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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SARA LEE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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[LOGO]
September 21, 1998
DEAR SARA LEE STOCKHOLDER:
It is my pleasure to invite you to Sara Lee Corporation's 1998 Annual
Meeting of Stockholders. I am pleased to report that this year's meeting will be
held at the ARIE CROWN THEATRE AT MCCORMICK PLACE, 2301 SOUTH LAKE SHORE DRIVE,
CHICAGO, ILLINOIS on Thursday, October 29, 1998, at 10:00 a.m. A map and
directions to the Arie Crown Theatre are located on the back page of this proxy
statement.
The formal notice of the meeting follows on the next page. In addition to
the four items of business, we will also discuss Sara Lee's 1998 performance and
answer your questions. Enclosed with this proxy statement are your voting card,
a postage-paid envelope to return your voting card, your admission ticket to the
meeting and Sara Lee's 1998 Annual Report.
Three of our directors -- Allen F. Jacobson, Newton N. Minow and Sir Arvi H.
Parbo -- have attained their 72nd birthday since the last annual meeting and
therefore will not be standing for reelection. In addition, Donald J.
Franceschini, Sara Lee's Vice Chairman, retired in December, 1997. Messrs.
Franceschini, Jacobson, Minow and Sir Arvi Parbo have served a combined total of
29 years as members of our Board of Directors. We are deeply grateful to them
for their many contributions to the success of Sara Lee Corporation.
Your vote is important. Whether you plan to attend the meeting or not, you
may vote your shares via a toll-free telephone number, via the Internet or you
may sign, date and mail the enclosed voting card in the envelope provided.
Instructions regarding all three methods of voting are contained on the voting
card. If you attend the meeting and prefer to vote in person, you may do so.
I look forward to seeing you at the meeting.
Sincerely,
[LOGO]
John H. Bryan
Chairman and Chief Executive Officer
<PAGE>
[LOGO]
------------------------------------------
NOTICE OF THE 1998
ANNUAL MEETING OF STOCKHOLDERS
------------------------------------------
The Annual Meeting of Stockholders of Sara Lee Corporation will be held on
Thursday, October 29, 1998, at 10:00 a.m., at the ARIE CROWN THEATRE AT
MCCORMICK PLACE, 2301 SOUTH LAKE SHORE DRIVE, CHICAGO, ILLINOIS for the
following purposes:
1. to elect 17 directors;
2. to vote upon a proposed amendment to the Charter of the Corporation to
increase the total number of authorized shares of stock and the number of
authorized shares of common stock and to reduce the par value of the
Corporation's common stock;
3. to vote upon the 1998 Long-Term Incentive Stock Plan;
4. to vote on the ratification of the appointment of Arthur Andersen LLP as
our independent accountants for the 1999 fiscal year; and
5. to transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on September 1, 1998 are
entitled to notice of and to vote at the Annual Meeting.
Whether or not you plan to attend the meeting, we urge to vote.
By Order of the Board of Directors
[SIGNATURE]
Janet Langford Kelly
Senior Vice President, Secretary and
General Counsel
September 21, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION ABOUT SARA LEE CORPORATION.................................... 1
INFORMATION ABOUT THE ANNUAL MEETING...................................... 1
Information About Attending the Annual Meeting.......................... 1
Information About this Proxy Statement.................................. 1
Information About Voting................................................ 1
Information for Sara Lee Employees Who are Stockholders................. 2
Information Regarding Tabulation of the Vote............................ 2
Quorum Requirement...................................................... 2
Information About Votes Necessary for Action to be Taken................ 2
Other Matters........................................................... 3
ELECTION OF DIRECTORS..................................................... 3
MEETINGS AND COMMITTEES OF THE BOARD...................................... 7
DIRECTOR COMPENSATION..................................................... 8
SARA LEE COMMON STOCK AND ESOP STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE
OFFICERS................................................................ 9
EXECUTIVE COMPENSATION.................................................... 10
Report of the Compensation and Employee Benefits Committee on Executive
Compensation.......................................................... 10
Performance Graph....................................................... 14
Summary Compensation Table.............................................. 15
Option Grants in Last Fiscal Year....................................... 16
Option Exercises and Fiscal Year-End Values............................. 18
Employment Agreements................................................... 19
Severance Plans......................................................... 19
RETIREMENT PLANS.......................................................... 19
PROPOSAL TO AMEND THE CHARTER OF THE CORPORATION TO INCREASE THE TOTAL
NUMBER OF AUTHORIZED SHARES OF STOCK AND THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND TO REDUCE THE PAR VALUE OF THE CORPORATION'S COMMON
STOCK................................................................... 20
PROPOSAL TO APPROVE THE 1998 LONG-TERM INCENTIVE STOCK PLAN............... 21
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS............................. 25
OTHER INFORMATION......................................................... 25
Section 16(a) Beneficial Ownership Reporting Compliance................. 25
Stockholder Proposals for the 1999 Annual Meeting....................... 25
Sara Lee's Form 10-K.................................................... 25
Expenses of Solicitation................................................ 26
EXHIBIT A................................................................. 27
</TABLE>
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INFORMATION ABOUT SARA LEE CORPORATION
Sara Lee is a global manufacturer and marketer of high-quality, brand-name
consumer products. We have operations in more than 40 countries and market
branded consumer products in more than 140 countries. We employ 139,000 people
worldwide. The address of our principal executive office is Three First National
Plaza, Chicago, Illinois 60602-4260. Our telephone number is (312) 726-2600.
Sara Lee's website on the Internet is located at http://www.saralee.com.
INFORMATION ABOUT THE ANNUAL MEETING
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Our Annual Meeting will be held on Thursday, October 29, 1998 at 10:00 a.m.
at the Arie Crown Theatre at McCormick Place, 2301 South Lake Shore Drive,
Chicago, Illinois. Please note that the doors to the Theatre will not open for
admission until 9:30 a.m. If you plan to attend the Annual Meeting, please bring
your admission ticket with you. Your admission ticket is included with this
proxy statement.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you these proxy materials because Sara Lee's Board of Directors is
soliciting your proxy to vote your shares at the Annual Meeting. If you own Sara
Lee common stock in more than one account, such as individually and also jointly
with your spouse, you may receive more than one set of these proxy materials. To
assist us in saving money and to provide you with better stockholder services,
we encourage you to have all your accounts registered in the same name and
address. You may do this by contacting Sara Lee's Shareholder Services
Department at (312) 558-8662. This proxy statement summarizes information that
we are required to provide to you under the rules of the Securities and Exchange
Commission and which is designed to assist you in voting your shares. On
September 21, 1998, we began mailing these proxy materials to all stockholders
of record at the close of business on September 1, 1998.
INFORMATION ABOUT VOTING
Stockholders can vote in person at the Annual Meeting or by proxy. There are
three ways to vote by proxy:
- By Telephone -- You can vote by telephone by calling toll-free
1-888-426-7034 and following the instructions on the proxy card;
- By Internet -- You can vote by Internet by following the instructions on
the proxy card; or
- By Mail -- You can vote by mail by signing, dating and mailing the
enclosed proxy card.
If you vote by proxy, the individuals named on the card (your "proxies")
will vote your shares in the manner you indicate. You may specify whether your
shares should be voted for all, some or none of the nominees for director and
whether your shares should be voted for or against the amendment to Sara Lee
Corporation's Charter to increase the total number of authorized shares of stock
and the number of authorized shares of common stock and to reduce the par value
of the common stock, the approval of the 1998 Long-Term Incentive Stock Plan,
and the ratification of Arthur Andersen. If you do not indicate instructions on
the card, your shares will be voted for the election of the seventeen nominees
for directors, the amendment to Sara Lee Corporation's Charter, the approval of
the 1998 Long-Term Incentive Stock Plan, and the ratification of Arthur Andersen
as independent public accountants for the 1999 fiscal year.
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If your shares are not registered in your own name and you plan to attend
the Annual Meeting and vote your shares in person, you should contact your
broker or agent in whose name your shares are registered to obtain a broker's
proxy card and bring it to the Annual Meeting in order to vote.
You may revoke or change your proxy at any time before it is exercised by
sending a written revocation to Sara Lee's Secretary, Janet Langford Kelly, by
providing a later dated proxy, by voting in person at the meeting or through
Internet or telephone voting.
Each share of Sara Lee common stock is entitled to one vote. As of September
1, 1998, there were shares of common stock outstanding. Each share of Sara
Lee Employee Stock Ownership Plan Convertible Preferred Stock (ESOP Stock) is
entitled to 5.132 votes. As of September 1, 1998, there were 4,126,299 shares of
ESOP Stock outstanding. The common stock and the ESOP Stock vote together on all
matters as a single class.
INFORMATION FOR SARA LEE EMPLOYEES WHO ARE STOCKHOLDERS
If you are one of our many employees who is a stockholder and you
participate in the Employee Stock Ownership Plan (the ESOP), the Sara Lee Common
Stock Fund under any of Sara Lee's retirement or savings plans (the Savings
Plans), or in Sara Lee's Dividend Reinvestment Plan (the DRIP), you will receive
one proxy with respect to all of your shares registered in the same name.
Employees whose accounts are not registered in the same name will receive a
separate proxy with respect to their individual, ESOP, Savings Plans or DRIP
shares. If you participate in the ESOP you are entitled to direct the ESOP
trustee how to vote the shares allocated to your account, as well as a
proportionate share of unallocated shares and unvoted shares. If you participate
in any of the Savings Plans you have the right to direct the Savings Plans
trustee how to vote the shares allocated to your account. If you participate in
the Savings Plans and you do not return a proxy with respect to Savings Plans
shares, your Savings Plans shares will be voted by the Savings Plans trustee in
the same proportion as shares held by the Savings Plan trustee for which voting
instructions have been received.
INFORMATION REGARDING TABULATION OF THE VOTE
Sara Lee has a policy that all proxies, ballots and votes tabulated at a
meeting of the stockholders are confidential, and the votes will not be revealed
to any Sara Lee employee or anyone else, other than to the non-employee
tabulator of votes or an independent election inspector, except (1) as necessary
to meet applicable legal requirements or (2) in the event a proxy solicitation
in opposition to the election of the Board of Directors is filed with the
Securities and Exchange Commission. Representatives of Harris Trust and Savings
Bank will tabulate votes and act as Inspectors of Election at the meeting.
QUORUM REQUIREMENT
A quorum is necessary to hold a valid meeting. If stockholders entitled to
cast at least a majority of all the votes entitled to be cast at the meeting are
present in person or by proxy, a quorum will exist. Abstentions and broker
non-votes are counted as present for establishing a quorum. A broker non-vote
occurs when a broker votes on some matter on the proxy card but not on others
because the broker does not have the authority to do so.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Seventeen directors will be elected at the meeting by a plurality of all the
votes cast at the meeting, meaning that the seventeen nominees for director with
the most votes will be elected. In an uncontested election for directors, the
plurality requirement is not a factor. The affirmative vote of two-thirds of all
the votes entitled to be cast on the matter is required to approve the amendment
to the Charter of Sara Lee Corporation. Approval of the 1998 Long-Term Incentive
Stock Plan and the ratification of Arthur Andersen LLP as the independent public
accountants of the corporation for the
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fiscal year 1999 requires an affirmative vote of the majority of the votes cast
on the matter. Abstentions and non-votes will have the effect of a "no" vote as
to the proposed amendment to the Charter of the corporation and will have no
effect on the result of the vote on the election of directors, the approval of
the 1998 Long-Term Incentive Stock Plan and the ratification of Arthur Andersen
LLP.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this proxy
statement. Under our Bylaws, generally no business besides the four items
discussed in this proxy statement may be transacted at the meeting. However, if
any other matter properly comes before the Annual Meeting, your proxies will act
on such matter in their discretion.
ELECTION OF DIRECTORS
[PHOTO]
BOARD OF DIRECTORS
FRONT ROW FROM LEFT: JOAN D. MANLEY, JOHN H. BRYAN, C. STEVEN
MCMILLAN, NEWTON N. MINOW.
MIDDLE ROW FROM LEFT: ROZANNE L. RIDGWAY, DUANE L. BURNHAM, VERNON
E. JORDAN, JR., RICHARD L. THOMAS, WILLIE D.
DAVIS, HANS B. VAN LIEMT, CHARLES W. COKER,
PAUL A. ALLAIRE.
BACK ROW FROM LEFT: JAMES L. KETELSEN, ALLEN F. JACOBSON, FRANK L.
MEYSMAN, SIR ARVI H. PARBO, FRANS H.J.J.
ANDRIESSEN, JAMES S. CROWN, JOHN D. ZEGLIS.
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Sara Lee's directors are elected each year at the Annual Meeting by the
stockholders. We do not have a staggered board. Seventeen directors will be
elected at this year's Annual Meeting. Each director will serve until the 1999
Annual Meeting of stockholders and until he or she is succeeded by another
qualified director who has been elected. All the nominees, except Judith A.
Sprieser, Sara Lee's Senior Vice President and Chief Financial Officer, are
currently directors.
James S. Crown was elected to the Board by the other directors on January
29, 1998 and John D. Zeglis was elected to the Board by the other directors on
August 27, 1998.
If a nominee is unavailable for election, the proxy holders may vote for
another nominee proposed by the Board or the Board may reduce the number of
directors to be elected at the Annual Meeting. The following information is
furnished with respect to each nominee for election as a director. The ages of
the nominees are as of October 29, 1998.
PAUL A. ALLAIRE Chairman and Chief Executive Officer of Xerox Corporation
(information processing). Mr. Allaire became a director of Sara Lee in 1989. He
is a director of Lucent Technologies, J.P. Morgan & Co. Inc., Fuji Xerox Co.,
Ltd., and SmithKline Beecham plc and a trustee of Carnegie-Mellon University and
Worcester Polytechnic Institute. Mr. Allaire is also a director of the Ford
Foundation, a member of the board of the Council on Foreign Relations and the
Council on Competitiveness. He is a member of The Business Council and the
Business Roundtable. Age 60.
FRANS H.J.J. ANDRIESSEN Professor, European Integration, University of
Utrecht, the Netherlands. Mr. Andriessen is a former Minister of Finance in the
Netherlands. He became a member of the Commission of the European Communities in
1981, and was first Vice President of the Commission from 1989 until 1993. He is
a member of the board of SHV (Steenkool en Handelsvereniging), DHV Beheer BV,
DELA Cooperatie and Robeco. He is special advisor to KPMG Netherlands. He became
a director of Sara Lee in 1993. Mr. Andriessen is a member of the Supervisory
Board of Sara Lee/DE N.V., a subsidiary of Sara Lee. Age 69.
JOHN H. BRYAN Chairman of the Board and Chief Executive Officer of Sara Lee
Corporation. Mr. Bryan became a director of Sara Lee in 1974. He is a director
of Amoco Corporation, First Chicago NBD Corporation and General Motors
Corporation. Mr. Bryan is a past Chairman and a director of the Grocery
Manufacturers of America, Inc., Vice Chairman of The Business Council, a member
of the Business Roundtable and a director and past national Chairman of the
Business Committee for the Arts. He is the past Chairman of Catalyst and a
trustee of the University of Chicago, Vice Chairman of the Board of Trustees of
The Art Institute of Chicago and former Chairman of the Chicago Council on
Foreign Relations. Age 62.
DUANE L. BURNHAM Chairman of the Board and Chief Executive Officer of
Abbott Laboratories (health care products and services). He became a director of
Sara Lee in 1991. Mr. Burnham is also a director of Northern Trust Corporation.
He is a member of the Business Roundtable and the Commercial Club of Chicago. He
is also a member of the boards of the Healthcare Leadership Council, Evanston
Hospital Corporation (Evanston, IL), the Lyric Opera (Chicago) and Chairman of
the Chicago Council on Foreign Relations. Mr. Burnham is a trustee of
Northwestern University and the Museum of Science and Industry (Chicago) and a
member of the Advisory Board of the J.L. Kellogg Graduate School of Management
at Northwestern University. Age 56.
CHARLES W. COKER Chairman of the Board and Chief Executive Officer of
Sonoco Products Company (packaging products manufacturer). He became a director
of Sara Lee in 1986. Mr. Coker is also a director of NationsBank Corporation,
Springs Industries, Inc. and Carolina Power and Light Company. He is Chairman of
the Board of Hollings Cancer Center. Age 65.
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JAMES S. CROWN General Partner of Henry Crown and Company (Not
Incorporated) (diversified investments). He became a director of Sara Lee in
1998. Mr. Crown is also a director of General Dynamics Corporation and First
Chicago NBD Corporation. Age 45.
WILLIE D. DAVIS President of All-Pro Broadcasting, Inc. (radio stations), a
privately owned company. Mr. Davis became a director of Sara Lee in 1983. He is
also a director of The Dow Chemical Company, Kmart Corporation, Alliance Bank
(Culver City, California), Johnson Controls Inc., MGM Grand Inc., L.A. Gear,
Inc., Strong Fund, Rally's Hamburgers, Inc. and WICOR, Inc. Mr. Davis is a
trustee of the University of Chicago and Marquette University. Age 64.
VERNON E. JORDAN, JR. Senior partner of the Washington, D.C. law firm of
Akin, Gump, Strauss, Hauer & Feld L.L.P. Mr. Jordan became a director of Sara
Lee in 1989. He served as President of the National Urban League, Inc. from 1972
to 1982. Mr. Jordan is a director of American Express Company, Bankers Trust New
York Corporation and its subsidiary, Bankers Trust Company, Dow Jones & Company,
Inc., J.C. Penney Company, Inc., Revlon Group, Ryder System, Inc., Union Carbide
Corporation, Callaway Golf Company and Xerox Corporation. He is also a trustee
of the Ford Foundation. Mr. Jordan is a trustee of Howard University and a
governor of the Joint Center for Political and Economic Studies. Age 63.
JAMES L. KETELSEN Retired Chairman of the Board and Chief Executive Officer
of Tenneco Inc. (diversified industrial corporation). He was Chairman of the
Board and Chief Executive Officer of Tenneco Inc. from 1978 to 1992. Mr.
Ketelsen became a director of Sara Lee in 1982. He is also a director of GTE
Corporation and J.P. Morgan & Co. Inc. and its subsidiary, Morgan Guaranty Trust
Co. Age 67.
HANS B. VAN LIEMT Retired Chairman of the Board of Management of DSM NV
(chemicals). Mr. van Liemt served as Chairman of the Board of Management of DSM
NV from 1984 to 1993. Mr. van Liemt became a director of Sara Lee in 1994. He is
Chairman of the Supervisory Board of Sara Lee/DE N.V., a subsidiary of Sara Lee.
Mr. van Liemt is Chairman of the Supervisory Boards of Gamma Holding NV and
Oce-Van der Grinten NV. He is also a member of the Supervisory Boards of
ABN-AMRO Holding NV, Van Leer Group Foundation, Arnhemsche Holding NV and
Stienstra Holding BV. Mr. van Liemt is a trustee of the Foundation of the
Catholic University of Nijmegen and the Lucas-Franciscus Foundation for
Revalidation. He is active on the boards of the Preference Shares Foundation of
Koninklijke PTT NV, the Preference Shares Foundation of Philips NV and of the
Preference Shares Foundation of EVC International. Age 65.
JOAN D. MANLEY Retired Group Vice President and retired director of Time
Incorporated (communications). Mrs. Manley became a director of Sara Lee in
1982. She is also a director of BFP Holdings, Inc. Age 66.
C. STEVEN MCMILLAN President and Chief Operating Officer of Sara Lee
Corporation since 1997, Executive Vice President from 1993 to 1997 and Senior
Vice President from 1986 to 1993. Mr. McMillan became a director of Sara Lee in
1993. He is also a director of Illinova Corporation. Mr. McMillan is a member of
the Advisory Boards of the Stedman Nutrition Center of the Duke University
Medical School and the J.L. Kellogg Graduate School of Management at
Northwestern University, a member of the Productivity Council of the Grocery
Manufacturers of America, Inc., a member of the Supervisory Board of Sara Lee/DE
N.V., a subsidiary of Sara Lee and a trustee of the Museum of Contemporary Art
in Chicago. Age 52.
FRANK L. MEYSMAN Executive Vice President of Sara Lee Corporation since
March, 1997, Senior Vice President from March, 1994 to March, 1997 and Vice
President from 1992 to 1994. Mr. Meysman has also been Chairman of the Board of
Management of Sara Lee/DE, N.V., a subsidiary of Sara Lee, since 1994. Mr.
Meysman became a director of Sara Lee in March, 1997. In addition to
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his management responsibility for Sara Lee's Coffee and Grocery and Household
and Body Care lines of business, Mr. Meysman manages Sara Lee's businesses in
the Asia-Pacific region. He is a member of the Supervisory Board of VNU, a
Dutch-based publishing company and director of the Zeneca Group, a U.K. based
pharmaceutical company. Age 46.
ROZANNE L. RIDGWAY Former Ambassador and Assistant Secretary of State for
European and Canadian Affairs and, since July, 1994, Chair (non-executive) of
the Baltic American Enterprise Fund. She became a director of Sara Lee in 1992.
Ambassador Ridgway served in the U.S. Foreign Service from 1957 until her
retirement in 1989, including assignments as Ambassador for Oceans and Fisheries
Affairs; Ambassador to Finland; Counselor of the Department of State; and
Ambassador to the German Democratic Republic. Ambassador Ridgway is a director
of Bell Atlantic Corporation, The Boeing Company, Emerson Electric Company,
Minnesota Mining & Manufacturing Company, RJR Nabisco, Inc. and Union Carbide
Corporation. She serves on the International Advisory Board of the New
Perspective Fund. Ambassador Ridgway is also a director of the Center for Naval
Analysis, a trustee of the National Geographic Society and Hamline University, a
member of the American Academy of Diplomacy and a Fellow of the National Academy
of Public Administration. She also served as President (1989 - 1993) and
Co-Chair (1993 - 1996) of the Atlantic Council of the United States. Age 63.
JUDITH A. SPRIESER Senior Vice President and Chief Financial Officer of
Sara Lee Corporation since 1994. Ms. Sprieser has been with Sara Lee Corporation
since 1987 and, prior to her current position, she served as President and Chief
Executive Officer of Sara Lee Bakery, North America. She is a director of USG
Corporation and a member of the board of trustees of Northwestern University.
She is also a member of the Young Presidents Organization, the Economic Club and
the American Institute of Certified Public Accountants. Age 45.
RICHARD L. THOMAS Retired Chairman of First Chicago NBD Corporation (bank
holding company) and The First National Bank of Chicago. Mr. Thomas became a
director of Sara Lee in 1976. He is also a director of First Chicago NBD
Corporation, CNA Financial Corporation, The PMI Group, Inc., The Sabre Holdings
Group, Inc., Scotsman Industries, Inc., Unicom Corporation and IMC Global, Inc.
Mr. Thomas is a life trustee of the Chicago Symphony Orchestra, a trustee of
Rush-Presbyterian-St. Luke's Medical Center (Chicago), Northwestern University
and Kenyon College. Age 67.
JOHN D. ZEGLIS President and director of AT&T Corporation since 1997. Mr.
Zeglis became a director of Sara Lee in 1998. Mr. Zeglis is also a director of
Illinova Corporation and Helmerich & Payne, Inc. Age 51.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE
NOMINEES.
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MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met seven times during the fiscal year. In addition
to meetings of the full Board, directors also attended meetings of Board
committees. All of the directors, except Mr. Allaire, attended at least 75% of
all the meetings of the Board and those committees on which he or she served
during the fiscal year. The Board of Directors has standing audit, board affairs
and corporate governance, compensation and employee benefits, executive,
employee and public responsibility, and finance committees. The following table
shows the membership of the various committees.
<TABLE>
<CAPTION>
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COMMITTEE MEMBERSHIP ROSTER
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BOARD AFFAIRS EMPLOYEE AND
AND CORPORATE COMPENSATION AND PUBLIC
NAME AUDIT GOVERNANCE EMPLOYEE BENEFITS EXECUTIVE RESPONSIBILITY FINANCE
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<S> <C> <C> <C> <C> <C> <C>
Paul A. Allaire X X X X*
<CAPTION>
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Frans H.J.J. Andriessen X X
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
John H. Bryan X X* X X
<CAPTION>
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Duane L. Burnham X X
<CAPTION>
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Charles W. Coker X X* X X
<CAPTION>
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James S. Crown X X
<CAPTION>
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Willie D. Davis X X
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Allen F. Jacobson X X
<CAPTION>
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Vernon E. Jordan, Jr. X* X X
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
James L. Ketelsen X X X X*
<CAPTION>
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Hans B. van Liemt X X
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Joan D. Manley X X X
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C. Steven McMillan X X
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Frank L. Meysman X X
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Newton N. Minow X X
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Sir Arvi H. Parbo X X
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Rozanne L. Ridgway X X
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Richard L. Thomas X* X X
<CAPTION>
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John D. Zeglis X X
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</TABLE>
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* Chairperson
AUDIT COMMITTEE. The Audit Committee provides oversight regarding
accounting, auditing and financial reporting practices of Sara Lee. Each year it
recommends to the Board of Directors a firm of independent public accountants to
serve as auditors with whom it discusses the scope and results of their audit,
non-audit services, fees for services and their independence in servicing Sara
Lee. The Audit Committee meets with Sara Lee's internal auditors to discuss the
work they perform and also is informed by management and the independent public
accountants about the adequacy of compliance with Sara Lee's existing major
accounting and financial policies; procedures and policies relative to the
adequacy of Sara Lee's internal accounting controls; and compliance with the
Foreign Corrupt Practices Act of 1977 and other federal and state laws relating
to accounting practices. The Audit Committee met three times during the year.
7
<PAGE>
BOARD AFFAIRS AND CORPORATE GOVERNANCE COMMITTEE. The Board Affairs and
Corporate Governance Committee reviews and considers directorship policies and
practices from time to time, screens and recommends candidates for director, and
reviews the management succession plan and executive resources. The Board
Affairs and Corporate Governance Committee met two times during the year.
Candidates for director suggested by stockholders are considered by the Board
Affairs and Corporate Governance Committee. Such suggestions, together with
biographical information about the suggested candidate, should be submitted to
the Secretary, Janet Langford Kelly, Sara Lee Corporation, Three First National
Plaza, Chicago, Illinois 60602-4260.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE. The Compensation and Employee
Benefits Committee reviews and approves Sara Lee's compensation philosophy
covering corporate officers and other key management employees; reviews the
competitiveness of Sara Lee's total compensation practices; determines the
annual base salaries and incentive awards to be paid to executive officers and
approves the annual salaries of all corporate officers and certain other
executives; reviews and approves salary ranges for corporate officers and other
key management employees; approves the terms and conditions of proposed
incentive plans applicable to corporate officers and other key management
employees; approves and administers Sara Lee's employee benefit plans; and
reviews and approves special hiring and severance arrangements with executive
officers. A director is not eligible to serve as a member of the Compensation
and Employee Benefits Committee if a Sara Lee employee is a member of the board
of directors of the company which employs such director. None of the members is,
or has ever been, an employee of Sara Lee. The Compensation and Employee
Benefits Committee met two times during the year.
EXECUTIVE COMMITTEE. The Executive Committee exercises the authority of the
Board on such matters as are delegated to it by the Board of Directors from time
to time and exercises the authority of the Board between meetings of the Board
of Directors. The Executive Committee did not meet during the year.
EMPLOYEE AND PUBLIC RESPONSIBILITY COMMITTEE. The Employee and Public
Responsibility Committee provides oversight and guidance in those areas
concerning Sara Lee's obligations to its employees and to its major public
constituencies, including its stockholders, customers, consumers and the
communities in which Sara Lee operates. The Employee and Public Responsibility
Committee met three times during the year.
FINANCE COMMITTEE. The Finance Committee reviews the Corporation's
financial policies and performs other duties as requested by the Board of
Directors from time to time. The Finance Committee met three times during the
year.
DIRECTOR COMPENSATION
Directors who are Sara Lee employees receive no fees for their services as
directors. Outside directors receive an annual retainer of $62,500 and an annual
grant of options to purchase 5,000 shares of common stock (5,500 shares for
chairs of committees of the Board). Outside directors may elect to receive
common stock, options to purchase common stock, or a combination of stock and
options, in lieu of all or a portion of their annual retainer. Directors do not
receive any meeting or attendance fees. Directors are eligible to receive
restoration stock options upon exercise of their stock options.
Outside directors may elect to defer part or all of their annual retainer
under a non-qualified, unfunded deferred compensation plan. Deferred amounts are
invested, at the election of the director, in an interest-bearing account or a
stock equivalent account. The amounts deferred, plus any appreciation, are paid
in cash on dates selected by the director.
During the 1998 fiscal year, Sara Lee paid fees for legal services performed
by the law firm of Sidley & Austin, of 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.
8
<PAGE>
SARA LEE COMMON STOCK AND ESOP STOCK OWNERSHIP
BY DIRECTORS AND EXECUTIVE OFFICERS
This table indicates how much common stock and ESOP Stock the executive
officers and directors beneficially owned as of September 4, 1998. In general,
"beneficial ownership" includes those shares a director or executive officer has
the power to vote, or the power to transfer, and stock options that are
exercisable currently or become exercisable within 60 days. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHARES OF COMMON OPTIONS NUMBER OF SHARES
STOCK BENEFICIALLY EXERCISABLE OF ESOP STOCK
NAME OWNED WITHIN 60 DAYS BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paul A. Allaire 21,188 8,027
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frans H.J.J. Andriessen 7,499 8,754
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
John H. Bryan (1)(2)(3) 1,331,856 901,341 492
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Duane L. Burnham (3) 9,681 18,865
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles W. Coker 50,501 14,150
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
James S. Crown 5,000 8,364
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Willie D. Davis 14,555 5,000
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allen F. Jacobson (3)(4) 12,692 5,402
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vernon E. Jordan, Jr. 13,106 10,676
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
James L. Ketelsen 23,763 27,099
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hans B. van Liemt 7,146 6,699
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joan D. Manley 26,102 5,000
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
C. Steven McMillan (1)(2) 249,281 335,580 492
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frank L. Meysman (2)(3) 106,517 456,295
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Newton N. Minow (1)(3)(4) 66,850 5,000
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sir Arvi H. Parbo (4) 13,135 5,000
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rozanne L. Ridgway 7,106 6,680
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Judith A. Sprieser (2)(3) 99,903 157,989 483
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard L. Thomas (1) 178,267 5,500
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
John D. Zeglis --
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors and Executive Officers as a
group (25 persons) 2,369,757 3,303
- ----------------------------------------------------------------------------------------
</TABLE>
- -------------------------
(1) Includes shares of common stock owned by relatives or held in trusts for the
benefit of relatives with respect to which the named persons disclaim any
beneficial interest.
(2) Includes restricted shares granted under Sara Lee's 1995 Long-Term Incentive
Stock Plan (and predecessor plans) as described on page 12.
(3) Includes shares of common stock with respect to which the following
directors and executive officers share voting and investment power with
others: Mr. Bryan, 31,491 shares; Mr. Burnham, 9,681 shares; Mr. Jacobson,
12,692 shares; Mr. Meysman, 3,117 shares; Mr. Minow, 64,718 shares and Ms.
Sprieser 28,621 shares.
(4) As noted above, Allen Jacobson, Newton Minow and Sir Arvi Parbo are retiring
and not standing for reelection.
9
<PAGE>
As of September 4, 1998, all directors and executive officers as a group
beneficially owned shares of common stock, or % of the outstanding
shares of common stock, and shares of ESOP Stock, or % of the
outstanding shares of ESOP Stock. No person named in the table owns more than 1%
of the outstanding shares of common stock or of the outstanding shares of ESOP
Stock. Each share of ESOP Stock is convertible into four shares of common stock.
As of September 1, 1998, State Street Bank & Trust Company of Boston, 200
Newport Avenue, North Quincy, Massachusetts 02171, as Trustee for the ESOP, held
4,126,299 shares of ESOP Stock (all of the outstanding shares of ESOP Stock), of
which 1,714,146 shares (42%) were allocated to participant accounts and
2,412,153 shares (58%) were unallocated shares. Each Sara Lee employee who
participates in the ESOP is entitled to direct the Trustee how to vote the
shares allocated to his or her account as well as a proportionate share of
unallocated or unvoted shares.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE ON EXECUTIVE
COMPENSATION
THE COMMITTEE:
The Compensation and Employee Benefits Committee is comprised of directors
who are not employees or former employees of Sara Lee. Our responsibilities as
committee members include the approval and administration of the compensation
and benefit programs for Sara Lee's named executive officers whose compensation
is shown in this proxy statement. To assist us in this process, we use the
services of independent executive compensation consulting firms.
GUIDING COMPENSATION PRINCIPLES:
Sara Lee's executive compensation program is based upon the following
principles. The program will:
- support the attainment of Sara Lee's long and short-term strategic and
financial objectives;
- align executives' goals with our stockholders;
- reward executives for continuous improvement in earnings per share and
growth in stockholder value;
- be competitive in comparison with Sara Lee's peer companies;
- encourage significant ownership of Sara Lee stock;
- be performance-based with variable pay constituting a significant portion
of total compensation.
TYPES OF COMPENSATION:
Sara Lee's executive compensation program consists of two main types of
compensation:
1. ANNUAL COMPENSATION which includes base salary and annual bonus
incentives. The amounts of any annual incentives paid are based upon the degree
to which specific financial, strategic and non-financial objectives are
accomplished.
2. LONG-TERM COMPENSATION which includes stock options and restricted
performance share awards. The value of these forms of compensation depends
primarily upon the future value of Sara Lee stock.
PEER GROUP:
The companies used by Sara Lee for compensation comparisons consist of a
select group containing many of the largest global consumer products companies.
Many of these companies are
10
<PAGE>
represented in the Peer Composite index shown in the Performance Graph on page
14. This peer group is used for comparisons of all components of the
compensation package.
ANNUAL COMPENSATION:
BASE SALARY. We determine the appropriateness of executives' salaries by
considering the responsibilities of their positions, their individual
performance and by reference to the median levels of salaries paid by the peer
group. Salary increases are considered annually and are based on both financial
and non-financial results achieved during the preceding fiscal year.
BONUS INCENTIVES. The annual bonus incentive for the named executive
officers is the lesser of:
1. An incentive pool which is 1.5% of the net income in excess of that
necessary to achieve a 10% return on average total common stockholders
equity, with thirty percent of the incentive pool allocated to the Chairman
and the remainder divided equally among the other named executive officers,
or
2. An amount which is based upon the achievement of performance goals,
set at the beginning of each fiscal year, such as earnings per share, return
on capital, operating profit and non-financial objectives including
management development and diversity representation goals.
PROJECT 2000:
In September 1997 Sara Lee announced a major restructuring to reduce the
degree of its vertical integration by selling low-return assets, divesting other
non-core businesses and implementing global cost reduction programs. The
proceeds from these activities are and will be used to repurchase at least $3
billion in Sara Lee common stock by the end of fiscal 2000. This restructuring
and deverticalization will give management the opportunity to concentrate on the
greatest value-creating activities, which are developing and managing leading
brands.
As an incentive to successfully complete the restructuring and implement the
deverticalization strategy, we approved stock options and restricted performance
shares above the normal amount typically granted each year. These grants were
made to provide additional incentives for management to carry out the company's
Project 2000 initiatives, which represent a fundamental shift in the way in
which Sara Lee runs its businesses. The grants made to the named executive
officers and other senior executives are described in greater detail in the
Long-Term Compensation section of this report and in the accompanying
compensation tables.
As a unifying event intended to focus attention on its Project 2000
initiatives, Sara Lee also made a broad-based stock option grant to
approximately 50,000 of its employees around the world. This grant excluded all
key executives participating in the executive stock option program. The terms of
this grant may differ among the many countries in which participants reside. The
typical grant was an option to purchase 100 shares of common stock, with an
exercise price equal to the fair market value on the date of grant. The options
expire in ten years.
Sara Lee has already made significant strides in accomplishing its Project
2000 goals, such as the following:
- Sold ten yarn and textile plants to National Textiles, L.L.C.
- Divested several non-core businesses such as the Douwe Egberts Van Nelle
Tobacco Company, Sara Lee's European car care operations and its remaining
interest in Electrolux Corporation.
- Repurchased 27.2 million shares of common stock with a cash outlay of
approximately $1.5 billion.
11
<PAGE>
LONG TERM COMPENSATION:
Under the 1995 Long-Term Incentive Stock Plan, we provide stock awards to
Sara Lee's key executives in the form of stock options and restricted
performance shares. These awards provide a strong incentive for the executives
to maximize long-term stockholder value.
STOCK OPTIONS. All stock options have an option price equal to the market
value of Sara Lee's stock on the grant date. The maximum term of each grant is
ten years, except for executives living in the Netherlands, in which case for
tax reasons the maximum term is 5 years. We set guidelines by executive level
for the number of shares available for grant. The grants made in August 1997 to
approximately 140 senior executives, including the named executive officers,
were approximately three times the normal annual grant level and have an
exercise price of $41.06, which was the fair market value of Sara Lee's common
stock on the date of grant. In recognition of the size of these awards, these
stock options were subject to vesting either upon the attainment of an average
stock price of $60, over a twenty consecutive day period within three years of
the grant date, or all vesting at one time on August 27, 2006. On April 2, 1998,
the $60 price-test vesting requirement was met. However, these special stock
options do not become exercisable any earlier than Sara Lee's normal stock
options have been in the past. Therefore, one-third of these special stock
options become exercisable on each of the first three anniversary dates
following the August 27, 1997 grant date.
RESTRICTED PERFORMANCE SHARES. The Long-Term Performance Incentive Plan
(LTPIP) provides annual grants of shares of common stock (i.e., restricted
performance shares) to about 140 participants, including the named executive
officers. These shares may be earned three years later based upon achievement of
specific earnings per share and return on invested capital goals. Restricted
performance shares were granted in August 1997 at the beginning of the
three-year performance cycle covering fiscal years 1998-2000. Similar to the
number of stock options granted, the restricted performance share grants in
August 1997 were also approximately three times the normal annual grant
guidelines. In recognition of the size of these awards, extraordinary
performance goals were set. The LTPIP provides that no shares are earned for
performance results at the "Threshold" level and as many as 125% of the original
shares granted may be earned for "Outstanding" results.
LTPIP participants residing in the Netherlands, such as Mr. Meysman,
received special performance-based stock options in lieu of restricted
performance shares for Dutch tax reasons.
STOCK OWNERSHIP:
We believe that it is important to align executives' interests with those of
our stockholders. Sara Lee's executives have a substantial portion of their
incentive pay based upon Sara Lee's stock performance. Because we strongly
believe that our executives should have a meaningful stake in Sara Lee, stock
ownership guidelines now apply to approximately 1,200 of Sara Lee's key
executives. The ownership requirements range from a minimum of 1,000 to a
maximum of 150,000 shares. Expressed as a percentage of salary, the ownership
requirements range from a low of about 50% to a high of about 900% of annual
salary for these executives.
To assist and encourage compliance with these ownership guidelines, Sara Lee
has adopted restoration stock options as a feature within its stock option
program. Restoration stock options encourage executives to accumulate shares of
Sara Lee stock for purposes of exercising their stock options. Restoration stock
options are granted when an executive uses currently owned shares to purchase
the stock option shares. Restoration stock options are subject to the same terms
and conditions as the original options they replace, except that the restoration
options' exercise price is set at market value on the date the restoration stock
option is granted. In order to receive a restoration stock option, the market
value of Sara Lee's stock must be at least 25% greater than the exercise price
of the option on the date the option is exercised. A plan participant may
receive restoration stock options only twice in the same calendar year.
12
<PAGE>
CHIEF EXECUTIVE'S COMPENSATION:
Mr. Bryan's base salary has been capped at $928,200 since 1995 as a part of
Sara Lee's strategy to maximize the Company's tax deduction for executive
compensation. The foregone value of Mr. Bryan's base salary increases and
certain perquisites that were eliminated in 1995 are periodically replaced with
restricted performance shares.
We set specific financial, strategic and non-financial performance goals for
Mr. Bryan at the beginning of fiscal year 1998. Basic earnings per share results
accounted for 63% of his fiscal year 1998 goals. The remaining 37% were related
to other corporate strategic and individual performance goals. Sara Lee's basic
earnings per share in fiscal year 1998 of $2.32 represented a 13% increase over
fiscal year 1997. Some of the other goals for which Mr. Bryan was responsible
were the divestiture of non-core businesses, succession planning activities and
the implementation of Sara Lee's restructuring program.
Based upon our assessment of Mr. Bryan's and Sara Lee's performance during
fiscal year 1998, he earned an annual bonus incentive payment of $1,819,272
which represents 196% of his base salary. This amount was below the maximum
award possible under the annual bonus incentive described above.
On August 27, 1997, Mr. Bryan was granted a stock option to purchase 750,000
shares of Sara Lee common stock. This grant was subject to the $60 price-vesting
test described earlier. Mr. Bryan was also granted 67,200 restricted performance
shares under the 1998-2000 Long-Term Performance Incentive Plan. This grant
contained 7,200 shares which were granted to replace foregone salary increases
and perquisites that were eliminated in order to maximize Sara Lee's tax
deduction of executive compensation under Section 162(m) of the Internal Revenue
Code.
TAX DEDUCTIBILITY OF COMPENSATION:
The Internal Revenue Code contains a provision that limits the tax
deductibility of certain compensation paid to named executive officers. This
provision disallows the deductibility of certain compensation in excess of $1
million per year unless it is considered performance-based compensation under
the tax code. We have adopted policies and practices that should ensure the
maximum tax deduction possible under Section 162(m) of the tax code. However, we
reserve the right to forego any or all of the tax deduction if we believe it to
be in the best long-term interests of our stockholders.
SUMMARY:
We believe the compensation programs of Sara Lee are strategically
integrated with the Company's business plan and are properly aligned with
stockholders' best interests. The programs allow Sara Lee to attract, retain and
motivate exceptional managers and reward them appropriately for exceptional
results. We continually monitor these programs and change them in recognition of
the dynamic, global marketplace in which Sara Lee competes. Sara Lee will
continue to emphasize performance and equity-based incentive plans that reward
increased stockholders' returns.
Charles W. Coker, Chairperson,
James S. Crown,
James L. Ketelsen,
Hans B. van Liemt,
Joan D. Manley,
Rozanne L. Ridgway,
Richard L. Thomas
13
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AS OF JUNE 30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SARA LEE CORPORATION PEER COMPOSITE S&P 500
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $88 $94 $101
1995 $121 $115 $128
1996 $142 $140 $161
1997 $186 $185 $217
1998 $254 $228 $282
Assumes an investment of $100 on June 30, 1993, and the reinvestment of
dividends.
</TABLE>
Sara Lee has elected to utilize a weighted composite of the S&P Foods, Household
Products and Textiles (Apparel) Manufacturers Indices because no single
standardized industry index represents a comparable peer group. As of June 27,
1998, the three indices are comprised of the following companies: the S&P Foods
Index -- Bestfoods, Campbell Soup Company, ConAgra, Inc., General Mills, Inc.,
H.J. Heinz Company, Hershey Foods Corporation, Kellogg Company, The Quaker Oats
Company, Ralston Purina Group, Sara Lee Corporation, Unilever N.V., Wm. Wrigley
Jr. Company; the S&P Household Products Index -- The Clorox Company,
Colgate-Palmolive Company, Fort James Corporation, Kimberly-Clark Corporation,
The Procter & Gamble Company, and the S&P Textiles (Apparel) Manufacturers Index
- -- Fruit of the Loom, Inc., Liz Claiborne, Inc., Russell Corp., Springs
Industries, V.F. Corporation. The returns on the Peer Composite index were
calculated as follows: at the beginning of each fiscal year the amount invested
in each S&P industry sector index was equivalent to the percentage of Sara Lee's
operating profits in its food, household and body care and apparel businesses,
respectively, for the preceding year. As a result, the investment allocation was
re-weighted each year to reflect the profit percentage change that occurred in
Sara Lee's business mix during the prior year.
14
<PAGE>
SUMMARY COMPENSATION TABLE
The table below shows the before-tax compensation for John H. Bryan, the
Chairman and Chief Executive Officer of Sara Lee, and the four next highest
compensated executive officers of Sara Lee.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS PAYOUTS
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION STOCK OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($)(1) (#)(2) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John H. Bryan 1998 $ 928,200 $1,819,272 $ 140,817(5) $2,755,200 1,281,340 $ 117,843 $ 265,484
Chairman of the Board 1997 $ 928,200 $1,241,468 $ 89,128 $ 400,000 604,591 $ 178,364 $ 58,472
and Chief Executive 1996 $ 928,200 $1,303,378 $ 67,384 $ 863,500 1,141,107 -- $ 34,080
Officer
C. Steven McMillan 1998 $ 700,000 $1,021,300 $ 6,870 $1,845,000 545,622 $ 18,023 $ 145,714
President and Chief 1997 $ 617,308 $ 661,754 $ 31,821 $ 208,000 214,533 $ 125,344 $ 52,162
Operating Officer 1996 $ 567,854 $ 610,443 -- $ 412,500 161,918 -- $ 39,140
Frank L. Meysman(6) 1998 $ 415,636 $ 476,069 -- $2,900,000 301,940 -- --
Executive Vice 1997 $ 398,050 $ 377,869 $ 10,063 -- 67,349 -- --
President 1996 $ 386,245 $ 359,961 -- -- 63,000 -- --
James R. Carlson 1998 $ 431,539 $ 389,463 $ 708 $ 984,000 204,093 $ 2,884 $ 79,571
Senior Vice President 1997 $ 324,817 $ 266,025 863 $ 0 47,237 $ 45,124 $ 26,575
1996 $ 256,215 $ 198,874 3,000 $ 123,750 26,432 -- $ 21,782
Judith A. Sprieser 1998 $ 393,846 $ 367,064 -- $ 676,500 163,695 $ 26,289 $ 67,117
Senior Vice President 1997 $ 364,539 $ 297,099 $ 490 $ 96,000 65,780 $ 38,648 $ 24,203
and Chief Financial 1996 $ 314,288 $ 285,468 276 $ 192,500 42,671 -- $ 18,025
Officer
</TABLE>
- -------------------------
(1) Market value of restricted performance shares of common stock on the date of
grant. Dividends on the restricted performance shares awarded to each
participant are escrowed during the period of the restriction. Dividends and
interest on the escrowed dividends will be distributed at the end of the
performance cycle in the same proportion as the restrictions on the
restricted shares lapse. With the exception of Mr. Meysman, whose
arrangement is described below, the restrictions lapse if, and only to the
extent that, certain performance goals are met. To the extent the
performance goals are not attained, both dividends and interest will be
forfeited. In the event of a change of control, the restrictions imposed on
the restricted performance shares will lapse, and all restricted performance
shares will be released to participants. As of June 26, 1998, the market
value and aggregate number of all restricted shares held by Messrs. Bryan,
McMillan, Meysman, Carlson and Ms. Sprieser were, respectively, $17,163,038
(303,100), $9,088,313 (160,500), $2,831,250 (50,000), $2,650,050 (46,800)
and $1,896,938 (33,500).
On April 29, 1998, Mr. Meysman entered into a special retention arrangement
with Sara Lee. Mr. Meysman received 50,000 restricted share units. Provided
Mr. Meysman remains continually employed by Sara Lee until April 29, 2003,
(the vesting date) then on the vesting date the restricted share units will
vest and convert into shares of common stock and be distributed. Dividends
and interest on those dividends will accrue during the restriction period
and be paid in cash on the vesting date. Mr. Meysman may elect to defer the
distribution of some or all of the share units, dividend units and interest
into the Sara Lee Deferred Compensation Plan.
(2) Represents options to purchase common stock granted pursuant to Sara Lee's
stock option plans. Amounts reported in this column include Restoration
Stock Options granted during fiscal years 1996, 1997 and 1998, as discussed
on page 12.
(3) Market value of shares awarded on August 27, 1998 under the FY1996-1998
Long-Term Performance Incentive Plan.
(4) The amounts reported in this column for fiscal year 1998 include (i) all
amounts allocated to the following officers under the ESOP and a
supplemental benefit plan (as discussed on page 19): Mr. Bryan, $262,469,
Mr. McMillan, $120,221, Mr. Carlson, $54,800 and Ms. Sprieser, $57,202, (ii)
interest accrued at above-market rates (as defined by the rules of the
Securities and Exchange Commission) on compensation deferred for prior
periods by the following officers: Mr. Bryan, $3,015, Mr. McMillan, $2,100
and Mr. Carlson, $170, and (iii) premiums paid by Sara Lee in connection
with universal life insurance policies which are owned by certain of the
following officers: Mr. McMillan, $23,393, Mr. Carlson, $24,601 and Ms.
Sprieser, $9,915.
(5) The amount reported for Mr. Bryan includes $67,249 for the personal use of
corporate transportation.
(6) Mr. Meysman's compensation information contained in this Proxy Statement has
been converted from Dutch guilders to U.S. dollars based upon an average
foreign exchange rate.
15
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table gives more information on stock options granted during
the last fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM
% OF TOTAL
OPTIONS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS GRANTED IN FISCAL PRICE EXPIRATION 5% (3) 10% (3)
NAME (#)(1) YEAR ($/SH) DATE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan New Grant (2)
750,000 3.58 % $ 41.06 08/28/2007 $19,355,748 $49,044,892
Restoration Options
65,103 0.31 % 57.34 07/03/1999 285,326 577,663
99,731 0.48 % 56.88 08/24/2004 2,161,371 4,984,962
75,778 0.36 % 56.88 08/30/2005 1,944,902 4,611,455
50,391 0.24 % 56.88 08/28/2006 1,500,135 3,656,404
19,980 0.10 % 56.88 08/25/2003 358,270 804,578
64,448 0.31 % 56.88 07/01/2002 892,417 1,944,917
19,393 0.09 % 56.88 11/30/1998 48,362 96,446
41,585 0.20 % 56.88 07/03/1999 175,692 355,348
48,371 0.23 % 56.88 07/03/1999 204,362 413,336
7,146 0.03 % 56.88 11/30/1998 17,820 35,539
39,414 0.19 % 56.88 08/25/2003 706,750 1,587,169
C. Steven McMillan New Grant (2)
375,000 1.79 % $ 41.06 08/28/2007 $9,677,874 $24,522,446
Restoration Options
26,986 0.13 % 51.44 07/03/1999 115,720 235,028
17,216 0.08 % 51.44 08/24/2004 347,764 805,823
19,707 0.09 % 51.44 08/30/2005 469,863 1,119,372
12,711 0.06 % 51.44 07/01/2002 166,052 363,506
7,675 0.04 % 51.44 07/01/2002 100,264 219,488
15,512 0.07 % 60.91 08/24/2004 339,575 776,425
1,731 0.01 % 60.91 07/01/2002 23,616 51,043
14,164 0.07 % 60.91 08/25/2003 254,218 566,073
24,500 0.12 % 60.91 08/28/2006 745,462 1,800,647
10,326 0.05 % 60.91 07/03/1999 36,143 72,537
4,959 0.02 % 60.91 11/30/1998 8,309 16,443
12,929 0.06 % 60.91 01/28/2003 203,962 447,446
2,206 0.01 % 60.91 08/25/2003 39,594 88,164
Frank L. Meysman New Grant
75,000(2) 0.36 % $ 41.81 08/13/2002 $ 866,885 $1,915,726
150,000(2) 0.72 % 41.06 08/28/2002 3,871,150 9,808,978
60,000 0.29 % 41.06 08/28/2002 681,068 1,505,089
Restoration Options
16,211 0.08 % 60.13 06/02/2003 269,477 595,515
729 0.00 % 60.13 06/02/2003 12,118 26,780
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM
% OF TOTAL
OPTIONS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS GRANTED IN FISCAL PRICE EXPIRATION 5% (3) 10% (3)
NAME (#)(1) YEAR ($/SH) DATE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
James R. Carlson New Grant (2)
130,000 0.62 % $ 41.06 08/28/2007 $3,354,996 $8,501,115
Restoration Options
7,798 0.04 % 53.44 07/01/2002 105,273 230,323
7,826 0.04 % 53.44 07/03/1999 34,380 69,788
6,479 0.03 % 53.44 07/03/1999 28,462 57,776
6,061 0.03 % 53.44 07/03/1999 26,626 54,049
2,854 0.01 % 53.44 11/30/1998 7,862 15,734
1,771 0.01 % 53.44 12/02/1997 165 322
2,962 0.01 % 53.44 08/25/2003 51,437 115,974
6,608 0.03 % 59.69 08/25/2003 115,680 257,440
13,087 0.06 % 59.69 08/24/2004 279,615 638,956
10,002 0.05 % 59.69 08/30/2005 254,921 598,743
8,645 0.04 % 59.69 08/28/2006 256,946 620,269
Judith A. Sprieser New Grant (2)
120,000 0.57 % $ 41.06 08/28/2007 $3,096,920 $7,847,183
Restoration Options
3,870 0.02 % 49.75 07/03/1999 17,533 35,735
1,511 0.01 % 49.75 01/28/2003 22,477 50,139
2,631 0.01 % 49.75 07/03/1999 11,920 24,294
5,838 0.03 % 49.75 07/01/2002 76,350 167,766
519 0.00 % 49.75 07/01/2002 6,787 14,914
729 0.00 % 49.75 11/30/1998 2,182 4,384
279 0.00 % 49.75 11/30/1998 835 1,678
264 0.00 % 49.75 07/03/1999 1,196 2,438
1,218 0.01 % 49.75 07/03/1999 5,518 11,247
6,903 0.03 % 59.75 08/30/2005 180,932 426,909
9,813 0.05 % 59.75 08/24/2004 216,393 496,703
10,120 0.05 % 59.75 01/26/2005 240,494 558,376
All Stockholders N.A. N.A. N.A. N.A. $16,404,809,119 $41,573,007,193
</TABLE>
NOTES TO OPTION GRANTS IN LAST FISCAL YEAR ON THE FOLLOWING PAGE.
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<PAGE>
NOTES TO OPTION GRANTS IN LAST FISCAL YEAR
(1) The table includes both new options and Restoration Stock Options granted
upon the exercise of existing options. The grant of a Restoration Stock
Option upon the exercise of an existing option is intended to promote
increased employee share ownership by encouraging the early exercise of
existing options. The grant of a Restoration Stock Option (as described on
page 12) does not result in an increase in the total combined number of
shares and options held by an employee.
(2) Exercise price equals 100% of the fair market value of the common stock on
the date of grant and may be exercised within 10 years, except for Mr.
Meysman, whose options may be exercised within five years due to Dutch tax
laws. The options, as noted in the report of the Compensation and Employee
Benefits Committee of the Board of Directors on page 12, on April 2, 1998,
generally become exercisable in three equal annual installments, on the
first, second and third year anniversary dates of the date of grant. No
option may be exercised until the expiration of one year from the date of
grant, except that Mr. Meysman's options are exercisable immediately due to
Dutch tax laws. In the event of a change of control of Sara Lee, the
Compensation and Employee Benefits Committee may provide for appropriate
adjustments, including acceleration of vesting.
(3) The dollar amounts indicated in these columns are the result of calculations
assuming growth rates required by the rules of the Securities and Exchange
Commission. These growth rates are not intended by Sara Lee to forecast
future appreciation, if any, of the price of common stock, and Sara Lee
expressly disclaims any representation to that effect.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows the number and value of stock options (exercised
and unexercised) for Messrs. Bryan, McMillan, Meysman, Carlson and Ms. Sprieser
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE- MONEY OPTIONS
AT FISCAL YEAR-END (#) ATFISCAL YEAR-END ($) (1)
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan $ 466,237 1,001,771 $ -- $16,505,653
C. Steven McMillan 238,293 5,907,497 150,580 554,661 1,444,799 8,252,826
Frank L. Meysman 42,734 1,594,833 456,295 -- 8,578,984 --
James R. Carlson 103,140 2,968,732 33,980 198,843 108,226 2,805,819
Judith A. Sprieser 62,006 1,862,920 62,152 192,504 1,232,409 3,046,618
</TABLE>
(1) Calculated based on the share price of common stock on June 26, 1998 (the
last business day of the fiscal year) of $56.63 less the option exercise
price. An option is in-the-money if the market value of the common stock
subject to the option exceeds the exercise price.
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<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Meysman has employment agreements with Sara Lee and Sara Lee/DE N.V., a
subsidiary of Sara Lee ("Sara Lee/DE"). Under the agreements, Mr. Meysman
currently receives an annual base salary of 880,000 Dutch guilders (which is
approximately $440,000). Mr. Meysman also participates in Sara Lee's annual
short-term incentive plans, long-term incentive plans and deferred compensation
plans on a basis commensurate with other officers of Sara Lee. Mr. Meysman's
agreement with Sara Lee may be terminated at any time. Mr. Meysman's agreement
with Sara Lee/DE generally may be terminated upon six months prior notice, at
which time his participation in Sara Lee plans ceases. Generally, if Mr.
Meysman's employment is terminated without cause, he is entitled to severance
equal to at least one year's salary plus other benefits which are described
below in the description of Sara Lee's severance plans. If Mr. Meysman's
employment is terminated at the option of Sara Lee/DE after age 57 1/2, or at
his option after age 60, he will be paid 90% of his base salary for the first
year following such termination of employment and 80% of his base salary for
each year thereafter until he reaches age 62, subject to reduction under certain
circumstances. In April, 1998 Mr. Meysman was awarded 50,000 restricted share
units which will remain restricted until April, 2003, at which time the
restricted share units vest, provided Mr. Meysman remains continually in the
employ of Sara Lee until that time.
SEVERANCE PLANS
Sara Lee has a severance policy for all corporate officers of Sara Lee. The
policy provides that if an officer's employment is terminated without cause, the
officer will receive between 12 and 24 months of salary as severance payments.
The amount of actual severance payments depends on the officer's position,
length of service and age. Officers also receive a partial payment under the
incentive plans applicable to the fiscal year in which the termination occurs.
The terminated officer's participation in Sara Lee's insurance plans, except for
disability insurance (which ends on the date of termination of employment), will
continue for the same number of months for which he or she is receiving
severance payments. At the discretion of the Chief Executive Officer of Sara
Lee, the severance payments may be increased by up to six months' salary, if the
terminated officer is 50 years of age or older, or up to three months' salary,
if the terminated officer is 40 to 49 years of age. Severance payments terminate
if the terminated officer becomes employed by a competitor of Sara Lee.
RETIREMENT PLANS
The following table shows the approximate annual pension benefits payable
under Sara Lee's qualified pension plan, as well as a nonqualified supplemental
benefit plan. The compensation covered by the pension program is based on an
employee's annual salary and bonus. The amounts payable under the pension
program are computed on the basis of a straight-life annuity and are not subject
to deduction for Social Security benefits or other amounts. Benefits accrued
under a defined benefit supplemental plan with present values exceeding $100,000
for participants age 55 and older and $300,000 for participants who have not yet
attained the age of 55 are funded with periodic payments by Sara Lee to
individual trusts established by the participants.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL NORMAL RETIREMENT PENSION
BASED UPON THE INDICATED CREDITED SERVICE
FINAL
AVERAGE
COMPENSATION 10 YEARS 15 YEARS 25 YEARS 35 YEARS
<S> <C> <C> <C> <C>
$ 750,000 $ 131,250 $ 196,875 $ 328,125 $ 459,375
1,000,000 175,000 262,500 437,500 612,500
1,250,000 218,750 328,125 546,875 765,625
1,500,000 262,500 393,750 656,250 918,750
1,750,000 306,250 459,375 765,625 1,071,875
2,000,000 350,000 525,000 875,000 1,225,000
2,250,000 393,750 590,625 984,375 1,378,125
2,500,000 437,500 656,250 1,093,750 1,531,250
2,750,000 481,250 721,875 1,203,125 1,684,375
</TABLE>
19
<PAGE>
As of September 1, 1998, Messrs. Bryan, McMillan, Carlson and Ms. Sprieser
had 24, 20, 25 and 11 years of credited service, respectively, under the pension
plan and Mr. Bryan has additional accrued benefits under a predecessor pension
plan of a company acquired by Sara Lee. Mr. Meysman has 8 years of credited
service under the pension plans of Sara Lee/DE N.V., a subsidiary of Sara Lee.
He does not participate in Sara Lee's pension plans.
PROPOSAL TO AMEND THE CHARTER OF THE CORPORATION
TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF STOCK
AND THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND TO
REDUCE THE PAR VALUE OF THE CORPORATION'S COMMON STOCK
The Board of Directors recommends that Sara Lee's Charter be amended to
increase the number of authorized shares of Common Stock from 600,000,000 to
1,200,000,000.
Sara Lee presently has 600,000,000 authorized shares of Common Stock, par
value $1.33 1/3 per share. As of September 1, 1998, shares of Common
Stock were issued and outstanding, and only shares remain available for
issuance. Consequently, under certain circumstances, Sara Lee may not be able to
issue new Common Stock if the need should arise for future acquisitions,
financing transactions, stock splits in the form of stock dividends or for other
corporate purposes without first obtaining approval of stockholders at a special
meeting. The proposed increase in the number of authorized shares of Common
Stock will afford Sara Lee the necessary flexibility to take advantage of
business and financial opportunities in the event that stock is required to be
issued in a transaction without the delay and expense of a special meeting of
the stockholders to approve the authorization of additional stock.
The additional shares of Common Stock, which would be authorized by the
proposed amendment, would have the same rights and privileges as the shares of
Common Stock currently authorized and issued. Except for certain transactions
involving the issuance of stock for which the New York Stock Exchange rules
require prior stockholder approval in order to list or maintain a listing of
such stock on the Exchange, and except for certain transactions requiring
stockholder approval under the Maryland General Corporation Law, the Board of
Directors may approve the issuance of previously authorized shares of Common
Stock at such times and to such persons and for such legal consideration as it
may determine to be in the best interest of Sara Lee and its stockholders
without prior approval of or ratification by the stockholders.
Other than for the possibility of issuing new shares of Common Stock under
Sara Lee's stock option plans, Sara Lee has no present arrangements,
commitments, understandings or pending negotiations for the issuance of new
Common Stock.
The Board of Directors has also proposed to amend Sara Lee's Charter to
decrease the par value of each share of Common Stock from $1.33 1/3 to $.01. A
nominal par value of $.01 per share is consistent with the practice of many
other publicly held corporations.
Under the laws of the State of Maryland, where Sara Lee is incorporated, par
value per share has no substantive legal significance other than in connection
with the calculation of fees for filing certain charter documents with the State
of Maryland. By decreasing the par value per share of Common Stock from
$1.33 1/3 to $.01, Sara Lee will realize a small savings in such fees in the
future. In addition, if the par value is decreased, approximately $609 million
will be moved from Common Stock to Capital Surplus on Sara Lee's balance sheet.
Total Stockholders' Equity as shown on the balance sheet will not change.
20
<PAGE>
The Board of Directors believes that reducing par value to $.01 per share is
consistent with the action of many other publicly held corporations and will
have no effect on the business operations of Sara Lee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT TO THE CHARTER TO INCREASE THE TOTAL NUMBER OF AUTHORIZED
SHARES OF STOCK AND THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND TO
REDUCE THE PAR VALUE OF THE COMMON STOCK.
PROPOSAL TO APPROVE THE 1998 LONG-TERM INCENTIVE STOCK PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the Sara Lee
Corporation 1998 Long-Term Incentive Stock Plan (the "1998 Plan"). The Board
recommends the approval of the 1998 Plan to replace the Sara Lee Corporation
1995 Long-Term Incentive Stock Plan (the "1995 Plan"), which was adopted by the
stockholders on October 26, 1995. The primary purposes of the 1998 Plan are (i)
to promote the interests of Sara Lee and its stockholders by strengthening Sara
Lee's ability to attract and retain highly competent individuals to serve as
officers and other key employees and (ii) to provide a means to encourage stock
ownership and proprietary interest by officers and key employees in Sara Lee.
Under the 1998 Plan, Sara Lee may grant stock options, stock appreciation rights
("SARs"), or stock awards, as discussed in greater detail below. Awards may be
granted singly, in combination or in tandem and may be evidenced by an agreement
that sets forth the terms, conditions and limitations of such award. Awards may
also 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
compensation plan of Sara Lee, including the plan of any entity acquired by (or
whose assets are acquired by) Sara Lee. Approximately 1,300 officers and other
employees are eligible to participate in the 1998 Plan. Reference is made to
Exhibit A to this Proxy Statement for the complete text of the 1998 Plan, which
is summarized below.
DESCRIPTION OF THE 1998 PLAN
ADMINISTRATION
The 1998 Plan will be administered by 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"), which
Committee shall consist of at least three members who may be "Non-Employee
Directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 (the "Exchange Act") and who are "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "Code").
The 1998 Plan is intended to provide participants with stock-based incentive
compensation that is not subject to the deduction limitations under Section
162(m) of the Code. Section 162(m) of the Code generally limits to $1 million
the amount that a publicly held corporation is allowed each year to deduct for
the compensation paid to each of the corporation's chief executive officer and
the corporation's four most highly compensated executive officers other than the
chief executive officer. However, "qualified performance-based compensation" is
not subject to the $1 million deduction limit. To qualify as qualified
performance-based compensation, the following requirements must be satisfied:
(i) the performance goals are determined by a committee consisting solely of two
or more "outside directors;" (ii) the material terms under which the
compensation is to be paid, including the performance goals, are approved by a
majority of the corporation's stockholders; and (iii) if applicable, the
committee certifies that the applicable performance goals were satisfied before
payment of any
21
<PAGE>
performance-based compensation is made. As noted above, the Committee will
consist solely of "outside directors" for purposes of Section 162(m) of the
Code. As a result, and based on regulations issued by the United States
Department of the Treasury, certain compensation under the 1998 Plan, such as
that payable with respect to stock options and SARs, is not expected to be
subject to the $1 million deduction limit, but other compensation payable under
the 1998 Plan, such as any restricted stock award which is not subject to a
performance condition to vesting, may be subject to such limit.
Subject to the express provisions of the 1998 Plan, the Committee will have
broad authority to administer and interpret the 1998 Plan as it deems necessary
and appropriate. This authority includes, but is not limited to, selecting award
recipients, establishing award terms and conditions, adopting procedures and
regulations governing awards, and making all other determinations necessary or
advisable for the administration of the 1998 Plan. However, the Committee will
not have the authority to cancel outstanding stock options or SARs for the
purpose of replacing or regranting such awards with a purchase price that is
less than the purchase price of the original stock option or SAR. Except with
respect to grants to persons who are subject to Section 16 of the Exchange Act,
or who are or are likely to be "covered employees" within the meaning of Section
162(m) of the Code, the Committee may delegate some or all of its authority to
administer the 1998 Plan to the Chairman and Chief Executive Officer or other
executive officer of Sara Lee.
AVAILABLE SHARES
The 1998 Plan authorizes the issuance of up to 30,000,000 shares of Common
Stock, plus the number of shares available under the 1995 Plan, which are not
subject to awards under the 1995 Plan, reduced by the number of shares which
become subject to outstanding awards under the 1998 Plan; provided, that the
number of shares subject to awards that are granted in substitution of awards
issued by an entity acquired by (or whose assets are acquired by) Sara Lee will
not reduce the number of shares available under the 1998 Plan. To the extent
shares subject to outstanding awards under the 1998 Plan or the 1995 Plan are
not issued by reason of the expiration, termination, cancellation or forfeiture
of such award or by reason of the tendering or withholding of shares of Common
Stock to pay all or a portion of the purchase price, or to satisfy all or a
portion of the tax withholding obligations relating to such award, and to the
extent shares are purchased by Sara Lee with the amount of cash obtained upon
the exercise of options granted under the 1998 Plan or the 1995 Plan, then such
shares of Common Stock will again be available under the 1998 Plan. In the event
of a stock dividend, stock split, merger, consolidation, recapitalization,
spin-off or other similar change or event, the number of available shares will
be adjusted, as the Committee in its discretion may deem appropriate.
The aggregate number of shares of Common Stock that may be used in
settlement or payment of stock awards or issued upon exercise of "incentive
stock options" within the meaning of Section 422 of the Code is 8,500,000. The
maximum number of shares for which awards may be granted to any person in any
calendar year is 1,000,000 (2,000,000 with respect to the calendar year in which
such person begins service as Chief Executive Officer of Sara Lee); provided
that such limit shall not include replacement options, which are described under
"Stock Options" below. The maximum number of shares for which replacement
options may be granted to any person in any calendar year is 4,000,000.
CHANGE IN CONTROL
In the event (i) a person (subject to certain exceptions) becomes the
beneficial owner of 20% or more of the voting power of Sara Lee's outstanding
stock which may be voted on all matters submitted to stockholders generally,
(ii) individuals who immediately after the 1998 Annual Meeting constitute the
Board of Directors, and any new director whose nomination for election or
election is recommended or approved by a majority of the directors who were
directors immediately after the 1998 Annual Meeting or whose nomination or
election was previously so recommended or approved, cease to constitute a
majority of the Board of Directors or (iii) the stockholders approve a
22
<PAGE>
reorganization, merger or consolidation or Sara Lee sells or disposes of all or
substantially all of its property and assets (unless Sara Lee's stockholders
receive 50% or more of the voting power of the resulting entity) or Sara Lee
liquidates or dissolves, or in contemplation of any such event, the Committee
may make appropriate adjustments (including acceleration of vesting and
settlements of or substitutions for awards).
EFFECTIVE DATE, TERMINATION AND AMENDMENT
If approved by stockholders, the 1998 Plan will become effective as of the
date of such approval and will terminate when shares of Common Stock are no
longer available for the grant, exercise or settlement of awards, unless
terminated earlier by the Board of Directors. The Board of Directors may amend
the 1998 Plan at any time, subject to any requirement of stockholder approval
required by applicable law, rule or regulation and provided that no amendment
may be made without stockholder approval if such amendment would (i) increase
the maximum number of shares of Common Stock available under the 1998 Plan or
(ii) effect any change inconsistent with Section 422 of the Code.
STOCK OPTIONS
A stock option represents the right to purchase a specified number of shares
of Common Stock during a specified period up to ten years as determined by the
Committee. The purchase price per share for each stock option may not be less
than 100% of the fair market value on the date of grant; provided, that a stock
option granted in substitution of an award granted by an entity acquired by (or
whose assets are acquired by) Sara Lee may be granted with a purchase price that
preserves the economic value of the award and with respect to a stock option
granted retroactively in substitution for an SAR, the purchase price per share
may be the fair market value on the grant date of the SAR. A stock option may be
in the form of an incentive stock option or a non-qualified stock option. The
shares covered by a stock option may be purchased, in accordance with the
applicable award agreement, by cash payment or other method permitted by the
Committee, including (i) tendering (or attesting to ownership of) shares of
Common Stock, (ii) authorizing third party exercise transactions, or (iii) any
combination of the above. The Committee may grant stock options that provide for
the grant of a replacement option if the exercise price and related tax
obligations are satisfied by tendering (or attesting to ownership of) shares of
Common Stock to, or having shares withheld by, Sara Lee. The replacement option
would cover the number of shares of Common Stock tendered or withheld, would
have an option purchase price set at the fair market value as of the date of
exercise of the original stock option, and would have a term equal to the
remaining term of the original stock option.
SARS
An SAR represents a right to receive a payment, in cash, shares of Common
Stock or a combination, equal to the excess of the fair market value of a
specified number of shares of Common Stock on the date the SAR is exercised over
the fair market value of such shares on the date the SAR was granted. However,
if an SAR is granted retroactively in substitution for a stock option, the fair
market value may be the fair market value on the date the stock option was
granted.
STOCK AWARDS
A stock award represents an award made in or valued, in whole or in part, by
reference to shares of Common Stock. All or part of a stock award may be payable
in shares of Common Stock and may be subject to conditions and restrictions
established by the Committee. Such conditions may include, but are not limited
to, continuous service with Sara Lee and its subsidiaries and/or the achievement
of performance goals. The performance criteria that may be used by the Committee
in granting stock awards contingent on performance goals consist of total
stockholder return, net sales, operating income, income before taxes, net
income, net income per share (basic or diluted), profitability as measured by
23
<PAGE>
return ratios, including return on invested capital, return on equity and return
on investment, cash flows, market share or cost reduction goals. The Committee
may select one criterion or multiple criteria for measuring performance, and the
measurement may be based on corporation or business unit performance, or on
comparative performance with other companies.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. federal income tax
consequences generally arising with respect to awards under the 1998 Plan.
A participant will not recognize taxable income at the time a stock option
is granted and Sara Lee will not be entitled to a tax deduction at such time. A
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding in respect of an employee) upon exercise of a
non-qualified stock option equal to the excess of the fair market value of the
shares purchased over their exercise price, and Sara Lee will be entitled to a
corresponding deduction. A participant will not recognize income (except for
purposes of the alternative minimum tax) upon exercise of an incentive stock
option. If the shares acquired by exercise of an incentive stock option are held
for the longer of two years from the date the stock option was granted and one
year from the date it was exercised, any gain or loss arising from a subsequent
disposition of such shares will be taxed as long-term capital gain or loss, and
Sara Lee will not be entitled to any deduction. If, however, such shares are
disposed of within the above-described period, then in the year of such
disposition the participant will recognize compensation taxable as ordinary
income equal to the excess of the lesser of (i) the amount realized upon such
disposition and (ii) the fair market value of such shares on the date of
exercise over the exercise price, and Sara Lee will be entitled to a
corresponding deduction.
A participant will not recognize taxable income at the time SARs are granted
and Sara Lee will not be entitled to a tax deduction at such time. Upon
exercise, the participant will recognize compensation taxable as ordinary income
(and subject to income tax withholding in respect of an employee) in an amount
equal to the fair market value of any shares delivered and the amount of cash
paid by Sara Lee. This amount is deductible by Sara Lee as compensation expense.
A participant will not recognize taxable income at the time restricted stock
is granted and Sara Lee will not be entitled to a tax deduction at such time,
unless the participant makes an election to be taxed at such time. If such
election is not made, the participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding in respect of an
employee) at the time the restrictions lapse in an amount equal to the excess of
the fair market value of the shares at such time over the amount, if any, paid
for such shares. The amount of ordinary income recognized by making the
above-described election or upon the lapse of restrictions is deductible by Sara
Lee as compensation expense, except to the extent the deduction limits of
Section 162(m) of the Code apply. In addition, a participant receiving dividends
with respect to restricted stock for which the above-described election has not
been made and prior to the time the restrictions lapse will recognize
compensation taxable as ordinary income (and subject to income tax withholding
in respect of an employee), rather than dividend income, in an amount equal to
the dividends paid and Sara Lee will be entitled to a corresponding deduction,
except to the extent the deduction limits of Section 162(m) of the Code apply.
A participant will recognize compensation taxable as ordinary income (and
subject to income tax withholding in respect of an employee) at the time bonus
stock is granted in an amount equal to the then fair market value of such stock.
This amount is deductible by Sara Lee as compensation expense, except to the
extent the deduction limits of Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time performance
shares are granted and Sara Lee will not be entitled to a tax deduction at such
time. Upon the settlement of performance shares, the participant will recognize
compensation taxable as ordinary income (and subject to income
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<PAGE>
tax withholding in respect of an employee) in an amount equal to the fair market
value of any shares delivered and the amount of cash paid by Sara Lee. This
amount is deductible by Sara Lee as compensation expense, except to the extent
the deduction limits of Section 162(m) of the Code apply.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
SARA LEE CORPORATION 1998 LONG-TERM INCENTIVE STOCK PLAN.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP to serve as the independent public accountants of
Sara Lee for its fiscal year ending July 3, 1999. The Board seeks to have the
stockholders ratify the appointment of Arthur Andersen. Arthur Andersen, which
has served as the independent public accountants of Sara Lee since 1965, follows
a policy of rotating the partner in charge of Sara Lee's audit every seven
years. Sara Lee paid Arthur Andersen approximately $9,067,000 for audit and
audit related fees during the past fiscal year. Representatives of Arthur
Andersen will be present at the Annual Meeting to respond to questions and to
make a statement if they desire to do so. If the appointment of Arthur Andersen
is not ratified by the stockholders, the Board of Directors may appoint other
independent public accountants based upon the recommendation of the Audit
Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
FISCAL YEAR 1999.
OTHER INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Due to an administrative oversight, James S. Crown, a director of Sara Lee,
failed to file one Form 4 on a timely basis with the Securities and Exchange
Commission to report his acquisition of 5,000 shares of common stock. The
purchase was reported immediately upon discovery of the oversight.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
If you wish to submit proposals for possible inclusion in Sara Lee's 1999
Proxy Statement, we must receive them on or before Monday, May 25, 1999. The
Bylaws of the Company provide that in order for a stockholder to nominate a
candidate for election as a director at an annual meeting of stockholders or
propose business for consideration at such meeting, notice must be generally
given in writing to the Secretary of the Company at the principal executive
offices of the Company not later than the close of business on the 60th day nor
earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting. Accordingly, a stockholder
nomination or proposal intended to be considered at the 1999 annual meeting must
be received by the Secretary after the close of business on August 1, 1999 and
on or prior to the close of business on August 31, 1999. Proposals should be
mailed to Sara Lee Corporation, to the attention of Sara Lee's Secretary, Janet
Langford Kelly, Three First National Plaza, Chicago, Illinois 60602-4260. A copy
of the Bylaws may be obtained from Janet Langford Kelly, Sara Lee's Secretary.
SARA LEE'S FORM 10-K
A copy of Sara Lee's Annual Report on Form 10-K for the fiscal year ended
June 27, 1998, as filed with the Securities and Exchange Commission, will be
sent to any stockholder without charge
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upon written request addressed to Sara Lee Corporation, to the attention of the
Investor Relations and Corporate Affairs Department, Three First National Plaza,
Chicago, Illinois, 60602-4260.
EXPENSES OF SOLICITATION
This solicitation is being made by mail, but may also be made by telephone
or in person by Sara Lee officers and employees (without additional
compensation). In addition, we have hired Morrow & Co., Inc. for $14,000 plus
associated costs and expenses, to assist in the solicitation. Sara Lee will
reimburse brokerage firms, nominees, custodians and fiduciaries for their
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto.
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EXHIBIT A
[LOGO]
---------------------------------------------
1998 LONG-TERM INCENTIVE STOCK PLAN
---------------------------------------------
ARTICLE I -- PURPOSES
The purposes of the Sara Lee Corporation 1998 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 1998 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 members of the Board of Directors who may be "non-employee
directors" under Rule 16b-3 of the Exchange Act and "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, and its subsidiaries.
e. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
f. "FAIR MARKET VALUE" means the average of the highest and lowest sale
prices of a Share on the New York Stock Exchange Composite Transactions Tape on
the date of determination, 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
the average of the highest and lowest sale 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 that complies with Section
422 of the Code, or any successor law.
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h. "NON-QUALIFIED STOCK OPTION" means a stock 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, person expected to
become an 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 1998 Long-Term Incentive Stock
Plan, as amended and restated from time to time.
1. "PRIOR PLAN" means the Sara Lee Corporation 1995 Long-Term Incentive
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.
The term "CHANGE OF CONTROL" has the meaning set forth in Article X.
ARTICLE III -- EFFECTIVE DATE 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
when Shares are no longer available for the grant, exercise or settlement of
Awards.
ARTICLE IV -- ADMINISTRATION
The Committee shall be responsible for administering the Plan, and shall
have full 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.
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 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 persons.
The Committee may delegate some or all of its power to the Chairman and
Chief Executive Officer or other executive officer of the Corporation as the
Committee deems appropriate; provided, that (i) the Committee may not delegate
its power with regard to the grant of an Award to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code or who, in the
Committee's judgment, is likely to be a covered employee at any time during the
period an Award to such employee would be outstanding and (ii) the Committee may
not delegate its power with regard to the selection for participation in the
Plan of an officer or other person subject to Section 16 of the Exchange Act or
decisions concerning the timing, pricing or amount of an Award to such an
officer or other person.
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ARTICLE V -- AVAILABLE SHARES
a. LIMITATIONS -- Subject to Article V(b) of the Plan, the aggregate number
of Shares which may be issued under the Plan shall be 30,000,000 Shares plus the
number of Shares available under the Prior Plan which are not subject to awards
under the Prior Plan, reduced by the aggregate number of Shares which become
subject to outstanding Awards; provided, that the number of Shares subject to
Awards that are granted in substitution of an option or other award (a
"Substitute Award") issued by an entity acquired by (or whose assets are
acquired by) the Corporation shall not reduce the number of Shares available
under the Plan. To the extent that Shares subject to an outstanding Award or an
award under the Prior Plan are not issued by reason of the expiration,
termination, cancellation or forfeiture of such award or by reason of the
tendering or withholding of Shares to pay all or a portion of the purchase
price, if any, or to satisfy all or a portion of the tax withholding obligations
relating to an award, and to the extent Shares are purchased by the Corporation
with the amount of cash obtained upon the exercise of Options or options granted
under the Prior Plan, then such Shares shall again be available under the Plan.
The aggregate number of Shares that may be used in settlement or payment of
Stock Awards or that may be issued upon exercise of Incentive Stock Options is
10,000,000. The number of Shares for which Awards may be granted to any person
in any calendar year shall not exceed 1,000,000; provided, that such limit shall
be 2,000,000 with respect to the calendar year in which such person begins
service as the Chief Executive Officer of the Corporation; and provided,
further, that neither limit shall include any Replacement Options and the number
of Shares for which Replacement Options may be granted to any person in any
calendar year shall not exceed 4,000,000. Issued Shares shall consist of
authorized and unissued Shares and no fractional Shares shall be issued. Cash
may be paid in lieu of any fractional Shares in settlement of Awards.
b. ADJUSTMENTS -- In the event of any stock dividend, stock split,
combination or exchange of 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 similar change or
event, such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change or event shall be made
with respect to the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding Option and the
purchase price per security, the terms of each outstanding SAR, and the number
and class of securities subject to each outstanding Stock Award shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding Options without an increase in the aggregate purchase price. If
any such adjustment would result in a fractional security being (a) available
under the Plan, such fractional security shall be disregarded, or (b) subject to
an Award, the Corporation shall pay the holder of such Award, in connection with
the first vesting, exercise or settlement of such award in whole or in part
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise price, if any, of such Award.
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 compensation plan of the
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Corporation including a plan of any entity acquired by (or whose assets are
acquired by) the Corporation. 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 up to ten years as
determined by the Committee. The purchase price per Share for each Option
shall not be less than 100% of the Fair Market Value on the date of grant;
provided, that a Substitute Award may be granted with a purchase price per
Share that is intended to preserve the economic value of the award which the
Substitute Option replaced. If an Option is granted retroactively in
substitution for an SAR, the Fair Market Value in the Award agreement may be
the Fair Market Value on the grant date of the SAR. An Option may be in the
form of an Incentive Stock Option or a Non-Qualified Stock Option, as
determined by the Committee. 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 ("Replacement Options") if the
exercise price and tax withholding obligations 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 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 grant date of the SAR as set forth in the Award
agreement, except that if an SAR is granted retroactively in substitution
for an Option, the designated Fair Market Value in the Award agreement may
be the Fair Market Value on the grant date of the Option.
(iii) STOCK AWARDS -- A Stock Award shall represent an Award made in or
valued in whole or in part by reference to Shares, such as performance
shares or units or phantom shares or units. Stock Awards may be payable in
whole or in part 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 or other plan or document, which may include, but are
not limited to, continuous service with the Corporation, and/or the
achievement of one or more performance goals. The performance criteria that
may be used by the Committee in granting Stock Awards contingent on
performance goals shall consist of total stockholder return, net sales,
operating income, income before income taxes, net income, net income per
share (basic or diluted), profitability as measured by return ratios,
including return on invested capital, return on equity and return on
investment, cash flows, market share or cost reduction goals. The Committee
may select one criterion or multiple criteria for measuring performance, and
the measurement may be based on 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
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<PAGE>
restrictions and conditions as the Committee may establish, including
reinvestment in additional Shares or Share equivalents.
ARTICLE VIII -- PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash under such rules and
procedures as it may establish under the Plan. It also may provide that deferred
settlements include the payment or crediting of interest on the deferral
amounts, or the payment or crediting of dividend equivalents where the deferral
amounts are denominated in Share equivalents.
ARTICLE IX -- TRANSFERABILITY
Unless otherwise specified in an Award agreement, Awards shall not be
transferable or assignable other than by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company.
ARTICLE X -- CHANGE OF CONTROL
Either in contemplation of or in the event of a Change in Control (as
defined below), the Committee may provide for appropriate adjustments (including
acceleration of vesting and settlements of or substitutions for 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 reorganization, merger
or consolidation or the Corporation sells, or otherwise disposes of, all or
substantially all of the Corporation's property and assets, or the
Corporation liquidates or dissolves (other than a reorganization, merger,
consolidation or sale which would result in all or substantially all of the
beneficial owners of the Voting Stock of the Corporation outstanding
immediately prior thereto continuing to beneficially own, directly or
indirectly (either by remaining outstanding or by being converted into
voting securities of the resulting entity), more than fifty percent of the
combined voting power of the voting securities of the Corporation or such
entity resulting from the transaction (including, without limitation, an
entity which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's property or assets, directly or
indirectly) outstanding immediately after such transaction in substantially
the same proportions relative to each other as their ownership immediately
prior to such transaction); or
A-5
<PAGE>
(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 immediately after the 1998 annual meeting of stockholders,
or (ii) any person who subsequently becomes a member of the Board whose
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors. The term "Voting Stock" means all capital
stock of the Corporation which by its terms may be voted on all matters
submitted to stockholders of the Corporation generally.
ARTICLE XI -- AWARD AGREEMENTS
Awards may be evidenced by an agreement that sets forth the terms,
conditions and limitations of such 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 -- AMENDMENTS
The Board may amend the Plan at any time as it deems necessary or
appropriate, subject to any requirement of stockholder approval required by
applicable law, rule or regulation, including Section 162(m) and Section 422 of
the Code; provided, however, that no amendment shall be made without stockholder
approval if such amendment would increase the maximum number of Shares available
under the Plan (subject to Article V(b)), or effect any change inconsistent with
Section 422 of the Code. No amendment may impair the rights of a holder of an
outstanding Award without the consent of such holder. The Board may suspend the
Plan or discontinue the Plan at any time; provided, 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. 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.
c. 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.
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d. 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.
e. WITHHOLDING -- The Corporation shall have the right to withhold from any
amounts payable under this Plan all federal, state, foreign, city and local
taxes as shall be legally required.
f. 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.
g. FOREIGN EMPLOYEES -- Without amending the Plan, the Committee may grant
awards to eligible persons who are foreign nationals on such terms and
conditions different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to foster and promote achievement of
the purposes of the 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.
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<PAGE>
[LOGO]
Three First National
Plaza
Chicago, Illinois
60602-4260
[MAP]
DIRECTIONS TO MCCORMICK PLACE AND THE ARIE CROWN THEATRE
McCormick Place and the Arie Crown Theatre is located at 23rd St. and Lake Shore
Drive.
FROM THE NORTH:
From the North, take Interstate 94 (the Edens) to the Kennedy Expressway (I-90)
to the Dan Ryan (I-94). Continue south on the Dan Ryan keeping to the right and
exit north on the Stevenson Expressway (I-55) to Lake Shore Drive south. Exit on
31st Street. Turn right and follow the parking signs.
FROM THE NORTHWEST:
From the Northwest or O'Hare Airport, take the Northwest Tollway (I-90) to the
Kennedy/Dan Ryan (I-94) to the Stevenson North (I-55) to Lake Shore Drive south
and exit on 31st Street. Turn right and follow the parking signs.
FROM THE SOUTH:
From Indiana via the Skyway, take the Indiana Tollway (I-90) to the Chicago
Skyway to the local traffic lanes of the Dan Ryan Expressway (I-94) north to the
Stevenson Expressway (I-55) north to Lake Shore Drive south and exit on 31st
Street. Turn right and follow the parking signs.
From Indiana or the South via I-80/94, take I-80/94 to the Calumet Expressway to
the Dan Ryan Expressway (I-94) north to the Stevenson Expressway (I-55) north to
Lake Shore Drive south and exit on 31st Street. Turn right and follow the
parking signs.
FROM THE WEST:
From the West, take the Eisenhower Expressway (I-290) east to the Dan Ryan
Expressway (I-94) south. Keep to the right and follow signs to the Stevenson
Expressway (I-55) north. Take that to Lake Shore Drive south and exit on 31st
Street. Turn right and follow the parking signs.
<PAGE>
<TABLE>
<S><C>
SARA LEE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
[ ]
For Withheld For All Except
All As to All as noted For Against Abstain
[ ] [ ] [ ] [ ] [ ] [ ]
1. Election of Directors 2. Proposal to amend the Corporation's
01-P. Allaire 02-F. Andriessen 03-J. Bryan charter to increase the number of
04-D. Burnham 05-C. Coker 06-J. Crown authorized shares.
07-W. Davis 08-V. Jordan, Jr. 09-J. Ketelsen
10-H. van Liemt 11-J. Manley 12-C. McMillan
13-F. Meysman 14-R. Ridgway 15-R. Thomas
16-J. Zeglis
For Against Abstain
To withhold as to less than all nominees, strike through [ ] [ ] [ ]
the names of one or more nominees. 3. Proposal to approve the 1998 Long-Term
Incentive Stock Plan.
For Against Abstain
[ ] [ ] [ ]
4. Ratify the appointment of Arthur
Andersen LLP as independent public
accountants.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSALS 1, 2, 3 AND 4
Dated , 1998
-------------------------------------------
- ------------------------------------------------
Signature(s)
NOTE: Please sign exactly as your name or names appear
on the reverse side. For joint accounts, each owner
should sign. When signing as officer, executor,
administrator, attorney, trustee or guardian, etc.,
please give your full title.
- -----------------------------------------------------------------------------------------------------------------------------------
CONTROL NUMBER Detach Proxy Card Here
[ ]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
SARA LEE CORPORATION encourages you to take advantage of the new and convenient ways to vote your shares. This year you may vote
by mail, or choose one of the two methods described below. Your telephone or Internet vote authorizes the named proxies to vote
your shares in the same manner as if you marked, signed, and returned your proxy card. To vote by telephone or Internet, read the
accompanying proxy statement and ballot and then follow these easy steps:
TO VOTE BY PHONE Call toll free [1-888-426-7034] any time on a touch tone telephone. There is NO CHARGE to you for the call.
Enter the 6-digit CONTROL NUMBER located above.
Option #1: To vote as the Board of Directors recommends on ALL proposals: Press 1
When asked, please confirm your vote by pressing 1
Option #2: If you choose to vote on each proposal separately, press 0 and follow the simple recorded
instructions.
TO VOTE BY INTERNET Go to the website WWW.HARRISBANK.COM/CORPORATIONS/SHAREHOLDERPROXY.HTM
Enter your 6-digit CONTROL NUMBER
Follow the simple instructions on the screen.
You can also elect to receive future shareholder materials electronically at this website.
IF YOU VOTE BY TELEPHONE OR THE INTERNET DO NOT MAIL BACK THE PROXY CARD.
THANK YOU FOR VOTING!
</TABLE>
<PAGE>
SARA LEE CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING, OCTOBER 29, 1998
THE UNDERSIGNED STOCKHOLDER OF COMMON STOCK OR EMPLOYEE STOCK OWNERSHIP PLAN
CONVERTIBLE PREFERRED STOCK OF SARA LEE CORPORATION, A MARYLAND CORPORATION
(THE "COMPANY"), HEREBY APPOINTS JOHN H. BRYAN, JUDITH A. SPRIESER AND JANET
LANGFORD KELLY, OR ANY OF THEM, AS THE PROXIES FOR UNDERSIGNEDS PROXY OR
PROXIES, WITH FULL POWER OF SUBSTITUTION IN EACH OF THEM, TO ATTEND THE
ANNUAL MEETING OF THE STOCKHOLDERS OF THE COMPANY TO BE HELD AT THE ARIE
CROWN THEATRE AT MCCORMICK PLACE, 2301 SOUTH LAKE SHORE DRIVE, CHICAGO,
ILLINOIS, ON OCTOBER 29, 1998, AT 10:00 A.M., CHICAGO TIME, AND ANY
POSTPONEMENT OR ADJOURNMENT THEREOF TO CAST ON BEHALF OF THE UNDERSIGNED ALL
VOTES THAT THE SHARES OF COMMON STOCK AND EMPLOYEE STOCK OWNERSHIP PLAN
CONVERTIBLE AT UNDERSIGNED IS ENTITLED TO VOTE AT SUCH MEETING, AS FULLY AS
THE UNDERSIGNED COULD IF PERSONALLY PRESENT, UPON THE PROPOSALS SET FORTH ON
THE REVERSE SIDE HEREOF AND, IN THE DISCRETION OF THE PROXIES, ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE ANNUAL MEETING OF
STOCKHOLDERS AND OF THE ACCOMPANYING PROXY STATEMENT AND REVOKES ANY PROXY
HERETOFORE GIVEN WITH RESPECT TO SUCH MEETING.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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