<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SARA LEE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
SARA LEE CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- -------------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
SARA LEE CORPORATION
---------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 26, 1995
---------------------------------------------------------------------------
TO THE STOCKHOLDERS OF
SARA LEE CORPORATION:
Notice is hereby given that the annual meeting of the stockholders of SARA
LEE CORPORATION will be held at THE ART INSTITUTE OF CHICAGO, ARTHUR RUBLOFF
AUDITORIUM, COLUMBUS DRIVE BETWEEN MONROE AND JACKSON STREETS, CHICAGO,
ILLINOIS, on Thursday, October 26, 1995, at 10:00 A.M., Chicago time, for the
following purposes:
1. to elect 18 directors;
2. to consider and vote upon the Performance-Based Annual Incentive
Plan;
3. to consider and vote upon the 1995 Long-Term Incentive Stock Plan;
4. to consider and vote upon the 1995 Non-Employee Director Stock Plan;
5. to ratify the appointment of Arthur Andersen LLP as the independent
public accountants of Sara Lee Corporation for fiscal year 1996; and
6. to transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on September 1, 1995, are
entitled to notice of and to vote at the annual meeting.
Your attention is directed to the accompanying Proxy Statement and proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING
IN THE UNITED STATES.
By Order of the Board of Directors
Janet Langford Kelly
Senior Vice President, Secretary and
General Counsel
September 20, 1995
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NOTICE OF ANNUAL MEETING............................................................ Cover
PROXY STATEMENT..................................................................... 1
ELECTION OF DIRECTORS............................................................... 2
OWNERSHIP OF COMMON STOCK AND ESOP STOCK BY DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS.......................................................................... 9
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD........................................ 10
Audit Committee................................................................... 10
Compensation and Employee Benefits Committee...................................... 10
Board Affairs and Corporate Governance Committee.................................. 10
DIRECTOR COMPENSATION............................................................... 11
EXECUTIVE COMPENSATION.............................................................. 11
Report of the Compensation and Employee Benefits Committee on
Executive Compensation......................................................... 11
Performance Graph................................................................. 16
Summary Compensation Table........................................................ 17
Option Grants Table............................................................... 18
Option Exercises and Fiscal Year-End Values....................................... 19
RETIREMENT PLANS.................................................................... 19
Pension Plan...................................................................... 19
Employee Stock Ownership Plan..................................................... 20
PROPOSAL TO APPROVE THE PERFORMANCE-BASED ANNUAL INCENTIVE PLAN..................... 21
PROPOSAL TO APPROVE THE 1995 LONG-TERM INCENTIVE STOCK PLAN......................... 23
PROPOSAL TO APPROVE THE 1995 NON-EMPLOYEE DIRECTOR STOCK PLAN....................... 27
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................... 29
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING....................................... 29
OTHER MATTERS....................................................................... 29
APPENDIX A -- PERFORMANCE-BASED ANNUAL INCENTIVE PLAN............................... A-1
APPENDIX B -- 1995 LONG-TERM INCENTIVE STOCK PLAN................................... B-1
APPENDIX C -- 1995 NON-EMPLOYEE DIRECTOR STOCK PLAN................................. C-1
</TABLE>
<PAGE> 4
[SARA LEE CORPORATION LOGO]
September 20, 1995
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 26,1995
The enclosed proxy is solicited by the Board of Directors of Sara Lee
Corporation ("Sara Lee") to be voted at the annual meeting of stockholders to be
held on October 26, 1995, or any adjournments thereof ("Annual Meeting"). A
stockholder returning a proxy may revoke it at any time prior to the voting at
the Annual Meeting. A proxy returned by a stockholder which is not subsequently
revoked will be voted in accordance with the instructions indicated thereon. If
no instructions are indicated on a returned and duly executed proxy, the shares
represented by the proxy will be voted FOR the election of the 18 nominees for
director proposed by the Board of Directors and set forth herein, FOR the
approval of the Performance-Based Annual Incentive Plan, FOR the approval of the
1995 Long-Term Incentive Stock Plan, FOR the approval of the 1995 Non-Employee
Director Stock Plan, FOR the ratification of the appointment of Arthur Andersen
LLP as the independent public accountants of Sara Lee for fiscal year 1996, and
in accordance with the judgment of the persons named in the proxy as to such
other matters as may properly come before the Annual Meeting.
If you are a stockholder and also participate in the Sara Lee Corporation
Employee Stock Ownership Plan (the "ESOP"), in the Sara Lee Corporation Common
Stock Fund under any of Sara Lee's employee retirement or savings plans
(collectively, the "Savings Plans"), or in Sara Lee's Dividend Reinvestment Plan
(the "DRP"), you will receive one proxy with respect to all shares registered in
the same name. Stockholders whose accounts are not registered in the same name
will receive a separate proxy with respect to their individual and ESOP, Savings
Plan or DRP shares. Each ESOP participant is entitled to direct the ESOP trustee
how to vote the shares allocated to such participant's account, as well as a
proportionate share of unallocated or unvoted shares. Each Savings Plan
participant has the right to direct the Savings Plan trustee how to vote the
shares allocated to such participant's account. If a participant in any of the
Savings Plans does not return a proxy with respect to Savings Plan shares, the
participant's Savings Plan shares shall be voted by the Savings Plan trustee in
the same proportion as shares held by the Savings Plan trustee for which voting
instructions have been received.
Sara Lee has a policy that all proxies, ballots and votes tabulated at a
meeting of the stockholders of Sara Lee which identify the specific vote of a
stockholder shall be confidential, and that such votes shall not be revealed to
any employee of Sara Lee or any third party other than to the non-employee
tabulator of such votes or an independent election inspector appointed to
certify the results of the stockholder vote, except (1) as shall be necessary to
meet applicable legal requirements or (2) in the event there shall be filed with
the Securities and Exchange Commission a proxy solicitation in opposition to the
election of the Board of Directors.
Only stockholders of record at the close of business on September 1, 1995
are entitled to notice of and to vote at the Annual Meeting. As of September 1,
1995, there were 484,116,512 shares of Sara Lee Common Stock ("Common Stock")
outstanding and entitled to vote at the Annual Meeting, each such share being
entitled to cast one vote, and 4,514,427 shares of Employee Stock Ownership Plan
Convertible Preferred Stock ("ESOP Stock") outstanding and entitled to vote at
the Annual Meeting, each such share being entitled to cast 5.133 votes. The
Common Stock and the ESOP Stock vote together as a single class on the matters
scheduled to be considered at the Annual Meeting. The affirmative vote of a
majority of the votes cast at the Annual Meeting is required for approval of
each of the
1
<PAGE> 5
proposals presented in this Proxy Statement. Under applicable Maryland law, in
determining whether a proposal has received the requisite number of affirmative
votes, abstentions and broker non-votes will not be counted and will have no
effect on the outcome of the vote.
The mailing address of the principal office of Sara Lee is Three First
National Plaza, Chicago, Illinois 60602-4260. This Proxy Statement and enclosed
proxy were first mailed to stockholders entitled to notice of and to vote at the
Annual Meeting on or about September 20, 1995.
ELECTION OF DIRECTORS
The names of, and certain information with respect to, the Board of
Directors' nominees for election as directors, to serve until the 1996 annual
meeting of stockholders or until their successors are elected and qualified, are
set forth below and were furnished to Sara Lee by the nominees. All the nominees
have been previously elected as directors by the stockholders.
If, for any reason, any of the nominees shall become unavailable for
election, the individuals named in the enclosed proxy may exercise their
discretion to vote for any substitutes proposed by the Board of Directors,
unless the Board of Directors should decide to reduce the number of directors to
be elected at the Annual Meeting. The affirmative vote of a majority of the
votes cast is required for the election of each nominee for director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED
HEREIN.
The following information is furnished with respect to each nominee for
election as a director. The ages of the nominees are as of October 26, 1995.
- ----------------------
PAUL A. ALLAIRE
Chairman and Chief Executive Officer of Xerox
Corporation (information processing). Mr. Allaire
became a director of Sara Lee in 1989. He is a
director of Rank Xerox Limited, Fuji Xerox Co.,
Ltd., Xerox Financial Services, Inc., SmithKline
Beecham plc and the New York Stock Exchange, and
a trustee of Carnegie-Mellon University and
Worcester Polytechnic Institute. Mr. Allaire is a
member of the Board of the Council on Foreign
Relations and Chairman of the Council on
Competitiveness. He is a member of The Business
- ---------------------- Council and the Business Roundtable. Mr. Allaire
is a member of the Audit and Employee and Public
Responsibility Committees of Sara Lee. Age 57.
- ----------------------
FRANS H.J.J. ANDRIESSEN
Professor, European Integration, University of
Utrecht, the Netherlands. Mr. Andriessen is a
former Minister of Finance in the Netherlands. He
became a member of the Commission of the European
Communities in 1981, and was first Vice President
of the Commission from 1989 until 1993. He became
a director of Sara Lee in 1993. Mr. Andriessen is
a member of the Audit and Employee and Public
Responsibility Committees of Sara Lee. Age 66.
- ----------------------
2
<PAGE> 6
- ----------------------
JOHN H. BRYAN
Chairman of the Board and Chief Executive Officer
of Sara Lee. Mr. Bryan became a director of Sara
Lee in 1974. He is a director of Amoco
Corporation, First Chicago Corporation and General
Motors Corporation. Mr. Bryan is a past Chairman
and a director of the Grocery Manufacturers of
America, Inc., Vice Chairman of The Business
Council and a member of the Business Roundtable,
and a director and past national Chairman of the
Business Committee for the Arts. He is Chairman of
Catalyst and a trustee of the University of
- ---------------------- Chicago, Vice Chairman of the Board of Trustees of
The Art Institute of Chicago and Chairman of the
Chicago Council on Foreign Relations. Mr. Bryan is
Chairman of the Executive Committee and a member
of the Board Affairs and Corporate Governance,
Employee and Public Responsibility and Finance
Committees of Sara Lee. Age 59.
- ----------------------
DUANE L. BURNHAM
Chairman of the Board and Chief Executive Officer
of Abbott Laboratories (health care products and
services) since 1990. Mr. Burnham has held senior
management positions with Abbott Laboratories
since 1982. He became a director of Sara Lee in
1991. Mr. Burnham is a member of the Business
Roundtable and the Commercial Club of Chicago. He
is also a member of the Boards of the Healthcare
Leadership Council, the Lyric Opera (Chicago), and
the Chicago Council on Foreign Relations. Mr.
- ---------------------- Burnham is a trustee of Northwestern University
and the Museum of Science and Industry (Chicago),
and a member of the Advisory Board of the
J. L. Kellogg Graduate School of Management at
Northwestern University. He is a member of the
Audit and Compensation and Employee
Benefits Committees of Sara Lee. Age 53.
- ----------------------
CHARLES W. COKER
Chairman of the Board and Chief Executive Officer
of Sonoco Products Company (packaging products
manufacturer). Mr. Coker was President of Sonoco
Products Company from 1970 to 1990. He became a
director of Sara Lee in 1986. Mr. Coker is also a
director of NationsBank Corporation (formerly NCNB
Corporation), Springs Industries, Inc., Carolina
Power and Light Company and the American Forest &
Paper Association. He is a member of the Board of
Hollings Cancer Center. Mr. Coker is a member of
the Compensation and Employee Benefits and
- ---------------------- Employee and Public Responsibility Committees
of Sara Lee. Age 62.
3
<PAGE> 7
- ----------------------
WILLIE D. DAVIS
President of All-Pro Broadcasting, Inc. (radio
stations), a privately owned company. Mr. Davis
became a director of Sara Lee in 1983. He is also
a director of The Dow Chemical Company, Kmart
Corporation, Alliance Bank (Culver City,
California), Johnson Controls Inc., MGM Grand Inc.
and WICOR. Mr. Davis is a trustee of the
University of Chicago, Marquette University and
Occidental College. He is Chairman of the Employee
and Public Responsibility Committee and a member
of the Board Affairs and Corporate Governance,
- ---------------------- Compensation and Employee Benefits and Executive
Committees of Sara Lee. Age 61.
- ----------------------
DONALD J. FRANCESCHINI
Executive Vice President of Sara Lee since
January 1994, Senior Vice President from 1993 to
January 1994, and Vice President from 1992 to
1993. Mr. Franceschini was President of Playtex
Apparel, Inc. from 1986 until its acquisition by
Sara Lee in 1991. He became a director of Sara
Lee in January 1994. Mr. Franceschini is a past
President of the State of Delaware-American
Institute of Industrial Engineers, a
member/patron of the Fairfield Historical Society
(Fairfield, Connecticut), and a member of the
- ---------------------- Wake Forest MBA Board of Visitors. He is a member
of the Employee and Public Responsibility and
Finance Committees of Sara Lee. Age 60.
- ----------------------
ALLEN F. JACOBSON
Retired Chairman of the Board and Chief
Executive Officer and a director of Minnesota
Mining & Manufacturing Company (industrial,
imaging, and health care products). Mr. Jacobson
was Chairman of the Board and Chief Executive
Officer of Minnesota Mining & Manufacturing
Company from 1986 to 1991. He became a director
of Sara Lee in 1990. Mr. Jacobson is also a
director of Abbott Laboratories, Deluxe
Corporation, Mobil Corporation, Northern States
Power Company, Potlatch Corporation, Prudential
- ---------------------- Insurance Company, Silicon Graphics, Inc., U S
WEST, Inc. and Valmont Industries, Inc. Mr.
Jacobson is a member of the National Academy of
Engineering. He is Chairman of the Compensation
and Employee Benefits Committee and a member of
the Board Affairs and Corporate Governance,
Executive and Finance Committees of Sara Lee. Age
69.
4
<PAGE> 8
- ----------------------
VERNON E. JORDAN, JR.
Senior partner of the Washington, D.C. law firm
of Akin, Gump, Strauss, Hauer & Feld L.L.P. Mr.
Jordan became a director of Sara Lee in 1989. He
served as President of the National Urban League,
Inc. from 1972 to 1982. Mr. Jordan is a director
of American Express Company, Bankers Trust New
York Corporation and its subsidiary, Bankers
Trust Company, Corning Incorporated, Dow Jones &
Company, Inc., J.C. Penney Company, Inc., Revlon
- --------------------- Group, Inc., Ryder System, Inc., Union Carbide
Corporation and Xerox Corporation. He is also a
director of the Ford Foundation and The Lyndon
Baines Johnson Foundation. Mr. Jordan is a
trustee of Howard University and a governor of
the Joint Center for Political and Economic
Studies. He is a member of the Audit and Employee
and Public Responsibility Committees of Sara Lee.
Age 60.
- ----------------------
JAMES L. KETELSEN
Retired Chairman of the Board and Chief Executive
Officer of Tenneco Inc. (diversified industrial
corporation). He was Chairman of the Board and
Chief Executive Officer of Tenneco Inc. from 1978
to 1992. Mr. Ketelsen became a director of Sara
Lee in 1982. He is also a director of GTE
Corporation and J.P. Morgan & Co. and its
subsidiary, Morgan Guaranty Trust Co. He is
Chairman of the Finance Committee and a member of
the Board Affairs and Corporate Governance,
Compensation and Employee Benefits and Executive
Committees of Sara Lee. Age 64.
- ----------------------
- ---------------------- HANS B. VAN LIEMT
Retired Chairman of the Board of Management of
DSM NV (chemicals). Mr. van Liemt served as
Chairman of the Board of Management of DSM NV
from 1984 to 1993. Mr. van Liemt became a
director of Sara Lee in 1995. He is Chairman of
the Supervisory Board of Sara Lee/DE N.V., a
subsidiary of Sara Lee. Mr. van Liemt is Chairman
of the Supervisory Boards of Gamma Holding NV and
Oce-Van der Grinten NV. He is also a member of
the Supervisory Boards of ABN-AMRO Holding NV,
- ---------------------- Van Leer Group Foundation, NV Verenigd Bezit VNU
and Stienstra Holding BV. Mr. van Liemt is a
trustee of the Foundation of the Catholic
University of Nijmegen, the Lucas-Franciscus
Rehabilitation Foundation, the Preference Shares
Foundation of Koninklijke PTT NV, the Preference
Shares Foundation of Philips NV and of the
Preference Shares Foundation of EVC
International. He is a member of the Audit and
Finance Committees of Sara Lee. Age 62.
5
<PAGE> 9
- ----------------------
JOAN D. MANLEY
Retired Group Vice President and retired director
of Time Incorporated (communications). Mrs. Manley
became a director of Sara Lee in 1982. She is also
a director of Aon Corporation, BFP Holdings, Inc.,
Scholastic Corporation and Viking Office Products,
Inc. Mrs. Manley is a member of the Audit and
Finance Committees of Sara Lee. Age 63.
- ----------------------
- ----------------------
C. STEVEN MCMILLAN
Executive Vice President of Sara Lee since 1993
and Senior Vice President from 1986 to 1993. Mr.
McMillan became a director of Sara Lee in 1993.
He is also a director of Electrolux Corporation
and J.P. Foodservice, Inc. Mr. McMillan is a
member of the Advisory Board of the Stedman
Nutrition Center of the Duke University Medical
School, a member of the Board of Advisors of Troy
State University Business School, and a member of
the Productivity Council of the Grocery
Manufacturers of America, Inc. He is a member of
- ---------------------- the Employee and Public Responsibility and
Finance Committees of Sara Lee. Age 49.
- ----------------------
NEWTON N. MINOW
Counsel to, and former partner of, the Chicago
law firm of Sidley & Austin. He became a director
of Sara Lee in 1988. Mr. Minow served as Chairman
of the Federal Communications Commission from
1961 to 1963. He is also a director of Aon
Corporation, Manpower, Inc., Tribune Company, and
True North Communications Inc. Mr. Minow is
Chairman of the Carnegie Corporation of New York,
a trustee and former Chairman of the Board of
Trustees of the RAND Corporation, and former
Chairman of the Board of Governors of the Public
- ---------------------- Broadcasting Service. He is also a trustee of the
University of Notre Dame and a life trustee of
Northwestern University, where he is director of
the Annenberg Washington Program and serves as
the Walter H. Annenberg Professor of
Communications Law and Policy. Mr. Minow is
Chairman of the Audit Committee, and a member of
the Board Affairs and Corporate Governance,
Executive and Finance Committees of Sara Lee. Age
69.
6
<PAGE> 10
- ----------------------
MICHAEL E. MURPHY
Vice Chairman and Chief Administrative Officer
of Sara Lee since 1994, Vice Chairman and Chief
Financial and Administrative Officer from 1993 to
1994, and Executive Vice President and Chief
Financial and Administrative Officer from 1979 to
1993. He became a director of Sara Lee in 1979.
Mr. Murphy is a director of GATX Corporation. He
is a member of the Advisory Board of the J.L.
Kellogg Graduate School of Management of
Northwestern University, member of the Chicago
Committee of the Chicago Council on Foreign
- ---------------------- Relations, member of the Executive Committee of
the Civic Federation of Chicago and a director of
Northwestern Memorial Corporation (university
hospitals), the Lyric Opera (Chicago),
Jobs-for-Youth (Chicago) and Big Shoulders Fund
(Chicago). Mr. Murphy is a member of the Employee
and Public Responsibility, Executive and Finance
Committees of Sara Lee. Age 59.
- ----------------------
SIR ARVI H. PARBO A.C.
Chairman of Western Mining Corporation Holdings
Limited (exploration and mining) since 1974, and
also Chairman of Alcoa of Australia Limited,
Munich Reinsurance Company of Australia Limited
and Zurich Australian Insurance Group. Sir Arvi
became a director of Sara Lee in 1991. He is a
director of Aluminum Company of America and of
Hoechst Australian Investments Proprietary
Limited, and a member of the Chase International
Advisory Committee. Sir Arvi is a member of the
- ---------------------- Compensation and Employee Benefits and Finance
Committees of Sara Lee. Age 69.
- ----------------------
ROZANNE L. RIDGWAY
Co-Chair of The Atlantic Council of the United
States (association to promote understanding of
international security, political and economic
problems) since 1993, President from 1989 to 1993
and, since July 1994, Chair of the Baltic American
Enterprise Fund. She became a director of Sara Lee
in 1992. Ambassador Ridgway served in the U.S.
Foreign Service from 1957 until her retirement in
1989, including assignments as Ambassador for
Oceans and Fisheries Affairs; Ambassador to
Finland; Counselor of the Department of
- ---------------------- State; Ambassador to the German Democratic
Republic; and from 1985 to 1989, Assistant
Secretary of State for European and Canadian
Affairs. Ambassador Ridgway is a director of Bell
Atlantic Corporation, The Boeing Company, Citicorp
and its subsidiary, Citibank, Emerson Electric
Company, Minnesota Mining & Manufacturing Company,
RJR Nabisco, Inc. and Union Carbide Corporation.
She serves on the International Advisory Board of
the New Perspective Fund. Ambassador Ridgway is
also a director of the Center for Naval Analysis
and of the Council on Ocean Law and a trustee of
the National Geographic Society and of Hamline
University, Vice Chairman of the American Academy
of Diplomacy, and a Fellow of the National Academy
of Public Administration. She is a member of the
Compensation and Employee Benefits and Employee
and Public Responsibility Committees of Sara Lee.
Age 60.
7
<PAGE> 11
- ----------------------
RICHARD L. THOMAS
Chairman of the Board and Chief Executive
Officer of First Chicago Corporation (bank
holding company) and its subsidiary, The First
National Bank of Chicago. Mr. Thomas became a
director of Sara Lee in 1976. He is also a
director of CNA Financial Corporation. Mr. Thomas
is a life trustee of the Orchestral Association
of Chicago and a trustee of Rush-Presbyterian-St.
Luke's Medical Center (Chicago). He is also a
trustee of Northwestern University and Kenyon
College. Mr. Thomas is Chairman of the Board
- ---------------------- Affairs and Corporate Governance Committee and a
member of the Audit, Employee and Public
Responsibility and Executive Committees of Sara
Lee. Age 64.
8
<PAGE> 12
OWNERSHIP OF COMMON STOCK AND ESOP STOCK
BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table contains information as to the beneficial ownership of
Common Stock and ESOP Stock as of September 1, 1995, by each director and
nominee for director, the executive officers named in the Summary Compensation
Table on page 17, and by all directors and executive officers as a group. Except
as otherwise noted, the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON STOCK ESOP STOCK
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED
- -------------------------------------------------- ------------ ------------
<S> <C> <C>
Paul A. Allaire................................... 15,887 --
Frans H.J.J. Andriessen........................... 2,233 --
John H. Bryan..................................... 1,967,484(1),(2),(3) 331.7
Duane L. Burnham.................................. 6,565 --
Charles W. Coker.................................. 44,443 --
Willie D. Davis................................... 12,163 --
Donald J. Franceschini............................ 815,169(1),(3) 155.1
Allen F. Jacobson................................. 7,683 --
Vernon E. Jordan, Jr.............................. 7,687 --
James L. Ketelsen................................. 23,763 --
Hans B. van Liemt................................. 2,105 --
Joan D. Manley.................................... 20,563 --
C. Steven McMillan................................ 352,892(1),(3) 331.7
Frank L. Meysman.................................. 201,665(1) --
Newton N. Minow................................... 64,718 --
Michael E. Murphy................................. 438,515(1),(3),(4) 331.7
Sir Arvi H. Parbo A.C............................. 6,008 --
Rozanne L. Ridgway................................ 2,842 --
Richard L. Thomas................................. 164,742(2),(4) --
Directors and Executive Officers as a group (22
persons)........................................ 4,310,483(1),(2),(3),(4),(5) 2,126.4
</TABLE>
- -------------------------
(1) Includes shares of Common Stock which the following directors and executive
officers have the right to acquire within 60 days upon the exercise of stock
options: Mr. Bryan, 644,720 shares; Mr. Franceschini, 63,199 shares; Mr.
McMillan, 192,909 shares; Mr. Meysman, 186,682 shares; Mr. Murphy, 40,034
shares; and executive officers other than named executive officers, 130,846
shares.
(2) Includes shares of Common Stock owned by relatives or held in trusts for the
benefit of relatives with respect to which the named persons disclaim any
beneficial interest.
(3) Includes restricted shares granted under Sara Lee's 1989 Incentive Stock
Plan as described on pages 12 and 13.
(4) Includes shares of Common Stock with respect to which the following
directors and executive officers share voting and investment power with
others: Mr. Murphy, 224,593 shares; and Mr. Thomas, 1,500 shares.
(5) Does not include 201,665 shares beneficially owned by Mr. Meysman.
As of September 1, 1995, all directors and executive officers as a group
beneficially owned, or were deemed to beneficially own, 4,310,483 shares of
Common Stock, or 0.890% of the outstanding shares of Common Stock on that date,
and 2,126.4 shares of ESOP Stock, or 0.047% of the outstanding ESOP Stock on
that date. No person named in the table owns more than 1% of the outstanding
Common Stock or of the outstanding ESOP Stock. Each share of ESOP Stock is
convertible into 5.133 shares of Common Stock, as provided in the ESOP.
9
<PAGE> 13
As of September 1, 1995, State Street Bank & Trust Company of Boston, 200
Newport Avenue, North Quincy, Massachusetts 02171, as trustee for the ESOP
("Trustee"), held 4,514,427 shares of ESOP Stock (all of the outstanding shares
of ESOP Stock), of which 1,168,043 shares (25.87%) were allocated to participant
accounts and 3,346,384 shares (74.13%) were unallocated shares, and 9,517 shares
of Common Stock (less than 1% of the outstanding shares of Common Stock), all of
which were allocated to participant accounts. Each ESOP participant is entitled
to direct the Trustee how to vote the shares allocated to his account as well as
a proportionate share of unallocated or unvoted shares.
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held six meetings during the fiscal year ended July
1, 1995. The average attendance by directors at the meetings of the Board of
Directors and Board committees was 98%. All directors attended at least 75% of
the meetings of the Board of Directors and Board committees of which they are
members.
AUDIT COMMITTEE. The Audit Committee, whose members are presently Newton N.
Minow (Chairman), Paul A. Allaire, Frans H.J.J. Andriessen, Duane L. Burnham,
Vernon E. Jordan, Jr., Hans B. van Liemt, Joan D. Manley and Richard L. Thomas,
held three meetings during fiscal year 1995. This Committee provides oversight
regarding accounting, auditing and financial reporting practices of Sara Lee.
Each year it recommends to the Board of Directors a firm of independent public
accountants to serve as auditors with whom it discusses the scope and results of
their audit, non-audit services, fees for services and their independence in
servicing Sara Lee. The Audit Committee meets with Sara Lee's internal auditors
to discuss the work they perform and also is informed by management and the
independent public accountants about the adequacy of compliance with Sara Lee's
existing major accounting and financial policies; procedures and policies
relative to the adequacy of Sara Lee's internal accounting controls; and
compliance with the Foreign Corrupt Practices Act of 1977 and other federal and
state laws relating to accounting practices.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE. The Compensation and Employee
Benefits Committee is presently comprised of Allen F. Jacobson (Chairman), Duane
L. Burnham, Charles W. Coker, Willie D. Davis, James L. Ketelsen, Sir Arvi H.
Parbo A.C., and Rozanne L. Ridgway, none of whom are, or have ever been,
employees of Sara Lee. The functions of the Compensation and Employee Benefits
Committee are to review and approve Sara Lee's total compensation philosophy
covering corporate officers and other key management employees; to review the
competitiveness of Sara Lee's total compensation practices; to determine the
annual base salaries and incentive awards to be paid to specified executive
officers and approve the annual salaries of all corporate officers and certain
other highly-paid executives; to review and approve salary ranges for corporate
officers and other key management employees; to approve the terms and conditions
of proposed incentive plans applicable to corporate officers and other key
management employees; to approve and administer Sara Lee's incentive and other
employee benefit plans, subject to the approval of the Board of Directors or the
stockholders of Sara Lee, where appropriate; and to review and approve special
hiring and severance arrangements with executive officers. A director is not
eligible to serve as a member of the Compensation and Employee Benefits
Committee if a Sara Lee employee is a member of the board of directors of the
company which employs such director. The Compensation and Employee Benefits
Committee held four meetings in fiscal year 1995.
BOARD AFFAIRS AND CORPORATE GOVERNANCE COMMITTEE. The Board Affairs and
Corporate Governance Committee is presently comprised of Richard L. Thomas
(Chairman), John H. Bryan, Willie D. Davis, Allen F. Jacobson, James L. Ketelsen
and Newton N. Minow. The functions of the Board Affairs and Corporate Governance
Committee are to review and consider directorship policies and practices from
time to time, to screen and recommend candidates for director, and to review the
management succession plan and executive resources. The Board Affairs and
Corporate Governance Committee held two meetings in fiscal year 1995. Candidates
for director suggested by stockholders will be considered by the Board Affairs
and Corporate Governance Committee. Such suggestions, together with biographical
10
<PAGE> 14
information about the suggested candidate, should be submitted to the Secretary,
Sara Lee Corporation, Three First National Plaza, Chicago, Illinois 60602-4260.
DIRECTOR COMPENSATION
Outside directors are currently paid an annual retainer of $61,500, which
is comprised of $37,000 in cash, payable in equal quarterly payments of $9,250,
and shares of Common Stock having a market value of $24,500 on the first
business day of November. Committee chairpersons are paid an annual retainer of
$63,500. On March 30, 1995, the Board of Directors approved a change in the
annual retainer payable to outside directors. Effective on November 1, 1995, all
outside directors will receive an annual retainer of $62,500 in cash, with no
additional cash compensation for service as a committee chairperson. Pursuant to
the 1995 Non-Employee Director Stock Plan, subject to stockholder approval
thereof, beginning on November 1, 1995, outside directors will receive an annual
grant of options to purchase 5,000 shares of Common Stock (plus an additional
option to purchase 500 shares for chairs of standing committees of the Board),
and may elect to receive Common Stock, options to purchase Common Stock, or a
combination thereof, in lieu of all or a portion of their annual retainer. For
more information regarding the 1995 Non-Employee Director Stock Plan, see pages
27 through 29.
During fiscal year 1995, total outside directors' fees of $871,023 were
paid in cash and shares of Common Stock. Management directors receive no fees
for their services as a director. Outside directors may elect to defer payment
of all or a portion of their annual retainer under a non-qualified, unfunded
deferred compensation plan. Deferred amounts are invested, at the election of
the director, in an interest-bearing account or a stock equivalent account. The
amounts deferred, plus any appreciation thereon, are paid in cash on the dates
specified by the director.
-------------------------
Notwithstanding anything to the contrary set forth in any of Sara Lee's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings by reference,
including this Proxy Statement, in whole or in part, the following Report of the
Compensation and Employee Benefits Committee on Executive Compensation and the
Performance Graph shall not be incorporated by reference into any such filings.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE ON EXECUTIVE
COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY AND PRINCIPLES
The Compensation and Employee Benefits Committee ("Committee"), composed of
directors who are not employees or former employees of Sara Lee, is responsible
for the approval and administration of compensation programs for Sara Lee's
executive officers. In conducting its review of executive compensation matters,
the Committee utilizes the compensation data and advisory services of
independent compensation consultants. Sara Lee's philosophy of executive
compensation is based on the following principles:
- - Executive compensation programs shall support the attainment of Sara Lee's
short-term and long-term strategic and financial objectives by rewarding its
executive officers for continuous improvement in earnings per share and growth
in stockholder value.
- - Total compensation shall represent competitive levels of compensation when
compared to the financial performance and compensation levels of executives of
global companies against which Sara Lee competes for management talent.
- - Performance-related pay shall be a significant component of total compensation
placing a substantial portion of an executive officer's compensation at risk.
11
<PAGE> 15
- - Equity ownership plans shall be designed and maintained to encourage
significant stock ownership in Sara Lee by its executive officers to align
their interests with those of stockholders.
BASE SALARY
Executive officers' salaries are determined by evaluating the
responsibilities of their positions and their performance, and by reference to
the median levels of salaries paid in the competitive marketplace for comparable
executive ability and experience. This marketplace consists of a select peer
group of the largest U.S.-based, global consumer products companies, the
majority of which are represented in the S&P Food/Household/Apparel Composite
index (as defined on page 16) shown in the Performance Graph on page 16. The
same competitive peer group is used for all components of the compensation
package. Individual salary increases, which are considered annually, are based
on Sara Lee's financial performance and the attainment of individual
non-financial objectives during the preceding fiscal year. In the case of
operating executive officers, other factors considered are the financial results
of their business units as well as non-financial performance measures, such as
market share; manufacturing productivity; product quality and relationships with
customers, suppliers and employees; employee safety; environmental quality of
operations; business ethics; leadership and management development. The
Committee exercises its judgment in determining the impact that these or any
other relevant performance criteria have on setting the executive officers'
salaries.
ANNUAL INCENTIVES
Executive officers are also eligible to earn an annual cash incentive
award, the amount of which is based on three factors: (i) the position of the
executive officer, which determines the maximum percentage of annual base salary
which may be awarded, ranging from 125% to 95% of annual base salary; (ii) the
attainment of specified earnings per share of Sara Lee, and in the case of an
operating executive officer, the attainment of a specified level of operating
profits and of asset management goals for the fiscal year for those operations
for which the executive is accountable; and (iii) individual non-financial
performance objectives, all of which are set at the beginning of the fiscal year
by the Committee for John H. Bryan, Chief Executive Officer, or by the immediate
superiors of the other executive officers. Maximum awards are set at levels
which would provide top quartile total annual cash compensation opportunities,
i.e. base salary earnings plus incentive award, if those performance objectives
deemed to represent an outstanding level of performance are achieved.
LONG-TERM INCENTIVE PLAN
Under the 1989 Incentive Stock Plan (approved by the stockholders in
October 1989), the Committee grants stock awards, in the form of stock options
and performance shares (also referred to as restricted shares), which provide an
incentive for executive officers to maximize long-term stockholder value. In
making its annual determination of stock awards, the Committee does not consider
an individual's current stock option or other Sara Lee stock holdings.
Stock options to purchase Common Stock are granted annually under the 1989
Incentive Stock Plan to executive officers at an option price of 100% of the
market value on the date of grant, with a maximum term of 10 years. The
Committee sets guidelines for the number of shares subject to each option grant
based on the evaluation of competitive compensation data at the median level of
the select peer group and the executive officer's base salary and position. The
total number of shares available for the granting of stock options each year is
based on the number of shares of Common Stock outstanding and the earnings per
share performance of Sara Lee during the immediately preceding fiscal year.
To encourage stock ownership by executive officers, restoration stock
options ("Restoration Options") are granted simultaneously with the exercise of
the original stock option. Restoration Options are intended to encourage an
executive officer to exercise a stock option earlier than might otherwise occur,
thus resulting in increased share ownership by the executive officer.
Restoration Options are granted when an executive officer exercises an option by
surrendering (or attesting to) currently owned
12
<PAGE> 16
shares to purchase the shares subject to the option as well as to satisfy tax
withholding obligations related to the exercise of the option. Restoration
Options are subject to the same terms and conditions as the original options,
including the expiration date, except that the option price of a Restoration
Option is the fair market value on the date of its grant rather than the option
price of the original option. In 1994, the Committee approved changes to the
Restoration Option program whereby only one Restoration Option will be granted
for each original stock option granted after June 29, 1994. Additionally, the
market value of the underlying stock must have appreciated by at least 25%
before a Restoration Option may be granted.
Sara Lee has adopted the Long-Term Performance Incentive Plan ("LTPIP")
under the 1989 Incentive Stock Plan as the only long-term performance incentive
program under which the Committee could award executive officers shares of
Common Stock which may be earned based upon achievement of specified corporate
and/or group financial goals. The LTPIP will be continued under the 1995 Long-
Term Incentive Stock Plan, the successor to the 1989 Incentive Stock Plan, which
is proposed for stockholder approval. The full text of the 1995 Long-Term
Incentive Stock Plan appears as Appendix B to this Proxy Statement.
Performance shares are granted annually at the beginning of each new
three-year performance cycle. For Dutch tax purposes, Dutch participants who are
resident in the Netherlands receive stock options in lieu of performance shares
of Common Stock under the LTPIP. The Committee sets target award levels at
approximately the median value of the competitive peer group. The fiscal year
95-97 performance measures for corporate positions, including Messrs. Bryan and
Murphy, consist of cumulative primary earnings per share growth over the
three-year performance cycle, and three-year average returns on capital and
equity. In addition to these performance measures, Messrs. Franceschini and
McMillan also have operating profit and return on average investment for their
respective business groups as performance measures. Mr. Meysman's performance
measures consist of cumulative primary earnings per share growth, operating
profit and return on average investment for his business group.
Dividends on the performance shares awarded to each participant are
escrowed during the performance cycle. Dividends and interest on the escrowed
dividends will be distributed at the end of the performance cycle in the same
proportion as the restrictions on the performance shares lapse as a result of
achieving the specified performance goals. To the extent the performance goals
are not attained, both dividends and interest would be forfeited by the
participant. To the extent that target performance levels are exceeded, a
maximum of 125% of the performance shares initially awarded may be earned.
Dividends are not paid retroactively on any additional shares issued for
performance above target levels.
In keeping with Sara Lee's principle of designing and maintaining stock
incentive plans to encourage significant stock ownership in Sara Lee by its
executives, the Committee has approved target levels of stock ownership
(excluding stock options and performance shares that have been awarded but not
yet earned) to clarify for executives the levels of stock ownership that Sara
Lee believes are significant. The target levels of stock ownership range from
five times annual base salary for the Chief Executive Officer to approximately
two-thirds of annual base salary for operating unit vice presidents. These
target ownership levels are applicable to about 500 of Sara Lee's key
executives. All five executive officers named in the Summary Compensation Table
on page 17 maintain ownership levels which exceed their target.
CHIEF EXECUTIVE OFFICER'S COMPENSATION AND CORPORATE PERFORMANCE FOR FISCAL
YEAR 1995
The Committee increased Mr. Bryan's annualized base salary from $892,500 to
$928,200 effective September 1, 1994. The Committee determined that Mr. Bryan's
base salary should be increased by 4.0%, which was identical to the general
merit increase budget for all key executives of Sara Lee in fiscal year 1995.
Mr. Bryan's base salary will be capped going forward as part of Sara Lee's
strategy with respect to the deductibility of amounts paid as compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
which is also discussed in the following section. The foregone value of future
salary increases will be replaced with other forms of performance-based
compensation. Based upon an independent consultant's analysis of compensation
data for the position of
13
<PAGE> 17
Chief Executive Officer, Mr. Bryan's current base salary was at the median level
for base salary paid to chief executive officers by Sara Lee's competitive peer
group.
Under the annual incentive plan applicable to fiscal year 1995, Mr. Bryan
was eligible to earn a cash bonus equal to 125% of his base salary, of which 56%
was based on earnings per share performance and 44% was based on the attainment
of strategic and individual performance measured against the goals set by the
Committee at the beginning of fiscal year 1995. Sara Lee's primary earnings per
share of $1.62 represented a 10.2% increase over fiscal year 1994. The
aforementioned fiscal year 1994 results excluded a $495 million extraordinary
charge to net income related to a restructuring program and a $35 million charge
related to the adoption of Statement of Financial Accounting Standards No. 109.
The Committee evaluated Mr. Bryan's strategic and individual performance in
achieving other financially related goals including return on equity, return on
invested capital and debt-to-total capital ratio. Additionally, the Committee
evaluated non-financial goals such as management development, succession
planning and workplace diversity initiatives. Based upon the Committee's
assessment of Mr. Bryan's performance in relation to these factors, he earned an
incentive award of $1,117,912, which represents 121.3% of his base salary
earnings for fiscal year 1995.
On August 24, 1994, Mr. Bryan was granted an option to purchase 150,000
shares of Common Stock of Sara Lee by the Committee in accordance with the
guidelines of the Committee referred to above and Sara Lee's earnings per share
performance for fiscal year 1994. Mr. Bryan was granted 30,000 performance
shares under the fiscal year 95-97 Long-Term Performance Incentive Plan.
TAX DEDUCTIBILITY CONSIDERATIONS
In 1993, the Code was amended to limit the deductibility of certain
compensation in excess of $1 million paid to each of the five highest paid
executive officers. The Chief Executive Officer and Messrs. Franceschini,
McMillan and Murphy have deferred their base salary and incentive awards up to
the amounts necessary to ensure there is no loss of tax deductibility under
Section 162(m) of the Code for fiscal year 1995. The compensation paid to Mr.
Meysman which is subject to Section 162(m) did not exceed $1 million.
As stated in last year's proxy statement, it is the Committee's intent,
pending finalization of the Section 162(m) regulations, to adopt policies to
obtain maximum tax deductibility of executive compensation, consistent with its
responsibility to provide motivational and competitive compensation which is
performance-based. Final rules for Section 162(m) have not yet been issued. If
compliance with the final rules would conflict with the aforementioned Executive
Compensation Philosophy and Principles, or is deemed not to be in the best
interests of stockholders, the Committee will abide by the Executive
Compensation Philosophy and Principles regardless of the impact of such actions
on the tax deductibility of compensation paid to executive officers covered by
Section 162(m).
As part of its efforts to obtain maximum tax deductibility of executive
compensation under the proposed Section 162(m) regulations, on August 30, 1995
the Committee approved several modifications to the compensation program of the
Chief Executive Officer. The Chief Executive Officer's base salary has been
capped at its current level of $928,200 and his most significant executive
perquisites have been eliminated. The foregone value of future base salary
increases and perquisites will be replaced with performance-based forms of
compensation.
In furtherance of the goal of obtaining the maximum tax deductibility of
compensation paid to all executive officers covered by Section 162(m), the Board
of Directors is recommending that all stockholders vote for the proposals to
approve the new Sara Lee Corporation Performance-Based Annual Incentive Plan, as
set forth in the proposal on pages 21 through 23 of this Proxy Statement, and
the Sara Lee Corporation 1995 Long-Term Incentive Stock Plan, as set forth in
the proposal on pages 23 through 27.
14
<PAGE> 18
SUMMARY
The Compensation and Employee Benefits Committee believes that the
compensation programs of Sara Lee and the administration of those programs well
serve the interests of Sara Lee stockholders. These programs allow Sara Lee to
attract, retain and motivate exceptional management talent and to compensate
executives in a manner that reflects their contribution to both the short- and
long-term performance of the corporation. Sara Lee intends to continue to
emphasize performance-based compensation programs that it believes positively
affect stockholder value.
Allen F. Jacobson, Chairman
Duane L. Burnham
Charles W. Coker
Willie D. Davis
James L. Ketelsen
Sir Arvi H. Parbo A.C.
Rozanne L. Ridgway
15
<PAGE> 19
PERFORMANCE GRAPH
The graph below compares the yearly percentage change in cumulative total
stockholder return on Common Stock with (i) the cumulative total return of the
Standard and Poor's 500 Stock Index ("S&P 500") and (ii) the cumulative total
return of a weighted composite of Standard and Poor's Foods, Household Products
and Textile-Apparel Manufacturers Indices, respectively ("S&P Food/Household/
Apparel Composite").
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AS OF JUNE 30
<TABLE>
<CAPTION>
S&P
MEASUREMENT PERIOD FOOD/HOUSEHOLD/APPAREL
(FISCAL YEAR COVERED) SARA LEE COMPOSITE S&P 500
<S> <C> <C> <C>
1990 100 100 100
1991 143 118 107
1992 187 129 122
1993 183 128 138
1994 161 121 140
1995 222 145 177
</TABLE>
Assumes an investment of $100 on June 30, 1990, and the reinvestment of
dividends.
Sara Lee has elected to utilize a weighted composite of the S&P Foods, Household
Products and Textile-Apparel Manufacturers Indices because no single
standardized industry index represents a comparable peer group. As of June 30,
1995, the three Indices are comprised of the following companies: the S&P Foods
Index -- Archer-Daniels-Midland Co., CPC International Inc., Campbell Soup
Company, ConAgra, Inc., General Mills, Inc., H.J. Heinz Company, Hershey Foods
Corporation, Kellogg Company, The Quaker Oats Company, Ralston Purina Group,
Sara Lee Corporation, Unilever N.V., Wm. Wrigley Jr. Company; the S&P Household
Products Index -- The Clorox Company, Colgate-Palmolive Company, Kimberly-Clark
Corporation, The Procter & Gamble Company, Scott Paper Co.; and the S&P
Textile-Apparel Manufacturers Index -- Fruit of the Loom, Inc., Liz Claiborne,
Inc., Russell Corp., Springs Industries, V.F. Corporation. The returns on the
S&P Food/Household/Apparel Composite were calculated as follows: at the
beginning of each fiscal year the amount invested in each S&P industry sector
index was equivalent to the percentage of Sara Lee's operating profits in its
food, household and personal care and apparel businesses, respectively, for the
preceding year. As a result, the investment allocation was re-weighted each year
to reflect the profit percentage change that occurred in Sara Lee's business mix
during the prior year.
16
<PAGE> 20
SUMMARY COMPENSATION TABLE
The following table sets forth information as to certain compensation paid
to, or set aside for, the Chief Executive Officer of Sara Lee and each of the
four other most highly compensated executive officers of Sara Lee and its
subsidiaries (collectively, the "named executive officers") for services
rendered during the fiscal years ended July 1, 1995, July 2, 1994 and July 3,
1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(1) (#)(2) ($)(3)
- ------------------- ------ -------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John H. Bryan 1995 $921,609 $1,117,912 $181,720(4) $690,000 150,000 $ 42,117
Chairman of the Board 1994 $892,500 $ 676,515 $166,600 None 100,089 $ 53,517
and Chief Executive 1993 $885,144 $ 870,053 $131,082 None 633,186 $ 76,365
Officer
Michael E. Murphy 1995 $543,046 $ 644,596 $ 74,271(4) $345,000 75,000 $ 30,360
Vice Chairman and Chief 1994 $529,573 $ 394,532 $ 2,670 None 45,100 $ 25,658
Administrative Officer 1993 $489,019 $ 418,111 (5) $246,250 239,634 $ 51,440
C. Steven McMillan 1995 $515,192 $ 556,407 $ 81,387(4) $345,000 75,000 $ 28,086
Executive Vice President 1994 $475,000 $ 441,750 $ 67,202 None 61,605 $ 32,467
1993 $439,065 $ 443,293 (5) $843,750 118,971 $ 38,881
Donald J. Franceschini 1995 $495,385 $ 532,539 (5) $345,000 75,000 $ 15,834
Executive Vice President 1994 $379,250 $ 324,117 (5) $470,000 42,800 $ 13,546
1993 $263,135 $ 244,716 (5) $441,628 18,000 $ 8,204
Frank L. Meysman(6) 1995 $488,126 $ 323,559 (5) None 78,000 None
Senior Vice President 1994 $222,198 $ 168,515 (5) None 18,734 None
1993 $227,962 $ 154,652 (5) None 25,918 None
</TABLE>
- -------------------------
(1) Market value of restricted shares of Common Stock awarded under the 1989
Incentive Stock Plan on the date of grant. In the event of a change of
control (as defined in the 1989 Incentive Stock Plan), the restrictions
imposed on the restricted shares will lapse, and all restricted shares will
be released to participants. The number of restricted shares awarded during
fiscal year 1995 and the aggregate number and market value of restricted
shares held by each of the named executive officers at July 1, 1995, is set
forth below. The share amounts set forth below have been adjusted to reflect
the 2-for-1 stock split of Common Stock in December 1992, and the market
value was calculated based on the closing price of Common Stock on June 30,
1995 (the last business day of the fiscal year), which was $28.50 per share.
<TABLE>
<CAPTION>
SHARES TOTAL RESTRICTED SHARES
AWARDED HELD AT END OF FY 1995
IN FISCAL -----------------------
NAME YEAR 1995 SHARES MARKET VALUE
------------------------------------------------ --------- ------- ------------
<S> <C> <C> <C>
John H. Bryan................................... 30,000 222,000 $6,327,000
Michael E. Murphy............................... 15,000 121,000 $3,448,500
C. Steven McMillan.............................. 15,000 109,000 $3,106,500
Donald J. Franceschini.......................... 15,000 51,800 $1,476,300
Frank L. Meysman................................ None N.A. N.A.
</TABLE>
For a discussion of the treatment of dividends and/or dividend equivalents
received by participants with respect to restricted shares, see page 13.
(2) Represents options to purchase Common Stock granted pursuant to the 1989
Incentive Stock Plan. Amounts reported in this column have been adjusted to
reflect the 2-for-1 Common Stock split in December 1992, and include
Restoration Options granted during fiscal years 1993, 1994 and 1995, as
discussed on pages 12 and 13.
(3) The amounts reported in this column for fiscal year 1995 include (i) all
amounts allocated to the following named executive officers under the ESOP
and the Supplemental Plan (as defined on page 19): Mr. Bryan, $35,362, Mr.
Murphy, $23,840, Mr. McMillan, $22,485, and Mr. Franceschini, $15,834, and
(ii) interest accrued at above-market rates (as defined by the rules of the
Securities and Exchange Commission) on compensation deferred for prior
periods by the named executive officers: Mr. Bryan, $6,755, Mr. Murphy,
$6,520 and Mr. McMillan, $5,601.
17
<PAGE> 21
(4) The amount reported for Mr. Bryan includes $61,975 for personal financial
services, the amount reported for Mr. Murphy includes $47,025 for personal
financial services, and the amount reported for Mr. McMillan includes
$42,193 for the personal use of corporate transportation.
(5) None of the named executive officers received perquisites or other personal
benefits in an amount large enough to require reporting in this column, nor
did any of them receive any other compensation required to be reported in
this column.
(6) Mr. Meysman's compensation information contained in this Proxy Statement has
been converted from Dutch guilders to U.S. dollars based upon an average
foreign exchange rate applicable for each fiscal year.
OPTION GRANTS TABLE
The following table shows stock option award information for the named
executive officers during fiscal year 1995. The amounts shown as potential
realizable values for all stockholders represent the corresponding increases
over a ten-year period (the term of new options granted to non-Dutch optionees)
in the market value of 480,656,301 shares of Common Stock outstanding held by
all stockholders as of July 1, 1995, based on a share price of $28.50 (the
closing price per share of Common Stock on the last business day of fiscal year
1995).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF
TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION FOR
SECURITIES GRANTED
UNDERLYING TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE ----------------------------
GRANTED IN FISCAL PRICE EXPIRATION 5%(2) 10%(2)
NAME (#) YEAR ($/SH) DATE ($) ($)
- ----------------------------- -------------- --------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan New Grant(1)
150,000 3.13% $22.81 8/24/04 $ 2,151,763 $ 5,452,990
Michael E. Murphy New Grant(1)
75,000 1.56% $22.81 8/24/04 $ 1,075,881 $ 2,726,495
C. Steven McMillan New Grant(1)
75,000 1.56% $22.81 8/24/04 $ 1,075,881 $ 2,726,495
Donald J. Franceschini New Grant(1)
75,000 1.56% $22.81 8/24/04 $ 1,075,881 $ 2,726,495
Frank L. Meysman New Grant(1)
60,000 1.25% $22.81 8/24/99 $ 378,119 $ 835,544
LTPIP Grant(3)
18,000 0.38% $22.81 8/24/99 $ 113,436 $ 250,663
All Stockholders N.A. N.A. N.A. N.A. $8.6 Billion $21.8 Billion
</TABLE>
- -------------------------
(1) New options to purchase Common Stock granted under Sara Lee's 1989 Incentive
Stock Plan. All options were granted at 100% of the fair market value of the
Common Stock on the date of grant and may be exercised within 10 years,
except for Dutch optionees, whose options may be exercised within five
years. The options generally become exercisable in equal annual
installments, which are cumulative over a period of three years. No option
may be exercised until the expiration of one year from the date of grant,
except for options granted to Dutch employees which, for Dutch tax purposes,
are exercisable immediately. In the event of a change of control of Sara Lee
(as defined in the 1989 Incentive Stock Plan), all outstanding stock options
become immediately exercisable. The grant of a non-qualified option after
June 29, 1994 includes the right to only one Restoration Option which may be
granted only if the market value of the Common Stock underlying the option
has increased by at least 25% on the exercise date. For more information on
Restoration Options, see pages 12 and 13.
(2) The dollar amounts indicated in these columns are the result of calculations
assuming 5% and 10% growth rates as required by the rules of the Securities
and Exchange Commission. These growth rates are not intended by Sara Lee to
forecast future appreciation, if any, of the price of Common Stock, and Sara
Lee expressly disclaims any representation to that effect.
(3) Mr. Meysman's new grant of an option to purchase 60,000 shares of Common
Stock is subject to the terms and conditions applicable to Dutch optionees
as described in footnote (1) above. For Dutch tax purposes, in lieu of
performance shares being granted under the LTPIP, Mr. Meysman and other
Dutch participants resident in the
18
<PAGE> 22
Netherlands receive stock options. The option to purchase 18,000 shares of
Common Stock granted to Mr. Meysman under the LTPIP is also subject to the
terms and conditions applicable to Dutch optionees as described in footnote
(1) above. Additionally, the sale of shares obtained through the exercise of
these options is restricted based upon achievement of specified corporate
and/or group financial goals. For more information on the LTPIP, see page
13.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of stock options during fiscal year
1995, and concerning unexercised options held at the end of fiscal year 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#)(1) FISCAL YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan.......... None None 564,953 209,534 $ 700,437 $ 998,763
Michael E. Murphy...... None None 251,334 108,400 $ 411,300 $ 512,812
C. Steven McMillan..... None None 155,242 100,334 $ 253,357 $ 488,565
Donald J.
Franceschini......... None None 30,599 105,201 $ 90,651 $ 530,641
Frank L. Meysman....... 11,640 $92,014 123,682 None $ 572,231 None
</TABLE>
- -----------------------
(1) Represents the number of shares of Common Stock underlying options held by
each named executive officer.
(2) Calculated based on the share price of Common Stock on June 30, 1995 (the
last business day of fiscal year 1995) of $28.50 less the option exercise
price. An option is in-the-money if the market value of the Common Stock
subject to the option exceeds the exercise price.
RETIREMENT PLANS
PENSION PLAN
The named executive officers (other than Mr. Meysman) participate in the
Sara Lee Corporation Pension and Retirement Plan (the "Pension Plan"), a defined
benefit pension plan which is qualified under Section 401(a) of the Code, and
the Sara Lee Corporation Supplemental Benefit Plan (the "Supplemental Plan"), a
nonqualified plan. The Pension Plan has approximately 17,000 participants, and
the named executive officers (other than Mr. Meysman) participate in the Pension
Plan on the same basis as all other eligible employees. The annual pension
benefit under the plans, taken together, is in general determined by a
participant's credited years of service multiplied by a percentage of the
participant's final average compensation (compensation during the highest five
consecutive years of the last ten years of employment). For the named executive
officers, the sum of amounts listed in the "Salary" and "Bonus" column of the
Summary Compensation Table is used as compensation in the calculation of annual
pension benefits. The Code places certain limitations on the amount of pension
benefits that may be paid under qualified plans. Any benefits payable in excess
of those limitations will be paid under the Supplemental Plan. Benefits accrued
under the Supplemental Plan with present values exceeding $100,000 are funded
with periodic payments by Sara Lee to individual trusts established by the
participants.
The following table may be used to calculate the approximate annual
benefits payable under the Pension Plan and the Supplemental Plan to
participants in specified final average compensation and
19
<PAGE> 23
years of service classifications, assuming retirement on July 1, 1996, at age
65, payment in the form of a straight-life annuity and no offset for Social
Security benefits or individual trust balances.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL NORMAL RETIREMENT PENSION
FINAL BASED UPON THE INDICATED CREDITED SERVICE
AVERAGE -------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 25 YEARS 35 YEARS
- ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 500,000 $ 87,500 $131,250 $218,750 $ 306,250
$ 750,000 131,250 196,875 328,125 459,375
$1,000,000 175,000 262,500 437,500 612,500
$1,250,000 218,750 328,125 546,875 765,625
$1,500,000 262,500 393,750 656,250 918,750
$1,750,000 306,250 459,375 765,625 1,071,875
$2,000,000 350,000 525,000 875,000 1,225,000
</TABLE>
As of September 1, 1995, Messrs. Bryan, Franceschini, McMillan and Murphy
had 21, 3, 17 and 16 full years of credited service, respectively, under the
Pension Plan and all except for Mr. McMillan have additional accrued benefits
under predecessor pension plans of companies acquired by Sara Lee. Mr. Meysman
has 5 years of credited service under the pension plan of Sara Lee/DE N.V., a
subsidiary of Sara Lee, and has no credited service under the Pension Plan. The
annual compensation covered by the Pension Plan and the Supplemental Plan, or,
for Mr. Meysman, by the Sara Lee/DE N.V. pension plan, for each of the named
executive officers for 1994 is as follows: Mr. Bryan, $1,715,577, Mr.
Franceschini, $823,381, Mr. McMillan, $1,011,658, Mr. Murphy, $1,011,772 and Mr.
Meysman, $390,000.
EMPLOYEE STOCK OWNERSHIP PLAN
Sara Lee's Employee Stock Ownership Plan ("ESOP") is a tax-qualified
leveraged employee stock ownership plan. In general, employees of Sara Lee's
corporate office, or of a participating subsidiary or division, other than
employees covered by collective bargaining agreements, are eligible to
participate in the ESOP after having completed one year of service and attained
the age of 21. The named executive officers (other than Mr. Meysman) participate
in the ESOP on the same basis as all other eligible employees. Each year Sara
Lee makes contributions to the ESOP which, together with the dividends paid on
the ESOP Stock held by the ESOP, are used to pay loan interest and principal
incurred by the ESOP to purchase ESOP Stock. With each principal payment, a
portion of the ESOP Stock is allocated to participating employees, at a rate of
at least 1.75% of the participant's compensation. The Code places certain
limitations on the amount of ESOP Stock that may be allocated to a participant
under a tax-qualified employee stock ownership plan. Any allocation in excess of
those limitations will be reserved under the Supplemental Plan described above
under the caption "Pension Plan".
Participants are fully vested in their ESOP accounts upon completion of
five years of service, disability, retirement or death. A participant is not
entitled to a distribution from the ESOP until he terminates employment with
Sara Lee, becomes disabled or dies. The distribution will be made, at the
election of the participant, in Common Stock or cash. Distributions of excess
ESOP allocations from the Supplemental Plan are made only in cash.
For the calendar year ended December 31, 1994, Messrs. Bryan, Franceschini,
McMillan and Murphy were respectively allocated 49.3, 40.9, 49.3 and 49.3 shares
each of ESOP Stock to their accounts. Mr. Meysman does not participate in the
ESOP because he is not employed by a participating subsidiary or division. All
participants in the ESOP had an aggregate of 270,651 shares of ESOP Stock
allocated to their accounts. Under the Supplemental Plan, Messrs. Bryan,
Franceschini, McMillan and Murphy were respectively allocated units equivalent
to 261.1, 99.1, 148.6 and 160.2 shares of ESOP Stock to their accounts.
-------------------------
Sara Lee has a severance policy applicable to the named executive officers
(except for Mr. Meysman) and all corporate officers of Sara Lee which was
adopted in 1994. The Policy provides that
20
<PAGE> 24
if an officer's employment is terminated other than for cause, such officer is
entitled to receive severance payments equal to a minimum of 12 and a maximum of
30 months of salary, the number of which would depend on the officer's position,
length of service and age, and a pro rata payment under the incentive plans
applicable to the fiscal year in which the termination occurs. The terminated
officer's participation in Sara Lee's insurance plans, except for disability
insurance (which ends on the date of termination of employment), will continue
for the same number of months for which he or she is receiving severance
payments. At the discretion of the Chief Executive Officer of Sara Lee, the
severance payments may be increased by up to 6 months' salary, if the terminated
officer is 50 years of age or older, or up to 3 months' salary, if the
terminated officer is 40 to 49 years of age. Severance payments terminate if the
terminated officer becomes employed by a competitor of Sara Lee.
Mr. Meysman is a party to employment agreements (collectively, the
"Agreements") with Sara Lee and Sara Lee/DE N.V., a subsidiary of Sara Lee
("Sara Lee/DE"). Pursuant to the Agreements, Mr. Meysman is entitled (i) to an
annual base salary payable in Dutch guilders (which was $488,126 for fiscal year
1995 based upon an average foreign exchange rate used for purposes of the
conversion from Dutch guilders to U.S. dollars, and which is subject to annual
increases beginning January 1, 1996), (ii) to participate in Sara Lee's annual
short-term incentive plan, long-term incentive plans and deferred compensation
plans on a basis commensurate with other officers of Sara Lee, and (iii) to
certain perquisites commensurate with his position as Managing Director of Sara
Lee/DE and an officer of Sara Lee. Mr. Meysman's Agreement with Sara Lee/DE
generally is terminable by either party upon six months prior notice; his
participation in the aforementioned Sara Lee plans will cease upon his
termination of employment with Sara Lee/DE. Under certain circumstances, Mr.
Meysman is entitled to receive compensation at his then current base salary for
up to 30 months following termination of his employment by Sara Lee/DE, such
compensation to be increased by one month's salary for each year his age exceeds
50 years at the date of such termination of employment. These severance
obligations may be reduced by a percentage of other income earned by Mr. Meysman
during the period severance benefits are payable. If Mr. Meysman's employment is
terminated at the option of Sara Lee/DE after he attains age 57 years, or at his
option after he attains age 60 years, he will be paid 90% of his then base
salary for the first year following such termination of employment and 80% of
his then base salary for each year thereafter until he attains age 62 years,
subject to reduction under certain circumstances.
During fiscal year 1995, Sara Lee paid fees for legal services performed by
the law firm of Sidley & Austin, to which Newton N. Minow is of counsel, and the
law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., of which Vernon E.
Jordan, Jr. is a senior partner. Sara Lee paid fees for investment banking
services to The First National Bank of Chicago, of which Richard L. Thomas is
Chairman of the Board and Chief Executive Officer.
PROPOSAL TO APPROVE THE PERFORMANCE-BASED
ANNUAL INCENTIVE PLAN
The Board of Directors adopted the Sara Lee Corporation Performance-Based
Annual Incentive Plan (the "Annual Incentive Plan") on August 31, 1995, subject
to approval by the stockholders at the Annual Meeting.
The Annual Incentive Plan is being submitted to stockholders for approval
in response to recent federal income tax legislation that imposes certain
limitations on Sara Lee's ability to deduct compensation paid to certain of its
executive officers. One exception to these limitations is for "performance-
based" compensation that has been disclosed to and approved by a majority of
stockholders prior to payment of the awards. The Annual Incentive Plan is
intended to comply with the performance-based exception to the deduction
limitation rules. If the Annual Incentive Plan is approved by the stockholders,
it will go into effect for fiscal year 1996.
21
<PAGE> 25
SUMMARY OF THE ANNUAL INCENTIVE PLAN
A summary of the Annual Incentive Plan which includes the material terms of
performance-based compensation that Sara Lee intends to pay pursuant to the Plan
is set forth below. The summary is qualified in its entirety by reference to the
full text of the Annual Incentive Plan, which is attached to this Proxy
Statement as Appendix A.
The purpose of the Annual Incentive Plan is to advance the interests of
Sara Lee and its stockholders by providing certain of Sara Lee's key executives
with annual incentive compensation which is tied to the achievement of
preestablished and objective performance goals. Only "covered employees" (as
defined in Section 162(m) of the Code) of Sara Lee or any entity directly or
indirectly controlled by Sara Lee are eligible to participate in the Annual
Incentive Plan. Currently, the five named executive officers that appear in the
Summary Compensation Table are the only "covered employees" of Sara Lee. The
performance period under the Annual Incentive Plan will be the same as Sara
Lee's fiscal year, or such other period as designated by the Compensation and
Employee Benefits Committee (the "Committee").
Under the Annual Incentive Plan, each participant is eligible to receive a
maximum performance award equal to an allocated portion of a bonus pool, which
is funded only if Sara Lee achieves a specified percentage return on
stockholders' equity for the performance period. Specifically, if Sara Lee
attains 10 percent return on stockholders' equity (as defined in the Annual
Incentive Plan), a bonus pool is funded equal to 1.5 percent of the amount of
net income (as defined in the Annual Incentive Plan) in excess of the net income
necessary to attain a 10 percent return on stockholders' equity. The maximum
performance award that may be granted to a participant is determined by
allocating 30 percent of the bonus pool to the Chief Executive Officer, or such
other person or persons acting in such capacity, and the remaining 70 percent
equally to the other participants in the Annual Incentive Plan. The actual
performance award granted to a participant is determined by the Committee, which
retains its discretion to reduce or eliminate (but not increase) a performance
award based on its consideration of any extraordinary changes which may occur
during the year, as well as individual or business performance criteria such as
net income, operating earnings, earnings per share, return on investment, and
other relevant operating and strategic business results applicable to an
individual participant.
Performance awards are paid in cash after written certification by the
Committee that all applicable performance criteria are achieved for the year.
Receipt of performance awards may be deferred under certain circumstances.
It is not possible to determine the amounts of awards for fiscal year 1996
or subsequent years at this time. However, listed below are the amounts awarded
to each of the participants for fiscal year 1995
22
<PAGE> 26
under Sara Lee's current incentive compensation program and which would have
been awarded under the Annual Incentive Plan after exercise of the Committee's
discretion to reduce awards.
PERFORMANCE-BASED ANNUAL INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)
------------------------------ ----------------
<S> <C>
John H. Bryan
Chairman of the Board
and Chief Executive Officer $1,117,912
Michael E. Murphy
Vice Chairman and
Chief Administrative Officer $ 644,596
C. Steven McMillan
Executive Vice President $ 556,407
Donald J. Franceschini
Executive Vice President $ 532,539
Frank L. Meysman
Senior Vice President $ 323,559
Executive Group N.A.
Non-Executive Director Group(14 persons) N.A.
Non-Executive Officer Employee Group N.A.
</TABLE>
ADMINISTRATION OF THE ANNUAL INCENTIVE PLAN
The Annual Incentive Plan is administered by the Committee, which has broad
authority to administer and interpret the Annual Incentive Plan and its
provisions as it deems necessary and appropriate. The Committee may amend or
terminate the Annual Incentive Plan at any time, except that no amendment may be
made without prior approval of Sara Lee's stockholders that would materially
change the method for determining the terms of the performance awards.
The affirmative vote of a majority of the votes cast on this proposal will
constitute approval of the Performance-Based Annual Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PERFORMANCE-BASED ANNUAL INCENTIVE PLAN.
PROPOSAL TO APPROVE THE 1995 LONG-TERM
INCENTIVE STOCK PLAN
The Board of Directors adopted the Sara Lee Corporation 1995 Long-Term
Incentive Stock Plan (the "1995 Plan") on August 31, 1995, subject to approval
by the stockholders at the Annual Meeting. The Board recommends the approval of
the 1995 Plan to replace the 1989 Incentive Stock Plan (the "Prior Plan"), which
was adopted by the stockholders on October 26, 1989 and amended and restated
effective August 29, 1991. The 1995 Plan is being submitted to stockholders for
approval in response to the Board's belief that stock-based incentives are
important factors in attracting, retaining, and rewarding officers and other
selected employees, and in aligning their interests with those of stockholders.
The 1995 Plan is designed to permit the granting of long-term incentive
stock-based awards in different forms, including stock options, stock
appreciation rights (SARs), and other stock awards. The 1995 Plan authorizes the
issuance of up to 25,000,000 shares of Common Stock, plus any shares of Common
Stock remaining available under the Prior Plan. In addition, any shares of
Common Stock from awards under the 1995 Plan or the Prior Plan that are
forfeited, expired, canceled, settled without issuance of shares, or received
(or attested to) as consideration of an option exercise shall again become
available for grant under the 1995 Plan. As of July 1, 1995, there were
3,428,746 shares of
23
<PAGE> 27
Common Stock available for future awards and 18,228,074 aggregate shares of
Common Stock covered by outstanding awards under the Prior Plan. The Fair Market
Value (as defined below) of a share of Common Stock on that date was $28.50.
SUMMARY OF THE 1995 PLAN
A summary of the 1995 Plan is set forth below. The summary is qualified in
its entirety by reference to the full text of the 1995 Plan, which is attached
to this Proxy Statement as Appendix B.
The primary purposes of the 1995 Plan are to promote the interests of Sara
Lee and its stockholders by improving Sara Lee's ability to attract and retain
highly talented individuals to serve as officers and other key employees, and to
provide a means to encourage stock ownership and proprietary interest by
officers and key employees in Sara Lee. Any employee of Sara Lee or any entity
that is directly or indirectly controlled by Sara Lee may be designated by the
Compensation and Employee Benefits Committee ("Committee") to receive one or
more awards under the 1995 Plan. The Committee anticipates limiting awards under
the 1995 Plan to approximately 1,050 key employees.
Under the 1995 Plan, participants may receive stock options, stock
appreciation rights ("SARs"), or stock awards, as discussed in greater detail
below. The Committee will determine the type or types of awards to be made to
each participant. Awards may be granted singly, in combination, or in tandem.
Awards also may be made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment for grants or rights under any other employee
or compensation plan of Sara Lee, including the plan of any acquired entity.
"Fair Market Value" for all awards granted under the 1995 Plan is defined
generally as the average of the highest and lowest quoted selling price per
share reported on the New York Stock Exchange Composite Transactions Tape on the
date on which the award is granted.
STOCK OPTIONS
A stock option represents a right to purchase a specified number of shares
of Common Stock during a specified period as determined by the Committee. The
purchase price per share for each stock option may not be less than 100% of Fair
Market Value on the date of grant. A stock option may be in the form of an
incentive stock option ("ISO") which complies with Section 422 of the Code, or
in the form of a non-qualified stock option. The shares covered by a stock
option may be purchased, in accordance with the applicable award agreement, by
(1) cash payment, (2) tendering (or attesting to ownership of) shares of Common
Stock, (3) third-party exercise transactions, or (4) any combination of the
above. The Committee may grant stock options that provide for the grant of a
replacement stock option if the exercise price and related taxes due are
satisfied by tendering (actually or by attestation) shares of Common Stock to,
or having shares of Common Stock withheld by, Sara Lee. The replacement stock
option would cover the number of shares of Common Stock tendered, attested to or
withheld, would have an option purchase price set at the Fair Market Value as of
the date of exercise of the original option, and would have an option term equal
to the remaining term of the original option.
SARS
An SAR generally represents a right to receive payment, in cash, shares of
Common Stock or a combination, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the SAR is exercised over
the Fair Market Value of such shares on the date the SAR was granted, as set
forth in the applicable award agreement.
STOCK AWARDS
A stock award represents an award made in shares of Common Stock. All or
part of any stock award may be subject to conditions and restrictions
established by the Committee, and set forth in the award agreement, which may
include, but are not limited to, continuous service with Sara Lee, and/or the
achievement of performance goals. The performance criteria that may be used by
the Committee in granting stock awards contingent on performance goals consist
of total stockholders' return, earnings,
24
<PAGE> 28
earnings per share, revenues and profitability as measured by return ratios,
including but not limited to return on invested capital and return on equity.
The Committee may select one criterion or multiple criteria for measuring
performance, and the measurement may be based on absolute corporation or
business unit performance, or on comparative performance with other companies.
The Committee may provide that any awards under the 1995 Plan earn
dividends or dividend equivalents. Such dividends or dividend equivalents may be
paid currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be made subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
shares or share equivalents.
The Committee has decided that initial awards under the 1995 Plan are to
consist of (1) stock awards, which are subject to earnout over a specified
performance cycle based on Sara Lee's performance and the participant's
continued employment, and (2) stock options.
The aggregate number of shares of Common Stock granted to any single
individual in the form of stock options or SARs under the 1995 Plan may not
exceed 2,000,000 shares for any five consecutive fiscal years during which the
1995 Plan is in effect, except that such amount may not exceed 4,000,000 shares
for the initial five consecutive fiscal years during which a new employee begins
service as Chief Executive Officer. The aggregate number of shares of Common
Stock granted to any individual in the form of stock awards under the 1995 Plan
may not exceed 150,000 shares for any three fiscal year performance cycle during
which the 1995 Plan is in effect, and the aggregate number of shares of Common
Stock granted as stock awards under the 1995 Plan may not exceed 8,500,000
shares.
In the event of a stock dividend, stock split, or other change affecting
the shares or share price, all shares available for issuance and outstanding
under previously granted awards may be adjusted in an equitable manner as
determined by the Committee.
Payment of awards may be in the form of cash, shares of Common Stock, other
awards, or combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit participants to elect to defer the
issuance of shares or the settlement of awards in cash under such rules and
procedures as it may establish under the 1995 Plan. It also may provide that
deferred settlements include the payment or crediting of interest on the
deferral amounts, or the payment or crediting of dividend equivalents where
amounts are denominated in share equivalents.
Awards granted under the 1995 Plan will not be transferable or assignable
other than by will or the laws of descent and distribution, except that the
Committee may provide for the transferability of particular awards: (1) in
limited instances to a spouse or other immediate family member, (2) pursuant to
a qualified domestic relations order, or (3) as may otherwise be permitted by
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In the event that a participant terminates employment with
Sara Lee to assume a position with a specified non-profit institution, the
Committee may subsequently authorize a third party to administer any outstanding
awards held by the participant.
Either in contemplation of or in the event that Sara Lee undergoes a change
in control (as defined in the 1995 Plan) or is not the surviving corporation in
a merger or consolidation with another corporation, the Committee may provide
for appropriate adjustments (including acceleration of vesting and settlements
of awards either at the time an award is granted or at a subsequent date).
FEDERAL INCOME TAX CONSEQUENCES
In general, under the Code as presently in effect, a participant will not
be deemed to receive any income for federal income tax purposes at the time an
option or SAR is granted or a restricted stock award is made, nor will Sara Lee
be entitled to a tax deduction at that time. However, when any part of an
25
<PAGE> 29
option or SAR is exercised, when restrictions on restricted stock lapse, or when
an unrestricted stock award is made, the federal income tax consequences may be
summarized as follows:
1. In the case of an exercise of a non-qualified option, the
participant will recognize ordinary income in an amount equal to the
difference between the option price and the fair market value of the shares
on the exercise date.
2. In the case of an exercise of an SAR, the participant will
recognize ordinary income on the exercise date in the amount equal to any
cash and unrestricted shares, at fair market value, received.
3. In the case of an exercise of an option or SAR payable in
restricted stock, or in the case of an award of restricted stock, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the fair market value of the stock
will not be taxable to the recipient as ordinary income until the year in
which his or her interest in the stock is freely transferable or is no
longer subject to a substantial risk of forfeiture. However, the recipient
may elect to recognize income when the stock is received, rather than when
his or her interest in the stock is freely transferable or is no longer
subject to a substantial risk of forfeiture. If the recipient makes this
election, the amount taxed to the recipient as ordinary income is
determined as of the date of receipt of the restricted stock.
4. In the case of ISO's there is no tax liability at the time of
exercise. However, the excess of the fair market value of the stock on the
exercise date over the option price is included in the participant's income
for purposes of the alternative minimum tax. If no disposition of the ISO
stock is made before the later of one year from the date of exercise and
two years from the date of grant of the ISO, the participant will realize a
long-term capital gain or loss upon a sale of the stock, equal to the
difference between the option price and the sale price. If the stock is not
held for the required period, ordinary income tax treatment will generally
apply to the amount of any gain at sale or exercise, whichever is less, and
the balance of any gain or loss will be treated as capital gain or loss
(long-term or short-term, depending on whether the shares have been held
for more than one year).
5. Upon the exercise of a non-qualified option or SAR, the award of
stock, or the recognition of income on restricted stock, Sara Lee will
generally be allowed an income tax deduction equal to the ordinary income
recognized by the employee. Sara Lee does not receive an income tax
deduction as a result of the exercise of an ISO, provided that the ISO
stock is held for the required period as described above. When a cash
payment is made pursuant to the award, the recipient will recognize the
amount of the cash payment as ordinary income, and Sara Lee will generally
be entitled to a deduction in the same amount.
6. Sara Lee may not deduct compensation of more than $1,000,000 that
is paid in a taxable year to certain "covered employees" as defined in the
Code. The deduction limit, however, does not apply to certain types of
compensation, including qualified performance-based compensation. Sara Lee
believes that compensation attributable to awards granted under the 1995
Plan will be treated as qualified performance-based compensation and
therefore will not be subjected to the deduction limit.
ADMINISTRATION OF THE 1995 PLAN
The 1995 Plan will be administered by the Committee, which has broad
authority to administer and interpret the 1995 Plan and its provisions as it
deems necessary and appropriate. This authority includes, but is not limited to,
selecting award recipients, establishing award terms and conditions, adopting
procedures and regulations governing awards, and making all other determinations
necessary or advisable for the administration of the 1995 Plan. All decisions
made by the Committee are final and binding on all persons affected by such
decisions.
The 1995 Plan may be amended by the Board as it deems necessary or
appropriate, except that the Board may not adopt, without the approval of Sara
Lee's stockholders within 12 months of such adoption, any amendment for which
stockholder approval is required for the Plan to continue to comply with the
requirements of Rule 16b-3 under the Exchange Act.
26
<PAGE> 30
The 1995 Plan will become effective upon its approval by the stockholders
of Sara Lee. Unless previously terminated by the Board, the 1995 Plan will
expire at the close of business on the tenth anniversary of such stockholder
approval.
The affirmative vote of a majority of the votes cast on this proposal will
constitute approval of the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1995 LONG-TERM
INCENTIVE STOCK PLAN.
PROPOSAL TO APPROVE THE 1995 NON-EMPLOYEE DIRECTOR STOCK PLAN
The Board of Directors adopted the Sara Lee Corporation 1995 Non-Employee
Director Stock Plan (the "Director Stock Plan") on March 30, 1995, subject to
approval by the stockholders at the Annual Meeting.
The Board of Directors believes that the ownership of Common Stock by
directors supports the maximization of long-term stockholder value by aligning
the interests of directors with those of stockholders. The Director Stock Plan
is designed to facilitate the ownership of Common Stock by outside directors by
providing for the grant of stock options to outside directors, and by permitting
such directors to elect to receive all or a portion of their annual retainer in
Common Stock, options to purchase Common Stock or a combination thereof.
SUMMARY OF THE DIRECTOR STOCK PLAN
A summary of the Director Stock Plan is set forth below. The summary is
qualified in its entirety by reference to the full text of the Director Stock
Plan, which is attached to this Proxy Statement as Appendix C.
The purpose of the Director Stock Plan is to promote the long-term growth
of Sara Lee by enhancing Sara Lee's ability to attract and retain highly
qualified and capable non-employee directors with diverse backgrounds and
experience and by increasing the proprietary interest of non-employee directors
in Sara Lee. Only non-employee directors of Sara Lee are eligible to participate
in the Director Stock Plan. Currently, Sara Lee has 14 non-employee directors.
Under the Director Stock Plan, each non-employee director will receive an
annual grant of an option to purchase 5,000 shares of Common Stock (5,500 shares
in the case of each chair of a standing committee), and may elect to receive
Common Stock, or options to purchase Common Stock, or a combination of both, in
lieu of all or a portion of his or her annual retainer. Effective November 1,
1995, non-employee directors will receive an annual retainer of $62,500. A
maximum of 500,000 shares of Common Stock will be available for the award of
shares and the grant of stock options under the Director Stock Plan, subject to
adjustment in the event of stock splits, stock dividends or changes in corporate
structure affecting Common Stock. To the extent a stock option granted under the
Director Stock Plan expires or terminates unexercised, the shares of Common
Stock allocable to the unexercised portion of such option will be available for
awards under the Director Stock Plan. In addition, to the extent that shares are
delivered (actually or by attestation) to pay all or a portion of an option
exercise price, such shares will become available for awards under the Director
Stock Plan.
If the Director Stock Plan is approved by stockholders, each non-employee
director will be granted an option to purchase 5,000 shares of Common Stock, and
each non-employee director who serves as a chairperson of a standing committee
will receive an additional option to purchase 500 shares of Common Stock, on
November 1, 1995, and each November 1st thereafter while the Director Stock Plan
is in effect. If a non-employee director begins service on a date other than the
date of the annual meeting of Sara Lee stockholders in any year, the number of
shares subject to the option shall be prorated. Each non-employee director may
also elect to receive a portion of his or her annual retainer in Common Stock or
options to purchase Common Stock. The number of shares of Common Stock issuable
will be based upon
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the fair market value per share of Common Stock (as defined in the Director
Stock Plan) on November 1st in the year of such election, and will be determined
by dividing such fair market value into the amount of the annual retainer that
the director elected to receive in Common Stock. The number of stock options
granted will be determined by multiplying the amount of the annual retainer that
the director elected to receive in stock options by four, then dividing by such
fair market value.
The exercise price per share of all stock options granted under the
Director Stock Plan will be 100% of the fair market value per share of Common
Stock on the grant date, defined as the average of the highest and lowest quoted
selling price per share reported on the New York Stock Exchange Composite
Transactions Tape. Options granted under the Director Stock Plan vest
immediately, but are not exercisable until six months from the date of grant,
except that an Option granted to a participant who is a resident of the
Netherlands and subject to the personal income tax laws of the Netherlands may
be exercisable immediately after the date of grant. Options granted under the
Director Stock Plan may be exercised until the tenth anniversary of the date of
grant (fifth anniversary in the case of participants resident in and subject to
the income tax laws of the Netherlands). Options may be exercised either by the
payment of cash in the amount of the aggregate option price or by surrendering
(or attesting to ownership of) shares of Common Stock owned by the participant
for at least six months prior to the date the option is exercised, or a
combination of both, having a combined value equal to the aggregate option price
of the shares subject to the option or portion of the option being exercised.
Any option or portion thereof that is not exercised on or before the tenth
anniversary of the date of grant (or fifth anniversary thereof, in the case of
Dutch optionees) shall expire.
Options granted under the Director Stock Plan will not be transferable by
the participant other than by court order, will or the laws of descent and
distribution, unless such transferability is permitted under Rule 16b-3 under
the Exchange Act and will be exercisable during the participant's lifetime only
by the participant or the participant's guardian, legal representative or
similar person.
Upon the occurrence of a "change of control" of Sara Lee as defined in the
Director Stock Plan, any and all outstanding options granted under the Director
Stock Plan become immediately exercisable.
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option under the Director Stock Plan will not result in
income for the participant or in a deduction for Sara Lee. The exercise of an
option will generally result in compensation income for the participant and a
deduction for Sara Lee, in each case measured by the difference between the
exercise price and the fair market value of the shares at the time of exercise.
The receipt of shares of Common Stock under the Director Stock Plan will
generally result in compensation income for the participant and a deduction for
Sara Lee, based on the fair market value of the shares on the date awarded.
ADMINISTRATION OF THE DIRECTOR STOCK PLAN
The Director Stock Plan will be administered by the Compensation and
Employee Benefits Committee of the Board of Directors. The Board of Directors
may amend or terminate the Director Stock Plan at any time, but the terms of any
option granted under the Director Stock Plan may not be adversely modified
without the participant's consent. In addition, the Board of Directors may not
amend the Director Stock Plan more than once every six months to change the
number of shares subject to an option, the exercise price of an option, the
grant date of an option, or the termination provisions relating to an option,
other than to comply with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations promulgated
thereunder.
ADDITIONAL INFORMATION
The closing price of Sara Lee's Common Stock, as reported on the New York
Stock Exchange Composite Transactions Tape on September 1, 1995, was $28.00.
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The affirmative vote of a majority of the votes cast on this proposal will
constitute approval of the Director Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1995 NON-
EMPLOYEE DIRECTOR STOCK PLAN.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders at the Annual Meeting, the Board of Directors has appointed
Arthur Andersen LLP ("Andersen") to serve as the independent public accountants
of Sara Lee for its fiscal year ending June 29, 1996. Andersen, which has served
as the independent public accountants of Sara Lee since 1965, follows a policy
of rotating the partner in charge of Sara Lee's audit every seven years. Other
partners and non-partner personnel are rotated on a periodic basis.
Representatives of Andersen are expected to be present at the Annual Meeting,
will have the opportunity to make a statement, if they desire to do so, and will
be available to respond to questions. If the appointment of Andersen is not
ratified by the stockholders, the Board of Directors will appoint other
independent public accountants based upon the recommendation of the Audit
Committee.
The affirmative vote of a majority of the votes cast on this proposal will
constitute ratification of the appointment of Andersen.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL
YEAR 1996.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1996 annual meeting
of stockholders must be received by Sara Lee no later than May 23, 1996.
Proposals may be mailed to Sara Lee Corporation, to the attention of the
Secretary, Three First National Plaza, Chicago, Illinois 60602-4260.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will act in respect thereof in accordance with their best judgment.
A copy of Sara Lee's Annual Report on Form 10-K for the fiscal year ended
July 1, 1995, as filed with the Securities and Exchange Commission, will be sent
to any stockholder without charge upon written request addressed to Sara Lee
Corporation, to the attention of the Investor Relations and Corporate Affairs
Department, Three First National Plaza, Chicago, Illinois, 60602-4260.
The cost of solicitation of the proxies will be borne by Sara Lee. In
addition to solicitation of the proxies by use of the mails, employees of Sara
Lee, without extra remuneration, may solicit proxies personally or by telephone.
Kissel-Blake Inc. has been retained by management to assist in the solicitation
of proxies for a fee of $14,000 plus reimbursement of expenses. Sara Lee will
reimburse brokerage firms, nominees, custodians and fiduciaries for their
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto.
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Under the federal securities laws, directors, officers and ten percent
stockholders of Sara Lee are required to report to the Securities and Exchange
Commission, within specified monthly and annual due dates, their initial
ownership in Sara Lee equity securities, and all subsequent transactions in such
securities. Sara Lee believes that during fiscal year 1995 all of such filing
requirements were timely satisfied.
By Order of the Board of Directors
Janet Langford Kelly
Senior Vice President,
Secretary and General Counsel
September 20, 1995
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APPENDIX A
SARA LEE CORPORATION
PERFORMANCE-BASED ANNUAL INCENTIVE PLAN
ARTICLE I -- PURPOSE OF THE PLAN
The purpose of the Sara Lee Corporation Performance-Based Annual Incentive
Plan is to advance the interests of Sara Lee Corporation and its stockholders by
providing certain of its key executives with annual incentive compensation which
is tied to the achievement of preestablished and objective performance goals.
The Plan is intended to provide participants with annual incentive compensation
which is not subject to the deduction limitation rules prescribed under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and should
be construed to the extent possible as providing for remuneration which is
"performance-based compensation" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder.
ARTICLE II -- DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
a. "AVERAGE TOTAL COMMON STOCKHOLDERS' EQUITY" means the simple
average of the Corporation's Total Common Stockholders' Equity as reported
in the Corporation's consolidated balance sheet for the beginning and the
end of any Performance Period.
b. "BOARD" means the Board of Directors of Sara Lee Corporation.
c. "COMMITTEE" means the Compensation and Employee Benefits Committee
of the Board of Directors, a subcommittee thereof, or such other committee
as may be appointed by the Board of Directors. The Committee shall be
comprised of three or more non-employee members of the Board of Directors
who shall qualify to administer the Plan as "disinterested directors" under
Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and as
"outside directors" under Section 162(m) of the Code.
d. "CORPORATION" means Sara Lee Corporation, or any entity that is
directly or indirectly controlled by Sara Lee Corporation.
e. "INCENTIVE POOL FUND" means the amount equal to 1.5 percent of Net
Income in excess of the Net Income necessary to achieve the Performance
Goal for the Performance Period.
f. "NET INCOME" means the Corporation's net income available for
common stockholders as reported in the Corporation's consolidated
statements of income for a Performance Period, as adjusted to eliminate the
effects of charges for restructurings, extraordinary items, discontinued
operations, and cumulative effect of accounting changes, each as defined by
Generally Accepted Accounting Principles.
g. "PLAN" means the Sara Lee Corporation Performance-Based Annual
Incentive Plan, as may be amended and restated from time to time.
h. "PARTICIPANT" means a "covered employee" as defined in Section
162(m) of the Code and the regulations promulgated thereunder, who has been
selected by the Committee as a participant in the Plan during a Performance
Period.
i. "PERFORMANCE AWARD" means an award granted pursuant to the terms of
Article IV of this Plan.
j. "PERFORMANCE GOAL" means the amount of Net Income necessary to
achieve a 10 percent Return on Average Total Common Stockholders' Equity
for the Performance Period.
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k. "PERFORMANCE PERIOD" means the Corporation's fiscal year, or such
other period as designated by the Committee.
l. "POOL FUND ALLOCATION" means the percentage of the Incentive Pool
Fund that is allocated to each Participant with respect to any Performance
Period.
m. "RETURN ON AVERAGE TOTAL COMMON STOCKHOLDERS' EQUITY" means the
quotient of Net Income divided by Average Total Common Stockholders' Equity
for any Performance Period.
ARTICLE III -- PLAN ADMINISTRATION
The Committee shall have full discretion, power and authority to administer
and interpret the Plan and to establish rules and procedures for its
administration as the Committee deems necessary and appropriate. Any
interpretation of the Plan or other act of the Committee in administering the
Plan shall be final and binding upon all Participants.
ARTICLE IV -- PERFORMANCE AWARDS
For each Performance Period, the Committee shall determine the amount of a
Participant's Performance Award as follows:
a. GENERAL -- Each Participant shall be eligible to receive a
Performance Award if the Performance Goal for the Performance Period has
been achieved. The maximum amount of a Participant's Performance Award
shall be equal to the Participant's Pool Fund Allocation of the Incentive
Pool Fund for the Performance Period. The actual amount of a Participant's
Performance Award may be reduced or eliminated by the Committee as set
forth in paragraph (c) below.
b. ALLOCATION OF INCENTIVE POOL FUND -- The Incentive Pool Fund for
each Performance Period shall be allocated among Participants as follows:
thirty percent to the Chief Executive Officer, or such other person or
persons acting in such capacity; and seventy percent equally and ratably
among the other Participants.
c. REDUCTION OR ELIMINATION OF POOL FUND ALLOCATION -- The Pool Fund
Allocation for each Participant may be reduced or eliminated by the
Committee in its sole discretion; provided, however,
that under no circumstances may the amount of the Incentive Pool Fund, or
the Pool Fund Allocation to any Participant, be increased. In determining
whether a Pool Fund Allocation will be reduced or eliminated, the Committee
shall consider any extraordinary changes which may occur during the
Performance Period, such as changes in accounting practices or applicable
law, and shall consider such individual or business performance criteria
that it deems appropriate, including, but not limited to, the Corporation's
net income, operating earnings, earnings per share, return on investment,
and other relevant operating and strategic business results applicable to
an individual Participant.
Once the Committee has determined the amount of a Participant's award
pursuant to paragraphs (a), (b) and (c) in this Article IV, and upon the
certification required under Article V, the Committee shall grant the
Participant's Performance Award pursuant to such terms and procedures as the
Committee shall adopt under Article III.
ARTICLE V -- PAYMENT OF PERFORMANCE AWARDS
Subject to any stockholder approval required by law, payment of any
Performance Award to a Participant for any Performance Period shall be made in
cash after written certification by the Committee that the Performance Goal for
the Performance Period was achieved, and any other material terms of the
Performance Award were satisfied. Any Performance Award may be deferred pursuant
to the terms and conditions of the Corporation's deferred compensation plan or
plans then in effect.
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ARTICLE VI -- PLAN AMENDMENT AND TERMINATION
The Committee may amend or terminate the Plan by resolution at any time as
it shall deem advisable, subject to any stockholder approval required by law,
provided that the Committee may not amend the Plan to change the method for
determining Performance Awards under Article IV without the approval of the
majority of votes cast by stockholders in a separate vote. No amendment may
impair the rights of a Participant to any Performance Award already granted with
respect to any Performance Period.
ARTICLE VII -- MISCELLANEOUS PROVISIONS
a. EMPLOYMENT RIGHTS -- The Plan does not constitute a contract of
employment and participation in the Plan will not give a Participant the right
to continue in the employ of the Corporation on a full-time, part-time, or any
other basis. Participation in the Plan will not give any Participant any right
or claim to any benefit under the Plan, unless such right or claim has
specifically been granted by the Committee under the terms of the Plan.
b. COMMITTEE'S DECISION FINAL -- Any interpretation of the Plan and any
decision on any matter pertaining to the Plan which is made by the Committee in
its discretion in good faith shall be binding on all persons.
c. GENDER AND NUMBER -- Where the context permits, words in the masculine
gender shall include the feminine and neuter genders, the plural form of a word
shall include the singular form, and the singular form of a word shall include
the plural form.
d. GOVERNING LAW -- Except to the extent superseded by the laws of the
United States, the laws of the State of Illinois, without regard to its conflict
of laws principles, shall govern in all matters relating to the Plan.
e. INTERESTS NOT TRANSFERABLE -- Any interests of Participants under the
Plan may not be voluntarily sold, transferred, alienated, assigned or
encumbered, other than by will or pursuant to the laws of descent and
distribution.
f. SEVERABILITY -- In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the Plan.
g. WITHHOLDING -- The Corporation will withhold from any amounts payable
under this Plan all federal, state, foreign, city and local taxes as shall be
legally required.
h. EFFECT ON OTHER PLANS OR AGREEMENTS -- Payments or benefits provided to
a Participant under any stock, deferred compensation, savings, retirement or
other employee benefit plan are governed solely by the terms of such plan.
ARTICLE VIII -- EFFECTIVE DATE
The effective date of this Plan shall be as of July 2, 1995, subject to
stockholder approval. This Plan and any benefits granted hereunder shall be null
and void if stockholder approval is not obtained at the next annual meeting of
stockholders.
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APPENDIX B
SARA LEE CORPORATION
1995 LONG-TERM INCENTIVE STOCK PLAN
ARTICLE I -- PURPOSES OF THE PLAN
The purposes of the Sara Lee Corporation 1995 Long-Term Incentive Stock
Plan are to promote the interests of the Corporation and its stockholders by
strengthening the Corporation's ability to attract and retain highly competent
officers and other key employees, and to provide a means to encourage stock
ownership and proprietary interest in the Corporation. The 1995 Long-Term
Incentive Stock Plan is intended to provide plan participants with stock-based
incentive compensation which is not subject to the deduction limitation rules
prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and should be construed to the extent possible as providing for
remuneration which is "performance-based compensation" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder.
ARTICLE II -- DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
a. "AWARD" means, individually or in the aggregate, an award granted
to a Participant under the Plan in the form of an Option, a Stock Award, or
an SAR, or any combination of the foregoing.
b. "BOARD" means the Board of Directors of Sara Lee Corporation.
c. "COMMITTEE" means the Compensation and Employee Benefits Committee
of the Board of Directors, a subcommittee thereof, or such other committee
as may be appointed by the Board of Directors. The Committee shall be
comprised of three or more non-employee members of the Board of Directors
who shall qualify to administer the Plan as "disinterested directors" under
Rule 16b-3 of the Exchange Act and as "outside directors" under Section
162(m) of the Code.
d. "CORPORATION" means Sara Lee Corporation, or any entity that is
directly or indirectly controlled by Sara Lee Corporation.
e. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
f. "FAIR MARKET VALUE" means the average between the highest and
lowest quoted selling price per Share on the New York Stock Exchange
Composite Transactions Tape on the grant date, provided that if there
should be no sales of Shares reported on such date, the Fair Market Value
of a Share on such date shall be deemed equal to the average between the
highest and lowest sales prices of a Share on such Composite Tape for the
last preceding date on which sales of Shares were reported.
g. "INCENTIVE STOCK OPTION" means a stock option which complies with
Section 422 of the Code, or any successor law.
h. "NON-QUALIFIED STOCK OPTION" means an Option that does not meet the
requirements of Section 422 of the Code, or any successor law.
i. "OPTION" means an option awarded under Article VI to purchase
Shares. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option, as determined by the Committee in its sole
discretion.
j. "PARTICIPANT" means any employee of the Corporation, or former
employee of the Corporation for the purposes of adjustments to Awards
pursuant to Article V(b) of the Plan, designated by the Committee as
eligible to receive an Award or Awards under the Plan.
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k. "PLAN" means this Sara Lee Corporation 1995 Long-Term Incentive
Stock Plan, as may be amended and restated from time to time.
l. "PRIOR PLAN" means the Sara Lee Corporation 1989 Incentive Stock
Plan, as amended and restated from time to time.
m. "SAR" means a stock appreciation right.
n. "SHARES" means shares of the Corporation's common stock, par value
$1.33 1/3 per share.
o. "STOCK AWARD" means an Award made under Article VI in Shares.
In addition, the term "Change of Control" shall have the meaning set forth
in Article X.
ARTICLE III -- EFFECTIVE DATE OF THE PLAN AND DURATION
The Plan shall become effective upon its approval by the stockholders of
the Corporation. Unless previously terminated by the Board, the Plan shall
expire at the close of business on the tenth anniversary of such stockholder
approval.
ARTICLE IV -- PLAN ADMINISTRATION
The Committee shall be responsible for administering the Plan, and shall
have full and exclusive power to interpret the Plan and to adopt such rules,
regulations and guidelines for carrying out the Plan as it may deem necessary or
appropriate, all of which power shall be executed in the best interests of the
Corporation and in keeping with the provisions and objectives of the Plan. This
power includes, but is not limited to, selecting Award recipients, establishing
all Award terms and conditions, adopting procedures and regulations governing
Awards, and making all other determinations necessary or advisable for the
administration of the Plan. In no event, however, shall the Committee have the
power to cancel outstanding stock options or SARs for the purpose of replacing
or regranting such options or SARs with a purchase price that is less than the
purchase price of the original option or SAR. All decisions made by the
Committee shall be final and binding on all Participants.
ARTICLE V -- AVAILABLE SHARES OF COMMON STOCK
a. LIMITATIONS -- Subject to the provisions of Article V(b) of the Plan,
the aggregate number of Shares which may be issued to Participants under the
Plan shall be:
(i) 25,000,000 Shares; plus
(ii) any Shares available for grants under the Prior Plan which have
not been committed for issuance under awards made under the Prior Plan;
plus
(iii) any Shares that are represented by Awards or portions of Awards
under the Plan or the Prior Plan that are forfeited, expired, canceled, or
are settled without the issuance of Shares; plus
(iv) any Shares that may be tendered, either actually or by
attestation, by a Participant as full or partial payment made to the
Corporation in connection with the exercise price of any Option granted
under the Plan or the Prior Plan.
The aggregate number of Shares that may be represented by Awards made to
any individual Participant under the Plan shall not exceed 2,000,000 Shares for
any five consecutive fiscal years during which the Plan is in effect, with
respect to Awards granted under paragraphs (a)(i) and (ii) of Article VI, except
that such amount shall not exceed 4,000,000 Shares for the initial five
consecutive fiscal years during which a Participant who is a new employee begins
service as Chief Executive Officer, and shall not exceed 150,000 Shares for any
three-year performance cycle, with respect to Awards granted under paragraph
(a)(iii) of Article VI. The aggregate number of Shares that may be used in
settlement of Awards granted pursuant to Article VI(a)(iii) of the Plan shall
not exceed 8,500,000 Shares. Any Shares
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issued under the Plan shall consist of authorized and unissued Shares and no
fractional Shares shall be issued under the Plan. Cash may be paid in lieu of
any fractional Shares in settlement of Awards under the Plan.
b. ADJUSTMENTS -- In the event of any stock dividend, stock split,
combination or exchange of equity securities, merger, consolidation,
recapitalization, spin-off or other distribution (other than normal cash
dividends) of any or all of the assets of the Corporation to stockholders, or
any other change affecting Shares or Share price, such proportionate
adjustments, if any, as the Committee in its discretion may deem appropriate to
reflect such change shall be made with respect to: (i) the limitations on the
numbers of Shares that may be issued and represented by Awards under the Plan as
set forth in Article V(a); (ii) each outstanding Award made under the Plan; and
(iii) the exercise price per Share for any outstanding Options, SARs or similar
Awards under the Plan.
ARTICLE VI -- AWARDS
a. GENERAL -- The Committee shall determine the type or types of Award(s)
to be made to each Participant. Awards may be granted singly, in combination or
in tandem. In the sole discretion of the Committee, Awards also may be made in
combination or in tandem with, in replacement of, as alternatives to, or as the
payment form for grants or rights under any other employee or compensation plan
of the Corporation including a plan of any acquired entity. The types of Awards
that may be granted under the Plan are:
(i) OPTIONS -- An Option shall represent the right to purchase a
specified number of Shares during a specified period as determined by the
Committee. The purchase price per Share for each Option shall not be less
than 100% of the Fair Market Value on the date of grant. In addition, if an
Option is granted retroactively in substitution for an SAR, the designated
Fair Market Value in the applicable award agreement may be the Fair Market
Value on the date such SAR was awarded. An Option may be in the form of an
Incentive Stock Option or a Non-Qualified Stock Option, as determined by
the Committee in its sole discretion. The Shares covered by an Option may
be purchased, in accordance with the applicable Award agreement, by cash
payment or such other method permitted by the Committee, including (i)
tendering (either actually or by attestation) Shares valued at the Fair
Market Value at the date of exercise; (ii) authorizing a third party to
sell the Shares (or a sufficient portion thereof) acquired upon exercise of
an Option, and assigning the delivery to the Corporation of a sufficient
amount of the sale proceeds to pay for all the Shares acquired through such
exercise and any tax withholding obligations resulting from such exercise;
or (iii) any combination of the above. The Committee may grant Options that
provide for the grant of a replacement Option if the exercise price and the
related taxes due are satisfied by tendering (either actually or by
attestation) Shares to, or having Shares withheld by, the Corporation. The
replacement Option would cover the number of Shares tendered (either
actually or by attestation) or withheld, would have an option purchase
price per Share set at the Fair Market Value per Share on the date of
exercise of the original Option, and would have a term equal to the
remaining term of the original Option.
(ii) SARS -- An SAR shall represent a right to receive a payment, in
cash, Shares or a combination, equal to the excess of the Fair Market Value
of a specified number of Shares on the date the SAR is exercised over the
Fair Market Value on the date the SAR was granted as set forth in the
applicable Award agreement; except that if an SAR is granted retroactively
in substitution for an Option, the designated Fair Market Value in the
applicable award agreement may be the Fair Market Value on the date such
Option was granted.
(iii) STOCK AWARDS -- A Stock Award shall represent an Award made in
Shares. All or part of any Stock Award may be subject to conditions and
restrictions established by the Committee, and set forth in the Award
agreement, which may include, but are not limited to, continuous service
with the Corporation, and/or the achievement of performance goals. The
performance criteria that may be used by the Committee in granting Stock
Awards contingent on performance goals shall consist
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of total stockholders' return, earnings, earnings per share, revenues, and
profitability as measured by return ratios, including but not limited to
return on invested capital and return on equity. The Committee may select
one criterion or multiple criteria for measuring performance, and the
measurement may be based on absolute Corporation or business unit
performance, or based on comparative performance with other companies.
ARTICLE VII -- DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that any Awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a Participant's Plan account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
Shares or Share equivalents.
ARTICLE VIII -- PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash under such rules and
procedures as it may establish under the Plan. It also may provide that deferred
settlements include the payment or crediting of interest on the deferral
amounts, or the payment or crediting of dividend equivalents where the deferral
amounts are denominated in Share equivalents.
ARTICLE IX -- TRANSFERABILITY
Awards granted under the Plan shall not be transferable or assignable other
than by will or the laws of descent and distribution, except that the Committee
may provide for the transferability of particular Awards:
a. by gift or other transfer to either (i) a spouse or other immediate
family member, or (ii) any trust or estate in which the original Award
recipient or such person's spouse or other immediate family member has a
substantial interest;
b. pursuant to a qualified domestic relations order; and
c. as may otherwise be permitted by Rule 16b-3 promulgated under the
Exchange Act.
In the event that a Participant terminates employment with the Corporation
to assume a position with a governmental, charitable, educational or similar
non-profit institution, the Committee may subsequently authorize a third party,
including but not limited to a "blind" trust, to act on behalf of and for the
benefit of such Participant regarding any outstanding Awards held by the
Participant subsequent to such termination of employment. If so permitted by the
Committee, a Participant may designate a beneficiary or beneficiaries to
exercise the rights of the Participant and receive any distribution under the
Plan upon the death of the Participant.
ARTICLE X -- CHANGE OF CONTROL
Either in contemplation of or in the event that the Corporation undergoes a
Change in Control (as defined below) or is not the surviving corporation in a
merger or consolidation with another corporation, the Committee may provide for
appropriate adjustments (including acceleration of vesting and settlements of
Awards either at the time an Award is granted or at a subsequent date).
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A "Change of Control" shall occur when:
(a) a "Person" (which term, when used in this Article X, shall have
the meaning it has when it is used in Section 13(d) of the Exchange Act,
but shall not include the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, or
any corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
Voting Stock (as defined below) of the Corporation) is or becomes, without
the prior consent of a majority of the Continuing Directors of the
Corporation (as defined below), the Beneficial Owner (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of
Voting Stock (as defined below) representing twenty percent or more of the
combined voting power of the Corporation's then outstanding securities; or
(b) the stockholders of the Corporation approve a definitive agreement
or plan to merge or consolidate the Corporation with or into another
corporation (other than a merger or consolidation which would result in the
Voting Stock (as defined below) of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more
than fifty percent of the combined voting power of the voting securities of
the Corporation or such surviving entity outstanding immediately after such
merger or consolidation), or to sell, or otherwise dispose of, all or
substantially all of the Corporation's property and assets, or to liquidate
the Corporation; or
(c) the individuals who are Continuing Directors of the Corporation
(as defined below) cease for any reason to constitute at least a majority
of the Board of the Corporation.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board on March 30, 1995, or (ii) any person who subsequently
becomes a member of the Board whose nomination for election or election to the
Board is recommended or approved by a majority of the Continuing Directors. The
term "Voting Stock" means all capital stock of the Corporation which by its
terms may be voted on all matters submitted to stockholders of the Corporation
generally.
ARTICLE XI -- AWARD AGREEMENTS
Awards under the Plan shall be evidenced by agreements that set forth the
terms, conditions and limitations for each Award. Such terms may include, but
are not limited to, the term of the Award, the provisions applicable in the
event the Participant's employment terminates, and the Corporation's authority
to unilaterally or bilaterally amend, modify, suspend, cancel or rescind any
Award. The Committee need not require the execution of any such agreement by a
Participant, in which case acceptance of the Award by the respective Participant
shall constitute agreement by the Participant to the terms of the Award.
ARTICLE XII -- PLAN AMENDMENT
The Board may amend the Plan at any time as it deems necessary or
appropriate to better achieve the purposes of the Plan, provided that no such
amendment shall be effective unless approved within 12 months after the date of
the adoption of such amendment by such affirmative vote of the stockholders of
the Corporation as may be required by Rule 16b-3 under the Exchange Act if such
stockholder approval is required for the Plan to continue to comply with the
requirements of Rule 16b-3 under the Exchange Act. The Board may suspend the
Plan or discontinue the Plan at any time; provided, however, that no such action
shall adversely affect any outstanding benefit.
ARTICLE XIII -- MISCELLANEOUS PROVISIONS
a. EMPLOYMENT RIGHTS -- The Plan does not constitute a contract of
employment and participation in the Plan will not give a Participant the right
to continue in the employ of the Corporation on a full-time,
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part-time, or any other basis. Participation in the Plan will not give any
Participant any right or claim to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of the Plan.
b. COMMITTEE'S DECISION FINAL -- Any interpretation of the Plan and any
decision on any matter pertaining to the Plan which is made by the Committee in
its discretion in good faith shall be binding on all persons.
c. GENDER AND NUMBER -- Where the context permits, words in the masculine
gender shall include the feminine and neuter genders, the plural form of a word
shall include the singular form, and the singular form of a word shall include
the plural form.
d. GOVERNING LAW -- Except to the extent superseded by the laws of the
United States, the laws of the State of Illinois, without regard to its conflict
of laws principles, shall govern in all matters relating to the Plan.
e. INTERESTS NOT TRANSFERABLE -- The interests of Participants under the
Plan are not subject to their debts or other obligations and, except as may be
required by the tax withholding provisions of the Internal Revenue Code or any
state's income tax act, or pursuant to an agreement between a Participant and
the Corporation or as provided in Article IX, may not be voluntarily sold,
transferred, alienated, assigned or encumbered.
f. SEVERABILITY -- In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the Plan.
g. WITHHOLDING -- The Corporation will withhold from any amounts payable
under this Plan all federal, state, foreign, city and local taxes as shall be
legally required.
h. EFFECT ON OTHER PLANS OR AGREEMENTS -- Payments or benefits provided to
a Participant under any stock, deferred compensation, savings, retirement or
other employee benefit plan are governed solely by the terms of such plan.
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APPENDIX C
SARA LEE CORPORATION
1995 NON-EMPLOYEE DIRECTOR STOCK PLAN
ARTICLE I -- PURPOSE OF THE PLAN
The purpose of the Sara Lee Corporation 1995 Non-Employee Director Stock
Plan is to promote the long-term growth of Sara Lee Corporation by increasing
the proprietary interest of Non-Employee Directors in Sara Lee Corporation and
to attract and retain highly qualified and capable Non-Employee Directors.
ARTICLE II -- DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
2.1 "ANNUAL RETAINER" means the annual cash retainer fee payable by
the Corporation to a Non-Employee Director for services as a director of
the Corporation, as such amount may be changed form time to time.
2.2 "AWARD" means an award granted to a Non-Employee Director under
the Plan in the form of Options or Shares, or any combination thereof.
2.3 "BOARD" means the Board of Directors of Sara Lee Corporation.
2.4 "CORPORATION" means Sara Lee Corporation.
2.5 "FAIR MARKET VALUE" means, with respect to any date, the average
between the highest and lowest sale prices per Share on the New York Stock
Exchange Composite Transactions Tape on such date, provided that if there
shall be no sale of Shares reported on such date, the Fair Market Value of
a Share on such date shall be deemed to be equal to the average between the
highest and lowest sale prices per Share on such Composite Tape for the
last preceding date on which sales of Shares were reported.
2.6 "OPTION" means an option to purchase Shares awarded under Article
VIII or IX which does not meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, or any successor law.
2.7 "OPTION GRANT DATE" means the date upon which an Option is granted
to a Non-Employee Director.
2.8 "OPTIONEE" means a Non-Employee Director of the Corporation to
whom an Option has been granted or, in the event of such Non-Employee
Director's death prior to the expiration of an Option, such Non-Employee
Director's executor, administrator, beneficiary or similar person, or, in
the event of a transfer permitted by Article VII hereof, such permitted
transferee.
2.9 "NON-EMPLOYEE DIRECTOR" means a director of the Corporation who is
not an employee of the Corporation or any subsidiary of the Corporation.
2.10 "PLAN" means the Sara Lee Corporation 1995 Non-Employee Director
Stock Plan, as amended and restated from time to time.
2.11 "STOCK AWARD DATE" means the date on which Shares are awarded to
a Non-Employee Director.
2.12 "SHARES" means shares of the Common Stock, par value $1.33 1/3
per share, of the Corporation.
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2.13 "STOCK OPTION AGREEMENT" means a written agreement between a
Non-Employee Director and the Corporation evidencing an Option.
ARTICLE III -- ADMINISTRATION OF THE PLAN
3.1 ADMINISTRATOR OF THE PLAN. The Plan shall be administered by the
Compensation and Employee Benefits Committee of the Board ("Committee").
3.2 AUTHORITY OF COMMITTEE. The Committee shall have full power and
authority to: (i) interpret and construe the Plan and adopt such rules and
regulations as it shall deem necessary and advisable to implement and
administer the Plan and (ii) designate persons other than members of the
Committee to carry out its responsibilities, subject to such limitations,
restrictions and conditions as it may prescribe, such determinations to be
made in accordance with the Committee's best business judgment as to the
best interests of the Corporation and its stockholders and in accordance
with the purposes of the Plan. The Committee may delegate administrative
duties under the Plan to one or more agents as it shall deem necessary or
advisable.
3.3 DETERMINATIONS OF COMMITTEE. A majority of the Committee shall
constitute a quorum at any meeting of the Committee, and all determinations
of the Committee shall be made by a majority of its members. Any
determination of the Committee under the Plan may be made without notice or
a meeting of the Committee by a written consent signed by all members of
the Committee.
3.4 EFFECT OF COMMITTEE DETERMINATIONS. No member of the Committee or
the Board shall be personally liable for any action or determination made
in good faith with respect to the Plan or any Award or to any settlement of
any dispute between a Non-Employee Director and the Corporation. Any
decision or action taken by the Committee or the Board with respect to an
Award or the administration or interpretation of the Plan shall be
conclusive and binding upon all persons.
ARTICLE IV -- AWARDS UNDER THE PLAN
Awards in the form of Options shall be granted to Non-Employee Directors in
accordance with Article VIII. Awards in the form of Options or Shares, or a
combination thereof, may be granted to Non-Employee Directors in accordance with
Article IX. Each Option granted under the Plan shall be evidenced by a Stock
Option Agreement.
ARTICLE V -- ELIGIBILITY
Non-Employee Directors of the Corporation shall be eligible to participate
in the Plan in accordance with Articles VIII and IX.
ARTICLE VI -- SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Article XII, the aggregate number of
Shares which may be issued upon the award of Shares and the exercise of Options
shall not exceed 500,000 Shares. To the extent that Shares subject to an
outstanding Option are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such Option or by reason of the
delivery of Shares (either actually or by attestation) to pay all or a portion
of the exercise price of such Option, then such Shares shall again be available
under the Plan.
ARTICLE VII -- NON-TRANSFERABILITY OF OPTIONS
All Options granted under the Plan shall not be transferable by a
Non-Employee Director during his or her lifetime and may not be assigned,
exchanged, pledged, transferred or otherwise encumbered or disposed of except by
court order, will or by the laws of descent and distribution. Notwithstanding
the
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foregoing, in the event Options may be transferable without failing to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, then each
Option shall be transferable to the extent set forth in the related Stock Option
Agreement, as determined by the Committee (provided that all Options granted
under Article VIII with the same Option Grant Date shall have identical
provisions relating to the transferability of such Options). In the event that
any Option is thereafter transferred as permitted by the preceding sentence, the
permitted transferee thereof shall be deemed the Optionee hereunder. Options
shall be exercisable during the Optionee's lifetime only by the Optionee or by
the Optionee's guardian, legal representative or similar person.
ARTICLE VIII -- NON-ELECTIVE OPTIONS
Each Non-Employee Director shall be granted Options, subject to the
following terms and conditions:
8.1 TIME OF GRANT. On the first business day of November of each year
(or, if later, on the date on which a person is first elected or begins to
serve as a Non-Employee Director), each person who is a Non-Employee
Director and who is not the chair of a standing committee of the Board
shall be granted an Option to purchase 5,000 Shares (which number shall be
pro-rated if such Non-Employee Director is first elected or begins to serve
as a Non-Employee Director on a date other than the date of an annual
meeting of stockholders) and each Non-Employee Director who is the chair of
a standing committee of the Board shall be granted an Option to purchase
5,500 Shares (of which the number 5,000 shall be pro-rated if such
Non-Employee Director is first elected or begins to serve as a Non-Employee
Director on a date other than the date of an annual meeting of
stockholders, and the number 500 shall be pro-rated if such Non-Employee
Director first begins to serve as a chairperson on a date other than the
annual meeting of stockholders).
8.2 PURCHASE PRICE. The purchase price per Share under each Option
granted pursuant to this Article shall be 100% of the Fair Market Value per
Share on the Option Grant Date.
8.3 EXERCISE OF OPTIONS. Each Option shall be fully exercisable on and
after that date which is six months after the Option Grant Date and,
subject to Article X, shall not be exercisable prior to such date,
provided, however, that an Option granted to an Optionee who is a resident
of the Netherlands and subject to the personal income tax laws of the
Netherlands may be exercisable immediately after the Option Grant Date. In
no event shall the period of time over which the Option may be exercised
exceed ten years from the Option Grant Date. An Option, or portion thereof,
may be exercised in whole or in part only with respect to whole Shares.
Shares shall be issued to the Optionee pursuant to the exercise of an
Option only upon receipt by the Corporation from the Optionee of payment in full
either in cash or by surrendering (or attesting to the ownership of) Shares
together with proof acceptable to the Committee that such Shares have been owned
by the Optionee for at least six months prior to the date of exercise of the
Option, or a combination of cash and Shares, in an amount or having a combined
value equal to the aggregate purchase price for the Shares subject to the Option
or portion thereof being exercised. The Shares issued to an Optionee for the
portion of any Option exercised by attesting to the ownership of Shares shall
not exceed the number of Shares issuable as a result of such exercise
(determined as though payment in full therefor were being made in cash) less the
number of Shares for which attestation of ownership is submitted. The value of
owned Shares submitted (directly or by attestation) in full or partial payment
for the Shares purchased upon exercise of an Option shall be equal to the
aggregate Fair Market Value of such owned Shares on the date of the exercise of
such Option.
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ARTICLE IX -- ELECTIVE OPTIONS AND SHARES
Each Non-Employee Director shall be granted Options or Shares, or a
combination thereof, subject to the following terms and conditions:
9.1 TIME OF GRANT. On the first business day of November of each year,
Options or Shares, or a combination thereof, shall be granted to each
Non-Employee Director who, at least six months prior thereto, files with
the Committee or its designee a written election to receive Options or
Shares, or a combination thereof, in lieu of all or a portion of such
Non-Employee Director's Annual Retainer. In the event a Non-Employee
Director does not file a written election in accordance with the preceding
sentence by reason of becoming a Non-Employee Director after the date which
is six months prior to the first business day of November in any year,
Options or Shares, or a combination thereof, shall be granted to such
Non-Employee Director on the first day (the "Effective Date") which is six
months after the date such Non-Employee Director files with the Committee
or its designee a written election to receive Options or Shares, or a
combination thereof, in lieu of all or a portion of such Non-Employee
Director's Annual Retainer; provided, however, that such election may apply
only to the portion of such Non-Employee Director's Annual Retainer
determined by multiplying such Non-Employee Director's Annual Retainer by a
fraction, the numerator of which is the number of days from and including
the Effective Date to and including the last day of the period for which
such Annual Retainer would otherwise be payable, and the denominator of
which is 365 or 366, as the case may be. An election pursuant to the first
sentence of this Section 9.1 may be revoked or changed only on or prior to
the date which is six months prior to the first business day of the
following November. An election pursuant to the second sentence of this
Section 9.1 shall be irrevocable.
9.2 NUMBER AND TERMS OF OPTIONS. The number of Shares subject to an
Option granted pursuant to this Article shall be the number of whole Shares
equal to (i) the product of four (4) times the portion of the Annual
Retainer which the Non-Employee Director has elected pursuant to Section
9.1 shall be payable in Options, divided by (ii) the Fair Market Value per
Share on the Option Grant Date. Any fraction of a Share shall be
disregarded and the remaining amount of such Annual Retainer shall be paid
in cash. The purchase price per Share under each Option granted pursuant to
this Article shall be 100% of the Fair Market Value per Share on the Option
Grant Date. Each Option granted pursuant to this Article shall be
exercisable in accordance with Section 8.3.
9.3 NUMBER OF SHARES. The Number of Shares granted pursuant to this
Article shall be the number of whole Shares equal to (i) the portion of the
Annual Retainer which the Non-Employee Director has elected pursuant to
Section 9.1 shall be payable in Shares, divided by (ii) the Fair Market
Value per Share on the Stock Award Date. Any fraction of a Share shall be
disregarded and the remaining amount of such Annual Retainer shall be paid
in cash. Upon an Award of Shares to a Non-Employee Director, the stock
certificate representing such Shares shall be issued and transferred to the
Non-Employee Director, whereupon the Non-Employee Director shall become a
stockholder of the Corporation with respect to such Shares and shall be
entitled to vote the Shares.
ARTICLE X -- CHANGE OF CONTROL
10.1 EFFECT OF CHANGE OF CONTROL. Upon the occurrence of an event of
"Change of Control", as defined below, any and all outstanding Options
shall become immediately exercisable.
10.2 DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall
occur when:
(a) a "Person" (which term, when used in this Section 10.2, shall have
the meaning it has when it is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), but shall not
include the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, or any corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of Voting Stock (as
defined below) of the Corporation) is or becomes, without the prior
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consent of a majority of the Continuing Directors of the Corporation (as
defined below), the Beneficial Owner (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of Voting Stock (as
defined below) representing twenty percent or more of the combined voting
power of the Corporation's then outstanding securities; or
(b) the stockholders of the Corporation approve a definitive agreement
or plan to merge or consolidate the Corporation with or into another
corporation (other than a merger or consolidation which would result in the
Voting Stock (as defined below) of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more
than fifty percent of the combined voting power of the voting securities of
the Corporation or such surviving entity outstanding immediately after such
merger or consolidation), or to sell, or otherwise dispose of, all or
substantially all of the Corporation's property and assets, or to liquidate
the Corporation; or
(c) the individuals who are Continuing Directors of the Corporation
(as defined below) cease for any reason to constitute at least a majority
of the Board of the Corporation.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board on March 30, 1995 or (ii) any person who subsequently
becomes a member of the Board whose nomination for election or election to the
Board is recommended or approved by a majority of the Continuing Directors. The
term "Voting Stock" means all capital stock of the Corporation which by its
terms may be voted on all matters submitted to stockholders of the Corporation
generally.
ARTICLE XI -- AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, that no action authorized by this Article shall
adversely change the terms and conditions of an outstanding Option without the
Optionee's consent and, subject to Article XII, the number of Shares subject to
an Option granted under Article VIII, the purchase price therefor, the date of
grant of any such Option and the termination provisions relating to such Option,
shall not be amended more than once every six months, other than to comply with
changes in the Internal Revenue Code of 1986, as amended, or any successor law,
or the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, or the rules and regulations thereunder.
ARTICLE XII -- ADJUSTMENT PROVISIONS
12.1 If the Corporation shall at any time change the number of issued
Shares without new consideration to the Corporation (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of
shares, liquidation, combination or other change in corporate structure
affecting the Shares) or make a distribution of cash or property which has
a substantial impact on the value of issued Shares, the total number of
Shares reserved for issuance under the Plan shall be appropriately adjusted
and the number of Shares covered by each outstanding Option and the
purchase price per Share under each outstanding Option and the number of
shares underlying Options to be issued annually pursuant to Section 8.1
shall be adjusted so that the aggregate consideration payable to the
Corporation and the value of each such Option shall not be changed.
12.2 Notwithstanding any other provision of the Plan, and without
affecting the number of Shares reserved or available hereunder, the
Committee shall authorize the issuance, continuation or assumption of
outstanding Options or provide for other equitable adjustments after
changes in the Shares resulting from any merger, consolidation, sale of
assets, acquisition of property or stock, recapitalization, reorganization
or similar occurrence in which the Corporation is the continuing or
surviving corporation, upon such terms and conditions as it may deem
necessary to preserve Optionees' rights under the Plan.
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<PAGE> 48
12.3 In the case of any sale of assets, merger, consolidation or
combination of the Corporation with or into another corporation other than
a transaction in which the Corporation is the continuing or surviving
corporation and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), any Optionee who
holds an outstanding Option shall have the right (subject to the provisions
of the Plan and any limitation applicable to the Option) thereafter and
during the term of the Option, to receive upon exercise thereof the
Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of Shares which would have been
obtained upon exercise of the Option or portion thereof, as the case may
be, immediately prior to the Acquisition. The term "Acquisition
Consideration" shall mean the kind and amount of shares of the surviving or
new corporation, cash, securities, evidence of indebtedness, other property
or any combination thereof receivable in respect of one Share of the
Corporation upon consummation of an Acquisition.
ARTICLE XIII -- EFFECTIVE DATE
The Plan shall be submitted to the stockholders of the Corporation for
approval and, if approved by a majority of all the votes cast at the 1995 annual
meeting of stockholders, shall become effective as of the date of approval by
the Board. If stockholder approval is not obtained at the 1995 annual meeting of
stockholders, the Plan shall be nullified.
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[LOGO]
Three First National Plaza
Chicago, Illinois 60602-4260
Notice of
1995
Annual Meeting
of Stockholders and
Proxy Statement
- --------------------------------------------------------------------------------
10 A.M., THURSDAY, OCTOBER 26, 1995
PLEASE NOTE THAT THE ANNUAL MEETING WILL BE HELD AT
THE ART INSTITUTE OF CHICAGO
ARTHUR RUBLOFF AUDITORIUM
COLUMBUS DRIVE BETWEEN MONROE AND JACKSON STREETS
CHICAGO, ILLINOIS
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
Please sign and promptly return your
proxy in the enclosed envelope
<PAGE> 50
SARA LEE CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING, OCTOBER 26, 1995
THE UNDERSIGNED HEREBY APPOINTS JOHN H. BRYAN, JUDITH A. SPRIESER AND JANET
LANGFORD KELLY, OR ANY OF THEM, AS THE UNDERSIGNED'S PROXY OR PROXIES, WITH
FULL POWER OF SUBSTITUTION, TO VOTE ALL SHARES OF COMMON STOCK AND EMPLOYEE
STOCK OWNERSHIP PLAN CONVERTIBLE PREFERRED STOCK OF SARA LEE CORPORATION WHICH
THE UNDERSIGNED IS ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD IN THE ART INSTITUTE OF CHICAGO, ARTHUR RUBLOFF AUDITORIUM, COLUMBUS DRIVE
BETWEEN MONROE AND JACKSON STREETS, CHICAGO, ILLINOIS, ON OCTOBER 26, 1995 AT
10:00 A.M., CHICAGO TIME, AND ANY ADJOURNMENTS THEREOF, AS FULLY AS THE
UNDERSIGNED COULD IF PERSONALLY PRESENT, UPON THE PROPOSALS SET FORTH ON THE
REVERSE SIDE HEREOF AND TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING, REVOKING ANY PROXY OR PROXIES HERETOFORE GIVEN.
IMPORTANT -- This Proxy must be signed and dated on the reverse side.
- -------------------------------------------------------------------------------
SARA LEE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
<TABLE>
<S><C>
[ ]
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF A VALID PROXY IS RETURNED, AND NO CHOICE IS INDICATED
WITH RESPECT TO A PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
1. Election of Directors For All 2. Approval of proposed For Against Abstain
Paul A. Allaire, Frans H.J.J. For Withheld Except nominees written in below. Performance-Based / / / / / /
Andriessen, John H. Bryan, / / / / / / _____________________________ Annual Incentive Plan.
Duane L. Burnham, Charles Nominee Exception
W. Coker, Willie D. Davis, 3. Approval of proposed For Against Abstain
Donald J. Franceschini, 1995 Long-Term Incentive / / / / / /
Allen F. Jacobson, Vernon Stock Plan.
E. Jordan, Jr., James L.
Ketelsen, Hans B. van Liemt, 4. Approval of proposed For Against Abstain
Joan D. Manley, C. Steven 1995 Non-Employee / / / / / /
McMillian, Newton N. Minow, Director Stock Plan.
Michael E. Murphy, Sir Arvi
H. Parbo A.C., Rozanne L. 5. Ratify the appointment For Against Abstain
Ridgway and Richard L. Thomas. of Arthur Andersen LLP / / / / / /
as independent public
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR accountants.
PROPOSALS 1, 2, 3, 4 AND 5.
Dated:____________, 1995
Signature ____________________________________
Signature ____________________________________
NOTE: Please sign exactly as your name or names
appear on the reverse side. For joint accounts,
each owner should sign. When signing as executor,
administrator, attorney, trustee or guardian,
etc., please give your full title.
</TABLE>
- --------------------------------------------------------------------------------
Detach Proxy Card Here
ADMISSION TICKET
SARA LEE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, OCTOBER 26, 1995
10 A.M.
THE ART INSTITUTE OF CHICAGO
ARTHUR RUBLOFF AUDITORIUM
COLUMBUS DRIVE BETWEEN MONROE AND JACKSON STREETS
CHICAGO, ILLINOIS
<PAGE> 51
Edgar Format Appendix
Pursuant to Rule 304(a) of Regulation S-T, following is a list of all graphic
or image information contained in the paper format version of Sara Lee
Corporation's 1995 Notice of Annual Meeting of Stockholders, Proxy Statement
and Form of Proxy;
1. The Notice of Annual Meeting (cover page) contained the Sara
Lee Corporation logo ("Logo"), centered at the top of the page. The Logo
consists of the words "SARA LEE CORPORATION" with "SARA LEE" printed in teal
color ink and "CORPORATION" printed in gray color ink.
2. The captions "TABLE OF CONTENTS" on the inside front cover
page, "PROXY STATEMENT" on page 1, "ELECTION OF DIRECTORS" on page 2,
"OWNERSHIP OF COMMON STOCK AND ESOP STOCK BY DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS" on page 9, "MEETINGS AND CERTAIN COMMITTEES OF THE BOARD" on page 10,
"DIRECTOR COMPENSATION" on page 11, "EXECUTIVE COMPENSATION" on page 11,
"RETIREMENT PLANS" on page 19, "PROPOSAL TO APPROVE THE PERFORMANCE-BASED
ANNUAL INCENTIVE PLAN" on page 21, "PROPOSAL TO APPROVE THE 1995 LONG-TERM
INCENTIVE STOCK PLAN" on page 23, "PROPOSAL TO APPROVE THE 1995 NON-EMPLOYEE
DIRECTOR STOCK PLAN" on page 27, "APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS" on page 29, "STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING" on
page 29, "OTHER MATTERS" on page 29, "PERFORMANCE-BASED ANNUAL INCENTIVE PLAN"
on page A-1, "1995 LONG-TERM INCENTIVE STOCK PLAN" on page B-1, and "1995
NON-EMPLOYEE DIRECTOR STOCK PLAN" on page C-1, and the phrase "YOUR VOTE IS
IMPORTANT" on the back cover are printed in teal color ink.
3. Page 1 contains the Logo, centered at the top of the page.
4. Pages 2-8 contained 1-1/2 inch by 1-1/4 inch black-and-white
photographs of the corporations' nominees for director, as indicated on those
pages.
5. Page 16 contained a line graph, with the horizontal axis
labeled in years from 1990 through 1995, and the vertical axis labeled in
dollars from 100 to 225, in increments of 25, on which the data contained in
the table on page 16 of the attached EDGAR format version of the Proxy
Statement is represented by three lines, labeled "Sara Lee," "S&P Food/
Household/Apparel Composite" and "S&P 500," respectively. The line labeled
"Sara Lee" is printed in teal color ink. The data represented in the graph,
and a key to the lines contained in the graph, is set forth below the graph.
6. The back cover of the Proxy Statement contains the Logo in the
upper right hand corner of the page.
