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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 28, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ________________ TO ________________
COMMISSION FILE NUMBER 1-3344
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SARA LEE CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 36-2089049
(State of Incorporation) (I.R.S. Employer Identification
No.)
THREE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60602-4260
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number including area code: (312) 726-2600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.33 1/3 par value The Chicago Stock Exchange
The New York Stock Exchange
The Pacific Stock Exchange
Amsterdam Stock Exchange
The Bourse (Paris)
Swiss Exchange
The Stock Exchange (London)
Preferred Stock Purchase Rights The Chicago Stock Exchange
The New York Stock Exchange
The Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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Indicate by check mark whether the registrant (1) has filed all required
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of September 2, 1997, the aggregate market value of the voting and
non-voting common equity (based upon the closing price per share of Common Stock
on the New York Stock Exchange on such date) held by non-affiliates of the
registrant was approximately $19.9 billion.
On September 2, 1997, the registrant had outstanding 480,725,013 shares of
common stock of $1.33 1/3 par value, which is the registrant's only class of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement, dated September 22, 1997, are
incorporated by reference into Items 10-12 of Part III.
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PART I
Item 1. Business
(A) GENERAL DEVELOPMENT OF BUSINESS
Sara Lee Corporation ("Sara Lee" or the "Corporation") is a global
manufacturer and marketer of high-quality, brand-name products for consumers
throughout the world. It was organized in Baltimore, Maryland in 1939 as the
C.D. Kenny Company and adopted its current name in 1985.
For the past five years, the main focus of Sara Lee has been to continue to
build brand equity and improve returns. Sara Lee currently has 31 "megabrands",
defined as a brand with sales of more than $100 million. Sara Lee pursued its
strategy of building brand equity and improving returns through the introduction
of new products, the expansion of existing products into new markets, and a
significant commitment to marketing support in order to build leadership brands.
In fiscal 1997, Sara Lee spent $1.9 billion to retain and grow the equity of its
brands with customers, and to support its stable of value-added, high-margin
products in its four industry segments, Packaged Meats and Bakery, Coffee and
Grocery, Household and Body Care and Personal Products. This amount represents
an increase of 5% over fiscal 1996.
On September 15, 1997, Sara Lee announced that it is considering the
adoption of a three-year strategic program to more tightly focus its business
activity and make the Corporation more competitive. The key element of the
program is a plan to de-verticalize the operations of Sara Lee to the extent
practical and possible by divesting operating assets. Sara Lee is targeting to
raise $3 billion in cash over the next three years through the divestment of
operating assets and further cost reduction programs, including outsourcing. The
three-year strategic program will result in a fiscal 1998 after-tax charge,
which is currently estimated to be approximately $1.6 billion, related primarily
to the sale and write down of assets that Sara Lee has determined it does not
need to own in order to fulfill its primary mission of building brands on a
global basis. Sara Lee anticipates that the charge will be predominantly
non-cash.
SARA LEE PACKAGED MEATS AND BAKERY
Sara Lee Packaged Meats continued its focus on high-margin, value-added
products in fiscal year 1997 with an emphasis on convenient and "better-for-you"
products. Several Sara Lee meat brands introduced more easy-to prepare and
reduced-fat or fat-free products in fiscal 1997. Reduced-fat products account
for an increasing percentage of Sara Lee's retail meat sales. On a worldwide
basis, unit volumes were unchanged for the year, reflecting a continuing
strategy to exit low-margin categories and the impact of higher commodity costs,
although sales and profits increased.
In fiscal 1997, Sara Lee pursued its objectives of building brands and
increasing business outside the United States through its acquisition of Aoste,
a leading processed meats company in France and one of Europe's largest
processed meats producers. Aoste manufactures processed meats under the major
brand names of AOSTE, JUSTIN BRIDOU and COCHONOU. As a result of the
acquisition, Sara Lee is the largest packaged meats company in the world. Sara
Lee also focused on integrating its international businesses and brands to take
advantage of operating synergies, cost-containment programs and new product
opportunities.
Sara Lee Bakery maintained its leadership position as the top frozen-baked
goods brand in the United States, the United Kingdom and Australia in fiscal
1997. During the fiscal year, Sara Lee Bakery continued to pursue growth and
expansion opportunities in international markets. Currently, more than 25% of
total Bakery sales are generated outside the U.S. Sara Lee Bakery also
introduced and expanded its distribution of a number of new products, including
fresh-baked goods. Fresh-baked offerings are currently available in
approximately one-third of U.S. markets. In fiscal 1997, Sara Lee also expanded
the number of products with microwaveability, smaller or single-serving sizes
and added convenience. Sara Lee Bakery's foodservice unit continued to expand
its product offerings, including a selection of ultra-premium pies and cakes.
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During the year, Sara Lee Bakery completed its acquisition of Finnegans Famous
Cakes Ltd., a leading privately owned foodservice company based in England. The
Bakery also acquired Grand Metropolitan, Plc's Brossard bakery businesses in
France and Italy. In fiscal 1997, worldwide unit volume, excluding acquisitions,
declined 5% for the fiscal year, reflecting a weak retail environment for frozen
baked goods, although sales and profits rose in international markets.
Sara Lee Foodservice's business, PYA/Monarch, maintained its position as the
leading foodservice distributor in the southeastern United States and the
fourth-largest full-line foodservice company in the nation. Sara Lee continues
to focus on low-cost production, customer service and increasing unit volumes.
PYA/Monarch has continued to pursue a strategy of aggressive warehouse expansion
to meet sales growth in key markets. PYA also introduced new technologies in the
1997 fiscal year to enhance responsiveness to customers. Foodservice unit
volumes increased 4%, excluding acquisitions.
SARA LEE COFFEE AND GROCERY
During fiscal 1997, the Coffee and Grocery line of business introduced new
items to address regional taste preferences, lifestyle trends and worldwide
demand for premium and specialty coffees. Sara Lee offered new coffee products
in France, Greece, the Netherlands, Spain and Australia. Sara Lee also continued
to refine its format for retail coffee outlets in Europe, opening four JACQMOTTE
STORE coffee shops in Belgium and four COFFEE TIMES outlets in the Netherlands.
During the 1997 fiscal year, instant coffee products were introduced in Russia,
where Sara Lee has marketed tea since 1994. New tea products were also launched
during the fiscal year. Sara Lee expanded its line of ready-to-drink, cold fruit
teas in the Netherlands.
Green coffee costs were volatile in fiscal 1997. As green coffee costs began
to rise early in the third quarter of fiscal 1997, consumer demand strengthened
in anticipation of retail price increases. Unit volumes for roasted coffee rose
3% for the fiscal year, excluding acquisitions.
The volatility in green coffee prices as well as the strengthening of the
U.S. dollar relative to European currencies affected the coffee and grocery
operations. While reported sales fell 2.9%, dollar-denominated profits rose
2.9%. In local currency terms, both revenues and profits grew in the 1997 fiscal
year.
SARA LEE HOUSEHOLD AND BODY CARE
Sara Lee Household and Body Care is comprised of three core categories --
shoe care, body care and insecticides. In fiscal 1997, Household and Body Care
continued to grow and posted increased sales and profits on the strength of its
shoe care and body care businesses. Sales for insecticides were negatively
affected by cool summer conditions in Europe. Product developments in Sara Lee's
shoe care business continued in fiscal 1997, with the introduction under the
Kiwi brand of a line of "self-shine" sponges with leather-nourishing
capabilities. In the body care category, a premium priced range of DUSCHDAS
NATURELLE shower gels was introduced in Germany and the range of DUSCHDAS
products was extended with a formulation designed for older skin. The BADEDAS
ERHOLUNGSTHERAPIE line of relaxing bath and shower products was also expanded.
SANEX shower gels and deodorants were relaunched across Europe with a new
formula and packaging and the DELIAL line of sun care products was relaunched in
Spain.
Sara Lee's Direct Selling businesses in Mexico, Indonesia, the Philippines,
South Africa, China and Uruguay were bolstered in fiscal 1997 by the acquisition
of HomCare Japan, Ltd., and in early fiscal 1998 by the acquisition of the
Australian direct selling business Nutri-Metics International, which has
operations in 18 countries. The establishment of House of Fuller/Argentina in
late fiscal 1997 also increased Sara Lee's presence in South America.
The direct selling business offers a channel for marketing Household and
Body Care products directly to consumers. A growing selection of apparel
products also are marketed.
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Increasing economic stability in Mexico led to improved performance in sales
and operating profit for Sara Lee's House of Fuller direct selling business in
fiscal 1997. House of Fuller, with more than 215,000 independent sales
representatives, is the number-two direct seller in Mexico.
In Asia, House of Sara Lee expanded products offerings for consumers in
China, Indonesia and the Philippines. The acquisition of HomCare Japan added
40,000 independent sales representatives to Sara Lee's growing direct selling
business in the Asia-Pacific region, while Nutri-Metics added more than 200,000
representatives in 18 countries worldwide.
SARA LEE PERSONAL PRODUCTS
Sara Lee Intimates increased worldwide unit volumes 1% in fiscal 1997.
During fiscal 1997, Sara Lee maintained its number-one position in the intimate
apparel markets in the United States, Canada and Mexico. In fiscal 1997, Sara
Lee's worldwide Intimate Apparel business emphasized value-added innovations as
well as products that provide access to new markets. For example, PLAYTEX
introduced a line of plus-sized lingerie -- Body Language -- and updated other
product offerings, while BALI introduced three new figure shaping collections.
Sara Lee also expanded its product lines geographically, acquiring the French
RIEN brand and entering into a co-branding alliance with Amway Japan Ltd., which
will result in the exclusive collection of Playtex bras being sold through more
than one million Amway Japan distributors.
Sara Lee Accessories posted increased sales and unit volumes in fiscal 1997.
COACH continues to focus on innovative product initiatives, brand leveraging
through licensing agreements and expanded distribution. COACH introduced the
ERGO collection in late fiscal 1997 and entered into a licensing agreement with
the Movado Group to produce wristwatches. Currently, there are 149 Coach retail
stores in the United States and another 125 locations around the world,
including a new flagship Coach store in Florence, Italy. Sara Lee recently
divested a controlling interest in Aris Isotoner, a manufacturer of gloves and
accessories.
Sara Lee Knit Products continued to focus on value-added products,
cost-effective manufacturing and expanding channels of distribution in fiscal
1997. Worldwide unit volumes for all knit product categories increased 9% during
fiscal 1997, excluding acquisitions. In fiscal 1997, Sara Lee continued to hold
the number-one market position for U.S. men's and boys' underwear and U.S.
women's and girls' panties category. For the fourth consecutive year, the HANES
megabrand was the number one apparel label in the mass channel of distribution.
In fiscal 1997, Sara Lee added a number of new products to its knit product
lines, including HANES' The Michael Jordan Collection of premium underwear, new
men's underwear collections under the CHAMPION and SPALDING lines, and new
characters to the popular HANES SHOWTOONS underwear. Under the Polo Ralph Lauren
label, Sara Lee introduced underwear, loungewear, pajamas and terry robes. Sara
Lee also continued to expand the JUST-MY-SIZE label, which offers an extensive
line of plus-sized casualwear, sleepwear and sportswear.
Sara Lee Hosiery's worldwide legwear business, which includes sheer hosiery,
socks, tights and opaques, posted lower sales in 1997, reflecting weak global
market trends. To counter declining demand for sheer hosiery worldwide, Sara Lee
is strengthening the equity of its principal hosiery brands, improving operating
efficiencies and developing high-margin, value-added products that broaden
consumer choices in legwear. Worldwide legwear unit volumes fell 2% last year,
combining a 4% decline in sheer hosiery sales with a 6% increase in socks.
In fiscal 1997, Sara Lee unveiled new hosiery products offering superior
fit, durability and figure control. Sara Lee also implemented marketing and
advertising programs and initiatives to enhance the prominence of its top
brands.
Sara Lee continued to support initiatives to enhance brand identity and
awareness of new products. Prominent among these initiatives was the Tina Turner
HANES hosiery campaign, which included print, billboard and television
advertising, as well as sponsorship of a North American concert tour.
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The DIM brand, marketed worldwide in more than 50 countries, marked its 30th
year as France's top name in hosiery with new product introductions, including
extensions to its popular VENTRE PLAT line of control-top sheer hosiery.
New products offering BODY CONTOURING features, comfort and durability again
dominated new product introductions for Sara Lee Hosiery. These products offer
specific benefits to consumers while providing higher profit margins.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Sara Lee's businesses are classified into four industry segments: Packaged
Meats and Bakery, Coffee and Grocery, Household and Body Care and Personal
Products. The financial information about Sara Lee's industry segments can be
found on page F-24 of this Report.
(C) NARRATIVE DESCRIPTION OF BUSINESS
SARA LEE PACKAGED MEATS AND BAKERY
Sara Lee Packaged Meats processes and sells pork, poultry and beef products
to supermarkets, warehouse clubs, national chains and institutions throughout
the United States, Europe and Mexico. Sales are transacted through Sara Lee's
own sales force, brokers and institutional buyers. Some of the more prominent
brands in the United States within this category include BALL PARK, BEST'S
KOSHER, BRYAN, HILLSHIRE FARM, HYGRADE, JIMMY DEAN, KAHN'S, MR. TURKEY, SARA LEE
and SINAI 48. Sara Lee's more prominent European brands include STEGEMANN in the
Netherlands, ARGAL in Spain and NOBRE in Portugal. Sara Lee has a 49.9% interest
in AXA Alimentos, S.A. de C.V., which owns Kir Alimentos S.A. de C.V., a leading
processed meats company in Mexico. In fiscal 1997, Sara Lee acquired Aoste, a
leading processed meats company in France and one of Europe's largest processed
meats producers. Aoste markets processed meats under the brand names of AOSTE,
JUSTIN BRIDOU and COCHONOU. Sara Lee is the largest processed meats company in
the world.
The products offered by this line of business include smoked sausage, bacon,
hot dogs, breakfast sausage, breakfast sandwiches, premium deli and luncheon
meats, ham, turkey, and packaged lunch combinations. The ingredients -- pork,
turkey and beef -- are purchased by Sara Lee from a variety of sources. The
prices of these raw materials fluctuate, depending primarily on supply and
demand. Meat commodity costs rose in fiscal 1997. Because of the range of
sources from which these raw materials are available, Sara Lee believes that it
will continue to have access to adequate supplies.
The Packaged Meats category is highly competitive, with an emphasis on
product quality, price, advertising and promotion, and customer service. Sara
Lee's competitors include international, national, regional and local companies.
The Packaged Meats category has accounted for 10% or more of Sara Lee's
consolidated revenues during the past three fiscal years. Sara Lee believes it
is one of the three industry leaders in the United States.
Most of Sara Lee's Packaged Meats operations are regulated by the U.S.
Department of Agriculture, whose focus is the quality, sanitation and safety of
meat products, and, to some extent, by state and local government agencies. Sara
Lee's Packaged Meats operations in Europe and Mexico are regulated by local
authorities.
Sara Lee Bakery produces a wide variety of fresh and frozen baked and
specialty items. Its core products are pies, cheesecakes, pound cakes and Danish
pastries. These products are sold through supermarkets, foodservice
distributors, bakery-deli and direct channels throughout the United States,
United Kingdom, France, Mexico, Australia and numerous Asia-Pacific countries.
Sales are transacted through Sara Lee's sales force and independent wholesalers
and distributors. The key ingredients for these products -- butter, milk, sugar,
fruits, eggs and flour -- are purchased from suppliers at prices that are
subject to such influences as supply and demand, weather, and government price
controls. Because of the
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number of sources from which such raw materials are generally available, Sara
Lee believes it will continue to have access to adequate supplies.
Competition in this category is keen, with a large number of participants.
Sara Lee seeks to maintain and enhance a leading position in the industry
through superior quality and value, marketing efforts that are designed to
reinforce and build brand recognition, and through superior customer service.
In the United States, Sara Lee Bakery products are subject to regulation by
the Food and Drug Administration, the federal agency charged with, among other
things, enforcing laws pertaining to food processing, content and labeling, and
to a lesser extent, by state and local government agencies.
Sara Lee Foodservice's business is conducted principally under the
PYA/Monarch name. With the acquisition of Bass & Swaggerty, a Florida based
foodservice distributor in fiscal 1997, PYA/Monarch strengthened its position as
the leading foodservice distributor in the southeastern United States. PYA/
Monarch is the fourth largest full-line foodservice company in the nation. This
business distributes dry, refrigerated and frozen foods, paper supplies and
foodservice equipment to institutional and commercial foodservice customers.
The institutional foodservice distribution industry is highly competitive,
with price and service being the major means by which Sara Lee Foodservice
competes. This line of business generates lower margins on sales dollars than
Sara Lee's other businesses. The foodservice business accounted for 10% or more
of Sara Lee's consolidated revenues during the past three fiscal years.
SARA LEE COFFEE AND GROCERY
Sara Lee believes it is one of the top four coffee roasters in the world,
and one of the top three in the European market. It has a significant presence
in such countries as the Netherlands, Belgium, France, Denmark, Spain and
Australia, and has established positions in Central and Eastern Europe through
acquisitions and expanded sales efforts. While DOUWE EGBERTS is its European
flagship brand, its other premium European coffee brands include MAISON DU CAFE,
MARCILLA and MERRILD. Sara Lee's PICKWICK brand, an important brand in the
European tea market, is expanding its current lines in an effort to appeal to
younger consumers and has entered the Russian and Eastern European markets.
This is a very competitive business with the other participants consisting
primarily of other large multi-national companies. Sara Lee seeks to maintain a
competitive edge by offering its customers superior quality and value.
Sara Lee is also a significant competitor in the out-of-home coffee service
business. Its Douwe Egberts Coffee Systems business provides coffee and
dispensing equipment in Europe, while its Superior Coffee and Foods business
provides similar products and services in the United States.
The significant cost item in the production of coffee products is the price
of green coffee, which varies depending on such factors as weather (which
affects the quality and quantity of available supplies), consumer demand, the
political climate in the producing nations, unilateral pricing policies of
producing nations, speculation on the commodities market, and the relative
valuations and fluctuations of the currencies of producer versus consumer
countries. These factors also generally affect Sara Lee's competitors.
Uncertainty over the availability of supplies resulted in extreme volatility in
the price of green coffee in fiscal 1995, leading to the highest prices in
recent years. In fiscal 1996, green coffee prices declined. Green coffee
experienced significant cost volatility in fiscal 1997 and green coffee prices
rose substantially in the latter half of the fiscal year. Sara Lee anticipates
that green coffee prices will continue to be affected due to uncertainty over
the availability of future supplies. Sara Lee has, and expects to continue to,
offset the negative effect of price increases through careful inventory
management, cost cutting, and higher prices for its coffee products. Primarily
due to consumers increasing their purchases of coffee in anticipation of retail
price increases, unit volume gains were posted for Sara Lee coffee brands in
most European markets.
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The Sara Lee Coffee and Grocery line of business also manufactures rice
products under the LASSIE brand in the Netherlands, snack and nut products under
the DUYVIS, FELIX and BENENUTS brands in the Netherlands, Belgium and France,
and cut and pipe tobacco under the AMPHORA, DRUM and VAN NELLE brands in Europe.
The Sara Lee Coffee and Grocery business has accounted for 10% or more of
Sara Lee's consolidated revenues during the past three fiscal years.
SARA LEE HOUSEHOLD AND BODY CARE
Sara Lee Household and Body Care is composed of three primary core
categories: shoe care -- led by a worldwide line of Kiwi products; body care
items -- led by the SANEX brand, but also including DUSCHDAS and BADEDAS and
baby care products sold under the ZWITSAL, FISSAN and PRODERM names; and
insecticides -- sold internationally under the CATCH, BLOOM, VAPONA and RIDSECT
brand names. AMBI-PUR air fresheners, ZENDIUM and PRODENT oral care products,
and BIOTEX and NEUTRAL specialty detergents are also important categories for
Sara Lee. Body care items and insecticides are marketed principally in Europe as
well as into the Asia-Pacific and Latin America markets. These products are sold
through a variety of retail channels including supermarkets. These are very
competitive businesses. Sara Lee seeks to maintain a competitive advantage by
offering its customers superior quality and value.
Sara Lee Direct Selling distributes a wide range of products -- cosmetics,
fragrances, toiletries, personal products and jewelry -- through a network of
independent sales representatives. This method of reaching the consumer has been
particularly successful at the House of Fuller business in Mexico, the House of
Sara Lee businesses in Indonesia and the Philippines, and the Avroy Shlain
business in South Africa. Sara Lee also operates direct selling organizations in
China and Uruguay and has acquired direct selling businesses in Japan and
Australia. While this segment is very fragmented, Sara Lee believes it has an
important position in many product lines in those countries in which it
competes.
SARA LEE PERSONAL PRODUCTS
The Personal Products line of business, which is headquartered in
Winston-Salem, North Carolina, includes the Intimates, Accessories, Knit
Products and Hosiery business groups.
Sara Lee Intimates' business includes bras, panties and shapewear. These are
manufactured and distributed under such labels as BALI, HANES HER WAY, PLAYTEX,
WONDERBRA and DAISYFRESH in North America, and PLAYTEX and DIM in Europe. Sara
Lee holds a leading position in the Mexican bra market through its PLAYTEX and
HANES HER WAY brand and continued to build market share in Canada during fiscal
1997 through its PLAYTEX, WONDERBRA, DAISYFRESH and HANES HER WAY brands.
Distribution channels for intimate apparel range from department and
specialty stores for such premium brands as BALI, and some PLAYTEX products, to
warehouse clubs and mass-merchandise outlets for some of the value-priced
brands. Sales are effected through Sara Lee's sales force.
The intimate apparel market is a competitive one based on consumer brand
loyalty. Sara Lee endeavors to maintain its competitive edge through marketing
and promotional efforts, and by offering consumers value through a superior
combination of quality and price.
Sara Lee Accessories' business involves the manufacture and marketing of
premium leather products through its Coach division. Coach products are sold
through department stores, catalog sales and Sara Lee stores. Coach operates
approximately 149 retail stores in the United States and 125 stores located
outside the United States.
Sara Lee Knit Products' business involves the manufacture and distribution
of men's, women's and children's underwear and activewear (T-shirts, fleecewear
and other jersey products for casualwear) in North America, South and Central
America, Europe and the Asia-Pacific countries. These products are
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sold through Sara Lee's sales force to department stores, mass merchandisers,
discount chains and the screen print trade. Principal brands in this category
include CHAMPION, HANES, HANES HER WAY and RINBROS in North America, and
ABANDERADO, PRINCESA, CHAMPION, HANES and DIM in Europe. Sara Lee believes that
it has the leading market share in both the women's and girls' panties category
in the United States, and in the heavily branded category of men's and boys'
underwear in the United States, and the leading position in men's and boys'
underwear in Mexico.
Activewear is marketed under Sara Lee's HANES and CHAMPION lines. In
addition to targeting the public activewear market, Champion also manufactures
and markets authentic uniforms and practicewear for professional and amateur
athletic teams, including such organizations as the National Basketball
Association, the National Football League, the Olympics and a number of major
university sports teams.
The principal raw material in this product category is cotton. Sara Lee
currently believes it has access to an adequate supply of cotton from a variety
of sources.
The knit products business is highly competitive, with products relying on
brand recognition, quality, price and loyalty. Sara Lee competes by offering
superior value, making use of low-cost sourcing, marketing activities and
utilizing its megabranding strategy. The megabrands strategy entails marketing
various products through common packaging, promotion and advertising. The Knit
Products business has accounted for 10% or more of Sara Lee's consolidated
revenues during each of the past three fiscal years.
Sara Lee Hosiery is the market leader in hosiery markets in North America,
Western Europe, Australia, New Zealand and South Africa. It also continues to
establish operations in various Asia-Pacific countries, placing it in a
strategic position to capitalize on developing markets in that area.
Hosiery products consist of a wide variety of branded, packaged consumer
products, including pantyhose, stockings, combination panty and pantyhose
garments, tights, knee-highs and socks, many of which are available in both
sheer and opaque styles. These products are sold domestically under such brand
names as HANES, L'EGGS, DONNA KARAN and DKNY (the last two being licensed), and
abroad under such labels as DIM, PRETTY POLLY, ELBEO, NUR DIE, BELLINDA,
FILODORO, PHILIPPE MATIGNON and OMERO. Sara Lee is the largest sock manufacturer
in the United States.
Hosiery products are sold by Sara Lee's sales force in channels ranging from
department and specialty stores (for premium brands such as HANES, DONNA KARAN
and DKNY in the United States, and DIM abroad), to supermarkets, warehouse
clubs, discount chains and convenience stores for brands like L'EGGS and some
DIM products aimed at the price-conscious consumer. Hosiery products are also
distributed through catalog sales and Sara Lee stores. The hosiery business has
accounted for 10% or more of Sara Lee's consolidated revenues during each of the
past three fiscal years.
The hosiery business is very competitive in both the United States and
Europe. In the United States, Sara Lee's major competitors are other hosiery
companies, and the primary methods of competition are quality, value, function,
and, with respect to L'eggs products, service and distribution. In Europe, where
most of Sara Lee's competitors are small companies who compete in the unbranded
sector of the market, the primary focus is on quality.
Raw materials -- nylon, spandex, and cotton -- for the products in this
category are readily available to Sara Lee from a variety of sources.
TRADEMARKS
Sara Lee is the owner of over 30,000 trademark registrations and
applications in over 140 countries. Sara Lee's trademarks are among its most
valuable assets as it pursues its strategy of building brands globally.
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CUSTOMERS
None of Sara Lee's business segments or lines of business is dependent upon
a single customer or a small number of customers, the loss of which would have a
material adverse effect on Sara Lee's consolidated results of operations. Sara
Lee considers major mass retailers and supermarket chains in both the United
States and Europe to be significant customers across one or more product
categories, and it has developed specific approaches to working with individual
customers.
SEASONALITY
Sara Lee's Packaged Meats and Bakery businesses experience some seasonality.
Sara Lee Packaged Meats' sales tend to be higher in the fourth fiscal quarter
due to increased demand associated with the onset of the outdoor barbecuing
season and various holidays. Sara Lee Bakery experiences increased demand for
its products during the second quarter, driven principally by holiday buying.
Sara Lee Personal Products, particularly Accessories and Knit Products,
generally experience increased demand during the second quarter as a result of
"back to school" purchases and the holiday season. The European hosiery business
is somewhat seasonal in nature, unlike the domestic hosiery business, and tends
to experience a reduced demand in the summer months.
ENVIRONMENTAL MATTERS
Sara Lee is subject to a number of federal, state and local statutes, rules,
regulations and ordinances in the United States and other countries relating to
the discharge of materials into the environment, or otherwise relating to the
protection of the environment ("Environmental Laws").
While Sara Lee expects to make capital and other expenditures in compliance
with Environmental Laws, it does not anticipate that such compliance will have a
material adverse effect on its consolidated financial position, results of
operations or cash flows. Sara Lee has implemented a program to monitor
compliance with Environmental Laws and is continually examining its methods of
operation and product packaging to reduce its use of natural resources.
EMPLOYEES
Sara Lee has approximately 141,000 employees worldwide.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Sara Lee's foreign operations are conducted primarily through wholly- or
partially-owned subsidiaries incorporated outside the United States. Sara Lee's
principal foreign subsidiary is Sara Lee/DE N.V., a Netherlands limited
liability company headquartered in Utrecht, the Netherlands ("Sara Lee/DE").
Sara Lee indirectly owns a 100% interest in Sara Lee/DE, 41% in the form of
voting shares and 59% in the form of depository receipts issued by the
independent Stichting Administratiekantoor Douwe Egberts Sara Lee. Sara Lee/DE
has responsibility for managing the Coffee and Grocery and Household and Body
Care divisions of Sara Lee.
8
<PAGE>
The foreign operations of the Packaged Meats line of business are conducted
through Sara Lee Processed Meats (Europe) B.V., the Aoste Group and Imperial
Holding N.V., while the foreign operations of Sara Lee Bakery are conducted
through Kitchens of Sara Lee U.K. Ltd., Kitchens of Sara Lee (Australia) Pty.
Ltd. and Brossard France S.A.
The Coffee and Grocery line of business is conducted by a number of
subsidiaries, principally European, including Sara Lee/DE, Douwe Egberts
Nederland B.V., Douwe Egberts France S.A., Douwe Egberts Espana S.A., Merrild
Kaffe A/S, Douwe Egberts N.V., Compack Douwe Egberts Rt., Harris/DE Pty. Ltd.,
Balirny Douwe Egberts A.S. and Douwe Egberts Coffee Systems Nederland B.V.
The Household and Body Care line of business is conducted by subsidiaries in
over forty countries, principally Sara Lee/DE, Kiwi Brands Pty. Ltd., Kiwi
France S.A., Kortman Intradal B.V., A/S Blumoller, Sara Lee/DE Espana S.A., Sara
Lee Household and Personal Care U.K. Ltd., and Sara Lee/DE Italy S.p.A.
The Personal Products line of business includes numerous foreign businesses,
including Dim S.A., Grupo Sans, a division of Sara Lee/DE Espana S.A., Sara Lee
Personal Products, S.p.A., Sara Lee Personal Products (Australia) Pty. Ltd.,
Pretty Polly, a division of Sara Lee UK Holdings Ltd., Vatter GmbH, the Filodoro
Group, Sara Lee Hosiery, S.A. de C.V., Rinbros, S.A. de C.V., and Maglificio
Bellia S.p.A.
The financial information about foreign and domestic operations can be found
on page F-25 of this Report.
Item 2. Properties.
Sara Lee operates 291 food processing and consumer product manufacturing
plants, each containing more than 20,000 square feet in building area, in 27
states and 37 foreign countries. Sara Lee owns 231 and leases 60 of these
plants. It also operates 124 warehouses containing more than 20,000 square feet
in building area in 18 states and 21 foreign countries. Of these warehouses, 61
are owned and 63 are leased. The following table identifies the plants and
warehouses presently owned or leased by Sara Lee that contain at least 250,000
square feet in building area.
<TABLE>
<CAPTION>
APPROXIMATE
BUILDING AREA
INDUSTRY SEGMENT AND IN SQUARE
DIVISION OR SUBSIDIARY LOCATION FEET
- ------------------------------------------------ ------------------------------------------------ -------------
<S> <C> <C>
PACKAGED MEATS AND BAKERY
Aoste........................................... Aoste, France 743,000
Aoste........................................... Maclas, France 387,000
Aoste........................................... Peyrolles, France 374,000
Aoste........................................... St. Symphorien, France 303,000
Bil Mar Foods................................... Zeeland, Michigan 577,000
Bryan Foods, Inc................................ West Point, Mississippi 769,000
Hillshire Farm & Kahn's......................... Alexandria, Kentucky 325,000
Hillshire Farm & Kahn's......................... Cincinnati, Ohio 563,000
Hillshire Farm & Kahn's......................... New London, Wisconsin 565,000
Kitchens of Sara Lee............................ Bridlington, England 285,000
PYA/Monarch, Inc................................ Charlotte, North Carolina 288,000
PYA/Monarch, Inc................................ Bloomington, Indiana 321,000
PYA/Monarch, Inc................................ Lexington, South Carolina 364,000
PYA/Monarch, Inc................................ Montgomery, Alabama 276,000
Sara Lee Bakery................................. New Hampton, Iowa 294,000
Sara Lee Bakery................................. Tarboro, North Carolina 346,000
Sara Lee Bakery................................. Traverse City, Michigan 295,000
Sara Lee Processed Meats (Europe) B.V........... Rio Maior, Portugal 348,000
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
BUILDING AREA
INDUSTRY SEGMENT AND IN SQUARE
DIVISION OR SUBSIDIARY LOCATION FEET
- ------------------------------------------------ ------------------------------------------------ -------------
Sara Lee Processed Meats (Europe) B.V........... Miralcamp, Spain 260,000
<S> <C> <C>
COFFEE AND GROCERY
Douwe Egberts Van Nelle Tabaksmaatschappij
B.V............................................ Rotterdam, the Netherlands 605,000
Koninklijke Douwe Egberts B.V................... Joure, the Netherlands 1,094,000
Koninklijke Douwe Egberts B.V................... Utrecht, the Netherlands 577,000
Koninklijke Douwe Egberts B.V................... Zaandam, the Netherlands 367,000
Van Nelle International B.V..................... Joure, the Netherlands 301,000*
HOUSEHOLD AND BODY CARE
Kiwi Brands Inc................................. Douglassville, Pennsylvania 290,000
Kiwi Brands Pty. Ltd............................ Clayton, Australia 313,000
Sara Lee/DE Espana S.A.......................... Santiga, Spain 284,000*
Sara Lee/DE Germany............................. Dusseldorf, Germany 333,000*
Sara Lee Household & Body Care
U.K. Limited................................... Slough, England 318,000
PERSONAL PRODUCTS
Canadelle Inc................................... Montreal, Canada 289,000
Champion Products, Inc.......................... Laurel Hill, North Carolina 368,000
Champion Products, Inc.......................... Gaffney, South Carolina 294,000
Champion Products, Inc.......................... Perry, New York 253,000
Champion Products, Inc.......................... Dunn, North Carolina 289,000
Coach Leatherware............................... Jacksonville, Florida 357,000*
Dim, S.A........................................ Autun, France 328,000
Filodoro Calze SpA.............................. Casalmoro, Italy 343,000
Filodoro Calze SpA.............................. Casalmoro, Italy 251,000
L'eggs Products................................. Clarksville, Arkansas 321,000
L'eggs Products................................. Rockingham, North Carolina 440,000
Playtex Apparel, Inc............................ Dover, Delaware 424,000
Sara Lee Direct................................. Rural Hall, North Carolina 598,000*
Sara Lee Hosiery................................ East Rockingham, North Carolina 330,000*
Sara Lee Hosiery................................ Winston-Salem, North Carolina 770,000
Sara Lee Hosiery................................ Darlington, South Carolina 287,000
Sara Lee Knit Products.......................... Eden, North Carolina 418,000
Sara Lee Knit Products.......................... Forest City, North Carolina 340,000
Sara Lee Knit Products.......................... Galax, Virginia 424,000
Sara Lee Knit Products.......................... Martinsville, Virginia 704,000*
Sara Lee Knit Products.......................... Mountain City, Tennessee 562,000
Sara Lee Knit Products.......................... Rabun Gap, Georgia 754,000
Sara Lee Knit Products.......................... Rural Hall, North Carolina 931,000
Sara Lee Knit Products.......................... Sanford, North Carolina 275,000
Sara Lee Knit Products.......................... Winston-Salem, North Carolina 568,000
Sara Lee Knit Products.......................... Greenwood, South Carolina 500,000
Sara Lee Knit Products.......................... Winston-Salem, North Carolina 395,000
Sara Lee Sock Company........................... Kernersville, North Carolina 340,000
Vatter GmbH..................................... Rheine, Germany 549,000
</TABLE>
- ------------
* These facilities are leased; the remainder are owned by Sara Lee.
10
<PAGE>
Item 3. Legal Proceedings.
As a result of environmental audits which Sara Lee undertook of its
facilities pursuant to a consent agreement entered into between Sara Lee and the
U.S. Environmental Protection Agency ("EPA"), Sara Lee advised the EPA that Sara
Lee may have violated certain notification and reporting regulations under
various federal environmental statutes. In June, 1997, Sara Lee paid the EPA
$237,500 in penalties in settlement of these matters.
Bil Mar Foods, a subsidiary of Sara Lee Corporation, has entered into a
Consent Order with the State of Michigan, Department of Environmental Quality
regarding possible violations of certain conditions of Bil Mar's National
Pollutant Discharge Elimination System Permit in connection with the operation
of Bil Mar's waste water treatment plant. As a result, Bil Mar is now making a
number of modifications and enhancements to ensure that its wastewater treatment
plant remains in full compliance with all conditions of the Permit and all
applicable environmental regulations. As part of the Consent Order, Bil Mar
Foods has agreed to pay $300,000 to the state.
In addition to the foregoing, Sara Lee is a party to various pending legal
proceedings and claims. Although the outcome of such matters cannot be
determined with certainty, Sara Lee's General Counsel and management are of the
opinion that the final outcomes should not have a material adverse effect on
Sara Lee's results of operations, financial position or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
11
<PAGE>
PART II
Item 5. Market for Sara Lee's Common Equity and Related Stockholder Matters.
Sara Lee's securities are traded on the exchanges listed on the cover page
of this Form 10-K Report. As of September 2, 1997, Sara Lee had approximately
89,000 holders of record of its Common Stock. Information about the high and low
sales prices for each full quarterly period and the amount of cash dividends
declared on Sara Lee's Common Stock during the past three fiscal years is set
forth on page F-26 of this Report.
Item 6. Selected Financial Data.
The requisite financial information for Sara Lee for the five fiscal years
ended June 28, 1997, is set forth on pages F-2 and F-3 of this Report. Such
information should be read in conjunction with the consolidated Financial
Statements and related Notes to Financial Statements on pages F-4 through F-26
of this Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This discussion and analysis of results of operations, financial condition
and risk management should be read in conjunction with the General Development
of Business on pages 1 through 4, Narrative Description of Business on pages 4
through 8, and the Consolidated Financial Statements and related Notes to
Financial Statements on pages F-4 through F-26 of this Report.
RESULTS OF OPERATIONS
The net sales and operating income of the Corporation's business segments
for the past three years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
NET SALES
Packaged Meats and Bakery.................................... $ 7,614 $ 6,530 $ 6,110
Coffee and Grocery........................................... 2,813 2,896 2,777
Household and Body Care...................................... 1,843 1,837 1,691
Personal Products............................................ 7,482 7,370 7,151
Inter-segment sales.......................................... (18) (9) (10)
--------- --------- ---------
Net sales.................................................... $ 19,734 $ 18,624 $ 17,719
--------- --------- ---------
--------- --------- ---------
OPERATING INCOME
Packaged Meats and Bakery.................................... $ 476 $ 422 $ 383
Coffee and Grocery........................................... 440 428 374
Household and Body Care...................................... 228 214 181
Personal Products............................................ 761 729 658
--------- --------- ---------
Operating income............................................. 1,905 1,793 1,596
Interest, net................................................ (159) (173) (185)
Unallocated corporate expenses............................... (262) (242) (192)
--------- --------- ---------
Pretax income................................................ $ 1,484 $ 1,378 $ 1,219
--------- --------- ---------
--------- --------- ---------
</TABLE>
12
<PAGE>
CONSOLIDATED RESULTS -- 1997 COMPARED WITH 1996
Net sales increased 6.0% to $19.7 billion in 1997, from $18.6 billion in
1996. Businesses acquired net of businesses sold subsequent to the start of 1996
increased net sales by approximately 6.0%. The strengthening of the U.S. dollar
relative to foreign currencies had the effect of reducing sales by approximately
2.3%. Thus, on a comparable basis, sales increased 2.3%. Unit volume growth in
the Corporation's Coffee, Knit Products and Intimate Apparel businesses was
primarily responsible for the sales growth.
The gross profit margin was 37.8% in 1997, compared with 38.4% in 1996. The
reduction in 1997 was primarily attributable to lower margins in the
Corporation's Personal Products segment offset in part by improved margins in
the Coffee and Grocery, and Household and Body Care segments. Operating income
(pretax earnings before interest and corporate expenses) increased 6.2%.
Businesses acquired net of businesses sold subsequent to the start of 1996
increased operating income by 2.9%. The strengthening of the U.S. dollar
relative to foreign currencies had the effect of reducing operating income by
approximately 3.3%. Thus, on a comparable basis, operating income increased
6.6%.
Net interest expense was $159 million in 1997, compared with $173 million in
1996. The lower interest expense is attributable to lower average interest rates
and average borrowings. Unallocated corporate expenses, which are costs not
directly attributable to specific segment operations, increased 8.3% over 1996.
This increase is due to higher administrative costs and expenses associated with
certain sold companies, offset by positive impacts of hedging foreign currency
movements.
The effective tax rate was 32.0% in 1997, compared with 33.5% in 1996. The
reduction in the tax rate in 1997 was primarily attributable to increased
earnings in certain foreign jurisdictions that have lower tax rates than the
United States.
Net income for 1997 increased 10.1% to $1.0 billion and primary earnings per
share increased 10.9% to $2.03. The higher percentage increase in earnings per
share compared to net income is primarily attributable to lower preferred
dividends.
CONSOLIDATED RESULTS -- 1996 COMPARED WITH 1995
Net sales increased 5.1% to $18.6 billion in 1996 from $17.7 billion in
1995. Businesses acquired net of businesses sold subsequent to the start of 1995
increased net sales by approximately 2.0%. Changes in foreign currencies had no
material impact on sales; thus, on a comparable basis, sales increased 3.1%.
The gross profit margin was 38.4% in 1996, compared with 37.8% in 1995. The
increase in 1996 was attributable to improved margins in the Corporation's
Personal Products, and Coffee and Grocery operations, offset in part by lower
margins in the Packaged Meats and Bakery operations.
Operating income increased 12.3% to $1.8 billion in 1996 from $1.6 billion
in 1995, with each of the Corporation's business segments reporting increases in
excess of 10%. Businesses acquired net of businesses sold subsequent to the
start of 1995 increased operating income by 1.9%. Changes in foreign currencies
had no material impact on operating income. On a comparable basis, operating
income increased 10.5%.
Net interest expense was $173 million in 1996, compared with $185 million in
1995. The lower interest expense in 1996 was primarily due to lower average
borrowings and lower average interest rates during the year. Unallocated
corporate expenses were $242 million in 1996 and $192 million in 1995.
Unallocated corporate expenses in 1996 were negatively impacted by the costs of
hedging foreign currency movements, expenses associated with minority interests
in subsidiaries and higher administrative costs.
The effective tax rate was 33.5% in 1996, compared with 34.1% in 1995. The
reduction of the tax rate in 1996 was primarily due to increased earnings in
certain foreign jurisdictions that have lower tax rates than the United States.
13
<PAGE>
RESTRUCTURING
In 1994, the Corporation provided for the cost of restructuring its
worldwide operations. The planned restructuring activities were substantially
completed in 1996. Operating costs were lowered by $210 million in 1997, $169
million in 1996 and $89 million in 1995. The Corporation expects the
restructuring plan to generate savings in 1998 of $250 million. Savings from the
planned actions are being used for business-building initiatives and profit
improvement.
OPERATING RESULTS BY BUSINESS SEGMENT -- 1997 COMPARED WITH 1996
Net sales and operating income in the Packaged Meats and Bakery segment
increased in 1997 by 16.6% and 12.8%, respectively, largely due to the
acquisition of the European processed meats company, Aoste. Excluding the impact
of acquisitions and changes in foreign currencies, Packaged Meats and Bakery
sales and operating income increased in 1997 by 4.0% and 4.3%, respectively.
Unit volumes for worldwide Packaged Meats were flat for the fiscal year,
reflecting higher commodity costs that affected retail prices for most products.
Worldwide unit volumes for the Bakery business declined 5% for the full year,
reflecting a soft U.S. retail environment for frozen baked goods. Foodservice
units increased 4% for the full year. All unit volume comparisons exclude
acquisitions.
Net sales in the Coffee and Grocery segment decreased 2.9%, while operating
income increased 2.9%. These results reflect the negative impact of a stronger
U.S. dollar relative to European currencies. Excluding the impact of
acquisitions and changes in foreign currencies, Coffee and Grocery sales and
operating income increased in 1997 by 2.1% and 11.7%, respectively. Operating
margins improved as a result of lower coffee costs in the first half of the
year, improved operating efficiencies and increased sales of higher margin
products. Unit volumes for roasted coffee increased 3%.
Net sales in the Household and Body Care segment increased 0.3%, while
operating income increased 6.4%. Results benefited from increased profitability
within several Household and Body Care categories including shoe care, body care
and direct selling. Excluding the impact of acquisitions and changes in foreign
currencies, Household and Body Care sales and operating income increased in 1997
by 3.0% and 10.4%, respectively.
During 1997, Personal Products sales and operating income increased 1.5% and
4.4%, respectively. The improvement in segment profitability was primarily
attributable to incremental savings from the 1994 restructuring and lower LIFO
inventory provisions. Unit volumes for Personal Products' major product
categories -- sheer hosiery, knit products and intimate apparel -- increased 3%
for the year. Excluding the impact of acquisitions and changes in foreign
currencies, Personal Products sales and operating income increased 0.9% and
3.8%, respectively.
OPERATING RESULTS BY BUSINESS SEGMENT -- 1996 COMPARED WITH 1995
Net sales and operating income in the Packaged Meats and Bakery segment
increased in 1996 by 6.9% and 10.2%, respectively, primarily as a result of
business acquisitions offset in part by lower gross margins and lower unit sales
volumes. Packaged Meats unit volume was down in 1996 due to a deliberate
strategy to exit low-margin categories combined with the negative impact on
consumer demand of higher commodity prices. Bakery unit volumes declined 1% in
1996 reflecting frozen bakery industry trends. Foodservice units increased 3%
for the full year. Excluding the impact of acquisitions and changes in foreign
currencies, Packaged Meats and Bakery sales and operating income increased in
1996 by 3.5% and 7.2%, respectively.
Net sales in the Coffee and Grocery segment increased 4.3% in 1996, while
operating income increased 14.2%. Sales were positively impacted by a 4%
increase in roasted coffee unit volumes, the strengthening of foreign currencies
relative to the U.S. dollar and acquisitions. Operating income benefited from
improved gross margins resulting from lower coffee costs, higher volumes, a
focus on value-
14
<PAGE>
added product sales and currency movements. Excluding the impact of acquisitions
and changes in foreign currencies, Coffee and Grocery sales and operating income
increased in 1996 by 0.5% and 9.7%, respectively.
Net sales in the Household and Body Care segment increased 8.7%, while
operating income increased 18.5% in 1996 as a result of improved gross margins
and sales performance offset in part by the weakening of the Mexican peso
relative to the U.S. dollar. Sales of this segment's core products, such as shoe
care, body care and insecticides, were strong during the year. Excluding the
impact of acquisitions and changes in foreign currencies, Household and Body
Care sales and operating income increased in 1996 by 3.2% and 15.7%,
respectively.
During 1996, Personal Products sales and operating income increased 3.1% and
10.8%, respectively, due to improved gross margins resulting from a continued
emphasis on sales of high-margin, value-added products in each of the segment's
worldwide businesses and the impact of the 1994 restructuring. Worldwide legwear
and sheer hosiery each posted volume declines of 9% for the year. These volume
declines were offset by management's emphasis on higher-margin new products.
Worldwide knit products unit volume was flat for the year, as improved retail
activewear volumes were offset by lower screenprint and flat U.S. underwear unit
sales. Worldwide intimate apparel unit sales volume was up 3%, driven by strong
demand in the Bali and Playtex brands in the United States offset by weakness in
Canada and Mexico reflecting difficult market conditions in these countries.
Excluding the impact of acquisitions and changes in foreign currencies, Personal
Products sales and operating income increased in 1996 by 3.7% and 11.4%,
respectively.
FINANCIAL POSITION
Net cash provided from operating activities was $1.6 billion in 1997,
compared with $1.3 billion in 1996 and $1.4 billion in 1995. Higher
profitability and lower working capital requirements were primarily responsible
for the improved 1997 operating cash flow results. The 1996 results were
impacted by increased year-end working capital requirements.
Net cash used in investment activities was $1.0 billion in 1997, $693
million in 1996 and $517 million in 1995. Higher capital expenditures and
business acquisitions were the primary reasons for the increased cash use in
1997 and 1996.
During 1997, the Corporation acquired several companies for an aggregate
purchase price of $674 million in cash and $18 million of common stock. The
principal acquisitions were Aoste, a European manufacturer of processed meat
products, Lovable Italiana S.p.A., an Italian intimate apparel company, and
Brossard France S.A., a French manufacturer and marketer of bakery products. The
Corporation also divested a minority ownership position in JP Foodservice, a
domestic distributor of food products, and a controlling interest in Aris
Isotoner, a manufacturer of gloves and accessories. No material gain or loss was
recognized on these divestments.
During 1996, the Corporation acquired several companies for an aggregate
purchase price of $216 million in cash. The principal acquisition was the
European skin care and sweetener businesses of Bayer AG.
During 1995, the Corporation acquired several companies for an aggregate
purchase price of $168 million in cash. The principal acquisition was the
Imperial Meats Group, a European manufacturer and distributor of processed
meats. Also during 1995, the Corporation acquired the remaining outstanding
shares of Consolidated Foodservice Companies, a domestic foodservice
distribution business. Common stock having a value of $55 million was issued in
July 1995 as consideration for the Consolidated Foodservice Companies
acquisition.
Capital expenditures were $547 million in 1997, $542 million in 1996 and
$480 million in 1995. A significant portion of these expenditures was for the
reduction of manufacturing and distribution costs, and
15
<PAGE>
for expansion of capacity to meet internal growth. The Corporation expects 1998
capital expenditures to be in a range of $500 million to $600 million. The 1998
expenditures will be funded by internal sources and available borrowing
capacity. The Corporation retains substantial flexibility to adjust its spending
levels in order to act upon other opportunities, including business acquisitions
and stock repurchases.
During 1997, cash of $468 million was used for financing activities. Net
cash expended for the purchase of the Corporation's common stock totaled $393
million and was largely offset by additional borrowings of $362 million.
Dividend payments totaled $430 million. During 1996, cash of $555 million was
used for financing activities, primarily to repay $150 million of debt and to
pay dividends of $395 million. As of June 28, 1997, the
total-debt-to-total-capital ratio increased to 33.4% from 29.6% at June 29,
1996. The current capital structure is within the Corporation's objective of
maintaining a total-debt-to-total-capital ratio of no more than 40% over time
and provides sufficient financial flexibility to pursue business opportunities.
RISK MANAGEMENT
The Corporation is exposed to market risk from changes in interest rates,
foreign exchange rates and commodity prices. To modify the risk from these
interest rate, foreign currency exchange rate and commodity price fluctuations,
the Corporation enters into various hedging transactions that have been
authorized pursuant to the Corporation's policies and procedures. The
Corporation does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives.
A discussion of the Corporation's accounting policies for financial
instruments is included in the Summary of Significant Accounting Policies in the
Notes to Financial Statements, and further disclosure relating to financial
instruments is included in the Financial Instrument and Risk Management note.
FOREIGN EXCHANGE
The Corporation primarily uses foreign currency forward contracts to hedge
the exposure to the Corporation of adverse changes in foreign exchange rates.
The Corporation's exposure to foreign exchange rates primarily exists with the
Dutch guilder, French franc, Italian lira, Spanish peseta and German mark
against the U.S. dollar. Hedging is accomplished through the use of financial
instruments as the gain or loss on the hedging instrument offsets the gain or
loss on an asset, liability or a basis adjustment to a firm commitment. Hedging
of anticipated transactions is accomplished with financial instruments as the
gain or loss on the hedge occurs on or near the maturity date of the anticipated
transactions.
INTEREST RATES
The Corporation uses interest rate swaps to modify the Corporation's
exposure to interest rate movements and reduce borrowing costs. The
Corporation's net exposure to interest rate risk consists of floating rate
instruments that are benchmarked to U.S. and European short-term money market
interest rates. Interest rate risk management is accomplished through the use of
swaps to create synthetic debt instruments.
COMMODITIES
The Corporation is a purchaser of certain commodities such as beef, pork,
cotton, coffee, wheat, corn, soybean and corn oils and sugar. The Corporation
generally purchases these commodities based upon market prices that are
established with the vendor as part of the purchase process. The Corporation
does not use significant levels of commodity financial instruments to hedge
commodity prices due to a high correlation between the commodity cost and the
ultimate selling price of the Corporation's products.
16
<PAGE>
RISK MANAGEMENT ACTIVITIES
The Corporation maintains risk management control systems to monitor the
foreign exchange, interest rate and commodity risks, and the Corporation's
offsetting hedge positions. The risk management control system uses analytical
techniques including market value, sensitivity analysis and value at risk
estimations.
VALUE AT RISK
These estimations are intended to measure the maximum amount the Corporation
could lose from adverse market movements in interest rates and foreign exchange
rates, given a specified confidence level, over a given period of time. Loss is
defined in the value at risk estimation as fair market value loss. As a result,
foreign exchange gains or losses that are charged directly to translation
adjustments in common stockholders' equity are included in this estimate. The
value at risk estimation utilizes historical interest rates and foreign exchange
rates from the past year to estimate the volatility and correlation of these
rates in the future. The model uses the variance-covariance statistical modeling
technique and includes all interest rate sensitive debt and swaps, foreign
exchange hedges and their corresponding underlying exposures. The estimated
value at risk amounts shown below represent the potential loss the Corporation
could incur from adverse changes in either interest rates or foreign exchange
rates for a one-day period. These amounts are not significant compared with the
equity, earnings or daily change in market capitalization of the Corporation.
<TABLE>
<CAPTION>
TIME CONFIDENCE
VALUE AT RISK AMOUNT AMOUNTS INTERVAL LEVEL
- ------------------------------ ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Interest rates................ $ 3.2 1 day 95%
Foreign exchange.............. 12.7 1 day 95
</TABLE>
The foreign exchange value at risk amount is principally driven by the large
amount of foreign currency-denominated net assets the corporation has deployed
around the world, including manufacturing plants, inventory and short-term net
working capital. These assets are translated to U.S. dollars at the current
exchange rate. The change in the value of the assets due to changing foreign
exchange rates is included as part of translation adjustment in common
stockholders' equity, and not part of income. However, the foreign exchange
value at risk amount includes the estimate of the loss on these assets.
The amounts presented here from the value at risk model also disregard the
possibility that interest rates and foreign exchange rates can move in the
corporation's favor. The assumption within the value at risk model is that
changes in interest rates and foreign exchange rates are adverse. It is highly
unlikely that the Corporation would experience continuous daily losses such as
these over an extended period of time. Rather, actual experience has
demonstrated that gains on certain days are offset by losses on other days.
SENSITIVITY ANALYSIS
For commodity derivative instruments held, the Corporation utilizes a
sensitivity analysis technique to evaluate the effect that changes in the market
value of commodities will have on the Corporation's commodity derivative
instruments. This analysis includes the commodity derivative instruments and,
thereby, does not consider the underlying exposure. At year-end, the potential
change in fair value of commodity derivative instruments, assuming a 10% change
in the underlying commodity price, was $5.2 million. This amount is not
significant compared with the earnings and equity of the Corporation.
FORWARD-LOOKING INFORMATION
This risk management discussion and the estimated amounts generated from the
value at risk and sensitivity analyses are forward-looking statements of market
risk assuming certain adverse market
17
<PAGE>
conditions occur. Actual results in the future may differ materially from these
projected results due to actual developments in the global financial markets.
The analysis methods used by the Corporation to assess and mitigate risk
discussed above should not be considered projections of future events or losses.
Item 8. Financial Statements and Supplementary Data.
The consolidated Financial Statements and related Notes to Financial
Statements of Sara Lee identified in the Index to Financial Statements appearing
under Item 14, Exhibits, Financial Statement Schedules and Reports on Form 8-K,
are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of Sara Lee.
The following is a list of all current executive officers of Sara Lee
Corporation.
<TABLE>
<CAPTION>
FIRST
AGE AT OCTOBER ELECTED AN
NAME 30, 1997 OFFICES AND POSITIONS HELD OFFICER
- --------------------------------------------------- --------------- ------------------------------------ -----------
<S> <C> <C> <C>
John H. Bryan...................................... 61 Chairman of the Board, Chief 3/28/74
Executive Officer and Director
C. Steven McMillan................................. 51 President and Director* 3/31/83
Michael E. Murphy.................................. 61 Vice Chairman, Chief Administrative 6/28/79
Officer and Director
Donald J. Franceschini............................. 62 Vice Chairman and Director* 8/27/92
Frank L. Meysman................................... 45 Executive Vice President and 3/31/94
Director*
James R. Carlson................................... 55 Senior Vice President** 7/1/93
Gary C. Grom....................................... 51 Senior Vice President -- Human 10/25/90
Resources
Janet Langford Kelly............................... 39 Senior Vice President, Secretary and 11/25/95
General Counsel
Mark J. McCarville................................. 51 Senior Vice President -- Corporate 6/24/82
Development
Judith A. Sprieser................................. 44 Senior Vice President and Chief 11/1/94
Financial Officer
</TABLE>
- ------------
* Effective March 27, 1997. Prior thereto, Messrs. McMillan and Franceschini
were executive vice presidents of Sara Lee, and Mr. Meysman was a senior
vice president.
** Effective January 30, 1997. Prior to that, Mr. Carlson was a vice president.
There are no family relationships between any of the above-named executive
officers.
Each of the executive officers listed above has served Sara Lee or its
subsidiaries in various executive capacities for the past five years except
Janet Langford Kelly. Before joining Sara Lee, Ms. Kelly was a partner in the
Chicago office of Sidley & Austin.
For information with respect to the directors of Sara Lee, see "Election of
Directors" contained in the Proxy Statement, which is incorporated herein by
reference.
18
<PAGE>
Item 11. Executive Compensation.
The information set forth in the Proxy Statement under the captions
"Executive Compensation," and "Retirement Plans" is incorporated herein by
reference; provided, however, that the Report of the Compensation and Employee
Benefits Committee on Executive Compensation and the Performance Graph contained
in the Proxy Statement are not incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person or "group" (as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) is known by Sara Lee to beneficially own more
than 5% of any class of Sara Lee's voting securities, except that, as of
September 2, 1997, State Street Bank & Trust Company of Boston, as trustee
("Trustee") of the Sara Lee Corporation Employee Stock Ownership Plan ("ESOP"),
held in trust 4,267,227 shares (100% of the outstanding shares) of Sara Lee's
Employee Stock Ownership Plan Convertible Preferred Stock ("ESOP Stock"), of
which 1,525,927 shares (35.76%) were allocated to participant accounts and
2,741,300 shares (64.24%) were unallocated shares. Each ESOP participant is
entitled to direct the Trustee how to vote the shares allocated to such
participant's account, as well as a proportionate share of unallocated or
unvoted shares. The ESOP Stock votes as a class with the Common Stock and each
share of ESOP Stock is entitled to 5.133 votes. Each share of ESOP Stock is
convertible into four shares of Sara Lee Common Stock.
(b) Security ownership by management as contained in the Proxy Statement
under the caption "Sara Lee Common Stock and ESOP Stock Ownership by Directors
and Executive Officers" is incorporated herein by reference.
(c) There are no arrangements known to Sara Lee the operation of which may
at a subsequent date result in a change in control of Sara Lee.
Item 13. Certain Relationships and Related Transactions.
During fiscal 1997, 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 banking services to an affiliate
of First Chicago NBD Corporation, of which Richard L. Thomas is the Retired
Chairman. Each of the above individuals is a director of Sara Lee.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
(a) 1. FINANCIAL STATEMENTS
Report of Independent Public Accountants............................................................ F-1
Consolidated Statements of Income -- Years ended July 1, 1995, June 29, 1996 and June 28, 1997...... F-4
Consolidated Balance Sheets -- July 1, 1995, June 29, 1996 and June 28, 1997........................ F-5
Consolidated Statements of Common Stockholders' Equity -- Balances at July 1, 1995, June 29, 1996
and June 28, 1997................................................................................... F-7
Consolidated Statements of Cash Flows -- Years ended July 1, 1995, June 29, 1996 and June 28,
1997................................................................................................ F-8
Notes to Financial Statements....................................................................... F-9
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants............................................................ F-27
Schedule II -- Valuation and Qualifying Accounts.................................................... F-28
</TABLE>
(b) REPORTS ON FORM 8-K
None.
<TABLE>
<CAPTION>
(c) EXHIBITS INCORPORATION BY REFERENCE
-------------------------------------------------
<S> <C> <C>
(3a) Charter Exhibit 4.1 to Registration Statement No.
33-35760 on Form S-8 dated July 6, 1990, Exhibit
4.2 to Registration Statement No. 33-37575 on
Form S-8 dated November 1, 1990 and Exhibit 3(a)
to Report on Form 10-K for Fiscal Year ended July
2, 1994.
(3b) Bylaws Exhibit 3(b) to Report on Form 10-K for Fiscal
Year ended June 29, 1996
(4) Sara Lee, by signing this Report, agrees to furnish the Securities and Exchange Commission, upon its
request, a copy of any instrument which defines the rights of holders of long-term debt of Sara Lee and
all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be
filed, and which authorizes a total amount of securities not in excess of 10% of the total assets of Sara
Lee and its subsidiaries on a consolidated basis.
(10) 1. 1979 Stock Option Plan, as amended Exhibit 10 (1) to Report on Form 10-K for Fiscal
Year ended July 1, 1995
2. 1981 Stock Option Plan, as amended Exhibit 10 (11) to Report on Form 10-K for Fiscal
Year ended July 1, 1989
3. 1988 Non-Qualified Stock Option Plan, as Exhibit 10 (3) to Report on Form 10-K for Fiscal
amended Year ended July 1, 1995
4. 1989 Incentive Stock Plan, as amended
5. Supplemental Benefit Plan, as amended
6. Accelerated Growth Incentive Plan Fiscal Exhibit 10 (12) to Report on Form 10-K for Fiscal
Years 1990-1994 Year ended June 30, 1990
7. 1991 Non-Qualified Deferred Compensation Plan Exhibit 10 (15) to Report on Form 10-K for Fiscal
(Base Salary) Year ended June 29, 1991
8. 1992 Non-Qualified Deferred Compensation Plan Exhibit 10 (15) to Report on Form 10-K for Fiscal
(Base Salary) Year ended June 27, 1992
9. FY '93 Non-Qualified Deferred Compensation Exhibit 10 (16) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended June 27, 1992
10. 1993 Non-Qualified Deferred Compensation Plan Exhibit 10 (19) to Report on Form 10-K for Fiscal
(Base Salary) Year ended July 3, 1993
11. FY '94 Non-Qualified Deferred Compensation Exhibit 10 (20) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended July 3, 1993
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INCORPORATION BY REFERENCE
-------------------------------------------------
<S> <C> <C>
12. 1994 Non-Qualified Deferred Compensation Plan Exhibit 10 (14) to Report on Form 10-K for Fiscal
(Base Salary) Year ended July 2, 1994
13. FY '95 Non-Qualified Deferred Compensation Exhibit 10 (15) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended July 2, 1994
14. Non-Qualified Deferred Compensation Plan
(Annual Bonus)
15. Performance-Based Annual Incentive Plan Appendix A to Proxy Statement dated September 20,
1995
16. 1995 Long-Term Incentive Stock Plan, as
amended
17. 1995 Non-Employee Director Stock Plan, as
amended
18. Non-Qualified Deferred Compensation Plan for Exhibit 10 (18) to Report on Form 10-K for Fiscal
Outside Directors Year ended June 29, 1996
19. FY 1995-97 Long Term Performance Incentive Exhibit 10 (19) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
20. FY 1996-98 Long Term Performance Incentive Exhibit 10 (20) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
21. FY 1997-99 Long Term Performance Incentive Exhibit 10 (21) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
22. Non-Qualified Estate Builder Deferred Exhibit 10 (17) to Report on Form 10-K for Fiscal
Compensation Plan Year ended June 29, 1985
23. Severance Policy for Corporate Officers, as
amended
24. Employment Agreement, dated January 1, 1996,
between Sara Lee Corporation and Frank L.
Meysman
25. Employment Agreement, dated January 1, 1996,
between Sara Lee/DE N.V. and Frank L. Meysman
and attachments (translated from Dutch)
26. Stockholder Rights Agreement Exhibit 4 to Report on Form 10-Q for the quarter
ended March 26, 1988
(11) Computation of Net Income per Common Share
(12) 1. Computation of Ratio of Earnings to Fixed
Charges
2. Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend
Requirements
(21) List of Subsidiaries
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INCORPORATION BY REFERENCE
-------------------------------------------------
<S> <C> <C>
(23) Consent of Arthur Andersen LLP
(24) Powers of Attorney
(27) Financial Data Schedules
</TABLE>
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, Sara Lee Corporation has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
September 22, 1997
SARA LEE CORPORATION
By: /s/ JANET LANGFORD KELLY
-----------------------------------------
Janet Langford Kelly
SENIOR VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of Sara Lee
Corporation and in the capacities indicated on September 22, 1997.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ ---------------------------
<C> <S>
/s/ JOHN H. BRYAN Chairman of the Board,
- ------------------------------ Chief Executive Officer
John H. Bryan and Director
/s/ C. STEVEN MCMILLAN
- ------------------------------ President and Director
C. Steven McMillan
/s/ MICHAEL E. MURPHY Vice Chairman, Chief
- ------------------------------ Administrative Officer
Michael E. Murphy and Director
/s/ DONALD J. FRANCESCHINI
- ------------------------------ Vice Chairman and Director
Donald J. Franceschini
/s/ FRANK L. MEYSMAN
- ------------------------------ Executive Vice President
Frank L. Meysman and Director
/s/ JUDITH A. SPRIESER
- ------------------------------ Senior Vice President and
Judith A. Sprieser Chief Financial Officer
/s/ WAYNE R. SZYPULSKI
- ------------------------------ Vice President and
Wayne R. Szypulski Controller
*
- ------------------------------ Director
Paul A. Allaire
*
- ------------------------------ Director
Frans H.J.J. Andriessen
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ ---------------------------
<C> <S>
*
- ------------------------------ Director
Duane L. Burnham
*
- ------------------------------ Director
Charles W. Coker
*
- ------------------------------ Director
Willie D. Davis
*
- ------------------------------ Director
Allen F. Jacobson
*
- ------------------------------ Director
Vernon E. Jordan, Jr.
*
- ------------------------------ Director
James L. Ketelsen
*
- ------------------------------ Director
Hans B. van Liemt
*
- ------------------------------ Director
Joan D. Manley
*
- ------------------------------ Director
Newton N. Minow
*
- ------------------------------ Director
Sir Arvi H. Parbo A.C.
*
- ------------------------------ Director
Rozanne L. Ridgway
*
- ------------------------------ Director
Richard L. Thomas
</TABLE>
*By Janet Langford Kelly as Attorney-in-Fact pursuant to Powers of Attorney
executed by the directors listed above, which Powers of Attorney have been filed
with the Securities and Exchange Commission.
/s/ JANET LANGFORD KELLY
--------------------------------------
Janet Langford Kelly
AS ATTORNEY-IN-FACT
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders,
SARA LEE CORPORATION:
We have audited the accompanying consolidated balance sheets of SARA LEE
CORPORATION (a Maryland corporation) AND SUBSIDIARIES as of June 28, 1997, June
29, 1996, and July 1, 1995, and the related consolidated statements of income,
common stockholders' equity, and cash flows for each of the three years in the
period ended June 28, 1997. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sara Lee
Corporation and Subsidiaries as of June 28, 1997, June 29, 1996, and July 1,
1995, and the results of their operations and their cash flows for each of the
three years in the period ended June 28, 1997, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois,
July 28, 1997.
F-1
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
COMPOUND YEARS ENDED
GROWTH RATE ----------------------
------------------------ JUNE 28, JUNE 29,
5 YEARS 10 YEARS 1997 1996
----------- ----------- ---------- ----------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales............................................................. 8.3% 8.0% $ 19,734 $ 18,624
Operating income...................................................... 9.5 11.7 1,905 1,793
Income before income taxes............................................ 4.8 12.7 1,484 1,378
Net income............................................................ 5.8 14.2 1,009 916
Effective tax rate.................................................... -- -- 32.0% 33.5%
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets.......................................................... 5.3% 11.9% $ 12,953 $ 12,602
Long-term debt........................................................ -- -- 1,933 1,842
Redeemable preferred stock............................................ -- -- 242 338
Common stockholders' equity........................................... 4.8 11.7 4,280 4,320
Return on average common stockholders' equity......................... -- -- 22.9% 21.5%
- ------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE (5)
Net income -- primary................................................. 5.7% 13.2% $ 2.03 $ 1.83
Average shares outstanding (in millions).......................... -- -- 485 485
Net income -- fully diluted........................................... 5.6 12.8 1.97 1.78
Average shares outstanding (in millions).......................... -- -- 503 504
Dividends (6)......................................................... 6.1 13.1 .82 .74
Book value at year-end................................................ 4.8 10.8 8.91 8.91
Market value at year-end.............................................. 11.1 13.7 42.06 32.50
- ------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
Capital expenditures.................................................. 1.5% 6.7% $ 547 $ 542
Depreciation.......................................................... 6.4 11.1 483 454
Amortization of intangibles........................................... 10.7 19.3 197 180
Media advertising expense............................................. 5.0 7.4 414 444
Total advertising and promotion expense............................... 8.4 11.8 1,937 1,838
Common stockholders of record......................................... -- -- 88,800 91,300
Number of employees................................................... -- -- 141,000 135,300
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In 1994, a restructuring provision reduced operating income and income
before income taxes by $732 and net income by $495. In addition, in 1994,
the cumulative effect of adopting a mandated change in the method of
accounting for income taxes reduced net income by $35.
(2) 53-week year.
(3) Fiscal 1992 income before income taxes includes a $412 gain on sale of
business offset by a $190 restructuring provision. These transactions
increased net income by $140.
(4) Fiscal 1989 income before income taxes includes an $87 gain on sales of
businesses offset by a $55 restructuring provision. These transactions
increased net income by $11.
(5) Restated for the 2-for-1 stock splits in fiscal 1993, 1990 and 1987.
(6) Fiscal 1992 includes a $.12 special dividend.
THE NOTES TO FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL SUMMARY.
F-2
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------------------------------------------------
JULY 1, JULY 2, JULY 3, JUNE 27, JUNE 29, JUNE 30, JULY 1, JULY 2, JUNE 27,
1995 1994(1) 1993(2) 1992(3) 1991 1990 1989(4) 1988(2) 1987
-------- -------- -------- -------- -------- -------- -------- ------- --------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................ $17,719 $ 15,536 $ 14,580 $ 13,243 $ 12,381 $ 11,606 $ 11,718 $10,424 $ 9,155
Operating income......................... 1,596 632 1,307 1,207 1,085 938 847 753 632
Income before income taxes............... 1,219 389 1,082 1,174 830 713 639 513 448
Net income............................... 804 199 704 761 535 470 410 325 267
Effective tax rate....................... 34.1% 39.9% 34.9% 35.2% 35.5% 34.1% 35.8% 36.7 % 40.4%
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets............................. $12,431 $ 11,665 $ 10,862 $ 9,989 $ 8,122 $ 7,636 $ 6,523 $5,012 $ 4,192
Long-term debt........................... 1,817 1,496 1,164 1,389 1,399 1,524 1,488 893 633
Redeemable preferred stock............... 334 331 357 351 344 338 182 225 75
Common stockholders' equity.............. 3,939 3,326 3,551 3,382 2,550 2,292 1,915 1,575 1,416
Return on average common stockholders'
equity................................. 21.4% 5.1% 19.6% 24.7% 20.6% 20.9% 22.7% 21.1 % 20.5%
- -----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE (5)
Net income -- primary.................... $ 1.62 $ .37 $ 1.40 $ 1.54 $ 1.08 $ .96 $ .88 $ .71 $ .59
Average shares outstanding (in
millions).......................... 480 480 485 476 464 460 454 447 447
Net income -- fully diluted.............. 1.57 .36 1.37 1.50 1.05 .93 .87 .71 .59
Average shares outstanding (in
millions).......................... 499 498 504 497 485 480 456 447 447
Dividends (6)............................ .67 .63 .56 .61 .46 .41 .35 .29 .24
Book value at year-end................... 8.20 6.92 7.31 7.05 5.48 4.97 4.21 3.56 3.20
Market value at year-end................. 28.50 20.63 24.25 24.81 20.19 14.56 13.47 9.22 11.63
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
Capital expenditures..................... $ 480 $ 628 $ 728 $ 509 $ 522 $ 595 $ 541 $ 449 $ 287
Depreciation............................. 436 414 383 354 302 268 215 198 168
Amortization of intangibles.............. 170 154 139 118 92 83 65 53 34
Media advertising expense................ 422 371 392 325 288 313 303 253 203
Total advertising and promotion
expense................................ 1,675 1,498 1,455 1,294 1,067 1,013 925 801 637
Common stockholders of record............ 93,400 95,600 88,100 75,400 69,400 64,800 56,500 52,400 50,000
Number of employees...................... 149,100 145,900 138,000 128,000 113,400 107,800 101,800 85,700 92,400
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In 1994, a restructuring provision reduced operating income and income
before income taxes by $732 and net income by $495. In addition, in 1994,
the cumulative effect of adopting a mandated change in the method of
accounting for income taxes reduced net income by $35.
(2) 53-week year.
(3) Fiscal 1992 income before income taxes includes a $412 gain on sale of
business offset by a $190 restructuring provision. These transactions
increased net income by $140.
(4) Fiscal 1989 income before income taxes includes an $87 gain on sales of
businesses offset by a $55 restructuring provision. These transactions
increased net income by $11.
(5) Restated for the 2-for-1 stock splits in fiscal 1993, 1990 and 1987.
(6) Fiscal 1992 includes a $.12 special dividend.
THE NOTES TO FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL SUMMARY.
F-3
<PAGE>
SARA LEE CORPORATION AND SUBSIDIAIRIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------
JUNE 28, JUNE 29, JULY 1,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
NET SALES..................................................................... $ 19,734 $ 18,624 $ 17,719
--------- --------- ---------
Cost of sales................................................................. 12,267 11,470 11,023
Selling, general and administrative expenses.................................. 5,824 5,603 5,292
Interest expense.............................................................. 202 228 243
Interest income............................................................... (43) (55) (58)
--------- --------- ---------
18,250 17,246 16,500
--------- --------- ---------
Income before income taxes.................................................... 1,484 1,378 1,219
Income taxes.................................................................. 475 462 415
--------- --------- ---------
NET INCOME.................................................................... 1,009 916 804
Preferred dividends, net of tax............................................... (26) (27) (28)
--------- --------- ---------
Net income available for common stockholders.................................. $ 983 $ 889 $ 776
--------- --------- ---------
--------- --------- ---------
NET INCOME PER COMMON SHARE -- PRIMARY........................................ $ 2.03 $ 1.83 $ 1.62
--------- --------- ---------
--------- --------- ---------
Average shares outstanding.................................................. 485 485 480
--------- --------- ---------
--------- --------- ---------
NET INCOME PER COMMON SHARE -- FULLY DILUTED.................................. $ 1.97 $ 1.78 $ 1.57
--------- --------- ---------
--------- --------- ---------
Average shares outstanding.................................................. 503 504 499
--------- --------- ---------
--------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
F-4
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 28, JUNE 29, JULY 1,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash and equivalents......................................................... $ 272 $ 243 $ 202
Trade accounts receivable, less allowances of $205 in 1997, $197 in 1996 and
$192 in 1995............................................................... 1,841 1,728 1,653
Inventories
Finished goods............................................................. 1,803 1,802 1,782
Work in process............................................................ 497 381 423
Materials and supplies..................................................... 673 624 625
--------- --------- ---------
2,973 2,807 2,830
Other current assets......................................................... 305 303 243
--------- --------- ---------
Total current assets......................................................... 5,391 5,081 4,928
--------- --------- ---------
Trademarks and other assets.................................................. 536 636 615
Property
Land....................................................................... 126 132 136
Buildings and improvements................................................. 2,008 1,924 1,879
Machinery and equipment.................................................... 3,777 3,657 3,462
Construction in progress................................................... 293 263 206
--------- --------- ---------
6,204 5,976 5,683
Accumulated depreciation................................................... 3,125 2,969 2,719
--------- --------- ---------
Property, net................................................................ 3,079 3,007 2,964
Intangible assets, net....................................................... 3,947 3,878 3,924
--------- --------- ---------
$ 12,953 $ 12,602 $ 12,431
--------- --------- ---------
--------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
BALANCE SHEETS.
F-5
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 28, JUNE 29, JULY 1,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable.................................................................. $ 476 $ 319 $ 559
Accounts payable............................................................... 1,703 1,592 1,436
Accrued liabilities
Payroll and employee benefits................................................ 701 702 693
Advertising and promotion.................................................... 337 290 278
Taxes other than payroll and income.......................................... 189 207 218
Income taxes................................................................. 119 101 66
Other........................................................................ 1,236 1,296 1,373
Current maturities of long-term debt........................................... 255 135 221
--------- --------- ---------
Total current liabilities...................................................... 5,016 4,642 4,844
--------- --------- ---------
Long-term debt................................................................. 1,933 1,842 1,817
Deferred income taxes.......................................................... 416 333 273
Other liabilities.............................................................. 543 604 705
Minority interest in subsidiaries.............................................. 523 523 519
Preferred stock (authorized 13,500,000 shares; no par value)
Auction: Issued and outstanding -- 2,000 shares in 1997 and 3,000 shares in
1996 and 1995; redeemable at $100,000 per share............................ 200 300 300
ESOP convertible: Issued and outstanding -- 4,328,597 shares in 1997,
4,468,303 shares in 1996 and 4,570,153 shares in 1995...................... 314 324 331
Unearned deferred compensation............................................... (272) (286) (297)
Common stockholders' equity
Common stock: (authorized 600,000,000 shares; $1.33 1/3 par value) Issued and
outstanding -- 480,277,317 shares in 1997, 485,054,554 shares in 1996 and
480,656,301 shares in 1995................................................. 640 646 640
Capital surplus.............................................................. -- 141 67
Retained earnings............................................................ 4,274 3,783 3,252
Translation adjustments...................................................... (618) (227) 3
Unearned restricted stock issued for future services......................... (16) (23) (23)
--------- --------- ---------
Total common stockholders' equity.............................................. 4,280 4,320 3,939
--------- --------- ---------
$ 12,953 $ 12,602 $ 12,431
--------- --------- ---------
--------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
BALANCE SHEETS.
F-6
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(DOLLARS IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNEARNED
COMMON CAPITAL RETAINED TRANSLATION RESTRICTED
TOTAL STOCK SURPLUS EARNINGS ADJUSTMENTS STOCK
------ ------ ------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 2, 1994........................................... $3,326 $641 $ 76 $2,799 $(170) $(20)
Net income......................................................... 804 -- -- 804 -- --
Cash dividends
Common ($.67 per share).......................................... (320) -- -- (320) -- --
Auction preferred ($4,188.00 per share).......................... (13) -- -- (13) -- --
ESOP convertible preferred ($5.4375 per share)................... (25) -- -- (25) -- --
Stock issuances
Stock option and benefit plans................................... 57 4 53 -- -- --
Restricted stock, less amortization of $7........................ 7 -- 13 -- -- (6)
Reacquired shares.................................................. (93) (5) (88) -- -- --
Translation adjustments............................................ 173 -- -- -- 173 --
ESOP tax benefit................................................... 10 -- -- 10 -- --
Other.............................................................. 13 -- 13 (3) -- 3
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT JULY 1, 1995........................................... 3,939 640 67 3,252 3 (23)
Net income......................................................... 916 -- -- 916 -- --
Cash dividends
Common ($.74 per share).......................................... (358) -- -- (358) -- --
Auction preferred ($4,219.00 per share).......................... (13) -- -- (13) -- --
ESOP convertible preferred ($5.4375 per share)................... (24) -- -- (24) -- --
Stock issuances
Business acquisitions............................................ 55 3 52 -- -- --
Stock option and benefit plans................................... 93 6 87 -- -- --
Restricted stock, less amortization of $13....................... 13 1 17 -- -- (5)
Reacquired shares.................................................. (103) (4) (99) -- -- --
Translation adjustments............................................ (230) -- -- -- (230) --
ESOP tax benefit................................................... 10 -- -- 10 -- --
ESOP share redemption.............................................. 7 -- 7 -- -- --
Other.............................................................. 15 -- 10 -- -- 5
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT JUNE 29, 1996.......................................... 4,320 646 141 3,783 (227) (23)
Net income......................................................... 1,009 -- -- 1,009 -- --
Cash dividends
Common ($.82 per share).......................................... (394) -- -- (394) -- --
Auction preferred ($4,000.93 per share).......................... (12) -- -- (12) -- --
ESOP convertible preferred ($5.4375 per share)................... (24) -- -- (24) -- --
Stock issuances
Business acquisitions............................................ 18 1 17 -- -- --
Stock option and benefit plans................................... 93 6 87 -- -- --
Restricted stock, less amortization of $19....................... 19 -- 13 -- -- 6
Reacquired shares.................................................. (393) (14) (281) (98) -- --
Translation adjustments............................................ (391) -- -- -- (391) --
ESOP tax benefit................................................... 10 -- -- 10 -- --
ESOP share redemption.............................................. 10 1 9 -- -- --
Other.............................................................. 15 -- 14 -- -- 1
------ ------ ------- -------- ----- ---
BALANCES AT JUNE 28, 1997.......................................... $4,280 $640 $ -- $4,274 $(618) $(16)
------ ------ ------- -------- ----- ---
------ ------ ------- -------- ----- ---
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
F-7
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------
JUNE 28, JUNE 29, JULY 1,
1997 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................................ $ 1,009 $ 916 $ 804
Adjustments for noncash charges included in net income
Depreciation............................................................ 483 454 436
Amortization of intangibles............................................. 197 180 170
Increase in deferred taxes.............................................. 40 31 88
Other noncash credits, net.............................................. (56) (77) (118)
Changes in current assets and liabilities, net of businesses acquired
and sold
(Increase) in trade accounts receivable............................... (66) (138) (38)
(Increase) in inventories............................................. (129) (83) (138)
Decrease (increase) in other current assets........................... 17 (63) 18
Increase in accounts payable.......................................... 59 95 81
(Decrease) increase in accrued liabilities............................ (2) (11) 70
--------- ----------- ---------
Net cash from operating activities...................................... 1,552 1,304 1,373
--------- ----------- ---------
INVESTMENT ACTIVITIES
Purchases of property and equipment....................................... (547) (542) (480)
Acquisitions of businesses................................................ (674) (216) (168)
Dispositions of investment and businesses................................. 114 12 12
Sales of property......................................................... 59 49 73
Other..................................................................... 6 4 46
--------- ----------- ---------
Net cash used in investment activities.................................. (1,042) (693) (517)
--------- ----------- ---------
FINANCING ACTIVITIES
Issuances of common stock................................................. 93 93 57
Purchases of common stock................................................. (393) (103) (93)
Redemption of preferred stock............................................. (100) -- --
Borrowings of long-term debt.............................................. 495 354 573
Repayments of long-term debt.............................................. (252) (369) (289)
Short-term borrowings (repayments), net................................... 119 (135) (743)
Payments of dividends..................................................... (430) (395) (358)
--------- ----------- ---------
Net cash used in financing activities................................... (468) (555) (853)
--------- ----------- ---------
Effect of changes in foreign exchange rates on cash....................... (13) (15) 10
--------- ----------- ---------
Increase in cash and equivalents.......................................... 29 41 13
Cash and equivalents at beginning of year................................. 243 202 189
--------- ----------- ---------
Cash and equivalents at end of year....................................... $ 272 $ 243 $ 202
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
F-8
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include all majority-owned
subsidiaries. All significant intercompany transactions of consolidated
subsidiaries are eliminated. Acquisitions recorded as purchases are included in
the income statement from the date of acquisition.
FISCAL YEAR
The Corporation's fiscal year ends on the Saturday closest to June 30.
Unless otherwise stated, references to years relate to 52-week fiscal years.
INTANGIBLE ASSETS
The excess of cost over the fair market value of tangible net assets and
trademarks of acquired businesses is amortized on a straight-line basis over the
periods of expected benefit, which range from
10 years to 40 years. Accumulated amortization of intangible assets amounted to
$896 at June 28, 1997, $811 at June 29, 1996 and $710 at July 1, 1995.
Subsequent to its acquisition, the Corporation continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life of an intangible asset may warrant revision or that the
remaining balance of an intangible asset may not be recoverable. When factors
indicate that an intangible asset should be evaluated for possible impairment,
the Corporation uses an estimate of the related business' undiscounted future
cash flows over the remaining life of the asset in measuring whether the
intangible asset is recoverable.
INVENTORY VALUATION
Inventories are valued at the lower of cost (in 1997, approximately 21% at
last-in, first-out [LIFO] and the remainder at first-in, first-out [FIFO]) or
market. Inventories recorded at LIFO were approximately $32 at June 28, 1997,
$36 at June 29, 1996 and $18 at July 1, 1995, lower than if they had been valued
at FIFO. Inventory cost includes material and conversion costs.
PROPERTY
Property is stated at cost, and depreciation is computed using principally
the straight-line method at annual rates of 2% to 20% for buildings and
improvements, and 4% to 33% for machinery and equipment. Additions and
improvements that substantially extend the useful life of a particular asset and
interest costs incurred during the construction period of major properties are
capitalized. Repair and maintenance costs are charged to expense. Upon sale, the
cost and related accumulated depreciation are removed from the accounts.
F-9
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
FOREIGN OPERATIONS
Foreign currency-denominated assets and liabilities are translated into U.S.
dollars at the exchange rates existing at the balance sheet date. Translation
adjustments resulting from fluctuations in the exchange rates are recorded as a
separate component of common stockholders' equity. Income and expense items are
translated at the average exchange rates during the respective periods.
FINANCIAL INSTRUMENTS
The Corporation uses financial instruments to manage its exposure to
movements in interest rates, foreign exchange rates and commodity prices. The
use of these financial instruments modifies the exposure of these risks with the
intent to reduce the risk to the Corporation. The Corporation does not use
financial instruments for trading purposes, nor is the Corporation a party to
leveraged derivatives.
FINANCING TRANSACTIONS
Non-U.S. dollar financing transactions are generally effective as hedges of
long-term investments in the corresponding currency. Foreign currency gains or
losses on the hedges of long-term investments are recorded in the translation
adjustments component of common stockholders' equity with the offset recorded as
an adjustment to the non-U.S. dollar financing liability.
INTEREST RATE AGREEMENTS
Interest rate exchange agreements, defined as swaps and caps and floors, are
effective at creating synthetic instruments and thereby modifying the
Corporation's interest rate exposures. The Corporation enters into interest rate
exchange agreements to create synthetic instruments. Net interest is accrued as
either interest receivable or payable with the offset recorded in interest
expense. Any premium paid is amortized over the life of the agreement.
FORWARD EXCHANGE CONTRACTS
The Corporation uses primarily short-term forward exchange contracts for
hedging purposes to reduce the effects of adverse foreign exchange rate
movements. The contracts that effectively meet the risk reduction and
correlation criteria, as measured on a currency-by-currency basis, are accounted
for using hedge accounting. Under this method, the change in fair value of
forward contracts that hedge firm commitments is deferred and recognized as part
of the related foreign currency transactions as they occur. Firm commitments
include the purchases of inventory, capitalized assets or expenses of the
Corporation. The change in fair value of any forward contract that is not
effective as a hedge of the firm commitment is included in selling, general and
administrative expenses and other accrued liabilities.
Forward contracts that hedge the currency exposure on nonpermanent
intercompany loans are also accounted for using hedge accounting if the contract
meets the risk reduction and correlation criteria, as measured on a
currency-by-currency basis. Under hedge accounting, these contracts are valued
at current spot rates on a monthly basis, and the change in value is recognized
currently and included, along with any amortization of forward points over the
life of the contract, in selling, general and administrative expenses. Any
foreign exchange gain or loss on the underlying intercompany loan is also
included in selling, general and administrative expenses. Changes in the value
of forward contracts related to anticipated purchases and sales are marked to
market through selling, general and administrative expenses on a monthly basis.
F-10
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
If, subsequent to entering into a hedge transaction with forward contracts,
the underlying transaction is no longer likely to occur, the hedge position is
removed and any gain or loss is included in selling, general and administrative
expenses.
COMMODITIES
The Corporation uses commodity futures and purchased options for hedging
purposes to reduce the effect of changing commodity prices. The contracts that
effectively meet the risk reduction and correlation criteria, as measured on a
commodity-by-commodity basis, are recorded using hedge accounting. Effectiveness
is measured based upon high correlation between commodity gains and losses on
the futures contract and those on the firm commitment. Under hedge accounting,
the gain or loss on the hedge is deferred and recorded as a component of the
underlying inventory purchase. Gains and losses on hedges that are terminated
prior to the execution of the inventory purchase are recorded in inventory until
the inventory is sold.
NET INCOME PER COMMON SHARE
Primary net income per common share is based on the average number of common
shares outstanding and common share equivalents and net income reduced for
preferred dividends, net of the tax benefits related to the ESOP convertible
preferred stock dividends. The fully diluted net income per share calculation
assumes conversion of the ESOP convertible preferred stock into common stock and
further adjusts net income for the additional ESOP compensation expense, net of
tax benefits, resulting from the assumed replacement of the ESOP convertible
preferred stock dividends with common stock dividends.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), which will be effective for the Corporation in the second quarter of 1998.
When adopted, SFAS 128 will replace the presentation of primary earnings per
share (EPS) with basic EPS. Basic EPS excludes dilution and is computed by
dividing net income available for common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS, which reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted, will also need to be disclosed.
The basic and diluted EPS amounts for the past three years were:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Basic EPS..................... $ 2.05 $ 1.85 $ 1.63
Diluted EPS................... 1.97 1.78 1.57
</TABLE>
STOCK-BASED COMPENSATION
The Corporation accounts for stock options using Accounting Principles Board
Opinion No. 25 (APB 25).
INCOME TAXES
Income taxes are provided on the income reported in the financial
statements, regardless of when such taxes are payable. U.S. income taxes are
provided on undistributed earnings of foreign subsidiaries that are intended to
be remitted to the Corporation. If the permanently reinvested earnings of
foreign subsidiaries were remitted, the U.S. income taxes due under current tax
law would not be material.
F-11
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
ADVERTISING
The costs of advertising are generally expensed in the year in which the
advertising first takes place.
COMMON STOCK
Changes in outstanding common shares for the past three years were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
Beginning balances........................................... 485,055 480,656 480,765
Stock issuances:
Business acquisitions...................................... 549 2,567 --
Stock option and benefit plans............................. 4,566 4,438 3,158
Restricted stock plans..................................... 88 394 367
Stock purchased/retired...................................... (10,609) (3,375) (3,932)
ESOP share redemption........................................ 560 457 60
Other........................................................ 68 (82) 238
--------- --------- ---------
Ending balances.............................................. 480,277 485,055 480,656
--------- --------- ---------
--------- --------- ---------
</TABLE>
PREFERRED STOCK
Four series of 500 shares each of nonvoting auction preferred stock are
outstanding as of June 28, 1997. At its option, the Corporation redeemed two
series of 500 shares each of this preferred stock during 1997. The shares were
redeemed at face value, and no gain or loss was recognized.
The dividend rate for each of the series of auction preferred stock is
established through a Dutch auction conducted by an agent of the Corporation.
Auctions are held six out of every seven weeks with the dividend rate for one of
the series set at each auction. Since inception, no auction has failed. If an
auction does fail, the holders of the preferred stock would continue to hold the
shares and receive a dividend rate that is a function of current commercial
paper rates.
The convertible preferred stock sold to the Corporation's Employee Stock
Ownership Plan (ESOP) is redeemable at the option of the Corporation at any time
after December 15, 2001. Each share is currently convertible into four shares of
the Corporation's common stock and is entitled to 5.133 votes. This stock has a
7.5% annual dividend rate, payable semiannually, and has a liquidation value of
$72.50 plus accrued but unpaid dividends. The purchase of the preferred stock by
the ESOP was funded with notes guaranteed by the Corporation. The loan is
included in long-term debt and is offset in the Corporation's Consolidated
Balance Sheets under the caption Unearned Deferred Compensation. Each year, the
Corporation makes contributions that, with the dividends on the preferred stock
held by the ESOP, will be used to pay loan interest and principal. Shares are
allocated to participants based upon the ratio of the current year's debt
service to the sum of the total principal and interest payments over the life of
the loan. Plan expense is recognized in accordance with methods prescribed by
the FASB.
ESOP-related expenses amounted to $13 in 1997, $13 in 1996 and $12 in 1995.
Payments to the ESOP were $43 in 1997, $41 in 1996 and $38 in 1995. Principal
and interest payments by the ESOP amounted to $19 and $24 in 1997, $16 and $25
in 1996 and $12 and $26 in 1995.
F-12
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The Corporation has a Preferred Stock Purchase Rights Plan. The Rights are
exercisable 10 days after certain events involving the acquisition of 20% or
more of the Corporation's outstanding common stock or the commencement of a
tender or exchange offer for at least 25% of the common stock. Upon the
occurrence of such an event, each Right, unless redeemed by the board of
directors, entitles the holder to receive common stock equal to twice the
exercise price of the Right. The exercise price is $140 multiplied by the number
of preferred shares held. There are 3,000,000 shares of preferred stock reserved
for issuance upon exercise of the Rights.
MINORITY INTEREST IN SUBSIDIARIES
Minority interest in subsidiaries primarily consists of preferred equity
securities issued by subsidiaries of the Corporation. No gain or loss was
recognized as a result of the issuance of these securities and the Corporation
owned substantially all of the voting equity of the subsidiaries both before and
after the transactions.
Minority interest in subsidiaries includes $295 of preferred equity
securities issued by a wholly owned foreign subsidiary of the Corporation. The
securities provide a rate of return based upon specified inter-bank borrowing
rates. The securities are redeemable in 2004 in exchange for common shares of
the issuer, which may then be put to the Corporation for preferred stock. The
subsidiary may call the securities at any time.
$200 of the minority interest in subsidiaries consists of preferred equity
securities issued by a domestic subsidiary of the Corporation. The securities
provide the holder a rate of return based upon a specified inter-bank borrowing
rate, are redeemable in 2005 and may be called at any time by the subsidiary.
The subsidiary has the option of redeeming the securities with either cash, debt
or equity of the Corporation.
STOCK-BASED COMPENSATION
The Corporation has various stock award plans, stock option plans and an
employee stock purchase plan. Under the stock award and stock option plans, the
Corporation is authorized to grant up to 25 million shares of common stock.
Under the employee stock purchase plan, the Corporation is authorized to sell
and issue up to 60 million shares of common stock to its full-time employees.
The Corporation applies APB 25 and related interpretations in accounting for
its stock-based compensation plans. During 1997, the Corporation adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires pro forma disclosures regarding the Corporation's
plans.
STOCK AWARDS
Stock awards are restricted as to disposition and subject to forfeiture
until certain three-year performance goals are achieved by the employee. All
restricted stock awards entitle the participant to full voting rights and
dividends that are escrowed until the participant receives the shares. Upon the
issuance of restricted shares, unearned compensation is recognized and is
amortized over the performance period.
STOCK OPTIONS
The exercise price of each stock option equals 100% of the market price of
the Corporation's stock on the date of grant and has a maximum term of 10 years.
These options generally vest ratably over three years. Under the stock option
plans, an active employee may receive a replacement stock option equal to
F-13
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
the number of shares surrendered upon a stock-for-stock exercise. The exercise
price of the replacement option is 100% of the market value at the date of
exercise of the original option and will remain exercisable for the remaining
term of the original option. Replacement stock options generally vest six months
from the grant date.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model and the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Expected lives............................................................................ 2.9 years 2.8 years
Risk-free interest rate................................................................... 6.1% 5.9%
Expected volatility....................................................................... 22.9% 24.3%
Dividend yield............................................................................ 2.2% 2.4%
</TABLE>
A summary of the status of the Corporation's option plans as of June 28,
1997 and June 29, 1996 and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- ----------- --------- -----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
Outstanding at beginning of year......................................... 17,426 $ 25.86 15,947 $ 24.26
Granted................................................................ 8,328 34.31 7,658 29.07
Exercised.............................................................. (5,943) 26.87 (5,733) 25.63
Canceled/expired....................................................... (560) 27.81 (446) 26.57
--------- ----------- --------- -----------
Outstanding at end of year............................................... 19,251 $ 29.14 17,426 $ 25.86
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Options exercisable at year-end.......................................... 9,614 $ 27.37 8,961 $ 24.90
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Options available for future grants...................................... 18,853 24,388
----- -----
----- -----
Weighted average fair value of options granted during the year........... $5.75 $4.87
---- ----
---- ----
</TABLE>
The following table summarizes information about stock options outstanding
at June 28, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
AT JUNE 28, CONTRACTUAL EXERCISE AT JUNE 28, EXERCISE
RANGE OF EXERCISE PRICES 1997 LIFE (YRS.) PRICE 1997 PRICE
- ---------------------------------------------------- ----------- ------------- ----------- ------------- -----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 8.30-$27.38....................................... 5,950 5.2 $ 22.99 4,810 $ 22.99
27.39- 32.00....................................... 5,058 6.6 27.96 2,525 28.47
32.01- 42.81....................................... 8,243 7.2 34.31 2,279 35.39
----------- ----- ----------- ----- -----------
$ 8.30-$42.81....................................... 19,251 6.4 $ 29.14 9,614 $ 27.37
----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- -----------
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN (ESPP)
The ESPP permits full-time employees to purchase a limited number of shares
of the Corporation's common stock at 85% of market value. Under the plan, the
Corporation sold 1,541,592 and 1,794,552
F-14
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
shares to employees in 1997 and 1996, respectively. Pro forma compensation
expense is calculated for the fair value of the employee's purchase rights using
the Black-Scholes model. Assumptions include an expected life of 1/4 of a year,
weighted average risk-free interest rates of 5.1% and 5.0% in 1997 and 1996,
respectively, and other assumptions that are consistent with those used for the
Corporation's stock option plans described above.
Under APB 25, no compensation cost is recognized for stock options and
replacement stock options under the various stock-based compensation plans and
shares purchased under the ESPP. Had compensation cost for the Corporation's
grants for stock-based compensation been determined consistent with SFAS 123,
the Corporation's net income and net income per common share would have been
reduced by less than 3% in both 1997 and 1996.
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1996,
and additional awards in future years are anticipated.
ACQUISITIONS AND DIVESTMENTS
During 1997, the Corporation acquired several companies for an aggregate
purchase price of $674 in cash and $18 of common stock. The principal
acquisitions were Aoste, a European manufacturer of processed meat products,
Lovable Italiana S.p.A., an Italian intimate apparel company, and Brossard
France S.A., a French manufacturer and marketer of bakery products. The
Corporation also divested a minority ownership position in JP Foodservice, a
domestic distributor of food products, and a controlling interest in Aris
Isotoner, a manufacturer of gloves and accessories. No material gain or loss was
recognized on these divestments.
During 1996, the Corporation acquired several companies for an aggregate
purchase price of $216 in cash. The principal acquisition was the European skin
care and sweetener businesses of Bayer AG.
During 1995, the Corporation acquired several companies for an aggregate
purchase price of $168 in cash. The principal acquisition was the Imperial Meats
Group, a European manufacturer and distributor of processed meats. Also during
1995, the Corporation acquired the remaining outstanding shares of Consolidated
Foodservice Companies, a domestic foodservice distribution business. Common
stock having a value of $55 was issued in July 1995 as consideration for the
Consolidated Foodservice Companies acquisition.
F-15
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
INTEREST RATE AND CURRENCY SWAPS
To manage interest rate and foreign exchange risk and to lower its cost of
borrowing, the Corporation has entered into interest rate and currency swaps.
The currency swaps effectively hedge long-term Dutch guilder-, French franc- and
Swiss franc-denominated investments and French franc-denominated intercompany
loans. The weighted average maturities of interest rate and currency swaps as of
June 28, 1997 were 2.8 years and 2.0 years, respectively.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
INTEREST RATES(2)
NOTIONAL ----------------------
PRINCIPAL(1) RECEIVE PAY
------------- ----------- ---
<S> <C> <C> <C>
INTEREST RATE SWAPS
1997 Receive variable -- pay fixed............................................ $ 98 4.1% 4.4%
Receive fixed -- pay variable............................................ 25 7.1 5.4
1996 Receive fixed -- pay variable............................................ 25 7.1 5.3
1995 Receive variable -- pay fixed............................................ 200 6.1 5.7
Receive fixed -- pay variable............................................ 45 7.6 5.9
CURRENCY SWAPS
1997 Receive fixed -- pay fixed............................................... $ 259 6.4% 4.1%
1996 Receive fixed -- pay fixed............................................... 85 8.0 5.8
1995 Receive variable -- pay fixed............................................ 175 6.4 7.3
Receive fixed -- pay fixed............................................... 194 6.4 6.6
Receive variable -- pay variable......................................... 320 7.9 6.9
</TABLE>
- ------------
(1) The notional principal is the amount used for the calculation of interest
payments that are exchanged over the life of the swap transaction and is
equal to the amount of foreign currency or dollar principal exchanged at
maturity.
(2) The weighted average interest rates are as of the respective balance sheet
dates.
- ------------
The Corporation has entered into an interest rate collar to hedge
fluctuations in Dutch interest rates. The Dutch guilder-denominated collar has a
notional principal of $103, a cap of 7.0% and a floor of 3.5%.
FORWARD EXCHANGE CONTRACTS
The Corporation uses forward exchange contracts to reduce the effect of
fluctuating foreign currencies on short-term foreign currency-denominated
intercompany transactions, firm third-party product sourcing commitments and
other known foreign currency exposures.
The table below summarizes by major currency the contractual amounts of the
Corporation's forward exchange contracts in U.S. dollars. The bought amounts
represent the net U.S. dollar equivalent of commitments to purchase foreign
currencies, and the sold amounts represent the net U.S. dollar equivalent of
commitments to sell foreign currencies. The foreign currency amounts have been
translated into a
F-16
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
U.S. dollar equivalent value using the exchange rate at the reporting date.
Forward exchange contracts mature at the anticipated cash requirement date of
the hedged transaction, generally within one year.
<TABLE>
<CAPTION>
BOUGHT (SOLD)
-------------------------------
FOREIGN CURRENCY 1997 1996 1995
- ---------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
French franc...................................................................... $ (44) $ 125 $ (352)
Italian lira...................................................................... (402) (287) (254)
Spanish peseta.................................................................... (69) (40) (55)
Dutch guilder..................................................................... (191) (194) (236)
German mark....................................................................... (65) 50 36
Other............................................................................. (183) (263) (314)
</TABLE>
At June 28, 1997, the deferred unrealized gains and losses on forward
exchange contracts were not material to the financial position of the
Corporation.
CONCENTRATIONS OF CREDIT RISK
A large number of major international financial institutions are
counterparties to the Corporation's financial instruments. The Corporation
enters into financial instrument agreements only with those counterparties
meeting very stringent credit standards, limiting the amount of agreements or
contracts it enters into with any one party and, where legally available,
executing master netting agreements. These positions are continuously monitored.
While the Corporation may be exposed to credit losses in the event of
nonperformance by these counterparties, it does not anticipate losses, because
of these control procedures.
Trade accounts receivable due from highly leveraged customers were $64 at
June 28, 1997, $53 at June 29, 1996 and $49 at July 1, 1995. The financial
position of these businesses has been considered in determining allowances for
doubtful accounts.
GUARANTEES
The Corporation had third-party guarantees outstanding, aggregating
approximately $24 at June 28, 1997, $29 at June 29, 1996 and $31 at July 1,
1995. These guarantees relate primarily to financial arrangements to support
various suppliers of the Corporation and are secured by the inventory and fixed
assets of suppliers.
FAIR VALUES
The carrying amounts of cash and equivalents, trade receivables, notes
payable, accounts payable and auction preferred stock approximated fair value as
of June 28, 1997, June 29, 1996 and July 1, 1995. The fair values of the
remaining financial instruments recognized on the Consolidated Balance Sheets of
the Corporation at the respective year-end were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Long-term debt, including current portion...................................... $ 2,258 $ 1,993 $ 2,102
ESOP convertible preferred stock............................................... 751 615 567
</TABLE>
The fair value of the Corporation's long-term debt, including the current
portion, is estimated using discounted cash flows based on the Corporation's
current incremental borrowing rates for similar types of
F-17
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
borrowing arrangements. The fair value of the ESOP preferred stock is based upon
the contracted conversion into the Corporation's common stock.
The fair value of the Corporation's interest rate swaps, currency swaps,
forward exchange contracts and interest rate collar approximate their carrying
value in the financial statements as of June 28, 1997, June 29, 1996 and July 1,
1995. The fair value of these instruments was not material to the financial
position of the Corporation.
LONG-TERM DEBT
<TABLE>
<CAPTION>
INTEREST RATE
RANGE MATURITY 1997 1996 1995
------------------ ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. dollar
obligations: ESOP debt........................... 5.73-8.18% 2004 $ 276 $ 295 $ 311
Notes and debentures................ 4.75-8.37 1998-2008 1,038 1,330 1,165
Revenue bonds....................... 4.20-5.75 2002-2024 55 46 36
Zero coupon notes................... 10.00-14.25 2014-2015 17 15 14
Various other obligations........... 4 4 7
--------- --------- ---------
1,390 1,690 1,533
--------- --------- ---------
Foreign currency
obligations: Swiss franc......................... 5.76-5.78 2000 71 -- 111
Dutch guilder....................... 4.17-6.50 1998-2002 355 235 259
French franc........................ 3.46-4.94 1999-2002 305 -- --
Various other obligations........... 67 52 135
--------- --------- ---------
798 287 505
--------- --------- ---------
Total long-term debt..................................... 2,188 1,977 2,038
Less current maturities.................................. 255 135 221
--------- --------- ---------
$ 1,933 $ 1,842 $ 1,817
--------- --------- ---------
--------- --------- ---------
</TABLE>
The ESOP debt is guaranteed by the Corporation.
The zero coupon notes are net of unamortized discounts of $107 in 1997, $109
in 1996 and $110 in 1995. Principal payments of $19 and $105 are due in 2014 and
2015, respectively.
Payments required on long-term debt during the years ending in 1998 through
2002 are $255, $200, $306, $212 and $482, respectively.
The Corporation made cash interest payments of $202, $236 and $236 in 1997,
1996 and 1995, respectively.
Rental expense under operating leases amounted to approximately $214 in 1997
and $222 in 1996 and 1995. Future minimum annual fixed rentals required during
the years ending in 1998 through 2002 under noncancelable operating leases
having an original term of more than one year are $127, $105, $91, $77 and $68,
respectively. The aggregate obligation subsequent to 2002 is $133.
The Corporation is contingently liable for long-term leases on properties
operated by others. The minimum annual rentals under these leases average
approximately $4 for the years ending in 1998-2002 and $1 in 2003-2007. Amounts
thereafter are not material.
F-18
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
CREDIT FACILITIES
The Corporation has numerous credit facilities available, including
revolving credit agreements totaling $1,635 that had an annual fee of 0.05% as
of June 28, 1997. These agreements support commercial paper borrowings. Selected
data on the Corporation's short-term obligations follow:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Maximum period-end
borrowings................... $ 1,735 $ 1,709 $ 2,300
Average borrowings during the
year......................... 1,502 1,532 1,969
Weighted average interest rate
during the year.............. 4.8% 6.1% 6.6%
Weighted average interest rate
at year-end.................. 5.7 6.6 6.9
</TABLE>
CONTINGENCIES
The Corporation is a party to several pending legal proceedings and claims,
and environmental actions by governmental agencies. Although the outcome of such
items cannot be determined with certainty, the Corporation's general counsel and
management are of the opinion that the final outcome should not have a material
effect on the Corporation's results of operations or financial position.
RETIREMENT PLANS
The Corporation has noncontributory defined benefit plans covering certain
of its domestic employees. The benefits under these plans are primarily based on
years of service and compensation levels. The plans are funded in conformity
with the requirements of applicable government regulations. The plans' assets
consist principally of marketable equity securities, corporate and government
debt securities and real estate.
The Corporation's foreign subsidiaries have plans for employees consistent
with local practices.
The Corporation also sponsors defined contribution pension plans at several
of its subsidiaries. Contributions are determined as a percent of each covered
employee's salary.
Certain employees are covered by union-sponsored, collectively bargained,
multi-employer pension plans. Contributions are determined in accordance with
the provisions of negotiated labor contracts and generally are based on the
number of hours worked.
The annual pension expense for all plans was:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Defined benefit plans......... $ 37 $ 48 $ 43
Defined contribution plans.... 9 9 11
Multi-employer plans.......... 2 3 4
--- --- ---
Total pension expense......... $ 48 $ 60 $ 58
--- --- ---
--- --- ---
</TABLE>
F-19
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The components of the defined benefit plan expenses were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Benefits earned by employees......................................................... $ 64 $ 58 $ 60
Interest on projected benefit obligations............................................ 120 120 105
Actual investment return on plan assets.............................................. (214) (312) (47)
Net amortization and deferral........................................................ 67 182 (75)
--------- --------- ---------
Net pension expense.................................................................. $ 37 $ 48 $ 43
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reduction in the 1997 defined benefit plan expense is primarily
attributable to higher asset returns and the strengthening of the U.S. dollar
relative to foreign currencies.
The status of defined benefit plans at the respective year-end was:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Fair market value of plan assets................................................ $ 1,956 $ 1,854 $ 1,592
--------- --------- ---------
Actuarial present value of benefits for services rendered:
Accumulated benefits based on salaries to date:
Vested...................................................................... 1,558 1,505 1,281
Nonvested................................................................... 64 55 47
Additional benefits based on estimated future salary levels................... 164 154 204
--------- --------- ---------
Projected benefit obligations................................................. 1,786 1,714 1,532
--------- --------- ---------
Excess of plan assets over projected benefit obligations........................ 170 140 60
Unamortized net transitional asset.............................................. (10) (12) (17)
Unrecognized net gain........................................................... (21) (24) (3)
Unrecognized prior service cost................................................. 52 66 81
--------- --------- ---------
Prepaid pension asset recognized on the Consolidated Balance Sheets............. $ 191 $ 170 $ 121
--------- --------- ---------
--------- --------- ---------
</TABLE>
Weighted average rates used in determining net pension expense and related
obligations for defined benefit plans were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Discount rate................................................................... 7.2% 7.3% 7.5%
Rate of compensation increase................................................... 4.7 4.7 5.2
Long-term rate of return on plan assets......................................... 8.3 8.3 8.3
</TABLE>
The Corporation provides health care and life insurance benefits to certain
retired employees, their covered dependents and beneficiaries. Generally,
employees who have attained age 55 and who have rendered 10 years of service are
eligible for these postretirement benefits. Certain retirees are required to
contribute to plans in order to maintain coverage. The components of the expense
for these plans were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Benefits earned by employees.................................................... $ 5 $ 5 $ 5
Interest on projected benefit obligations....................................... 12 13 11
Net amortization and deferral................................................... 1 1 --
--------- --------- ---------
Net postretirement benefit expense.............................................. $ 18 $ 19 $ 16
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The status of postretirement benefit plans at the respective year-end was:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Actuarial present value of benefits for services rendered:
Retirees...................................................................... $ 102 $ 101 $ 90
Fully eligible active participants............................................ 16 16 15
Other active participants..................................................... 60 56 43
--------- --------- ---------
Accumulated postretirement benefit obligations.................................. 178 173 148
Fair market value of plan assets................................................ 2 2 2
--------- --------- ---------
Accumulated postretirement benefit obligations in excess of plan assets......... 176 171 146
Unrecognized net transitional asset............................................. 3 -- 14
Unrecognized net gain........................................................... 19 17 14
Unrecognized prior service cost................................................. 2 -- (1)
--------- --------- ---------
Postretirement benefit obligations recognized on the Consolidated Balance
Sheets......................................................................... $ 200 $ 188 $ 173
--------- --------- ---------
--------- --------- ---------
Discount rate................................................................... 7.2% 7.2% 7.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumed health care cost trend rate was 12% for 1997, decreasing to 7%
by the year 2002 and remaining at that level thereafter. These trend rates
reflect the Corporation's prior experience and management's expectation that
future rates will decline. Increasing the assumed health care cost trend rates
by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of June 28, 1997 by 12% and the
postretirement benefit expense for 1997 by 14%.
The Corporation adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" (SFAS
106), for retiree benefit plans outside the United States in 1996. Under SFAS
106, the Corporation accrues the estimated cost of retiree health care and life
insurance benefits during the employees' active service periods. The
Corporation's previous method of accounting for postretirement benefits other
than pensions was similar to that required by SFAS 106, and the accumulated
benefit obligation for these plans was accrued prior to the required adoption of
SFAS 106. The accumulated benefit obligation for retiree benefit plans outside
the United States was $22 as of June 28, 1997.
F-21
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
INCOME TAXES
The provisions for income taxes computed by applying the U.S. statutory rate
to income before taxes as reconciled to the actual provisions were:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income before provision for income taxes:
United States...................................... $ 742 50.0% $ 638 46.3% $ 648 53.1%
Foreign............................................ 742 50.0 740 53.7 571 46.9
--------- ----- --------- ----- --------- -----
$ 1,484 100.0% $ 1,378 100.0% $ 1,219 100.0%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
Taxes at U.S. statutory rates........................ $ 519 35.0% $ 482 35.0% $ 427 35.0%
State taxes, net of federal benefit.................. 13 .9 15 1.1 16 1.3
Difference between U.S. and foreign rates............ (85) (5.7) (68) (5.0) (67) (5.5)
Nondeductible amortization........................... 62 4.2 54 3.9 50 4.1
Other, net........................................... (34) (2.4) (21) (1.5) (11) (0.8)
--------- ----- --------- ----- --------- -----
Taxes at effective worldwide tax rates............... $ 475 32.0% $ 462 33.5% $ 415 34.1%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
Current and deferred tax provisions were:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
United States........................................ $ 169 $ 12 $ 166 $ 25 $ 154 $ 39
Foreign.............................................. 245 28 237 10 150 47
State................................................ 21 -- 28 (4) 23 2
----- --- ----- --- ----- -----
$ 435 $ 40 $ 431 $ 31 $ 327 $ 88
----- --- ----- --- ----- -----
----- --- ----- --- ----- -----
</TABLE>
Following are the components of the deferred tax provisions occurring as a
result of transactions being reported in different years for financial and tax
reporting:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Depreciation.................................................................... $ (2) $ 22 $ 31
Inventory valuation methods..................................................... 37 (35) (4)
Nondeductible reserves.......................................................... 53 77 64
Other, net...................................................................... (48) (33) (3)
--------- --------- ---------
$ 40 $ 31 $ 88
--------- --------- ---------
--------- --------- ---------
Cash payments for income taxes.................................................. $ 340 $ 224 $ 279
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-22
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The deferred tax (assets) liabilities at the respective year-end were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax (assets) liabilities:
Restructuring reserves................................................... $ -- $ (89) $ (166)
Reserves not deductible until paid....................................... (295) (253) (213)
Pension, postretirement and other employee benefits...................... (42) (35) (8)
Net operating loss and other tax carryforwards........................... (1) (2) (3)
Property, plant and equipment............................................ 309 298 265
Other.................................................................... (12) -- 13
--------- --------- ---------
Net deferred tax (assets).................................................. $ (41) $ (81) $ (112)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-23
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
INDUSTRY SEGMENT INFORMATION
The Corporation's business segments are described in the Narrative
Description of Business on pages 4 through 8.
<TABLE>
<CAPTION>
PACKAGED HOUSEHOLD
MEATS COFFEE AND AND BODY PERSONAL INTER-
AND BAKERY GROCERY CARE PRODUCTS CORPORATE SEGMENT TOTAL
----------- ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1997
Sales(1)............................ $ 7,614 $ 2,813 $ 1,843 $ 7,482 $ -- $ (18) $ 19,734
Pretax income....................... 476 440 228 761 (421)(2) -- 1,484
Assets.............................. 2,749 1,921 1,530 6,471 282(3) -- 12,953
Depreciation and amortization....... 167 90 78 326 19 -- 680
Capital expenditures................ 173 83 44 246 1 -- 547
- -----------------------------------------------------------------------------------------------------------------------------
1996
Sales(1)............................ $ 6,530 $ 2,896 $ 1,837 $ 7,370 $ -- $ (9) $ 18,624
Pretax income....................... 422 428 214 729 (415)(2) -- 1,378
Assets.............................. 2,045 2,033 1,571 6,635 318(3) -- 12,602
Depreciation and amortization....... 135 86 78 312 23 -- 634
Capital expenditures................ 152 78 37 271 4 -- 542
- -----------------------------------------------------------------------------------------------------------------------------
1995
Sales(1)............................ $ 6,110 $ 2,777 $ 1,691 $ 7,151 $ -- $ (10) $ 17,719
Pretax income....................... 383 374 181 658 (377)(2) -- 1,219
Assets.............................. 2,062 1,986 1,391 6,686 306(3) -- 12,431
Depreciation and amortization....... 129 82 79 294 22 -- 606
Capital expenditures................ 116 66 35 262 1 -- 480
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes sales between segments. Such sales are at transfer prices that are
equivalent to market value.
(2) Includes net interest expense of $159 in 1997, $173 in 1996 and $185 in 1995
incurred primarily in the United States to finance and support consolidated
operations.
(3) Principally cash and equivalents, certain fixed assets and certain other
noncurrent assets.
- ------------
Industry segment sales and operating income applicable to businesses sold
prior to June 28, 1997 were not material.
F-24
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
GEOGRAPHIC AREA INFORMATION
<TABLE>
<CAPTION>
ASIA-
WESTERN/ PACIFIC/
UNITED CENTRAL LATIN
STATES EUROPE AMERICA OTHER CORPORATE INTER-AREA TOTAL
--------- ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1997
Sales(1)................................ $ 11,506 $ 6,611 $ 1,223 $ 411 $ -- $ (17) $ 19,734
Pretax income........................... 1,017 723 128 37 (421)(2) -- 1,484
Assets(3)............................... 5,851 5,346 1,154 320 282(4) -- 12,953
- -------------------------------------------------------------------------------------------------------------------------------
1996
Sales(1)................................ $ 11,252 $ 5,834 $ 1,141 $ 412 $ -- $ (15) $ 18,624
Pretax income........................... 980 671 116 26 (415)(2) -- 1,378
Assets(3)............................... 5,824 4,945 1,157 358 318(4) -- 12,602
- -------------------------------------------------------------------------------------------------------------------------------
1995
Sales(1)................................ $ 10,659 $ 5,484 $ 1,160 $ 439 $ -- $ (23) $ 17,719
Pretax income........................... 880 564 101 51 (377)(2) -- 1,219
Assets(3)............................... 5,729 5,038 999 359 306(4) -- 12,431
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes sales between geographic areas. Such sales are at transfer prices
that are equivalent to market value.
(2) Includes net interest expense of $159 in 1997, $173 in 1996 and $185 in 1995
incurred primarily in the United States to finance and support consolidated
operations.
(3) The tangible net assets of foreign operations included in the accompanying
Consolidated Balance Sheets were $1,137 at June 28, 1997, $1,123 at June 29,
1996 and $892 at July 1, 1995.
(4) Principally cash and equivalents, certain fixed assets and certain other
noncurrent assets.
- ------------
F-25
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1997
Net sales.................................................................. $ 4,886 $ 5,269 $ 4,649 $ 4,930
Gross profit............................................................... 1,809 2,020 1,757 1,881
Net income................................................................. 206 317 206 280
Per common share
Net income............................................................... .41 .64 .41 .57
Cash dividends declared.................................................. .19 .21 .21 .21
Market price -- high..................................................... 35.88 40.50 43.38 43.38
-- low........................................................ 30.00 35.13 36.50 39.13
-- close...................................................... 35.75 38.38 42.25 42.06
- -----------------------------------------------------------------------------------------------------------------------
1996
Net sales.................................................................. $ 4,656 $ 4,898 $ 4,443 $ 4,627
Gross profit............................................................... 1,725 1,878 1,719 1,832
Net income................................................................. 186 283 188 259
Per common share
Net income............................................................... .37 .57 .37 .52
Cash dividends declared.................................................. .17 .19 .19 .19
Market price -- high..................................................... 30.38 33.75 35.50 33.88
-- low........................................................ 26.88 28.88 29.88 30.25
-- close...................................................... 29.75 32.00 32.88 32.50
- -----------------------------------------------------------------------------------------------------------------------
1995
Net sales.................................................................. $ 4,290 $ 4,648 $ 4,193 $ 4,588
Gross profit............................................................... 1,618 1,764 1,565 1,749
Net income................................................................. 165 252 166 221
Per common share
Net income............................................................... .33 .51 .33 .45
Cash dividends declared.................................................. .16 .17 .17 .17
Market price -- high..................................................... 23.38 26.00 27.75 29.00
-- low........................................................ 19.38 22.38 24.25 26.25
-- close...................................................... 22.50 25.25 26.13 28.50
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Management
of SARA LEE CORPORATION:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Sara Lee Corporation included in this
Form 10-K, and have issued our report thereon dated July 28, 1997. Our audit was
made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental schedule II is the responsibility
of the Corporation's management and is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This supplemental schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois,
July 28, 1997.
F-27
<PAGE>
SCHEDULE II
SARA LEE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
PROVISION
CHARGED WRITE-OFFS
BALANCE AT TO COSTS (1)/ OTHER BALANCE
BEGINNING AND ALLOWANCES ADDITIONS AT END
OF YEAR EXPENSES TAKEN (DEDUCTIONS) OF YEAR
---------- --------- ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JULY 1, 1995:
Allowances for bad debts........................................ $109 $ 42 $ (30) $ 6 $127
Other receivable allowances..................................... 55 122 (115) 3 65
----- --------- ----- ------ -------
Total......................................................... $164 $164 $(145) $ 9 $192
----- --------- ----- ------ -------
----- --------- ----- ------ -------
FOR THE YEAR ENDED JUNE 29, 1996:
Allowances for bad debts........................................ $127 $ 34 $ (35) $(5) $121
Other receivable allowances..................................... 65 113 (105) 3 76
----- --------- ----- ------ -------
Total......................................................... $192 $147 $(140) $(2) $197
----- --------- ----- ------ -------
----- --------- ----- ------ -------
FOR THE YEAR ENDED JUNE 28, 1997:
Allowances for bad debts........................................ $121 $ 29 $ (28) $10 $132
Other receivable allowances..................................... 76 108 (111) -- 73
----- --------- ----- ------ -------
Total......................................................... $197 $137 $(139) $10 $205
----- --------- ----- ------ -------
----- --------- ----- ------ -------
</TABLE>
- ------------
(1) Net of collections on accounts previously written off.
F-28
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
(c) EXHIBITS INCORPORATION BY REFERENCE
-------------------------------------------------
<S> <C> <C>
(3a) Charter Exhibit 4.1 to Registration Statement No.
33-35760 on Form S-8 dated July 6, 1990, Exhibit
4.2 to Registration Statement No. 33-37575 on
Form S-8 dated November 1, 1990 and Exhibit 3(a)
to Report on Form 10-K for Fiscal Year ended July
2, 1994.
(3b) Bylaws Exhibit 3(b) to Report on Form 10-K for Fiscal
Year ended June 29, 1996
(4) Sara Lee, by signing this Report, agrees to furnish the Securities and Exchange Commission, upon its
request, a copy of any instrument which defines the rights of holders of long-term debt of Sara Lee and
all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be
filed, and which authorizes a total amount of securities not in excess of 10% of the total assets of Sara
Lee and its subsidiaries on a consolidated basis.
(10) 1. 1979 Stock Option Plan, as amended Exhibit 10 (1) to Report on Form 10-K for Fiscal
Year ended July 1, 1995
2. 1981 Stock Option Plan, as amended Exhibit 10 (11) to Report on Form 10-K for Fiscal
Year ended July 1, 1989
3. 1988 Non-Qualified Stock Option Plan, as Exhibit 10 (3) to Report on Form 10-K for Fiscal
amended Year ended July 1, 1995
4. 1989 Incentive Stock Plan, as amended
5. Supplemental Benefit Plan, as amended
6. Accelerated Growth Incentive Plan Fiscal Exhibit 10 (12) to Report on Form 10-K for Fiscal
Years 1990-1994 Year ended June 30, 1990
7. 1991 Non-Qualified Deferred Compensation Plan Exhibit 10 (15) to Report on Form 10-K for Fiscal
(Base Salary) Year ended June 29, 1991
8. 1992 Non-Qualified Deferred Compensation Plan Exhibit 10 (15) to Report on Form 10-K for Fiscal
(Base Salary) Year ended June 27, 1992
9. FY '93 Non-Qualified Deferred Compensation Exhibit 10 (16) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended June 27, 1992
10. 1993 Non-Qualified Deferred Compensation Plan Exhibit 10 (19) to Report on Form 10-K for Fiscal
(Base Salary) Year ended July 3, 1993
11. FY '94 Non-Qualified Deferred Compensation Exhibit 10 (20) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended July 3, 1993
12. 1994 Non-Qualified Deferred Compensation Plan Exhibit 10 (14) to Report on Form 10-K for Fiscal
(Base Salary) Year ended July 2, 1994
13. FY '95 Non-Qualified Deferred Compensation Exhibit 10 (15) to Report on Form 10-K for Fiscal
Plan (Annual Bonus) Year ended July 2, 1994
14. Non-Qualified Deferred Compensation Plan
(Annual Bonus)
15. Performance-Based Annual Incentive Plan Appendix A to Proxy Statement dated September 20,
1995
16. 1995 Long-Term Incentive Stock Plan, as
amended
17. 1995 Non-Employee Director Stock Plan, as
amended
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INCORPORATION BY REFERENCE
-------------------------------------------------
<S> <C> <C>
18. Non-Qualified Deferred Compensation Plan for Exhibit 10 (18) to Report on Form 10-K for Fiscal
Outside Directors Year ended June 29, 1996
19. FY 1995-97 Long Term Performance Incentive Exhibit 10 (19) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
20. FY 1996-98 Long Term Performance Incentive Exhibit 10 (20) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
21. FY 1997-99 Long Term Performance Incentive Exhibit 10 (21) to Report on Form 10-K for Fiscal
Plan Year ended June 29, 1996
22. Non-Qualified Estate Builder Deferred Exhibit 10 (17) to Report on Form 10-K for Fiscal
Compensation Plan Year ended June 29, 1985
23. Severance Policy for Corporate Officers, as
amended
24. Employment Agreement, dated
January 1, 1996, between Sara Lee Corporation
and Frank L. Meysman
25. Employment Agreement, dated
January 1, 1996, between Sara Lee/DE N.V. and
Frank L. Meysman and attachments (translated
from Dutch)
26. Stockholder Rights Agreement Exhibit 4 to Report on Form 10-Q for the quarter
ended March 26, 1988
(11) Computation of Net Income per Common Share
(12) 1. Computation of Ratio of Earnings to Fixed
Charges
2. Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend
Requirements
(21) List of Subsidiaries
(23) Consent of Arthur Andersen LLP
(24) Powers of Attorney
(27) Financial Data Schedules
</TABLE>
<PAGE>
SARA LEE CORPORATION 1989 INCENTIVE STOCK PLAN
ARTICLE I - PURPOSE OF THE PLAN
The purpose of the Sara Lee Corporation 1989 Incentive Stock Plan is to
promote the long-term growth of Sara Lee Corporation by rewarding key management
employees with a proprietary interest in Sara Lee Corporation for outstanding
long-term performance and to attract, motivate and retain highly qualified and
capable management employees.
ARTICLE II - DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
2.1 "AWARD" means an award granted to a Participant under the Plan in the
form of an Option or Restricted Stock, or any combination of the foregoing.
2.2 "BOARD" means the Board of Directors of Sara Lee Corporation.
2.3 "CORPORATION" means Sara Lee Corporation.
2.4 "DISABILITY" means total disability as defined from time to time under
the Sara Lee Corporation Long-Term Disability Plan.
2.5 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.6 "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 Option Grant Date, provided that if there should be no
sale 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.
2.7 "INCENTIVE STOCK OPTION" means an Option which meets the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, or any
successor law.
2.8 "OPTION" means an option awarded under Article VIII to purchase Shares.
An Option may be either an Incentive Stock Option or a Non-Qualified Stock
Option.
2.9 "OPTION EXERCISE PERIOD" means the period from the Option Grant Date to
the date on which an Option expires.
2.10 "OPTION GRANT DATE" means the date upon which the Committee grants an
Option to an Optionee.
<PAGE>
2.11 "OPTIONEE" means the employee of the Corporation to whom an Option has
been granted.
2.12 "NON-QUALIFIED STOCK OPTION" means an Option which does not meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
or any successor law.
2.13 "PARTICIPANT" means an employee of the Corporation or any Subsidiary
to whom an Award has been granted which has not terminated, expired or been
fully exercised.
2.14 "PLAN" means the Sara Lee Corporation 1989 Incentive Stock Plan, as
may be amended and restated from time to time.
2.15 "RESTRICTED PERIOD" means the period of time, which may be a single
period or multiple periods, during which Restricted Stock awarded to a
Participant remains subject to the restrictions imposed on such Shares, as
determined by the Committee.
2.16 "RESTRICTIONS" means the restrictions and conditions imposed on
Restricted Stock awarded to a Participant, as determined by the Committee, which
must be satisfied in order for the Restricted Stock to vest, in whole or in
part, in the Participant.
2.17 "RESTRICTED STOCK" means an award of Shares on which are imposed
Restriction Period(s) and Restrictions which subject them to a "substantial
risk of forfeiture" as defined in Section 83 of the Internal Revenue Code of
1986, as amended, or any successor law.
2.18 "RESTRICTED STOCK AGREEMENT" means a written agreement between a
Participant and the Corporation evidencing an award of Restricted Stock.
2.19 "RESTRICTED STOCK AWARD DATE" means the date on which the Committee
awarded Restricted Shares to the Participant.
2.20 "RETIREMENT" means retirement from active employment with the
Corporation or any Subsidiary pursuant to the terms and conditions of the
pension or retirement plans of the Corporation applicable to the Participant.
2.21 "SHARES" means shares of the Common Stock, par value $1.33 1/3 per
share, of the Corporation.
2.22 "STOCK OPTION AGREEMENT" means a written agreement between a
Participant and the Corporation evidencing an award of an Option.
<PAGE>
2.23 "SUBSIDIARY" means any domestic or foreign corporation or entity of
which the Corporation owns, directly or indirectly, at least 20% of the total
combined voting power of such corporation or other entity.
In addition, the term "Change of Control" shall have the meaning set forth
in Section 10.2.
ARTICLE III --- ADMINISTRATION OF THE PLAN
3.1 ADMINISTRATOR OF PLAN. The Plan shall be administered by the
Compensation and Employee Benefits Committee of the Board ("Committee") which
shall be comprised of directors who are "Non-Employee Directors" as defined in
Rule 16b-3 or any successor rule of the Securities and Exchange Commission.
3.2 AUTHORITY OF COMMITTEE. The Committee shall have full power and
authority to:
(i) designate the Participant to whom Options or Restricted Stock may be
awarded from time to time;
(ii) determine the type of Award to be granted to each Participant under
the Plan and the number of Shares subject thereto;
(iii)determine the duration of the Restriction Period and the
Restrictions to be imposed with respect to each Award;
(iv) interpret and construe the Plan and to adopt such rules and
regulations it shall deem necessary and advisable to implement and
administer the Plan;
(v) approve the form and terms and conditions of the Restricted Stock
Agreement or the Stock Option Agreement, as the case may be between
the Corporation and the Participant; and
(vi) designate persons other than members of the Committee to carry out its
responsibilities, subject to such limitations, restrictions and
conditions as it may prescribe, provided that the Committee may not
delegate its authority (a) with respect to the granting of awards to
persons subject to Sections 16(a) and 16(b) of the Exchange Act or (b)
if such delegation would cause the Plan not to comply with the
requirements of Rule 16b-3 or any successor rule under the Exchange
Act.
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.
<PAGE>
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 DELEGATION. The Committee may delegate such non-discretionary
administrative duties under the Plan to one or more agents as it shall deem
necessary and advisable.
3.5 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 Participant and the Corporation. Any decision made 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 which may be made to a Participant under the Plan may be in the form
of a Non-Qualified Stock Option, an Incentive Stock Option or Restricted Stock,
or a combination thereof, at the discretion of the Committee. If an Option is
designated as an Incentive Stock Option, the terms of such Option shall be in
conformance with Section 422 of the Internal Revenue Code of 1986, as amended,
or any successor law.
ARTICLE V --- ELIGIBILITY
The Participants in the Plan shall be the officers and key management
employees of the Corporation and its Subsidiaries as designated by the
Committee. A Participant who has been granted an Award under the Plan may be
granted additional Awards under the Plan under such circumstances and at such
times as the Committee may determine.
ARTICLE VI --- SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Article XIV, the aggregate number of
Shares which may be issued and released from Restrictions upon the exercise of
Options and the vesting of Restricted Stock, respectively, shall not exceed
11,000,000 Shares, plus any Shares which as of the effective date of the Plan
are reserved for issuance under the Corporation's 1979 Stock Option Plan, 1981
Incentive Stock Option Plan, and 1988 Non-Qualified Stock Option Plan and which
are not thereafter issued.
ARTICLE VII --- TRANSFERABILITY OF AWARDS
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 any particular Award in the manner set
forth in the related Award agreement.
<PAGE>
ARTICLE VIII --- OPTIONS
Options granted under the Plan shall be subject to the following terms and
conditions:
(A) OPTION PRICE. The option price per share under each Option granted by
the Committee shall be not less than 100% of the Fair Market Value per share on
the Option Grant Date.
(B) EXERCISE OF OPTIONS. Each Option shall be exercisable on the dates and
for the number of Shares as shall be provided in the Stock Option Agreement,
provided that (i) no Option shall be exercisable earlier than six months after
the Option Grant Date, (ii) in no event shall the period of time over which the
Option may be exercised exceed ten years from the Option Grant Date, (iii) 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 become exercisable
immediately after the Option Grant Date, and (iv) the Committee shall have full
authority to grant Options to Executives (as defined in the Supplement described
below) who are subject to the personal income tax laws of the United Kingdom and
employed by the Corporation or any of its subsidiaries pursuant to the terms and
conditions of the Supplement attached hereto which sets forth a plan approved by
the United Kingdom's Finance Act 1984. The Supplement may be amended from time
to time so that its terms and conditions will comply with the applicable
requirements of United Kingdom law.
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 submitting acceptable proof to the Committee of the
ownership of Shares which have been owned by the Optionee for at least six
months prior to the date of exercise of the Option, or a combination of both,
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
submitting proof of acceptable ownership of Shares shall not exceed the
number of Shares covered by the respective Option less the number of Shares
for which proof of ownership is submitted. The value of owned Shares for
which proof of ownership is submitted in full or partial payment for the
Shares purchased upon the 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.
In the discretion of the Committee, payment for any Shares subject to an
Option may also be made by delivering a properly executed exercise notice to the
Corporation, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Corporation the amount of sale or loan proceeds to pay
the purchase price. To facilitate the foregoing, the Corporation may enter
into agreements for coordinated procedures with one or more brokerage firms.
<PAGE>
(C) REPLACEMENT OPTIONS. The Committee may provide either at the time of
grant or subsequently that an Option include the right to acquire a replacement
option. An Option which provides for the grant of a replacement option shall
entitle the Participant, upon exercise of the Option (in whole or in part) prior
to termination of employment of the Participant and satisfaction of the option
price in Shares, to receive a replacement option. In addition to any other
terms and conditions the Committee deems appropriate, the replacement option
shall be subject to the following terms: the number of Shares shall not exceed
the number of whole Shares used to satisfy the Option price of the original
Option and the number of whole shares, if any, withheld by the Corporation as
payment for withholding taxes in accordance with Article XI hereof, the Option
Grant Date will be the date of the exercise of the original Option, the option
price per share shall be the Fair Market Value on the Option Grant Date, the
replacement option shall be exercisable no earlier than six months after the
Option Grant Date, the Option term will not extend beyond the term of the
original Option, and the replacement option shall be a Non-Qualified Option and
shall otherwise meet all conditions of this Article VIII. A replacement option
may also be granted with respect to any option granted under the Corporation's
1979 Stock Option Plan, 1981 Incentive Stock Option Plan and 1988 Non-Qualified
Stock Option Plan. The Committee may rescind the replacement option at any time
prior to the replacement option becoming exercisable without the consent of the
Participant.
(D) COMPLIANCE WITH RULE 16(B)-3. To the extent that the provisions in
subparagraph (b) and (c) above on the number of Shares that can be issued under
the Plan do not conform with Rule 16b-3 under the Exchange Act as adopted and
interpreted by the Securities and Exchange Commission, the Committee shall make
such modification in the determination of share usage and issuance so as to
conform the Plan and any Options granted hereunder to the Rule's requirements,
provided, however, that any such modification shall not increase the number of
Shares beyond the Shares specified in Article VI.
(E) TERMINATION OF EMPLOYMENT OF OPTIONEE. The Committee shall have
authority to determine the circumstances under which Awards of options will vest
upon termination of employment of the optionee for any reason. Such provisions
will be contained in the Option Agreement given to each Optionee.
ARTICLE IX --- RESTRICTED STOCK
91. TERMS OF RESTRICTED STOCK AWARDS. Subject to and consistent with the
provisions of the Plan, with respect to each Award of Restricted Stock to a
Participant, the Committee shall determine:
(a) the terms and conditions of the Restricted Stock Agreement between the
Corporation and the Participant evidencing the Award;
<PAGE>
(b) the Restriction Period for all or a portion of the Award;
(c) the Restrictions applicable to the Award, including, but not limited
to, continuous employment with the Corporation or any of its Subsidiaries for a
specified term or the attainment of specific corporate, divisional or individual
performance standards or goals, which Restriction Period and Restrictions may
differ with respect to each Participant;
(d) whether the Participant shall receive the dividends and other
distributions paid with respect to an award of the Restricted Stock as declared
and paid to the holders of the Shares during the Restriction Period or shall be
withheld by the Corporation for the account of the Participant until the
Restriction Periods have expired or the Restrictions have been satisfied, and
whether interest shall be paid on such dividends and other distributions
withheld, and if so, the rate of interest to be paid, or whether such dividends
may be reinvested in Shares;
(e) the percentage of the Award which shall vest in the Participant in the
event of death, Disability or Retirement prior to the expiration of the
Restriction Period or the satisfaction of the Restrictions applicable to an
award of Restricted Stock; or
(f) notwithstanding the Restriction Period and the Restrictions imposed on
the Restricted Shares, as set forth in a Restricted Stock Agreement, whether to
shorten the Restriction Period or waive any Restrictions, if the Committee
concludes that it is in the best interests of the Corporation to do so.
9.2 DELIVERY OF SHARES. Upon an Award of Restricted Stock to a
Participant, the stock certificate representing the Restricted Stock shall be
issued and transferred to and in the name of the Participant, whereupon the
Participant shall become a stockholder of the Corporation with respect to such
Restricted Stock and shall be entitled to vote the Shares. Such stock
certificates shall be held in custody by the Corporation, together with stock
powers executed by the Participant in favor of the Corporation, until the
Restriction Period expires and the Restrictions imposed on the Restricted Stock
are satisfied.
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:
(a) any and all outstanding Options shall become immediately exercisable;
(b) the Restriction Period and Restrictions imposed on the Restricted Stock
shall lapse, and the Restricted Stock shall vest in the Participant to the
extent determined by the Committee; and
<PAGE>
(c) within ten business days after the occurrence of a Change of Control,
the certificates representing the Restricted Stock so vested, without any
restrictions or legend thereon, shall be delivered to the Participant, and any
dividends and distributions paid with respect to the Restricted Stock which were
escrowed during the Restriction Period and the earnings thereon shall be paid to
the Participant.
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")) (other than 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
shareholders 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 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 June 29, 1989, 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 --- WITHHOLDING OF TAXES
Federal, state or local law may require the withholding of taxes applicable
to gains resulting from an Award. The Committee may, in its discretion and
subject to such rules as it may adopt, permit the Participant to pay all or a
portion of the federal, state or local withholding taxes arising in connection
<PAGE>
with an Award by electing to (i) have the Corporation withhold Shares,
(ii) tender back Shares received in connection with such Award or
(iii) deliver other previously owned Shares, under each election such Shares
having a Fair Market Value on the date specified in the rules adopted by the
Committee equal to the amount to be withheld.
ARTICLE XII --- NO RIGHT TO CONTINUED EMPLOYMENT
Neither the establishment of the Plan nor the granting of an Award shall
confer upon any Participant any right to continue in the employ of the
Corporation or any of its Subsidiaries or interfere in any way with the right of
the Corporation or any of its Subsidiaries to terminate such employment at any
time. No Award shall be deemed to be salary or compensation for the purpose of
computing benefits under any employee benefit, pension or retirement plans of
the Corporation or any of its Subsidiaries, unless the Committee shall determine
otherwise.
ARTICLE XIII --- AMENDMENT AND TERMINATION
The terms and conditions applicable to any Award may thereafter be amended
or modified by mutual agreement between the Corporation and the Participant or
such other persons as may then have an interest therein. Also, by mutual
agreement between the Corporation and a Participant in the Plan or under any
other present or future plan of the Corporation, stock options or other awards
may be granted to a Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted such Participant under the Plan,
or under any other present or future plan of the Corporation. The Board may
amend the Plan from time to time or terminate the Plan at any time. However, no
action authorized by this Article shall reduce the amount of any existing Award
or adversely change the terms and conditions thereof without the Participant's
consent.
ARTICLE XIV --- ADJUSTMENT PROVISIONS
14.1 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 Award and the option price for each outstanding Option shall be
adjusted so that the aggregate consideration payable to the Corporation and the
value of each such Award shall not be changed.
14.2 Notwithstanding any other provision of the Plan, and without affecting
the number of Shares reserved or available hereunder, the Committee may
authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Shares resulting from any
merger, consolidation, sale of assets, acquisition of property of 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 equitable and appropriate.
<PAGE>
14.3 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 Participant to whom an
Option has been granted under the Plan 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 might 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 XV --- EFFECTIVE DATE
The Plan shall become effective, as amended, on August 29, 1991, subject to
the approval of a majority of Shares and other voting shares represented and
entitled to vote at the annual meeting of stockholders on October 31, 1991. If
such approval is not obtained, the Plan shall remain in effect as approved by
the stockholders on October 26, 1989.
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Adopted by the Board of Directors on August 29, 1991, amended on January 30,
1997 and amended on June 26, 1997.
<PAGE>
SARA LEE CORPORATION
SUPPLEMENTAL BENEFIT PLAN
(As Amended and Restated Effective July 1, 1995)
SECTION 1
INTRODUCTION
1.1. PLAN. SARA LEE CORPORATION SUPPLEMENTAL BENEFIT PLAN (the
"Plan") is maintained by SARA LEE CORPORATION, a Maryland corporation (the
"Corporation") for the benefit of eligible employees of the Corporation and
those subsidiaries and affiliates of the Corporation which are designated by the
Corporation as participating employers.
1.2. EFFECTIVE DATE AND PLAN YEAR. The Plan was established as
of July 1, 1978. The effective date of the amendment and restatement of the
Plan as set forth herein is July 1, 1995. The "Plan Year" shall mean the period
beginning each July 1, and ending the next following June 30.
1.3. EMPLOYERS. The Corporation and each other SLC
Controlled Group Member which has been designated by the Corporation as a
participating employer is referred to herein as an "Employer" and may be
referred to collectively as the "Employers." An "SLC Controlled Group
Member" means the Corporation and any affiliated or related corporation which
is a member of a controlled group of corporations (within the meaning of
Section 1563(a) of the Internal Revenue Code of 1986, as amended ("Code")
determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C)) which
includes the Corporation or any trade or business (whether or not
incorporated), which is under the common control with the Corporation (within
the meaning of Section 414(c) of the Code).
1.4. PURPOSE. The Plan has been established to supplement the
retirement benefits provided by the Sara Lee Corporation Employee Stock
Ownership Plan (the "ESOP"), the Sara Lee Corporation Consolidated Pension and
Retirement Plan (the "Consolidated Plan") and each other defined benefit pension
maintained by an Employer which is listed as a Covered Plan in Exhibit A to the
Plan that is intended to satisfy the requirements for qualification under
Section 401(a) of the Code (such plans are referred to herein collectively as
the "Covered Plans" and individually as a "Covered Plan").
1.5. PLAN SUPPLEMENTS. The provisions of the Plan may be
modified by supplements to the Plan. The terms and provisions of each
supplement are a part of the Plan and supersede the provisions of the Plan to
the extent necessary to eliminate inconsistencies between the Plan and the
supplement.
SECTION 2
PARTICIPATION AND SUPPLEMENTAL BENEFITS
2.1. ELIGIBILITY. Each employee of an Employer who
participates in a Covered Plan will become a Participant in this Plan on the
earlier of the following to occur:
(a) the date that the benefits the employee would otherwise
accrue in the Covered Plan are limited by operation of Code
Sections 415 or 401(a)(17),
(b) if the employee is a highly-compensated employee for
purposes of Code Section 414(r) and participates in the
Consolidated Plan, the date that the benefits the employee
would otherwise accrue in the Consolidated Plan are limited
because the employee's Supplemental Compensation (as
defined in subsection 2.2 below) is not considered in
determining benefits under the Consolidated Plan.
<PAGE>
2.2. SUPPLEMENTAL BENEFITS. At a Participant's retirement or
earlier termination of employment with all SLC Controlled Group Members, the
Participant shall be entitled to the "Supplemental Benefit" that has accrued for
him under the Plan. A Participant's accrued Supplemental Benefit as of any date
shall be as follows:
(a) ESOP. If the Participant is covered only by the ESOP, the
Participant's accrued Supplemental Benefit as of any date
shall consist of the aggregate Employer contributions that
would have been made to the ESOP on behalf of the
Participant for each plan year prior to such date but which
were not contributed because of the limitations of Sections
401(a)(17) or 415 of the Code, with such aggregate
contributions adjusted upward or downward to reflect the
investment experience under the ESOP; provided, that for
plan years of the ESOP ending prior to January 1, 1997, the
Employer contribution that shall be considered to have been
foregone in any plan year of the ESOP shall not, for
purposes of this Plan, exceed 1.75 percent of that portion
of the Participant's compensation (as determined under the
ESOP) for that plan year in excess of the Code
Section 401(a)(17) limit for that year.
(b) OTHER COVERED PLANS. If the Participant is covered by the
Consolidated Plan or another Covered Plan but not the ESOP,
his accrued Supplemental Benefit as of any date shall
consist of the full amount of retirement benefit produced
for him by the pension formula applicable to the
Participant under the Covered Plan as of such date (the
"Full Benefit") less the maximum amount of retirement
benefit that can be provided under the Covered Plan after
application of the limitations imposed by Sections
401(a)(17) and 415 of the Code.
(c) COMPENSATION ADJUSTMENTS. If the Participant is covered by
the Consolidated Plan, in determining the Participant's
Full Benefit under subparagraph (b) next above, the
Participant's compensation shall include (i) deferred
compensation, if any, provided any such amount of deferred
compensation shall be considered compensation in the plan
year deferred, and (ii) for plan years ending after July 1,
1989 and prior to July 1, 1994, the Participant's Long-Term
Bonus Credit. A Participant's "Long-Term Bonus Credit" for
a plan year equals the applicable percentage of the
Participant's Base Salary listed in the table below,
multiplied by the ratio of (A) the Participant's bonus
under the company's short-term (annual) bonus plan for that
plan year to (B) the maximum bonus that could have been
paid to the Participant for that plan year under the
short-term (annual) bonus plan reduced, in the case of the
Long Term Bonus Credit for the plan year ended June 30,
1990, by the amount of long term bonus paid to the
Participant's during that year with respect to the FY 1988
to 1990 long term bonus plan.
Applicable Percentage
Category of Base Salary
Chairman/CEO, President
and Vice-Chairman 25%
Corporate Executive Vice
Presidents 21.67%
Corporate Senior Vice
Presidents 18.77%
Corporate Vice Presidents
(Operations) 15%
Corporate Vice Presidents
(Staff) and Division
Presidents 12.5%
<PAGE>
In addition, for any year a Participant's compensation package
is adjusted for the purpose of satisfying the limits imposed
under Section 162(m) of the Code, the Participant's compensation
considered in determining the Participant's Full Benefit shall
be equal to the compensation the Participant would have received
had no adjustment in the Participant's compensation package been
made. Finally, in determining the Full Benefit under
subparagraph 2.2(b) above for any Participant who has less than
five full years of compensation considered under the Covered
Plan's formula, any bonus or other annual non-periodic
compensation payment for a period of less than one year shall
be considered to have been earned ratably over a period of
one year.
(d) COMBINATION OF PLANS. If the Participant is covered by the
Consolidated Plan or another Covered Plan and the ESOP, the
Participant's accrued Supplemental Benefit as of any date shall
consist of the sum of the benefits determined separately under
(a) and (b) above.
(e) PRIOR SERVICE AND NON-QUALIFIED BENEFITS. In determining a
Participant's Full Benefit under subparagraph 2.2(b) above, only
service with an Employer while it is an SLC Controlled Group
Member shall be considered; provided, however, that service with
an Employer prior to the date the Employer first became an SLC
Controlled Group Member and service with a predecessor employer
shall be considered only if such service formed the basis of a
benefit under an unfunded, non-qualified retirement plan
maintained by such Employer prior to the date it first became an
SLC Controlled Group Member or by such predecessor employer (a
"Prior Plan") and the liability for benefits under that Prior
Plan were assumed by the Corporation pursuant to the terms of an
asset or stock purchase agreement.
(f) IMPUTED SERVICE. In determining a Participant's accrued
Supplemental Benefit, any period required to be included as
service pursuant to an employment, severance or other written
agreement with the Corporation shall be considered service with
the Corporation under the Plan.
That portion of a Participant's accrued Supplemental Benefit which is
attributable to his participation in a particular Covered Plan shall become
nonforfeitable on the same basis and at the same time as such Participant's
accrued benefit under such Covered Plan becomes nonforfeitable.
2.3. PAYMENT OF BENEFITS. A Participant's Supplemental Benefit
shall, subject to the further provisions of this Plan, be payable to or on
account of the Participant as follows:
(a) That portion of the Participant's Supplemental Benefit which is
attributable to the Participant's participation in the ESOP
shall be paid to the Participant, or in case of his death to his
beneficiary or surviving spouse, beginning at the same time, in
the same manner, over the same period and subject to the same
terms and conditions as the Participant's benefits in the ESOP
are paid except as otherwise determined by the Committee (as
described in subsection 4.1) after conferring with the person to
whom such payments are to be made.
<PAGE>
(b) That portion of the Participant's Supplemental Benefit which is
attributable to the Participant's participation in the
Consolidated Plan or any other Covered Plan other than the ESOP
shall be payable on a monthly basis to or on account of the
Participant beginning at the same time, in the same manner, over
the same period and under the same terms and conditions as the
Participant's benefits in the Covered Plan are paid; provided
that benefits payable to any surviving spouse shall be based
upon the difference between (i) the full amount of retirement
benefit for the Participant as determined under subparagraph
2.2(b) above multiplied by the percentage of such benefit
payable to the surviving spouse, less (ii) the amount of
surviving spouse's benefits being provided under the
Covered Plan. In no event will any payments be made hereunder
to or on account of a surviving spouse after the month in which
the spouse's death occurs. Notwithstanding the foregoing if the
present value of a Participant's Supplemental Benefit determined
under this sub-paragraph 2.3(b) is $10,000 or less, the
Committee shall have the discretion to pay the present value
of such benefit to the Participant, (or in the event of the
Participant's death, to the Participant's surviving spouse)
in a lump sum. The present value of that portion of a
Participant's Supplemental Benefit under subparagraph 2.2(b)
shall be determined by using the interest, mortality and
other actuarial assumptions used at the time under the
Consolidated Plan for purposes of determining an actuarial
equivalent lump sum.
2.4. PAYMENT MODIFICATIONS. Regardless of any other provisions of
this Plan, the period during which any monthly installments hereunder are to be
paid to a Participant or to his surviving spouse may be modified by the
Committee after consulting with the person or persons to whom such monthly
installments are to be paid.
2.5. BENEFITS PROVIDED BY EMPLOYERS. Benefits payable under this
Plan to a Participant or his spouse shall be paid directly by the Participant's
Employer. No Employer shall be required to segregate any assets to be applied
for the payment of benefits under this Plan.
2.6. OFFSET FOR BENEFITS PROVIDED BY GRANTOR TRUSTS. Notwithstanding
any provision of the Plan to the contrary, the benefits a Participant or his
beneficiary is entitled to receive from the Plan will be offset on a dollar for
dollar basis by the sum of:
(a) the value of assets in the grantor trust established by the
Participant pursuant to a Supplemental Compensation Agreement
between the Participant and the Corporation which trust is
designed to provide benefits in lieu of the benefits provided by
this Plan, and
(b) an amount equal to the federal, state and local income taxes the
Participant would pay if the Participant's benefits under the
Plan were paid in a single lump sum. The offset provided in this
subsection shall occur on the date the Participant terminates
employment for any reason and shall be made on an actuarial
equivalent present value basis using the interest, mortality and
other actuarial assumptions employed under the Participant's
Supplemental Compensation Agreement in determining the actuarial
equivalent lump sum value of the Participant's benefits upon
termination of the Supplemental Compensation Agreement. If there
were withdrawals or distributions from the Participant's grantor
trust, for purposes of this offset, the value of assets in the
Participant's grantor trust shall be increased by the amounts
that would have been available under the Participant's grantor
trust had such withdrawals or distributions not been made and
such amounts had accumulated under the trust each year at an
interest rate equal to one point over the rate at First National
Bank of Chicago on the first business day of December of each
year, less an amount equal to the sum of federal, state and local
income taxes the Participant would have paid that year on said
assumed trust income.
<PAGE>
SECTION 3
OTHER EMPLOYMENT
A Participant or his spouse receiving Supplemental Benefits hereunder
will continue to be entitled thereto regardless of other employment or
self-employment.
SECTION 4
GENERAL
4.1. COMMITTEE. This Plan will be administered by the Sara Lee
Corporation Employee Benefits Administrative Committee (the "Committee")
appointed by the Board of Directors of the Corporation. The Committee has
the discretionary authority to determine factual issues and eligibility for
Plan coverage and benefits, to interpret the provisions and terms of Plan and
to decide claims for benefits under the terms of the Plan. Subject to
applicable law, any interpretation of the provisions of the Plan (including
any Supplement) and any decision on any matter within the discretion of the
Committee made by the Committee in good faith shall be final and binding on
all persons. A misstatement or other mistake of fact shall be corrected when
it becomes known, and the Committee shall make such adjustment on account
thereof as it considers equitable and practicable. The Committee shall not
be liable in any manner for any determination of fact made in good faith.
Any claim for benefits under the Plan shall be handled by the Committee
pursuant to the claims procedures under the ESOP and Consolidated Plan and
such procedures are incorporated herein by this reference.
4.2. BENEFICIARY. Each Participant under this Plan, by writing filed
with the Committee, may designate such person or persons as he shall select as
his "beneficiary" to receive any Supplemental Benefits which may be payable at
his death. In the absence of any such designation, any such benefits shall be
paid to the Participant's estate.
4.3. INTERESTS NOT TRANSFERABLE. Except as to any withholding of tax
under the laws of the United States or any State, the interest of any
Participant, his spouse or minor children under the Plan is not subject to the
claims of creditors and may not be voluntarily or involuntarily sold,
transferred, assigned, alienated or encumbered.
4.4. FACILITY OF PAYMENT. Any amounts payable hereunder to any
person under legal disability or who, in the judgment of the Committee, is
unable to properly manage his financial affairs may be paid to the legal
representative of such person or may be applied for the benefit of such
person in any manner which the Committee may select.
4.5. GENDER AND NUMBER. Where the context admits, words in the
masculine gender shall include the feminine gender, the plural shall include the
singular, and the singular shall include the plural.
4.6. CONTROLLING LAW. To the extent not superseded by the laws of
the United States, the laws of Illinois shall be controlling in all matters
relating to the Plan.
4.7. SUCCESSORS. This Plan is binding on each Employer and will
inure to the benefit of any successor of an Employer, whether by way of
purchase, merger, consolidation or otherwise.
4.8. CONTINUED EMPLOYMENT. The establishment of this Plan shall not
be construed to give any Participant the right to be retained in the Employer's
service.
<PAGE>
SECTION 5
AMENDMENT AND TERMINATION
While the Employers expect to continue the Plan indefinitely, the
right to amend or terminate the Plan by action of the Board of Directors of
the Corporation is hereby reserved, provided that in no event shall any
Participant's Supplemental Benefit accrued to the date of such amendment or
termination be reduced or modified by such action.
IN WITNESS WHEREOF, the undersigned members of the Committee,
pursuant to the authority delegated to the Committee by resolutions of the
Board dated January 27, 1994, have executed this restatement of the Plan,
this 6th day of March, 1997.
/s/ Michael E. Murphy
_____________________________
/s/ Gary C. Grom
_____________________________
As Committee Members
<PAGE>
SARA LEE CORPORATION
FY98 NON-QUALIFIED
DEFERRED COMPENSATION PLAN
(ANNUAL BONUS)
1. PURPOSE: The purpose of the Sara Lee Corporation FY98 Non-Qualified
Deferred Compensation Plan (Annual Bonus) (the "Plan") is to permit a
Participant, as defined below, to defer the payment of 25% or more of
his/her FY98 annual bonus award earned under the provisions of an annual
(short-term) bonus plan of Sara Lee Corporation or any of its subsidiaries
incorporated under the laws of any state in the United States (the
"Company").
2. PARTICIPANTS: A Participant shall mean an employee of the Company who is a
participant in a short-term (annual) performance incentive plan for fiscal
year 1998 ("Participant").
3. ADMINISTRATION OF THE PLAN: The Plan shall be administered by the
Compensation and Employee Benefits Committee of the Board of Directors of
Sara Lee Corporation (the "Committee"). The Committee may delegate certain
administrative authority to employee(s) of the Company, but shall retain
the responsibility for interpretation and modification of the Plan.
4. DEFERRED COMPENSATION: "Deferred Compensation" shall mean the amount of
the FY98 annual bonus awarded but deferred in accordance with the terms of
Paragraph 5 of the Plan.
5. ELECTION TO DEFER COMPENSATION: A Participant may elect to defer at least
25% of his/her FY98 bonus award earned under an annual (short-term) bonus
plan. Such deferral shall be effected by executing a Deferred Compensation
Agreement ("Agreement"), in the form set forth in Exhibit A of the Plan,
and executing the Agreement ON OR BEFORE JUNE 28, 1997.
6. PAYMENT OF DEFERRED COMPENSATION: A Participant may elect in the Agreement
to receive the payment(s) of Deferred Compensation in annual installments
commencing in the year specified therein, or in a lump sum in the year
specified therein, provided that the payments do not commence or, in the
case of a lump sum, are not made during the tax year in which it is earned.
7. IRREVOCABILITY: An election to defer, filed in accordance with paragraph 5
above, is binding and irrevocable and paragraph 3 of the Agreement may not
be modified or amended except as specified in paragraphs 10 and 12 below.
<PAGE>
8. MAINTENANCE OF DEFERRED COMPENSATION ACCOUNTS: The Company will maintain a
separate Deferred Compensation Account ("Account") for each Participant.
On June 30 and December 31 of each year and on the date of final payment
from the Account, the Company will credit the Account with interest on the
outstanding balance (principal and interest to date). The rate of interest
for each fiscal year will be set at the beginning of each fiscal year based
on the current cost to Sara Lee Corporation of issuing five year maturity
debt. The rate will be the average of quotes from two prominent investment
banks, but will not be lower than five year maturity debt for a company
whose credit rating is comparable to that of Sara Lee Corporation.
9. RETIREMENT: In the event that a Participant retires before all the
Deferred Compensation is paid from his/her Account, the Plan shall remain
in effect and his/her Account shall continue to be maintained by the
Company for the benefit of the Participant and paid in accordance with the
Agreement.
10. DEATH OR TOTAL DISABILITY OF PARTICIPANT: Upon the death or total
disability of a Participant (total disability as defined in the Sara Lee
Corporation Key Executive Disability Income Plan), the payment of the
Account balance shall be made as requested by the totally disabled
Participant, designated beneficiary (or beneficiaries) or the
Executor/Executrix of the Participant's estate. This request must be made
in writing to the Corporate Compensation Department within 180 days
following the death or total disability of a Participant. If this request
is not made within 180 days following the death or total disability of a
Participant, the Deferred Compensation will be paid in accordance with the
Agreement.
11. TERMINATION OF EMPLOYMENT: The Plan shall remain in effect and the Account
shall continue to be maintained by the Company for the benefit of a
Participant and paid in accordance with the Agreement in the event that the
Participant terminates employment with the Company for any reason before
all the Deferred Compensation is paid from his/her Account.
12. FINANCIAL HARDSHIP: Notwithstanding the time and frequency of the date of
payment of Deferred Compensation designated in the Agreement or in
paragraphs 9, 10 and 11 hereof, the Senior Vice President-Human Resources
of Sara Lee Corporation, as the representative for the Committee, may
authorize, upon written application to the Corporate Compensation
Department by the Participant, his/her designated beneficiary or the
Executor/Executrix of the Participant's estate, the acceleration of
Deferred Payments (including a lump sum payment) provided that the
requesting party can substantiate to the reasonable satisfaction of the
Senior Vice President-Human Resources of Sara Lee Corporation that
adherence to the designated payment form and/or schedule set forth in the
Agreement would result in severe financial hardship to the Participant,
his/her designated beneficiary or to his/her estate. A bonafide financial
hardship must be the result of an unanticipated event. Such accelerated or
lump sum payment shall not exceed the amount required to meet the financial
need of the Participant, his/her designated beneficiary or his/her estate.
<PAGE>
13. NO RIGHTS OF EMPLOYMENT: Participation in the Plan in no way constitutes a
contract or agreement to continued employment of the Participant by the
Company for any fixed period of time.
14. STATUS OF OBLIGATION: The balances accumulated in the Accounts under the
terms of the Plan shall constitute general contractual obligations of the
Company. The Company shall not segregate assets, create any security
interest, or encumber its assets in order to provide for the payment(s) of
the balance(s) which shall accumulate in the Accounts. Notwithstanding the
preceding sentence, the Company may, in its sole discretion, establish an
irrevocable grantor trust, the assets of which shall be subject to the
claims of the Company's creditors in the event of the Company's bankruptcy
or insolvency, and if so established, benefits payable under the Plan shall
be paid from such trust to the extent not otherwise paid from the Company's
general assets.
15. NON-ASSIGNABILITY: The rights and benefits of a Participant under the Plan
are personal and cannot be pledged, transferred or assigned except upon a
Participant's death, to a beneficiary (or beneficiaries) designated in the
Agreement, or if no beneficiaries are so designated, to the Participant's
estate and thereafter as determined by will or the laws of descent and
distribution. A Participant may, subsequent to the execution of the
Agreement, modify the beneficiary or beneficiaries currently designated.
16. AMENDMENT(S): Any substantive amendment(s) to the Plan shall be approved
by the Committee. No amendment(s) shall be made which would adversely
affect the tax status of the Deferred Compensation accumulated in the
Accounts.
17. EFFECTIVE DATE; TERMINATION: The Plan shall become effective June 29,
1997, subject to approval by the Committee. The Committee may terminate
the Plan at any time; however, such termination shall not affect the rights
of Participants which were accrued prior to such termination. In the event
of a termination, the Committee will comply with a Participant's election
regarding the distribution of the Deferred Compensation.
18. PREDECESSOR PLANS: The rights and provisions as described in this document
are applicable to this Plan only and shall not apply to any other deferred
compensation plan of the Company in which a Participant is a participant.
<PAGE>
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 "Non-Employee 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
<PAGE>
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.
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
<PAGE>
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 my 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 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
<PAGE>
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 the 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 or 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 Shares were 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
<PAGE>
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 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 for 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 any particular Award in the manner set
forth in the related Award agreement.
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,
<PAGE>
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).
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.
<PAGE>
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, 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.
<PAGE>
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.
i. FOREIGN EMPLOYEES --- Without amending this Plan, the Committee may
grant awards to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may, in the
judgment of the Committee, be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such
purposes, the Committee may make such modifications, amendments, procedures,
subplans and the like as may be necessary or advisable to comply with
provisions of laws in other countries or jurisdictions in which the
Corporation or its subsidiaries operates or has employees.
As adopted on August 31, 1995 and approved by stockholders on October 26,
1995 and amended on January 30, 1997 and amended on June 26, 1997 and amended on
August 28, 1997.
<PAGE>
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 from 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 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,
<PAGE>
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.
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.
<PAGE>
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 Article 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 --- TRANSFERABILITY OF OPTIONS
Options 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 any particular Option in the
manner set forth in the related Stock Option Agreement.
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
<PAGE>
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.
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 GRANT OF OPTIONS OR SHARES. On the first day of November of each year,
Options or Shares, or a combination thereof, shall be granted to each
Non-Employee Director who, at least ten business days 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, Options or Shares,
or a combination thereof, shall be granted to such Non-Employee Director on the
tenth business day (the "Effective Date") after the date such Non-Employee
<PAGE>
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 shall be
irrevocable on and after the tenth business day prior to the date of grant of
the Options or Shares, as the case may be. 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
<PAGE>
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 of 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.
ARTILCE 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.
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
<PAGE>
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.
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, evident 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.
As adopted on March 30, 1995 and approved by the stockholders on October
26, 1995 and amended on January 30, 1997 and amended on June 26, 1997.
<PAGE>
SARA LEE CORPORATION
SEVERANCE POLICY FOR CORPORATE OFFICERS
EFFECTIVE FEBRUARY 1, 1994
1. INTRODUCTION. This document sets forth the policy of Sara Lee
Corporation ("Corporation") governing severance payments and benefits
("Severance") to be made in the event of the involuntary termination of
employment with the Corporation of an officer of the Corporation elected by
the Board of Directors and eligible to participate in the Corporation's
Long-Term Performance Incentive Plans ("Officer" or "Terminated Officer").
2. STATEMENT OF GENERAL POLICY. It is the policy of the Corporation that
an Officer whose employment with the Corporation has been involuntarily
terminated for any reason other than for "Cause" (as defined in Section 3(i)
below), death, disability or retirement shall be entitled to specified
Severance. This Policy duly recognizes the circumstances of termination,
years of service with the Corporation and age on the date of termination as
factors to be considered in the determination of the amount of Severance to
be paid to a Terminated Officer. The Objectives of this Policy are to:
(1) provide a Terminated Officer with reasonable compensation to bridge the
Terminated Officer until reemployment or normal retirement, and (2) provide
reasonable consideration for the release of the Corporation of all claims
against it by a Terminated Officer.
This Policy is inapplicable to a Terminated Officer in circumstances
where (i) the Officer is relieved of his or her responsibility and is
immediately offered new employment with the Corporation or is transferred to
a subsidiary or affiliate of the Corporation, with the consent of the
Officer, (ii) the Corporation divests itself of a subsidiary, division or
operation as a going concern which employed the Officer and the employment of
the Officer by such division, subsidiary or operation is continued by the new
or acquiring entity either on substantially the same financial terms and
conditions as prior to the disposition of such division, subsidiary or
operation or on such financial terms and conditions acceptable to the
Officer, or (iii) the Terminated Officer voluntarily resigns.
3. CATEGORIES OF TERMINATION OF EMPLOYMENT. The categories of
termination, which shall determine the amount of Severance to be paid to a
Terminated Officer, are:
(i) TERMINATION FOR CAUSE ("Category I Termination"). Termination for
Cause is a termination of employment by the Corporation when the Officer
has willfully engaged in conduct demonstrably and materially injurious to
the Corporation or is convicted of or confesses to a crime involving
dishonesty, moral turpitude or other disreputable behavior.
(ii) TERMINATION FOR GOOD REASON ("Category II Termination").
Termination for Good Reason is a termination of employment when (a) the
Officer is terminated because of unacceptable performance, (b) the
Officer's employment is terminated involuntarily due to an organization
restructuring which results in the elimination of the Officer's position
or function, or (c) the Officer terminates his or her employment at the
request of the Corporation.
<PAGE>
The characterization of an Officer's termination under this Policy shall
be made by the Corporation's Senior Vice President-Human Resources.
4. SEVERANCE BENEFITS PAYABLE.
CATEGORY I TERMINATION. An Officer terminated under the circumstances
of a Category I Termination shall receive no Severance from the Corporation
under this Policy.
CATEGORY II TERMINATION. An Officer terminated under the circumstances
of a Category II Termination shall:
(A) receive, for each full year of employment with the Corporation
or any subsidiary or affiliate of the Corporation (including the years of
employment with a corporation acquired by the Corporation), three (3)
months' salary (in effect on the date of termination), if he or she is an
Executive Vice President or an officer senior thereto and a Director of
the Corporation; two (2) months' salary (in effect on the date of
termination), if he or she is a Senior Vice President; or one (1) month's
salary (in effect on the date of termination), if he or she is a Vice
President, but in no event shall this Salary Portion of Severance be less
than twelve (12) months' salary or more than twenty four (24) months'
salary;
(B) be paid a pro-rata amount (to the effective date of termination
of employment) of
(i) the annual bonus payable under the Annual Bonus Plan of the
Corporation in effect with respect to the fiscal year in which the
termination of employment shall occur, assuming a Superior level of
performance with respect to the non-discretionary portion of such
bonus; and
(ii) the long-term bonus payable under the Long-Term
Performance Bonus Plan of the Corporation terminating at the end of
the fiscal year closest to the date of termination (forfeiting
participation in any long-term bonus plans ending thereafter); and
(C) at the discretion of the Chief Executive Officer of the
Corporation, be paid an additional Salary Portion of Severance up to
three (3) additional months' salary if the Officer is age 40 years or
older but less than age 50 on the date of termination of employment or up
to six (6) additional months' salary if the Officer is age 50 or older on
the date of termination of employment.
TERMINATION OF BENEFITS. All Severance shall cease on the earliest of
(1) the Terminated Officer's 62nd birthday, provided that he or she is
eligible to begin to receive pension benefits under the Sara Lee Corporation
Consolidated Pension and Retirement Plan or any other qualified retirement
plan of the Corporation (a "Retirement Plan") at age 62, (2) the date the
Terminated Officer becomes employed by a competitor of the Corporation or any
of its subsidiaries or becomes reemployed by the Corporation and (3) the date
the Terminated Officer begins to receive benefits from a Retirement Plan.
<PAGE>
HEALTH COVERAGE. If a Terminated Officer eligible for Severance elects
to continue health insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), the period such coverage will be
offered will not be less than the Severance Period (i.e. the period the
Terminated Officer is expected to receive the Salary Portion of Severance)
and the Corporation will subsidize the premium for such continuation coverage
during the Severance Period to the extent that the Terminated Officer would
otherwise be required to pay more for such coverage during that period than a
similarly situated active employee would be required to pay for comparable
coverage. After the end of the Severance Period, the Terminated Officer will
be required to pay the full COBRA premium. If the Terminated Officer is
eligible for early retirement under the terms of the Sara Lee Corporation
Consolidated Pension and Retirement Plan (or would become eligible if the
Severance Period is considered as employment) the Terminated Officer may
elect to receive retiree health care coverage.
PARTICIPATION IN OTHER PLANS. Except as otherwise provided herein,
participation in all other plans available to the Executive Benefit Group,
including but not limited to, qualified pension plans, stock purchase plans,
401(k) plans and ESOPs, personal accident insurance, travel accident
insurance, short and long term disability insurance and accidental death and
dismemberment insurance, shall cease on the Officer's date of termination.
Non-qualified Supplemental ESOP and pension benefits will be provided to a
Terminated Officer eligible for Severance through the Corporation's
Supplemental Benefit Plan by treating the Severance Period as a period of
employment with the Corporation. The Corporation shall continue to pay
premiums during the Severance Period on any policy purchased by such a
Terminated Officer under the Executive Life Insurance Program and will
continue to pay premiums after the Severance Period pursuant to the Executive
Life Insurance Program if the Terminated Officer is eligible for early
retirement or becomes eligible for early retirement during the Severance
Period. Any stock option awards such Terminated Officer received prior to
the date of termination shall continue to vest during the Severance Period
pursuant to the terms of the stock option plan. Any stock option awards that
vest prior to the end of the Severance Period must be exercised by the
Terminated Officer within the applicable periods specified in the option
plan. A Terminated Officer who continues to be eligible for Severance shall
continue to participate in the Estate Builder Plan at the Target Rate. The
Terminated Officer can surrender the Corporation car at termination of
employment or purchase the car from the Corporation at the car's then fair
market value. Reimbursement of club memberships and expenses incurred after
the Terminated Officer terminates employment shall cease on the termination
of employment and the Matching Grant Program shall also terminate at
termination of employment.
5. MODE OF PAYMENT OF SEVERANCE. The Salary Portion of the Severance
shall be paid bi-weekly in accordance with the Corporation's Corporate Office
pay schedule, unless the Chief Executive Officer of the Corporation, at his
sole discretion, shall elect to pay the Salary Portion in a lump sum payment
or a combination of bi-weekly payments and a lump sum payment. The bonus
payment segment, if any, of the Severance shall be paid to the Terminated
Officer on the same date the active participants under the bonus plans are
paid.
6. SEPARATION AGREEMENT. No benefits under this Policy shall be payable
to any Terminated Officer until the Terminated Officer and the Corporation
have executed a Separation Agreement (in substantially the form approved by
<PAGE>
the Committee or its Chairman, with such revisions or modifications as shall
be deemed necessary or appropriate by the Senior Vice President-Human
Resources) and the payment of benefits under this Policy shall be subject to
the terms and conditions of such Separation Agreement.
7. DEATH OF TERMINATED OFFICER. In the event that the Terminated
Officer shall die prior to the completion of the payments of the Salary
Portion and prior to the payment of the bonus payment segment of the
Severance, the Terminated Officer's estate or beneficiary, whichever is
applicable, shall be paid the remaining payments of the Salary Portion and
the unpaid bonus payment. Such payments shall not affect or reduce any other
death benefits which the Terminated Officer's estate or beneficiary shall be
entitled to receive under other plans of the Corporation.
8. POLICY INTERPRETATIONS AND VARIATIONS. The Compensation and Employee
Benefits Committee of the Corporation shall administer this Policy, the
Committee or its representative shall decide any issues and disputes arising
under this Policy, and the decision of the Committee shall be binding and
conclusive on the Terminated Officer and the Corporation. Any variations
from the Policy may only be made by the Committee in its sole discretion.
<PAGE>
Ex. 10(24)
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of January 1, 1996 by and between Sara Lee
Corporation, a Maryland corporation, with its principal place of business
at Three First National Plaza, Suite 4600, Chicago, Illinois 60602 U.S.A.
60602 ("Sara Lee"), and F.L.V. Meysman, an individual whose principal
residence is at Nachtegaallaan 1, 2243 EL Wassenaar, the Netherlands
("Meysman").
INTRODUCTION
A. Meysman is a Senior Vice President of Sara Lee. Meysman also serves as
Chairman of the Board of Management of Sara Lee|DE N.V., an indirect,
wholly-owned subsidiary of Sara Lee, incorporated in the Netherlands ("Sara
Lee|DE") .
B. Meysman has agreed to continue to serve Sara Lee and Sara Lee|DE as a
Senior Vice President and as Chairman of Sara Lee|DE's Board of Management,
respectively, in consideration for certain compensation and benefits.
C. Meysman has entered into a written employment agreement with Sara Lee
dated November 9, 1994, providing for certain compensation and benefits to
Meysman in consideration for his services as Senior Vice President (the
"Employment Agreement").
D. Meysman has entered into a written employment agreement with Sara Lee|DE
dated as of November 9, 1994, providing for certain compensation and benefits
related to his services as Chairman of the Board of Management of Sara Lee|
DE (the "Sara Lee|DE Employment Agreement").
E. Meysman and Sara Lee desire to amend and restate the terms of the
Employment Agreement.
Now therefore, Sara Lee and Meysman hereby agree to amend and restate the
Employment Agreement as follows:
1. EMPLOYMENT - DUTIES AND RESPONSIBILITIES
Subject to the terms and conditions of this Agreement, Sara Lee agrees
to continue to employ Meysman in the capacity of Senior Vice President.
In consideration of the compensation and benefits provided for in this
Agreement, Meysman agrees to perform such services as may be requested
from time to time by Sara Lee. Without limiting the foregoing, Meysman
agrees to assist with the ongoing design and development of Sara Lee's
corporate and business strategies, acquisition and divestment policies,
business planning, human resources policies, (cross divisional) management
development programs and corporate communications policies. In addition
Meysman agrees to (i) represent Sara Lee externally and enhances investor
relations and (ii) contribute to and establish programs and policies to
optimize the financial results of the respective divisions and operating
companies of Sara Lee. In undertaking the foregoing duties and
responsibilities, the parties acknowledge and agree that Meysman requires
to be in the U.S.A. for at least twenty days per year.
2. EMPLOYMENT AT WILL
The parties acknowledge and agree that Meysman shall hold his office as
a Senior Vice President of Sara Lee at the pleasure of the Board of
Directors of Sara Lee, and that consequently, Meysman is an "at will"
employee and this Agreement and his employment may be terminated by
Sara Lee at any time without reason or cause.
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3. ANNUAL SALARY
In consideration for the services rendered by Meysman to Sara Lee,
during the term of this Agreement and commencing as of January 1, 1996
Sara Lee shall pay Meysman an annual gross salary of NLG 178,000. Sara
Lee shall evaluate Meysman's performance at least annually and may adjust
his annual gross salary as of January 1 of each succeeding year that
this Agreement remains in effect. Sara Lee shall pay Meysman's salary,
after deducting or withholding all applicable payroll taxes and
premiums due in the U.S.A., paid in advance, in four quarterly
installments, on or about the last business day of December, March,
June and September. At Meysman's request, Sara Lee will arrange for the
direct deposit (via wire transfer or other electronic delivery) of
Meysman' s quarterly annual salary payments to Meysman's bank or other
financial institution.
4. SHORT-TENM (ANNUAL) PERFORMANCE INCENTIVE PLAN
During the term of this Agreement, Meysman shall be entitled to
participate in the Sara Lee Corporation Short-Term (Annual) Performance
Incentive Plan (the "Annual Plan") in accordance with the terms and
conditions of the Annual Plan. The Annual Plan currently provides for
the opportunity to earn additional compensation payable in cash (the
"Annual Bonus"). The potential amount of the Annual Bonus may be
related to the performance of operating businesses for which Meysman is
responsible, the performance of Sara Lee Corporation in its entirety,
and the performance of Meysman in meeting certain individual
performance criteria.
Under the terms of the Annual Plan Meysman shall be eligible to earn an
incentive award, payable in cash, of up to 100% of his annual salary during
each fiscal year. The performance standards against which his award will be
determined shall be established at the beginning of each fiscal year during
the term of this Agreement by the Sara Lee executive to whom Meysman reports
and the terms and provisions established for the Annual Plan by Sara Lee's
Board of Directors, or a committee thereof. Any award earned by Meysman under
the Annual Plan payable in cash shall be paid to Meysman at the same time as
awards under the Annual Plan are paid to other Sara Lee executives.
5. FINANCIAL COUNSELING
During the term of this Agreement, Sara Lee shall reimburse Meysman for
amounts paid by him related to his personal financial counseling in
accordance with the terms and conditions of the Sara Lee Corporation
Personal Financial Counseling Program.
6. AGREEMENT WITH RESPECT TO CONFIDENTIAL INFORMATION
(a) NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Meysman agrees, during the term of employment and after employment,
to keep confidential all information relating to the business of Sara
Lee which he learns or develops or has access to during the term of
this employment, excepting only such information as is already known to
the public, or becomes known to the public through no fault of Meysman,
and not to use (except in the ordinary course of his employment),
release, or disclose the same except with the prior written permission
of Sara Lee.
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As used in this Agreement, "confidential information" means any
information or compilation of information relating to the business of
Sara Lee not publicly known or readily ascertainable by proper means.
It includes, but is not limited to, trade secrets, customer lists,
price lists, and information relating to products, technology,
research, development, manufacturing, purchasing, accounting,
engineering, marketing, merchandising and selling.
(b) SARA LEE PROPERTY
Meysman agrees that all Sara Lee property including records, files,
memoranda, reports, price lists, customer lists, plans, documents,
equipment and the like, relating to the business of Sara Lee, which
Meysman shall use or prepare or come into contact with, shall be the
exclusive property of Sara Lee. Meysman further agrees that, upon
request by Sara Lee, and in any event upon termination of employment,
Meysman shall turn over to Sara Lee such property in his possession or
under his control.
7. REMEDIES
Meysman agrees that this Agreement is intended to protect and
preserve legitimate business interests of Sara Lee and that it will be
difficult, if not impossible, to compute the amount of loss and damage to
Sara Lee if Meysman should breach his covenants under this Agreement. It is
further agreed that any breach or threatened breach of this Agreement may
render irreparable harm to Sara Lee.
Accordingly, in the event of a breach or threatened breach by Meysman, Sara
Lee shall have available to it all remedies provided by law or equity,
including, but not limited to, preliminary and permanent injunctive relief,
without the requirement to deliver or post security, to restrain Meysman from
violating this Agreement. Nothing herein shall be construed as prohibiting
Sara Lee from pursuing any other remedies available to it. Notwithstanding
any legal remedies available to Sara Lee as a result of a breach of this
Agreement, in the event of a breach by Meysman, Sara Lee shall be entitled to
withhold and avoid payment of any money or other benefits due or to become
due under this or any other agreement between Meysman and Sara Lee with the
exception of any basic compensation earned prior to termination.
8. TERMINATION AND SEVERANCE
In the event this Agreement is terminated by Sara Lee, Meysman shall be
eligible for severance benefits subject to the terms and conditions of the
Sara Lee Corporation Severance Policy for Corporate officers, as amended from
time to time (the "Policy"). The severance benefits, if any, payable under
the Policy shall be the sole and exclusive severance benefits payable to
Meysman.
9. OTHER TERMS AND CONDITIONS OF EMPLOYMENT
This Agreement shall not be deemed to amend or modify the terms and
conditions of the Sara Lee|DE Agreement. The Sara Lee|DE Agreement shall
remain in full force and effect in accordance with its provisions.
10. GOVERNING CONDITIONS
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of
Illinois.
<PAGE>
11. ENTIRE AGREEMENT/AMENDMENTS
This Agreement supersedes all existing agreements between the parties,
whether written or oral, including the Employment Agreement with respect to
Meysman's employment by Sara Lee. No change, modification or amendment of
this Agreement shall be of any effect unless in writing and signed by Meysman
and Sara Lee.
/s/Frank L. Meysman
- ---------------------------
Frank L. Meysman
SARA LEE CORPORATION
/s/Gary C. Grom
-------------------------------
By: Gary C. Grom
Senior Vice President
Human Resources
<PAGE>
Ex-10(25)
Translation of Employment Agreement between Sara Lee|DE and Mr. F. Meysman,
duly signed on June 11, 1997
- ----------------------------
EMPLOYMENT AGREEMENT
The undersigned:
1. SARA LEE/DE N.V., with its head office established in Joure, and with
offices in Utrecht, represented in law for these purposes, in pursuance of
the provision of Article 24, paragraph 2 of the Company's articles of
association, by H.B. van Liemt, in his capacity as Chairman of the
Supervisory Board,
hereinafter referred to as "the Company"
and
2. Mr. F. Meysman, resident at Nachtegaallaan 1, 2243 EL Wassenaar, the
Netherlands,
hereinafter referred to as the "Managing Director"
TAKING INTO ACCOUNT THE FACT THAT:
the Managing Director entered the employment of Douwe Egberts N.V. in Belgium
on January 16, 1986 as the Marketing Director of Douwe Egberts Belgium, and
entered into the employment of the Company on September 1, 1990, where he has
successively held the positions of Senior Vice President Corporate Strategy &
Business Development, member of the Coffee & Grocery Board, and the position
of Chairman of the Household & Personal Care Board; the Managing Director was
appointed as Vice President in 1992, and as Senior Vice President of Sara Lee
Corporation ("SLC") on April 6, 1994;
the Company's Supervisory Board decided on April 16, 1992, to appoint the
Managing Director as a member of the Company's Board of Management;
in pursuance of Article 21, paragraph 1 of the Company's Articles of
Association, the Company's Supervisory Board decided on April 19, 1994 to
appoint the Managing Director as Chairman of the Company's Board of
Management;
the Managing Director is familiar with the affiliation understandings between
SLC and the Company;
the Company's Supervisory Board, in accordance with Article 22 of the
Company's Articles of Association, has resolved on December 7, 1995, to
revise the terms and conditions of employment of the Managing Director,
effective as of January 1, 1996;
the Managing Director accepts the above referred to revision of the terms and
conditions of employment, applicable to him;
in consideration of the above referred to revision of the terms and
conditions of employment, applicable to the Managing Director, parties hereto
have deemed it desirable to amend the employment-agreement, signed as per
November 9, 1994, in conformity with the resolution, adopted December 7,
1995, of the Company's Supervisory Board;
the parties wish to arrange the unaffected continuation of their working
<PAGE>
relationship of the Managing Director with the Company, taking into account
the provisions of Article 22 of the Articles of Association of the Company,
whereby this agreement will replace the employment-agreement, dated November
9, 1994, in its entirety;
COME TO THE FOLLOWING AGREEMENT:
ARTICLE 1 - DURATION
a. This agreement enters into force on January 1, 1996, and replaces all the
employment agreements concluded between the Company and the Managing Director
before that date, and/or agreements concluded regarding their employment
relationship, which hereby lapse.
b. Without prejudice to the provisions of Appendices A and B of this
agreement, this agreement is concluded for an indeterminate period, and can
be terminated by either of the parties by registered letter at the end of a
calendar month, taking into account a six-month period of notice, as well as
taking into account the provisions relating to the dismissal of members of
the Board of Management, laid down in the Articles of Association of the
Company.
c. This agreement legally ends in any case without any termination being
required when a member of the Board of Management reaches the age at which
he is obliged to retire in accordance with the Articles of Association of
the Company.
ARTICLE 2 - TASK/SCOPE OF COMPETENCE
a. The Managing Director is obliged to perform his tasks in accordance with
the provisions of the law and of the Articles of Association of the Company
in this respect. Moreover, the Managing Director is obliged to always observe
the "Management Rules" laid down in accordance with Article 20, paragraph 2
of the Articles of Association, if these exist, and for as long as they
exist.
b. The Managing Director is the Chairman of the Board of Management, and this
board is responsible for the management of the Company. As Chairman, the
Managing Director is responsible in particular for the following fields:
strategy, general operational state of affairs, financial policy, internal
and external communication, human resources and legal matters.
The Supervisory Board has the right at any time to make additions or
amendments to the job description, following consultation with the Board of
Management and in consultation with the Managing Director.
<PAGE>
c. The Managing Director will be required to fulfill managing function(s) for
the Company's subsidiary and/or affiliated companies of the Company or
being part of the concern of SLC and to perform services for such
companies in addition to his function as Chairman of the Board of
Management.
d. The Managing Director will, apart from his position as Chairman of the Board
of management of the Company, continue to render services to SLC based upon
his position of Senior Vice President of SLC and his existing
employment-agreement with SLC.
e. The Managing Director is obliged to observe the Code of Conduct and
comparable Codes of SLC, as drawn up at intervals. The Code of Conduct
contains provisions, inter alia, relating to restrictions imposed on private
investments.
ARTICLE 3 - PRIMARY CONDITIONS OF EMPLOYMENT
a. SALARY
The Managing Director has the right to an annual gross salary of NLG 351,000
as of January 1, 1996. This salary includes all the legally compulsory
payments of any nature, including holiday pay and year-end allowance.
b. INCENTIVE AWARD
The Managing Director is entitled to an annual cash incentive award of
maximum 100% of his gross salary, earned during the fiscal year, depending on
the incentive award score expressing the performance of the Managing Director
for his services in the respective passed fiscal year, rendered to the
Company. The incentive award will each year be established, based on the
incentive award criteria, which have been laid down in writing on forehand in
consultation with the Managing Director by or on behalf of the Company's
Supervisory Board and the incentive award score determined after consultation
with the Managing Director by the Company's Supervisory Board after the
respective fiscal year has ended. The Company's Supervisory Board may
establish further specifications regarding the determination of incentive
award criteria and -scores.
c. PAYMENT
Payment of salary will be made on a monthly basis, in arrears by the end of
the respective month. Payment of the established incentive award will be made
in September of each year.
d. REVISION
The Managing Director's salary may be revised annually on January 1 on the
basis of the Managing Director's performance, assessed by the Company's
Supervisory Board, and of the general market developments relating to jobs at
a comparable level. The Managing Director will be informed on each salary
revision in writing.
<PAGE>
The first revision has taken place on January 1, 1996, and is included in
the annual gross salary, stated in Article 3, paragraph a. of this
agreement.
e. ILLNESS
For the first year of illness 1n which the Health Act is applicable, and the
following two years in which the party is unable to work because he is
incapacitated, the Company will supplement the payments made in accordance
with the Health Act or Disability Act respectively (or a legal regulation
which comes to replace or supplement these) to 100% of the salary applicable
on the day preceding the first day of illness, revised in the way described
in paragraph d. of this article. Payments made on the basis of the above
mentioned insurances will, in the case that the Managing Director reaches the
age of retirement during the period of illness or disability, be deducted
from the pension payments for the period concerned.
f. CLAUSE RELATING TO CLAIMS
The Company has no obligation to make any payment for disability as referred
to in paragraph e. of this article, if and insofar as the Managing Director
is able to make a claim for compensation for loss of salary from a third
party, in connection with his disability.
In that case, the Company will only pay sums equivalent to those referred to
in paragraph e. of this article, as an advance on the compensation for
damages to be received from the third party, and if the Managing Director
cedes his right to the Company to collect compensation for damages up to
the sum of the advances paid out by the Company.
The Company's obligation to pay the Managing Director the sums collected for
the compensation for damages is legally compensated with the advances paid
out to him.
g. STOCK OPTION PLAN
In consideration of your position as member of the Board of Management of the
Company and the duties related hereto, the Managing Director shall be
entitled to participate in any stock option plan of SLC providing for the
granting of options to purchase shares of the Company's securities to a
specified period of time at the market value of such shares on the date of
grant of the options and in any plans of SLC, which provide for the granting
of shares under a restricted stock plan. The number of stock options and/or
restricted shares, to which the Managing Director shall be entitled, will be
established within a particular plan established by the Board of Directors of
SLC or a committee thereof. The Managing Director shall be entitled to
participate in the above described benefit plans on the basis of his position
as Chairman of the Board of Management of the Company as well as his position
as Senior Vice President of SLC in relation to the same employment grade and
rank vis a vis comparable management positions within SLC.
The Company's Supervisory Board acknowledges the above described entitlement
of the Managing Director and gives its consent in regard of the discretionary
authority of the Board of Directors of SLC or a committee thereof.
<PAGE>
ARTICLE 4 - SECONDARY CONDITIONS OF EMPLOYMENT
a. HOLIDAY RIGHTS
The Managing Director is entitled to thirty days holiday per year. The
Managing Director takes his holiday in mutual consultation with the other
members of the Board of Management. In case of more lengthy absence, the
Managing Director will inform the Chairman of the Company's Supervisory Board
thereof.
b. PENSION ARRANGEMENTS
The pension arrangements laid down in Appendix C. apply to the Managing
Director.
c. The surviving relatives of the Managing Director have the right to a
payment as laid down in Article 7A, 1639.1 of the Civil Code.
ARTICLE 5 - TERTIARY CONDITIONS OF EMPLOYMENT
a. The Managing Director is, and will continue to be included in the
voluntary collective sickness insurance concluded by the Company. The
premiums for this are entirely at the Managing Director's expense. 60% of the
premium payable by the Managing Director is reimbursed by the Company on the
basis of insurance class 2a for the Managing Director and his wife, and
class 3 for his children.
b. CAR ARRANGEMENT
1. The Managing Director will have a suitable car with chauffeur at his
disposal at the Company's expense for business use.
2. Besides the arrangement sub 1., the Managing Director is entitled to car
facilities, laid down in the car arrangement applicable to members of the
Board of Management of the Company, for business as well as private
purposes.
c. TELEPHONE EXPENSES
The Company will reimburse the Managing Director the total cost of
telephone and fax connections and -communications at his home address with
deduction of an own contribution according to the arrangement, applicable to
members of the Board of Management of the Company.
d. EXPENSES WHICH CAN BE DECLARED
Expenses incurred by the Managing Director in the context of the performance
of his tasks on behalf of the Company, as a member of the Board of
Management, such as travelling and accommodation expenses, are reimbursed by
the Company on the basis of the submission of statements, to be administered
per quarter.
The statements must on request be sent to the Chairman of the Supervisory
Board of the Company.
e. EXPENSES WHICH CANNOT BE DECLARED
The Company pays the Managing Director a representation fee for expenses
which cannot be declared, which can be changed at any instance by the
Company's Supervisory Board.
<PAGE>
As of January 1, 1996 till the moment this representation fee is changed,
this fee amounts to NLG 18,000.-- per year. Payment hereof will be made on a
monthly basis.
f. INSURANCE FOR LEGAL LIABILITY
As Chairman of the Board of Management, and in every capacity in which he
acts for or in relation to the Company, the Managing Director is insured for
the duration of this agreement and afterwards for his legal liability, in
accordance with the policy appended in Appendix D. The costs of the insurance
are at the Company's expense. If the Managing Director is pronounced to be
legally liable for damages on the basis of his above mentioned liability, and
this is not covered by the above mentioned insurance policy, the Company will
reimburse the Managing Director for the damages suffered by the Managing
Director, unless the legal decision established that the Managing Director
was guilty of deliberate action or gross malpractice. The Managing Director
is obliged to maintain confidentiality vis-a-vis everyone regarding the
provision of this paragraph f.
ARTICLE 6
a. If the Managing Director receives any payment or reimbursement for any
function which he fulfills in his capacity of a member of the Company's
Board of Management, he shall pay it (or have it paid) into the Company's
funds.
b. For services, rendered by the Managing Director to companies being part of
the concern of SLC or the Company, the Managing Director is entitled to
receive compensations or benefits, which may be considered privately
earned employment income, provided these services are performed with the
prior consent in writing of the Company's Supervisory Board and provided
these services have a structural basis and require a direct involvement of
the Managing Director with the respective companies in view of their
business activities.
ARTICLE 7 - SUBSIDIARY JOBS
Notwithstanding the provision in Article 6, paragraph b. of this agreement,
the Managing Director undertakes not to work for any other employer, either
directly or indirectly, to refrain from doing business at his own expense,
and not to accept any post or take any salaried and/or time consuming
unsalaried position without the prior consent in writing of the Company's
Supervisory Board for the duration of his employment.
The Managing Director declares that on the date of signing of this agreement
he is fulfilling the subsidiary jobs, listed in Appendix E. of this
agreement, for which the Supervisory Board hereby grants the above mentioned
consent.
The payments and/or reimbursements in connection with the subsidiary jobs
referred to in this article do not have to be deducted from the salary
mentioned in Article 3, paragraph a, or from any payment or reimbursement
mentioned in this agreement.
<PAGE>
ARTICLE 8 - NON-COMPETITION
a. The Managing Director shall not, either directly or indirectly and either
on his own behalf or on behalf of any other, carry on or be engaged in any
business whatsoever which competes with the business of the Company and its
affiliated companies, nor render services, in whatever form, directly or
indirectly in this respect during the continuance of the employment as well
as during a period of twenty four months after termination of the employment
with the Company.
The Chairman of the Supervisory Board may on request waive the non
competition obligation regarding a specific activity or engagement of the
Managing Director, taking into account the potential damage to the Company
and its affiliated companies. Such request of the Managing Director will not
be withheld unreasonably.
Moreover, the Managing Director agrees not to attempt to entice away from the
Company or its affiliated companies any employee thereof during the above
mentioned period.
b. In the event of a breach of the obligations referred sub a. of this
article by the Managing Director, the Company shall be entitled, without any
notification being required, a contract penalty in the amount of one time the
latest gross annual salary of the Managing Director as well as a contract
penalty in the amount of NLG 50,000.-- for each day the violation continues
after notification of the detection thereof by the Company, notwithstanding
the right of the Company to claim the total damage instead of the contract
penalty.
ARTICLE 9 - CONFIDENTIALITY
a. The Managing Director shall keep confidential all specific information
relating to the business of the Company and its affiliated companies.
b. The Managing Director agrees, during the term of employment and after the
employment has been terminated for whatever cause, not in any way to disclose
to anyone any information, knowledge or data relating to the business of the
Company and its affiliated companies, which he has obtained by virtue of his
employment with the Company and for which the Company has imposed on him an
obligation of confidentiality or which he knows or should know that such
information has to be considered confidential.
c. The Managing Director shall only use the information, knowledge and data,
referred to sub b. of this article, within the framework of the exercise of
his duties pursuant to his employment with the Company.
d. In the event of a breach of the obligations, referred to sub a., b. and c.
of this article, the Company shall be entitled to a contract penalty for each
case of violation in the amount of one time the latest annual gross salary of
the Managing Director, notwithstanding the right of the Company to claim the
total damage instead of the contract penalty.
<PAGE>
ARTICLE 10 - DOCUMENTS
The Managing Director is prohibited in any way from having or keeping in his
private possession any documents or correspondence or copies thereof which
have become available to him in connection with his work, except insofar and
for as long as this is necessary for the performance of his tasks for the
company. In any case, the Managing Director is obliged, even without any
request to do so, to make such documents, correspondence or copies thereof
forthwith available to the Company at the end of his employment, or in the
event that he becomes inactive for any reason.
ARTICLE 11 - DISCHARGE
The Company has the right to discharge the Managing Director of his post as a
member of the Board of Management of the Company, without terminating the
Managing Director's employment, if and insofar as the Company considers that
the Managing Director is unable, because of sickness, accident or for other
reasons, to adequately fulfill his activities as a member of the Board of
Management, and in that case the Company will not be liable for any
compensation for damages.
The above is without prejudice to the Company's right to terminate the
employment subsequently in accordance with the provisions of this agreement.
ARTICLE 12
a. Any disputes which may arise from this agreement or from other agreements
resulting from this agreement, will be settled in accordance with the
regulations of the Dutch Arbitration Institute in Rotterdam. The Court of
Arbitration will consist of three arbitrators. The place of arbitration will
be located in Utrecht.
b. Dutch law applies to this agreement.
c. Amendments and additions to this agreement must be made in writing in
order to be legally valid.
ARTICLE 13
The appendices form an integral part of this agreement.
They are: A. Regulations for early retirement
B. Regulations for terminating the employment
C. Pension arrangement
D. Legal liability insurance
E. Subsidiary jobs
Drawn up in duplicate and signed in Utrecht on June 11, 1997.
SARA LEE|DE N.V. F. Meysman
H.B. van Liemt
<PAGE>
APPENDIX A
This Appendix is an integral part of the employment agreement dated
June 11, 1997
1. For reasons of its own, the Company reserves the right to insist that the
Managing Director takes early retirement from his position of Chairman of the
Board of Management, before reaching the age of retirement on his 62nd
birthday, but after reaching the age of 57.5 years.
If the Company's Supervisory Board requests the Managing Director to retire
in this way, the Company must take into account a period of notice of at
least six months, and the Managing Director will accept this retirement
without any reservations, and with his full co-operation at the time
requested and indicated by the Company.
2. The Company hereby gives the Managing Director the right to take voluntary
retirement at his own request when he reaches the age of 60. In this case,
the Managing Director will take into account a period of notice of at least
six months.
3. In the case of his retirement as Chairman of the Board of Management as a
result of the provisions sub l and sub 2 of this Appendix respectively, the
Managing Director shall, during the period starting on the date of the
termination of his employment with the company, up to the date of his
retirement at the age of 62, be entitled to a treatment in accordance with
the voluntary early retirement arrangement, as has been or may be established
by the Company's Supervisory Board, applicable to members of the Company's
Board of Management.
4. If the Managing Director retires as a Chairman of the Board of Management
in accordance with the provisions sub 1 or 2 of this Appendix, in
deviation from the conditions which apply for the other employees of the
Company, a payment on the basis of 90% of the gross annual salary which he
earned during the last year, referred to in Article 3 paragraph a. of this
agreement, will apply for the first year, starting on the date of the
termination of his employment with the Company, and on the basis of 80% of
the annual salary earned in the last year, for the remaining period until
he reaches the age of 62, with the understanding that the Company's
Supervisory Board may resolve to index this salary on an annual basis.
The provisions necessary for this regulation will be made by the Company.
The Company is entitled to transfer the rights and duties arising from the
regulation laid down in this Appendix A. to a Foundation established for
this purpose.
5. Insofar as the Managing Director receives income from work from another
source after the entry into force of the above mentioned arrangement, or
obtains income from independent enterprises, the additional part will be
deducted from the payment owed by the Company, insofar as this gross income,
together with the payments in accordance with sub 3 and 4 of Appendix A.,
amount to more than 100% of the above mentioned gross annual salary earned
during the last year of employment. The honoraria paid for performing the
tasks of a supervisor are not deemed to form part of the above mentioned
income from work or from independent enterprise respectively. In the case of
the income referred to here, the Managing Director will always submit a
specified statement to the Company.
<PAGE>
APPENDIX B
This Appendix is an integral part of the employment agreement dated
June 11, 1997.
The following arrangement applies for the Managing Director for the period
from his appointment as Chairman of the Board of Management to the time when
he reaches the age of 57.5 years.
1. If the Company terminates the employment before the Managing Director
reaches the age of 57.5 years without taking into account a period of notice
of six months, or, taking into account the period of notice of six months,
for reasons which are not urgent reasons, as described in Article 7a: 1639.p
of the Civil Code, -if necessary, in the case of a dispute in this respect,
as determined by arbitration, as referred to in Article 12 of this
agreement,- the Company shall owe the Managing Director a sum equal to:
a. either 1. 5 (one and a half) times the last gross annual salary, as
described in Article 3, paragraph a. of the employment agreement, in the
case of termination without taking into account the period of notice of
six months;
b. or 1 (one) times the last gross annual salary, as described in Article 3,
paragraph a. of the employment agreement, in the case of termination
taking into account the period of notice of six months;
c. or, respectively a compensation in excess of the compensation sub a. or
b., in consideration of the termination of the employment, deemed to be
reasonable, taking into account all relevant circumstances within the then
prevailing situation.
In case it is concluded that such compensation cannot be agreed upon in an
amicable manner between the Managing Director and the Company, any party
hereto will on basis of arbitration, as referred to in Article 12 of this
agreement, initiate the procedure to have such compensation established.
The decision of the arbitration-committee will be binding upon the
Managing Director as well as the Company.
The above compensation sub a., b. or c. respectively will be paid by the
Company, after deducting of taxes, premiums etc. due, as per the date of
termination of the employment respectively forthwith after receipt of the
decision of said arbitration-committee, if such decision is made at a
later date.
2. At the end of the employment, a premium-free policy will be granted on the
basis, of an actuarial calculation, for the pension rights accrued during the
period of employment till the date of termination thereof.
3. Provided a notice in writing has been timely received by the Company, the
Managing Director can stay covered by the collective sickness insurance
scheme concluded by the Company, though without being able to make a claim
on the Company for a contribution to the premiums.
4. All the conditions of employment are automatically terminated at the end of
the employment, unless expressly provided otherwise above.
<PAGE>
5. At the end of the employment the Managing Director will resign from all
positions, in which he has been appointed, in accordance with Article 2
paragraph c. of this agreement, and will sign all the necessary documents
and co-operate fully in this respect.
Drawn up in duplicate and signed at Utrecht on June 11, 1997.
SARA LEE|DE N.V. F. Meysman
H.B. van Liemt
<PAGE>
APPENDIX C
This Appendix, containing a -separately to be added- letter, stating
retirement benefit entitlements of the Managing Director, is an integral part
of the employment agreement dated June 11, 1997.
<PAGE>
APPENDIX D
This Appendix, containing the -separately to be added- insurance policy re
legal liability, is an integral part of the employment agreement dated
June 11, 1997.
<PAGE>
APPENDIX E
This Appendix is an integral part of the employment agreement dated June 11,
1997.
Subsidiary jobs, as referred to in Article 7 of this Agreement, fulfilled by
the Director at the time that the Agreement dated June 11, 1997, between the
Managing Director and the Company was signed:
- - Board member of the Belgian Olympic Committee
- - Supervisor of VNU, the Netherlands
- - Director of Zeneca, United Kingdom
<PAGE>
Translation of letter to F. Meysman from H. van Liemt on behalf of the
Supervisory Board of Sara Lee|DE
- ------------------------------------------------------------------------
Mr. F.L.V. Meysman
Nachtegaallaan l
2243 EL WASSENAAR
Utrecht, June ll, 1997
Dear Mr. Meysman,
With reference to our discussion re the revision of your employment contract,
signed June 11, 1997, pursuant to the resolution, dated December 7, 1995, of
the Supervisory Board of Sara Lee|DE, I herewith confirm -on behalf of this
Supervisory Board- what has been agreed upon between Sara Lee|DE and you.
What is stated in this letter by way of addition to your employment contract,
will be regarded as being appropriately documented between us.
In addition to your employment contract, dated June 11, 1997, the following
terms and conditions will be applicable:
1. As basis for the computation of the incentive award, laid down in article 3,
paragraph b., the annual gross salary, stated in article 3, paragraph a.
and adjusted with salary increases in accordance with article 3, paragraph
d., will be increased with the annual gross salaries respectively
compensations valid at such moment (per ultimo of the respective fiscal
year), which you receive in consideration for your services for Decotrade AG,
Switzerland and Douwe Egberts Belgium NV, Belgium, as well as for any other
company in which you might have been appointed in any salaried position in
conformity with article 2, paragraph c. This, therefore, does not include
your annual gross salary you receive on basis of your employment contract
with Sara Lee Corporation, USA.
2. Since the Supervisory Board of Sara Lee|DE eatablishes your performance
in the passed fiscal respectively calendar year, generally in consultation
with representatives of Sara Lee Corporation, the incentive award score and
salary increases expressed in the percentages will in principle also be
applicable re the computation of your incentive award and the adjustment of
your annual gross salary related to your employment with Sara Lee
Corporation.
3. In case the Supervisory Board of Sara Lee|DE resolves, in accordance
with article 3, paragraph d., to increase your annual gross salary stated in
article 3, paragraph a. in relation to your employment with Sara Lee|DE, it
will be proposed to the respective competent bodies of the companies,
referred to in sub 1. of this letter, to resolve that an increase in the same
percentage will be established re the annual gross salaries respectively
compensations you receive for the services you perform for these companies.
<PAGE>
4. With reference to the retirement benefit arrangement applicable to you, as
indicated in article 4, paragraph b., the pensionable salary as per the 1st
of January of each year will be -for the computation of the retirement
benefits granted to you- increased with the amount equal to the aggregate sum
of the annual gross salaries respectively compensations from the companies,
indicated in sub 1. of this letter, as well as of the annual gross salary
pursuant to your employment with Sara Lee Corporation.
5. With respect to what has been stated in article 3, sub e. re disability,
the sum of annual salaries, as indicated in sub 4. of this letter, will -in
case you become disabled- represent the determining salary within the
framework of arrangements re the establishment of disability allowances
applicable to members of the Board of Management.
6. Your latest annual gross salary, as meant in article 4 and 5 of Annex A,
as well as in article 1 of Annex B, being part of your employment contract,
will be increased to the amount corresponding with the sum of salaries
indicated in sub 4. of this letter.
Assuming you are in agreement with the phrasing of the above said additional
terms and conditions of your employment agreement, I request you to duly sign
copy of this letter for agreement.
Yours sincerely,
H.B. van Liemt
Chairman of the Supervisory Board
Duly signed for approval:
F.L.V. Meysman
<PAGE>
Exhibit 11
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(in millions except per share data)
FOR THE YEAR ENDED JUNE 28, 1997
--------------------------------
PRIMARY FULLY DILUTED
------------- -----------------
EARNINGS:
Net income $ 1,009 $ 1,009
Less: Dividends on Preferred Stocks,
net of tax benefits (26) (12)
Adjustment attributable to conversion
of ESOP Convertible Preferred Stock - (6)
----------- ---------------
Net Income Available for Common Stockholders $ 983 $ 991
=========== ==============
SHARES:
Average Shares Outstanding 480 480
Add: Common Stock Equivalents -
Stock Options 3 4
ESOP Convertible Preferred Stock - 17
Restricted stock and other 2 2
----------- ---------------
Adjusted Weighted Average Shares Outstanding 485 503
=========== ==============
NET INCOME PER COMMON SHARE: $ 2.03 $ 1.97
=========== ==============
<PAGE>
Exhibit 11
(Continued)
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(in millions except per share data)
FOR THE YEAR ENDED JUNE 29, 1996
--------------------------------
PRIMARY FULLY DILUTED
------------- -----------------
EARNINGS:
Net income $ 916 $ 916
Less: Dividends on Preferred Stocks,
net of tax benefits (27) (12)
Adjustment attributable to conversion
of ESOP Convertible Preferred Stock - (7)
----------- ---------------
Net Income Available for Common Stockholders $ 889 $ 897
=========== ==============
SHARES:
Average Shares Outstanding 482 482
Add: Common Stock Equivalents -
Stock Options 2 3
ESOP Convertible Preferred Stock - 18
Restricted stock and other 1 1
----------- ---------------
Adjusted Weighted Average Shares Outstanding 485 504
=========== ==============
NET INCOME PER COMMON SHARE: $ 1.83 $ 1.78
=========== ==============
<PAGE>
Exhibit 12.1
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT RATIOS)
Year Ended
--------------------------------
June 28, June 29,
1997 1996
------------- -------------
Fixed charges:
Interest expense $ 202 $ 228
Interest portion of rental expense 66 68
------------- -------------
Total fixed charges before
capitalized interest 268 296
Capitalized interest 12 10
------------- -------------
Total fixed charges $ 280 $ 306
============= =============
Earnings available for fixed charges:
Income before income taxes $ 1,484 $ 1,378
Less undistributed income in
minority owned companies (7) (5)
Add minority interest in majority-
owned subsidiaries 30 36
Add amortization of capitalized interest 23 22
Add fixed charges before capitalized
interest 268 296
------------- -------------
Total earnings available for
fixed charges $ 1,798 $ 1,727
============= =============
Ratio of earnings to fixed charges 6.4 5.6
============= =============
<PAGE>
Exhibit 12.2
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(IN MILLIONS EXCEPT RATIOS)
Year Ended
--------------------------------
June 28, June 29,
1997 1996
------------- -------------
Fixed charges and preferred stock
dividend requirements:
Interest expense $ 202 $ 228
Interest portion of rental expense 66 68
------------- -------------
Total fixed charges before
capitalized interest and preferred
stock dividend requirements 268 296
Capitalized interest 12 10
Preferred stock dividend requirements (1) 41 43
------------- -------------
Total fixed charges and preferred
stock dividend requirements $ 321 $ 349
============= =============
Earnings available for fixed charges
and preferred stock dividend
requirements:
Income before income taxes $ 1,484 $ 1,378
Less undistributed income in
minority owned companies (7) (5)
Add minority interest in majority-
owned subsidiaries 30 36
Add amortization of capitalized interest 23 22
Add fixed charges before capitalized
interest and preferred stock
dividend requirements 268 296
------------- -------------
Total earnings available for
fixed charges and preferred stock
dividend requirements $ 1,798 $ 1,727
============= =============
Ratio of earnings to fixed charges and
preferred stock dividend requirements 5.6 4.9
============= =============
(1) Preferred stock dividends in the computation have been increased to an
amount representing the pretax earnings that would have been required
to cover such dividends.
<PAGE>
EXHIBIT (21)
SUBSIDIARIES
OF
SARA LEE CORPORATION
The following is a list of active subsidiary corporations of the Registrant.
Subsidiaries which are inactive, exist solely to protect the business names,
but conduct no business, or are insignificant have been omitted; such omitted
subsidiaries considered in the aggregate do not constitute a significant
subsidiary.
DOMESTIC SUBSIDIARIES
PLACE OF
NAME INCORPORATION
APD Chemicals Corporation Delaware
Aris (Philippines), Inc. Delaware
Arp Corp. Delaware
Bali Foundations, Inc. Delaware
Bessin Corporation Illinois
BG Marketing Corp. Delaware
Bil Mar Farms, Inc. Delaware
Bil Mar Foods, Inc. Delaware
BNH, Inc. Delaware
Bryan Foods, Inc. Delaware
Canadelle Intimate Fashions, Inc. Nevada
Caribetex, Inc. Delaware
Champion Products Inc. New York
Coach Leatherware International, Inc. Delaware
Coach Stores, Inc. Delaware
DEA Leasing Corporation Delaware
Douwe Egberts/Van Nelle, Inc. Kentucky
Epic Company, Inc. Illinois
Gordon County Farm Company Delaware
Hanes Menswear, Inc. Delaware
<PAGE>
EXHIBIT (21)
Hanes Puerto Rico, Inc. Delaware
Hygrade Food Products Corporation New York
International Affiliates & Investment Inc. Delaware
International Baking Co., Inc. Delaware
Interstar, Inc. Florida
Jogbra Inc. Delaware
Kiwi (Europe) Corporation Delaware
Kolker Brothers, Inc. District of
Columbia
L'eggs Brands, Inc. Delaware
Milky Way Products Company Delaware
Nihon Sara Lee KK Corporation Delaware
Nutri-Metics International (USA) Inc. Delaware
Ozark Salad Company, Inc. Delaware
Playtex Apparel, Inc. Delaware
Playtex Dorado Corporation Delaware
Playtex Industries, Inc. Delaware
PYA, Inc. Delaware
PYA/Monarch, Inc. Delaware
Rice Hosiery Corporation North
Carolina
Sara Lee Champion Europe Inc. Delaware
Sara Lee Corporation Asia, Inc. Delaware
Sara Lee Foodservice Holdings, Inc. Delaware
Sara Lee French Investment Company, Inc. Delaware
Sara Lee Global Finance, Inc. Delaware
Sara Lee International Corporation Delaware
2
<PAGE>
EXHIBIT (21)
Sara Lee International Finance Corporation Delaware
Sara Lee Investments, Inc. Delaware
Sara Lee - Kiwi Holdings, Inc. Delaware
Sara Lee Sock Company Delaware
Sara Lee U.K. Depositor L.L.C. Delaware
Sara Lee U.K. Holdings, Inc. Delaware
Sara Lee U.K. Leasing L.L.C. Delaware
Sara Lee/DE Asia, Inc. Delaware
Saramar Corporation Delaware
ScotchMaid, Inc. Delaware
Seitz Foods, Inc. Delaware
SL Associates Delaware
SLC Leasing (Nevada)-II, Inc. Delaware
SLC Leasing (Wyoming), Inc. Delaware
SLC-MS, L.L.C. Delaware
SLE, Inc. Delaware
SLI Administrative Services Company, Inc. Delaware
SLKP Administrative Services Company, Inc. Delaware
SLKP Sales, Inc. Delaware
Smoky Hollow Foods, Inc. Delaware
Southern Belle, Inc. Delaware
Southern Meat Distribution Company Delaware
State Fair Foods, Inc. Texas
Super Products, Inc. Delaware
Sweet Sue Kitchens, Inc. Delaware
The Harwood Companies, Inc. Delaware
UPCR, Inc. Delaware
UPEL, Inc. Delaware
3
<PAGE>
EXHIBIT (21)
Wolferman's, Inc. Delaware
4
<PAGE>
EXHIBIT (21)
FOREIGN SUBSIDIARIES
ABC Industrie S.A. France
Abel Bonnex S.A. France
AB Fenom Sweden
Agepal SarL Luxemburg
Allende Internacional, S.A. de C.V. Mexico
Al Ponte Prosciutti srl Italy
Aoste Argentina Argentina
Aoste Belgique Belgium
Aoste Espana Spain
Aoste Export SNC France
Aoste Holding S.A. France
Aoste Management S.A. France
Aoste Schinken GmbH Germany
Aoste SNC France
APD Chemicals Ltd. England
A.P. Developments Limited Zambia
A/S Blumoller Denmark
Ashe Limited England
Ashe Pension Trustees Limited England
Auragate Pty. Ltd. Australia
Balirny Douwe Egberts AS Czech
Republic
Ballograf Bic Austria Vertriebs Ges. mbh Austria
Bal-Mex S.A. de C.V. Mexico
Belgian Nurdie Textile Company Germany
Beviston Pty. Ltd. Australia
5
<PAGE>
EXHIBIT (21)
Boers Groothandel B.V. Netherlands
Boers Vleeswaren B.V. Netherlands
Bravo Greece
Brossard France S.A. France
Caitlin Financial Corporation N.V. Netherlands
Antilles
Calixte Cochonou Export SNC France
Calixte Producteur SNC France
Canadelle Holding Corporation Limited Canada
Canadelle Limited Partnership Canada
Cartex Manufacturera, S.A. Costa Rica
Casual Wear de Mexico, S.A. de C.V. Mexico
Caytex, Inc. Cayman Islands
Caywear, Inc. Cayman Islands
CBI S.A. France
CH Property Holdings (NZ) Ltd. New Zealand
CH Laboratories (Sales) Ltd. Ireland
Champion Products, S.A. de C.V. Mexico
Champion UK Ltd. England
Charcuteries des Hautes Terres S.A. France
Coach Europe Services s.r.l. Italy
Coach Firenze s.r.l. Italy
Coach (UK) Limited England
Cochonou SNC France
Coffee Times B.V. Netherlands
Coffenco International GmbH Germany
Cofico N.V. Netherlands
Antilles
Comercial Rinbros, S.A. de C.V. Mexico
Compack Douwe Egberts Rt Hungary
6
<PAGE>
EXHIBIT (21)
Confecciones de Monclova, S.A. de C.V. Mexico
Confecciones de Monterrey, S.A. de C.V. Mexico
Confecciones de Nueva Rosita, S.A. de C.V. Mexico
Confecciones de El Pedregal, S.A. de C.V. El Salvador
Congelacion y Conservacion de Alimentos,
S.A. de C.V. Mexico
Conoplex Insurance Company Bermuda
Contex, S.A. de C.V. El Salvador
Control International Investments (ConSecFin) BV Netherlands
Corporacion Champion de El Salvador,
S.A. de C.V. El Salvador
Corporacion H.M., S.A. de C.V. Mexico
Cosmetic Manufacturers Ltd. New Zealand
Cosmetic Manufacturers Pty. Ltd. Australia
Cosmetic Manufacturers (Ireland) Ltd. Ireland
Covesa N.V. Belgium
Cruz Verde Portugal - Productos de Consumo Lda. Portugal
DEA (Bermuda) Ltd. Bermuda
Decaf B.V. Netherlands
Decaf N.V. Belgium
Decem B.V. Netherlands
Decotrade A.G. Switzerland
DEF Finance S.A. France
Defico N.V. Netherlands
Antilles
De Friesche Erven B.V. Netherlands
Del Castillo Transportes Ltda. Uruguay
Designer Workwear Pty. Ltd. Australia
Detrex B.V. Netherlands
Difan S.A.M. Monaco
7
<PAGE>
EXHIBIT (21)
Dim-Rosy AB Sweden
Dim-Rosy AG Switzerland
Dim-Rosy A/S Denmark
Dim-Rosy Benelux N.V. Belgium
Dim-Rosy Portugal Lda Portugal
Dim-Rosy S.p.A. Italy
Dim Rosy Textiles, Incorporated Canada
Dim Finance S.A. France
Dim S.A. France
Dimtex S.A. France
Disa SNC France
Douwe Egberts Agio GmbH Germany
Douwe Egberts Coffee & Tea International B.V. Netherlands
Douwe Egberts Coffee Systems France S. A. France
Douwe Egberts Coffee Systems International B.V. Netherlands
Douwe Egberts Coffee Systems Ltd. Canada
Douwe Egberts Coffee Systems Limited England
Douwe Egberts Coffee Systems Nederland B.V. Netherlands
Douwe Egberts Coffee Systems Operating B. V. Netherlands
Douwe Egberts Compack Kft. Hungary
Douwe Egberts Espana S.A. Spain
Douwe Egberts France S.A. France
Douwe Egberts GmbH Germany
Douwe Egberts Kaffee Systeme GmbH Germany
Douwe Egberts Kaffee Systeme GmbH & Co., K.G. Germany
Douwe Egberts Limited Canada
Douwe Egberts Nederland B.V. Netherlands
8
<PAGE>
EXHIBIT (21)
Douwe Egberts N.V. Belgium
Douwe Egberts UK Limited England
Douwe Egberts Van Nelle Diensten B.V. Netherlands
Douwe Egberts Van Nelle Tabaksmaatschappij B.V. Netherlands
Douwe Egberts Van Nelle Netherlands
Tabaksproduktiemaatschappij B. V.
Douwe Egberts Van Nelle Tobacco Belgium N.V. Belgium
Douwe Egberts Van Nelle Tobacco
International B.V. Netherlands
Douwe Egberts (Ireland) Ireland
Duyvis B.V. Netherlands
Elbeo & Comandita Portugal
Elbeo Limited England
Elbeo Meias e Confeccoes Lda. Portugal
Eri Deutschland GmbH Germany
Esa Eppinger GmbH Germany
ET.G.Y. SNC France
Euragral BV Netherlands
Fashion Accessories Philippines, Inc. Philippines
Fihomij BV Netherlands
Filodoro Calze S.p.A. Italy
Finnegan's Famous Cakes Limited England
Fontane del Ducca srl Italy
Fujian Sara Lee Consumer Products Company Ltd. China
Generator AB Sweden
Gromtex S.A. Tunisia
Hanes Brasil Industria E Comercio Ltda. Brazil
Hanes Caribe Ltd. Cayman
Islands
9
<PAGE>
EXHIBIT (21)
Hanes Choloma Ltd. Cayman
Islands
Hanes de Centroamerica S.A. Guatemala
Hanes de El Salvador, S.A. de C.V. El Salvador
Hanes de Mexico, S.A. de C.V. Mexico
Hanes Dominican Inc. Dominican
Republic
Hanes France S.A. France
Hanes Jamaica Limited Jamaica
Hanes Panama, Inc. Panama
Hanes Tejidos Costa Rica Ltd. Costa Rica
Hanes U.K. Limited England
Hanes (Deutschland) GmbH Germany
Harris/DE Pty. Ltd. Australia
Hesperia de Alimentacion S.A. Spain
Hilton Bonds N.Z. (1991) Limited New Zealand
Home Safe Products Sdn Bhd Malaysia
House of Fuller, S.A. de C.V. Mexico
H-Sec S.A. France
Imperial Holding N.V. Belgium
Imperial Meat Products N.V. Belgium
Inco Hellas A.E. Cosmetics and Household Greece
Consumer Products Industry
Industrias Carnicas Navarras S.A. Spain
Industrias de Carnes Nobre S.A. Portugal
Industrias Internacionales de San Pedro,
S.A. de C.V. Mexico
Industrias Mallorca, S.A. de C.V. Mexico
Inmobiliaria Meck-Mex, S.A. de C.V. Mexico
10
<PAGE>
EXHIBIT (21)
Intec B.V. Netherlands
Inter Food Service Ltd. England
Internacional Manufacturera, S.A. Mexico
International Food Service B.V. Netherlands
International Underwear Ltd. Morocco
INTEX Dessous Gesellschaft mbH Austria
INTEX Dessous GmbH Germany
INTEX Textil-Vertriebsgesellschaft AG Switzerland
Intradal Produktie Belgium N.V. Belgium
Iron Bark Industrial Clothing Pty. Ltd. Australia
Isabella (Private) Ltd. Germany
I. Tas Ezn B.V. Netherlands
Jamlee Ltd. Jamaica
Jamwear Ltd. Jamaica
Jogbra Honduras S.A. Honduras
Justin Bridou SNC France
Kir Alimentos, S.A. de C.V. Mexico
Kitchens of Sara Lee U.K. Limited England
Kitchens of Sara Lee (Australia) Pty. Ltd. Australia
Kitchens of Sara Lee, SNC France
Kiwi Brands Hong Kong Ltd. Hong Kong
Kiwi Brands Ltd. Kenya
Kiwi Brands Ltd. Malawi
Kiwi Brands Ltd. Zambia
Kiwi Brands Pty. Ltd. Australia
Kiwi Brands (N.Z.) Ltd. New Zealand
Kiwi Brands (Private) Limited Zimbabwe
Kiwi Brands (Tianjin) Co. Ltd. China
11
<PAGE>
EXHIBIT (21)
Kiwi Caribbean Limited England
Kiwi European Holdings B.V. Netherlands
Kiwi France S.A. France
Kiwi Holdings Limited England
Kiwi International Pte. Ltd. Signapore
Kiwi Overseas Investments Limited England
Kiwi TTK Limited India
Kiwi United Taiwan Company Ltd. China
Kiwi (EA) Ltd. England
Kiwi (Manufacturing) Sdn Bhd Malaysia
Kiwi (Thailand) Limited Thailand
Koninklijke Douwe Egberts B.V. Netherlands
Kortman Intradal B.V. Netherlands
Kortman Nederland B.V. Netherlands
KRS S.A. Tunisia
Lassie B.V. Netherlands
Les Fines Tranches SNC France
Les Salaisons Reunies SNC France
Lovable Italiana S.p.A. Italy
Madero Internacional, S.A. de C.V. Mexico
Maglificio Bellia S.p.A. Italy
Manufacturera de Cartago, S.A. Costa Rica
Manufacturera Cortez, S.A. Honduras
Marander Assurantie Compagnie B.V. Netherlands
Marcilla Coffee Systems S.A. Spain
Marketing-en Verkoopmaatschappij Stegeman B.V. Netherlands
Merrild Coffee Systems AB Sweden
Merrild Kaffe A/S Denmark
12
<PAGE>
EXHIBIT (21)
Midi Steak S.A. France
Monclova Internacional, S.A. de C.V. Mexico
Natrena B.V. Netherlands
Nihon Kiwi K.K. Japan
Nihon Sara Lee K.K. Japan
Notable, S.A. de C.V. Mexico
nur die Textilvertrieb Ges.mbH Austria
nur die Textilvertrieb Ges.mbH & Co KG Austria
Nutri-Metics International (NZ) Ltd. New Zealand
Nutri-Metics Worldwide Malaysia Sdn Bhd Malaysia
Nutri-Metics International (South Africa)
Pty. Ltd. Australia
Nutri-Metics International (Guangzhou) Ltd. China
Nutri-Metics France S.A. France
Nutri-Metics International (France) S.A. France
Nutri-Metics Holdings France S.A. France
Nutri-Metics International (Netherlands)
Pty. Ltd. Australia
Nutri-Metics International (Ireland) Ltd. Ireland
Nutri-Metics International (Greece) Inc. Greece
Nutri-Metics International (UK) Ltd. England
Nutri-Metics International (Australia) Ltd. Australia
Nutri-Metics International (Thailand) Ltd. Thailand
Nutri-Metics International (Hong Kong) Ltd. Hong Kong
Nutri-Metics B Sdn Bhd International Brunei
Nutri-Metics International (Canada) Inc. Canada
N.V. Kortman Intradal S.A. Belgium
NV Zwarte Kat/Cle d'Or Belgium
Opus Chemical AB Sweden
Oxwall Tools B.V. Netherlands
Philippe Matignon France S.A. France
13
<PAGE>
EXHIBIT (21)
Playtex Espana, S.A. Spain
Playtex France S.A. France
Playtex Investments Europe S.A. France
Playtex Limited England
Playtex Trading Limited England
Plustex B.V. Netherlands
Plustex S.A. Belgium
Pretty Polly Limited Ireland
Pretty Polly Pension Trustees Limited England
Pretty Polly Supplementary Trustee Limited England
Pretty Polly (Killarney) Limited Ireland
Probemex, S.A. de C.V. Mexico
Product Suppliers A.G. Switzerland
P.T. Kiwi Distribution Company Indonesia
P.T. Kiwi Indonesia Indonesia
PT Premier Ventures Indonesia
PT Prodenta Indonesia Indonesia
PT Suria Yozani Indonesia
PTX Tunisie S.A. Tunisia
PTX (D.R.) Inc. Cayman Islands
Rinbros, S.A. de C.V. Mexico
Roger de Lyon Charcutier S.A. France
Roger de Lyon SNC France
Rolland et Norroy S.A. France
Roux Soignat S.A. France
Sagepar SaRL France
Sara Lee Bakery Sdn Bhd Malaysia
14
<PAGE>
EXHIBIT (21)
Sara Lee Bakery (Australia) Pty. Ltd. Australia
Sara Lee Brasil Ltda. Brazil
Sara Lee Canada Holdings Limited Canada
Sara Lee Champion France S.A. France
Sara Lee Charcuterie, S.A. France
Sara Lee Chile S.A. Chile
Sara Lee Clothing Company Pty. Ltd. Australia
Sara Lee de Costa Rica, S.A. Costa Rica
Sara Lee Direct Marketing UK Limited England
Sara Lee Europe Direct Marketing S.A. France
Sara Lee Europe Finance S.A.S. France
Sara Lee Food Holdings Pty. Ltd. Australia
Sara Lee France Finance S.A.S. France
Sara Lee France SNC France
Sara Lee Foreign Sales Corporation Barbados
Sara Lee French Holdco 1 S.A. France
Sara Lee Germany GmbH Germany
Sara Lee Holding Corporation Limited Canada
Sara Lee Holdings (Australia) Pty. Ltd. Australia
Sara Lee Holdings (NZ) Ltd. New Zealand
Sara Lee Hosiery Canada Ltd. Canada
Sara Lee Hosiery de Mexico, S.A. de C.V. Mexico
Sara Lee Household & Personal Care UK Limited England
Sara Lee (Hong Kong) Limited Partnership Hong Kong
Sara Lee Intimates El Salvador, S.A. de C.V. El Salvador
Sara Lee Intimates Villanueva S.A. de C.V. Honduras
Sara Lee Knit Products Benelux N.V. Belgium
Sara Lee Knit Products Europe, N.V. Belgium
Sara Lee Mexicana S.A. de C.V. Mexico
Sara Lee of Canada Holdings Limited Partnership Canada
15
<PAGE>
EXHIBIT (21)
Sara Lee of Canada Investments Company Canada
Sara Lee of Canada Limited Canada
Sara Lee of Canada Limited Partnership Canada
Sara Lee Overseas Finance N.V. Netherlands
Antilles
Sara Lee Personal Products Hellas, S.A. Greece
Sara Lee Personal Products S.A. France
Sara Lee Personal Products S.p.A. Italy
Sara Lee Personal Products (Australia) Pty. Ltd. Australia
Sara Lee Personal Products (Fiji) Ltd. Fiji
Sara Lee Phillippines Inc. Philippines
Sara Lee Processed Meats (Europe) B.V. Netherlands
Sara Lee Trading Ltd. Thailand
Sara Lee UK Holdings Plc England
Sara Lee (South Africa) (Pty.) Ltd. South Africa
Sara Lee (UK Investments) Limited England
Sara Lee/DE Espana S.A. Spain
Sara Lee/DE Finance B.V. Netherlands
Sara Lee/DE Holdings GmbH Germany
Sara Lee/DE Holdings (South Africa)
(Pty) Limited South Africa
Sara Lee/DE Household & Body Care Research B.V. Netherlands
Sara Lee/DE Italy S.p.A Italy
Sara Lee/DE N.V. Netherlands
Sara Lee/DE Osterreich GmbH Austria
Sara Lee/DE Poland Sp z o o Poland
Sara Lee/DE (Schweiz) AG Switzerland
SBB S.A. France
SCI du Mont Pilat France
16
<PAGE>
EXHIBIT (21)
SDP Rungis S.A. France
SERAA SARL France
Servicios Administrativos Sara Lee, S.A. de C.V. Mexico
Shanghai Vocal Enterprise Limited China
Siamcona Ltd. Thailand
SLI Compania de Servicio Administrativos S.A. Costa Rica
SLKP Compania de Servicio Administrativos S.A. Costa Rica
SLPP (Berkeley Vale) Pty. Ltd. Australia
SLPP (Coolaroo) Pty. Ltd. Australia
SN Degoisey S.A. France
Societe Bretonne d'Andouilles et
d'Andouillettes S.A. France
Societe des Salaisons de Balanod SNC France
Spantex, S.A. de C.V. Mexico
Spring City de Honduras, S.A. Honduras
Stegeman B.V. Netherlands
Supportex AB Sweden
Swissguard (Pty.) Limited South Africa
S3C S.A. France
Taesa, S.A. de C.V. Mexico
Tana B.V. Netherlands
Tana Canada Incorporated Canada
Tana France S.A. France
Tana Schuhpflege AG Switzerland
Tejidos Flex Corporation Panama
Telec A.G. Switzerland
Temana International Ltd. England
Textiles Tropicales, Sociedad Anonima Costa Rica
17
<PAGE>
EXHIBIT (21)
Tomten A/S Norway
Tradi Charcuterie S.A. France
Tradi France S.A. France
Tradition Lingerie S.A.S. France
Tricotbest B.V. Germany
Tricotbest Ceska Republica spol. s r.o. Germany
Tricotbest GmbH Germany
Tricotbest Hungaria Kft. Germany
Tricotbest Polska Germany
Tricotbest (Russia) Germany
Tricotbest Slovensko s.r.o. Germany
Tricotbest Ukraina Germany
Tuxan Schuhpflegemittel GmbH Austria
Underwear Ltd. Malta
Uninex S.A. Uruguay
Valma B.V. Netherlands
Van Nelle Holding (Germany) GmbH Germany
Van Nelle Produktie B.V. Netherlands
Vatter GmbH (Rheine) Germany
Vatter Produktions GmbH Germany
Verpakkingsindustrie Boers B.V. Netherlands
Vlimense Belegging-Maatschappij BV Netherlands
Wijnhandel JanVan Goyen B.V. Netherlands
24762030 Nova Scotia Ltd. Canada
1116-9087 Quebec Inc. Canada
18
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated July 28, 1997 included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-35760, 33-57615, 33-60837,
33-60071, 33-64383, 33-63715, 33-63717, 33-59002, 33-49212, 33-33245, 33-33244,
33-23211, 333-17987, 333-18385, 333-21101 and 333-14167.
Chicago, Illinois /s/ Arthur Andersen LLP
September 22, 1997 --------------------------
Arthur Andersen LLP
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Paul A. Allaire
--------------------
Paul A. Allaire
Dated: 9/17/97
--------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Frans H.J.J. Andriessen
---------------------------
Frans H.J.J. Andriessen
Dated: 9/17/97
--------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Duane L. Burnham
----------------------
Duane L. Burnham
Dated: 9/17/97
-----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Charles W. Coker
----------------------
Charles W. Coker
Dated: 9/17/97
---------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Willie D. Davis
----------------------
Willie D. Davis
Dated: 9/17/97
---------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Allen F. Jacobson
-------------------------
Allen F. Jacobson
Dated: 9/17/97
----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Vernon E. Jordan, Jr.
----------------------------
Vernon E. Jordan, Jr.
Dated: 9/17/97
---------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ James L. Ketelsen
-------------------------
James L. Ketelsen
Dated: 9/17/97
-------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Hans B. van Liemt
-----------------------
Hans B. van Liemt
Dated: 9/17/97
---------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for her and in her name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as she might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or her substitute, may lawfully do
or cause to be done by virtue herself.
/s/ Joan D. Manley
----------------------
Joan D. Manley
Dated: 9/17/97
----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Newton N. Minow
------------------------
Newton N. Minow
Dated: 9/17/97
-----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Sir Arvi H. Parbo A. C.
-----------------------------
Sir Arvi H. Parbo A. C.
Dated: 9/17/97
----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for her and in her name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as she might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or her substitute, may lawfully do
or cause to be done by virtue herself.
/s/ Rozanne L. Ridgway
-----------------------
Rozanne L. Ridgway
Dated: 9/17/97
---------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman,
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and
all amendments thereto and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute, may lawfully do
or cause to be done by virtue himself.
/s/ Richard L. Thomas
-------------------------
Richard L. Thomas
Dated: 9/17/97
----------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman, each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue himself.
/s/ John H. Bryan
------------------------------
John H. Bryan
Dated: 9/17/97
-------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman, each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue himself.
/s/ C. Steven McMillan
-------------------------
C. Steven McMillan
Dated: 9/17/97
--------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman, each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue himself.
/s/ Michael E. Murphy
------------------------------
Michael E. Murphy
Dated: 9/17/97
--------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman, each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue himself.
/s/ Donald J. Franceschini
-----------------------------------
Donald J. Franceschini
Dated: 9/17/97
--------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Janet Langford Kelly and R. Henry Kleeman, each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act for him and in his name, place and
stead, in any and all capabilities to sign the Annual Report on Form 10-K of
Sara Lee Corporation for the fiscal year ending June 28, 1997, and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue himself.
/s/ Frank L. Meysman
------------------------------
Frank L. Meysman
Dated: 9/17/97
--------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED BALANCE SHEET AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> JUN-28-1997
<CASH> 247
<SECURITIES> 25
<RECEIVABLES> 2,046
<ALLOWANCES> 205
<INVENTORY> 2,973
<CURRENT-ASSETS> 5,391
<PP&E> 6,204
<DEPRECIATION> 3,125
<TOTAL-ASSETS> 12,953
<CURRENT-LIABILITIES> 5,016
<BONDS> 1,933
0
242
<COMMON> 640
<OTHER-SE> 3,640
<TOTAL-LIABILITY-AND-EQUITY> 12,953
<SALES> 19,734
<TOTAL-REVENUES> 19,734
<CGS> 12,267
<TOTAL-COSTS> 12,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 137
<INTEREST-EXPENSE> 159
<INCOME-PRETAX> 1,484
<INCOME-TAX> 475
<INCOME-CONTINUING> 1,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,009
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 1.97
</TABLE>
