10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-3344

Sara Lee Corporation

(Exact name of registrant as specified in its charter)

Maryland	36-2089049
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3500 Lacey Road, Downers Grove, Illinois 60515

(Address of principal executive offices)

(Zip Code)

(630) 598-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer, large accelerated filer, smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

On September 26, 2009, the Registrant had 697,306,010 outstanding shares of common stock $.01 par value, which is the Registrant’s only class of common stock.

SARA LEE CORPORATION AND SUBSIDIARIES

INDEX

PART I	–
ITEM 1	–	FINANCIAL STATEMENTS (Unaudited)
		Condensed Consolidated Balance Sheets - At September 26, 2009 and June 27, 2009	3
		Consolidated Statements of Income - For the Quarters ended September 26, 2009 and September 27, 2008	4
		Condensed Consolidated Statements of Equity - For the period June 28, 2008 to September 26, 2009	5
		Consolidated Statements of Cash Flows - For the Three Months ended September 26, 2009 and September 27, 2008	6
		Notes to Consolidated Financial Statements	7
ITEM 2	–	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 4	–	CONTROLS AND PROCEDURES	44
PART II	–
ITEM 1	–	LEGAL PROCEEDINGS	44
ITEM 1A	–	RISK FACTORS	44
ITEM 2(c)	–	REPURCHASES OF EQUITY SECURITIES BY THE ISSUER	45
ITEM 4	–	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	45
ITEM 6	–	EXHIBITS	46
SIGNATURE			47

2

SARA LEE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets at September 26, 2009 and June 27, 2009

(Unaudited)

In millions	Sept. 26, 2009		June 27, 2009
Assets
Cash and equivalents	$	1,263	$	959
Trade accounts receivable, less allowances		1,339		1,272
Inventories
Finished goods		500		443
Work in process		30		32
Materials and supplies		344		291
		874		766
Current deferred income taxes		181		207
Other current assets		267		250
Assets held for sale		387		376
Total current assets		4,311		3,830
Property, net of accumulated depreciation of $2,852 and $2,776, respectively		2,197		2,200
Trademarks and other identifiable intangibles, net		578		585
Goodwill		1,320		1,295
Deferred income taxes		360		309
Other noncurrent assets		257		245
Noncurrent assets held for sale		981		953
	$	10,004	$	9,417
Liabilities and Equity
Notes payable	$	86	$	20
Accounts payable		906		1,004
Income taxes payable and current deferred taxes		38		23
Other accrued liabilities		1,448		1,467
Current maturities of long-term debt		22		46
Liabilities held for sale		320		286
Total current liabilities		2,820		2,846
Long-term debt		2,760		2,738
Pension obligation		609		595
Deferred income taxes		70		55
Other liabilities		1,140		1,061
Noncurrent liabilities held for sale		55		64
Equity
Sara Lee common stockholders’ equity		2,524		2,036
Noncontrolling interest		26		22
Total Equity		2,550		2,058
	$	10,004	$	9,417

See accompanying Notes to Consolidated Financial Statements.

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SARA LEE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

For the Quarters ended September 26, 2009 and September 27, 2008

(Unaudited)

	Quarter Ended
In millions, except per share data	Sept. 26, 2009			Sept. 27, 2008
Continuing Operations
Net sales	$	2,588		$	2,794
Cost of sales		1,619			1,817
Selling, general and administrative expenses		764			838
Net charges for (income from) exit activities, asset and business dispositions		13			(4	)
Contingent sale proceeds		(133	)		(150	)
Interest expense		35			45
Interest income		(6	)		(20	)
		2,292			2,526
Income from continuing operations before income taxes		296			268
Income tax expense		106			77
Income from continuing operations		190			191
Discontinued operations
Net income from discontinued operations, net of tax (benefit) expense of $(31) and $22		94			39
Net income	$	284		$	230
Income from continuing operations per share of common stock
Basic	$	0.27		$	0.27
Diluted	$	0.27		$	0.27
Net income per share of common stock
Basic	$	0.41		$	0.33
Diluted	$	0.41		$	0.32
Average shares outstanding
Basic		697			708
Diluted		698			709
Cash dividends declared per share of common stock	$	—		$	—

See accompanying Notes to Consolidated Financial Statements.

4

SARA LEE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

For the Period June 28, 2008 to September 26, 2009

(Unaudited)

				Sara Lee Common Stockholders’ Equity
In millions	Total			Common Stock		Capital Surplus			Retained Earnings			Unearned Stock			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest
Balances at June 28, 2008	$	2,830		$	7	$	7		$	2,760		$	(112	)	$	149		$	19
Net income		364			—		—			364			—			—			—
Earnings of noncontrolling interest		11																	11
Translation adjustments, net of tax		(563	)		—		—			—			—			(561	)		(2	)
Net unrealized gain (loss) on qualifying cash flow hedges, net of tax		(30	)		—		—			—			—			(30	)		—
Pension/Postretirement activity, net of tax		(164	)		—		—			—			—			(164	)		—
Other comprehensive income activity, net of tax		(2	)		—		—			—			—			(2	)		—
Comprehensive income (loss)		(384	)																9
Dividends		(310	)		—		—			(310	)		—			—			—
Dividends paid on noncontrolling interest/Other		(6	)																(6	)
Stock issuances—
Stock option and benefit plans		4			—		4			—			—			—			—
Restricted stock		29			—		29			—			—			—			—
Share repurchases and retirement		(103	)		—		(25	)		(78	)		—			—			—
Pension/Postretirement—adjustment to change measurement date, net of tax		(13	)		—		—			(16	)		—			3			—
ESOP tax benefit, redemptions and other		11			—		2			1			8			—			—
Balances at June 27, 2009		2,058			7		17			2,721			(104	)		(605	)		22
Net income		284			—		—			284			—			—			—
Earnings of noncontrolling interest		2																	2
Translation adjustments, net of tax		185			—		—			—			—			184			1
Net unrealized gain (loss) on qualifying cash flow hedges, net of tax		3			—		—			—			—			3			—
Pension/Postretirement activity, net of tax		3			—		—			—			—			3			—
Other comprehensive income activity, net of tax		2			—		—			—			—			1			1
Comprehensive income		479																	4
Stock issuances—																—			—
Stock option and benefit plans		1			—		1			—			—			—			—
Restricted stock		12			—		12			—			—			—			—
Balances at September 26, 2009	$	2,550		$	7	$	30		$	3,005		$	(104	)	$	(414	)	$	26

Comprehensive income (loss) attributable to Sara Lee Corporation was income of $475 million in the first quarter of 2010 and a loss of $(86) million in the first quarter of 2009. Total comprehensive loss in the first quarter of 2009 was $(86) million.

See accompanying Notes to Consolidated Financial Statements.

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SARA LEE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months ended September 26, 2009 and September 27, 2008

(Unaudited)

	Three Months ended
In millions	Sept. 26, 2009			Sept. 27, 2008
OPERATING ACTIVITIES—
Net income	$	284		$	230
Less: Cash received from contingent sale proceeds		(133	)		(150	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		99			94
Amortization		27			30
Net (gain) loss on business dispositions		—			(3	)
Pension contributions, net of expense		28			(13	)
Other		27			(5	)
Changes in current assets and liabilities, net of businesses acquired and sold		(145	)		(221	)
Net cash from (used in) operating activities		187			(38	)
INVESTMENT ACTIVITIES—
Purchases of property and equipment		(59	)		(57	)
Purchases of software and other intangibles		(5	)		(11	)
Dispositions of businesses and investments		—			15
Cash received from contingent sale proceeds		133			150
Cash received from (used in) derivative transactions		34			(24	)
Sales of assets		6			3
Net cash received from investment activities		109			76
FINANCING ACTIVITIES—
Borrowings of other debt		8			—
Repayments of other debt		(35	)		(4	)
Net change in financing with less than 90-day maturities		62			71
Payments of dividends		(78	)		(75	)
Net cash used in financing activities		(43	)		(8	)
Effect of changes in foreign exchange rates on cash		51			(87	)
Increase (decrease) in cash and equivalents		304			(57	)
Cash and equivalents at beginning of year		959			1,284
Cash and equivalents at end of quarter	$	1,263		$	1,227
COMPONENTS OF CHANGES IN CURRENT ASSETS AND LIABILITIES—
Trade accounts receivable	$	(30	)	$	(50	)
Inventories		(80	)		(146	)
Other current assets		(2	)		4
Accounts payable		(44	)		(68	)
Accrued liabilities		(37	)		(35	)
Accrued taxes		48			74
Changes in current assets and liabilities, net of businesses acquired and sold	$	(145	)	$	(221	)

See accompanying Notes to Consolidated Financial Statements.

6

SARA LEE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Basis of Presentation

The consolidated financial statements for the three months ended September 26, 2009 and September 27, 2008 have not been audited by an independent registered public accounting firm, but in the opinion of Sara Lee Corporation (“the corporation or the company”), these financial statements include all normal and recurring adjustments necessary for a fair presentation of our financial position, operating results, and cash flows. The results of operations for the three months ended September 26, 2009 are not necessarily indicative of the operating results to be expected for the full fiscal year. The Condensed Consolidated Balance Sheet as of June 27, 2009 has been derived from the corporation’s audited financial statements included in our Annual Report on Form 10-K for the year ended June 27, 2009. The businesses comprising the former International Household and Body Care segment are presented as discontinued operations in the corporation’s consolidated financial statements. See Note 4 – “Discontinued Operations and Sold Businesses” for additional information regarding these discontinued operations. Unless stated otherwise, any reference to income statement items in these financial statements refers to results from continuing operations.

The interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Although the corporation believes the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the corporation’s Form 10-K for the year ended June 27, 2009 and other financial information filed with the Securities and Exchange Commission. These financial statements consider subsequent events through the date of filing with the Securities and Exchange Commission.

The corporation’s fiscal year ends on the Saturday closest to June 30. The first quarter of fiscal 2010 ended on September 26, 2009 and the first quarter of fiscal 2009 ended on September 27, 2008. Each of these quarters was a thirteen-week period. Fiscal 2010 is a 53-week year, whereas fiscal 2009 was a 52-week year. Unless otherwise stated, references to years relate to fiscal years.

In the first quarter of 2010, the corporation adopted new accounting guidance related to noncontrolling interests in consolidated financial statements. This guidance requires the classification of noncontrolling interests in subsidiaries, formerly referred to as minority interest, as a separate component of equity and the changes in ownership interest must be accounted for as equity transactions. It also requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. The adoption of this accounting guidance did not have an impact on the Consolidated Statements of Income as the corporation does not have any noncontrolling interests associated with its continuing operations. However, the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Equity have been revised, for all periods presented, to isolate the impact of noncontrolling interests on equity and comprehensive income.

In the first quarter of 2010, the corporation adopted new accounting guidance related to business combinations which requires changes in the accounting and reporting of business acquisitions. This guidance requires an acquirer to recognize and measure the identifiable assets acquired, liabilities assumed, contractual contingencies, contingent consideration and any noncontrolling interest in an acquired business at fair value on the acquisition date. In addition, it also requires that acquisition costs generally be expensed when incurred, restructuring costs generally be expensed in periods subsequent to the acquisition date and any adjustments to deferred tax asset valuation allowances and acquired uncertain tax positions after the measurement period to be reflected in income tax expense. The adoption of this guidance has not impacted the consolidated financial statements.

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2. Net Income Per Share

Net income per share – basic is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Net income per share – diluted reflects the potential dilution that could occur if options or fixed awards to be issued under stock-based compensation awards were converted into common stock. For the quarter ended September 26, 2009, options to purchase 24.0 million shares of the corporation’s common stock had exercise prices that were greater than the average market price of those shares during the respective reporting periods. For the quarter ended September 27, 2008, options to purchase 27.8 million of the corporation’s common stock had exercise prices that were greater than the average market price of those shares during the respective reporting periods. These shares are excluded from the earnings per share calculation as they are anti-dilutive.

The average shares outstanding declined in the first quarter of 2010 as compared to the first quarter of 2009 as a result of shares repurchased under the corporation’s ongoing share repurchase program. The corporation repurchases common stock at times management deems appropriate, given current market valuations. During the first quarter of 2010, the corporation did not repurchase any shares of its common stock. During fiscal 2009, the corporation repurchased 11.4 million shares of common stock, all of which were repurchased after the end of the first quarter. At September 26, 2009, 13.5 million shares remain authorized for repurchase under the corporation’s previous share repurchase program. On September 14, 2009, the Board of Directors authorized the repurchase of an additional $1 billion of the corporation’s common stock, which is in addition to the 13.5 million share repurchase authorization. The timing and amount of future share repurchases will be based upon market conditions and other factors.

The following is a reconciliation of net income to net income per share – basic and diluted – for the first quarter of 2010 and 2009 (per share amounts are rounded and may not add to total):

Computation of Net Income per Common Share

(In millions, except per share data)

	Sept. 26, 2009		Sept. 27, 2008
Income from continuing operations	$	190	$	191
Income from discontinued operations, net of tax		94		39
Net income	$	284	$	230
Average shares outstanding – basic		697		708
Dilutive effect of stock option and award plans		1		1
Diluted shares outstanding		698		709
Income from continuing operations per share
Basic	$	0.27	$	0.27
Diluted	$	0.27	$	0.27
Income from discontinued operations per share
Basic	$	0.13	$	0.05
Diluted	$	0.13	$	0.05
Net income per share
Basic	$	0.41	$	0.33
Diluted	$	0.41	$	0.32

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3. Segment Information

The following is a general description of the corporation’s five business segments:

• North American Retail – sells a variety of packaged meat and frozen bakery products to retail customers in North America and includes the corporation’s U.S. Senseo retail coffee business.

• North American Fresh Bakery – sells a variety of fresh bakery products to retail customers in North America.

• North American Foodservice – sells a variety of meats, bakery, and beverage products to foodservice customers in North America.

• International Beverage – sells coffee and tea products in major markets around the world, including Europe, Australia and Brazil.

• International Bakery – sells a variety of bakery and dough products to retail and foodservice customers in Europe and Australia.

The results of the businesses comprising the corporation’s former International Household and Body Care segment are now being reported as discontinued operations for all periods presented. See Note 4 – “Discontinued Operations and Sold Businesses” for additional information regarding these discontinued operations.

The corporation incurs various information technology (IT) and human resource (HR) costs related to its business segments. The IT costs include amortization of software used directly by the business segments, intranet website management costs, systems support, maintenance and project costs. The HR costs include benefits administration, organizational development, labor relations and recruiting costs incurred by the corporate human resource function on behalf of the business segments. Prior to fiscal 2010, these costs were included in Other general corporate expenses. Beginning in fiscal 2010, the corporation now includes these IT and HR costs in the operating results of the business segments. The reason for this change is that the integration of our operations over the past several years has resulted in more centralized services, which in many cases are conducted directly for the benefit of the business segments. Management believes these costs should be reflected in operating segment income in order to provide better information regarding the actual results of the business segment. Business segment information has been revised to be consistent with the new basis of presentation.

The following is a summary of net sales and operating segment income by business segment for the first quarters of 2010 and 2009.

	Net Sales						Income before Income Taxes
(In millions)	First Quarter 2010			First Quarter 2009			First Quarter 2010			First Quarter 2009
North American Retail	$	659		$	680		$	80		$	55
North American Fresh Bakery		541			571			14			17
North American Foodservice		457			537			38			25
International Beverage		734			784			123			142
International Bakery		204			231			6			15
Total business segments		2,595			2,803			261			254
Intersegment sales		(7	)		(9	)		—			—
Total net sales and operating segment income		2,588			2,794			261			254
Amortization of intangibles		—			—			(11	)		(12	)
General corporate expenses:		—			—
Other		—			—			(55	)		(64	)
Mark-to-Market derivative gains/(losses)		—			—			(3	)		(35	)
Contingent sale proceeds		—			—			133			150
Total net sales and operating income		2,588			2,794			325			293
Net interest expense		—			—			(29	)		(25	)
Net sales and income before income taxes	$	2,588		$	2,794		$	296		$	268

9

In 2010, the corporation will begin to present certain segment assets, principally consisting of cash, in corporate unallocated since these assets are primarily controlled by the corporate group. A summary of segment assets as of the first quarter of 2010 and year end 2009 is as follows:

	Sept. 26, 2009		June 27, 2009
Assets
North American Retail	$	1,264	$	1,266
North American Fresh Bakery		1,123		1,140
North American Foodservice		1,135		1,134
International Beverage		1,999		1,932
International Bakery		775		719
		6,296		6,191
Net assets held for sale		1,368		1,329
Other corporate assets (a)		2,340		1,897
Total assets	$	10,004	$	9,417

(a) Principally cash and cash equivalents, certain corporate fixed assets, deferred tax assets and certain other noncurrent assets.

4. Discontinued Operations and Sold Businesses

In September 2009, the corporation announced that it had received a binding offer to acquire its global body care and European detergents businesses for 1.275 billion euro. The proposed transaction is subject to certain customary closing conditions and regulatory approval. The corporation had previously announced that it was reviewing strategic options for its international household and body care businesses after receiving expressions of interest. These businesses represented approximately 50% of the net sales of the International Household and Body Care segment and this transaction is anticipated to close during 2010. The corporation is also actively marketing for sale its remaining household and body care businesses and, as a result, the businesses comprising the International Household and Body Care segment – air care, body care, shoe care and insecticides – are classified as discontinued operations and are presented in a separate line in the Consolidated Statements of Income for all periods presented. Additionally, the assets and liabilities of these businesses to be sold meet the accounting criteria to be classified as held for sale and have been aggregated and reported on separate lines of the Condensed Consolidated Balance Sheets for all periods presented.

The following is a summary of the operating results of the corporation’s discontinued operations:

	First Quarter Fiscal 2010						First Quarter Fiscal 2009
(In millions)	Net Sales		Pretax Income		Net Income		Net Sales		Pretax Income		Net Income
International Household and Body Care businesses	$	521	$	63	$	94	$	555	$	61	$	39

The $31 million tax benefit reported in the first quarter of 2010 was due to a $53 million net tax benefit that is related primarily to the reversal of a tax valuation allowance in the United Kingdom as the corporation anticipates being able to utilize tax loss carryforwards as a result of the anticipated disposition of the household and body care businesses in that country.

The following is a summary of the net assets held for disposal as of September 26, 2009 and June 27, 2009, which includes the net assets of the international household and body care businesses.

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(In millions)	Sept. 26, 2009		June 27, 2009
Trade accounts receivable	$	65	$	60
Inventories		268		262
Other current assets		54		54
Total current assets held for sale		387		376
Property		155		156
Trademarks and other intangibles		225		221
Goodwill		589		568
Other assets		12		8
Assets held for sale	$	1,368	$	1,329
Accounts payable	$	51	$	50
Accrued expenses and other current liabilities		262		227
Current maturities of long-term debt		7		9
Total current liabilities held for sale		320		286
Long-term debt		7		7
Other liabilities		48		57
Liabilities held for sale	$	375	$	350
Noncontrolling interest	$	26	$	22

The discontinued operations cash flows are summarized in the table below:

(In millions) – Increase / (Decrease)	Three Months Ended Sept. 26, 2009			Three Months Ended Sept. 27, 2008
Cash flow from operating activities	$	68		$	62
Cash flow (used in) from investing activities		(3	)		(4	)
Cash flow (used in) from financing activities		(65	)		(58	)
Effect of foreign exchange rates on cash		—			—
Net cash of discontinued operations	$	—		$	—

The cash used in financing operations primarily represents the net activity with the corporate office. The net assets of the discontinued operations do not include cash as all cash has been retained as a corporate asset.

5. Exit, Disposal and Transformation/Accelerate Activities

As part of its ongoing efforts to improve its operational performance and reduce cost, the corporation initiated Project Accelerate (“Accelerate”) in 2009, which is a series of global initiatives designed to drive significant savings in the next three years. It is anticipated that the overall cost of the initiatives will include severance costs as well as transition costs associated with transferring services to an outside third party. An important component of Project Accelerate involves outsourcing pieces of the North American and European Finance (transaction processing) and Global Information Services (applications development and maintenance) groups as well as the company’s global indirect procurement activities. In addition to cost savings, this business process outsourcing will help the corporation drive standardization, increase efficiency and provide flexibility. The corporation began implementation of the initiative in North America and Europe in the second quarter of 2009 and plans to complete global implementation within three years.

The company announced a transformation plan in February 2005 designed to improve performance and better position the company for long-term growth. The plan involved significant changes in the company’s organizational structure, portfolio changes involving the disposition of a significant portion of the corporation’s business, and a number of actions to improve operational efficiency. The corporation has recognized certain trailing costs related to these transformation actions, including the impact of certain activities that were completed for amounts more favorable than previously estimated.

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The nature of the costs incurred under these plans includes the following:

1) Exit Activities, Asset and Business Disposition Actions – These amounts primarily relate to:

• Employee termination costs

• Lease exit costs

• Gains or losses on the disposition of assets or asset groupings that do not qualify as discontinued operations

2) Transformation/Accelerate Costs recognized in Cost of sales and Selling, general and administrative expenses primarily relate to:

• Expenses associated with the installation of new information systems

• Costs to retain and relocate employees

• Consulting costs

• Costs associated with the transition of services to an outside third party vendor as part of a business process outsourcing initiative

Transformation/Accelerate costs are recognized in Cost of sales or Selling, general and administrative expenses in the Consolidated Statements of Income as they do not qualify for treatment as an exit activity or asset and business disposition under the accounting rules for exit and disposal activities. However, management believes the disclosure of these transformation/Accelerate related charges provides the reader greater transparency to the total cost of the initiatives.

The following is a summary of the (income) expense associated with new and ongoing actions, which also highlights where the costs are reflected in the Consolidated Statements of Income along with the impact on diluted EPS:

	Quarter ended
(In millions)	Sept. 26, 2009			Sept. 27, 2008
Selling, general and administrative expenses:
Transformation charges – IT costs	$	—		$	3
Project Accelerate costs		5			—
Net charges for (income from):
Exit activities		13			(1	)
Asset and business dispositions		—			(3	)
Decrease (increase) in income from continuing operations before income taxes		18			(1	)
Income tax benefit		(6	)		—
Decrease (increase) in income from continuing operations	$	12		$	(1	)
Impact on diluted EPS	$	.01		$	—

The impact of these actions on the corporation’s business segments and unallocated corporate expenses is summarized as follows:

	Quarter ended
(In millions)	Sept. 26, 2009		Sept. 27, 2008
North American Retail	$	3	$	(1	)
North American Fresh Bakery		1		—
North American Foodservice		—		(3	)
International Beverage		2		2
International Bakery		7		—
Decrease (increase) in operating segment income		13		(2	)
Increase in general corporate expenses		5		1
Total	$	18	$	(1	)

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The following discussion provides information concerning the exit, disposal and transformation/Accelerate activities for each year where actions were initiated and material reserves exist.

2010 Actions

During 2010, the corporation approved certain actions related to exit, disposal, and Accelerate activities and recognized net charges of $19 million related to these actions. Each of these activities is to be completed within a 12-month period after being approved and include the following:

• Recognized a charge to implement a plan to terminate 111 employees, related to both European and North American operations, and provide them with severance benefits in accordance with benefit plans previously communicated to the affected employee group or with local employment laws. Of the 111 targeted employees, 87 employees have not yet been terminated, but are expected to be terminated within the next 12 months.

• Recognized costs associated with the transition of services to an outside third party vendor as part of a business process outsourcing initiative.

The following table summarizes the net charges taken for the exit, disposal and Accelerate activities approved during 2010 and the related status as of September 26, 2009. The accrued amounts remaining represent those cash expenditures necessary to satisfy remaining obligations. The majority of the cash payments to satisfy the accrued costs are expected to be paid in the next 12 months. The composition of these charges and the remaining accruals are summarized below. Approximately $50 million of additional charges are expected to be recognized in the remainder of 2010.

(In millions)	Employee termination and other benefits		Accelerate costs – IT and other			Total
Exit, disposal and other costs (income) recognized during 2010	$	14	$	5		$	19
Cash payments		—		(3	)		(3	)
Accrued costs as of September 26, 2009	$	14	$	2		$	16

2009 Actions

During 2009, the corporation approved certain actions related to exit, disposal, transformation and Accelerate activities and recognized cumulative net charges of $125 million related to these actions. Each of these activities is to be completed within a 12-month period after being approved and include the following:

• Recognized a charge to implement a plan to terminate 1,097 employees, related to both European and North American operations, and provide them with severance benefits in accordance with benefit plans previously communicated to the affected employee group or with local employment laws. Of the 1,097 targeted employees, 589 employees have not yet been terminated, but are expected to be terminated by the end of 2010.

• Recognized a net gain associated with the disposal of the sauces and dressings business in the North American Foodservice segment.

• Recognized costs related to the implementation of common information systems across the organization in order to improve operational efficiencies.

• Recognized costs associated with the transition of services to an outside third party vendor as part of a business process outsourcing initiative.

Significant actions completed during the first three months of 2010 and the status of the remaining elements of the 2009 actions, along with the remaining accruals, is described below. The accrued amounts remaining represent those cash expenditures necessary to satisfy remaining obligations. The majority of the cash payments to satisfy the accrued costs are expected to be paid in the next 12 months. The corporation does not anticipate any additional material future charges related to the 2009 actions. The composition of these charges and the remaining accruals are summarized below.

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(In millions)	Employee termination and other benefits			Transformation/ Accelerate costs – IT and other			Total
Accrued costs as of June 27, 2009	$	95		$	6		$	101
Non-cash charges		(1	)		—			(1	)
Cash payments		(25	)		(2	)		(27	)
Change in estimate		(3	)		—			(3	)
Foreign exchange impacts		3			—			3
Accrued costs as of September 26, 2009	$	69		$	4		$	73

2008 Actions

During 2008, the corporation approved certain actions related to exit, disposal and transformation activities and recognized cumulative net charges of $89 million related to these actions. Each of these activities was completed within a 12-month period after being approved and included the following:

• Implemented a plan to terminate 525 employees and provide them with severance benefits in accordance with benefit plans previously communicated to the affected employee group or with local employment laws. Essentially all of these employees have been terminated at this time.

• Incurred costs to exit certain leased space, including the exit of a North American R&D facility.

• Recognized net gains associated with the disposal of several asset groupings, the largest of which was a $3 million gain related to the disposition of a North American Foodservice manufacturing facility. Total proceeds from these disposals were $9 million.

• Recognized costs related to the implementation of common information systems across the organization in order to improve operational efficiencies.

The status of the remaining elements of the 2008 actions, along with the remaining accruals, is described below. The accrued amounts remaining represent those cash expenditures necessary to satisfy remaining obligations. The majority of the cash payments to satisfy the accrued costs are expected to be paid in the next 12 months. The corporation does not anticipate any additional material future charges related to the 2008 actions. The composition of these charges and the remaining accruals are summarized below.

(In millions)	Employee termination and other benefits			Non-cancelable lease and other contractual obligations		Transformation costs – IT and other		Total
Accrued costs as of June 27, 2009	$	11		$	3	$	—	$	14
Cash payments		(1	)		—		—		(1	)
Change in estimate		—			2		—		2
Accrued costs as of September 26, 2009	$	10		$	5	$	—	$	15

In periods prior to 2008, the corporation had approved and completed various actions to exit certain defined business activities and lower its cost structure and these actions have had minimal impact on current year results. As of September 26, 2009, the accrued liabilities remaining in the Condensed Consolidated Balance Sheet related to these completed actions total $37 million and primarily represent certain severance obligations. These accrued amounts are expected to be satisfied in cash and will be funded from operations.

6. Financial Instruments

Background Information

The corporation uses derivative financial instruments, including forward exchange, futures, options and swap contracts, to manage its exposures to foreign exchange, commodity prices and interest rate risks. The use of these derivative financial instruments modifies the exposure of these risks with the intent to reduce the risk or cost to the corporation. The corporation does not use derivatives for trading or speculative purposes and is not a party to leveraged derivatives.

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The corporation recognizes all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet. The corporation uses either hedge accounting or mark-to-market accounting for its derivative instruments. For derivatives that qualify for hedge accounting, the corporation designates these derivatives as fair value, cash flow or net investment hedges by formally documenting the hedge relationships, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. The process includes linking derivatives that are designated as hedges of specific assets, liabilities, firm commitments or forecasted transactions.

As noted above, the corporation uses derivative financial instruments to manage some of its exposure to commodity prices. A commodity derivative not declared a hedge in accordance with the accounting rules related to derivative instruments and hedging activities is accounted for under mark-to-market accounting with changes in fair value recorded in the Consolidated Statements of Income. The corporation includes these unrealized mark-to-market gains and losses in general corporate expenses until such time that the exposure being hedged affects the earnings of the business segment. At that time, the cumulative gain or loss previously recorded in general corporate expenses for the derivative instrument will be reclassified into the business segment’s results.

On the date the derivative is entered into, the corporation designates the derivative as one of the following types of hedging instruments and accounts for the derivative as follows:

Fair Value Hedge – A hedge of a recognized asset or liability or an unrecognized firm commitment is declared as a fair value hedge which qualifies for hedge accounting. For fair value hedges, both the effective and ineffective portions of the changes in the fair value of the derivative, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in earnings and are reported in the Consolidated Statements of Income on the same line as the hedged item.

Cash Flow Hedge – A hedge of a forecasted transaction, firm commitment or of the variability of cash flows to be received or paid related to a recognized asset or liability is declared a cash flow hedge. Cash flow hedges qualify for hedge accounting. The effective portion of the change in the fair value of the derivative that is declared as a cash flow hedge is recorded in accumulated other comprehensive income (within common stockholders’ equity) and later reclassified to the income statement at the same time the underlying hedged item impacts the income statement. In addition, both the fair value of changes excluded from the corporation’s effectiveness assessments and the ineffective portion of the changes in the fair value of derivatives used as cash flow hedges are reported in Selling, general and administrative expenses in the Consolidated Statements of Income.

Net Investment Hedge – A hedge of the exposure of changes in the underlying foreign currency denominated subsidiary net assets is declared as a net investment hedge. Net investment hedges qualify for hedge accounting. Net investment hedges can include either derivative or non-derivative instruments including non-U.S. dollar financing transactions or non-U.S. dollar assets or liabilities, including intercompany loans. The effective portion of the change in the fair value of net investment hedges is recorded in the cumulative translation adjustment account within common stockholders’ equity. At September 26, 2009, the U.S. dollar equivalent of intercompany loans designated as net investment hedges was $3.4 billion.

Mark-to-Market Hedge – A derivative that is not qualified for hedge accounting in one of the categories above is accounted for under mark-to-market accounting and referred to as a mark-to-market hedge. Changes in the fair value of a mark-to-market hedge are recognized in the Consolidated Statements of Income to act as an economic hedge against the changes in the values of another item or transaction. Changes in the fair value of derivatives classified as mark-to-market hedges are reported in earnings in either the “Cost of sales” or “Selling, general and administrative expenses” lines of the Consolidated Statements of Income where the change in value of the underlying transaction is recorded.

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Types of Derivative Instruments

Interest Rate and Cross Currency Swaps – To manage interest rate risk, the corporation has entered into interest rate swaps that effectively convert certain fixed-rate debt instruments into floating-rate debt instruments. Interest rate swap agreements that are effective at hedging the fair value of fixed-rate debt agreements are designated and accounted for as fair value hedges. The corporation utilizes interest rate swap derivatives in order to maintain a targeted amount of both fixed-rate and floating-rate long term debt and notes payable. Currently the corporation has a fixed interest rate on approximately 68% of long-term debt and notes payable issued.

The corporation has issued certain foreign-denominated debt instruments and utilizes cross currency swaps to reduce the variability of functional currency cash flows related to the foreign currency debt. Cross currency swap agreements that are effective at hedging the variability of foreign-denominated cash flows are designated and accounted for as cash flow hedges. As of September 26, 2009, the total notional amount of the corporation’s interest rate swaps and cross currency swaps were $385 million and $823 million, respectively. The notional value of the cross currency swaps is calculated by multiplying the euro value swapped by the exchange rate at the reporting date.

In connection with the funding of the anticipated retirement of the 6.25% notes in September 2011, the corporation maintains a $50 million forward starting swap to effectively fix the cash flows related to interest payments on the anticipated debt issuance.

Currency Forward Exchange, Futures and Option Contracts – The corporation uses forward exchange and option contracts to reduce the effect of fluctuating foreign currencies on short-term foreign-currency-denominated intercompany transactions, third-party product-sourcing transactions, foreign-denominated investments and other known foreign currency exposures. Gains and losses on the derivative instruments are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates. Forward currency exchange contracts mature at the anticipated cash requirement date of the hedged transaction, generally within one year to eighteen months. Forward currency exchange contracts which are effective at hedging the fair value of a recognized asset or liability are designated and accounted for as fair value hedges. All remaining currency forward and options contracts are accounted for as mark-to-market hedges.

The principal currencies hedged by the corporation include the European euro, British pound, Danish krone, Hungarian forint, U.S. dollar, Swiss franc and Australian dollar. As of September 26, 2009, the net U.S. dollar equivalent of commitments to purchase and sell foreign currencies is $2,263 million and $2,224 million, respectively, using the exchange rate at the reporting date. The corporation hedges virtually all foreign exchange risk derived from recorded transactions and firm commitments and only hedges foreign exchange risk related to anticipated transactions where the exposure is potentially significant.

The corporation has held foreign exchange option contracts to reduce the foreign exchange fluctuations on anticipated purchase transactions. As of September 26, 2009, the U.S. dollar equivalent notional amount of foreign exchange options is $1.3 million and is determined by the delta adjusted value as of period end.

Commodity Futures and Options Contracts – The corporation uses commodity futures and options to hedge a portion of its commodity price risk. The principal commodities hedged by the corporation include hogs, beef, natural gas, diesel fuel, coffee, corn, wheat and other ingredients. The corporation does not use significant levels of commodity financial instruments to hedge commodity prices and primarily relies upon fixed rate supplier contracts to determine commodity pricing. In circumstances where commodity-derivative instruments are used, there is a high correlation between the commodity costs and the derivative instruments. For those instruments where the commodity instrument and underlying hedged item correlate between 80-125%, the corporation accounts for those contracts as cash flow hedges. However, the majority of commodity derivative instruments are accounted for as mark-to-market hedges.

As of September 26, 2009 the total notional amount of commodity futures and option contracts was $162 million and $13 million, respectively. The notional amount of commodity futures contracts is determined by the initial cost of the contracts while the notional amount of options contracts is determined by the delta adjusted value as of period end.

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The corporation only enters into futures and options contracts that are traded on established, well-recognized exchanges that offer high liquidity, transparent pricing, daily cash settlement and collateralization through margin requirements.

Cash Flow Presentation

The settlement of derivative contracts related to the purchase of inventory, commodities or other hedged items that utilize hedge accounting are reported in the Consolidated Statements of Cash Flows as an operating cash flow, while those derivatives that utilize the mark-to-market hedge accounting model are reported in investing activities when those contracts are realized in cash. Fixed to floating rate swaps are reported as a component of interest expense and therefore are reported in cash flow from operating activities similar to how cash interest payments are reported. The portion of the gain or loss on a cross currency swap that offsets the change in the value of interest expense is recognized in cash flow from operations, while the gain or loss on the swap that is offsetting the change in value of the debt is classified as a financing activity in the Consolidated Statement of Cash Flows.

Contingent Features/Concentration of Credit Risk

All of the corporation’s derivative instruments are governed by International Swaps and Derivatives Association (i.e. ISDA) master agreements, requiring the corporation to maintain an investment grade credit rating from both Moody’s and Standard & Poor’s credit rating agencies. If the corporation’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate collateralization on the derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on September 26, 2009, is $313 million for which the corporation has posted no collateral. If the credit-risk-related contingent features underlying these agreements were triggered on September 26, 2009, the corporation would be required to post collateral of, at most, $313 million with its counterparties.

A large number of major international financial institutions are counterparties to the corporation’s financial instruments including cross currency swaps, interest rate swaps, and currency exchange forwards and swaps. The corporation enters into financial instrument agreements only with counterparties meeting very stringent credit standards (a credit rating of A-/A3 or better), limiting the amount of agreements or contracts it enters into with any one party and, where legally available, executing master netting agreements. These positions are continually monitored. While the corporation may be exposed to credit losses in the event of nonperformance by individual counterparties of the entire group of counterparties, it has not recognized any losses with these counterparties in the past and does not anticipate material losses in the future.

Fair Value Measurements

Effective the beginning of 2009, the corporation implemented new accounting guidance related to the fair value of financial assets and liabilities while in 2010 new fair value accounting rules were adopted for non-financial assets and liabilities. The adoption of these rules did not have a significant impact on the measurement of the corporation’s assets and liabilities.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value must be categorized into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while level 3 generally requires significant management judgment. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

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Level 1 – Unadjusted Quoted Prices – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. An example would be a marketable equity security that is traded on a major stock exchange.

Level 2 – Pricing Models with Significant Observable Inputs – Valuations are based on information derived from either an active market quoted price, which may require further adjustment based on the attributes of the asset or liability being measured, or an inactive market transaction. Circumstances when adjustments to market quoted prices may be appropriate include (i) a quoted price for an actively traded equity investment that is adjusted for a contractual trading restriction, or (ii) the fair value derived from a trade of an identical or similar security in an inactive market. An interest rate swap derivative valued based on a LIBOR swap curve is an example of a level 2 asset or liability.

Level 3 – Pricing Models with Significant Unobservable Inputs – Valuations are based on internally derived assumptions surrounding the timing and amount of expected cash flows for the financial instrument, which are significant to the overall fair value measurement. These assumptions are unobservable in either an active or inactive market. The inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date. A goodwill impairment test that utilizes an internally developed discounted cash flow model is an example of a level 3 asset or liability.

The carrying amounts of cash and equivalents, trade accounts receivables, accounts payable, derivative instruments and notes payable approximate fair values.

The fair values and carrying amounts of long-term debt, including the current portion, at September 26, 2009 were $2,869 million and $2,782 million, and at June 27, 2009 were $2,780 million and $2,784 million, respectively. The fair value of the corporation’s long-term debt, including the current portion, is estimated using discounted cash flows based on the corporation’s current incremental borrowing rates for similar types of borrowing arrangements.

Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheet at September 26, 2009 and June 27, 2009 is as follows:

	Assets								Liabilities
	Other Current Assets				Other Non- Current Assets				Accrued Liabilities – Other				Other
	Sept. 26, 2009		June 27, 2009		Sept 26, 2009		June 27, 2009		Sept 26, 2009		June 27, 2009		Sept 26, 2009		June 27, 2009
Derivatives designated as hedging instruments:
Interest rate contracts (b)	$	2	$	3	$	30	$	30	$	—	$	—	$	—	$	—
Foreign exchange contracts (b)		—		1		—		—		6		8		283		249
Commodity contracts (a)		1		1		—		—		—		—		—		—
Total derivatives designated as hedges		3		5		30		30		6		8		283		249
Derivatives not designated as hedging instruments:
Foreign exchange contracts (b)		64		61		—		—		24		34		—		—
Commodity contracts (a)		—		1		—		—		—		—		—		—
Total derivatives not designated as hedges		64		62		—		—		24		34		—		—
Total derivatives	$	67	$	67	$	30	$	30	$	30	$	42	$	283	$	249

(a) Categorized as level 1: Fair value of level 1 assets and liabilities as of September 26, 2009 are $1 million and nil and at June 27, 2009 are $2 million and nil, respectively.

(b) Categorized as level 2: Fair value of level 2 assets and liabilities as of September 26, 2009 are $96 million and $313 million and at June 27, 2009 are $95 million and $291 million, respectively.

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Information on the location and amounts of derivative gains and losses in the Consolidated Statements of Income for the quarter ended September 26, 2009 is as follows:

	Gain or (Loss) Recognized in Income on Derivatives			Gain or (Loss) Recognized in Income on Hedged Item
Fair Value Derivatives	Location	Amount		Location	Amount
Interest rate contracts	Interest income	$	5	Interest (expense)	$	(1	)

	Gain (Loss) Recognized in OCI on Derivative (effective portion)			Gain (Loss) Reclassified from Accumulated OCI into Income (effective portion)				Gain (Loss) Recognized in Income on Derivative (ineffective portion and amount excluded from effectiveness testing)
Cash Flow Derivatives	Amount			Location	Amount			Location	Amount
Interest rate contracts	$	(1	)	N/A	$	—		N/A	$	—
Foreign exchange contracts		(21	)	Selling, general and administrative expenses		(26	)	Interest expense		(3	)
Commodity contracts		(2	)	Cost of sales		(3	)	Selling, general and administrative expenses		—
Total	$	(24	)		$	(29	)		$	(3	)

At September 26, 2009 the maximum maturity date of any cash flow hedge was approximately four years principally related to two cross currency swaps that mature in 2012 and 2013. The corporation expects to reclassify into earnings during the next twelve months net losses from Accumulated Other Comprehensive Income of approximately $1 million at the time the underlying hedged transaction is recognized in the Consolidated Statement of Income.

	Gain (Loss) Recognized in OCI on Derivative (effective portion)
Net Investment Derivatives	Quarter ended Sept 26, 2009
Foreign exchange contracts	$	(152	)

	Gain (Loss) Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments	Location	Quarter ended Sept 26, 2009
Foreign exchange contracts	Cost of sales	$	(5	)
Foreign exchange contracts	Selling, general and administrative expenses		49
Commodity contracts	Cost of sales		2
Commodity contracts	Selling, general and administrative expenses		(5	)
Total		$	41

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7. Pension and Other Postretirement Benefit Plans

The components of the net periodic pension cost and the postretirement medical cost (income) for the first quarter of 2010 and 2009 are as follows:

	Pension						Postretirement Medical and Life Insurance
(In millions)	First Quarter 2010			First Quarter 2009			First Quarter 2010			First Quarter 2009
Service cost	$	14		$	15		$	1		$	2
Interest cost		68			70			3			4
Expected return on plan assets		(65	)		(73	)		—			—
Amortization of:
Prior service cost		2			2			(8	)		(6	)
Net actuarial loss		13			3			—			1
Transition (asset) obligation		—			—			—			(1	)
Net periodic benefit cost	$	32		$	17		$	(4	)	$	—
Curtailment gain	$	—		$	—		$	—		$	12

The net periodic benefit cost of the corporation’s defined benefit pension plans in the first quarter of 2010 was $15 million higher than in 2009 as a result of the following:

• Service cost declined primarily as a result of an increase in the discount rate, which reflects the higher interest rates in various jurisdictions.

• Interest costs declined in the quarter, despite an increase in interest rates, due to the impact of changes in foreign currency exchange rates, primarily the British pound sterling and European euro.

• The amortization of net actuarial losses increased in 2010 as a result of an increase in net unamortized actuarial losses which are required to be amortized in future years. The amount of unamortized actuarial losses increased from $570 million at the end of 2008 to $883 million as of the end of 2009. This resulted in a higher level of loss amortization in 2010.

In 2010, the corporation classified the international household and body care businesses as discontinued operations and anticipates retaining the pension and postretirement medical obligations related to those businesses. The corporation no longer anticipates incurring service cost for the participants in those plans after these businesses are sold and this cost component is recognized in discontinued operations while the remainder of net periodic benefit cost is recognized in continuing operations.

During the first three months of 2010 and 2009, the corporation contributed $5 million and $33 million, respectively, to its defined benefit pension plans. At the present time, the corporation expects to contribute approximately $135 million of cash to its defined benefit pension plans in 2010. The exact amount of cash contributions made to pension plans in any year is dependent upon a number of factors including minimum funding requirements in the jurisdictions in which the corporation operates and arrangements made with trustees of certain foreign plans. As a result, the actual funding in 2010 may differ from the current estimate.

During 2009, the corporation entered into a new collective labor agreement in the Netherlands which eliminated postretirement health care benefits for certain employee groups, while also reducing benefits provided to others. The elimination of benefits resulted in the recognition of a curtailment gain of $17 million, of which $12 million impacted continuing operations, related to a portion of the unamortized prior service cost credit which was reported in accumulated other comprehensive income. The plan changes also resulted in a $32 million reduction in the accumulated postretirement benefit obligation with an offset to accumulated other comprehensive income (AOCI).

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The corporation has recognized a $7 million charge to income in 2010 to establish the estimated partial withdrawal liability for certain multi-employer pension plans. The charges were all recognized in Selling, general and administrative expenses in the Consolidated Statements of Income and related to the North American Fresh Bakery segment.

8. Receipt of Contingent Sale Proceeds

The corporation sold its European cut tobacco business in 1999. Under the terms of that agreement, the corporation was to receive an annual cash payment of 95 million euros if tobacco continued to be a legal product in the Netherlands, Germany and Belgium through July 15, 2009. The contingencies associated with the 2010 and 2009 payments passed in the first quarter of each fiscal year and the corporation received the annual payments and recorded income in the Contingent sales proceeds line in the Consolidated Statements of Income. The payment received in 2009 increased annual diluted earnings per share by $0.21 and the payment received in 2010 is expected to increase annual diluted earnings per share by $0.19. The payment received in 2010 represents the final payment to be received under the terms of the sale agreement.

9. Income Taxes

Effective Annual Tax Rate for Interim Reporting – Generally accepted accounting principles require that the interim period tax provision be determined as follows:

• At the end of each quarter, the corporation estimates the tax that will be provided for the fiscal year stated as a percent of estimated “ordinary” income for the fiscal year. The term ordinary income refers to income from continuing operations before income taxes, excluding significant unusual or infrequently occurring items. Discontinued operations are excluded in determining ordinary income.

• The estimated annual effective tax rate is applied to the year-to-date “ordinary” income at the end of each quarter to compute the year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is the difference between the most recent year-to-date and the prior quarter year-to-date computations.

• The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about valuation allowances established in prior years and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items which are recognized as discrete items in the interim period in which the event occurs.

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income of the corporation in each tax jurisdiction in which it operates and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, the corporation’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following table sets out the tax expense (benefit) and the effective tax rate for the corporation from continuing operations:

	First Quarter
(In millions)	2010			2009
Continuing operations
Income (loss) before income taxes	$	296		$	268
Income tax expense		106			77
Effective tax rate		35.7	%		28.6	%

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In the first quarter of 2010, the corporation recognized tax expense of $106 million on pretax income from continuing operations of $296 million, or an effective tax rate of 35.7%. The tax expense and related effective tax rate on continuing operations was determined by applying a 27.6% estimated annual effective tax rate to pretax earnings and then recognizing $24 million of discrete tax items. The discrete tax items primarily relate to additional tax expense of $25 million to establish a valuation allowance on net operating losses and other deferred tax assets in Belgium. The 2010 estimated annual effective rate includes a charge of $32 million related to the expected repatriation of a portion of 2010 earnings, which increases the rate by 4%. The estimated annual effective tax rate also includes $16 million of non-recurring tax benefits related to the utilization of U.K. net operating losses which lowered the estimated annual effective rate by approximately 2%. The portion of this tax benefit recognized in the first quarter of 2010 is $6 million.

In the first quarter of 2009, the corporation recognized tax expense of $77 million on pretax income of $268 million, or an effective rate of 28.6%. This rate also represents the estimated annual effective rate in the first quarter of 2009 as there were no discrete items. In 2009, the estimated annual effective tax rate includes a charge of $55 million for the repatriation of a portion of 2009 earnings, which increased the estimated effective annual tax rate by approximately 8%.

Unrecognized Tax Benefits

Each quarter, the corporation makes a determination of the tax liability needed for unrecognized tax benefits that should be recorded in the financial statements. For tax benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by the taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The year-to-date net increase in the liability for unrecognized tax benefits was $1 million, resulting in an ending balance of $548 million as of September 26, 2009. There was a decrease in the gross liability for uncertain tax positions of $17 million, of which, $1 million relates to audit settlements, and $16 million relates to the expiration of statutes of limitations. This decrease was offset by an increase in the gross liability for uncertain tax positions of $18 million, of which $8 million relates to increases related to the current period and $10 million relates to unfavorable foreign currency exchange translation.

At this time, the corporation estimates that it is reasonably possible that the liability for unrecognized tax benefits will decrease between $145 – $205 million in the next twelve months from a variety of uncertain tax positions as a result of the completion of various worldwide tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. In addition, the company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the three months ended September 26, 2009 the corporation recognized $8 million of interest and penalties in tax expense. As of June 27, 2009, the corporation had accrued interest and accrued penalties of $111 million. The change in accrued interest and accrued penalties during the three months ended September 26, 2009 was an increase of approximately $11 million.

The corporation’s tax returns are routinely audited by federal, state, and foreign tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service (IRS) has completed examinations of the company’s U.S. income tax returns through July 3, 2004. Fiscal years remaining open to examination in the Netherlands include 2003 and forward. Other foreign jurisdictions remain open to audits after 1998. With few exceptions, the company is no longer subject to state and local income tax examinations by tax authorities for years before June 28, 2003.

In addition, in July 2009, the Spanish tax authorities announced a challenge against tax positions claimed by the corporation’s Spanish subsidiaries for fiscal years 2003 through 2005. We are disputing their challenge and will continue to have further proceedings with the Spanish tax authorities regarding this issue. There is a reasonable possibility that the ultimate resolution will be higher or lower than the amounts reserved.

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10. Contingencies and Commitments

Aris – This is a consolidation of cases filed by individual complainants with the Republic of the Philippines, Department of Labor and Employment and the National Labor Relations Commission (NLRC) from 1998 through July 1999. The complaint alleges unfair labor practices due to the termination of manufacturing operations in the Philippines by a former subsidiary of the corporation known as Aris Philippines, Inc. (Aris). The complaint names the corporation as a party defendant.

In 2006, the arbitrator ruled against the corporation and awarded the plaintiffs $60 million in damages and fees, and the corporation appealed this administrative ruling. On December 19, 2006, the NLRC issued a ruling setting aside the arbitrator’s ruling, and remanded the case to the arbitrator for further proceedings.

The complainants and the corporation have filed motions for reconsideration – the corporation seeking a final judgment and outright dismissal of the case, instead of a remand to the arbitrator; and complainants seeking to reinstate the original arbitrator’s judgment against the defendants, including the corporation. The respective motions for reconsideration have been fully briefed by the parties and we await the NLRC’s rulings.

In response to the arbitrator’s original ruling, the Court of Appeals required the corporation to post a bond set at approximately $25 million. The corporation has appealed the Court of Appeals’ decision to the Supreme Court and no additional bond posting is required until all allowable appeals have been exhausted. The corporation continues to believe that the plaintiffs’ claims are without merit; however, it is reasonably possible that this case will be ruled against the corporation and have a material adverse impact on the corporation’s financial position, results of operations or cash flows.

American Bakers Association Retirement Plan (ABA Plan) – The corporation is a participating employer in the ABA Plan. In 1979, the Pension Benefit Guaranty Corporation (PBGC) determined that the ABA Plan was an aggregate of single-employer pension plans rather than a multiple employer plan. Under the express terms of the ABA Plan’s governing documents, the corporation’s contributions can only be used to pay for the benefits of its own employee-participants. As a result, the corporation has recognized its obligations under the plan as if it participated in a single-employer defined benefit plan under the accounting rules for pensions.

In August 2006, the PBGC reversed its 1979 determination and concluded that the ABA Plan is and always has been a multiple employer plan in which the participating parties share in the plan underfunding. If the PBGC’s position is upheld, the PBGC will avoid assuming a substantial portion of ABA Plan’s underfunding, which is approximately $60-$80 million. The corporation estimates it could be held responsible for approximately half of that underfunding. The corporation has initiated litigation seeking to overturn the PBGC’s August 2006 determination. The corporation continues to believe that the PBGC’s August 2006 determination is without merit and that the corporation is responsible only for the obligations related to its current and former employees; however, it is reasonably possible that a court may rule against the corporation. A negative ruling, to the extent the ABA Plan is terminated, would have a material adverse impact on the corporation’s financial position, results of operations or cash flows.

Hanesbrands Inc. – In September 2006, the corporation spun off its branded apparel business into an independent publicly-traded company named Hanesbrands Inc. (HBI). In connection with the spin off, the corporation and HBI entered into a tax sharing agreement that governs the allocation of tax assets and liabilities between the parties. HBI has initiated binding arbitration claiming that it is owed $72 million from the corporation under the tax sharing agreement. The corporation believes HBI’s claims are without merit and is vigorously contesting the matter.

Multi-Employer Pension Plans – The corporation participates in various multi-employer pension plans that provide retirement benefits to certain employees covered by collective bargaining agreements (MEPP). MEPPs are managed by trustee boards comprised of participating employer and labor union representatives, and participating employers are jointly responsible for any plan underfunding. The corporation’s MEPP contributions are established by the applicable collective bargaining agreements; however, our required contributions may increase based on the funded status of the plan and the provisions of the Pension Protection Act, which requires substantially underfunded MEPPs to implement rehabilitation plans to improve funded status. Factors that could impact funded status of a MEPP include investment performance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions.

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In addition to regular scheduled contributions, the corporation could be obligated to make additional contributions (known as a complete or partial withdrawal liability) if a MEPP has unfunded vested benefits. These withdrawal liabilities would be triggered if the corporation ceases to make contributions to that MEPP, either completely or with respect to only one or more collective bargaining units. The withdrawal liability would equal the corporation’s proportionate share of the unfunded vested benefits, based on the year in which the withdrawal liability is triggered. The corporation believes that certain of the MEPPs in which we participate have unfunded vested benefits. Due to uncertainty regarding future factors that could trigger withdrawal liability, such as the corporation’s decision to close a plant or the dissolution of a collective bargaining unit, we are unable to determine the amount and timing of the corporation’s future withdrawal liability, if any, or whether the corporation’s participation in these MEPPs could have any material adverse impact on its financial condition, results of operations or liquidity. From time to time the corporation receives inquiries or notices from MEPPs relating to potential withdrawal liability charges which, if not mutually agreed, may lead to legal disputes and the incurrence of additional withdrawal liability. The corporation is currently involved in litigation with one MEPP and it is reasonably possible that the outcome of this litigation may result in an additional partial withdrawal liability of approximately $16 million.

The corporation’s regular scheduled contributions to MEPPs totaled $49 million in 2009, $48 million in 2008 and $47 million in 2007. The corporation recognized charges for partial withdrawal liabilities of approximately $7 million in 2010 to date, $31 million in 2009, and an immaterial amount in 2008.

Competition Law – During the past few years, competition authorities in various European countries and the European Commission have initiated investigations into the conduct of consumer products companies. These investigations usually continue for several years and, if violations are found, may result in substantial fines. In connection with these investigations, Sara Lee’s household and body care business operating in Europe has received requests for information, made employees available for interviews, and been subjected to unannounced inspections by various competition authorities. To date, except for the previously disclosed €5.5 million fine imposed by the German cartel authorities in February 2008, no formal charges have been brought against Sara Lee concerning the substantive conduct that is the subject of these investigations. Our practice is to comply with all laws and regulations applicable to our business, including the antitrust laws, and to cooperate with relevant regulatory authorities. Based on currently available information, it is reasonably possible the corporation may be subject to additional fines and, with respect to two of the investigations, it is likely that we will receive notice of fines by calendar year end. However, at this time, we are unable to estimate the impact of these fines, if any, on our consolidated financial statements.

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is management’s discussion and analysis of the results of operations for the first quarter of 2010 compared with the first quarter of 2009 and a discussion of the changes in financial condition and liquidity during the first three months of 2010. Below is an outline of the analyses included herein:

• Business Overview

• Consolidated Results – First Quarter of 2010

• Operating Results by Business Segment

• Financial Condition

• Liquidity

• Significant Accounting Policies and Critical Estimates

• Issued by not yet Effective Accounting Standards

• Forward-Looking Information

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Business Overview

Our Business

Sara Lee is a global manufacturer and marketer of high-quality, brand name products for consumers throughout the world focused primarily in the meats, bakery, and beverage products categories. Our brands include Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Senseo and our namesake, Sara Lee.

In North America, the company sells a variety of packaged meat products that include hot dogs, corn dogs, breakfast sausages, dinner sausages and deli meats as well as a variety of fresh and frozen baked products and specialty items that include bread, buns, bagels, cakes and cheesecakes. These products are sold through the retail channel to supermarkets, warehouse clubs and national chains. The company also sells a variety of meat, bakery and beverage products to foodservice customers in North America. Internationally, the company sells coffee and tea products in Europe, Brazil, Australia and Asia through both the retail and foodservice channels as well as a variety of bakery and dough products to retail and foodservice customers in Europe and Australia.

In September 2009, the corporation announced that it had received a binding offer to acquire its global body care and European detergents businesses for 1.275 billion euro. These businesses represent approximately 50% of the net sales of the International Household and Body Care segment. The results of these businesses and the remaining household and body care businesses, which were previously reported as a separate business segment, are now being reported as discontinued operations. Prior period results have been revised to reflect these businesses as discontinued operations. See Note 4 – “Discontinued Operations and Sold Businesses” for additional information regarding these discontinued operations. Unless stated otherwise, any reference to income statement items in these financial statements refers to results from continuing operations. The corporation intends to use the proceeds from the divestiture to invest for growth in its core businesses and to repurchase stock.

Challenges and Risks

As an international consumer products company, we face certain risks and challenges that impact our business and financial performance. The risks and challenges described below have impacted our performance and are likely to impact our future results as well.

The food businesses are highly competitive. In many product categories, we compete not only with widely advertised branded products, but also with private label products that are generally sold at lower prices. As a result, from time to time, we may need to reduce the prices for some of our products to respond to competitive pressures and commodity cost decreases. In addition, the turmoil in the financial markets has led to general economic weakness, which has negatively impacted our business. The continued economic uncertainty may also result in increased pressure to reduce the prices for some of our products, limit our ability to increase or maintain prices or lead to a continued shift toward private label products. Any reduction in prices or our inability to increase prices could negatively impact profit margins and the overall profitability of our reporting units, which could potentially trigger a goodwill impairment.

Commodity prices directly impact our business because of their effect on the cost of raw materials used to make our products and the cost of inputs to manufacture, package and ship our products. Many of the commodities we use, including coffee, wheat, beef, pork, corn, corn syrup, soybean and corn oils, butter, sugar and fuel, have experienced price volatility due to factors beyond our control. The company’s objective is to offset commodity price increases with pricing actions and to offset any operating cost increases with continuous improvement savings.

The company’s business results are also heavily influenced by changes in foreign currency exchange rates. For the most recently completed fiscal year, approximately 35% of net sales and 50% of operating segment income were generated outside of the U.S. As a result, changes in foreign currency exchange rates, particularly the European euro, can have a significant impact on the reported results. Changes in foreign currency exchange rates decreased net sales by $74 million and decreased operating income by $6 million for the first three months of 2010.

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The company’s international operations also provide a significant portion of the company’s cash flow from operating activities, which is expected to require the company to continue to repatriate a greater portion of cash generated outside of the U.S. The repatriation of these funds has and is expected to continue to result in a higher effective income tax rate and cash tax payments.

Significant Items Affecting Comparability

The reported results for 2010 and 2009 reflect amounts recognized for actions associated with the corporation’s ongoing business transformation program, Project Accelerate and other significant amounts that impact comparability. More information on these costs can be found in Note 5 to the Consolidated Financial Statements, “Exit, Disposal and Transformation/Accelerate Activities.” The nature of these items includes the following:

Exit Activities, Asset and Business Dispositions – These costs are reported on a separate line of the Consolidated Statements of Income. Exit activities primarily relate to charges taken to recognize severance actions approved by the corporation’s management and the exit of leased facilities or other contractual arrangements. Asset and business disposition activities include costs associated with separating businesses targeted for sale, as well as gains and losses associated with the disposition of asset groups that do not qualify for discontinued operations reporting.

Project Accelerate Costs – These include costs associated with the transition of services to an outside third party vendor as part of a business process outsourcing initiative. The initiative includes the outsourcing of a portion of the North American and European finance processing functions, information systems application development and maintenance as well as indirect procurement activities. These costs are recognized in the Consolidated Statements of Income in Selling, general and administrative expenses or Cost of sales. Employee termination costs, lease exit costs and gains or losses on the disposition of assets or asset groupings that do not qualify as discontinued operations associated with these initiatives are reported as part of exit activities, asset and business dispositions.

The savings resulting from the Project Accelerate actions were approximately $25 million in the first quarter of 2010. The corporation anticipates annualized savings in 2010 of approximately $100-$150 million related to these actions, of which $50-$100 million is incremental to the Project Accelerate savings in 2009.

Business Transformation Costs – These include costs to retain and relocate existing employees, recruit new employees, and third-party consulting costs associated with transformation efforts. These costs are recognized in the Consolidated Statements of Income in Selling, general and administrative expenses or Cost of sales. Employee termination costs, lease exit costs and gains or losses on the disposition of assets or asset groupings that do not qualify as discontinued operations associated with these initiatives are reported as part of exit activities, asset and business dispositions.

Other Significant Items – The reported results are also impacted by other items that affect comparability. These items may include impairment charges, pension partial withdrawal liability charges, curtailment gains and certain discrete tax matters, which include contingent tax obligation and valuation allowance adjustments and various other tax matters.

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Impact of Significant Items on Net Income and Diluted Earnings per Share

	Quarter ended September 26, 2009									Quarter ended September 27, 2008
In millions, except per share data	Pretax Impact			Net Income (2)			Diluted EPS Impact (1)			Pretax Impact			Net Income (2)			Diluted EPS Impact (1)
Income from continuing operations	$	296		$	190		$	0.27		$	268		$	191		$	0.27
Net income				$	284		$	0.41					$	230		$	0.32
Significant items affecting comparability of income from continuing operations:
Charges for exit activities, asset and business dispositions:
Income from (charges for) exit activities	$	(13	)	$	(9	)	$	(0.01	)	$	1		$	—		$	—
Income from (charges for) business disposition activities		—			—			—			3			2			—
Subtotal		(13	)		(9	)		(0.01	)		4			2			—
(Charges to) income in Cost of sales:
Curtailment gain		—			—			—			6			4			0.01
Pension partial withdrawal liability charge		(1	)		(1	)		—			—			—			—
(Charges to) income in SG&A expenses:
Transformation charges - IT costs		—			—			—			(3	)		(1	)		—
Accelerate charges - Other		(5	)		(3	)		—			—			—			—
Curtailment gain		—			—			—			6			4			0.01
Pension partial withdrawal liability charge		(6	)		(4	)		(0.01	)		—			—			—
Impact of significant items on income from continuing operations before significant tax matters		(25	)		(17	)		(0.02	)		13			9			0.01
Significant tax matters affecting comparability:
Tax valuation allowance adjustment		—			(25	)		(0.04	)		—			—			—
U.K. net operating loss utilization		—			6			0.01			—			—			—
Other tax adjustments		—			1			—			—			—			—
Impact of significant items on income from continuing operations		(25	)		(35	)		(0.05	)		13			9			0.01
Significant items impacting discontinued operations:
Valuation allowance adjustment		—			47			0.07			—			—			—
Tax basis difference adjustment		—			11			0.02			—			—			—
Tax on unremitted earnings		—			(5	)		(0.01	)		—			—			—
Transformation/Accelerate charges		—			—			—			(2	)		(2	)		—
Professional fees/other		(4	)		(3	)		—			—			—			—
Curtailment gain		—			—			—			5			4			—
Impact of significant items on net income	$	(29	)	$	15		$	0.03		$	16		$	11		$	0.01

Notes:

(1) EPS amounts are rounded to the nearest $0.01 and may not add to the total.

(2) Taxes computed at applicable statutory rates.

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Consolidated Results – First Quarter of 2010 Compared with First Quarter of 2009

The following table summarizes net sales and operating income for the first quarter of 2010 and 2009 and certain items that affected the comparability of these amounts:

	Quarter ended
Total Corporation Performance (In millions)	Sept. 26, 2009			Sept. 27, 2008			Change			Percent Change
Net sales	$	2,588		$	2,794		$	(206	)	(7.4	)%
Increase / (Decrease) in net sales from:
Changes in foreign currency exchange rates	$	—		$	74		$	(74	)
Acquisitions/dispositions		12			58			(46	)
Total	$	12		$	132		$	(120	)
Operating income	$	325		$	293		$	32		10.7	%
Increase / (Decrease) in operating income from:
Changes in foreign currency exchange rates	$	—		$	6		$	(6	)
Exit activities, asset and business dispositions		(13	)		4			(17	)
Transformation/Accelerate charges		(5	)		(3	)		(2	)
Pension partial withdrawal liability charge		(7	)		—			(7	)
Curtailment gain		—			12			(12	)
Acquisitions/dispositions		1			3			(2	)
Total	$	(24	)	$	22		$	(46	)

Net Sales

Net sales decreased by $206 million or 7.4%. The weakening of foreign currencies, particularly the European euro and Brazilian real decreased reported net sales by $74 million, or 2.6%. Divestitures net of acquisitions made after the start of the first quarter of 2009 reduced net sales by $46 million, or 1.5%. Sales were negatively impacted by a decline in unit volumes of 3.8% and pricing actions that decreased net sales by less than 1% which were partially offset by a favorable shift in sales mix. The following table summarizes the components of the percentage change in net sales as compared to the prior year:

First Quarter 2010

Net Sales Changes	Unit Volumes	+	Price/ Mix/Other	+	Acquisitions/ Divestitures	+	Foreign Exchange	=	Net Sales Change
Total Corporation	(3.8)%		0.5%		(1.5)%		(2.6)%		(7.4)%

Operating Income

Operating income increased by $32 million, or 10.7%. The year-over-year net impact of the changes in foreign currency exchange rates, transformation/Accelerate charges and the other factors identified in the preceding table decreased operating income by $46 million. Operating income was favorably impacted by a $32 million reduction in unrealized commodity mark-to-market derivative losses versus the prior year partially offset by a $17 million reduction in contingent sales proceeds year-over-year due to changes in foreign currency exchange rates. The remaining increase in operating income of $63 million was primarily due to improved operating results for the North American business segments and a reduction in other general corporate expenses. The individual components that impacted operating income are discussed in more detail below.

Gross Margin

Gross margin dollars in the first quarter of 2010 decreased $8 million over the prior year due to lower unit volumes, changes in foreign currency exchange rates, the impact of business dispositions and the unfavorable impact of pricing actions, partially offset by savings from continuous improvement programs. The gross margin percent in the first quarter of 2010 increased to 37.5% from 35.0% in the first quarter of 2009 primarily due to the impact of lower commodity costs.

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Selling, General and Administrative Expenses

	Quarter ended
(In millions)	Sept. 26, 2009		Sept. 27, 2008		Change			Percent Change
SG&A expenses in the business segment results:
Media advertising and promotion	$	72	$	79	$	(7	)	(9.4	)%
Other		621		661		(40	)	(6.1	)
Total business segments		693		740		(47	)	(6.5	)
Amortization of identifiable intangibles		11		12		(1	)	(3.8	)
General corporate expenses:
Other		55		64		(9	)	(13.9	)
Mark-to-market derivative (gains) / losses		5		22		(17	)	(77.4	)
Total SG&A Expenses	$	764	$	838	$	(74	)	(8.8	)%

Selling, general and administrative (SG&A) expenses decreased by $74 million, or 8.8%. Measured as a percent of sales, SG&A expenses decreased from 30.0% in 2009 to 29.5% in 2010. Changes in foreign currency exchange rates decreased SG&A costs by $20 million, or 2.3%. The remaining decrease in SG&A expenses is $54 million, or 6.5%. SG&A expenses in the business segments decreased by $47 million, or 6.5%, due to a reduction in distribution and selling costs, the impact of cost containment actions and a reduction in media advertising and promotion (MAP) spending. Other general corporate expenses decreased $9 million versus the prior year due to the impact of headcount reductions and lower casualty insurance costs and professional fees. Derivative losses were $17 million lower than the prior year due to a reduction in mark-to-market losses primarily related to derivative energy contracts.

Transformation/Accelerate Actions, Impairment Charges, Exit Activities and Other Significant Items

The reported results for the first quarter of 2010 and 2009 reflect amounts recognized for actions associated with the corporation’s ongoing Project Accelerate and business transformation programs and other exit and disposal actions. The expense related to exit activities, asset and business dispositions was $13 million in the first quarter of 2010 versus $4 million of income in the first quarter of 2009. As discussed in Note 5 to the financial statements, “Exit, Disposal and Transformation/Accelerate Activities,” the charge in 2010 relates to the planned termination of employees related to both European and North American operations as part of Project Accelerate. The income in the first quarter of 2009 represented a net gain associated with the disposal of the sauces and dressings business in the Foodservice segment.

These actions are more fully described in the Exit, Disposal and Transformation/Accelerate Activities Note to the Consolidated Financial Statements.

Net Interest Expense

Net interest expense in the first quarter of 2010 was $29 million, an increase of $4 million over the first quarter of the prior year. Interest expense decreased by $10 million, related primarily to lower average debt outstanding, lower interest rates and changes in foreign currency exchange rates, while interest income declined by $14 million, due to changes in foreign currency exchange rates and lower average cash and cash equivalents year-over-year.

Income Tax Expense

Note 9 to the Consolidated Financial Statements provides a detailed explanation of the determination of the interim tax provision.

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The following table sets out the tax expense (benefit) and effective tax rate for the corporation’s continuing operations:

	First Quarter
(In millions)	2010			2009
Continuing operations
Income before income taxes	$	296		$	268
Income tax expense		106			77
Effective tax rate		35.7	%		28.6	%

In the first quarter of 2010, the corporation recognized tax expense of $106 million on pretax income from continuing operations of $296 million, or an effective tax rate of 35.7%. The tax expense and related effective tax rate on continuing operations was determined by applying a 27.6% estimated annual effective tax rate to pretax earnings and then recognizing $24 million of discrete tax items. The discrete tax items primarily relate to additional tax expense of $25 million to establish a valuation allowance on net operating losses and other deferred tax assets in Belgium. The 2010 estimated annual effective rate includes a charge of $32 million related to the expected repatriation of a portion of 2010 earnings, which increases the rate by 4%. The estimated annual effective tax rate also includes $16 million of non-recurring tax benefits related to the utilization of U.K. net operating losses which lowered the estimated annual effective rate by approximately 2%. The portion of this tax benefit recognized in the first quarter of 2010 is $6 million.

In the first quarter of 2009, the corporation recognized tax expense of $77 million on pretax income of $268 million, or an effective rate of 28.6%. This rate also represents the estimated annual effective rate in the first quarter of 2009 as there were no discrete items. In 2009, the estimated annual effective tax rate includes a charge of $55 million for the repatriation of a portion of 2009 earnings, which increased the estimated effective annual tax rate by approximately 8%.

Income from Continuing Operations and Diluted Earnings per Share (EPS)

Income from continuing operations in the first quarter of 2010 was $190 million versus $191 million in the comparable period of the prior year, as a $32 million increase in operating income in 2010 was offset by a $29 million increase in income tax expense and a $4 million increase in net interest expense versus the prior year.

Diluted EPS from continuing operations of $0.27 in the first quarter of 2010 was unchanged from the amount reported in the first quarter of 2009. Diluted EPS were favorably impacted by lower average shares outstanding during the first quarter of 2010 than during the first quarter of 2009. The lower average shares are due to the corporation’s ongoing share repurchase program.

Discontinued Operations

Net sales from discontinued operations were $521 million in the first quarter compared to $555 million in the prior year. On a constant currency basis, revenues were up 1% primarily driven by unit volume growth in body care. Pre-tax income increased to $63 million from $61 million, driven by continuous improvement savings and reduced advertising and promotional spending, partially offset by a non-recurring curtailment gain in the prior year and unfavorable foreign exchange impacts. The net income from discontinued operations was $94 million in the first quarter of 2010 and $39 million in the first quarter of 2009. The effective tax rate for the discontinued operations was a benefit of (49.5)% in the first quarter of 2010 as compared to a tax expense of 36.0% in the first quarter of 2009. The tax benefit in 2010 was due to the expected utilization of tax loss carryforwards precipitated by the anticipated sale of the household and body care businesses. The results of discontinued operations in the first quarter of 2010 and 2009 are related to the international household and body care businesses and represents a full quarter of results in each period.

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Net Income and Diluted Earnings per Share (EPS)

In the first quarter of 2010, the corporation reported net income of $284 million versus $230 million of net income in the comparable period of the prior year. The $54 million increase in net income was due to the $55 million increase in net income from discontinued operations. Diluted EPS increased from $0.32 per share in the first quarter of 2009 to $0.41 per share in the first quarter of 2010. Diluted EPS were impacted by lower average shares outstanding during the first quarter of 2010 than during the first quarter of 2009. The lower average shares are due to the corporation’s ongoing share repurchase program.

Operating Results by Business Segment

The results of the corporation’s household and body care businesses, which were previously reported as a separate business segment, are now being reported as discontinued operations. Prior period results have been revised to reflect these businesses as discontinued operations. See Note 4 – “Discontinued Operations and Sold Businesses” for additional information regarding these discontinued operations.

Net sales and income before income taxes by business segment for 2010 and 2009 are as follows:

	Quarter Ended
	Net Sales						Income Before Income Taxes
(In millions)	Sept. 26, 2009			Sept. 27, 2008			Sept. 26, 2009			Sept. 27, 2008
North American Retail	$	659		$	680		$	80		$	55
North American Fresh Bakery		541			571			14			17
North American Foodservice		457			537			38			25
International Beverage		734			784			123			142
International Bakery		204			231			6			15
Total business segments		2,595			2,803			261			254
Intersegment sales		(7	)		(9	)		—			—
Total net sales and operating segment income		2,588			2,794			261			254
Amortization of intangibles		—			—			(11	)		(12	)
General corporate expenses:
Other		—			—			(55	)		(64	)
Mark-to-market derivative gains/(losses)		—			—			(3	)		(35	)
Contingent sale proceeds		—			—			133			150
Total net sales and operating income		2,588			2,794			325			293
Net interest expense		—			—			(29	)		(25	)
Net sales and income before income taxes	$	2,588		$	2,794		$	296		$	268

The following tables illustrate the components of the change in net sales versus the prior year for each business segment and the total corporation:

First Quarter 2010

Net Sales Changes	Unit Volumes		+	Price/ Mix/Other		+	Acquisitions/ (Divestitures)		+	Foreign Exchange		=	Net Sales Change
North American Retail	(7.6	)%		4.4	%		0.0	%		0.0	%		(3.2	)%
North American Fresh Bakery	(2.4	)		(2.8	)		0.0			0.0			(5.2	)
North American Foodservice	(5.5	)		0.8			(10.2	)		(0.1	)		(15.0	)
International Beverage	0.1			(0.2	)		1.4			(7.7	)		(6.4	)
International Bakery	(3.3	)		(2.9	)		0.0			(5.3	)		(11.5	)
Total Continuing Business	(3.8	)%		0.5	%		(1.5	)%		(2.6	)%		(7.4	)%

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The following tables summarize the operating segment net sales and operating income for 2009 and 2008 and certain items that affected the comparability of these amounts:

North American Retail

	Quarter Ended
(In millions)	September 26, 2009			September 27, 2008			Change			Percent Change
Net sales	$	659		$	680		$	(21	)	(3.2	)%
Operating segment income	$	80		$	55		$	25		45.6	%
Increase / (Decrease) in operating segment income from
Exit activities, asset and business dispositions	$	(3	)	$	1		$	(4	)
Total	$	(3	)	$	1		$	(4	)
Gross margin percentage		33.3	%		27.4	%				5.9	%

First Quarter –

Net sales decreased by $21 million, or 3.2%. Sales decreased as a result of a decline in unit volumes, the continuing exit of the commodity hog business and the impact of the exit of the kosher meat business in the third quarter of the prior year. The net sales declines were partially offset by positive pricing actions, net of trade promotions, which increased net sales by approximately 1%, and an improved sales mix driven in part by the sale of innovative new products, and the planned exit of lower margin commodity products. The overall unit volume decline of 7.6% was also due in part to this continuing exit of the commodity hog business. Unit volumes, excluding commodity meats, declined 4.2% due to the exit of the kosher meat business and volume declines for smoked sausages and frozen bakery products, which more than offset higher volumes for breakfast sandwiches.

Operating segment income increased by $25 million, or 45. 6%. The negative impact of the change in exit activities, asset and business dispositions decreased operating segment income by $4 million, or 8.7%. The remaining increase in operating segment income of $29 million, or 54.3%, was due to lower commodity costs, the favorable impact of pricing actions, and savings from continuous improvement programs, which were partially offset by lower unit volumes and higher MAP spending.

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North American Fresh Bakery

	Quarter Ended
(In millions)	September 26, 2009			September 27, 2008			Change			Percent Change
Net sales	$	541		$	571		$	(30	)	(5.2	)%
Operating segment income	$	14		$	17		$	(3	)	(14.8	)%
Increase / (Decrease) in operating segment income from
Exit activities, asset and business dispositions	$	(1	)	$	—		$	(1	)
Pension partial withdrawal liability charge		(7	)		—			(7	)
Total	$	(8	)	$	—		$	(8	)
Gross margin percentage		47.3	%		45.4	%				1.9	%

First Quarter –

Net sales decreased by $30 million, or 5.2%. The decrease in net sales was due to a decline in unit volumes; price reductions, in response to lower commodity costs and competitive pressure, which decreased net sales by approximately 2%; and an unfavorable sales mix due to a shift to non-branded products. Unit volumes decreased 2.4% due to lower unit volumes for branded fresh bakery products partially offset by a slight increase in non-branded bakery volumes . The lower branded unit volume was due to increased competitive pressure and continuing weak economic conditions.

Operating segment income decreased by $3 million, or 14.8%. The negative impact of pension partial withdrawal liability charges and the change in exit activities, asset and business dispositions decreased operating segment income by $8 million, or 45.6%. The remaining increase in operating segment income of $5 million, or 30.8%, was due to the favorable impact of lower costs for key ingredients net of pricing actions, savings from continuous improvement programs and lower SG&A costs driven by lower fuel costs, sales commissions, and MAP spending, partially offset by lower volumes and an unfavorable sales mix shift to lower margin non-branded products.

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North American Foodservice

	Quarter Ended
(In millions)	September 26, 2009			September 27, 2008			Change			Percent Change
Net sales	$	457		$	537		$	(80	)	(15.0	)%
Increase / (Decrease) in net sales from
Changes in foreign currency exchange rates	$	—		$	1		$	(1	)
Dispositions		—			57			(57	)
Total	$	—		$	58		$	(58	)
Operating segment income	$	38		$	25		$	13		50.8	%
Increase/(Decrease) in operating segment income from
Exit activities, asset and business dispositions	$	—		$	3		$	(3	)
Dispositions		—			3			(3	)
Total	$	—		$	6		$	(6	)
Gross margin percentage		26.6	%		23.6	%				3.0	%

First Quarter –

Net sales decreased by $80 million, or 15.0%. Business dispositions, which include the DSD beverage business and a sauces and dressings business, after the start of the first quarter of 2009, and changes in foreign currency exchange rates reduced net sales by $58 million, or 10.3%. The remaining net sales decrease of $22 million, or 4.7%, was due to unit volume declines for meat and bakery products partially offset by higher unit volumes for beverage products and the favorable impact of pricing actions. The positive pricing actions increased sales by approximately 1%. Overall net unit volumes declined 5.5%. The decline in meat and bakery volumes was driven in part by demand softness and the planned exit of certain lower margin meat business.

Operating segment income increased by $13 million, or 50.8%. The negative impact of the change in exit activities, asset and business dispositions decreased operating segment income by $3 million, or 21.5%. Dispositions after the start of the first quarter of 2009 reduced operating segment income by $3 million, or 31.8%. The remaining operating segment income increase of $19 million was due to the favorable impact of lower commodity costs, pricing actions, continuous improvement savings, and lower distribution and fuel costs, which were only partially offset by lower unit volumes.

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International Beverage

	Quarter Ended
(In millions)	September 26, 2009			September 27, 2008			Change			Percent Change
Net sales	$	734		$	784		$	(50	)	(6.4	)%
Increase / (Decrease) in net sales from
Changes in foreign currency exchange rates	$	—		$	60		$	(60	)
Acquisitions/ Dispositions		12			1			11
Total	$	12		$	61		$	(49	)
Operating segment income	$	123		$	142		$	(19	)	(13.0	)%
Increase / (Decrease) in operating segment income from
Changes in foreign currency exchange rates	$	—		$	6		$	(6	)
Exit activities, asset and business dispositions		(2	)		(1	)		(1	)
Transformation charges		—			(1	)		1
Curtailment gain		—			12			(12	)
Acquisition		1			—			1
Total	$	(1	)	$	16		$	(17	)
Gross margin percentage		39.5	%		42.1	%				(2.6	)%

First Quarter –

Net sales decreased by $50 million, or 6.4%. The impact of foreign currency changes, particularly in the European euro and Brazilian real, decreased reported net sales by $60 million, or 7.7%. The acquisition of a beverage business in Brazil, net of dispositions after the start of the first quarter of 2009, increased sales by $11 million, or 1.4%. The remaining decrease in net sales of $1 million, or 0.1%, resulted from increased trade promotions offset by a favorable shift in sales mix. Pricing actions, which included increased trade promotion activity, reduced net sales by approximately 1%. Unit volumes were virtually flat with an increase of 0.1% as volume growth in single serve coffee and instants were offset by declines in roast and ground. Retail volumes in Europe decreased due to volume declines in traditional roast and ground due in part to competitive pressures from private label and hard discounters as well as weak economic conditions throughout Europe, which was partially offset by increases in single serve coffee volumes due to improvements in the Netherlands, France and Germany. The volume declines in Europe were partially offset by improved volumes in Brazil during the quarter. Unit volumes in the foodservice channel decreased despite a growth in concentrates in Europe.

Operating segment income decreased by $19 million, or 13.0%. Changes in foreign currency exchange rates decreased operating segment income by $6 million, or 4.5%. The impact of a nonrecurring curtailment gain in the prior year decreased operating segment income by $12 million, or 7.4%. Acquisitions after the start of the first quarter of 2009 increased operating segment income by $1 million. The remaining operating segment income decrease of $2 million, or 1.6% was due to an increase in commodity costs, including hedging losses, and the negative impact of pricing actions, partially offset by the benefits of continuous improvement programs, lower MAP spending and a favorable shift in sales mix.

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International Bakery

	Quarter Ended
(In millions)	September 26, 2009			September 27, 2008			Change			Percent Change
Net sales	$	204		$	231		$	(27	)	(11.5	)%
Increase / (Decrease) in net sales from
Changes in foreign currency exchange rates	$	—		$	13		$	(13	)
Total	$	—		$	13		$	(13	)
Operating segment income	$	6		$	15		$	(9	)	(63.7	)%
Increase / (Decrease) in operating segment income from
Changes in foreign currency exchange rates	$	—		$	1		$	(1	)
Exit activities, asset and business dispositions		(7	)		1			(8	)
Transformation charges		—			(1	)		1
Total	$	(7	)	$	1		$	(8	)
Gross margin percentage		39.0	%		38.6	%				0.4	%

First Quarter –

Net sales decreased by $27 million, or 11.5%. The impact of foreign currency changes in the European euro and Australian dollar decreased reported net sales by $13 million, or 5.3%. The remaining net sales decrease of $14 million, or 6.2%, was the result of lower unit volumes and the negative impact of price reductions in response to lower commodity costs, which decreased net sales by approximately 3%. Net unit volumes decreased 3.3% due to a decline in fresh bread volumes in Spain, as a result of a reduction in branded sales due in part to economic and competitive pressures. These volume declines were partially offset by an increase in refrigerated dough volumes in Europe and increased volumes in Australia.

Operating segment income decreased by $9 million, or 63.7%. The net change in exit activities, asset and business dispositions and transformation charges along with changes in foreign currency exchange rates decreased operating segment income by $8 million, or 51.8. The remaining decrease in operating segment income was $1 million, or 11.9%, as the impact of lower unit volumes, price reductions and an unfavorable sales mix shift to lower margin products were partially offset by lower commodity costs, continuous improvement savings and lower SG&A costs due to cost control efforts.

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Financial Condition

The Consolidated Statements of Cash Flows includes amounts related to discontinued operations. The discontinued operations had a significant impact on the cash flows from operating activities for the first three months of fiscal 2010 and 2009. See Note 4 – “Discontinued Operations and Sold Businesses” for additional information regarding cash flows related to discontinued operations.

Cash From Operating Activities

The cash from operating activities generated by continuing and discontinued operations in the first three months of fiscal 2010 and 2009 is summarized in the following table.

	Three Months ended
(In millions)	Sept. 26, 2009		Sept. 27, 2008
Cash from Operating Activities:
Continuing Operations	$	119	$	(100	)
Discontinued Operations		68		62
Total	$	187	$	(38	)

In the first three months of 2010, $187 million of cash was generated by operating activities as compared to a use of cash of $38 million in the first three months of 2009. The increase in cash generated by operating activities on a year-over-year basis is due to a decrease in the cash used to fund working capital needs primarily related to inventory, accounts receivable, and accounts payable as well as, a reduction in cash paid for pension contributions. Additionally, the improvement in net income year-over-year less the decrease in contingent sales proceeds increased cash flow from operations by $71 million.

Cash from Investment Activities

Cash received from investment activities was $109 million in the first three months of 2010 as compared to $76 million in the comparable period of 2009. The increase in cash received from investment activities was due to the receipt of $34 million of cash related to derivative transactions in 2010 as compared to $24 million of cash used in derivative transactions in the prior year. The year-over-year change was due primarily to an increase in cash received on the settlement of foreign exchange contracts, the majority of which were related to hedges of foreign currency balance sheet exposures. This increased source of cash was partially offset by a $17 million reduction in cash received from contingent sale proceeds in the first three months of 2010 as a result of changes in foreign currency exchange rates. Capital expenditures for the purchases of property, equipment, software and other intangibles were virtually unchanged with $64 million of expenditures in 2010 as compared to $68 million in 2009.

Cash from Financing Activities

Net cash used in financing activities was $43 million during the first three months of 2010 as compared to $8 million in the prior year period. The year-over-year increase in cash used was due to a $23 million increase in cash used to repay long-term debt, net of new borrowings. In 2009, the corporation repaid $4 million of long-term debt that matured during the first three months, while in the first three months of 2010, $35 million of cash was used to repay long-term debt using $8 million of new borrowings and cash on hand. The cash dividends paid were virtually the same in both years.

Liquidity

Notes Payable/Cash and Equivalents

Notes payable consists primarily of commercial paper obligations. The balance of notes payable at September 26, 2009 of $86 million was $66 million higher than the amount reported at June 27, 2009. The corporation had cash and cash equivalents on the balance sheet at September 26, 2009 of $1,263 million, which was $304 million higher than the balance at June 27, 2009, due in part to the increase in cash generated by operating activities, as well as the $51 million positive impact of changes in foreign currency exchange rates, as a large portion of the cash is denominated in euros, which was only partially offset by the use of cash to repay debt and pay dividends.

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Anticipated Business Dispositions/Use of Proceeds

As noted previously, the corporation received a binding offer to sell its global body care and European detergents businesses for 1.275 billion euro. The corporation intends to use the proceeds from the divestiture to invest for growth in its core businesses and to repurchase stock. On September 14, 2009, the Board of Directors authorized the repurchase of an additional $1 billion of the corporation’s common stock, which is in addition to a previous 13.5 million share repurchase authorization. The corporation has not purchased any shares in the first quarter of 2010 and has not provided guidance on the amount of shares that may be purchased in 2010. The timing and amount of future share repurchases will be based upon market conditions and other factors. The corporation intends to maintain the current quarterly dividend of $0.11 per share for the next four quarters, regardless of the timing of dispositions.

Credit Facility and Credit Ratings

The corporation has a $1.85 billion five-year revolving credit facility available that management considers sufficient to satisfy its operating requirements. This facility expires in December 2011 and the pricing under this facility is based upon the corporation’s current credit rating. At September 26, 2009, the corporation did not have any borrowings outstanding under the credit facility and the facility does not mature or terminate upon a credit rating downgrade.

The corporation’s credit ratings by Standard & Poor’s, Moody’s Investors Service and FitchRatings, as of September 26, 2009, were as follows:

	Senior Unsecured Obligations	Short-term Borrowings	Outlook
Standard & Poor’s	BBB+	A-2	Negative
Moody’s Investors Service	Baa1	P-2	Stable
FitchRatings	BBB	F-2	Stable

Changes in the corporation’s credit ratings result in changes in the corporation’s borrowing costs. The corporation’s current short-term credit rating allows it to participate in a commercial paper market that has a number of potential investors and a higher degree of liquidity. A downgrade of the corporation’s short-term credit rating would place the corporation in a commercial paper market that would contain significantly less market liquidity than it currently operates in with a rating of “A-2”, “P-2” or “F-2.” This would reduce the amount of commercial paper the corporation could issue and raise its commercial paper borrowing cost. To the extent that the corporation’s operating requirements were to exceed its ability to issue commercial paper following a downgrade of its short-term credit rating, the corporation has the ability to use available credit facilities to satisfy operating requirements, if necessary.

Debt

The corporation’s total long-term debt decreased $2 million in the first three months of 2010, from $2,784 million at June 27, 2009, to $2,782 million at September 26, 2009, as a result of the repayment of maturing long-term debt during the first three months of 2010 partially offset by the impact of changes in foreign currency exchange rates.

The corporation’s total long-term debt is due to be repaid as follows: $19 million in the remainder of 2010; $436 million in 2011; $1,165 million in 2012; $530 million in 2013; $25 million in 2014; $68 million in 2015; and $539 million thereafter. These maturing debt obligations are expected to be satisfied with a combination of new long-term debt issuances, short-term borrowings, cash on hand, and operating cash flows.

Including the impact of swaps that are effective hedges and convert the economic characteristics of the debt, the corporation’s long-term debt and notes payable consist of approximately 68% fixed-rate debt as of September 26, 2009, as compared with 70% as of June 27, 2009. The decrease in fixed-rate debt at

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September 26, 2009 versus June 27, 2009 is due to the repayment of $25 million of fixed rate debt during the first quarter of 2010. The corporation monitors the interest rate environments in the geographic regions in which it operates and modifies the components of its debt portfolio as necessary to manage interest rate and foreign currency risks.

Covenants

The corporation’s debt agreements and credit facility contain customary representations, warranties and events of default, as well as, affirmative, negative and financial covenants with which the corporation is in compliance. One financial covenant includes a requirement to maintain an interest coverage ratio of not less than 2.0 to 1.0. The interest coverage ratio is based on the ratio of EBIT to consolidated net interest expense with consolidated EBIT equal to net income plus interest expense, income tax expense, and extraordinary or non-recurring non-cash charges and gains. For the 12 months ended September 26, 2009, the corporation’s interest coverage ratio was 5.9 to 1.0.

Leases

The corporation has numerous operating leases for manufacturing facilities, warehouses, office space, vehicles, machinery and equipment. Operating lease obligations are scheduled to be paid as follows: $70 million in the remainder of 2010; $75 million in 2011; $51 million in 2012; $34 million in 2013; $24 million in 2014; $20 million in 2015; and $70 million, thereafter. The corporation is contingently liable for certain long-term leases on property operated by others. These leased properties relate to certain businesses that have been sold. The corporation continues to be liable for the remaining terms of the leases on these properties in the event that the owners of the businesses are unable to satisfy the lease liability. The minimum annual rentals under these leases are as follows: $20 million in the remainder of 2010; $22 million in 2011; $17 million in 2012; $14 million in 2013; $12 million in 2014; $12 million in 2015; and $30 million, thereafter.

Future Contractual Obligations and Commitments

During 2007, the corporation exited a U.S. meat production plant that included a hog slaughtering operation. Certain purchase contracts for the purchase of live hogs at this facility were not exited or transferred after the closure of the facility. Currently, these contracts represent a remaining purchase commitment of approximately 400 thousand hogs through June 2012. Under the terms of these contracts, the corporation will continue to purchase these live hogs and therefore, the corporation has entered into a hog sales contract under which these hogs will be sold to another slaughter operator. The corporation’s purchase price of these hogs is generally based on the price of corn products, and the corporation’s selling price for these hogs is generally based on USDA posted hog prices. Divergent movements in these indices will result in either gains or losses on these hog transactions. Expected losses from these hog purchase commitments are recognized when we determine the loss is probable of occurring.

The corporation has various funding obligations and certain contingent guaranty obligations that are outlined below.

Pension Plans

As shown in the Pension footnote to the Consolidated Financial Statements that was included in the corporation’s 2009 Annual Report on Form 10-K, the funded status of the corporation’s defined benefit pension plans is defined as the amount by which the projected benefit obligation exceeds the plan assets. The underfunded status of the plans was $466 million at the end of 2009 as compared to $321 million at the end of 2008. Further information on the corporation’s pension plans is contained in Note 7 to these Consolidated Financial Statements.

In the first three months of 2010, the corporation contributed $5 million to these defined benefit pension plans and the corporation anticipates that approximately $135 million of cash contributions will be made for the entire fiscal year. The exact amount of cash contributions made to pension plans in any year is dependent upon a number of factors including minimum funding requirements in the jurisdictions in which the company operates and arrangements made with the trustees of certain foreign plans. As a result, actual funding in 2010 may be materially different from the current estimate. The Significant Accounting

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Policies section and Note 19 – Defined Benefit Pension Plans to the Consolidated Financial Statements, that are included in the corporation’s 2009 Annual Report on Form 10-K, provide a more complete description of the measurement date, assumptions, funded status, expected benefit payments and funding policies related to these defined benefit plans.

The corporation participates in various multi-employer pension plans that provide retirement benefits to certain employees covered by collective bargaining agreements (MEPP). MEPPs are managed by trustee boards comprised of participating employer and labor union representatives, and participating employers are jointly responsible for any plan underfunding. The corporation’s MEPP contributions are established by the applicable collective bargaining agreements; however, our required contributions may increase based on the funded status of the plan and the provisions of the Pension Protection Act, which requires substantially underfunded MEPPs to implement rehabilitation plans to improve funded status. Factors that could impact funded status of a MEPP include investment performance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions.

In addition to regular scheduled contributions, the corporation could be obligated to make additional contributions (known as a complete or partial withdrawal liability) if a MEPP has unfunded vested benefits. These partial withdrawal liabilities would be triggered if the corporation ceases to make contributions to that MEPP, either completely or with respect to only one or more collective bargaining units. The withdrawal liability would equal the corporation’s proportionate share of the unfunded vested benefits, based on the year in which the withdrawal liability is triggered. The corporation believes that certain of the MEPPs in which we participate have unfunded vested benefits. Due to uncertainty regarding future factors that could trigger withdrawal liability, such as the corporation’s decision to close a plant or the dissolution of a collective bargaining unit, we are unable to determine the amount and timing of the corporation’s future withdrawal liability, if any, or whether the corporation’s participation in these MEPPs could have any material adverse impact on its financial condition, results of operations or liquidity. From time to time the corporation receives inquiries or notices from MEPPs relating to potential withdrawal liability charges which, if not mutually agreed, may lead to legal disputes and the incurrence of additional withdrawal liability. The corporation is currently involved in litigation with one MEPP and it is reasonably possible that the outcome of this litigation may result in an additional withdrawal liability of approximately $16 million.

The corporation’s regular scheduled contributions to MEPPs totaled $49 million in 2009, $48 million in 2008 and $47 million in 2007. The corporation recognized charges for withdrawal liabilities of approximately $7 million in 2010 to date, $31 million in 2009, and an immaterial amount in 2008.

Repatriation of Foreign Earnings and Income Taxes

The corporation anticipates that it will continue to repatriate a portion of the earnings of its foreign subsidiaries. The projected tax cost associated with the anticipated return of the earnings of foreign subsidiaries will be recognized as the amounts are earned. However, the corporation pays the tax liability upon completing the repatriation action.

At the end of 2009, the corporation had a deferred tax liability of approximately $12 million for future repatriation actions that had not yet been completed at the end of 2009 but will be completed in 2010. The corporation currently estimates that the cost of such repatriation actions associated with 2009 earnings continues to be approximately $12 million. The corporation currently estimates that the tax cost for the repatriation of a portion of 2010 foreign earnings to the U.S. will be approximately $32 million, with the majority of these taxes expected to be paid in 2010.

Other income or losses generated by the business, as well as the impact of changes in foreign currency exchange rates, will impact the total amount of cash taxes paid in any period. If further repatriation actions are completed in 2010, the amount of cash taxes that are paid in 2010 could increase. Additional repatriation actions may occur in future periods and these actions will require additional cash tax payments. The funding of these tax payments will be made with cash generated from operations, dispositions and short-term borrowings.

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Transformation/Accelerate Liabilities

The corporation has recognized amounts for transformation, Project Accelerate and other restructuring charges. At September 26, 2009, the corporation had recognized cumulative liabilities of approximately $140 million that relate primarily to future severance and other lease and contractual payments. These amounts will be paid when the obligation becomes due, and the corporation expects a significant portion of these amounts will be paid over the next twelve months.

Guarantees

The corporation is a party to a variety of agreements under which it may be obligated to indemnify a third party with respect to certain matters. Typically, these obligations arise as a result of contracts entered into by the corporation, under which the corporation agrees to indemnify a third party against losses arising from a breach of representations and covenants related to such matters as title to assets sold, the collectibility of receivables, specified environmental matters, lease obligations assumed and certain tax matters. In each of these circumstances, payment by the corporation is conditioned on the other party making a claim pursuant to the procedures specified in the contract. These procedures allow the corporation to challenge the other party’s claims. In addition, the corporation’s obligations under these agreements may be limited in terms of time and/or amount, and in some cases the corporation may have recourse against third parties for certain payments made by the corporation. It is not possible to predict the maximum potential amount of future payments under certain of these agreements, due to the conditional nature of the corporation’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the corporation under these agreements have not had a material effect on the corporation’s business, financial condition or results of operations. The corporation believes that if it were to incur a loss in any of these matters, such loss would not have a material effect on the corporation’s business, financial condition or results of operations.

The material guarantees for which the maximum potential amount of future payments can be determined include the corporation’s contingent liability on leases on property operated by others which is described above, and the corporation’s guarantees of certain third-party debt. These debt guarantees require the corporation to make payments under specific debt arrangements in the event that the third parties default on their debt obligations. The maximum potential amount of future payments that the corporation could be required to make in the event that these third parties default on their debt obligations is approximately $15 million. At the present time, the corporation does not believe it is probable that any of these third parties will default on the amount subject to guarantee.

Risk Management

The corporation maintains risk management control systems to monitor the foreign exchange, interest rate and commodity risks, and the corporation’s offsetting hedge positions. The corporation utilizes derivative instruments to create offsetting hedge positions and accounts for these instruments under either the hedge accounting model or the mark-to-market accounting model. The corporation utilizes the mark-to-market accounting model for certain of these derivative instruments and the change in fair value of derivatives that are accounted for under the mark-to-market accounting model are reported in earnings each period, which can lead to increased volatility in reported earnings.

As outlined in the corporation’s 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission, the corporation’s control systems use analytical techniques including market value, sensitivity analysis and value at risk estimations. The value at risk estimations shown in the table below, which includes risks for the entire corporation, are intended to measure the maximum amount the corporation could lose from adverse market movements in interest rates and foreign exchange rates for a one-day period at a 95% confidence level.

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(In millions)	Amounts		Average		Time Interval	Confidence Level
Value at Risk Amounts
First quarter 2010
Interest rates	$	16	$	16	1 day	95	%
Foreign exchange		26		26	1 day	95
Fiscal Year End 2009
Interest rates	$	26	$	29	1 day	95	%
Foreign exchange		29		43	1 day	95

Sensitivity Analysis – For commodity derivative instruments held, the corporation utilizes a sensitivity analysis technique to evaluate the effect that changes in the market value of commodities will have on the corporation’s commodity derivative instruments. This analysis includes the commodity derivative instruments and, thereby, does not consider the fair value change in the underlying exposure. At the end of the first quarter of 2010 and the end of 2009, the potential change in fair value of commodity derivative instruments, assuming a 10% change in the underlying commodity price, was $7 million and $13 million, respectively.

Significant Accounting Policies and Critical Estimates

The corporation’s significant accounting policies are discussed in the Notes to the Consolidated Financial Statements that are incorporated in the 2009 Annual Report on Form 10-K that is filed with the Securities and Exchange Commission. The accounting policies and estimates that can have a significant impact upon the operating results, financial position and footnote disclosures of the corporation are described in the Financial Review in the corporation’s 2009 Annual Report on Form 10-K.

Issued but not yet Effective Accounting Standards

A summary of new accounting pronouncements issued, but not yet effective, which are relevant to the operations of the corporation are summarized below.

Employers’ Disclosures about Postretirement Benefit Plan Assets – In December 2008, new accounting guidance was issued that expands the disclosure requirements about plan assets for pension plans, postretirement medical plans, and other funded postretirement plans. Specifically, the rules require disclosure of: i) how investment allocation decisions are made by management; ii) major categories of plan assets; iii) significant concentrations of credit risk within plan assets; iv) the level of the fair value hierarchy in which the fair value measurements of plan assets fall (i.e. level 1, level 2 or level 3); v) information about the inputs and valuation techniques used to measure the fair value of plan assets; and vi) a reconciliation of the beginning and ending balances of plan assets valued with significant unobservable inputs (i.e. level 3 assets). The reconciliation of level 3 assets shall be broken out by realized gains/losses, unrealized gains/losses, purchases, sales, accounting settlements, and transfers of assets in and out of the level 3 category. This new guidance is required to be adopted by the corporation in fiscal 2010. The corporation does not expect the adoption to have a material impact on the Consolidated Financial Statements.

Revenue Arrangements with Multiple Deliverables – In September 2009, new accounting guidance was issued concerning accounting for revenue arrangements with multiple deliverables. The guidance requires companies to allocate revenue in arrangements involving multiple deliverables based on the estimated selling price of each deliverable, even though such deliverables are not sold separately. It also eliminates the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize a portion of the overall arrangement fee that is attributable to items that have already been delivered. The guidance also establishes a selling price hierarchy for determining the selling price of a deliverable and expands disclosures for multiple-deliverable revenue arrangements. The new guidance is required to be adopted by the corporation for revenue arrangements entered into or materially modified at the beginning of fiscal 2011.

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Forward-Looking Information

This document contains certain forward-looking statements, including the anticipated costs and benefits of restructuring, transformation and Project Accelerate actions, access to credit markets and the corporation’s credit ratings, the planned extinguishment of debt, the funding of pension plans, potential payments under guarantees and amounts due under future contractual obligations and commitments, projected capital expenditures, cash tax payments, pension settlement amounts and effective tax rates. In addition, from time to time, in oral statements and written reports, the corporation discusses its expectations regarding the corporation’s future performance by making forward-looking statements preceded by terms such as “expects,” “projects,” “anticipates” or “believes.” These forward-looking statements are based on currently available competitive, financial and economic data, as well as management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Consequently, the corporation wishes to caution readers not to place undue reliance on any forward-looking statements. Among the factors that could cause Sara Lee’s actual results to differ from such forward-looking statements are factors relating to:

• Sara Lee’s relationship with its customers, such as (i) a significant change in Sara Lee’s business with any of its major customers, such as Wal-Mart, its largest customer, including changes in the level of inventory these customers maintain; and (ii) credit and other business risks associated with customers operating in a highly competitive retail environment;

• The consumer marketplace, such as (iii) significant competition, including advertising, promotional and price competition; (iv) changes in consumer behavior due to economic conditions, such as a shift in consumer demand toward private label; (v) fluctuations in the cost of raw materials, Sara Lee’s ability to increase or maintain product prices in response to fluctuations in cost and the impact on Sara Lee’s profitability; (vi) the impact of various food safety issues and regulations on sales and profitability of Sara Lee products; and (vii) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance;

• Sara Lee’s international operations, such as (viii) impacts on reported earnings from fluctuations in foreign currency exchange rates, particularly the European euro, given Sara Lee’s significant concentration of business in Western Europe; (ix) Sara Lee’s generation of a high percentage of its revenues from businesses outside the United States and costs to remit these foreign earnings into the United States to fund Sara Lee’s domestic operations; (x) the impact on Sara Lee’s business of its receipt of a binding offer to purchase the global body care and European detergent businesses and its intent to divest the remainder of its international household and body care business; and (xi) Sara Lee’s ability to continue to source production and conduct manufacturing and selling operations in various countries due to changing business conditions, political environments, import quotas and the financial condition of suppliers;

• Previous business decisions, such as (xii) Sara Lee’s ability to generate margin improvement through cost reduction and efficiency initiatives, including Project Accelerate and the outsourcing of significant portions of our financial transaction processing, global IT applications development and maintenance, and global indirect procurement activities; (xiii) Sara Lee’s ability to achieve planned cash flows from capital expenditures and acquisitions, and the impact of changing interest rates and the cost of capital on the discounted value of those planned cash flows, which could impact future impairment analyses; (xiv) credit ratings issued by the three major credit rating agencies and the impact these ratings have on Sara Lee’s cost to borrow funds and access to capital/debt markets; (xv) the settlement of a number of ongoing reviews of Sara Lee’s income tax filing positions in various jurisdictions and inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which Sara Lee transacts business; and (xvi) changes in the expense for and contingent liabilities relating to multi-employer pension plans in which Sara Lee participates.

• In addition, the corporation’s results may also be affected by general factors, such as economic conditions, political developments, interest and inflation rates, accounting standards, taxes and laws and regulations in markets where the corporation competes. Sara Lee undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports the corporation files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the corporation’s management, including its Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure based on management’s interpretation of the definition of “disclosure controls and procedures,” in Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost/benefit relationship of possible controls and procedures.

Sara Lee’s Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, evaluated the effectiveness of Sara Lee’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”) and, based upon such evaluation, have concluded that as of the Evaluation Date, the corporation’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the last fiscal quarter there have been no changes in the corporation’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the corporation’s internal control over financial reporting.

PART II

ITEM 1 – LEGAL PROCEEDINGS

None

ITEM 1A – RISK FACTORS

There have been no material changes from the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 27, 2009.

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ITEM 2(c) – REPURCHASES OF EQUITY SECURITIES BY THE ISSUER

Issuer Purchases of Equity Securities

The following table outlines Sara Lee’s purchases of shares of its common stock during the first quarter of fiscal 2010.

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number and Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
June 29, 2009 to August 1, 2009	—	—	—	13,459,121		—
August 2, 2009 to August 29, 2009	—	—	—	13,459,121		—
August 30, 2009 to September 26, 2009	—	—	—	13,459,121	$	1.0 billion
Total	—	—	—	13,459,121	$	1.0 billion

(1) Sara Lee has two continuing stock repurchase programs under which it may repurchase shares of common stock in either open market or private transactions. With respect to the first program, Sara Lee announced on August 4, 2005 that its Board of Directors had increased the number of shares authorized under this program by an additional 100 million shares. As of September 26, 2009, 13.5 million shares remain authorized for repurchase under this program. With respect to the second program, Sara Lee announced on September 25, 2009 that its Board of Directors had authorized a $1.0 billion share repurchase program. As of September 26, 2009, no shares have been repurchased under this program. There is no expiration date for either program.

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Corporation’s 2009 Annual Meeting of Stockholders was held on October 29, 2009 in Chicago, Illinois (“Annual Meeting”).

(b) A total of 574,969,949 shares of the Corporation’s common stock (82.46% of all shares entitled to vote at the Annual Meeting) were represented at the Annual Meeting, in person or by proxy. The stockholders of the Corporation were requested to elect 12 directors, and all nominees were elected as indicated by the following voting tabulation:

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Name of Nominee	For	Against	Abstain
Brenda C. Barnes	551,391,156	21,372,697	2,206,096
Christopher B. Begley	557,255,738	14,960,868	2,753,343
Crandall C. Bowles	409,429,621	162,733,633	2,806,695
Virgis W. Colbert	528,257,477	43,817,034	2,895,438
James S. Crown	409,484,525	162,764,712	2,720,712
Laurette T. Koellner	554,892,047	17,232,294	2,845,608
Cornelis J.A. van Lede	551,312,171	20,822,549	2,835,229
Dr. John McAdam	544,503,857	27,619,661	2,846,431
Sir Ian Prosser	556,277,034	15,867,806	2,825,109
Norman R. Sorensen	410,440,280	161,799,158	2,730,511
Jeffrey W. Ubben	554,748,557	17,980,094	2,241,298
Jonathan P. Ward	388,492,077	183,770,469	2,707,403

(c) (i) The stockholders were requested to ratify the appointment of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accountants for fiscal year 2010. Of the total votes cast, 564,673,134 votes were cast for the proposal, 8,082,958 votes were cast against the proposal, and 2,213,857 votes abstained.

ITEM 6 – EXHIBITS

The Exhibits are numbered in accordance with Item 601 of Regulation S-K.

Exhibit Number	Description
10.1	Letter agreement dated September 25, 2009 from Unilever N.V. and Unilever PLC to Sara Lee Corporation.
10.2	Letter agreement dated September 25, 2009 from Sara Lee Corporation to Unilever N.V. and Unilever PLC.
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
101.1	Sections of the Sara Lee Corporation Quarterly Report on Form 10-Q for the quarter ended September 26, 2009, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Common Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; (v) Notes to Consolidated Financial Statements, tagged in block text; and (vi) document and entity information.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SARA LEE CORPORATION
	(Registrant)
	By:	/s/ Thomas S. Shilen, Jr.
		Thomas S. Shilen, Jr.
		Corporate Controller
		Senior Vice President, Finance
DATE: November 5, 2009

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EX-10.1

Exhibit 10.1

OFFER LETTER

To:	Sara Lee Corporation 3500 Lacey Road
	Downers Grove
	IL 60515 USA
	For the attention of: Brenda C. Barnes: Chairman and Chief Executive Officer

25 September 2009

STRICTLY PRIVATE AND CONFIDENTIAL

IRREVOCABLE BINDING OFFER: SALE AND PURCHASE OF WORLDWIDE BODY CARE BUSINESS AND EUROPEAN DETERGENTS BUSINESS

Dear Ms. Barnes,

We refer to the proposed sale by Sara Lee Corporation (the Seller) of the Shares and the Businesses comprising the Worldwide Body Care Business and European Detergents Business (together the Acquired Businesses). Terms defined in this letter shall have the same meaning as set forth in the draft sale and purchase agreement (the Draft SPA) in the form attached to this letter as Annex 1. The Seller and the Purchaser are together referred to as the Parties.

1. PURCHASER OFFER

1.1 Unilever N.V. and Unilever PLC (together the Purchaser) hereby make an irrevocable and binding offer (the Purchaser Offer), which Purchaser Offer shall be capable of acceptance by the Seller (subject to the further terms of this letter) in one of the following two forms:

(a) the Purchaser Offer may be accepted by the Seller in a form that relates to the entire Acquired Businesses (the First Option), in which case the Parties shall, subject as the case may be to the provisions of paragraph 2.5 below, enter into the Draft SPA; and

(b) the Purchaser Offer may be accepted by the Seller in a form that relates to the entire Acquired Businesses other than the French Business, as defined below (the Second Option) in which case the Parties shall, subject as the case may be to the provisions of paragraph 2.1 below in so far as it relates to Dutch Consultation Requirements (as defined below) and the provisions of paragraph 2.5 below, enter into the Second Draft SPA (as defined below).

1.2 We hereby agree that we shall not have any rights whatsoever, whether on the basis of applicable law or otherwise, to withdraw, in any way claim the unenforceability of or to otherwise terminate the Purchaser Offer before the Purchaser Offer Termination Time (as defined below) and hereby irrevocably waive any such rights. This is without prejudice to our right to rely on the conditions to and other rights of termination of the Draft SPA.

1.3 For the purposes of this letter the term Purchaser Offer Termination Time means the time at which the Purchaser Offer shall expire, being 24.00 (Central European Time) on the date falling 12 calendar months after the date of this letter, provided that if by that time the Consultation Requirements (as defined in paragraph 2 below) have not yet been complied with, the Seller and the Purchaser shall each have the unilateral right - to be exercised by written notice issued to the other Party prior to the original

Purchaser Offer Termination Time - to extend the time by which the Purchaser Offer shall expire to 24.00 (Central European Time) on the date falling 15 calendar months (or such later date as may be agreed upon in writing between the Parties) after the date of this letter, in which case the term Purchaser Offer Termination Time shall refer to the time to which the expiry of the Purchaser Offer has been so extended. The period between the date hereof and the Purchaser Offer Termination Time shall be referred to as the Purchaser Offer Period.

2. CONSULTATION REQUIREMENTS

2.1 In this letter, the employee consultation obligations under the Dutch Works Councils Act (Wet op de ondernemingsraden), the SER Merger Code (SER besluit Fusiegedragsregels 2000) and the Covenant with the Central Works Council of Koninklijke Douwe Egberts B.V. which must legally have been satisfied prior to the signing of the Draft SPA are referred to as the Dutch Consultation Requirements and the employee consultation obligations under the French Labour Code which must legally have been satisfied prior to the signing of the Draft SPA are referred to as the French Consultation Requirements. The Dutch Consultation Requirements and the French Consultation Requirements are referred to together as the Consultation Requirements. With respect to acceptance of the Purchaser Offer, we acknowledge that you cannot accept the Purchaser Offer in the form of the First Option until the applicable Consultation Requirements have been complied with and that you cannot accept the Purchaser Offer in the form of the Second Option until the Dutch Consultation Requirements have been complied with.

2.2 Upon the execution of this letter, the Seller shall without any unnecessary delay initiate the process necessary to comply with the Consultation Requirements. Accordingly, as soon as practicably possible after the date of this letter, consultation shall be commenced with each employee representative body as is necessary to comply with the Consultation Requirements. In this respect, the Seller undertakes to use its best endeavours, and procure that its Affiliates use their best endeavours, to take such steps as are necessary or desirable to satisfy the Consultation Requirements as soon as possible, and in any event before the Purchaser Offer Termination Time. Furthermore, until Closing the Seller shall not, and shall procure that no member of the Seller Group, nor any of its or their respective officers, directors, employees, representatives or advisors shall, commit any act or omission that is inconsistent with the agreed communication messages set out in Annex 2 of this letter.

2.3 Similarly, the Purchaser undertakes to use its best endeavours, and to procure that its Affiliates use their best endeavours, to take such steps as are necessary or desirable to satisfy the Consultation Requirements as soon as possible, and in any event before the Purchaser Offer Termination Time. The Purchaser also undertakes to provide, and to procure that its Affiliates provide, the Seller and its Affiliates with all reasonable support and cooperation in order to assist the Seller and its Affiliates with the satisfaction of the Consultation Requirements. Furthermore, until Closing the Purchaser shall not, and shall procure that no member of the Purchaser Group, nor any of its or their respective officers, directors, employees, representatives or advisors shall, commit any act or omission that is inconsistent with the agreed communication messages set out in Annex 2 of this letter.

2.4 The Parties shall regularly consult and exchange all available information with each other as to the status of and progress with such steps.

2.5 In the event the employee consultation process with the Central Works Council of Koninklijke Douwe Egberts B.V, the Dutch Works Council “Ondernemingsraad Household & Bodycare / Corporate staven”, Sara Lee Household & Body Care France SNC comité d’entreprise (works council), Sara Lee Coffee & Tea France SNC Comité central d’Entreprise (central works council),

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Sara Lee Coffee & Tea France SNC Comité d’Etablissement de Villepinte (Villepinte works council), Sara Lee Villepinte Comité d’hygiène, sécurité & conditions de travail and/or any other relevant employee representative bodies in France or the Netherlands results in any suggestions or conditions relating to the terms of the transactions contemplated by the Purchaser Offer being made by any such employee representative body, then, during the Purchaser Offer Period, the Parties will discuss in good faith (without any binding obligation for either of the Parties to agree to any changes) whether and to what extent such transactions may be altered to accommodate the relevant employee representative body and undertake to take all actions necessary and reasonable to resolve any outstanding issues in this respect.

3. ADDITIONAL CONSULTATION REQUIREMENTS

3.1 In addition to the Consultation Requirements, Parties acknowledge and agree that it will also be necessary to follow employment consultation procedures under the European Works Council Agreement to which the Seller Group is a party and in countries and/or with employee representative bodies other than those referred to with respect to the Consultation Requirements (the Additional Consultation Requirements).

3.2 With respect to the Additional Consultation Requirements, the Seller shall without unnecessary delay initiate the process necessary to comply with the Additional Consultation Requirements. Accordingly, as soon as practicably possible after the date of this letter, consultation shall be commenced with each employee representative body as is necessary to comply with the Additional Consultation Requirements. In this respect, the Seller undertakes to use its best endeavours, and procure that its Affiliates use their best endeavours, to take such steps as are necessary or desirable to satisfy the Additional Consultation Requirements as soon as possible, and in any event before the Purchaser Offer Termination Time. Furthermore, until Closing the Seller shall not, and shall procure that no member of the Seller Group, nor any of its or their respective officers, directors, employees, representatives or advisors shall, commit any act or omission that is inconsistent with the agreed communication messages set out in Annex 2 of this letter.

3.3 Similarly, the Purchaser undertakes to use its best endeavours, and to procure that its Affiliates use their best endeavours, to take such steps as are necessary or desirable to satisfy the Additional Consultation Requirements as soon as possible, and in any event before the Purchaser Offer Termination Time. The Purchaser also undertakes to provide, and to procure that its Affiliates provide, the Seller and its Affiliates with all reasonable support and cooperation in order to assist the Seller and its Affiliates with the satisfaction of the Additional Consultation Requirements. Furthermore, until Closing the Purchaser shall not, and shall procure that no member of the Purchaser Group, nor any of its or their respective officers, directors, employees, representatives or advisors shall, commit any act or omission that is inconsistent with the agreed communication messages set out in Annex 2 of this letter.

3.4 The Parties shall regularly consult and exchange all available information with each other as to the status of and progress with such steps.

4. ACCEPTING THE PURCHASER OFFER IN THE FORM OF THE FIRST OPTION

4.1 With respect to the acceptance of the Purchaser Offer in the form of the First Option, we acknowledge that you cannot accept the Purchaser Offer in the form of the First Option and sign the Draft SPA until you are satisfied that the Consultation Requirements have been complied with.

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4.2 Accordingly, you will provide immediate written notice to us once you are satisfied that the Consultation Requirements have been complied with. Furthermore, if by written notice you thereafter accept the Purchaser Offer in the form of the First Option prior to the Purchaser Offer Termination Time, you will be treated as having duly accepted the Purchaser Offer in the form of the First Option. Subject to the provisions of paragraph 2.5 above, you will then return to us a signed version of the Draft SPA and we hereby agree to countersign the Draft SPA immediately after its delivery.

4.3 If you do not deliver notice of your acceptance of the Purchaser Offer in the form of the First Option before the Purchaser Offer Termination Time, the Purchaser Offer in the form of the First Option shall lapse and shall no longer be capable of acceptance.

5. ACCEPTING THE PURCHASER OFFER IN THE FORM OF THE SECOND OPTION

5.1 With respect to the acceptance of the Purchaser Offer in the form of the Second Option, we acknowledge that you cannot accept the Purchaser Offer in the form of the Second Option and sign the Second Draft SPA (as defined below) until you are satisfied that the Dutch Consultation Requirements have been complied with.

5.2 Accordingly, you will provide written notice to us once you are satisfied that the Dutch Consultation Requirements have been complied with. Furthermore, if by written notice you thereafter accept the Purchaser Offer in the form of the Second Option prior to the Purchaser Offer Termination Time, you will be treated as having duly accepted the Purchaser Offer in the form of the Second Option. Subject to the provisions of paragraph 2.5 above, you will then return to us a signed version of the Second Draft SPA and we hereby agree to countersign the Second Draft SPA immediately after its delivery.

5.3 If you do not deliver notice of your acceptance of the Purchaser Offer in the form of the Second Option before the Purchaser Offer Termination Time, the Purchaser Offer in the form of the Second Option shall lapse and shall no longer be capable of acceptance.

5.4 The Parties shall amend the terms of the Draft SPA (the Draft SPA as so amended hereinafter referred to as the Second Draft SPA) so as to make only such modifications as are legally necessary to reflect the exclusion from the Acquired Businesses of those parts of the Acquired Businesses that are located in France or the disposal of which would be subject to any French Consultation Requirements (hereinafter the French Business). The Second Draft SPA will in any event contain the following modifications:

(a) the definitions of the Acquired Businesses, the Worldwide Body Care Business and the European Detergents Business shall be modified to exclude the French Business;

(b) the definitions of Employees (including its various sub-categories) shall be amended to exclude any employees that form part of the French Business;

(c) the list of Assumed Business Debts shall be amended to exclude any debts that form part of the French Business;

(d) the definition of Assumed Liabilities shall be amended to exclude any liabilities that form part of the French Business, which liabilities shall be added to the list of Excluded Liabilities in Part F of Schedule 2 of the Draft SPA;

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(e) the list of Excluded Assets set out in Part C of Schedule 2 of the Draft SPA shall be amended to add to the list any assets that form part of the French Business;

(f) the list of Excluded Contracts in Part D of Schedule 2 of the Draft SPA shall be amended to add to the list any contracts that form part of the French Business;

(g) the definition of Business IP shall be amended to exclude any intellectual property that forms part of the French Business;

(h) the definitions of Business Properties shall be amended to exclude any freehold or leasehold properties that form part of the French Business;

(i) the definitions of Business Purchaser and Business Sellers and Schedule 1 of the Draft SPA shall be amended to exclude any Business Purchaser or Business Seller who is only acquiring or disposing of all or a part of the French Business;

(j) the aggregate of the Debt Free/Cash Free Prices for all of the Sets of Shares and Businesses (excluding the French Business) shall be equal to the aggregate Debt Free/Cash Free Prices for all of the Sets of Shares and Businesses pursuant to Exhibit 10 of the Draft SPA less the Debt Free/Cash Free Prices allocated, pursuant to Exhibit 10 of the Draft SPA, to the Sets of Shares and Businesses that form part of the French Business;

(k) the definition of IT Systems shall be amended to exclude any Information Technology that forms part of the French Business;

(l) the definition of Last Accounts shall continue to refer to the Acquired Businesses as contemplated by the Draft SPA;

(m) the definition of Local Agreements and Schedule 8 shall be modified to exclude any local sale and purchase agreements which relate to the Shares and/or Businesses which are to be excluded from the disposal in accordance with the above;

(n) the definitions of Share Purchasers and Share Sellers and Schedule 1 shall be modified to exclude any Share Purchaser or Share Seller which is only purchasing or selling Shares which are excluded from the disposal in accordance with the above; and

(o) the definition of Target Companies and Schedule 1 shall be amended to exclude any companies and subsidiaries that form part of the French Business.

5.5 The legal advisers to the Parties shall produce a Second Draft SPA taking into account the modifications referred to in paragraph 5.4 above within 3 months of the date of this letter (unless otherwise agreed between the Parties). If there is any dispute as to:

• the Shares or Businesses which need to be excluded in order that the disposal is not subject to French Consultation Requirements, then that dispute shall be referred by either Party to a Legal Expert with instructions to resolve the dispute by providing an opinion on what modifications to the Draft SPA are necessary so that the disposal is not subject to French Consultation Requirements and the Parties agree that the Draft SPA shall be modified in accordance with that opinion; and/or

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• the modified aggregate of Debt Free/Cash Free Prices, then that dispute shall be referred by either Party to an Expert with instructions to resolve the dispute by determining what the appropriate modifications to the Debt Free/Cash Free Prices should be and the Parties agree that the Draft SPA shall be amended in accordance with that determination.

Legal Expert shall be an independent French lawyer who specialises in French employment law and who has been practising in that specialisation for at least 10 years and such expert shall be identified by agreement between the Parties.

5.6 Where any dispute is referred to an Expert and/or a Legal Expert in accordance with the above, such expert (or experts) shall be requested to make their decision within 60 days of acknowledgement by the expert of its appointment. Each of the Parties shall make a written submission to the expert of its position and reasoning in relation to the dispute in question within 15 days of the appointment of the expert and thereafter to make any further submissions and/or statements as the expert may request. Each Party shall promptly provide access to all such information from time to time to the other Party and/or to the expert as may reasonably be required in order to determine the necessary modifications to the Draft SPA. The expert shall act as an expert (and not as an arbitrator) in making its determination which shall, in the absence of manifest error, be final and binding on the Parties and the Parties expressly waive any right they may have to challenge it.

6. THE FRENCH OFFER

6.1 Subject to the Purchaser Offer having been accepted in the form of the Second Offer, the Purchaser hereby makes an irrevocable and binding offer to purchase the French Business in accordance with the terms of the French SPA, as defined below (the French Offer), which Purchaser Offer shall be capable of acceptance by the Seller (subject to the further terms of this letter) once the French Consultation Requirements have been complied with (such in the manner referred to in paragraph 2.2 above).

6.2 We hereby agree that we shall not have any rights whatsoever, whether on the basis of applicable law or otherwise, to withdraw, in any way claim the unenforceability of or to otherwise terminate the French Offer before the French Offer Termination Time (as defined below) and hereby irrevocably waive any such rights. For the purposes of this letter the term French Offer Termination Time means the time at which the French Offer shall expire, being 24.00 (Central European Time) on the date falling 21 calendar months after the date of this letter.

7. ACCEPTING THE FRENCH OFFER

7.1 With respect to the French Offer (which Parties acknowledge will only come into existence following the Purchaser Offer having been accepted in the form of the Second Offer), we acknowledge that you cannot accept the French Offer and sign the French Draft SPA until the French Consultation Requirements have been complied with.

7.2 If the French Consultation Requirements are complied with after the Purchaser Offer has been accepted in the form of the Second Offer, you shall immediately notify us thereof in writing. Furthermore, if by written notice you thereafter accept the French Offer prior to the French Offer Termination Time, you will be treated as having duly accepted the French Offer. Subject to the provisions of paragraph 2.5 above, if the French Offer has been accepted:

(a) prior to closing having taken place pursuant to the Second Draft SPA, the Second Draft SPA shall be automatically terminated and Parties shall enter into the Draft SPA as if the Purchaser Offer had been accepted in the form of the First Option; and

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(b) after closing has taken place pursuant to the Second Draft SPA, Parties shall, following the determination of the French Draft SPA in accordance with paragraphs 7.4 and 7.5 below, enter into the French Draft SPA.

7.3 If you do not deliver notice of satisfaction of the French Consultation Requirements before the French Offer Termination Time, the French Offer shall lapse and shall no longer be capable of acceptance.

7.4 Parties shall negotiate in good faith to amend the terms of the Draft SPA (the Draft SPA as so amended hereinafter referred to as the French Draft SPA) so as to make only such modifications as are legally necessary to reflect the fact that only the French Business will be the subject of the French Draft SPA. The French Draft SPA will in any event contain the following modifications:

(a) the MAC Condition and all related provisions (including the definition in Schedule 1 of the Draft SPA of Material Adverse Change and the procedure set out in clauses 9.2 to 9.8 of the Draft SPA) shall be deleted from the French Draft SPA;

(b) the Long Stop Date shall be extended to a date that is 24 months after the date of this letter; and

(c) such modifications as are effectively the reverse of the modifications made to the Draft SPA pursuant to paragraphs 5.4(a) through (o) above, so as to ensure that together the Second Draft SPA and the French Draft SPA have the same aggregate effect as would have been the case had the Parties only entered into the Draft SPA.

8. COMPETITION CLEARANCE

We shall upon exchange of this letter prepare for and, to the extent possible, commence the notifications with the European Commission and other relevant competition authorities in accordance with clause 3.2 of the Draft SPA and both Parties shall in that connection comply with clauses 3.5 to 3.8 of the Draft SPA (in relation to conduct of the procedures to obtain the relevant competition clearance) as if such clauses were included in this letter.

9. TRANSITION PLANNING

Upon the execution of this letter, the Parties shall initiate integration planning on the basis set out in Annex 3.

10. EXCLUSIVITY

10.1 In consideration for us committing further time, effort and resources to the transactions contemplated by this letter you hereby confirm that you are not currently involved in discussions with, or considering any offer or proposal from any other person in relation to the Shares or the Businesses or any part thereof or performing any ongoing work in relation to any sale or disposal of the Shares or the Businesses or any part thereof other than the transactions contemplated by this letter.

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10.2 Until the earlier to occur of the signing by you of the Draft SPA and the Purchaser Offer Termination Time (or, if the Purchaser Offer is accepted in the form of the Second Option, the earlier to occur of the signing by you of the French Draft SPA and the French Offer Termination Date) or such later time as you and we may agree in writing, we will be granted exclusivity by you in relation to the acquisition of the Shares and the Businesses or any interest in them. By countersigning this letter you undertake not to solicit, invite or initiate or otherwise engage in negotiations or commitments concerning the sale of, or accept any bid or offer in relation to, the Shares or the Businesses or any part thereof during such period. You will not provide any information to any other person in relation to their possible acquisition of the Shares or the Businesses or any interest in them during such period. You will not commence employment consultation processes in relation to the sale of the Shares and/or the Businesses to any other person.

11. MATERIAL ADVERSE CHANGE

11.1 The Purchaser shall have a right to terminate the Purchaser Offer if a fact or circumstance has arisen which has resulted in, or is reasonably expected to result in, a Material Adverse Change from the date of this letter until the Purchaser Offer Termination Time (if the Purchaser Offer is not accepted) or the date the Purchaser Offer is accepted (if earlier), provided that the right to terminate the Purchaser Offer as a result of a Material Adverse Change shall be subject to the provisions of clause 9.2 to 9.8 of the Draft SPA, which clauses shall mutatis mutandis apply as if they were included in this letter.

11.2 For the avoidance of doubt, Parties agree that paragraph 11.1 above does not create any right of termination with respect to the French Offer.

12. CONDUCT OF BUSINESS

12.1 The Seller shall procure that (except as may be approved by the Purchaser in writing and other than with respect to the Permitted Actions):

(a) the Acquired Businesses are carried on in all material respects in the ordinary course and in accordance with the obligations set out in Schedule 7 of the Draft SPA, save that any reference in Schedule 7 to Closing is substituted by reference to the earlier of (i) the date of the execution by both Parties of the Draft SPA; (ii) the date of the execution by both Parties of the Second Draft SPA; and (iii) the Purchaser Offer Termination Date; and

(b) following the acceptance of the Purchaser Offer in the form of the Second Option, the French Business is carried on in all material respects in the ordinary course and in accordance with the obligations set out in Schedule 7 of the Second Draft SPA, save that any reference in Schedule 7 to Closing is substituted by reference to the earlier of (i) the date of the termination of the executed Second Draft SPA and the execution by both Parties of the Draft SPA (as referred to in paragraph 7.2(a) above); (ii) the date of execution of the French Draft SPA (as referred to in paragraph 7.2(b) above); and (iii) the French Offer Termination Time.

12.2 Parties agree that the remedy of specific performance and/or injunctive relief shall be the Purchaser’s sole and exclusive remedy in relation to a breach by the Seller of the provisions of paragraph 12.1 above, despite any other remedy that would otherwise be available to the Purchaser. However, the previous sentence shall be without prejudice to the Purchaser’s ability to claim damages after Closing for a breach of the provisions of clause 4.1 of the Draft SPA (as read together with Schedule 7 of the Draft SPA).

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13. ANNOUNCEMENTS

13.1 Neither party shall make or solicit any disclosure or announcement, issue any circular in connection with or otherwise publicise the existence or subject matter of the transactions contemplated by this letter (including, without limitation, our interest in the Acquired Businesses or any part thereof, the negotiations leading to, and any arrangements or document relating to, this letter or the transactions contemplated by it) without the prior written approval of the other party. You undertake to procure that your respective Affiliates and your and their Representatives comply with the undertaking set out in this paragraph as if each of them had given it.

13.2 Such restrictions shall not apply:

(a) in relation to the disclosures and announcements reasonably required in connection with the Consultation Requirements and/or the Additional Consultation Requirements, provided that the disclosing Party shall use reasonable efforts to also in such case protect the confidentiality of the relevant information; and

(b) to the extent that the announcement or circular is required by law or by any stock exchange or any regulatory, governmental or antitrust body (including any tax authority) or any other relevant authority of competent jurisdiction to which any party is subject or submits, whether or not the requirement has the force of law. If this exception applies, the party making the announcement or issuing the circular shall provide reasonable notice to the other party and use its reasonable efforts to consult with the other party in advance as to the form, content and timing of any such announcement or circular.

14. CONFIDENTIALITY

14.1 For the purposes of this letter:

Confidential Information means written information and information transferred or obtained orally, visually, electronically or by any other means comprising:

(a) (in relation to our obligations) any information received or held by us (or any of our Representatives) relating to the Seller Group or, prior to Closing, any of the Target Companies and/or the Businesses; or

(b) (in relation to your obligations) any information received or held by you (or any of your Representatives) relating to us, or, following Closing, any of the Target Companies and/or the Businesses; and

(c) information relating to the provisions of, and negotiations leading to this letter and the transactions contemplated by it (including, without limitation, our interest in the Acquired Businesses or any part thereof and any arrangements or document relating to the transactions contemplated by this letter).

Representatives means the respective directors, officers, employees, agents, advisers, accountants and consultants of each Party and of its respective Affiliates.

Page            9

14.2 The Parties shall (and undertake to procure that their respective Affiliates and your and their Representatives shall) maintain the confidentiality of the Confidential Information and shall not disclose Confidential Information to any person except (i) as permitted by the terms of this letter or (ii) with the prior written approval of the other party.

14.3 This paragraph 14 shall not prevent the disclosure of Confidential Information by the Parties or their Representatives to the extent the relevant party can demonstrate that:

(a) disclosure is required by law or by any stock exchange or any regulatory, governmental or antitrust body (including any tax authority) or any other relevant authority of competent jurisdiction to which any party is subject or submits having applicable jurisdiction (provided that if this except applies, the party making such disclosure shall provide reasonable written notice of its intention to disclose such information and take into account the reasonable comments of the other party when making such disclosure);

(b) disclosure is of Confidential Information which was lawfully in the possession of that party or any of its Representatives (in either case as evidenced by written records) without any obligation of secrecy prior to its being received or held;

(c) disclosure is of Confidential Information which has previously become publicly available other than as a result of the fault of that party, its Affiliates or their Representatives;

(d) disclosure is required for the purpose of any arbitral or judicial proceedings arising out of the Transactions or any arrangements or document relating to the Transactions.

14.4 The Parties and their respective Affiliates shall only disclose Confidential Information to Representatives if they are reasonably required to do so for purposes connected with the transactions contemplated by this letter and only if the Representatives are informed of the confidential nature of the Confidential Information.

14.5 If (i) the Purchaser Offer has not been accepted in the form of the First Option or the Second Offer prior to the Purchaser Offer Termination Date or (ii) the Purchaser Offer is accepted in the form of the Second Option prior to Purchaser Offer Termination Date, but the French Offer is not accepted prior to the French Offer Termination Date, then in both cases we shall as soon as practicable on request by you:

(a) return to you all written documents and other materials relating to the Seller, any Target Company, any Business or this letter (including any Confidential Information) which you (or your Representatives) have provided to the us (or our Representatives), without keeping any copies of them;

(b) destroy all information or other documents derived from such Confidential Information; and

(c) so far as it is practicable to do so, expunge such Confidential Information from any computer, word processor or other device.

14.6 The Parties agree that the confidentiality letter between them in relation to the transaction contemplated by this letter shall terminate forthwith and that none of them shall have any rights or remedies under the confidentiality letter save for antecedent breach.

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15. JOINT AND SEVERAL LIABILITY

All of the obligations of Unilever PLC and Unilever N.V. under or pursuant to this letter (whether or not expressed to be given by Unilever PLC and Unilever N.V. individually or together) are given jointly and severally and Unilever PLC and Unilever N.V. shall each have joint and several liability in respect of all such obligations.

16. GOVERNING LAW AND JURISDICTION

16.1 This letter and any obligations arising out of or in connection with this letter shall be governed by, and interpreted in accordance with, the laws of England.

16.2 The courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this letter, whether contractual or non-contractual. For such purposes each party irrevocably submits to the jurisdiction of the English courts, waives any objections to the jurisdiction of those courts and irrevocably agrees that a judgment or order of the English courts in connection with the matters set out in this letter is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

16.3 The Parties shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection the matters set out in this letter. The Purchaser’s agent for service shall be Unilever PLC, Unilever House, Blackfriars, London EC4P 4BQ, United Kingdom (or such other person as notified in writing to the Seller) and the Seller’s agent for service shall be Sara Lee UK Finance Limited, 225 Bath Road, Slough SL1 4AU, United Kingdom (or such other person as notified in writing to the Purchaser). Any claim form, judgment or other notice of legal process shall be sufficiently served if delivered to such agent at its address for the time being. The Parties undertake not to revoke the authority of their respective agents, without appointing another suitable party.

Yours faithfully,

Unilever N.V.	Unilever N.V.
/s/ signature	/s/ signature
Unilever PLC	Unilever PLC
/s/ signature	/s/ signature

Page            11

Annex 1: Draft SPA

Sara Lee Corporation

Unilever N.V.

Unilever PLC

AGREEMENT

for the sale and purchase of

the Body Care business of

Sara Lee Corporation

[DATE]

1

CONTENTS

Clause		Page
1.	SALE AND PURCHASE	5
2.	PRICE	6
3.	CONDITIONS TO CLOSING	7
4.	PRE-CLOSING UNDERTAKINGS	11
5.	CLOSING	11
6.	SELLER WARRANTIES	11
7.	PURCHASER WARRANTIES	12
8.	CONDUCT OF PURCHASER CLAIMS	12
9.	NO RIGHTS OF RESCISSION OR TERMINATION	13
10.	BUSINESS ASSETS, CONTRACTS AND LIABILITIES	15
11.	SPECIFIC INDEMNITIES	16
12.	RELEVANT PROPERTIES	17
13.	INTELLECTUAL PROPERTY AND IT	17
14.	EMPLOYEES	17
15.	RETIREMENT BENEFITS	19
16.	TAX	19
17.	INSURANCE	19
18.	TRADE DEBTORS AND TRADE CREDITORS	20
19.	PAYMENT OF INTER-COMPANY DEBT	20
20.	GUARANTEES AND OTHER THIRD PARTY ASSURANCES	20
21.	POST-CLOSING AGREEMENTS	21
22.	WORLDWIDE HOUSEHOLD BUSINESS	22
23.	INFORMATION, RECORDS AND ASSISTANCE POST-CLOSING	23
24.	CHANGES OF NAME AND DOMAIN NAME REGISTRATIONS	23
25.	AGENCY STRUCTURE	25
26.	PAYMENTS	25
27.	ANNOUNCEMENTS	25
28.	CONFIDENTIALITY	25
29.	JOINT AND SEVERAL LIABILITY UNILEVER PLC AND UNILEVER NV	27
30.	ASSIGNMENT ETC.	27
31.	FURTHER ASSURANCES	27

2

32.	COSTS	29
33.	NOTICES	29
34.	CONFLICT WITH OTHER AGREEMENTS	29
35.	WHOLE AGREEMENT	30
36.	WAIVERS, RIGHTS AND REMEDIES	30
37.	COUNTERPARTS	30
38.	VARIATIONS	31
39.	INVALIDITY	31
40.	THIRD PARTY ENFORCEMENT RIGHTS	31
41.	GOVERNING LAW AND JURISDICTION	31
SCHEDULE 1 DESIGNATED SELLERS AND DESIGNATED PURCHASERS		14
SCHEDULE 2 THE BUSINESSES		14
SCHEDULE 3 DISPOSITION STRUCTURE		14
SCHEDULE 4 SELLER WARRANTIES		14
SCHEDULE 5 LIMITATIONS ON LIABILITY		14
SCHEDULE 6 PURCHASER WARRANTIES		14
SCHEDULE 7 CONDUCT OF THE ACQUIRED BUSINESSES		14
SCHEDULE 8 CLOSING ARRANGEMENTS		14
SCHEDULE 9 BUSINESS CONTRACTS		14
SCHEDULE 10 PROPERTIES		14
SCHEDULE 11 INTELLECTUAL PROPERTY AND IT		14
SCHEDULE 12 RETIREMENT BENEFITS		14
SCHEDULE 13 TAX		14
SCHEDULE 14 TRADE DEBTORS AND TRADE CREDITORS		14
SCHEDULE 15 INTER-COMPANY DEBT		14
SCHEDULE 16 POST CLOSING FINANCIAL ADJUSTMENTS		14
SCHEDULE 17 AGENCY PROVISIONS		14
SCHEDULE 18 PERMITTED ACTIONS AND PERMITTED DISTRIBUTIONS		14
SCHEDULE 19 [BLANK]		14
SCHEDULE 20 DEFINITIONS AND INTERPRETATION		14

3

EXHIBITS REFERRED TO IN THIS AGREEMENT

Description	Clause/Schedule
EXHIBIT 1	THIRD PARTY ASSURANCES
Part A:	Third Party Assurances given by Seller Group
Part B:	Third Party Assurances given by Acquired Businesses
Part C:	Third Party Assurances given by Target Companies
EXHIBIT 2	INFORMATION ON TARGET COMPANIES
Part A:	Details of the Target Companies
Part B:	Details of the Subsidiaries of the Target Companies
EXHIBIT 3	REGISTERED OWNED IP
EXHIBIT 4	PROPERTIES
Part A:	Information on Target Company Properties
Part B:	Information on Business Properties
EXHIBIT 5	FINANCIAL ADJUSTMENTS
Part A:	Amounts for Normalised Working Capital and Estimated Inter-Company Payables and Receivables
Part B:	Closing Statement Format
Part C:	Working Capital Breakdown
EXHIBIT 6	EMPLOYEES
EXHIBIT 7	IT
EXHIBIT 8	BUSINESS CONTRACTS
Part A:	General Principles
Part B:	Included Contracts
Part C:	Excluded Contracts
EXHIBIT 9	CLOSING TIME
EXHIBIT 10	PURCHASE PRICE ALLOCATION
Exhibit 11	Last Accounts, Accounting Principles and Liabilities
Part A:	Last Accounts
Part B:	Accounting Principles
Part C:	Categories of Liabilities

[AGREED FORM DOCUMENTS REFERRED TO IN THIS AGREEMENT]

Description Clause/Schedule

4

AGREEMENT

dated                          

PARTIES:

(1) Sara Lee Corporation, a company incorporated in the United States of America whose registered office is at 3500 Lacey Road, Downers Grove, IL 60515 United States of America (the Seller);

(2) Unilever PLC, a company incorporated in England and Wales (registered number 41424) whose registered office is at Port Sunlight, Wirral, Merseyside, CH26 4UJ, United Kingdom (Unilever PLC); and

(3) Unilever N.V., a company incorporated in the Netherlands whose corporate seat is in Rotterdam and whose registered office is at Weena 455, 3014 AL Rotterdam, the Netherlands (Unilever NV and together with Unilever PLC, the Purchaser),

(together the parties).

Words and expressions used in this Agreement shall be interpreted in accordance with Schedule 20.

IT IS AGREED:

1. SALE AND PURCHASE

1.1 The Seller (through the Share Sellers and the Business Sellers) shall sell, or procure the sale of, and the Purchaser (through the Share Purchasers and the Business Purchasers) shall purchase, or procure the purchase of, the Shares and the Businesses on the terms, and subject to the Conditions, set out in this Agreement as at and with effect from Closing.

1.2 Each Share Seller shall sell, and each Share Purchaser shall purchase, the full legal and beneficial interest in the particular Set of Shares for which it is identified as the respective Share Seller or Share Purchaser in Part A of Schedule 1. Each Set of Shares shall be sold free of Third Party Rights of any description and with all rights attaching to them at Closing including the right to receive all distributions, dividends or any return of capital declared, paid or made in respect of the relevant Shares after Closing.

1.3 Each Business Seller:

(a) identified in Part B of Schedule 1 shall sell, and each Business Purchaser shall purchase, the particular Business for which it is identified as the respective Business Seller or Business Purchaser in Part B of Schedule 1, save that the Owned IP owned by each such Business Seller shall be assigned to the assignee(s) identified in the IP Assignment; and

(b) not identified in Part B of Schedule 1 shall assign to the assignee(s) identified in the IP Assignment and each such assignee shall purchase, the Owned IP owned by such Business Seller.

Each Business shall be sold as a going concern with effect from Closing.

1.4 The Seller shall (for itself and on behalf of the Share Sellers) waive all rights of pre-emption over any of the Shares conferred upon them in any way and shall procure that no later than Closing all rights of pre-emption and other similar or comparable rights over and in respect of all or any of the Shares conferred upon or held by any other person are waived so as to permit the sale and purchase of the Shares hereunder.

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2. PRICE

2.1 The overall price for the Shares and the Businesses shall be the aggregate of the prices for each Set of Shares and each Business as set out in this clause 2.

2.2 At Closing, the Purchaser shall pay to the Seller an amount (the Closing Payment), which is the aggregate of all the Initial Share Prices and Initial Business Prices, which aggregate is to be calculated on the basis of the following formula:

CP = DCFP – (EICP + EED + EABD) + (EICR +EC)

Where:

CP	=	the Closing Payment
DCFP	=	the amount of € 1,275,000,000, which amount shall be allocated in accordance with Exhibit 10
EICP	=	the aggregate of the Estimated Inter-Company Payables in respect of each Set of Shares
EED	=	the aggregate of the Estimated External Debt in respect of each Set of Shares
EABD	=	the aggregate of the Estimated Assumed Business Debt in respect of each Business
EICR	=	the aggregate of the Estimated Inter-Company Receivables in respect of each Set of Shares
EC	=	the aggregate of the Estimated Cash in respect of in respect of each Set of Shares

2.3 By no later than 17:30 (CET) on the last Business Day that is at least 10 Business Days prior to the anticipated Closing Date, the Seller shall acting reasonably and in good faith provide to the Purchaser:

(a) an estimate of the Estimated External Debt, the Estimated Cash, the Estimated Inter-Company Payables and the Estimated Inter-Company Receivables, each in respect of each Set of Shares and on an aggregated basis; and

(b) an estimate of the Estimated Assumed Business Debt, each in respect of each Business and on an aggregated basis.

2.4 In relation to each Set of Shares, the final price (the Final Share Price) shall be the amount which results from taking the Initial Share Price for those Shares and making appropriate adjustments for the following (each as calculated and paid in accordance with the Financial Adjustments):

(a) the External Debt of the relevant Target Sub-Group;

(b) the Inter-Company Debt of the relevant Target Sub-Group;

(c) the Cash of the relevant Target Sub-Group; and

(d) the Working Capital of the relevant Target Sub-Group.

6

2.5 In relation to each Business, the price (the Final Business Price) shall be the amount which results from taking the Initial Business Price for that Business and making appropriate adjustments for the following (each as calculated and paid in accordance with the Financial Adjustments):

(a) the Working Capital of that Business; and

(b) the Assumed Business Debt of that Business.

2.6 Each Final Share Price and each Final Business Price (subject to any further adjustment, if applicable, pursuant to clause 2.7 and/or clause 2.8), shall be adopted for all tax and accounting reporting purposes. Each Final Business Price will be allocated between the relevant Business Assets in accordance with Exhibit 10.

2.7 Any payment made in satisfaction of a liability arising under a Seller Obligation or a Purchaser Obligation, shall (subject to clause 2.8) be made on the following basis:

(a) if it is specifically referable to any particular Set of Shares (or to any Target Company or Target Companies in a particular Target Sub-Group) or any particular Business or Business Asset, it shall so far as possible adjust the price paid for the relevant Shares or Business or Business Asset;

(b) otherwise, it shall adjust the price for such Shares or Business as the Seller and the Purchaser agree to be appropriate in the circumstances; or in the absence of such agreement it shall adjust pro rata the price paid for each Set of Shares and each Business.

2.8 If any payment made in satisfaction of a liability under a Seller Obligation or any adjustment pursuant to the Financial Adjustments would in either case reduce the price of a particular Set of Shares or Business to less than €1, then such payment or adjustment shall be made on the following basis:

(a) the price of that particular Set of Shares or Business shall be reduced to €1; and

(b) the balance shall adjust the price for such Shares or Business as the Seller and the Purchaser agree to be appropriate in the circumstances or, if they do not agree, it shall adjust pro rata the price paid for each of the other Sets of Shares and Businesses, provided that in each case the price for the relevant Set of Shares or Business at the relevant time is not reduced to less than €1.

3. CONDITIONS TO CLOSING

3.1 Closing shall be conditional on the following Conditions having been fulfilled or waived in accordance with this Agreement:

(a) the European Commission adopting, or having been deemed to have adopted, a decision that the Proposed Transactions are compatible with the common market and the functioning of the EEA Agreement pursuant to Council Regulation (EC) No. 139/2004, and adopting or having been deemed to have adopted any further decision or approval necessary for Closing to occur;

(b) the competent competition or antitrust authorities in South Africa having granted clearance or declined jurisdiction, or having been deemed to have done so, over the Proposed Transactions, or any applicable waiting periods having expired or been terminated, in accordance with the rules applicable in that jurisdiction; and

(c) no fact or circumstance having arisen before the time of Closing which has resulted in, or is reasonably expected to result in, a Material Adverse Change (the MAC Condition), provided that the right to terminate this Agreement as a result of a Material Adverse Change shall be subject to the provisions of clauses 9.2 up to and including 9.8.

7

3.2 Subject to the Seller complying with the terms of clause 3.3, the Purchaser shall, at its own cost, use its reasonable best endeavours to ensure that the Conditions in clause 3.1 (other than the MAC Condition) are fulfilled promptly after the date of this Agreement and in any event prior to the Long Stop Date. Such reasonable best endeavours shall, without limitation, include the Purchaser taking promptly, and in any event in accordance with any applicable time limits, all reasonable steps (including making notifications, filings and applications for approval) required in order to obtain the consents required in order to satisfy the Conditions in clause 3.1 (other than the MAC Condition). Subject to the above, the Purchaser shall:

(a) make and progress all such notifications, filings and applications for approval with the relevant Governmental Entities as soon as reasonably practicable after the date of this Agreement and with all due diligence and in accordance with any applicable time limits;

(b) provide as soon as reasonably practicable all information which is requested or required by a Governmental Entity and in any event in accordance with any applicable time limits insofar as reasonably practicable;

(c) notify the Seller and its legal counsel as soon as reasonably practicable (and provide copies or, in the case of non-written material communications, a written summary) of any communications with or from any Governmental Entity in relation to such filings, notifications or applications for approval;

(d) give the Seller the opportunity to comment on any material submissions to any Governmental Entity, and give consideration to any reasonable comments and requests of the Seller and its legal counsel or other advisers and provide the Seller and its legal counsel with copies of all material written submissions, notifications, filings and other communications in the form submitted or sent (and, in the case of non-written communications, a written summary);

(e) (without limiting paragraph (d) above) provide the Seller and its legal counsel with a final draft of all material submissions, notifications, filings and other communications to any Governmental Entity with sufficient notice as will allow the Seller and its legal counsel a reasonable opportunity to provide comments and for the Purchaser to give consideration to any reasonable comments of the Seller and its legal counsel and other advisers on such drafts prior to their submission;

(f) where permitted by a Governmental Entity, allow persons nominated by the Seller (including but not limited to their respective legal counsel) to attend all meetings (and participate in all telephone or other conversations) with that Governmental Entity; and

(g) regularly review with the Seller and its legal counsel the progress of any notifications, filings or applications for approval to any Governmental Entity (including, where necessary, seeking to identify appropriate undertakings, divestments or commitments to address any concerns identified by any Governmental Entity) and discussing with the Seller and its legal counsel the scope, timing and tactics of any such undertakings, divestments or commitments, and the satisfaction thereof, with a view to obtaining the clearances or approvals necessary for the satisfaction of the Conditions set out in clause 3.1 (other than the MAC Condition) at the earliest opportunity and in any event prior to the Long Stop Date.

3.3 The Seller shall, at its own cost, use all reasonable endeavours to assist the Purchaser in fulfilling the Conditions in clause 3.1 (other than the MAC Condition) promptly after the Offer Date and in any event prior to the Long Stop Date, in particular, but not limited to:

(a) providing as soon as reasonably practicable all information which is requested or required by a Governmental Entity or other person for the purpose of clause 3.2; and

8

(b) providing information and documents reasonably requested by the Purchaser as soon as reasonably practicable for filing or other submissions.

Without prejudice to the Seller’s obligations under this clause 3.3, the Seller shall procure that each Business Seller and each Share Seller shall co-operate with and provide reasonable assistance to the Purchaser to enable it to fulfil its obligations under clause 3.2.

3.4 Nothing in clauses 3.2 or 3.3 shall require or oblige the Purchaser to provide to the Seller or the Seller to provide to the Purchaser (as the case may be) any confidential information or business secrets, provided that:

(a) where such relevant confidential or secret information is provided, it will be made available only to the legal counsel of the relevant recipient party (or parties); and the relevant recipient party shall procure that such legal counsel will not further disclose such information without the prior written consent of the relevant disclosing party; and

(b) a non-confidential version of the relevant document (or a non-confidential summary of any non-written communication, meeting or conversation) containing such confidential information or business secrets is made available to the relevant recipient party (or parties).

3.5 If it becomes reasonably apparent to the Purchaser or to the Seller (who shall inform the Purchaser of this fact) that a Governmental Entity:

(a) intends or threatens to open an in-depth, “Phase II” or analogous investigation into the Proposed Transactions or to bring suit before any court or tribunal to enjoin the Proposed Transactions, or

(b) will only approve the Proposed Transactions subject to any undertakings, commitments, divestments, conditions, obligations, measures, undertakings and/or modifications, consents decrees, settlements or analogous procedures (collectively, Regulatory Conditions),

the Purchaser shall promptly, and within the relevant time limits for doing so, offer, accept and agree to any such Regulatory Condition (or Regulatory Conditions) as may be necessary so as to enable the satisfaction of the Conditions prior to the opening of such in-depth, “Phase II” or analogous investigation into the Proposed Transactions or the bringing of any such suit to enjoin the Proposed Transactions.

3.6 If, without prejudice to the Purchaser’s obligations in clause 3.5, a Governmental Entity should open an in-depth, “Phase II” or analogous investigation into the Proposed Transactions or brings suit before any court or tribunal to enjoin the Proposed Transactions, and it becomes reasonably apparent to the Purchaser or to the Seller (who shall inform the Purchaser of this fact) that such Governmental Entity will approve the Proposed Transactions only subject to Regulatory Conditions, the provisions of clause 3.5 shall apply mutatis mutandis so as to enable the satisfaction of the Conditions prior to the Long Stop Date.

3.7 In relation to the fulfilment of the Condition set out in clause 3.1(a) only, the Purchaser shall not be obliged under clause 3.5 or 3.6 or otherwise under this Agreement to offer, accept or agree any Regulatory Condition to or with any Governmental Entity:

(a) involving business active in laundry care markets accounting individually or in aggregate for more than €10 million in turnover in laundry care markets in the last completed fiscal year of the relevant party (or parties) in a manner that goes beyond modification of the Purchaser’s conduct of, and manner of remuneration from, its business in laundry care markets following Closing;

(b) involving businesses active in body care markets accounting in aggregate for more than €70 million in turnover in the last completed fiscal year of the relevant party (or parties);

(c) relating to business conducted under the following Unilever brands:

(i) Rexona/Sure, Axe/Lynx and Dove; or

9

(ii) in the UK or Ireland, Vaseline; or

(d) relating to business conducted under the Sara Lee brand Sanex where such business accounted for more than €32 million in turnover in the Seller’s fiscal year ended 27 June 2009,

all such turnover to relate to turnover achieved by the relevant business from customers in the territory of the EU or the EEA.

3.8 In relation to the fulfilment of the Condition set out in clause 3.1(b) only, the Purchaser shall not be obliged under clause 3.5 or 3.6 or otherwise under this Agreement to offer, accept or agree any Regulatory Condition to or with any Governmental Entity relating to business conducted in South Africa under any Unilever brands.

3.9 Where, notwithstanding the Purchaser’s reasonable best endeavours pursuant to clauses 3.2 and 3.5 above, it becomes reasonably apparent to the Purchaser (who shall inform the Seller of this fact) or to the Seller (who shall inform the Purchaser of this fact) that the Conditions set forth in clause 3.1 (other than the MAC Condition) may not be satisfied in relation to the European Detergents Business without the opening of an in-depth, “Phase II” or analogous investigation into the Proposed Transactions, such European Detergents Business shall be excluded from the Proposed Transactions and the amount of the DCFP referred to in clause 2.2 shall be reduced by €25 million. Without prejudice to the first sentence of this clause 3.8 and the obligations of the Purchaser under clause 3.6, if a Governmental Entity should nonetheless, despite the exclusion of the European Detergents Business from the Proposed Transaction contemplated by the previous sentence, open an in-depth, “Phase II” or analogous investigation into the Proposed Transactions, the effect of the first sentence of this clause shall no longer apply unless and until it becomes reasonably apparent to the Purchaser (who shall inform the Seller of this fact) or to the Seller (who shall inform the Purchaser of this fact) that the Conditions set forth in clause 3.1 (other than the MAC Condition) may not be satisfied in relation to the European Detergents Business, in which case the provisions of the first sentence of this clause 3.9 shall apply mutatis mutandis.

3.10 The Conditions set forth in clause 3.1 (other than the MAC Condition) have been included for the benefit of both the Seller and the Purchaser and may be relied upon, in the case of any such Condition not having been satisfied, as a ground for Closing not to take place. Accordingly, the Conditions in clause 3.1 (other than the MAC Condition) may only be waived, in whole or in part, or the period in which the Conditions are to be satisfied, extended, by the written agreement of the Seller and the Purchaser.

3.11 The Seller and the Purchaser shall each notify the other promptly upon becoming aware:

(a) that any of the Conditions have been fulfilled; or

(b) of anything which will or may prevent any of the Conditions from being satisfied on or prior to the Long Stop Date.

3.12 The first Business Day in London on or by which all Conditions have been fulfilled (or waived in accordance with clause 3.10) is the Unconditional Date.

3.13 If the Unconditional Date has not occurred on or before the Long Stop Date, then the Seller or the Purchaser may, by written notice to the other party, terminate this Agreement, and upon delivery of such notice, neither the Seller nor the Purchaser shall be bound to proceed with the Proposed Transactions and, except for the Surviving Provisions, this Agreement shall automatically terminate and be of no further force or effect and no party shall have any claim hereunder of any nature whatsoever against the other party (save in respect of accrued rights and/or liabilities arising from the prior breach of this Agreement), provided, however, that the right to terminate this Agreement under this clause 3.13 shall not be available (i) to the Seller if it is in material breach of or has materially breached its obligations under this Agreement or (ii) to the Purchaser if it has materially breached its obligations under this Agreement and, in the case of both (i) and (ii), such breach has contributed materially to the non-satisfaction of the relevant Condition(s).

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4. PRE-CLOSING UNDERTAKINGS

4.1 From the Offer Date until Closing, the Seller shall procure or shall have procured (except as may be approved by the Purchaser in writing and other than with respect to the Permitted Actions) that the Acquired Businesses are carried on in all material respects only in the ordinary course and shall comply with the obligations set out in Schedule 7.

4.2 Other than in the circumstance in which the MAC Condition is the only Condition that has not been satisfied, if Closing does not take place because this Agreement has been terminated in accordance with clause 3.12, the Purchaser shall, not later than two Business Days after such termination, and without prejudice to any other remedies which the Seller may have under this Agreement in relation to any other matter, pay to the Seller an amount of €25,000,000.

4.3 From the Offer Date until Closing, the Seller shall co-operate with the Purchaser in developing the integration programme as outlined in Annex 3 to the Offer Letter to facilitate the orderly transfer of the Acquired Businesses to the Purchaser (including the migration and transfer of all Business Information, and communicating with customers, suppliers and clients of the Acquired Businesses).

5. CLOSING

5.1 Closing shall take place at the offices of the Seller’s Lawyers in Amsterdam on the Business Day immediately after the Closing Time (such date being the Closing Date).

5.2 At Closing each of the Seller and the Purchaser shall deliver or perform (or procure that there is delivered or performed) all those documents, items and actions listed in relation to that party or any of its Affiliates in Schedule 8.

5.3 Receipt of funds in accordance with paragraph 1(b) of Part C of Schedule 8 shall constitute a good discharge of the Purchaser’s obligation in respect of the payment of the Closing Payment. The Purchaser shall not be concerned to see that the moneys transferred are applied in paying the Share Sellers or the Business Sellers in accordance with their respective entitlements.

6. SELLER WARRANTIES

6.1 The Seller warrants to the Purchaser as at the Offer Date that: (i) each of the Warranties is accurate and not misleading, and (ii) the Warranties contained in paragraph 1 and sub-paragraphs 5.1, 5.3 and paragraph 8 of Part A of Schedule 4; paragraphs 1 and 3 of Part B of Schedule 4; paragraphs 1 and 7 of Part E of Schedule 4; and paragraph 1 of Part F of Schedule 4 will be accurate and not misleading at the Closing Date as if repeated immediately before the Closing Date by reference to the facts and circumstances subsisting at that date on the basis that any reference in the Warranties, whether express or implied, to the Offer Date is substituted by reference to the Closing Date. The Warranties are given subject to the limitations set out in Schedule 5 and the limitations set out in the Tax Covenant insofar as they are expressed to apply to the Tax Warranties.

6.2 None of the limitations in Schedule 5 or the Tax Covenant shall apply to any Claim or claim under the Tax Covenant which arises (or to the extent that it is increased) as a consequence of fraud or fraudulent misrepresentation by any member of the Seller Group or by any director or officer of any member of the Seller Group.

6.3 The Warranties shall continue in full force and effect notwithstanding Closing, and Closing shall not in any way constitute a waiver of the Purchaser’s right to damages.

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6.4 The Seller agrees and undertakes on behalf of itself and each member of the Seller Group that, if any claim is made against any of them by the Purchaser in connection with the sale of the Shares and/or the Businesses to the Purchaser, they shall not make any claim against any Employee on whom they may have relied before agreeing to any terms of this Agreement or the Tax Covenant or authorising any statement in the Disclosure Letter, unless such claim is the result of wilful misconduct, gross negligence or fraud of such Employee.

7. PURCHASER WARRANTIES

The Purchaser warrants to the Seller as at the Offer Date in the terms of the warranties set out in Schedule 6.

8. CONDUCT OF PURCHASER CLAIMS

8.1 If the Purchaser or any Designated Purchaser receives written notice of any claim or potential claim by a third party (a Third Party Claim), which might reasonably result in a Non-Tax Claim being made, the Purchaser shall promptly (and in any event within 20 Business Days of it or a Designated Purchaser receiving such notice) give notice of the Third Party Claim to the Seller and ensure that the Seller and its representatives are given all reasonable information and access to facilities to investigate it, provided that any failure by the Purchaser to give such notice to the Seller under this clause 8.1 shall not prevent any Claim by the Purchaser or extinguish any liability of the Seller under this Agreement but may be taken into account in calculating any such liability of the Seller to the extent that the Seller establishes that such liability is increased by such failure.

8.2 Furthermore, if:

(a) the Seller has confirmed to the Purchaser in writing that the subject matter of the Third Party Claim shall give rise to a Claim (without prejudice to the restrictions and limitations set out in Schedule 5), the Purchaser shall:

(i) not (and procure that each member of the Purchaser Group shall not) admit liability or make any agreement or compromise in relation to the Third Party Claim without prior written approval of the Seller;

(ii) (subject to the Purchaser or the relevant member of the Purchaser Group being indemnified by the Seller against all reasonable out of pocket costs and expenses incurred in respect of that Third Party Claim) ensure that it and each member of the Purchaser Group shall:

(A) take such action as the Seller may reasonably request to avoid, resist, dispute, appeal, compromise or defend the Third Party Claim;

(B) allow the Seller (if it elects to do so) to take over the conduct of all proceedings and/or negotiations as the Seller may reasonably deem appropriate in connection with the Third Party Claim; and

(C) provide such information and assistance as the Seller may reasonably require in connection with the preparation for and conduct of any proceedings and/or negotiations relating to the Third Party Claim.

(b) the Seller has notified the Purchaser in writing that the subject matter of the Third Party Claim, in the view of the Seller, does not give rise to a Claim, the following shall apply:

(i) the Seller shall not (and shall procure that each member of the Seller Group shall not) admit liability or make any agreement or compromise in relation to the Third Party Claim without prior written approval of the Purchaser;

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(ii) the Purchaser shall not (and shall procure that each member of the Purchaser Group shall not) admit liability or make any agreement or compromise in relation to the Third Party Claim without prior written approval of the Seller;

(iii) (subject to each party bearing their own costs) both the Seller (with respect to itself and the other members of the Seller Group) and the Purchaser (with respect to itself and the other members of the Purchaser Group) shall:

(A) take such action as may be reasonably necessary and as requested by the other to avoid, resist, dispute, appeal, compromise or defend the Third Party Claim;

(B) shall jointly and in consultation with each other conduct the proceedings and/or negotiations as may reasonably be deemed appropriate in connection with the Third Party Claim; and

(C) provide such information and assistance to each other as the other may reasonably require in connection with the preparation for and conduct of any proceedings and/or negotiations relating to the Third Party Claim.

(c) the Purchaser has notified the Seller in writing that the Purchaser shall not, and therefore irrevocably waives any right to, institute a Claim in relation to the subject matter of the relevant Third Party Claim, Parties agree that clauses 8.2(a) and 8.2(b) shall not apply.

9. NO RIGHTS OF RESCISSION OR TERMINATION

9.1 Subject to Clause 3.12, neither the Purchaser nor any Designated Purchaser shall be entitled to rescind or terminate this Agreement in any circumstances whatsoever (whether before or after Closing). This shall not exclude any liability for (or remedy in respect of) fraudulent misrepresentation.

9.2 Notwithstanding clause 9.1, if at any time before Closing any Material Adverse Change occurs then, subject to remaining provisions of this clause 9, the Purchaser may give written notice (a MAC Notice) to the Seller at any time before Closing to terminate this Agreement (other than the Surviving Provisions). Upon such a MAC Notice being served, Closing shall in any event be postponed until the steps and processes described in the remaining provisions of this clause 9 (being the remedial steps and the dispute resolution process) have been taken or followed.

9.3 The occurrence of a Material Adverse Change shall not entitle the Purchaser to terminate this Agreement unless the Seller receives a MAC Notice prior to Closing and the relevant facts and circumstances underlying the alleged Material Adverse Change, to the extent capable of remedy, have not been remedied (at least to such an extent that the relevant facts and circumstances no longer constitute a Material Adverse Change) within thirty (30) days after the date on which such MAC Notice is served on the Seller, it being understood that the taking of any steps to remedy the relevant facts and circumstances underlying the alleged Material Adverse Change shall not constitute any form of acknowledgement from the Seller that such facts and circumstances indeed constitute a Material Adverse Change. The taking of any such remedial steps shall therefore be without prejudice to (a) the ability of the Seller to serve a Disputed MAC Notice and (b) any argument of the Seller that the relevant facts and circumstances do not constitute a Material Adverse Change.

9.4 The Seller may notify the Purchaser in writing within 10 Business Days after receipt of a MAC Notice if it does not accept that a Material Adverse Change has occurred (a Disputed MAC Notice), in which case clauses 9.5 to 9.8 below shall apply. If the Seller:

(a) fails to give a Disputed MAC Notice within that time period; and

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(b) has not remedied the relevant facts and circumstances underlying the alleged Material Adverse Change within the period referred to in clause 9.3,

this Agreement (other than the Surviving Provisions) shall terminate forthwith, in which case neither party shall have any claim of any nature whatsoever against the other party under this Agreement (save in respect of any rights and liabilities which have accrued before termination or in relation to any of the Surviving Provisions).

9.5 If the Seller gives a valid Disputed MAC Notice under clause 9.4 the Parties shall use reasonable endeavours for a period of 10 Business Days from the date on which the Purchaser received the Disputed MAC Notice to resolve the dispute, failing which the question of whether a Material Adverse Change has occurred shall be referred on the application of either party within 5 Business Days of the end of the 10 Business Day period referred to above to the following firm of such accountants: Ernst & Young to determine the matter (the MAC Expert).

9.6 If the MAC Expert determines that:

(a) a Material Adverse Change has occurred and the Seller has not remedied the relevant facts and circumstances underlying the alleged Material Adverse Change within the period referred to in clause 9.3, this Agreement (other than the Surviving Provisions) shall terminate forthwith, in which case neither party shall have any claim of any nature whatsoever against the other party under this Agreement (save in respect of any rights and liabilities which have accrued before termination or in relation to any of the Surviving Provisions); or

(b) a Material Adverse Change has not occurred, the Purchaser shall have no right to terminate this Agreement on the basis of the alleged Material Adverse Change.

9.7 If there is a reference to the MAC Expert under clause 9.5 above, the following provisions shall apply:

(a) the MAC Expert shall be instructed to notify the Purchaser and the Seller of its determination within 10 Business Days of the referral;

(b) the Purchaser and the Seller shall within 3 Business Days of the referral make written submissions in relation to the alleged Material Adverse Change and, if so directed by the MAC Expert, shall attend any hearing before him and make oral submissions as required by him;

(c) the MAC Expert shall be entitled to engage such firm of independent legal (and other) advisors as it may consider appropriate in order to assist and advise with respect to the MAC Expert making its determination;

(d) the MAC Expert shall act as expert and not as arbitrator, and the MAC Expert’s determination shall, in the absence of manifest error, be final and binding on the Purchaser and the Seller and shall be deemed to have been accepted and approved by each of them;

(e) the fees and expenses of the MAC Expert (including any advisors engaged by the MAC Expert in accordance with paragraph (c) above) shall be borne by the Seller and the Purchaser in equal proportions;

(f) each party shall be responsible for the costs of its own advisers;

(g) each party shall and shall procure that its relevant Affiliates shall give the MAC Expert prompt access to, and the right to take copies of, the books, records and computer files relating to an alleged Material Adverse Change in their possession or control and shall provide the MAC Expert with such other information and assistance as he may reasonably request.

9.8 The Seller shall and shall procure that its Affiliates shall give the Purchaser and its advisers prompt access to the books, records and computer discs relating to any possible Material Adverse Change in their possession or control for the purposes of allowing the Purchaser to assess whether or not a Material Adverse Change has occurred and/or whether a Material Adverse Change is capable of remedy and/or whether a Material Adverse Change has been effectively remedied and for the purpose of enabling the Purchaser and its advisers to prepare its submission to the MAC Expert.

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10. BUSINESS ASSETS, CONTRACTS AND LIABILITIES

10.1 Nothing in this Agreement or any Transaction Document shall operate to transfer any of the Excluded Assets to the Purchaser (or any Business Purchaser) or make the Purchaser (or any Business Purchaser) liable for any of the Excluded Liabilities.

10.2 Subject to clause 10.7, the Purchaser (or the relevant Business Purchaser) shall become entitled to the benefits under the Business Contracts and Business Claims and this Agreement shall constitute an assignment of the benefit of the Business Contracts and Business Claims to the relevant Business Purchaser with effect from Closing.

10.3 Each Business Purchaser shall from Closing:

(a) assume and discharge when due any and all Assumed Liabilities of the Business Seller (including obligations arising under the Business Contracts) relating to the relevant Business;

(b) indemnify the Seller (or the relevant Affiliate) against any and all such Assumed Liabilities and any and all Costs suffered or incurred by any of them as a result of any such Assumed Liabilities or any failure to perform and discharge any obligations arising under the Business Contracts; and

(c) indemnify the Seller and each of its Affiliates against any and all such Assumed Liabilities and any and all Costs suffered or incurred by any of them (including in relation to any claim brought against any of them by the Worldwide Household Business Purchaser) in relation to any such Assumed Liabilities or any failure to perform and discharge any obligations arising under the Business Contracts.

10.4 Parties agree that the provisions of paragraphs 11(a), 12-14, 16, 17, 19 and 20 of Schedule 5 shall mutatis mutandis apply to an claim or potential claim of the Seller in relation to the matters referred to in clause 10.3, provided that any reference in such paragraphs to the Purchaser or a Designated Purchaser shall be considered a reference to the Seller or a Designated Seller, and vice versa.

10.5 After Closing, the Purchaser shall at its cost execute and deliver all such further documents and/or take such other action as:

(a) the Seller may reasonably request in order to effect the release and discharge in full of the relevant member of the Seller Group from any Assumed Liabilities or the assumption by the Purchaser (or a Designated Purchaser) as the primary obligor in respect of any Assumed Liabilities in substitution for the relevant member of the Seller Group (in each case on a non-recourse basis to any member of the Seller Group); and

(b) the Seller may reasonably request in order to effect the release and discharge in full of the relevant member of the Worldwide Household Business Purchaser Group from any Assumed Liabilities or the assumption by the Purchaser (or a Designated Purchaser) as the primary obligor in respect of any Assumed Liabilities in substitution for the relevant member of the Worldwide Household Business Purchaser Group (in each case on a non-recourse basis to any member of the Worldwide Household Business Purchaser Group).

10.6 After Closing, the Seller shall to procure that the Worldwide Household Business Purchaser shall at its cost execute and deliver all such further documents and/or take such other action as the Purchaser may reasonably request in order to effect the release and discharge in full of the relevant member of the Purchaser Group from any Excluded Liabilities or the assumption by the Worldwide Household Business Purchaser as the primary obligor in respect of any Excluded Liabilities in substitution for the relevant member of the Purchaser Group (in each case on a non-recourse basis to any member of the Purchaser Group).

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10.7 The provisions of Schedule 9 shall apply if and to the extent that the benefit and/or burden of any of the Business Contracts and Business Claims cannot be assigned, transferred or novated to the Purchaser or the relevant Designated Purchaser except by an agreement of novation or without obtaining a consent, approval, waiver or the like to the assignment, transfer or novation from a third party (each such agreement of novation or consent being a Third Party Consent).

11. SPECIFIC INDEMNITIES

11.1 The Seller (or the relevant Affiliate) shall from Closing indemnify and keep indemnified on demand each member of the Purchaser Group against any and all:

(a) Costs and Liabilities suffered or incurred by any of them arising out of or in connection with any of the Excluded Assets or Excluded Liabilities;

(b) Environmental Liabilities suffered or incurred by any of them (except for any Assumed Environmental Liabilities) including, without limitation, the Excluded Amersfoort Liabilities;

(c) Costs and Liabilities suffered or incurred by any of them arising out of or in connection with any pre-Closing restructuring steps that are taken in advance of any transfer of Shares or Businesses (or any part thereof) to the Purchaser or its Affiliates; and

(d) Fines imposed by a Governmental Entity, any damages awarded to claimants through private enforcement or costs associated with administering any investigation or action, in each case suffered or incurred by any member of the Purchaser Group arising out of or in connection with any infringements of Article 81 or Article 82 of the EC Treaty or Section 2 or Section 18 of the Competition Act 1998 or any other anti-trust or similar legislation in any jurisdiction by any Target Company or Business Seller (insofar as it relates to the Acquired Businesses), but only to the extent that such infringements took place prior to Closing.

11.2 Parties agree that the provisions of:

(a) clause 8; and

(b) paragraphs 4(c), 9, 11-14, 16, 17, 19 and 20 of Schedule 5,

shall apply mutatis mutandis to an claim or potential claim of the Purchaser in relation to the matters referred to in clause 11.1.

11.3 In addition to the provisions of clause 11.2, parties agree that the provisions of paragraphs 5 and 15 shall apply mutatis mutandis to a claim or potential claim of the Purchaser in relation to the matters referred to in clause 11.1(d).

11.4 No clause of this Agreement shall operate to require:

(i) the Purchaser to indemnify the Seller or any member of the Seller Group against any Liabilities relating to or arising from any pollution, contamination or hazardous substances at or under any Relevant Property that has migrated on or after Closing from any property owned or occupied by any member of the Seller Group and/or the Worldwide Household Business Purchaser Group; or

(ii) the Seller to indemnify the Purchaser or any member of the Purchaser Group against any Liabilities relating to or arising from any pollution, contamination or hazardous substances at or under any property owned or occupied by any member of the Seller Group and/or the Worldwide Household Business Purchaser Group that has migrated on or after Closing from any Relevant Property.

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12. RELEVANT PROPERTIES

The provisions of Schedule 10 shall apply in respect of the Relevant Properties.

13. INTELLECTUAL PROPERTY AND IT

The parties shall comply with their obligations set out in Schedule 11 in respect of the use of IPR, Information Technology and/or IT Systems by the Seller Group, the Purchaser Group and the Acquired Businesses on and after Closing.

14. EMPLOYEES

14.1 The parties intend that the contracts of employment of the Employees will have effect from the close of business on the Closing Date, as if originally made between each Employee and the relevant Business Purchaser or relevant Target Company. Accordingly, if the rights, powers, duties, liabilities and obligations of the relevant member of the Seller Group in respect of any contracts of employment with its Employees in force immediately before the Closing Date do not apply between the relevant Target Companies or Business Purchasers and such Employees on the Closing Date:

(a) the relevant Target Company or Business Purchaser shall, within fourteen (14) days after the Closing Date, make offers of employment to the relevant Employees on terms and conditions (which shall include treating any period of service with any member of the Seller Group as if it were service with the Target Company or Business Purchaser, which shall include rights to retirement benefits, and which shall include a job position of a level or grade in terms of responsibilities and required skills) which are no less favourable taken as a whole than those on which each such Employee was employed by the relevant member of the Seller Group immediately prior to the Closing Date; and

(b) where those Employees accept such offers of employment, the Seller will ensure that they are released from employment with the relevant member of the Seller Group with effect from the close of business on the Closing Date or on the date of acceptance of employment with the Target Company or Business Purchaser as the case may be, if later.

14.2 If, as a result of the Proposed Transactions contemplated by this Agreement, the contract of employment of any person who is not an Employee is found or alleged to have effect after the Closing Date as if originally made with the Purchaser or any member of the Purchaser Group, the following shall apply:

(a) the Seller or other member of the Seller Group shall, within 14 days of being so requested by the Purchaser (which request can only be made within the period of 1 month following the Closing Date), make an offer of employment to the relevant person on terms and conditions which are no less favourable taken as a whole than those on which each such person was employed by the relevant member of the Seller Group immediately prior to the Closing Date;

(b) in relation to any person who is not an Employee and who is not included in the Allocated and Attached Employee Adjustment, once that offer has been made and not accepted within 14 days after such offer having been made (or after the expiry of 14 days after it has been requested), the Seller will pay to the Purchaser an amount equal to the benefits that would have been payable in relation to the termination of such person, applying the redundancy and severance policies referred to in Clause 14.5 based on a termination by reason of redundancy and assuming a termination as per the expiry of the job offer or the expiry of 14 days after the Purchaser will have requested such an offer to be made;

(c) where that person accepts such offer of employment, the Purchaser will ensure that such person is released from employment with the relevant member of the Purchaser Group with effect from the date of acceptance of employment with the Seller or other member of the Seller Group.

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14.3 The Purchaser shall provide the Seller with such information as the Seller may reasonably request in writing as is necessary for any member of the Seller Group to comply with any legal requirement (whether statutory or pursuant to any written agreement with, or the constitution of, any works council or other employee representative body) in relation to the Proposed Transactions to consult with or inform the Employees (or any of them), a relevant trade union, a relevant works council or any other employee representatives. The obligations under this Clause 14.3 shall apply mutatis mutandis to the Seller.

14.4 For a period of not less than 12 months from the Closing Date, the Purchaser shall, and shall procure that the relevant Target Companies and the Business Purchasers shall, make no changes to the compensation and other terms and conditions of employment (which shall include retirement benefits on the basis that, provided equivalent value is maintained, there is no requirement to maintain the type or shape of retirement benefit provided under the relevant plan of the Seller Group) of each relevant Employee (including any such individuals on approved leave of absence) which will cause them to be less favourable, taken as a whole, than those terms and conditions of employment on which each Employee was employed by the Seller Group immediately before the Closing Date, to the extent that such terms and conditions are reasonably in line with the terms and conditions disclosed in the Data Room and referred to in the Disclosure Letter and subject to changes made in the normal course of business. Furthermore, the Purchaser shall treat any period of service of an Employee with any member of the Seller Group and with predecessor entities, as if it were service with the relevant Target Company or Business Purchaser or any member of the Purchaser Group. For the avoidance of doubt, nothing in this Clause 14.4 shall be construed as requiring the Purchaser or any member of the Purchaser Group to continue to employ any Employee during such period from the Closing Date or thereafter. This Clause 14.4 does not apply to rights to Retirement Benefits which are dealt with under Schedule 12.

14.5 For a period of not less than 12 months from the Closing Date, the Purchaser shall, and shall procure that the relevant Target Companies and the Business Purchasers shall, provide to each relevant Employee the same redundancy and severance policies of the Seller Group as were provided to them as of the Closing Date, provided that such terms and conditions are reasonably in line with the terms and conditions disclosed in the Data Room and referred to in the Disclosure Letter and subject to changes made in the normal course of business, such that if any member of the Purchaser Group terminates the employment of any such Employee within such period, the Purchaser shall, or shall procure, payment to such Employee of at least the same value to which that Employee would have been entitled under those redundancy and severance policies (and for purposes of determining such value, the Purchaser shall credit that Employee with both his or her years of employment with any member of the Seller Group and the term of his or her employment with any member of the Purchaser Group). For the avoidance of doubt, nothing in this Clause 14.5 shall be construed as requiring the Purchaser or any member of the Purchaser Group to continue to employ any Employee during such period from the Closing Date or thereafter. This Clause 14.5 does not apply to rights to Retirement Benefits which are dealt with under Schedule 12.

14.6 The Purchaser shall, and shall procure that each relevant Target Company and Business Purchaser shall, subject to Part (B), paragraph 6 of Exhibit 6, from Closing:

(a) assume and discharge when due any and all Employee Liabilities in respect of any period after Closing; and

(b) indemnify the Seller and each of its Affiliates on an after-tax basis against any and all such Employee Liabilities set out in (a) and any and all Costs suffered or incurred by any of them as a result of any such Employee Liabilities.

14.7 The Seller shall, and shall procure that each relevant member of the Seller Group shall, subject to Part (B), paragraph 6 of Exhibit 6, from Closing:

(a) assume and discharge all Liabilities in respect of the Employees in respect of any period on or before Closing; and

(b) indemnify the Purchaser as agent and/or trustee for each member of the Purchaser Group on an after-tax basis against any and all such Liabilities set out in (a) and any and all Costs suffered or incurred by any of them as a result of any such Liabilities.

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14.8 If, as a result of the Proposed Transactions, any Employee who is entitled to terminate his contract of employment and receive a severance payment so terminates and becomes so entitled, the Purchaser shall indemnify the Seller as agent and/or trustee for each member of the Seller Group against any and all Liabilities or Costs incurred by the Seller or any member of the Seller Group as a result of such termination if such right was a direct result of a change by any member of the Purchaser Group to the terms and conditions of employment, function level, job content of the individual compared to the situation immediately prior to Closing.

14.9 The Seller shall indemnify the Purchaser as agent and/or trustee for each member of the Purchaser Group on an after-tax basis against any Liabilities and any and all Costs incurred by the Purchaser or any member of the Purchaser Group in respect of:

(a) any material failure by the Seller, any member of the Seller Group or any Target Company to comply with its obligations under the Regulations relating to the requirement to inform and consult employee representatives and Employees in relation to the implementation of the Proposed Transactions, except to the extent that such failure to inform and consult is caused by the Purchaser failing to comply with its obligations under such applicable law; and

(b) any and all Liabilities, including tax and social security liabilities, in respect of any Employee incurred in respect of, or otherwise in connection with, the vesting of or exercise of any awards under any share incentive or share option scheme operated by the Seller or any retention bonus triggered as a result of the Proposed Transactions.

15. RETIREMENT BENEFITS

The provisions of Schedule 12 shall apply in respect of retirement benefit arrangements for the Employees.

16. TAX

16.1 The provisions of Schedule 13 shall apply in relation to taxation.

16.2 The Tax Covenant shall come into effect at the Closing Time.

17. INSURANCE

17.1 From the Offer Date until (and including) the Closing Date, members of the Seller Group and the Target Companies shall continue in force all policies of insurance maintained by them in respect of the Acquired Businesses. Until the Closing Date, the Seller shall procure that each Target Company and (in relation to the Acquired Businesses) Business Seller shall take such action as can be expected from a reasonably prudent businessman and as is reasonably necessary in order to maintain any of its insurances in force until the Closing Date.

17.2 Upon Closing, all insurance cover arranged in relation to the Acquired Businesses by the Seller Group (whether under policies maintained with third party insurers or other members of the Seller Group) shall cease (other than in relation to insured events taking place before Closing) and no member of the Purchaser Group (including, for the avoidance of doubt, the Target Companies) shall make any claim under any such policies in relation to insured events arising after Closing. The Seller shall be entitled to make arrangements with its insurers to reflect this clause.

17.3 All proceeds of insurance paid to and received by the Seller or its Affiliates (in excess of any deductible, retention or self-insurance amount) in respect of any event that occurs on or before the Closing Date, to the extent that the proceeds are for damaged properties or assets that constitute Business Assets or assets of the Target Companies, shall:

(a) to the extent the damage to the Business Assets or the assets of the Target Companies to which the proceeds pertain has not been repaired or restored or paid for by the Seller on or prior to Closing, be paid over to the Purchaser at the Closing or, if no proceeds have been received before the Closing, the Seller shall assign its claim thereto to the Purchaser promptly following the Closing Date; and

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(b) to the extent the damage to the Business Assets or the assets of the Target Companies to which the proceeds pertain has been repaired or restored or paid for by the Seller on or prior to Closing, be retained by the Seller or, if no proceeds have been received before the Closing, the Seller shall be entitled to retain the same once received.

17.4 This clause 17 shall not apply, and the provisions of Schedule 10 shall apply, in respect of the treatment of any buildings insurance cover or proceeds of such insurance (or any other matters relating to such building insurance) relating to the Relevant Properties.

18. TRADE DEBTORS AND TRADE CREDITORS

The provisions of Schedule 14 shall apply in respect of the treatment of Trade Debtors and Trade Creditors.

19. PAYMENT OF INTER-COMPANY DEBT

The provisions of Schedule 15 shall apply in respect of the payment of Inter-Company Debt.

20. GUARANTEES AND OTHER THIRD PARTY ASSURANCES

20.1 The Purchaser shall ensure that at Closing (or as soon as reasonably practicable thereafter) each member of the Seller Group is released in full from all Third Party Assurances listed in Part A of Exhibit 1 given by it in respect of obligations of any Target Company or relating to any Business Contract. In addition, the Purchaser shall use its reasonable best endeavours to ensure that, as soon as reasonably practicable after becoming aware of any other Third Party Assurance in respect of any obligations of any Target Company or relating to any Business Contract, each member of the Seller Group is released in full from such Third Party Assurance. Pending release of any Third Party Assurance referred to in this clause 20.1, the Purchaser shall indemnify the Seller and each of its Affiliates against any and all Costs arising after Closing under or by reason of that Third Party Assurance.

20.2 The Purchaser shall ensure that at Closing each member of the Worldwide Household Business Purchaser Group is released in full from all Third Party Assurances listed in Part B of Exhibit 1 given by it in respect of obligations of any Target Company or relating to any Business Contract. In addition, the Purchaser shall use its reasonable efforts to ensure that, as soon as reasonably practicable after becoming aware of any other Third Party Assurance in respect of any obligations of any Target Company or relating to any Business Contract, each member of the Worldwide Household Business Purchaser Group is released in full from such Third Party Assurance. Pending release of any Third Party Assurance referred to in this clause 20.2, the Purchaser shall indemnify the Worldwide Household Business Purchaser and each of its Affiliates against any and all Costs arising after Closing under or by reason of that Third Party Assurance.

20.3 The Seller shall ensure that at Closing each Target Company is released in full from all Third Party Assurances listed in Part C of Exhibit 1 given by it in respect of obligations of any member of the Seller Group. In addition, the Seller shall use its reasonable best endeavours to ensure that, as soon as reasonably practicable after becoming aware of any other Third Party Assurance in respect of any obligations of any member of the Seller Group, each Target Company is released in full from such Third Party Assurance. Pending release of any Third Party Assurance referred to in this clause 20.3, the Seller shall indemnify the Purchaser and each of its Affiliates against any and all Costs arising after Closing under or by reason of that Third Party Assurance.

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21. POST-CLOSING AGREEMENTS

21.1 The Purchaser agrees (and undertakes to procure) that:

(a) no Target Company resident in the Philippines shall pay any dividends at any time between the Closing Date and the end of the tax accounting period of that Target Company in which the Closing Date occurs, excluding any transaction or action taken on the basis of Schedule 3;

(b) no Target Company resident in the Philippines shall engage in any non-locally taxable income generating transaction outside the ordinary course of business and no tax or accounting election shall be made, revoked or amended by, or on behalf of, or with respect to, any such Target Company at any time between the Closing Date and the end of the tax accounting period of that Target Company in which the Closing Date occurs; and

(c) with respect to Indonesia the following shall apply:

(i) no Target Company resident in Indonesia shall pay any dividends that fall outside the ordinary historic course of Seller’s business of paying dividends to minority shareholders at any time between the Closing Date and the end of the tax accounting period of that Target Company in which the Closing Date occurs; and

(ii) no Target Company resident in Indonesia shall until 30 June 2010 engage in any non-locally taxable income generating transaction outside the ordinary course of business and no tax or accounting election shall be made, revoked or amended by, or on behalf of, or with respect to, any such Target Company at any time between the Closing Date and the end of the tax accounting period of that Target Company in which the Closing Date occurs; and

(iii) in respect of any actions described in sub-paragraph (ii) above to be taken by any Target Company resident in Indonesia after 30 June 2010 and before 1 July 2011 it shall consult with the Seller before taking any action that can reasonably be expected to affect the Seller’s US tax position.

21.2 The Seller shall not, and shall procure that no member of the Seller Group shall, within 18 months from the Closing Date solicit or entice away from the employment of any member of the Purchaser Group or any Business Purchaser any Key Manager without the prior written consent of the Purchaser or intentionally assist any person to do any of the foregoing. However, this provision shall not restrict the employment of any Key Manager:

(a) whose employment with the relevant member of the Purchaser Group has then ceased or who has received notice terminating such employment;

(b) who has responded independently to a published general recruitment advertisement not specifically directed at such Key Manager; or

(c) who has, of his or her own accord, approached any member of the Seller Group in connection with such Key Manager being employed by a member of the Seller Group.

21.3 The Purchaser shall not, and shall procure that no member of the Purchaser Group shall, within 18 months from the Closing Date solicit or entice away from the employment of any member of the Seller Group any Seller Key Manager without the prior written consent of the Seller or intentionally assist any person to do any of the foregoing. However, this provision shall not restrict the employment of any Seller Key Manager:

(a) whose employment with the relevant member of the Seller Group has then ceased or who has received notice terminating such employment;

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(b) who has responded independently to a published general recruitment advertisement not specifically directed at such Seller Key Manager; or

(c) who has, of his or her own accord, approached any member of the Purchaser Group in connection with such Seller Key Manager being employed by a member of the Purchaser Group.

21.4 The Seller shall not, and shall procure that no member of the Seller Group shall, for as long as such member remains an Affiliate of the Seller, do any of the following things:

(a) within two years after the Closing Date, be engaged or directly or indirectly interested in carrying on any business which competes with all or any part of the Acquired Businesses within the Territory as it is carried on at the Closing Date. This clause shall not prevent: (i) the holding of shares in a listed company for investment purposes only where the Seller does not exercise, directly or indirectly, any management function in the company concerned or any material influence in that company, which shall be taken to be the case if the shares do not confer more than 20 per cent. of the votes which could normally be cast at a general meeting of the company, (ii) acquiring in a single transaction or a series of related transactions any one or more companies and/or businesses which include a company or business which competes with all or any part of the Acquired Businesses within the Territory as it is carried on at the Closing Date, provided that such competing business does not represent more than 20 per cent. of the companies and/or businesses acquired in such transaction or series of related transactions (measured in terms of turnover), or (iii) the carrying on of any business by any member of the Seller Group, where the carrying on of such business existed prior to or at Closing (but not including the Acquired Businesses);

(b) within two years after Closing, solicit the custom, in relation to goods or services sold to any person by any member of the Target Company or Business Seller in the course of its business within the Territory during the two years before the Closing Date, of that person in respect of similar goods or services within the Territory; and

(c) assist any other person to do any of the foregoing things.

21.5 Each undertaking contained in this clause shall be construed as a separate undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade, the remaining undertakings shall continue to bind the Purchaser or the Seller, as the case may be.

22. WORLDWIDE HOUSEHOLD BUSINESS

22.1 Parties acknowledge that it is also the intention of the Seller to dispose of its Worldwide Household Business to one or more third parties (the Household Disposal). Parties have, however, agreed that Closing shall not be conditional upon the entering into and/or completion of the Household Disposal and accordingly acknowledge that it is possible that all or a certain part of the Worldwide Household Business will remain with the Seller Group. In this respect Parties agree that where in this Agreement reference is made to:

(a) the allocation of any asset, liability or agreement to the Worldwide Household Business and/or the Worldwide Household Business Purchaser (or any of its Affiliates);

(b) the entering into of any agreement with the Worldwide Household Business Purchaser (or any of its Affiliates);

(c) the Seller undertaking to procure something from the Worldwide Household Business Purchaser (or any of its Affiliates),

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such reference shall:

(i) to the extent that the relevant part of the Worldwide Household Business is at the relevant time still retained by the Seller Group and is not the subject of a completed transaction to dispose of such to a third party; and

(ii) unless the Seller notifies the Purchaser otherwise in writing,

be replaced by a reference to the Seller (or any of its Affiliates) and/or the relevant part of the business that is to be retained by the Seller Group, as designated by the Seller.

23. INFORMATION, RECORDS AND ASSISTANCE POST-CLOSING

23.1 For 7 years following the Closing Date, each member of the Purchaser Group shall provide the Seller (at the Seller’s cost) with reasonable access at reasonable times on reasonable advance notice to (and the right to take copies of) the books, accounts, customer lists and all other records held by it after Closing to the extent that such books, accounts, customer lists and other records relate to the conduct or performance of the Acquired Businesses during the period prior to Closing (the Records). This obligation is subject to the provisions of clause 28 (Confidentiality).

23.2 For 7 years following the Closing Date, no member of the Purchaser Group shall dispose of or destroy any of the Records without first giving the Seller at least 2 months’ notice of its intention to do so and giving the Seller a reasonable opportunity to remove and retain any of them (at the Seller’s expense).

23.3 For 7 years following the Closing Date, each member of the Purchaser Group shall (at the Seller’s expense) also give such reasonable assistance to any member of the Seller Group as the Seller may reasonably request in relation to any third party proceedings by or against any member of the Seller Group so far as they relate to the Acquired Business, including proceedings relating to employees’ claims or taxation.

23.4 For 7 years following the Closing Date, the Seller shall, and shall procure that each member of the Seller’s Group shall, provide the Purchaser (at the Purchaser’s cost) with reasonable access at reasonable times on reasonable advance notice to: (i) any information (including Non-Exclusive Information) held by it (and the right to take copies of such information), provided that to the extent that such information also contains information that is confidential to the Worldwide Household Business or any other business conducted by any member of the Seller’s Group, such confidential information shall be redacted from the information to be provided to the Purchaser and (ii) any employees of the Seller Group, in each case as is reasonably required by the Purchaser in connection with the Acquired Businesses.

24. CHANGES OF NAME AND DOMAIN NAME REGISTRATIONS

24.1 The Purchaser shall procure that (i) to the extent legally possible in the relevant jurisdictions, within 45 days after the Closing Date, or (ii) otherwise as soon as reasonably practicable, the name of any Target Company which consists of or incorporates the term “SARA LEE”, “SARA”, “LEE”, “SL” or “KIWI” is changed to a name which does not include that term or any name which, in the reasonable opinion of the Seller, is substantially or confusingly similar.

24.2 Subject to clauses 24.3 and 24.4, the Purchaser shall not, and shall procure that its Affiliates, and (with effect from the Closing Date), the Target Companies and the Acquired Businesses, shall not:

(a) carry out any advertising, marketing, promotional or sales activities that refer in any way whatsoever to the term “SARA LEE” (or any substantially or confusingly similar term) with effect from the Closing Date; or

(b) order any packaging, labels or advertising, marketing, promotional or sales literature or other materials (including finished goods) bearing the term “SARA LEE” (or any substantially or confusingly similar term) with effect from the Closing Date.

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24.3 Subject to clause 24.4, the Purchaser shall, and shall procure that the Business Purchasers, the Target Companies and the Acquired Businesses shall, as soon as reasonably practicable after the Closing Date (and in any event within 60 days afterwards), cease all further use of the term “SARA LEE” (or any substantially or confusingly similar term) and shall remove any trade or service name or mark, business name, logo, symbol or domain name related to or incorporating the term “SARA LEE” (or any substantially or confusingly similar term) from the properties and assets of the Target Companies and the Acquired Businesses.

24.4 Notwithstanding the restrictions set out in clauses 24.1 to 24.3, the Purchaser, the Target Companies and the Business Purchasers shall be permitted, and are hereby granted a non-exclusive licence:

(a) for three months with effect from the Closing Date, to order packaging and labels that are identical to those used in the Acquired Businesses at the Closing Date; and

(b) to use, sell or otherwise dispose of any packaging or labels or any advertising, marketing, promotional or sales literature or other materials for finished product existing at the Closing Date or as described in clause 24.4(a),

that bear the term “SARA LEE” or “SL” or any trade or service name or mark, business name, logo or symbol incorporating the term “SARA LEE” or “SL” and to use the term “SARA LEE”, “SL” or any trade or service name or mark, business name, logo or symbol incorporating the term “SARA LEE” or “SL” on or in connection with any finished product yet to be packaged and/or labelled before being sold until such time as the last of such finished products (incorporating such packaging or labels) has been sold; provided that the Purchaser shall (and shall procure that the Target Companies and the Business Purchasers shall):

(i) use all commercially reasonable efforts to dispose of such finished products (incorporating such packaging or labels) promptly after the Closing Date;

(ii) not apply or affix any such packaging or labels to any products with effect from the date that is six months after the Closing Date;

(iii) not make any changes to the advertising, marketing, promotional or sales literature and other material; and

(iv) in any event, on or before the date which is 12 months following the Closing Date, cease all further use of the term “SARA LEE” (or any substantially or confusingly similar term) and destroy any unused packaging, labels or advertising, marketing, promotional or sales literature, other materials or finished product on which the term “SARA LEE” (or any substantially or confusingly similar term) is used and certify to the Seller that such destruction has occurred.

24.5 The Seller shall, and shall procure that each member of the Seller Group and the Worldwide Household Business Purchaser shall, upon Closing or as soon as reasonably practicable thereafter remove from any web sites which it is retaining (or, as the case may be, acquiring in connection with the Worldwide Household Business) any reference to the Acquired Businesses and delete any hypertext links which connect any such web sites to web sites which relate to the Acquired Businesses.

24.6 The Purchaser shall, and shall procure that each member of the Purchaser Group shall, upon Closing or as soon as reasonably practicable thereafter remove from any web sites which it acquires pursuant to the terms of this Agreement any reference to the Worldwide Household Business or any business to be retained by the Seller or other member of the Seller Group and delete any hypertext links which connect any such web sites to web sites which relate to the Worldwide Household Business or any business to be retained by the Seller or other member of the Seller Group.

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24.7 On or as soon as reasonably possible after Closing, the Purchaser and the Seller shall send out a joint notice in the Agreed Form to an agreed list of the suppliers, customers and clients of the Acquired Businesses advising them of the transfer of the Acquired Businesses.

25. AGENCY STRUCTURE

Each of the Seller and the Purchaser agrees that it is entering into this Agreement on its own behalf as principal and as agent on behalf of the Designated Sellers or (as the case may be) the Designated Purchasers on the basis set out in Schedule 17.

26. PAYMENTS

26.1 Any payment to be made pursuant to this Agreement by the Purchaser (or any member of the Purchaser Group) shall be made to the Seller’s Bank Account. The Seller agrees to pay each member of the Seller Group that part of each payment to which it is entitled.

26.2 Any payment to be made pursuant to this Agreement by the Seller (or any member of the Seller Group) shall be made to the Purchaser’s Bank Account. The Purchaser agrees to pay each member of the Purchaser Group that part of each payment to which it is entitled.

26.3 Payment under clause 26.1 and 26.2 shall be in immediately available funds by electronic transfer on the due date for payment. Receipt of the amount due shall be an effective discharge of the relevant payment obligation.

26.4 If any sum due for payment in accordance with this Agreement is not paid on the due date for payment, the person in default shall pay Default Interest on that sum from but excluding the due date to and including the date of actual payment calculated on a daily basis.

27. ANNOUNCEMENTS

27.1 Neither the Seller nor the Purchaser (nor any of their respective Affiliates or representatives) shall make any announcement or issue any circular in connection with the existence or subject matter of this Agreement (or any other Transaction Document) without the prior written approval of the other.

27.2 The restriction in clause 27.1 shall not apply to the extent that the announcement or circular is required by law, by any stock exchange or any regulatory or supervisory body or authority of competent jurisdiction to which any party is subject or submits, whether or not the requirement has the force of law. If this exception applies, the party making the announcement or issuing the circular shall use its reasonable efforts to consult with the other party in advance as to its form, content and timing provided that any such announcement shall be made only after notice to the other party.

28. CONFIDENTIALITY

28.1 For the purposes of this clause 28:

(a) Confidential Information means any written information and information transferred or obtained orally, visually, electronically or by any other means comprising:

(i) (in relation to the obligations of the Purchaser) any information received or held by the Purchaser (or any of its Representatives) relating to the Seller Group or, prior to Closing, any of the Target Companies and/or the Businesses; or

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(ii) (in relation to the obligations of the Seller) any information received or held by the Seller (or any of its Representatives) relating to the Purchaser Group, or, following Closing, any of the Target Companies and/or the Businesses; and

(iii) information relating to the provisions of, and negotiations leading to, this Agreement and the other Transaction Documents (including, without limitation, the Purchaser’s interest in the Acquired Businesses or any part thereof and any arrangements or document relating to the transactions contemplated by this Agreement and the other Transaction Documents);

(b) Representatives means the respective directors, officers, employees, agents, advisers, accountants and consultants of each Party and of its respective Affiliates.

28.2 The Parties shall (and undertake to procure that their respective Affiliates and Representatives shall) maintain the confidentiality of the Confidential Information and shall not disclose Confidential Information to any person except (i) as permitted by this clause 28 or (ii) with the prior written approval of the other party.

28.3 This clause 28 shall not prevent the disclosure of Confidential Information by the Parties or their Representatives to the extent the relevant party can demonstrate that:

(a) disclosure is required by law or by any stock exchange or any regulatory, governmental or antitrust body (including any tax authority) or any other relevant authority of competent jurisdiction to which any party is subject or submits having applicable jurisdiction (provided that if this exception applies, the party making such disclosure shall provide reasonable written notice of its intention to disclose such information and take into account the reasonable comments of the other party when making such disclosure);

(b) disclosure is of Confidential Information which was lawfully in the possession of that party or any of its Representatives (in either case as evidenced by written records) without any obligation of secrecy prior to its being received or held;

(c) disclosure is of Confidential Information which has previously become publicly available other than as a result of the fault of that party, its Affiliates or their Representatives;

(d) disclosure is required for the purpose of any arbitral or judicial proceedings arising out of this Agreement (or any other Transaction Document); and

(e) disclosure is required for the purpose of implementation of any of the arrangements and/or steps contemplated pursuant to this Agreement.

28.4 The Parties and their respective Affiliates shall only disclose Confidential Information to Representatives if they are reasonably required to do so for purposes connected with the transactions contemplated by this Agreement and only if the Representatives are informed of the confidential nature of the Confidential Information.

28.5 If this Agreement terminates, the Purchaser shall as soon as practicable on request by the Seller:

(a) return to the Seller all written documents and other materials relating to the Seller, any Target Company, any Business or this Agreement (including any Confidential Information) which the Seller (or its Representatives) have provided to the Purchaser (or its Representatives) without keeping any copies of them;

(b) destroy all information or other documents derived from such Confidential Information; and

(c) so far as it is practicable to do so, expunge such Confidential Information from any computer, word processor or other device.

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28.6 The Parties agree that the confidentiality letter between them in relation to the Transaction contemplated by this Agreement shall terminate forthwith and that none of them shall have any rights or remedies under the confidentiality letter save for antecedent breach.

29. JOINT AND SEVERAL LIABILITY UNILEVER PLC AND UNILEVER NV

All of the obligations of Unilever PLC and/or Unilever NV under or pursuant to this Agreement and the other Transaction Documents (whether or not expressed to be given by Unilever PLC and Unilever NV individually or together) are given jointly and severally and Unilever PLC and Unilever NV shall each have joint and several liability in respect of all such obligations.

30. ASSIGNMENT ETC.

Unless the Seller and the Purchaser specifically agree in writing, no person shall assign, transfer, charge or otherwise deal with all or any of its rights under this Agreement nor grant, declare, create or dispose of any right or interest in it. Any purported assignment in contravention of this clause 30 shall be void.

31. FURTHER ASSURANCES

31.1 Each of the Seller and the Purchaser shall, for a period of 12 months from the Closing Date, do or procure the doing of all such acts and/or execute (or procure the execution of) such further documents as may be required by law or be necessary to implement and give effect to this Agreement, it being agreed that the Costs associated with the preparation of any such further documents for the recordal of the transfer to the Purchaser of any IPR shall be borne by the Purchaser. As soon as reasonably practicable following Closing, the Seller shall not, and shall procure that no member of the Seller Group shall, renew or use to host or redirect to any web site any domain name retained by the Seller Group that includes both the “SARA LEE” name and any trade name or mark comprised in the Business IP (in any order or combination). The Seller shall cease all use with effect from Closing of, and shall as soon as reasonably practical following Closing either abandon, surrender or allow to lapse any registration or application for, any trade mark that includes both SARA LEE, SARA, LEE, SL or KIWI and any trade name or mark comprised in the Business IP.

31.2 As soon as reasonably practicable following Closing and in any event on or before the date which is the first anniversary of the Closing Date, the parties shall review the composition of the Seller Group and the Acquired Businesses with a view to establishing whether any of them contains any asset (including any Intellectual Property Rights) which is owned by a member of the Seller Group but which is an asset that was intended, pursuant to the terms of this Agreement to transfer to the Purchaser Group as part of the Acquired Businesses or is owned by a member of the Purchaser Group but which is an Excluded Asset (together, the “Wrong Box Assets”). So far as permitted by law or by the provisions of any contract to be transferred pursuant to this clause 31.2, any such Wrong Box Assets shall be promptly transferred for no further consideration to (i) such member of the Purchaser Group as the Purchaser may specify, and shall be held on trust for the Purchaser pending such transfer or, as appropriate, to (ii) such member of the Seller Group as the Seller may specify, and shall be held on trust for the Seller pending such transfer.

31.3 The Seller shall ensure that:

(a) no Intellectual Property Rights (other than relating to Information Technology) that relate exclusively to the Acquired Businesses and no IP Agreements that relate exclusively to the Acquired Businesses, and to the extent allocated to the Acquired Businesses in accordance with Exhibit 8 (and only to that extent) other IP Agreements, are assigned or otherwise transferred (including by means of a sale of the shares of the company that owns such Intellectual Property Rights or is a party to such IP Agreements) by a member of the Seller Group to the Worldwide Household Business Purchaser;

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(b) it is entitled, on terms substantially similar to those set out in clause 31.2, to recover from the Worldwide Household Business Purchaser any Intellectual Property Rights and IP Agreements described in clause 31.3(a) that are transferred by a member of the Seller Group to the Worldwide Household Business Purchaser; and

(c) it exercises its rights described in clause 31.3(b).

31.4 To the extent that any member of the Purchaser Group receives any payment from a third party after Closing which is attributable to a Wrong Box Asset the Purchaser covenants to procure that such sum is promptly paid to such member of the Seller Group as the Seller may specify and is held on trust for the Seller pending such transfer.

31.5 To the extent that any member of the Seller Group receives any payment from a third party after Closing which is attributable to a Wrong Box Asset held by it the Seller covenants to procure that such sum is promptly paid to such member of the Purchaser Group as the Purchaser may specify and is held on trust for the Purchaser pending such transfer.

31.6 Each of the Seller and the Purchaser shall procure that its respective Affiliates comply with all obligations under this Agreement which are expressed to apply to any such Affiliates.

31.7 The Seller and the Purchaser agree that they shall, each bearing their own respective costs, cooperate with each other to ensure that to the extent possible all Environmental Consents required in order to carry on the Acquired Businesses as carried on at the date of Closing and which are transferable or otherwise require any notification or application to continue in force are transferred to the Purchaser (or to the relevant member of the Purchaser’s Group that carries on the Acquired Business to which any such Environmental Consent relates) or are the subject of a requisite notification or application, as the case may be, without undue delay. For the avoidance of doubt the primary responsibility for any application, notification or transfer of any Environmental Consent shall rest with the Purchaser (or relevant member of the Purchaser Group, as the case may be) save in respect of any Environmental Consent for which Environmental Law provides that any application, notification or transfer must be made or instigated by the Seller or by the Seller and Purchaser acting jointly. With effect from Closing the Purchaser shall assume the obligations and perform and carry out, complete and discharge all of the obligations under the Environmental Consents in good faith and in accordance with their terms and shall indemnify the Seller in respect of all liabilities, losses, costs, expenses, demands or claims suffered or incurred by the Seller in the period after Closing arising under or in relation to any of the Environmental Consents, except to the extent any such liability, loss, cost, expense, demand or claim arises from any act or omission of the Seller or any other member of the Seller Group.

31.8 The Seller shall have control and conduct of the Excluded Amersfoort Liabilities and shall, at its own cost, use reasonable endeavours to execute and deliver such documents and/or take such other action as is reasonably necessary in order to effect the assumption by a member of the Sellers Group of the obligations under the Amersfoort Agreements in respect of the Excluded Amersfoort Liabilities so that the relevant member of the Sellers Group becomes the obligor under the Amersfoort Agreements in substitution for the relevant member of the Purchaser’s Group as soon as reasonably practicable after Closing.

31.9 The Seller shall take reasonable steps to ensure that the Purchaser is reasonably informed of all material steps and action taken by the Seller in relation to the Excluded Amersfoort Liabilities and shall have regard to the reasonable representations of the Purchaser in relation to the Excluded Amersfoort Liabilities.

31.10 The Purchaser shall indemnify the Seller and each member of the Seller Group against any Liabilities suffered or incurred by the Seller or any member of the Seller Group to the extent that any act or omission of the Purchaser or any member of the Purchaser Group after Closing exacerbates or increases or worsens any pollution or contamination or hazardous substance that is the subject of the Excluded Amersfoort Liabilities.

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32. COSTS

32.1 Except as otherwise provided in this Agreement (or any other Transaction Document), the Seller and the Purchaser shall each be responsible for its own costs, charges and other expenses (including those of its Affiliates) incurred in connection with the Proposed Transactions.

32.2 The Purchaser or its Affiliates shall bear all stamp duty, notarisation fees or other documentary transfer or transaction duties, and all stamp duty reserve tax, stamp duty land tax and any other transfer taxes (including, in each case, any related interest or penalties arising as a result of the execution of this Agreement or of any of the other Transaction Documents whether or not any of the same are assessed on the Purchaser or its Affiliates or the Seller or its Affiliates. For the avoidance of doubt, the obligations of the Purchaser under this clause 32.2 shall not apply with respect to any pre-Closing restructuring steps taken as part of the disposition structure described in Schedule 3 that are taken in advance of any transfer of Shares or Businesses (or any part thereof) to the Purchaser or its Affiliates, it being agreed that all stamp duty, notarisation fees or other documentary transfer or transaction duties, and all stamp duty reserve tax, stamp duty land tax and any other transfer taxes in connection with such steps shall be borne by the Seller or its Affiliates.

33. NOTICES

33.1 Any notice in connection with this Agreement shall be in writing in English and delivered by hand, fax, registered post or courier using an internationally recognised courier company. A notice shall be effective upon receipt and shall be deemed to have been received (i) at the time of delivery, if delivered by hand, registered post or courier or (ii) at the time of transmission if delivered by fax provided that in either case, where delivery occurs outside Working Hours, notice shall be deemed to have been received at the start of Working Hours on the next following Business Day.

33.2 The addresses and fax numbers of the parties for the purpose of clause 33.1 are:

Seller	Address: 3500 Lacey Road Downers Grove IL 60515 USA	Fax:
For the attention of:	General Counsel
Purchaser	Address: Unilever House 100 Victoria Embankment London EC4Y 0DY United Kingdom	Fax: +44 20 7822 6536
For the attention of:	General Counsel, Europe

34. CONFLICT WITH OTHER AGREEMENTS

34.1 If there is any conflict between the terms of this Agreement and any other agreement, this Agreement shall prevail (as between the parties to this Agreement and as between any members of the Seller Group and any members of the Purchaser Group) unless (i) such other agreement expressly states that it overrides this Agreement in the relevant respect and (ii) the Seller and the Purchaser are either also parties to that other agreement or otherwise expressly agree in writing that such other agreement shall override this Agreement in that respect.

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34.2 Without prejudice to clause 34.1, the Purchaser undertakes that no claim shall be made by any member of the Purchaser Group under any of the Local Agreements for breach of any warranty, representation, undertaking, covenant or indemnity relating to the sale of any of the Target Companies and/or Businesses (or part thereof).

35. WHOLE AGREEMENT

35.1 In this clause 35 the Relevant Parties shall mean the Seller, the Purchaser, each Designated Seller and each Designated Purchaser, and each of them shall be a Relevant Party.

35.2 This Agreement and the other Transaction Documents together set out the whole agreement between the Relevant Parties in respect of the sale and purchase of the Shares and the Businesses and supersede any prior agreement (whether oral or written) relating to the Proposed Transactions. It is agreed that:

(a) no Relevant Party shall have any claim or remedy in respect of any statement, representation, warranty or undertaking made by or on behalf of any other Relevant Party (or any of its Connected Persons) in relation to the Proposed Transactions which is not expressly set out in this Agreement or any other Transaction Document;

(b) any terms or conditions implied by law in any jurisdiction in relation to the Proposed Transactions are excluded to the fullest extent permitted by law or, if incapable of exclusion, any right, or remedies in relation to them are irrevocably waived;

(c) the only right or remedy of a Relevant Party in relation to any provision of this Agreement or any other Transaction Document shall be for breach of this Agreement or the relevant Transaction Document; and

(d) except for any liability in respect of a breach of this Agreement or any other Transaction Document, no Relevant Party (or any of its Connected Persons) shall owe any duty of care or have any liability in tort or otherwise to any other Relevant Party (or its respective Connected Persons) in relation to the Proposed Transactions

provided that this clause shall not exclude any liability for (or remedy in respect of) fraudulent misrepresentation. Each Relevant Party agrees to the terms of this clause 35 on its own behalf and as agent for each of its Connected Persons. For the purpose of this clause, Connected Persons means (in relation to a Relevant Party) the officers, employees, agents and advisers of that Relevant Party or any of its Affiliates.

36. WAIVERS, RIGHTS AND REMEDIES

Except as expressly provided in this Agreement, no failure or delay by any party in exercising any right or remedy relating to this Agreement or any of the Transaction Documents shall affect or operate as a waiver or variation of that right or remedy or preclude its exercise at any subsequent time. No single or partial exercise of any such right or remedy shall preclude any further exercise of it or the exercise of any other remedy.

37. COUNTERPARTS

This Agreement may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart signature page of this Agreement by e-mail (PDF) or telecopy shall be as effective as delivery of a manually executed counterpart of this Agreement. In relation to each counterpart, upon confirmation by or on behalf of the signatory that the signatory authorises the attachment of such counterpart signature page to the final text of this Agreement, such counterpart signature page shall take effect together with such final text as a complete authoritative counterpart.

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38. VARIATIONS

No variation of this Agreement shall be valid unless it is in writing and signed by or on behalf of the direct contracting parties to it. For this purpose, a variation to this Agreement shall include any deletion, addition, supplement or replacement, howsoever effected.

39. INVALIDITY

Each of the provisions of this Agreement and the other Transaction Documents is severable. If any such provision is held to be or becomes invalid or unenforceable in any respect under the law of any jurisdiction, it shall have no effect in that respect and the parties shall use all reasonable efforts to replace it in that respect with a valid and enforceable substitute provision the effect of which is as close to its intended effect as possible.

40. THIRD PARTY ENFORCEMENT RIGHTS

A person who is not a party to this Agreement shall have no right under any statutory provision to enforce any of its terms.

41. GOVERNING LAW AND JURISDICTION

41.1 This Agreement shall be governed by, and interpreted in accordance with, English law.

41.2 Except as expressly provided otherwise in this Agreement, the courts of England are to have exclusive jurisdiction to settle any disputes which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement. For such purposes each party irrevocably submits to the jurisdiction of the English courts, waives any objections to the jurisdiction of those courts and irrevocably agrees that a judgment or order of the English courts in connection with this Agreement is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

41.3 The Purchaser shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. The Purchaser’s agent for service shall be Unilever PLC, Unilever House, Blackfriars, London EC4P 4BQ, United Kingdom (or such other person as notified in writing to the Seller) and any claim form, judgment or other notice of legal process shall be sufficiently served on the Purchaser if delivered to such agent at its address for the time being.

41.4 The Seller shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. The Seller’s agent for service shall be Sara Lee UK Finance Limited, 225 Bath Road, Slough SL1 4AU, United Kingdom (or such other person as notified in writing to the Seller) and any claim form, judgment or other notice of legal process shall be sufficiently served on the Seller if delivered to such agent at its address for the time being.

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EX-10.2

Exhibit 10.2

To: Unilever N.V. and Unilever PLC Unilever House 100 Victoria Embankment London EC4Y 0DK U.K.   For the attention of Paul Polman

25 September 2009

STRICTLY PRIVATE AND CONFIDENTIAL

OFFER LETTER FOR WORLDWIDE BODY CARE AND EUROPEAN DETERGENTS BUSINESS

Dear Sirs,

We acknowledge receipt of your letter dated 25 September 2009, which letter contains an irrevocable and binding offer from you to acquire the Worldwide Body Care Business and the European Detergents Business in accordance with the Draft SPA attached to that letter (the Offer Letter). Capitalised terms used herein shall have the meaning given in the Offer Letter, unless such term is not defined in the Offer Letter, in which case the relevant capitalised term shall have the meaning given in the Draft SPA attached to the Offer Letter.

1. ACCEPTANCE OF THE PURCHASER OFFER IN THE FORM OF THE FIRST OPTION

1.1 As stated in paragraph 4.1 of the Offer Letter, acceptance of the Purchaser Offer in the form of the First Option (and the subsequent entry into by us of the Draft SPA) will only be possible once the Consultation Requirements have been complied with.

1.2 In view of the Consultation Requirements, you acknowledge that we are not able to give any binding commitment with respect to accepting the Purchaser Offer in the form of the First Option.

2. ACCEPTANCE OF THE PURCHASER OFFER IN THE FORM OF THE SECOND OPTION

2.1 As stated in paragraph 5.1 of the Offer Letter, acceptance of the Purchaser Offer in the form of the Second Option (and the subsequent entry into by us of the Second Draft SPA) will only be possible once the Seller is satisfied that the Dutch Consultation Requirements have been complied with.

2.2 The Seller hereby irrevocably undertakes, in the form of a binding commitment, to accept the Purchaser Offer in the form of the Second Option by written notice to the Purchaser served on the last day of the Purchaser Offer Period (which, for the avoidance of doubt, may be extended by either Party pursuant to paragraph 1.3 of the Offer Letter) if at that time the Seller has not already accepted the Purchaser Offer in the form of the First Option, provided that such obligation shall only exist if the condition precedent set out in paragraph 2.3 below have been satisfied.

2.3 The obligation of the Seller to accept the Purchaser Offer in the form of the Second Option shall be subject to the Dutch Consultation Requirements having been complied with prior to the Purchaser Offer Termination Time. In this respect, the question of whether or not the Dutch Consultation Requirements have been complied with shall be determined on an objective basis and shall not be dependant on the subjective view of either of the Parties.

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2.4 As soon as practicably possible following the acceptance of the Purchaser Offer in the form of the Second Offer, Parties shall, subject to paragraph 2.5 of the Offer Letter, enter into the Second Draft SPA.

2.5 We hereby agree that we shall not have any rights whatsoever, whether on the basis of applicable law or otherwise, to claim the unenforceability of or to otherwise terminate the obligation referred to in paragraph 2.2 above to, subject to the satisfaction of the condition precedent set out in paragraph 2.3 above, accept the Purchaser Offer in the form of the Second Option and hereby irrevocably waive any such rights. This is without prejudice to our right to rely on the terms and conditions set out in the Second Draft SPA.

3. REIMBURSEMENT OF LOSS

3.1 In the event that the Dutch Consultation Requirements shall not have been complied with prior to the Purchaser Offer Termination Time, we acknowledge that you will suffer loss as a result of the expiry and resultant termination (such in accordance with paragraphs 4.3 and 5.3 of the Offer Letter) of the Purchaser Offer. Accordingly, subject to the satisfaction of the conditions referred to in paragraph 3.2 below, we hereby agree that if the Dutch Consultation Requirements shall not have been complied with prior to the Purchaser Offer Termination Time (which, for the avoidance of doubt, may be extended by either Party pursuant to paragraph 1.3 of the Offer Letter) we shall pay to you an amount of €10,000,000 (the Reimbursement Amount), which amount represents Parties’ genuine pre-estimate of the loss that is expected to be suffered by you in such event.

3.2 The obligation of the Seller to pay the Reimbursement Amount in accordance with paragraph 3.1 above, shall be subject to the satisfaction of the following conditions precedent:

(a) that the Dutch Consultation Requirements shall not have been complied with prior to the Purchaser Offer Termination Time (and in this respect, the question of whether or not the Dutch Consultation Requirements have been complied with shall be determined on an objective basis and shall not be dependant on the subjective view of either of the Parties);

(b) that the Conditions contained in clause 3.1(a) and (b) of the Draft SPA shall have been satisfied prior to the Purchaser Offer Termination Time;

(c) that the Purchaser shall have complied in all material respects with its obligations in respect of the Consultation Requirements as set out in the Offer Letter; and

(d) throughout the process surrounding the Consultation Procedures and the Additional Consultation Procedures the Purchaser shall not, and shall have procured that the members of the Purchaser Group and each of its and their respective officers, directors, employees, representatives and advisors shall not, in any way have committed any act or omission that is inconsistent with the agreed key communication messages set out in Annex 1 to this letter, unless the Purchaser can show that such inconsistency did not have a material adverse effect on the compliance with the Consultation Requirements.

4. AGREEMENT WITH OTHER PROVISIONS OF THE OFFER LETTER

Subject to the terms and conditions of this letter (which shall prevail in the case of any inconsistency with the terms of the Offer Letter), the Seller hereby acknowledges its agreement with the terms and conditions of the Offer Letter. However, it is acknowledged that nothing in this letter constitutes an acceptance of the Purchaser Offer (either in the form of the First Option or the Second Option)

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or the French Offer, as the case may be, although it is acknowledged that the Seller shall, on the last day of the Purchaser Offer Period, be obliged to accept the Purchaser Offer in the form of the Second Option if at that time the Seller has not already accepted the Purchaser Offer in the form of the First Option and the condition precedent set out in paragraph 2.3 above has been satisfied.

5. COUNTERPARTS

This letter may be executed in any number of counterparts by the Parties to it on separate counterparts and each counterpart will constitute an original.

6. MISCELLANEOUS

6.1 The provisions of paragraphs 13 (Announcements) and 14 (Confidentiality) of the Offer Letter shall apply mutatis mutandis to the provisions of this letter.

7. GOVERNING LAW

7.1 This letter and any obligations arising out of or in connection with this letter shall be governed by, and interpreted in accordance with, the laws of England.

7.2 The courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this letter, whether contractual or non-contractual. For such purposes each party irrevocably submits to the jurisdiction of the English courts, waives any objections to the jurisdiction of those courts and irrevocably agrees that a judgment or order of the English courts in connection with the matters set out in this letter is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

7.3 The Parties shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection the matters set out in this letter. The Purchaser’s agent for service shall be Unilever PLC, Unilever House, Blackfriars, London EC4P 4BQ, United Kingdom (or such other person as notified in writing to the Seller) and the Seller’s agent for service shall be Sara Lee UK Finance Limited, 225 Bath Road, Slough SL1 4AU, United Kingdom (or such other person as notified in writing to the Purchaser). Any claim form, judgment or other notice of legal process shall be sufficiently served if delivered to such agent at its address for the time being. The Parties undertake not to revoke the authority of their respective agents, without appointing another suitable party.

We kindly request you to return a countersigned copy of this letter as evidence of your acceptance of the contents thereof.

Yours faithfully,
Sara Lee Corporation
By:	/s/ Mr Mitch Marcus
Title:	Authorised Representative

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SIGNED FOR ACCEPTANCE OF THE CONTENTS OF THIS LETTER:

Unilever N.V.	Unilever N.V.
/s/ signature	/s/ signature
Unilever PLC	Unilever PLC
/s/ signature	/s/ signature

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ANNEX 1

Agreed Communication Plan

• Our mutual aim is to leverage capabilities, employees, knowledge, expertise and key brands, and to complete the consultation process in a timely manner.

• Maintain business as usual and delivery of 2009/10 business plan throughout the period.

• Communicate and respond in a timely way to our respective customers, our people, our partners, and our social partners.

• Work together to develop aligned employee communication strategies.

• Maintain demonstrated standards of behaviour to employees.

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EX-31.1

Exhibit 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brenda C. Barnes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sara Lee Corporation for the fiscal quarter ended September 26, 2009.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 5, 2009

/s/ Brenda C. Barnes,

Chairman and Chief Executive Officer

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EX-31.2

Exhibit 31.2

CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Marcel H.M. Smits, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sara Lee Corporation for the fiscal quarter ended September 26, 2009.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 5, 2009

/s/ Marcel H.M. Smits,

Executive Vice President and Chief Financial Officer

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EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Sara Lee Corporation (the “Company”) for the fiscal quarter ended September 26, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brenda C. Barnes, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: November 5, 2009

/s/ Brenda C. Barnes,

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Sara Lee Corporation (the “Company”) for the fiscal quarter ended September 26, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marcel H.M. Smits, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: November 5, 2009

/s/ Marcel H.M. Smits,

Executive Vice President and Chief Financial Officer