach shall cause such transferred accounts to be
accepted by such Plan and its related trust. Coach and Sara Lee
acknowledge and agree that such transfer of assets and liabilities
comply with Sections 401(a)(12), 414(l) and 411(d)(6) of the Code and
the regulations thereunder. Sara Lee shall take all actions necessary
and appropriate to provide that all amounts credited to the accounts of
Coach Transferred Employees participating in the Sara Lee 401(k) Plan
(excluding employer matching contributions) shall be fully vested and
nonforfeitable, effective as of the Distribution Date. Following the
Distribution Date, Sara Lee shall retain sole responsibility for all
benefit obligations under the Sara Lee 401(k) Plan, and Coach shall
have no obligation with respect thereto.
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(c) 401(k) Plan: Stock Considerations. As a result of the
spin-off of the Sara Lee 401(k) Plan and the Distribution, participant
accounts in each of the Sara Lee 401(k) Plan and the Coach 401(k) Plan
may both contain, in part, Sara Lee and Coach employer securities.
Coach and Sara Lee 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 requirements of ERISA and applicable securities laws.
(d) No Distribution to Coach Transferred Employees. The Sara
Lee 401(k) Plan and the Coach 401(k) Plan shall provide that no
distribution of account balances shall be made to any Coach Transferred
Employee solely on account of the Distribution.
(e) Administration of Coach 401(k) Plan. Prior to the
Distribution Date, Coach shall contract with a third party
administrator to administer the Coach 401(k) Plan, which contract shall
include the administration of participant loans transferred from the
Sara Lee 401(k) Plan to the Coach 401(k) Plan. Coach or such third
party administrator shall provide Sara Lee with at least sixty (60)
days written notice of the transfer of assets under Subsection 2.1(b).
Section 2.2 Pension Plan. Each Coach Transferred Employee who is
actively employed by the Coach Companies on the Distribution Date shall be
treated as terminating employment with Sara Lee on the Distribution Date for
purposes of the Sara Lee Pension Plan; provided, that Sara Lee shall amend the
Sara Lee Pension Plan to provide that for each Coach Transferred Employee who
was actively employed by the Coach Companies on the IPO Closing Date, service
with the Coach Companies after the Distribution Date shall be treated as vesting
service under the Sara Lee Pension Plan.
Section 2.3 ESOP.
(a) Termination Under ESOP. Each Coach Transferred Employee
who is actively employed by the Coach Companies on the Distribution
Date shall be treated as terminating employment with Sara Lee on the
Distribution Date for purposes of the Sara Lee ESOP.
(b) ESOP: Assumption of Liabilities and Transfer of Assets.
Effective as of or before the Distribution Date: (i) the Coach 401(k)
Plan (or such other defined contribution Plan established by Coach that
is qualified under Section 401(a) of the Code) shall assume and be
solely responsible for all Liabilities relating to, arising out of, or
resulting from each Coach Transferred Employee who is actively employed
by the Coach Companies on the Distribution Date under the Sara Lee
ESOP; and (ii) Sara Lee shall cause the accounts of such Coach
Transferred Employees under the Sara Lee ESOP that are held by its
related trust to be transferred to the Coach 401(k) Plan (or such other
defined contribution Plan established by Coach that is qualified under
Section 401(a) of
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the Code) and its related trust in cash (or, if mutually agreed by Sara
Lee and Coach, other property), and Coach shall cause such transferred
accounts to be accepted by such Plan and its related trust. Coach and
Sara Lee acknowledge and agree that such transfer of assets and
liabilities comply with Sections 401(a)(12), 414(l) and 411(d)(6) of
the Code and the regulations thereunder. Coach shall take all actions
necessary and appropriate to provide that all amounts transferred to
the accounts of Coach Transferred Employees under this Subsection
2.3(b) shall continue to vest on and after the Distribution Date.
Following the Distribution Date, Sara Lee shall retain sole
responsibility for all benefit obligations under the Sara Lee ESOP, and
Coach shall have no obligation with respect thereto. Coach shall
provide Sara Lee with at least sixty (60) days written notice of the
transfer of assets under this Subsection 2.3(b).
Section 2.4 Puerto Rico Plans.
(a) Termination Under Puerto Rico Plans. Each Coach
Transferred Employee who is actively employed by the Coach Companies on
the Distribution Date shall be treated as terminating employment with
Sara Lee on the Distribution Date for purposes of the Sara Lee Puerto
Rico Plans.
(b) Puerto Rico Plans: Assumption of Liabilities and Transfer
of Assets. Effective as of or before the Distribution Date: (i) the
Coach 401(k) Plan (or such other defined contribution Plan established
by Coach that is qualified under Section 401(a) of the Code and
satisfies the requirements of Puerto Rico law) shall assume and be
solely responsible for all Liabilities relating to, arising out of, or
resulting from each Coach Transferred Employee who is actively employed
by the Coach Companies on the Distribution Date under the Sara Lee
Puerto Rico Plans; and (ii) Sara Lee shall cause the accounts of such
Coach Transferred Employees under the Sara Lee Puerto Rico Plans that
are held by its related trust to be transferred to the Coach 401(k)
Plan (or such other defined contribution Plan established by Coach that
is qualified under Section 401(a) of the Code and satisfies the
requirements of Puerto Rico law) and its related trust in cash (or, if
mutually agreed by Sara Lee and Coach, other property), and Coach shall
cause such transferred accounts to be accepted by such Plan and its
related trust. Coach and Sara Lee acknowledge and agree that such
transfer of assets and liabilities comply with Sections 401(a)(12),
414(l) and 411(d)(6) of the Code and the regulations thereunder and all
other applicable requirements of Puerto Rico law. Coach shall take all
actions necessary and appropriate to provide that all amounts
transferred to the accounts of Coach Transferred Employees under this
Subsection 2.4(b) shall continue to vest on and after the Distribution
Date. Following the Distribution Date, Sara Lee shall retain sole
responsibility for all benefit obligations under the Sara Lee Puerto
Rico Plans, and Coach shall have no obligation with respect thereto.
Coach shall provide Sara Lee with at least sixty (60) days written
notice of the transfer of assets under this Subsection 2.4(b).
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Section 2.5 Other Coach Retirement Plans. As of the Separation Date,
Coach maintains the Coach Leatherware Company, Inc. Supplemental Pension Plan.
On and after the Separation Date, Coach may continue to maintain the Coach
Leatherware Company, Inc. Supplemental Pension Plan.
ARTICLE III
NON-QUALIFIED PLANS
Section 3.1 Deferred Compensation Plan.
(a) Elective Allocation of Assets and Assumption of
Liabilities. As of the IPO Closing Date, Sara Lee shall determine the
amount of Liabilities under the Sara Lee Deferred Compensation Plan
attributable to Coach Employees who elect to transfer their account
balances to the Coach Deferred Compensation Plan. As soon as
administratively practicable thereafter, Sara Lee shall pay to Coach
cash equal to such Liabilities. Coincident with the receipt of such
transfer, Coach shall assume all responsibilities and obligations
relating to, arising out of, or resulting from such Liabilities.
(b) Participation in Deferred Compensation Plan. Effective as
of June 1, 2000, eligible Coach Employees may commence participation in
the Coach Deferred Compensation Plan. Coach Employees who are currently
participating in the Sara Lee Deferred Compensation Plan shall continue
their participation in that Plan (according to its terms) unless and
until either (i) such Coach Employees elect to transfer their account
balances to the Coach Deferred Compensation Plan, or (ii) the
Distribution Date. Coach Terminated Employees who are currently
participating in the Sara Lee Deferred Compensation Plan shall continue
their participation in that Plan (according to its terms).
(c) Mandatory Allocation of Assets and Assumption of
Liabilities. As of the Distribution Date, Coach Transferred Employees
shall cease all future participation in the Sara Lee Deferred
Compensation Plan and Sara Lee shall determine the amount of
Liabilities under the Sara Lee Deferred Compensation Plan attributable
to Coach Transferred Employees who did not elect to transfer their
account balances to the Coach Deferred Compensation Plan in accordance
with Subsection 3.1(a). As soon as administratively practicable
thereafter, Sara Lee shall pay to Coach cash equal to such Liabilities.
Coincident with the receipt of such transfer, Coach shall assume all
responsibilities and obligations relating to, arising out of, or
resulting from such Liabilities.
Section 3.2 SERP. Each Coach Transferred Employee who is actively
employed by the Coach Companies on the Distribution Date shall be treated as
terminating employment with Sara Lee on the Distribution Date for purposes of
the Sara Lee SERP; provided, that Sara Lee
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shall amend the Sara Lee SERP to provide that for each Coach Transferred
Employee who was actively employed by the Coach Companies on the IPO Closing
Date, service with the Coach Companies after the Distribution Date shall be
treated as vesting service under the Sara Lee SERP.
ARTICLE IV
HEALTH AND WELFARE PLANS
Section 4.1 Health Plans as of the Distribution Date.
(a) Coach Health Plans. As of or before the Distribution Date,
Coach shall have established the Coach Health Plans listed on Schedule
4.1(a) and, correspondingly, Coach shall cease to be a Participating
Company in the Sara Lee Health Plans with respect to Coach Transferred
Employees and Coach Terminated Employees who are not receiving retiree
medical coverage under the Sara Lee Health Plans. Sara Lee shall retain
benefit obligations for Coach Transferred Employees and Coach
Terminated Employees who are receiving retiree medical coverage under
the Sara Lee Health Plans as of the earlier of the Distribution Date or
the date the Coach Health Plans are established, subject to the terms
of the Sara Lee Health Plans (including, without limitation, Sara Lee's
right to amend and/or terminate the Sara Lee Health Plans; provided
that Coach Employees and Coach Transferred Employees shall be treated
consistently with other similarly situated participants in the event of
any amendment and/or termination of the Sara Lee Health Plans). Coach
shall be solely responsible for the administration of the Coach Health
Plans, including the payment of all employer-related costs in
establishing and maintaining the Coach Health Plans, and for the
collection and remittance of participant contributions and premiums,
subject to Section 7.2. Following the earlier of the Distribution Date
or the date the Coach Health Plans are established, Sara Lee shall
retain sole responsibility for all benefit obligations under the Sara
Lee Health Plans (except as provided in Section 4.2), and Coach shall
have no obligation (except as provided in Section 4.2) with respect
thereto.
(b) HCFA. As of the earlier of (i) the Distribution Date or
(ii) the date the Coach Health Plans are established pursuant to
Subsection 4.1(a), Coach shall assume all Liabilities relating to,
arising out of, or resulting from claims, if any, under the HCFA data
match reports that relate to Coach Transferred Employees or the Coach
Terminated Employees who are not receiving retiree medical coverage
under the Sara Lee Health Plans.
Section 4.2 Health Plans from the Separation Date through the
Distribution Date.
(a) Coach Participating Company. Except as otherwise agreed by
Sara Lee
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and Coach, for the period beginning with the Separation Date and ending
on the Distribution Date (or such earlier date that Coach establishes
the Coach Health Plans), Coach shall be a Participating Company in the
Sara Lee Health Plans listed on Schedule 4.2. Sara Lee shall administer
claims incurred under the Sara Lee Health Plans by Coach Employees
before the Distribution Date but only to the extent that Coach has not,
before the Distribution Date, established and assumed administrative
responsibility for a corresponding Health Plan. Any determination made
or settlements entered into by Sara Lee with respect to such claims
shall be final and binding. Coach shall retain financial and
administrative ("run-out") Liability and all related obligations and
responsibilities for all claims incurred by Coach Transferred Employees
and Coach Employees before the Distribution Date (or such earlier date
that Coach establishes the Coach Health Plans), including any claims
that were administered by Sara Lee as of, on, or after the Distribution
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 Sara Lee and Coach.
(b) COBRA. Coach shall continue to be responsible through the
Distribution Date (or, if earlier, the date that Coach establishes the
Coach Health Plans) for compliance with the health care continuation
coverage requirements of COBRA and the Sara Lee Health Plans with
respect to Coach Employees, Coach Transferred Employees, Coach
Terminated Employees and qualified beneficiaries (as such term is
defined under COBRA). Effective as of the earlier of the date that
Coach establishes the Coach Health Plans or the Distribution Date,
Coach shall be solely responsible for compliance with the health care
continuation coverage requirements of COBRA and the Coach Health Plans
for Coach Transferred Employees and their qualified beneficiaries (as
such term is defined under COBRA).
Section 4.3 Section 125 Plan. Through the Distribution Date, Coach
shall remain a Participating Company in the Sara Lee Section 125 Plan. The
existing elections for Coach Transferred Employees participating in the Sara Lee
Section 125 Plan and for newly-eligible employees of Coach who elect to
participate in the Sara Lee Section 125 Plan shall remain in effect through the
end of the applicable Section 125 plan year in which the Distribution Date
occurs. Effective on the Distribution Date (or, if earlier, such other date
immediately following the date that Coach's participation in the Sara Lee
Section 125 Plan terminates), Coach shall establish, or caused to be
established, the Coach Section 125 Plan and Coach shall be solely responsible
for the Coach Section 125 Plan. In the event that Coach establishes the Coach
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 Coach Transferred Employees
who are participating in the Sara Lee FSA Plan to be transferred to the Coach
Section 125 Plan.
Section 4.4 Severance Plans. Coach shall, until the earlier of the IPO
Closing Date or the date Coach establishes the Coach Severance Plans, continue
to be a Participating Company in
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the Sara Lee Severance Plans.
Section 4.5 Disability Plans. As of the Separation Date, Coach was not
a Participating Company in the Sara Lee Disability Plans. Accordingly, on and
after the Separation Date, Coach shall not be eligible to become a Participating
Company in the Sara Lee Disability Plans.
Section 4.6 Business Travel Accident Insurance. Through the
Distribution Date, Coach shall remain a Participating Company in the Sara Lee
Business Travel Accident Insurance policy. Sara Lee shall be responsible for
administering or causing to be administered the Sara Lee Business Travel
Accident Insurance policy with respect to Coach Employees. Effective as of the
Distribution Date, Coach shall be solely responsible for maintaining its own
Business Travel Accident Insurance policy.
Section 4.7 Group Insurance Plan. Coach shall, until the earlier of the
Distribution Date or the date Coach establishes the Coach Group Insurance Plan,
continue to be a Participating Company in the Sara Lee Group Insurance Plan.
Section 4.8 Workers' Compensation Plan.
(a) Participation in the Sara Lee Workers' Compensation Plan.
Until the Distribution Date, Coach shall continue to be a Participating
Company in the Sara Lee Workers' Compensation Plan. Sara Lee shall
assume and be solely responsible for all Liabilities relating to,
arising out of, or resulting from all claims by Coach Employees, Coach
Terminated Employees and Coach Transferred Employees based on
employment with the Coach Business ("Coach Claims") prior to the
Distribution Date. Sara Lee shall continue to administer, or cause to
be administered, the Sara Lee Workers' Compensation Plan in accordance
with its terms and applicable law. Coach shall fully cooperate with
Sara Lee and its insurance company in the administration and reporting
of Coach Claims under the Sara Lee Workers' Compensation Plan. Any
determination made, or settlement entered into, by or on behalf of Sara
Lee or its insurance company with respect to Coach Claims under the
Sara Lee Workers' Compensation Plan shall be final and binding. Until
the Distribution Date, Coach shall continue to reimburse Sara Lee and
its insurance company for all costs related to Coach's participation in
the Sara Lee Workers' Compensation Plan.
(b) Establishment of the Coach Workers' Compensation Plan. As
of the Distribution Date, Coach shall be responsible for complying with
the workers' compensation requirements of the states in which the Coach
Group conducts business and for obtaining and maintaining insurance
programs for its risk of loss. Such insurance arrangements shall be
separate and apart from the Sara Lee Workers' Compensation Plan.
Section 4.9 Key Executive Plans. As of the Distribution Date, Coach
Transferred Employees who were participants in the Sara Lee Key Executive Plans
shall cease participation
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in such plans. Coach may establish plans for its key executives, in its sole
discretion.
ARTICLE V
EQUITY AND OTHER COMPENSATION
Section 5.1 Coach Incentive Plans.
(a) Coach GIP. As of the Separation Date, Coach maintained the
Coach GIP. The Coach GIP shall continue on and after the IPO Closing
Date and any bonus that has been earned and finally determined under
the Coach GIP for the benefit of, or that is allocable to, a Coach
Employee shall be paid at such time and pursuant to the terms and
conditions as specified in the Coach GIP.
(b) Coach Annual Incentive Plan. Effective as of June 29, 2000
Coach has established an annual incentive plan subject to the
parameters of the Coach Executive Bonus Plan for Coach Employees.
Section 5.2 Sara Lee Long-Term Incentive Plan. Any performance shares
that a Coach Employee has been awarded under the Sara Lee Long-Term Incentive
Plan for a performance period beginning prior to the Distribution Date shall
continue to vest and such Coach Employee shall continue to participate in the
Sara Lee Long-Term Incentive Plan with respect to such performance shares
through the end of the performance period pursuant to the terms and conditions
of the award and the Sara Lee Long-Term Incentive Plan. Sara Lee shall charge
Coach for the fair market value of awards earned by Coach Employees under the
Sara Lee Long-Term Incentive Plan.
Section 5.3 Executive Restricted Stock Plan.
(a) Elective Restricted Stock Unit Conversion by Coach at IPO
Pricing Date. Effective as of the date the IPO is priced (and subject
to the IPO being consummated), Coach Employees shall cease all future
participation in the Sara Lee Executive Restricted Stock Plan. As of
the date the IPO is priced (and subject to the IPO being consummated),
all Sara Lee Restricted Stock Units held by those officers and key
employees of Coach identified by Coach and Sara Lee in writing shall be
assumed by Coach to the extent that the individual (i) elects to have
such Sara Lee Restricted Stock Units assumed and (ii) executes a
release and waiver that satisfies Sara Lee. Subject to the specific
provisions of the agreements governing the Restricted Stock Units, the
Sara Lee Restricted Stock Units shall be converted to Coach Restricted
Stock Units as of the date the IPO is priced for each individual who
makes an election in accordance with this Subsection 5.3(a) by (1)
multiplying (A) the number of such individual's Sara Lee Restricted
Stock Units, and (B) the Sara Lee Stock Value, (2) dividing that number
by the Coach Stock Value, and (3)
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rounding down the resulting number to the nearest whole number of Coach
Restricted Stock Units. As soon as administratively practicable
thereafter, Sara Lee shall pay to Coach cash equal to the accrued value
of such Sara Lee Restricted Stock Units that are assumed under this
Subsection 5.3(a). Each Restricted Stock Unit so assumed by Coach shall
be subject to the terms and conditions set forth in the Coach Stock
Plan and as provided in the respective agreements governing such
assumed Restricted Stock Units. All Restricted Stock Units held by each
Coach Employee that are not assumed by Coach in accordance with the
previous two sentences shall continue to vest in accordance with the
provisions of the Sara Lee Executive Restricted Stock Plan.
(b) Restricted Stock Unit Conversion by Coach at Distribution
Date. At the Distribution Date, each outstanding Sara Lee Restricted
Stock Unit held by Coach Transferred Employees shall be assumed by
Coach and mandatorily converted to Coach Restricted Stock Units.
Subject to the specific provisions of the agreements governing the
Restricted Stock Units, such outstanding Sara Lee Restricted Stock
Units shall be converted to Coach Restricted Stock Units by (1)
multiplying (A) the number of such Sara Lee Restricted Stock Units, and
(B) the Sara Lee Stock Value, (2) dividing that number by the Coach
Stock Value, and (3) rounding down the resulting number to the nearest
whole number of Coach Restricted Stock Units. As soon as
administratively practicable thereafter, Sara Lee shall pay to Coach
cash equal to the accrued value of such assumed Sara Lee Restricted
Stock Units. Each Sara Lee Restricted Stock Unit so assumed by Coach
shall continue to have, and be subject to, substantially the same terms
and conditions set forth in the Coach Stock Plan and as provided in the
respective agreements governing such assumed Restricted Stock Units.
(c) Limitations on Release of Restricted Stock Unit Awards.
The agreements under which any Coach Restricted Stock Units are granted
shall provide that Coach common stock may not be released to satisfy
the Coach Restricted Stock Unit award under any condition: (i) prior to
the date that is six (6) months after the IPO Closing Date; (ii) prior
to the date that is twelve (12) months after the IPO Closing Date
unless, at the time of release, Sara Lee certifies to Coach that it no
longer owns either (A) shares of Coach common stock representing
"control" of Coach (within the meaning of Section 368(c) of the Code),
or (B) shares of Coach common stock sufficient to satisfy the
"80-percent voting and value test" described in Section 1504(a)(2) of
the Code; or (iii) on and after the date that is twelve (12) months
after the IPO Closing Date unless, at the time of release, either (A)
Sara Lee certifies to Coach that it no longer owns either (I) shares of
Coach common stock representing "control" of Coach (within the meaning
of Section 368(c) of the Code), or (II) shares of Coach common stock
sufficient to satisfy the "80-percent voting and value test" described
in Section 1504(a)(2) of the Code, or (B) Coach demonstrates to the
satisfaction of Sara Lee that it has purchased shares on the open
market prior to the release in a number sufficient to cover the
release. Notwithstanding the foregoing, prior to the Distribution Date,
Coach agrees to take such actions as may be
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required by Sara Lee to process Coach Restricted Stock Unit Awards,
including purchasing shares of Coach common stock on the open market,
to ensure that Sara Lee continues to hold either shares of Coach common
stock representing "control" of Coach (within the meaning of Section
368(c) of the Code) or shares of Coach common stock sufficient to
satisfy the "80-percent voting and value test" described in Section
1504(a)(2) of the Code after each Option exercise. Coach further agrees
that, to the extent it may legally do so, it shall promptly repurchase
shares of Coach common stock on the open market to enable any Coach
Transferred Employee who has satisfied the restrictions of Coach
Restricted Stock Unit award to receive the number of shares of Coach
common stock subject to such award.
Section 5.4 Sara Lee Options.
(a) Elective Option Assumption by Coach at IPO Pricing Date.
(i) As of the date the IPO is priced (and subject to
the IPO being consummated), each outstanding Sara Lee Option
held by those officers and key employees of Coach identified
by Coach and Sara Lee in writing, whether vested or unvested,
shall be assumed by Coach to the extent that such individual
elects to have any such Option assumed and executes a release
and waiver that satisfies Sara Lee. Each Sara Lee Option so
assumed by Coach shall be subject to the terms and conditions
set forth in the Coach Stock Plan and as provided in the
respective option agreements governing such assumed Options.
Subject to the specific provisions of the governing option
agreements, (A) each assumed Option shall be exercisable for
that number of whole shares of Coach common stock (rounded
down to the nearest whole number of shares of Coach common
stock) equal to the ratio of (I) the number of shares of Sara
Lee common stock that were issuable upon exercise of such Sara
Lee Option as of the date the IPO is priced, to (II) the
Elective Option Assumption Ratio, and (B) the per share
exercise price for the shares of Coach common stock issuable
upon exercise of such assumed Sara Lee Option (rounded up to
the nearest whole cent) shall be equal to the product of (I)
the exercise price per share of Sara Lee common stock subject
to such Sara Lee Option as of the date the IPO is priced, and
(II) the Elective Option Assumption Ratio.
(ii) In the event that, as of the date the IPO is
priced, the Coach Stock Value divided by the Sara Lee Stock
Value is less than one (1) (and subject to the IPO being
consummated), each individual who elects to have a Sara Lee
Option assumed as provided in Subsection 5.4(a)(i) above,
shall be eligible to receive an additional option to purchase
that number of shares of Coach common stock as of the date the
IPO is priced equal to (A) the ratio of (I) the number of
shares of Sara Lee common stock that were subject to such Sara
Lee Option, to (II) the Ratio,
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minus (B) the number of whole shares of Coach common stock
equal to the ratio of (I) the number of shares of Sara Lee
common stock that were issuable upon exercise of such Sara Lee
Option, to (II) the Elective Option Assumption Ratio. Each
such additional option shall be granted as of the date the IPO
is priced (subject to the IPO being consummated) and shall be
subject to the terms and conditions of the Coach Stock Plan
and the applicable option agreement. The exercise price per
share of each such additional option shall be equal to the
Coach Stock Value as of the date the IPO is priced.
Notwithstanding the foregoing, if the parties determine that
the grant of additional options pursuant to this Subsection
5.4(a)(ii) would result in variable accounting treatment, or
would otherwise cause Coach or Sara Lee to recognize an
expense, with respect to such additional options, then Coach
and Sara Lee agree (x) that such additional options will not
be granted, and (y) to use their respective commercially
reasonable best efforts, in good faith, to agree upon an
alternative equity-based or other compensation method that
provides to those individuals who otherwise would have
received additional options under this Subsection 5.4(a)(ii)
compensation that has substantially the same intrinsic value
represented by the forgone options.
(b) Option Assumption by Coach at Distribution Date. At the
Distribution Date, each outstanding Sara Lee Option held by Coach
Transferred Employees, whether vested or unvested, shall be assumed by
Coach and mandatorily converted to Coach Options. Subject to the
specific provisions of the governing option agreements, each Sara Lee
Option so assumed by Coach shall be subject to substantially the same
terms and conditions set forth in the Sara Lee Stock Plans and as
provided in the respective option agreements governing such Sara Lee
Option as of the Distribution Date, except that (i) such Sara Lee
Option shall be exercisable for that number of whole shares of Coach
common stock (rounded down to the nearest whole number of shares of
Coach common stock) equal to the ratio of (A) the number of shares of
Sara Lee common stock that were subject to such Sara Lee Option as of
the Distribution Date, to (B) the Ratio, and (ii) the per share
exercise price for the shares of Coach common stock issuable upon
exercise of such assumed Sara Lee Option (rounded up to the nearest
whole cent) shall be equal to the product of (A) the exercise price per
share of Sara Lee common stock subject to such Sara Lee Option as of
the Distribution Date, and (B) the Ratio.
(c) Assumption Criteria. It is the intention of Sara Lee and
Coach that the assumption of Sara Lee Options by Coach pursuant to
Subsections (a) and (b) above and the issuance of Coach Options under
this Section 5.4 meet the following criteria: (i) the aggregate
intrinsic value of the assumed Sara Lee Options immediately after the
assumption is not greater than such value immediately before the
assumption; (ii) with respect to each such assumed Sara Lee Option, the
ratio of the exercise price per share to the Coach Stock Value of the
assumed Sara Lee Options immediately after the assumption is not less
than the ratio of the exercise price per share to the Sara Lee Stock
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Value immediately before the assumption; and (iii) the vesting and
option term of the assumed Sara Lee Options shall not be changed.
(d) Restrictions on Exercise. The agreements under which Coach
Options are granted shall provide that a Coach Option may not be
exercised under any condition: (i) prior to the date that is six (6)
months after the IPO Closing Date; (ii) prior to the date that is
twelve (12) months after the IPO Closing Date unless, at the time of
exercise, Sara Lee certifies to Coach that it no longer owns either (A)
shares of Coach common stock representing "control" of Coach (within
the meaning of Section 368(c) of the Code), or (B) shares of Coach
common stock sufficient to satisfy the "80-percent voting and value
test" described in Section 1504(a)(2) of the Code; or (iii) on and
after the date that is twelve (12) months after the IPO Closing Date
unless, at the time of exercise, either (A) Sara Lee certifies to Coach
that it no longer owns either (I) shares of Coach common stock
representing "control" of Coach (within the meaning of Section 368(c)
of the Code), or (II) shares of Coach common stock sufficient to
satisfy the "80-percent voting and value test" described in Section
1504(a)(2) of the Code, or (B) Coach demonstrates to the satisfaction
of Sara Lee that it has purchased shares on the open market prior to
the exercise in a number sufficient to cover the exercise.
Notwithstanding the foregoing, prior to the Distribution Date, Coach
agrees to take such actions as may be required by Sara Lee to process
Option exercises, including purchasing shares of Coach common stock on
the open market, to ensure that Sara Lee continues to hold either
shares of Coach common stock representing "control" of Coach (within
the meaning of Section 368(c) of the Code) or shares of Coach common
stock sufficient to satisfy the "80-percent voting and value test"
described in Section 1504(a)(2) of the Code after each Option exercise.
Coach further agrees that, to the extent it may legally do so, it shall
promptly repurchase shares of Coach common stock on the open market to
enable any Coach Transferred Employee who has properly submitted an
option exercise notice and satisfied the option exercise price to
receive such number of shares of Coach common stock subject to such
exercise.
Section 5.5 Administrative Services. Prior to the IPO Closing Date,
Coach shall contract with a third party administrator, bank or stock transfer
agent ("Outsource") to administer any awards granted under the Coach Stock Plan
on or after the IPO Date. Until the Distribution Date, Sara Lee shall provide
administrative assistance to Coach in connection with the administration of
awards granted under the Coach Stock Plan in accordance with Section 4.17 of the
Separation Agreement.
Section 5.6 Certification of Ownership. Sara Lee agrees that it will
promptly certify to Coach its ownership of Coach common stock at such time as it
no longer owns either (A) shares of Coach common stock representing "control" of
Coach (within the meaning of Section 368(c) of the Code), or (B) shares of Coach
common stock sufficient to satisfy the "80-percent voting and value test"
described in Section 1504(a)(2) of the Code.
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ARTICLE VI
FRINGE AND OTHER BENEFITS
Section 6.1 Fringe Benefit Plans. As of or before the Distribution
Date, Coach shall adopt the Coach Fringe Benefit Plans.
ARTICLE VII
ADMINISTRATIVE PROVISIONS
Section 7.1 Intercompany Transitional Services. On the Separation Date,
Sara Lee and Coach shall enter into a Master Transitional Services Agreement
covering the provisions of interim services, including financial, accounting,
legal, benefits-related and other services by Sara Lee to Coach or, in certain
circumstances, vice versa. The provision of such interim services by each of
Sara Lee and Coach is intended to be covered exclusively by the terms and
conditions of the Master Transitional Services Agreement. Accordingly, Coach 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. Effective
beginning on the Separation Date, Coach shall pay its share of any
contributions made to any trust maintained in connection with a Sara
Lee Plan while Coach is a Participating Company in that Sara Lee Plan.
(b) Expenses and Costs of Plan Not Chargeable to a Trust.
Effective on and after the Separation Date, Coach shall be responsible
for (through either direct payment or reimbursement to Sara Lee) Sara
Lee's costs and expenses associated with Coach's participation in each
Sara Lee Plan while Coach 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 claims
incurred under the Sara Lee Workers' Compensation Plan, the cost of all
payments or other distributions (including the fair market value of all
Sara Lee securities issued by Sara Lee) made under the Sara Lee
Long-Term Incentive Plan, the cost of all restricted stock awards made
under the Sara Lee Executive Restricted 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
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reimbursement shall be made within thirty (30) business days after Sara
Lee provides Coach with notice of such expenses or costs.
(c) Contributions to Trusts. With respect to Sara Lee Plans to
which Coach Employees and Coach Transferred Employees make
contributions, Sara Lee shall use reasonable procedures to determine
Coach 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.
Effective as of the Separation Date, to the extent not covered by the
Master Transitional 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 Coach, and to the extent not chargeable
to a trust established in connection with a Sara Lee Plan (as provided
in paragraph (a)), Coach 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 (i) the Sara Lee
Plans while Coach participates in such Sara Lee Plans, and (ii) the
Coach Plans, to the extent Sara Lee procures, prepares, implements
and/or administers such Coach Plans. Coach's allocable share of such
costs and expenses will be determined in a manner consistent with the
manner in which the allocable share of such costs and expenses were
determined prior to the Separation Date.
Section 7.3 Sharing of Participant Information. Sara Lee and Coach
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 Coach Plans during the respective periods
applicable to such Plans. Sara Lee and Coach and their respective authorized
agents shall, subject to applicable laws of confidentiality and data protection,
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.
Section 7.4 Reporting and Disclosure Communications to Participants.
For any period Coach is a Participating Company in the Sara Lee Plans, Coach
shall take, or cause to be taken, all actions necessary or appropriate to
facilitate the distribution of all Sara Lee Plan-related communications and
materials 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 Coach Plans. Coach shall assist Sara Lee in complying with
all reporting and disclosure requirements of ERISA, including the preparation of
Form Series 5500 annual reports for the Sara Lee Plans, where applicable.
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Section 7.5 Employee Identification Numbers. Until the Distribution
Date, Sara Lee and Coach shall not change any employee identification numbers
assigned by Sara Lee. Sara Lee and Coach mutually agree to establish a policy
pursuant to which employee identification numbers assigned to either employees
of Sara Lee or Coach shall not be duplicated between Sara Lee and Coach.
Section 7.6 Beneficiary Designation. Subject to Section 7.10, all
beneficiary designations made by Coach Employees and Coach Transferred Employees
for the Sara Lee Plans shall be transferred to and be in full force and effect
under the corresponding Coach Plans, in accordance with the terms of each such
applicable Coach Plan and to the extent permissible under such Plan, until such
beneficiary designations are replaced or revoked by the Coach Employees and
Coach Transferred Employee who made the beneficiary designation.
Section 7.7 Requests for IRS and DOL Opinions. Sara Lee and Coach shall
make such applications to regulatory agencies, including the IRS and DOL, as may
be necessary or appropriate. Coach 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 Coach 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 Coach 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 Coach 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 Coach shall negotiate in
good faith to implement the provision in a mutually satisfactory manner.
Section 7.10 Tax Cooperation. In connection with the interpretation and
administration of this Agreement, Sara Lee and Coach shall comply with all
agreements, covenants, procedures and policies established pursuant to the
Separation Agreement and the other Ancillary Agreements (as defined below) and
the parties' intent to qualify the Distribution as a tax-free reorganization
under Code Sections 355 and 368(a)(1)(D).
Section 7.11 Financial Reporting Cooperation. Coach 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 Coach impacts Sara Lee financial reporting.
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ARTICLE VIII
EMPLOYMENT-RELATED MATTERS
Section 8.1 Terms of Coach Employment. All basic terms and conditions
of employment for Coach Employees and Coach Transferred Employees including,
without limitation, their pay 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 Coach Employee or Coach Transferred
Employee was employed by the Sara Lee Group, as applicable. In addition, 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 Coach Group.
Section 8.2 HR Data Support Systems. Sara Lee shall provide human
resources data support for Coach Employees and Coach Transferred Employees
through the date that is ninety (90) days following the Distribution Date (the
"Support Termination Date"). In the event that Sara Lee and Coach agree to
extend the time period beyond the Support Termination Date, then the costs and
expenses will be computed in accordance with Section 7.2; provided, however,
that an additional ten percent (10%) charge will be incurred by Coach. Following
the Support Termination Date, Sara Lee and Coach each reserves the right to
discontinue Coach's access to any Sara Lee human resources data support systems
with sixty (60) days notice.
Section 8.3 Employment of Employees with U.S. Work Visas. Coach
Employees with U.S. work visas authorizing them to work for Coach will continue
to hold work authorization for the Coach Group after the Separation Date. Coach
will request amendments to the nonimmigrant visa status of Coach Employees and
Coach Transferred Employees with U.S. work visas authorizing them to work for
Sara Lee, excluding the Coach Group, to request authorization to work for Coach.
Section 8.4 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 8.5 Personnel Records. Subject to applicable laws on
confidentiality and data protection, Sara Lee shall deliver to Coach prior to
the Distribution Date, personnel records of Coach Employees and Coach
Transferred Employees to the extent such records relate to Coach Employees' and
Coach Transferred Employees' active employment by, leave of absence from, or
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termination of employment with Coach.
Section 8.6 Medical Records. Subject to applicable laws on
confidentiality and data protection, Sara Lee shall deliver to Coach prior to
the Distribution Date, medical records of Coach Employees and Coach Transferred
Employees to the extent such records (a) relate to Coach Employees' and Coach
Transferred Employees' active employment by, leave of absence from, or
termination of employment with Coach, and (b) are necessary to administer and
maintain employee benefit plans, including Health Plans and Workers'
Compensation Plan and for determining eligibility for paid and unpaid Leaves of
Absence for medical reasons.
Section 8.7 Unemployment Insurance Program.
(a) Claims Administration Through Distribution Date. Unless
otherwise directed by Coach, Sara Lee shall assist Coach in receiving
service from Sara Lee's third party unemployment insurance
administrator through the Distribution Date. Coach shall cooperate with
the unemployment insurance administrator by providing any and all
necessary or appropriate information reasonably available to Coach.
(b) Claim Administration Post-Distribution Date. As of the
Distribution Date, Coach shall be responsible for complying with the
unemployment insurance requirements of the states in which the Coach
Group conducts business and for obtaining and maintaining third party
insurance programs for its risk of loss.
Section 8.8 Non-Termination of Employment; No Third-Party
Beneficiaries. 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 Coach
Employee, Coach Transferred Employee or other former, present or future employee
of Sara Lee or Coach under any Sara Lee Plan or Coach 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 Coach or
any member of the Coach Group shall cause any employee to be deemed to have
incurred a termination of employment (except for purposes of the Sara Lee
Pension Plan, the Sara Lee ESOP, the Sara Lee Puerto Rico Plans and the Sara Lee
SERP); and (b) no transfer of employment between Sara Lee and Coach before the
Distribution Date shall be deemed a termination of employment for any purpose
hereunder.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Effect if Separation, IPO and/or Distribution Does Not
Occur. Subject to Section 9.10, if the Separation, IPO and/or Distribution does
not occur, then all actions and events that are, under this Agreement, to be
taken or occur effective as of the Separation Date,
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IPO, and/or Distribution Date, or otherwise in connection with the Separation,
IPO and/or Distribution, shall not be taken or occur except to the extent
specifically agreed by Coach and Sara Lee.
Section 9.2 Relationship of Parties. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, the understanding and agreement being that no provision contained
herein, and no act of the parties, shall be deemed to create any relationship
between the parties other than the relationship set forth herein.
Section 9.3 Affiliates. Each of Sara Lee and Coach shall cause to be
performed and hereby guarantee the performance of any and all actions of the
Sara Lee Group or the Coach Group, respectively.
Section 9.4 Incorporation of Separation Agreement Provisions. The
following provisions of the Separation Agreement are hereby incorporated herein
by reference, and unless otherwise expressly specified herein, such provisions
shall apply as if fully set forth herein (references in this Section to an
"Article" or "Section" shall mean Articles or Sections of the Separation
Agreement, and, except as expressly set forth below, references within the
material incorporated herein by reference shall be references to the Separation
Agreement): Section 4.3 (relating to Agreement for Exchange of Information);
Section 4.11 (relating to Dispute Resolution); Section 4.13 (relating to No
Representation or Warranty); and Article IV (relating to Covenants and Other
Matters).
Section 9.5 Notices. Notices, demands, offers requests or other
communications required or permitted to be given by either party pursuant to the
terms of this Agreement shall be given in writing to the respective parties to
the following addresses and facsimile numbers:
(a) if to Sara Lee:
Sara Lee Corporation
Three First National Plaza
70 West Madison
Chicago, Illinois 60602-4260
Attention: General Counsel
Facsimile No.: (312) 345-5706
(b) if to Coach:
Coach
516 West 34th Street
New York, New York 10001
Attention: General Counsel
Facsimile No.: (212) 629-2398
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or to such other address or facsimile number as the party to whom notice is
given may have previously furnished to the other in writing as provided herein.
Any notice involving non-performance, termination, or renewal shall be sent by
hand delivery, recognized overnight courier or, within the United States, may
also be sent via certified mail, return receipt requested. All other notices may
also be sent by facsimile, confirmed by first class mail. All notices shall be
deemed to have been given when received, if hand delivered; when transmitted, if
transmitted by facsimile or similar electronic transmission method; one working
day after it is sent, if sent by recognized overnight courier; and three days
after it is postmarked, if mailed first class mail or certified mail, return
receipt requested, with postage prepaid.
Section 9.6 Governing Law and Jurisdiction. This Agreement shall be
construed in accordance with and all Disputes hereunder shall be governed by the
laws of the State of Illinois, excluding its conflict of law rules. The parties
agree that the Circuit Court of Cook County, Illinois and/or the United States
District Court for the Northern District of Illinois shall have exclusive
jurisdiction over all actions between the parties for preliminary relief in aid
of arbitration pursuant to Section 4.11 of the Separation Agreement, and
nonexclusive jurisdiction over any action for enforcement of an arbitral award.
Section 9.7 Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced separately by each member of the Sara Lee Group and each member of
the Coach Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party, and
any such assignment shall be void; provided, however, either party may assign
this Agreement to a successor entity in conjunction with such party's
reincorporation.
Section 9.8 Severability. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible and in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the fullest possible extent.
Section 9.9 Interpretation. The headings contained in this Agreement or
any Schedule hereto and in the table of contents to this Agreement are for
reference purposes only and shall
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not affect in any way the meaning or interpretation of this Agreement. Any
capitalized term used in any Schedule but not otherwise defined therein shall
have the meaning assigned to such term in this Agreement. When a reference is
made in this Agreement to an Article, Section or Schedule, such reference shall
be to an Article of, Section of, or Schedule to this Agreement unless otherwise
indicated.
Section 9.10 Amendment. The Board of Directors of Coach and Sara Lee
may mutually agree to amend the provisions of this Agreement at any time or
times, for any reason, either prospectively or retroactively, to such extent and
in such manner as the Boards mutually deem advisable. Each Board (or the Sara
Lee Corporation Employee Benefits Administrative Committee) may delegate its
amendment power, in whole or in part, to one or more Persons or committees as it
deems advisable. The Senior Vice President, Human Resources of Sara Lee and the
Senior Vice President, Human Resources of Coach have full power and authority to
mutually adopt an amendment to this Agreement; provided that if such amendment
requires a Plan amendment, an individual or entity with the authority to amend
the Plan must consent to such amendment of the Agreement. No change or amendment
will be made to this Agreement, except by an instrument in writing signed by
authorized individuals.
Section 9.11 Termination. This Agreement may be terminated at any time
prior to the IPO Closing Date by and in the sole discretion of Sara Lee without
the approval of Coach and, if so terminated, all transactions taken in
connection therewith shall be void. This Agreement may be terminated at any time
after the IPO Closing Date and before the Distribution Date by mutual consent of
Sara Lee and Coach. In the event of termination pursuant to this Section 9.11,
no party shall have any liability of any kind to the other party.
Section 9.12 Conflict. In the event of any conflict between the
provisions of this Agreement and the Separation Agreement, any Ancillary
Agreement, or Plan, the provisions of this Agreement shall control.
Section 9.13 Counterparts. This Agreement, including the Schedules
hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
ARTICLE X
DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
meanings indicated below, unless a different meaning is plainly required by the
context. The singular shall include the plural, unless the context indicates
otherwise. Headings of sections are used for convenience of reference only, and
in case of conflict, the text of this Agreement, rather than such headings,
shall control:
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Section 10.1 401(k) Plan. "401(k) Plan," when immediately preceded by
"Sara Lee," means the Sara Lee Corporation 401(k) Supplemental Savings Plan, a
defined contribution plan. When immediately preceded by "Coach," "401(k) Plan"
means the defined contribution plan to be established by Coach pursuant to
Section 1.2 and Article II.
Section 10.2 Affiliate. "Affiliate" means, with respect to any
specified Person, means any entity that Controls, is Controlled by, or is under
common Control with such Person. For this purpose, "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 control, 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 underlying agreements, documents and instruments referred to, contemplated
by, or made a part of the Separation Agreement.
Section 10.5 Assets. "Assets" is has the meaning set forth in the
General Assignment and Assumption Agreement.
Section 10.6 Business Travel Accident Insurance. "Business Travel
Accident Insurance," when immediately preceded by "Sara Lee," means the policy
or policies covering Sara Lee Business Travel Accident Insurance in the U.S. and
to the extent applicable, outside the U.S. When immediately preceded by "Coach,"
"Business Travel Accident Insurance" means the policy or policies covering the
business travel accident insurance to be established by Coach pursuant to
Sections 1.2 and 4.6.
Section 10.7 Coach. "Coach" means Coach, Inc., a Maryland corporation.
In all such instances in which Coach is referred to in this Agreement, it shall
also be deemed to include a reference to each member of the Coach Group, unless
it specifically provides otherwise; Coach shall be solely responsible to Sara
Lee for ensuring that each member of the Coach Group complies with the
applicable terms of this Agreement.
Section 10.8 Coach Business. "Coach Business" means the business of
producing lifestyle branded handbags, accessories, business cases, luggage and
travel accessories, time management products, outerwear, gloves and scarves,
watches footwear, eyewear, home furnishings and furniture as described in the
IPO Registration Statement.
Section 10.9 Coach Claims. "Coach Claims" has the meaning set forth in
Subsection 4.8(a).
Section 10.10 Coach Employee. "Coach Employee" means any individual who
is: (a)
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either actively employed by, or on leave of absence from, the Coach Group on the
Separation Date; (b) either actively employed by, or on leave of absence from,
the Sara Lee Group as either part of a work group or organization, or common
support function that, at any time after the Separation Date and before the
Distribution Date, moves to the employ of the Coach Group from the employ of the
Sara Lee Group; (c) a Coach Terminated Employee; (d) designated as a Coach
Employee (as of the specified date) by Sara Lee and Coach by mutual agreement;
or (e) 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 10.10(a) through (d) 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 a
Coach Employee with respect to any benefits he or she accrues or accrued under
any applicable Plan(s), unless he or she is a Coach Employee by virtue of
Subsections 10.10(a) through (d)).
Section 10.11 Coach GIP. "Coach GIP" means the Coach Growth Incentive
Plan.
Section 10.12 Coach Group. "Coach Group" means Coach and each
Subsidiary and Affiliate of Coach immediately after the Separation Date, or that
is contemplated to be a Subsidiary or Affiliate of Coach and each Person that
becomes a Subsidiary or Affiliate of Coach after the Separation Date.
Section 10.13 Coach Stock Value. "Coach Stock Value" means (a) from the
date the IPO is priced through the IPO Closing Date, the initial per-share
public offering price of Coach common stock, and (b) after the IPO Closing Date,
the average of the highest and lowest per-share sale prices of Coach common
stock on the NYSE Composite Transactions Tape on the five (5) trading days
preceding the date of determination; provided, that if there should be no sales
of Coach common stock on any of the five (5) trading days preceding the date of
determination, the Coach Stock Value shall be the average of the highest and
lowest per-share sale prices of Coach common stock on such Composite Tape for
the last preceding date on which sales of Coach common stock were reported.
Section 10.14 Coach Terminated Employee. "Coach Terminated Employee"
means any individual who is: (a) a former employee of the Sara Lee Group who was
terminated from the Coach Business on or before the Separation Date; or (b) a
former employee of the Coach Group; or (c) 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 Subsections 10.14(a) or (b) with respect to that former
employee's benefit under the applicable Plan(s). Notwithstanding the foregoing,
"Coach Terminated Employee" shall not, unless otherwise expressly provided to
the contrary in this Agreement, include: (a) an individual who is a Sara Lee
Employee or a Coach Transferred Employee at the Distribution Date; or (b) an
individual who is otherwise a Coach Terminated
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Employee, but who is subsequently employed by the Sara Lee Group or the Coach
Group prior to the Distribution Date.
Section 10.15 Coach Transferred Employee. "Coach Transferred Employee"
means any individual who, as of the Distribution Date, is: (a) either actively
employed by, or on a leave of absence from, the Coach Group; (b) an employee or
a member of a group of employees designated by Sara Lee and Coach, by mutual
agreement, as Coach Transferred Employees; or (c) 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, described in Subsections 10.15(a) or (b) 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 a Coach Transferred Employee with respect to any
benefits he or she accrues or accrued under any applicable Plan(s), unless he or
she is a Coach Transferred Employee by virtue of Subsections 10.15(a) and (b));
provided, that a "Coach Transferred Employee" shall include, with respect to a
Coach Plan established prior to the Distribution Date, an individual who would
constitute a Coach Transferred Employee under Subsections 10.15(a), (b) or (c)
above if the date such Plan was established was the Distribution Date. An
employee may be a Coach Transferred Employee pursuant to this Section regardless
of whether such employee is, as of the Distribution Date, actively employed, on
a temporary leave of absence from active employment, on layoff, or on any other
type of employment relative to a Sara Lee Plan, and regardless of whether, as of
the Distribution Date, such employee is then receiving any coverage under or
benefits from a Sara Lee Plan. Where the context permits, a Coach Transferred
Employee shall also mean an employee hired by Coach after the Distribution Date.
Section 10.16 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.
Section 10.17 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
Section 10.18 Deferred Compensation Plan. "Deferred Compensation Plan,"
when immediately preceded by "Sara Lee," means the Sara Lee Executive Deferred
Compensation Plan. When immediately preceded by "Coach," "Deferred Compensation
Plan" means the deferred compensation plan that was established by Coach
effective June 1, 2000.
Section 10.19 Dispute. "Dispute" means any dispute, controversy or
claim arising out of or relating to this Agreement or the Ancillary Agreements
or the breach, termination or validity thereof.
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Section 10.20 Disability Plans. "Disability Plan," means the Sara Lee
short term disability program and the Sara Lee Long Term Disability Plan.
Section 10.21 Distribution. "Distribution" means the distribution by
Sara Lee of all or a significant portion of the shares of capital stock of Coach
owned by Sara Lee after the IPO Closing Date, which divestiture may be
effectuated by Sara Lee as a dividend, an exchange with existing Sara Lee
stockholders for shares of Coach capital stock, a spin-off or otherwise;
provided, that such distribution results in Coach no longer constituting a
member of the Sara Lee controlled group, as determined in accordance with Code
Sections 414(b), 414(c) and 414(m).
Section 10.22 Distribution Date. "Distribution Date" means the date
that the Distribution is effective.
Section 10.23 DOL. "DOL" means the United States Department of Labor.
Section 10.24 Effective Date. "Effective Date" means the date that is
two (2) days prior to the date that the registration statement relating to the
IPO is declared effective.
Section 10.25 Elective Option Assumption Ratio. "Elective Option
Assumption Ratio" means the ratio determined by dividing the Coach Stock Value
as of the date the IPO is priced by the Sara Lee Stock Value as of that date;
provided, that the Elective Option Assumption Ratio shall never be less than one
(1.0).
Section 10.26 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
Section 10.27 ESOP. "ESOP" means the Sara Lee Employee Stock Ownership
Plan.
Section 10.28 Executive Bonus Plan. "Executive Bonus Plan" means the
Coach Annual Performance-Based Incentive Plan to be established by Coach
pursuant to Sections 1.2 and 5.1.
Section 10.29 Executive Restricted Stock Plan. "Executive Restricted
Stock Plan" means the Sara Lee Long-Term Restricted Stock Plan.
Section 10.30 FMLA. "FMLA" means the Family and Medical Leave Act of
1993, as amended from time to time.
Section 10.31 Foreign Plan. "Foreign Plan," when immediately preceded
by "Sara Lee," means a Plan maintained by the Sara Lee Group for the benefit of
its employees outside the U.S. When immediately preceded by "Coach," "Foreign
Plan" means a Plan to be established by Coach for the benefit of its employees
outside the U.S.
Section 10.32 Fringe Benefit Plans. "Fringe Benefit Plans," when
immediately preceded
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by "Sara Lee," means the Sara Lee Employee Assistance Program, the Sara Lee
Educational Assistance Plan and other fringe benefit plans, programs and
arrangements, sponsored and maintained by Sara Lee. When immediately preceded by
"Coach," "Fringe Benefit Plans" means the fringe benefit plans, programs and
arrangements to be established by Coach pursuant to Section 1.2 and Article VI.
Section 10.33 FSA Plan. "FSA Plan," when immediately preceded by "Sara
Lee," means the Sara Lee Flexible Spending Account Plan. When immediately
preceded by "Coach," "FSA Plan" means the flexible spending account plan to be
established by Coach pursuant to Sections 1.2 and 4.3.
Section 10.34 General Assignment and Assumption Agreement. "General
Assignment and Assumption Agreement" means the Ancillary Agreement which is
Exhibit C to the Separation Agreement.
Section 10.35 Group Insurance Plan. "Group Insurance Plan," when
immediately preceded by "Sara Lee," means the Sara Lee Group Insurance Plan.
When immediately preceded by "Coach," "Group Insurance Plan" means the group
insurance plan to be established by Coach pursuant to Section 1.2.
Section 10.36 HCFA. "HCFA" means the United States Health Care
Financing Administration.
Section 10.37 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 Business Travel Accident Insurance
program, 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 "Coach," "Health and Welfare Plans" means the Coach
Health Plans, the Coach Section 125 Plan, and the health and welfare plans to be
established by Coach pursuant to Section 1.2 and Article IV.
Section 10.38 Health Plans. "Health Plans," when immediately preceded
by "Sara Lee," means the Sara Lee Employee Health Benefit Plan, any other
medical, HMO, vision, and dental plans and any similar or successor Plans. When
immediately preceded by "Coach," "Health Plans" means the medical, HMO, vision
and dental plans to be established by Coach pursuant to Section 1.2 and Article
IV.
Section 10.39 HMO. "HMO" means a health maintenance organization that
provides benefits under the Sara Lee Health Plans or the Coach Health Plans.
Section 10.40 IPO. "IPO" means the initial public offering of Coach
common stock
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pursuant to a registration statement on Form S-1 pursuant to the Securities Act
of 1933, as amended.
Section 10.41 IPO Closing Date. "IPO Closing Date" means the date on
which the IPO is consummated.
Section 10.42 IPO Registration Statement. "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act of
1933 as amended, to be filed with the SEC registering the shares of common stock
of Coach to be issued in the IPO, together with all amendments thereto.
Section 10.43 IRS. "IRS" means the United States Internal Revenue
Service.
Section 10.44 Key Executive Plans. "Key Executive Plans" means the
welfare plans maintained by Sara Lee on behalf of its key executives.
Section 10.45 Liabilities. "Liabilities" means all debts, liabilities,
guarantees, assurances, commitments, and obligations, whether fixed, contingent
or absolute, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out
of any Contract or tort based on negligence or strict liability) and whether or
not the same would be required by generally accepted accounting principles to be
reflected in financial statements or disclosed in the notes thereto. For this
purpose, "Contract" means any contract, agreement, lease, license, sales order,
purchase order, instrument or other commitment that is binding on any Person or
any part of its property under applicable law.
Section 10.46 Long-Term Incentive Plan. "Long-Term Incentive Plan"
means the Sara Lee Long-Term Performance Incentive Plan.
Section 10.47 Master Transitional Services Agreement. "Master
Transitional Services Agreement" means the Ancillary Agreement which is Exhibit
F to the Separation Agreement.
Section 10.48 NYSE. "NYSE" means the New York Stock Exchange.
Section 10.49 Option. "Option," when immediately preceded by "Sara
Lee," means an option to purchase Sara Lee common stock pursuant to a Stock
Plan; provided, that for purposes of Subsection 5.4(a), "Option" does not
include any options to purchase Sara Lee common stock pursuant to the Sara Lee
Share 2000 Plan. When immediately preceded by "Coach," "Option" means an option
to purchase Coach common stock pursuant to a Stock Plan.
Section 10.50 Outsource. "Outsource" is defined in Section 5.5.
Section 10.51 Participating Company. "Participating Company" means: (a)
Sara Lee;
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(b) 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 (c) 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 10.52 Pension Plan. "Pension Plan" when immediately preceded by
"Sara Lee," means the Sara Lee Consolidated Pension and Retirement Plan.
Section 10.53 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 10.54 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 Coach.
Section 10.55 Post-Distribution Period. "Post-Distribution Period"
means, for each designated Plan, the period beginning as of the Distribution
Date and ending on the date that no member of the Coach Group is using Sara Lee
benefit delivery and administrative services with respect to that Plan.
Section 10.56 Premium Plan. "Premium Plan," when immediately preceded
by "Sara Lee," means the Sara Lee Flexible Compensation Plan, the vehicle by
which employees participating in the Sara Lee Health and Welfare Plans can
contribute their portion of the premium payments with pre-tax dollars. When
immediately preceded by "Coach," "Premium Plan" means the medical/dental pre-tax
premium plan to be established by Coach pursuant to Sections 1.2 and 4.3.
Section 10.57 Puerto Rico Plans. "Puerto Rico Plans" when immediately
preceded by "Sara Lee," means the Sara Lee Personal Products Retirement Savings
Plan of Puerto Rico and the Sara Lee Personal Products Hourly Retirement Plan of
Puerto Rico.
Section 10.58 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 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, the Sara Lee Pension Plan or the Sara Lee ESOP.
Section 10.59 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.
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Section 10.60 Ratio. "Ratio" means the ratio determined by dividing the
Coach Stock Value by the Sara Lee Stock Value.
Section 10.61 Record Date. "Record Date" means the close of business on
the date to be determined by the Board of Directors of Sara Lee as the record
date for determining the stockholders of Sara Lee entitled to receive shares of
common stock of Coach in the Distribution
Section 10.62 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. When
immediately preceded by "Coach," "Restricted Stock Unit" means a right to
receive shares of Coach common stock that are subject to transfer restrictions
or to employment and/or performance vesting conditions, pursuant to a Coach
Stock Plan.
Section 10.63 Revenue. "Revenue" means net revenue as determined in
accordance with generally accepted accounting principles.
Section 10.64 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 Coach for ensuring that each member of the Sara Lee Group
complies with the applicable terms of this Agreement.
Section 10.65 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 Coach, by mutual agreement.
Section 10.66 Sara Lee Group. "Sara Lee Group" means Sara Lee and each
Subsidiary and Affiliate of Sara Lee (or any predecessor organization thereof).
Section 10.67 Sara Lee Plans. "Sara Lee Plans" means the Plans
maintained by Sara Lee and shall include the Sara Lee Pension Plan, Sara Lee
ESOP, Sara Lee 401(k) Plan, Sara Lee Health and Welfare Plans, Sara Lee Group
Insurance Plan, Sara Lee Severance Plans, Sara Lee Fringe Benefit Plans, and the
Sara Lee Puerto Rico Plans.
Section 10.68 Sara Lee Stock Value. "Sara Lee Stock Value" means the
average of the highest and lowest per-share sale prices of Sara Lee common stock
on the NYSE Composite Transactions Tape on the five (5) trading days preceding
the date of determination.
Section 10.69 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 a Coach Transferred Employee.
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Section 10.70 SEC. "SEC" means the United States Securities and
Exchange Commission.
Section 10.71 Section 125 Plan. "Section 125 Plan," when immediately
preceded by "Sara Lee," means the Sara Lee Premium Plan and the Sara Lee FSA
Plan. When immediately preceded by "Coach," "Section 125 Plan" means the Coach
Premium Plan and the Coach FSA Plan to be established by Coach pursuant to
Sections 1.2 and 4.3.
Section 10.72 Separation. "Separation" means the contribution and
transfer from Sara Lee to Coach, and Coach's receipt and assumption of, directly
or indirectly, substantially all of the Assets and Liabilities currently
associated with the Coach Business and the stock, investments or similar
interests currently held by Sara Lee in subsidiaries and other entities that
conduct such business.
Section 10.73 Separation Agreement. "Separation Agreement" means the
Master Separation and Distribution Agreement of which this is Exhibit D thereto.
Section 10.74 Separation Date. "Separation Date" means the effective
date and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation and/or such other
date(s) as may be fixed by the Board of Directors of Sara Lee.
Section 10.75 SERP. "SERP," when immediately preceded by "Sara Lee,"
means the Sara Lee Supplemental Benefit Plan.
Section 10.76 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. When immediately preceded by "Coach,"
"Severance Plans" means the severance plans to be established by Coach pursuant
to Sections 1.2 and 4.4.
Section 10.77 Stock Plan. "Stock Plan," when immediately preceded by
"Sara Lee," means any 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 "Coach," "Stock
Plan" means the Coach 2000 Stock Incentive Plan to be established by Coach
pursuant to Section 1.2.
Section 10.78 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
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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 Coach after
giving effect to the Separation.
Section 10.79 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 "Coach," "Unemployment Insurance Program" means any group
unemployment insurance program to be established by Coach pursuant to Section
8.7.
Section 10.80 Workers' Compensation Plan. "Workers' Compensation Plan"
when immediately preceded by "Sara Lee" means the Sara Lee Workers' Compensation
Plan, comprised of the various arrangements established by a member of the Sara
Lee Group to comply with the workers' compensation requirements of the states in
which the Sara Lee Group conducts business. When immediately preceded by
"Coach," "Workers' Compensation Plan" means the workers' compensation program to
be established by Coach pursuant to Section 4.8.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
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IN WITNESS WHEREOF, each of the parties have caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized on the day
and year first above written.
SARA LEE CORPORATION
By: _______________________
Name:
Title:
COACH, INC.
By: _______________________
Name:
Title:
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<PAGE> 42
SCHEDULE 1.6
FOREIGN PLANS
[TO BE INSERTED.]
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<PAGE> 43
SCHEDULE 4.1(a)
COACH HEALTH PLANS
Coach Employee Health Plan
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<PAGE> 44
SCHEDULE 4.2
SARA LEE HEALTH PLANS
Sara Lee Corporation Employee Health Benefit Plan
Sara Lee Corporation Flexible Compensation Plan
Sara Lee Corporation Flexible Spending Account Plan
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<PAGE> 45
SCHEDULE 5.4
SARA LEE RESTRICTED STOCK HELD BY
NON-U.S. COACH TRANSFERRED EMPLOYEES
DELETE SCHEDULE UNLESS APPLICABLE.
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