Document:

exv10w07

 

EXHIBIT 10.07

KEY EMPLOYEE LONG TERM INCENTIVE PLAN

ARTICLE I

Purpose

     The purpose of this Key Employee Long Term Incentive Plan (the “Plan") is to enable Kellogg
Company (the “Company") to offer key employees of the Company and Designated Subsidiaries (defined
below) performance-based stock incentives and other equity interests in the Company and other
incentive awards, thereby attracting, retaining and rewarding such key employees, and strengthening
the mutuality of interests between key employees and the Company’s shareholders.

ARTICLE II

Definitions

     For purposes of this Plan, the following terms shall have the following meanings:

     2.1 “Award” shall mean any award under this Plan of any Stock Option, Reload Option,
Restricted Stock, Performance Shares, Performance Units or Other Stock-Based Award.

     2.2 “Board” shall mean the Board of Directors of the Company.

     2.3 “Code” shall mean the Internal Revenue Code of 1986, as amended.

     2.4 “Committee” shall mean the Compensation Committee of the Board consisting of three or
more Directors, none of whom shall be eligible to receive any Award pursuant to this Plan.

     2.5 “Common Stock” means the Common Stock, $0.25 par value per share,
of the Company.

     2.6 “Designated Subsidiary” shall mean one of such subsidiaries of the Company, 80 percent or
more of the voting capital stock of which is owned, directly or indirectly, by the Company, which
is designated from time to time by the Board.

     2.7 “Disability” shall mean Total Disability as defined in the Company’s Long Term Disability
Plan.

     2.8 “Disinterested Person” shall have the meaning set forth in Rule 16b-3(d)(3) as promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of 1934, or any
successor definition adopted by the Commission.

     2.9 “Fair Market Value” for purposes of this Plan, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, shall mean, with respect to
any date, the officially quoted closing price of the Common Stock on the

 

 

New York Stock
Exchange—Composite Transactions Tape on such date, provided that if there shall be no sales of a
share of Common Stock reported on such date, the Fair Market Value of the Common Stock on such date
shall be deemed to be the officially quoted closing price of the Common Stock on such Composite
Tape for the last preceding date on which sales of Common Stock were reported.

     2.10 “Incentive Stock Option” shall mean any Stock Option awarded under this Plan intended to
be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

     2.11 “Non-Qualified Stock Option” shall mean any Stock Option awarded under this Plan that is
not an Incentive Stock Option.

     2.12 “Other Stock-Based Award” shall mean an Award under Article 11 of this Plan that is
valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock.

     2.13 “Participant” shall mean an employee to whom an Award has been made pursuant to this
Plan.

     2.14 “Performance Cycle” shall have the meaning set forth in Section 10.1.

     2.15 “Performance Period” shall have the meaning set forth in Section 9.1.

     2.16 “Performance Share” shall mean an Award made pursuant to Article 9 of this Plan of the
right to receive Common Stock or cash of an equivalent value at the end of a specified performance
period.

     2.17 “Performance Unit” shall mean an Award made pursuant to Article 10 of this Plan of the
right to receive a fixed dollar amount, payable in cash or Common Stock or a combination of both.

     2.18 “Reload Option” shall have the meaning set forth in Section 6.5.

     2.19 “Restricted Stock” shall mean an Award of shares of Common Stock under this Plan that is
subject to restrictions under Article 7.

     2.20 “Restriction Period” shall have the meaning set forth in Subsection 7.3(a).

     2.21 “Retirement” shall mean termination of employment by an employee who is at least 55
years of age after at least 5 years of employment by the Company and/or a Designated Subsidiary.

     2.22 “Stock Option” or “Option” shall mean any option to purchase shares of Common Stock
(including Restricted Stock and Performance Share, if the Committee so determines) granted pursuant
to Article 6.

 

 

     2.23 “Termination of employment” shall mean a termination of service for reasons other than a
military or personal leave of absence granted by the Company.

     2.24 “Withholding Election” shall have the meaning set forth in Section 13.4.

ARTICLE III

Administration

     3.1 The Committee. The Plan shall be administered and interpreted by the Committee.

     3.2 Awards. The Committee shall have full authority to grant, pursuant to the terms of this
Plan, to officers and other key employees eligible under Article 5: (i) Stock Options, (ii)
Restricted Stock, (iii) Performance Shares, (iv) Performance Units, and (v) Other Stock-Based
Awards. In particular, the Committee shall have the authority:

     (a) to select the officers and other key employees of the Company to whom Stock Options,
Restricted Stock, Performance Shares, Performance Units and Other Stock-Based Awards may from time
to time be granted hereunder;

     (b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock, Performance Shares, Performance Units and Other Stock-Based Awards, or
any combination thereof, are to be granted hereunder to one or more eligible employees; provided,
however, that the maximum number of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock, Performance Shares, Performance Units, and Other Stock-Based Awards that may be
granted to any one individual in any fiscal year shall not exceed, individually or in the
aggregate, Awards to purchase or receive more than one million (1,000,000) shares of common
stock;

     (c) to determine the number of shares of Common Stock to be covered by each such Award
granted hereunder;

     (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of
any Award granted hereunder (including, but not limited to, the share price, any restriction or
limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver
thereof, regarding any Stock Option or other Award and the shares of Common Stock relating
thereto, based on such factors as the Committee shall
determine, in its sole discretion);

     (e) to determine whether, to what extent and under what circumstances grants of Options and
other Awards under this Plan are to operate on a tandem basis and/or in conjunction with or apart
from other cash awards made by the Company outside of this Plan;

 

 

     (f) to determine whether and under what circumstances a Stock Option may be settled in cash,
Stock, and/or Restricted Stock under Subsection 6.4(k); and

     (g) to determine whether, to what extent and under what circumstances Common Stock and other
amounts payable with respect to an Award under this Plan shall be deferred either automatically or
at the election of the Participant.

     3.3 Guidelines. Subject to Article 11 hereof, the Committee shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as
it shall, from time to time, deem advisable; to interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and to otherwise supervise
the administration of this Plan. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any Award granted in the manner and to the extent it
shall deem necessary to carry this Plan into effect. Notwithstanding the foregoing, no action of
the Committee under this Section 3.3 shall impair the rights of any Participant without the
Participant’s consent.

     3.4 Decisions Final. Any decision, interpretation or other action made or taken in good
faith by the Committee arising out of or in connection with the Plan shall be final, binding and
conclusive on the Company and all employees and their respective heirs, executors, administrators,
successors and assigns.

ARTICLE IV

Share Limitation

     4.1 Shares. The maximum aggregate number of shares of Common Stock which may be issued
under this Plan shall not exceed six million (6,000,000) shares (subject to any increase or
decrease pursuant to Section 4.2) which may be either authorized and unissued Common Stock or
issued Common Stock reacquired by the Company. If any Option granted under this Plan shall expire,
terminate or be cancelled for any reason without having been exercised in full, the number of
unpurchased shares shall again be available for the purposes of the Plan; provided, however, that
if such expired, terminated or cancelled Option shall have been issued in conjunction with another
Award, none of such unpurchased shares shall again become available for purposes of this Plan to
the extent that the related Award granted under this Plan is exercised. If an Option is exercised
using Common Stock already owned by the Participant exercising the Option, the number of shares
that shall be treated as issued under the Plan shall be (i) the number of shares issued minus (ii)
the number of shares exchanged in satisfaction of the Option Price and the number of shares so
exchanged shall be added to the total number of shares of Common Stock available under the Plan.
Further, if any shares of Common Stock granted hereunder are forfeited or such Award otherwise
terminates without the delivery of such shares upon the lapse of restrictions, the shares subject
to such grant, to the extent of such forfeiture or termination, shall again be available under this
Plan.

 

 

     4.2 Changes. In the event of any merger, reorganization, consolidation, recapitalization,
dividend (other than a dividend or its equivalent which is credited to a Plan Participant or a
regular cash dividend), Stock split, or other change in corporate structure affecting the Common
Stock, such substitution or adjustment shall be made in the maximum aggregate number of shares
which may be issued under this Plan, in the number and option price of shares subject to
outstanding Options granted under this Plan, and in the number of shares subject to other
outstanding Awards (including but not limited to Awards of Restricted Stock, Performance Shares,
Performance Units and Other Stock-Based Awards) granted under this Plan, as may be determined to be
appropriate by the Committee, in its sole discretion, provided that the number of shares subject to
any Award shall always be a whole number.

ARTICLE V

Eligibility

     5.1 Senior officers, senior management, and key employees of the Company and its Designated
Subsidiaries are eligible to be granted Options and other Awards under this Plan. Eligibility under
this Plan shall be determined by the Committee.

ARTICLE VI

Stock Options

     6.1 Options. Stock Options may be granted alone or in addition to other Awards granted under
this Plan. Each Stock Option granted under this Plan shall be of one of two types: (i) an Incentive
Stock Option or (ii) a Non-Qualified Stock Option.

     6.2 Grants. The Committee shall have the authority to grant to any Participant one or more
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion
thereof which does not qualify shall constitute a separate Non-Qualified Stock Option.

     6.3 Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term
of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422.

     6.4 Terms of Options. Options granted under this Plan shall be subject to the following
terms and conditions and shall be in such form and contain such additional terms and conditions,
not inconsistent with the terms of this Plan, as the Committee shall deem desirable:

 

 

     (a) Option Price. The option price per share of Common Stock purchasable under a Stock Option
shall be determined by the Committee at the time of grant but shall be not less than 100% of the
Fair Market Value of the Common Stock at grant if the Stock Option is intended to be an Incentive
Stock Option and shall not be less than 85% of the Fair Market Value of the Common Stock at grant
if the Stock Option is intended to be a Non-Qualified Stock Option.

     (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no
Incentive Stock Option shall be exercisable more than ten years after the date the Option is
granted, and no Non-Qualified Stock Option shall be exercisable more than ten years and one day
after the date the Option is granted.

     (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee at grant; provided, however,
that, except as provided in subsections (f) and (g) below and Article 3, unless otherwise
determined by the Committee and the Committee may waive such installment exercise provisions at any
time at or after grant in whole or in part, based on such factors as the Committee shall determine,
in its sole discretion.

     (d) Method of Exercise. Subject to whatever installment exercise and waiting period
provisions apply under subsection (c) above, Stock Options may be exercised in whole or in part at
any time during the option term, by giving written notice of exercise to the Company specifying the
number of shares to be purchased. Such notice shall be accompanied by payment in full of the
purchase price in such form as the Committee may accept. If and to the extent determined by the
Committee in its sole discretion at or after grant, payment in full or in part may also be made in
the form of Common Stock duly owned by the Participant (and for which the Participant has good
title free and clear of any liens and encumbrances) or Restricted Stock, or by reduction in the
number of shares issuable upon such exercise based, in each case, on the Fair Market Value of the
Stock on the last trading date preceding payment as determined by the Committee (without regard to
any forfeiture restrictions applicable to Restricted Stock). No shares of Stock shall be issued
until payment, as provided herein, therefor has been made. A Participant shall generally have the
rights to dividends or other
rights of a shareholder with respect to shares subject to the Option when the optionee has given
written notice of exercise, has paid for such shares as provided herein, and, if requested, has
given the representation described in Section 14.1. Notwithstanding the foregoing, if payment in
full or in part has been made in the form of Restricted Stock, an equivalent number of shares of
Common Stock issued on exercise of the Option shall be subject to the same restrictions and
conditions, and during the remainder of the Restriction Period, applicable to the shares of
Restricted Stock surrendered therefor.

     (e) Non-Transferability of Options. No Stock Option shall be transferable by the Participant
otherwise than by will or by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the Participant’s lifetime, only by the Participant.

 

 

     (f) Termination by Death. Except for Incentive Stock Options subject to subsection (j) below,
if a Participant’s employment by the Company or a Designated Subsidiary terminates by reason of
death, any Stock Option held by such Participant, unless otherwise determined by the Committee at
grant, shall be fully vested and may thereafter be exercised by the legal representative of the
estate, for a period of one year (or such other period as the Committee may specify at grant) from
the date of such death or until the expiration of the option term of such Stock Option, whichever
period is the
shorter.

     (g) Termination by Reason of Disability. Except for Incentive Stock Options subject to
subsection (j) below, if a Participant’s employment by the Company or a Designated Subsidiary
terminates by reason of Disability, any Stock Option held by such Participant, unless otherwise
determined by the Committee at grant, shall be fully vested and may thereafter be exercised by the
Participant for a period of five years (or such other
period as the Committee may specify at grant) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever period is the shorter;
provided, however, that, if the Participant dies within such five-year period (or such other period
as the Committee shall specify at grant), any unexercised Stock Option held by such Participant
shall thereafter be exercisable to the extent to which it was exercisable at the time of death for
a period of twelve months from the date of such death or until the expiration of the option term of
such Stock Option, whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.

     (h) Termination by Reason of Retirement. Except for Incentive Stock Options subject to
subsection (j) below, if a Participant’s employment by the Company or a Designated Subsidiary
terminates by reason of Retirement, any Stock Option held by such Participant, unless otherwise
determined by the Committee at grant, shall be fully vested and may thereafter be exercised by the
Participant for a period of five years (or such other period as the Committee may specify at grant)
from the date of such termination of employment or the expiration of the stated term of such Stock
Option, whichever period is the shorter; provided, however, that, if the Participant dies within
such five-year period, any unexercised Stock Option held by such Participant shall thereafter be
exercisable, to the extent to which it was exercisable at the time of death, for a period of twelve
months from the date of such death or until the expiration of the option term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as
a Non-Qualified Stock Option.

     (i) Other Termination. Unless otherwise determined by the Committee at or after grant, if a
Participant’s employment by the Company terminates for any reason other than death, Disability or
Retirement, the Stock Option shall thereupon terminate, except that such Stock Option may be
exercised for the lesser of three months or the balance of
such Stock Option’s term if the
Participant is involuntarily terminated by the Company without cause.

 

 

     (j) Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value
(determined as of the time of grant) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Participant during any calendar year under the
Plan and/or any other stock option plan of the Company or any subsidiary or parent corporation
(within the meaning of Section 425 of the Code) exceeds $100,000, such Options shall be treated as
Options which are not Incentive Stock Options.

     To the extent (if any) permitted under Section 422 of the Code, or the applicable regulations
thereunder or any applicable Internal Revenue Service pronouncement, if (i) a Participant’s
employment with the Company or a Designated Subsidiary is terminated by reason of death, Disability
or Retirement and (ii) the portion of any Incentive Stock Option that is otherwise exercisable
during the post-termination period specified under subsections (f), (g) or (h) above, applied
without regard to the $100,000 limitation currently contained in Section 422(d) of the Code, is
greater than the portion of such Stock Option that is immediately exercisable as an “incentive
stock option” during such post-termination period under Section 422, such excess shall be treated
as a Non-Qualified Stock Option.

     Should any of the foregoing provisions not be necessary in order for the Stock Options to
qualify as Incentive Stock Options, or should any additional provisions be required, the Committee
may amend the Plan accordingly, without the necessity of obtaining the approval of the shareholders
of the Company.

     (k) Buyout and Settlement Provisions. The Committee may at any time offer to buy out an
Option previously granted, based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.

     In addition, if the Option agreement so provides at grant or is amended after grant and prior
to exercise to so provide (with the Participant’s consent), the Committee may require that all or
part of the shares to be issued with respect to the spread value of an exercised Option take the
form of Performance Shares or Restricted Stock, which shall be valued on the date of exercise on
the basis of the Fair Market Value of such Performance Shares or Restricted Stock determined
without regard to the deferral limitations and/or forfeiture restrictions involved.

     6.5 Reload Options. Without in any way limiting the authority of the Committee to make
grants hereunder, and in order to induce officers and other key employees to retain ownership of
shares in the Company, the Committee shall have the authority (but not an obligation) to include
within any option agreement a provision entitling the optionee to a further option (a “Reload
Option") in the event the optionee exercises the option evidenced by the option agreement, in whole
or in part, by surrendering other shares of the Company in accordance with this Plan and the terms
and conditions of the option agreement. Any such Reload Option shall be for a number of shares
equal to the number of surrendered shares, shall become exercisable in the event the purchased
shares are held for a minimum period of time established by the Committee, and shall be subject to
such other terms and conditions as the Committee may determine.

 

 

ARTICLE VII

Restricted Stock

     7.1 Awards of Restricted Stock. Shares of Restricted Stock may be issued either alone or in
addition to other Awards granted under the Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock will be made, the
number of shares to be awarded, the price (if any) to be paid by the recipient (subject to Section
7.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule
and rights to acceleration thereof, and all other terms and conditions of the Awards. The Committee
may condition the grant of Restricted Stock upon the attainment of specified performance goals or
such other factors as the Committee may determine, in its sole discretion.

     The provisions of Restricted Stock awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same in subsequent years.

     7.2 Awards and Certificates. The prospective Participant selected to receive a Restricted
Stock Award shall not have any rights with respect to such Award, unless and until such Participant
has executed an agreement evidencing the Award and has delivered a fully executed copy thereof to
the Company, and has otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:

     (a) Purchase Price. The purchase price for shares of Restricted Stock shall be equal to or
less than their par value and may be zero.

     (b) Acceptance. Awards of Restricted Stock must be accepted within a period of 60 days (or
such shorter period as the Committee may specify at grant) after the Award date, by executing a
Restricted Stock Award agreement and by paying whatever price (if any) the Committee has designated
hereunder.

     (c) Legend. Each Participant receiving a Restricted Stock Award shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in
the name of such Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the following form:

     “The transferability of this certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of Kellogg Company (the

 

 

“Company") Key
Employee Long Term Incentive Plan and an Agreement entered into between the registered owner and
the Company dated                     . Copies of such Plan and Agreement are on file in the offices of the
Company, One Kellogg Square, Battle Creek, Michigan 49016-3599”.

     (d) Custody. The Committee may require that the stock certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock Award, the Participant shall have delivered a duly signed stock
power, endorsed in blank, relating to the Stock covered by such Award.

     7.3 Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to this
Plan shall be subject to the following restrictions and conditions:

     (a) Restriction Period. Subject to the provisions of this Plan and the Award agreement, during
a period set by the Committee commencing with the date of such Award (the “Restriction Period"),
the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under this Plan. Within these limits, the Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments and may accelerate or waive such
restrictions in whole or in part, based on service, performance and/or such other factors or
criteria as the Committee may determine in its sole discretion.

     (b) Rights as Shareholder. Except as provided in this subsection (b) and subsection (a)
above, the Participant shall have, with respect to the shares of Restricted Stock, all of the
rights of a holder of shares of Common Stock of the Company including the right to receive any
dividends. The Committee, in its sole discretion, as determined at the time of Award, may permit
or require the payment of dividends to be deferred.

     (c) Termination of Employment. Subject to the applicable provisions of the Award agreement
and this Article 7, upon termination of a Participant’s employment with the Company for any reason
during the Restriction Period, all Restricted Shares still subject to restriction will vest or be
forfeited in accordance with the terms and conditions established by the Committee at or after
grant.

     (d) Hardship. In the event of hardship or other special circumstances of a Participant whose
employment with the Company or a Designated Subsidiary is involuntarily terminated (other than for
cause), the Committee may, in its sole discretion, waive in whole or in part any or all remaining
restrictions with respect to such Participant’s shares of Restricted Stock, based on such factors
as the Committee may deem appropriate.

     (e) Lapse of Restrictions. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such
shares shall be delivered to the Participant. All legends shall be removed from said certificates
at the time of delivery to the Participant.

 

 

ARTICLE VIII

Performance Shares

     8.1 Award of Performance Shares. Performance Shares may be awarded either alone or in
addition to other Awards granted under this Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Performance Shares shall be awarded, the number of
Performance Shares to be awarded to any person, the duration of the period (the “Performance
Period") during which, and the conditions under which, receipt of the Shares will be deferred, and
the other terms and conditions of the Award in addition to those set forth in Section 8.2.

     The Committee may condition the grant of Performance Shares upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall determine, in its sole
discretion.

     The provisions of Performance Share Awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same in subsequent years.

     8.2 Terms and Conditions. Performance Shares awarded pursuant to this Article 8 shall be
subject to the following terms and conditions:

     (a) Non-Transferability. Subject to the provisions of this Plan and the Award agreement
referred to in subsection (g) below, Performance Share Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Performance Period. At the expiration of
the Performance Period, share certificates or cash of an equivalent value (as the Committee may
determine in its sole discretion) shall be delivered to the Participant, or his legal
representative, in a number equal to the shares covered by the Performance Share Award.

     (b) Dividends. Unless otherwise determined by the Committee at the time of Award, amounts
equal to any dividends declared during the Performance Period with respect to the number of shares
of Common Stock covered by a Performance Share Award will not be paid to the Participant.

     (c) Termination of Employment. Subject to the provisions of the Award agreement and this
Article 8, upon termination of a Participant’s employment with the Company for any reason during
the Performance Period for a given Award, the Performance Shares in question will vest or be
forfeited in accordance with the terms and conditions established by the Committee at or after
grant.

     (d) Accelerated Vesting. Based on service, performance and/or such other factors or criteria
as the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or
any part of any Performance Share Award and/or waive the deferral limitations for all or any part of such Award.

 

 

     (e) Hardship. In the event of hardship or other special circumstances of a Participant whose
employment with the Company or a Designated Subsidiary is involuntarily terminated other than for
cause, the Committee may, in its sole discretion, based on such factors as the Committee may deem
appropriate, waive in whole or in part any or all of the remaining deferral limitations imposed
hereunder with respect to any or all of the Participant’s Performance Shares, based on such factors
as the Committee deems appropriate.

     (f) Agreement. Each Award shall be confirmed by, and subject to the terms of, a Performance
Share agreement executed by the Company and the Participant.

ARTICLE IX

Performance Units

     9.1 Award of Performance Units. Performance Units may be awarded either alone or in addition
to other Awards granted under this Plan. The Committee shall determine the eligible persons to
whom and the time or times at which Performance Units shall be awarded, the number of Performance
Units to be awarded to any person, the duration of the period (the
“Performance Cycle”) during
which, and the conditions under which, a Participant’s right to Performance Units will be vested,
the ability of Participants to defer the receipt of payment of such Units, and the other terms and
conditions of the Award in addition to those set forth in Section 9.2.

     A Performance Unit shall have a fixed dollar value.

     The Committee may condition the vesting of Performance Units upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall determine, in its sole
discretion.

     The provisions of Performance Unit Awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same in subsequent years.

     9.2 Terms and Conditions. The Performance Units awarded pursuant to this Article 10 shall be
subject to the following terms and conditions:

     (a) Non-Transferability. Subject to the provisions of this Plan and the Award agreement
referred to in subsection (g) below, Performance Unit Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered.

     (b) Vesting. At the expiration of the Performance Cycle, the Committee shall determine the
extent to which the performance goals have been achieved, and the percentage of the Performance
Units of each Participant that have vested.

 

 

     (c) Payment. Subject to the provisions of this Plan and the Award agreement referred to in
subsection (g) below, the vested Performance Units shall be paid to the Participant or his legal
representative as soon as practicable after the end of a Performance Cycle. Payment may be made in
cash, shares of Common Stock or a combination of both, as determined by the Committee, in its sole
discretion.

     (d) Termination of Employment. Subject to the provisions of the Award agreement and this
Article 9, upon termination of a Participant’s employment with the Company for any reason during
the Performance Cycle for a given Award, the Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established by the Committee at or after
grant.

     (e) Accelerated Vesting. Based on service, performance and/or such other factors or criteria
as the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all
or any part of any Performance Unit Award and/or waive the deferral limitations for all or any part
of such Award.

     (f) Hardship. In the event of hardship or other special circumstances of a Participant whose
employment with the Company or a Designated Subsidiary is involuntarily terminated (other than for
cause), the Committee may, in its sole discretion, based on such factors as the Committee may deem
appropriate, waive in whole or in part any or all of the remaining deferral limitations imposed
hereunder with respect to any or all of the Participant’s Performance Units, based on such factors
as the Committee deems appropriate.

     (g) Agreement. Each Award shall be confirmed by, and subject to the terms of, a Performance
Unit agreement executed by the Company and the Participant.

ARTICLE X

Other Stock-Based Awards

     10.1 Other Awards. Other Awards of Common Stock and other Awards that are valued in whole or
in part by reference to, or are payable in or otherwise based on, Common Stock (“Other Stock-Based
Awards”), including, without limitation, Awards valued by reference to subsidiary performance, may
be granted either alone or in addition to or in tandem with Stock Options, Restricted Stock,
Performance Shares or Performance Units.

     Subject to the provisions of this Plan, the Committee shall have authority to determine the
persons to whom and the time or times at which such Awards shall be made, the number of shares of
Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. The
Committee may also provide for the grant of Common Stock under such Awards upon the completion of a
specified performance period.

 

 

     The provisions of Other Stock-Based Awards need not be the same with respect to each
Participant and such Awards to individual Participants need not be the same in subsequent years.

     10.2 Terms and Conditions. Other Stock-Based Awards made pursuant to this Article 10 shall be
subject to the following terms and conditions:

     (a) Non-Transferability. Subject to the provisions of this Plan and the Award agreement
referred to in subsection (e) below, shares of Common Stock subject to Awards made under this
Article 10 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the
date on which the shares are issued, or, if later, the date on which any applicable restriction,
performance or deferral period lapses.

     (b) Dividends. Unless otherwise determined by the Committee at the time of Award, subject to
the provisions of this Plan and the Award agreement, the recipient of an Award under this Article
10 shall be entitled to receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares of Common Stock covered by the Award, as
determined at the time of the Award by the Committee, in its sole discretion.

     (c) Vesting. Any Award under this Article 10 and any Common Stock covered by any such Award
shall vest or be forfeited to the extent o provided in the Award agreement, as determined by the
Committee, in its sole discretion.

     (d) Waiver of Limitation. In the event of the Participant’s Retirement, Disability or death,
or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or
in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an
Award under this Article 10.

     (e) Agreement. Each Award under this Article 10 shall be confirmed by, and subject to the
terms of, an agreement or other instrument executed by the Company and the Participant.

     (f) Price. Common Stock issued on a bonus basis under this Article 10 may be issued for no
cash consideration; Common Stock purchased pursuant to a purchase right awarded under this Article
10 shall be priced as determined by the Committee.

ARTICLE XI

Termination or Amendment of the Plan

     11.1 Termination or Amendment. The Board may at any time amend, discontinue or terminate this
Plan or any part thereof (including any amendment deemed necessary to ensure that the Company may
comply with any regulatory requirement referred to in Article 13); provided, however, that, unless
otherwise required by law, the rights of a Participant with respect to Options or other Awards
granted prior to such amendment, discontinuance or termination, may not be impaired without the
consent of such

 

 

Participant and, provided further, without the approval of the Company’s stockholders, no amendment
may be made which would (i) increase the aggregate number of shares of Common Stock that may be
issued under this Plan (except by operation of Section 4.2); (ii) change the definition of
employees eligible to receive Stock Awards under this Plan; (iii) decrease the option price of any
Stock Option to less than 100% of the Fair Market Value on the date of grant for a Stock Option
intended to be an Incentive Stock Option or to 85% of the Fair Market Value on the date of grant
for a Stock Option intended to be a Non-Qualified Stock Option; or (iv) extend the maximum option
period under Section 6.4 of the Plan.

     The Committee may amend the terms of any Stock Option or other Award theretofore granted,
prospectively or retroactively, but, subject to Article 4 above, no such amendment or other action
by the Committee shall impair the rights of any holder without the holder’s consent. The Committee
may also substitute new Stock Options for previously granted Stock Options having higher option
exercise prices.

ARTICLE XII

Unfunded Plan

     12.1 Unfunded Status of Plan. This Plan is intended to constitute an “unfunded” plan for
incentive and deferred compensation. With respect to any payments not yet made to a Participant by
the Company, nothing contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company.

ARTICLE XIII

General Provisions

     13.1 Legend. The Committee may require each person purchasing shares pursuant to a Stock
Option or other Award under the Plan to represent to and agree with the Company in writing that the
Participant is acquiring the shares without a view to distribution thereof. In addition to any
legend required by this Plan, the certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.

     All certificates for shares of Common Stock delivered under the Plan shall be subject to such
stock transfer orders and other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

     13.2 Other Plans. Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally applicable or
applicable only in specific cases.

 

 

     13.3 No Right to Employment. Neither this Plan nor the grant of any Option or other Award
hereunder shall give any Participant or other employee any right with respect to continuance of
employment by the Company or any subsidiary, nor shall there be a limitation in any way on the
right of the Company or any subsidiary by which an employee is employed to terminate his employment
at any time.

     13.4 Withholding of Taxes. The Company shall have the right to deduct from any payment to be
made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any
shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any
Federal, state or local taxes required by law to be withheld.

     The Committee may permit any such withholding obligation to be satisfied by reducing the
number of shares of Common Stock otherwise deliverable. A person required to file reports under
Section 16(a) of the Securities Act of 1933 with respect to securities of the Company may elect to
have a sufficient number of shares of Common Stock withheld to fulfill such tax obligations
(hereinafter a “Withholding Election") only if the election complies with the following conditions:
(x) the Withholding Election shall be subject to the disapproval of the Committee and (y) the
Withholding Election is made (i) during the period beginning on the third business day following
the date of release for publication of the quarterly or annual summary statements of sales and
earnings of the Company and ending on the twelfth business day following such date, (ii) six months
before the Stock Award becomes taxable, or (iii) during any other period in which a Withholding
Election may be made under the provisions of Rule 16b-3 promulgated pursuant to the Act. Any
fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded
and the amount due shall be paid instead in cash by the Participant.

     13.5 No Assignment of Benefits. No Option, Award or other benefit payable under this Plan
shall, except as otherwise specifically provided by law, be subject in any manner to anticipation,
alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt
to anticipate, alienate, attach, sell, transfer, assign, pledge, encumber or charge any such
benefit shall be void, and any such benefit shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person who shall be entitled
to such benefit, nor shall it be subject to attachment or legal process for or against such person.

     13.6 Listing and Other Conditions.

     (a) As long as the Common Stock is listed the on New York Stock Exchange or a national
securities exchange or system sponsored by a national securities association, the issue of any
shares of Common Stock pursuant to an Option or other Award shall be conditioned upon such shares
being listed on such exchange or system. The Company

 

 

shall have no obligation to issue such shares unless and until such shares are so listed, and
the right to exercise any Option or other Award with respect to such shares shall be
suspended until such listing has been effected.

     (b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of
shares of Common Stock pursuant to an Option or other Award is or may in the circumstances be
unlawful or result in the imposition of excise taxes under the statutes, rules or regulations of
any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or
to make any application or to effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to shares of Common Stock or Awards,
and the right to exercise any Option or other Award shall be suspended until, in the opinion of
said counsel, such sale or delivery shall be lawful.

     (c) Upon termination of any period of suspension under this Section 13.6, any Award affected
by such suspension which shall not then have expired or terminated shall be reinstated as to all
shares available before such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension shall extend the term of any
Option.

     13.7 Governing Law. This Plan and actions taken in connection herewith shall be governed and
construed in accordance with the laws of the State of Delaware (regardless of the law that might
otherwise govern under applicable Delaware principles of conflict of laws).

     13.8 Construction. Wherever any words are used in this Plan in the masculine gender they
shall be construed as though they were also used in the feminine gender in all cases where they
would so apply, and wherever any words are used herein in the singular form they shall be construed
as though they were also used in the plural form in all cases where they would so apply.

     13.9 Liability of Committee. No member of the Board of Directors, no employee of the Company
nor the Committee (nor its members) shall be liable for any act or action hereunder, whether of
omission or commission, by any other member or employee or by any agent to whom duties in
connection with the administration of the Plan have been delegated or, except in circumstances
involving his bad faith, gross negligence or fraud, for anything done or omitted to be done by
himself.

     13.10 Other Benefits. No Award payment under this Plan shall be deemed compensation for
purposes of computing benefits under any retirement plan of the Company or its subsidiaries nor
affect any benefits under any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation.

     13.11 Costs. The Company shall bear all expenses incurred in administering this Plan,
including expenses of issuing Common Stock pursuant to any Awards hereunder.

 

 

ARTICLE XIV

Effective Date of Plan

     The Plan shall be effective as of its approval by the Company’s shareholders.

ARTICLE XV

Term of Plan

     No Stock Option, Restricted Stock, Performance Shares, Performance Unit or Other Stock-Based
Award shall be granted pursuant to the Plan on or after the tenth anniversary of its approval, but
Awards granted prior to such tenth anniversary may extend beyond that date.exv10w10

 

Exhibit 10.10

KELLOGG COMPANY 2000 NON-EMPLOYEE DIRECTOR STOCK PLAN

     1. PURPOSE. The purpose of the Kellogg Company 2000 Non-Employee Director Stock Plan is to
promote the long-term growth of Kellogg Company by increasing the proprietary interest of
Non-Employee Directors in Kellogg Company and to attract and retain highly qualified and capable
Non-Employee Directors.

     2. DEFINITIONS. Unless the context clearly indicates otherwise, for the purposes of the Plan,
the following terms shall have the following meanings:

     2.1
“AWARD” means an award granted to a Non-Employee Director under the Plan in the form
of Options or Shares or any combination thereof.

     2.2 “BOARD” means the Board of Directors of Kellogg Company, as constituted from time to time.

     2.3 “COMMITTEE” means the committee of the Board designated to administer the Plan, as
described in Section 3 of the Plan.

     2.4
“COMPANY” means Kellogg Company, a Delaware corporation, or any successor corporation
to Kellogg Company.

     2.5 “EXCHANGE ACT” means the Securities Exchange Act of 1934, as in effect and as amended from
time to time, or any successor statute thereto, together with any rules, regulations and
interpretations promulgated thereunder or with respect thereto.

     2.6 “FAIR MARKET VALUE” means, with respect to any date, the officially quoted closing price
of the Shares on the New York Stock Exchange—Composite Transactions Tape on such date, provided
that if there shall be no sales of Shares reported on such date, the Fair Market Value of a Share
on such date shall be deemed to be the officially quoted closing price of the Shares on such
Composite Tape for the last preceding date on which sales of Shares were reported.

     2.7 “OPTION” means an option to purchase Shares awarded under Sections 8 or 9 which does not
meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or any
successor law.

     2.8 “OPTION GRANT DATE” means the date upon which an Option is granted to a Non-Employee
Director.

     2.9 “OPTIONEE” means a Non-Employee Director of the Company to whom an Option has been granted
or, in the event of such Non-Employee Director’s death prior to the expiration of an Option, such
Non-Employee Director’s executor, administrator, beneficiary or similar person, or, in the event of
a transfer permitted by Section 7 hereof, such permitted transferee.

 

 

     2.10 “NON-EMPLOYEE DIRECTOR” means a director of the Company who is not an employee of the
Company or any subsidiary of the Company.

     2.11 “PLAN” means the Kellogg Company 2000 Non-Employee Director Stock Plan, as amended and
restated from time to time (together with any rules and regulations promulgated by the Committee
with respect thereto).

     2.12 “SHARES” means Shares of the common stock, par value $.25 per share, of the Company or
any security of the Company issued by the Company in substitution or exchange therefor.

     2.13 “STOCK OPTION AGREEMENT” means a written agreement between a Non-Employee Director and
the Company evidencing an Option.

     2.14 “SUBSIDIARY(IES)” means any corporation (other than the Company) in an unbroken chain of
corporations, including and beginning with the Company, if each of such corporations, other than
the last corporation in the unbroken chain, owns, directly or indirectly, more than fifty percent
(50%) of the voting stock in one of the other corporations in such chain.

     3. ADMINISTRATION.

     3.1 ADMINISTRATOR OF THE PLAN. The Plan shall be administered by the Compensation Committee of
the Board.

     3.2 AUTHORITY OF COMMITTEE. The Committee shall have full power and authority to: (i)
interpret and construe the Plan and adopt such rules and regulations as it shall deem necessary and
advisable to implement and administer the Plan, and (ii) designate persons other than members of
the Committee to carry out its responsibilities, subject to such limitations, restrictions and
conditions as it may prescribe, such determinations to be made in accordance with the Committee’s
best business judgment as to the best interests of the Company and its share owners and in
accordance with the purposes of the Plan. The Committee may delegate administrative duties under
the Plan to one or more agents as it shall deem necessary or advisable.

     3.3 DETERMINATIONS OF COMMITTEE. A majority of the Committee shall constitute a quorum at any
meeting of the Committee, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made without notice or a
meeting of the Committee by a written consent signed by all members of the Committee.

     3.4 LIABILITY LIMITATION. Neither the Board nor the Committee, nor any member of either, shall
be liable for any act, omission, interpretation, construction or determination made in good faith
in connection with the Plan (or any Award), and the members of the Board and the Committee shall be
entitled to indemnification and

 

 

reimbursement by the Company in respect of any claim, loss, damage or expense (including, without
limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law
and/or under any directors and officers liability insurance coverage which may be in effect from
time to time.

     4. AWARDS. Awards in the form of Options shall be granted to Non-Employee Directors in
accordance with Section 8. Awards in the form of Shares shall be granted to Non-Employee Directors
in accordance with Section 9. Each Option granted under the Plan shall be evidenced by a Stock
Option Agreement.

     4.1 RELOAD PROVISION. The Committee may provide in any Stock Option Agreement that if the
Optionee exercises a Stock Option using Shares held for at least six (6) months and/or elects to
have Shares withheld to satisfy the Company’s withholding obligations, the Optionee will then
receive a new option covering the number of Shares used to exercise and/or satisfy withholding
obligations. Such option will have a per share exercise price equal to the then Fair Market Value
of the Shares, and will be subject to such terms and conditions as the Committee, in its sole
discretion, may determine. Nothing in this Section 4.1 will restrict the Committee’s ability to fix
or limit in a Stock Option Agreement the maximum number of Shares available under any new option
granted pursuant to a Stock Option Agreement.

     5. ELIGIBILITY. Non-Employee Directors of the Company shall be eligible to participate in the
Plan in accordance with Sections 8 and 9.

     6. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 11, the aggregate
number of Awards available for all grants of Options and awards of Shares under the Plan shall not
exceed 1,000,000. Further, subject to adjustment as provided in Section 11, the aggregate number of
Shares available for Awards pursuant to Section 9 shall not exceed 250,000. If any Awards expire
unexercised or are forfeited, surrendered, cancelled, terminated or settled in cash in lieu of
common stock, the shares of common stock which were thereto subject (or potentially subject) to
such Awards shall again be available for Awards under the Plan to the extent of such expiration,
forfeiture, surrender, cancellation, termination or settlement of such Awards.

     7. TRANSFERABILITY OF OPTIONS. Unless otherwise provided in the Stock Option Agreement, no
Option granted under the Plan, and no rights or interests herein or therein, shall or may be
assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed
of by an Optionee or any beneficiary(ies) of any Optionee, except by testamentary disposition by
the Optionee or the laws of intestate succession. No such interest shall be subject to execution,
attachment or similar legal process, including, without limitation, seizure for the payment of the
Optionee’s debts, judgments, alimony, or separate maintenance. Unless otherwise provided in the
Stock Option Agreement, during the lifetime of the Optionee, Options are exercisable only by the Optionee.

 

 

     8. OPTIONS. Each Non-Employee Director shall be granted Options, subject to the following
terms and conditions:

     8.1 TIME OF GRANT. All continuing Non-Employee Directors shall be granted the Option to
purchase 5,000 Shares on the date of the 2000 Annual Meeting of Share Owners. On January 31st of
each year (or annually on such other date as the Committee may grant options to the Company’s
executive officers under an incentive plan approved by the share owners) beginning in 2001, each
continuing Non-Employee Director shall be granted an Option to purchase 5,000 Shares. If a person
is first elected or appointed as a Non-Employee Director other than on the date of the Annual
Meeting of Share Owners, then on the date on which that person first begins to serve as a
Non-Employee Director he or she shall be granted an Option to purchase a pro-rated number of Shares
based upon the number of days remaining until the next Annual Meeting of Share Owners divided by
365.

     8.2 PURCHASE PRICE. The purchase price per Share under each Option granted pursuant to this
Section shall be 100% of the Fair Market Value per Share on the Option Grant Date.

     8.3 VESTING AND EXERCISE OF OPTIONS. Subject to Section 10, each Option granted to a
Non-Employee Director shall be fully vested on and after the Option Grant Date or on such other
date as set by the Committee. Each Option shall be fully exercisable on and after a date as set by
the Committee, which date shall be at least six months after the Option Grant Date, and, subject to
Section 10, shall not be exercisable prior to such date. In no event shall the period of time over
which the Option may be exercised exceed ten years from the Option Grant Date. An Option, or
portion thereof, may be exercised in whole or in part only with respect to whole Shares. Shares
shall be issued to the Optionee pursuant to the exercise of an Option only upon receipt by the
Company from the Optionee of payment in full either in cash or by surrendering (or attesting to the
ownership of) Shares together with proof acceptable to the Committee that such Shares have been
owned by the Optionee for at least six months prior to the date of exercise of the Option, or a
combination of cash and Shares, in an amount or having a combined value equal to the aggregate
purchase price for the Shares subject to the Option or portion thereof being exercised. The Shares
issued to an Optionee for the portion of any Option exercised by attesting to the ownership of
Shares shall not exceed the number of Shares issuable as a result of such exercise (determined as
though payment in full therefor were being made in cash) less the number of Shares for which
attestation of ownership is submitted. The value of owned Shares submitted (directly or by
attestation) in full or partial payment for the Shares purchased upon exercise of an Option shall
be equal to the aggregate Fair Market Value of such owned Shares on the date of the exercise of
such Option.

     9. SHARES.

     9.1 STOCK GRANTS. On May 1st of each year beginning in 2000, an annual Award of 1,700 Shares
shall be made to each Non-Employee Director. Non-Employee Directors

 

 

first elected or appointed to the Board at any time other than the Annual Meeting of Share Owners
shall receive an initial Award on the date on which that person first begins to serve as a
Non-Employee Director, pro-rated based upon the number of days remaining until the next Annual
Meeting of Share Owners divided by 365.

     9.2 STOCK ACCOUNT. The Committee may provide that annual Awards shall be made by entry into
a stock account. If the Committee does so, the Company shall establish a bookkeeping account in the
name of each Non-Employee Director (the “Stock Account”). For any Award made by Stock Account
entry, the Non-Employee Director’s Stock Account shall be adjusted to reflect such Shares and an
aggregate number of Shares credited to each Non-Employee Director on such date shall be transferred
by the Company to the Kellogg Company Grantor Trust for Non-Employee Directors. Except or the right
to direct the Trustee as to the manner which the Shares are to be voted, a Non-Employee Director
shall not have any rights with respect to any Shares credited to the Non-Employee Director’s Stock
Account and transferred to the Trust until the date the Non-Employee Director ceases, for any
reason, to serve as a director of the Company. Dividends on the Shares held in Stock Accounts will
be credited to the Non-Employee Director’s Stock Account to be used to acquire additional Shares.

     10. AMENDMENT, SUSPENSION, AND TERMINATION.

     10.1 IN GENERAL. The Board may suspend or terminate the Plan (or any portion thereof) at any
time and may amend the Plan at any time and from time to time in such respects as the Board may
deem advisable to insure that any and all Awards conform to or otherwise reflect any change in
applicable laws or regulations, or to permit the Company, or the Non-Employee Directors to benefit
from any change in applicable laws or regulations, or in any other respect the Board may deem to be
in the best interests of the Company or any Subsidiary. No such amendment, suspension, or
termination shall (a) materially adversely affect the rights of any Non-Employee Director under any
outstanding Options or Share grants, without the consent of such Non-Employee Director, (b) revise
the exercise price of any outstanding Option without share owner approval, or (c) increase the
number of Shares available for Awards pursuant to Section 6 without share owner approval.

     10.2 STOCK OPTION AGREEMENT MODIFICATIONS. The Committee may (in its sole discretion) amend or
modify at any time and from time to time the terms and provisions of any outstanding Options in any
manner to the extent that the Committee under the Plan or any Stock Option Agreement could have
initially determined the restrictions, terms and provisions of such Options, including, without
limitation, changing or accelerating the date or dates as of which such Options shall become
exercisable. No such amendment or modification shall, however, materially adversely affect the
rights of any Non-Employee Director under any such Award without the consent of such Non-Employee
Director.

 

 

     11. CHANGES IN CAPITALIZATION AND OTHER MATTERS.

     11.1 NO CORPORATE ACTION RESTRICTION. The existence of the Plan, any Stock Option Agreement
and/or the Awards granted hereunder shall not limit, affect or restrict in any way the right or
power of the Board or the share owners of the Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the Company’s or any Subsidiary’s capital
structure or its business, (b) any merger, consolidation or change in the ownership of the Company
or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference
stocks ahead of or affecting the Company’s or any Subsidiary’s capital stock or the rights thereof,
(d) any dissolution or liquidation of the Company or any Subsidiary, (e) any sale or transfer of
all or any part of the Company’s or any Subsidiary’s assets or business, or (f) any other corporate
act or proceeding by the Company or any Subsidiary. No Non-Employee Director, beneficiary or any
other person shall have any claim against any member of the Board or the Committee, the Company or
any Subsidiary, or any employees, officers, share owners or agents of the Company or any
Subsidiary, as a result of any such action.

     11.2 RECAPITALIZATION ADJUSTMENTS. If the Board determines that any dividend or other
distribution (whether in the form of cash, common stock, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, Change of Control or exchange of common stock or other
securities of the Company, or other corporate transaction or event affects the common stock such
that an adjustment is determined by the Board, in its sole discretion, to be necessary or
appropriate in order to prevent dilution or enlargement of benefits or potential benefits intended
to be made available under the Plan, the Board may, in such manner as it in good faith deems
equitable, adjust any or all of (i) the number of shares of common stock or other securities of the
Company (or number and kind of other securities or property) with respect to which Awards may be
granted, (ii) the number of shares of common stock or other securities of the Company (or number
and kind of other securities or property) subject to outstanding Awards, and (iii) the exercise
price with respect to any Option, or make provision for an immediate cash payment to the holder of
an outstanding Award in consideration for the cancellation of such Award.

     11.3 MERGERS. If the Company enters into or is involved in any merger, reorganization,
Change of Control or other business combination with any person or entity (a “Merger Event”), the
Board may, prior to such Merger Event and effective upon such Merger Event, take such action as it
deems appropriate, including, but not limited to, replacing such Options with substitute stock
options in respect of the shares, other securities or other property of the surviving corporation
or any affiliate of the surviving corporation on such terms and conditions, as to the number of
shares, pricing and otherwise, which shall substantially preserve the value, rights and benefits of
any affected Options granted hereunder as of the date of the consummation of the Merger Event.
Notwithstanding anything to the contrary in the Plan, if any Merger Event or Change of Control
occurs, the Company shall have the right, but not the obligation, to cancel each Non-Employee
Director’s Options and to pay to each affected Non-Employee Director in

 

 

connection with the cancellation of such Non-Employee Director’s Options, an amount equal to the
excess of the Fair Market Value, as determined by the Board, of the common stock underlying any
unexercised Options (whether then exercisable or not) over the aggregate exercise price of such
unexercised Options.

Upon receipt by any affected Non-Employee Director of any such substitute stock options (or
payment) as a result of any such Merger Event, such Non-Employee Director’s affected Options for
which such substitute options (or payment) were received shall be thereupon cancelled without the
need for obtaining the consent of any such affected Non-Employee Director.

     11.4 CHANGE OF CONTROL PROVISIONS.

(a) Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in
the event of a Change in Control:

(i) Any Options outstanding as of the date such Change in Control is determined to have
occurred, and which are not then exercisable, shall become fully exercisable; and

(ii) The Committee may also make additional adjustments and/or settlements of
outstanding Awards as it deems appropriate and consistent with the Plan’s purposes.

(b) Definition of Change in Control. For purposes of the Plan, a “Change in Control”
shall mean the happening of any of the following events:

(i) An acquisition after the date hereof by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (a) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the election
of directors (the “Outstanding Company Voting Securities”); excluding, however, the
following:

(1) any acquisition directly from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company or approved by the Incumbent Board
(as defined below),

(2) any acquisition by the Company,

(3) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company,

(4) any acquisition by an underwriter temporarily holding Company securities
pursuant to an offering of such securities, or

(5) any acquisition pursuant to a transaction which complies with clauses (1), (2)
and (3) of subsection (iii) of this Section 11.4(b); or

 

 

(ii) A change in the composition of the Board such that the individuals who, as of the
effective date of the Plan, constitute the Board (such Board shall be hereinafter
referred to as the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this Section, that any
individual who becomes a member of the Board subsequent to the effective date of the
Plan, whose election, or nomination for election by the Company’s share owners, was
approved by a vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be such pursuant
to this proviso), either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director, without written
objection to such nomination shall be considered as though such
individual were a member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member of the Incumbent
Board; or

(iii) Consummation of a reorganization, merger or consolidation (or similar
transaction), a sale or other disposition of all or substantially all of the assets of
the Company, or the acquisition of assets or stock of another entity (“Corporate
Transaction”); in each case, unless immediately following such Corporate Transaction

(1) all or substantially all of the individuals and entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively, the
outstanding shares of common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be,
(2) no Person (other than the Company, any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such Corporate
Transaction or the combined

 

 

voting power of the outstanding voting securities of such corporation entitled to
vote generally in the election of directors except, to the extent that such
ownership existed prior to the Corporate Transaction, and
(3) individuals who were members of the Incumbent Board at the time of the Board’s
approval of the execution of the initial agreement providing for such Corporate
Transaction will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or

(iv) The approval by the share owners of the Company of a complete liquidation or
dissolution of the Company.

     12. FOREIGN DIRECTORS. Without amending the Plan, Awards granted to Non-Employee Directors who
are foreign nationals may have such terms and conditions different from those specified in the Plan
as may, in the judgment of the Committee, be necessary or desirable to foster and promote
achievement of the purposes of the Plan and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, subplans and the like as may be necessary or
advisable to comply with provisions of laws in other countries or jurisdictions in which the
Company or its Subsidiaries operate or have Non-Employee Directors.

     13. MISCELLANEOUS.

     13.1 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards shall be required to be
issued or granted under the Plan unless legal counsel for the Company shall be satisfied that such
issuance or grant will be in compliance with all applicable federal and state securities laws and
regulations and any other applicable laws or regulations. The Committee may require, as a condition
of any payment or share issuance, that certain agreements, undertakings, representations,
certificates, and/or information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or regulations.
Certificates for Shares delivered under the Plan may be subject to such stock-transfer orders and
such other restrictions as the Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange upon which the common
stock is then listed, and any applicable federal or state securities law. In addition, if at any
time specified herein (or in any Stock Option Agreement or otherwise) for (a) the making of any
Award, or the making of any determination, (b) the issuance or other distribution of Shares, or (c)
the payment of amounts to or through a Non-Employee Director with respect to any Award, any law,
rule, regulation or other requirement of any governmental authority or agency shall require either
the Company, any Subsidiary or any Non-Employee Director (or any estate, designated beneficiary or
other legal representative thereof) to take any action in
connection with any such determination, any such Shares to be issued or distributed, any such
payment, or the making of any such determination, as the case may be, shall be deferred until such
required action is taken. With respect to persons subject to
Section 16
of the Exchange Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 promulgated under the Exchange Act.

 

 

     13.2 STOCK OPTION AGREEMENTS. Each Non-Employee Director receiving an Award under the Plan
shall enter into a Stock Option Agreement with the Company in a form specified by the Committee.
Each such Non- Employee Director shall agree to the restrictions, terms and conditions of the Award
set forth therein and in the Plan.

     13.3 DESIGNATION OF BENEFICIARY. Each Non-Employee Director to whom an Award has been made
under the Plan may designate a beneficiary or beneficiaries to exercise any Option or to receive
any payment which under the terms of the Plan and the relevant Stock Option Agreement may become
exercisable or payable on or after the Non-Employee Director’s death. At any time, and from time to
time, any such designation may be changed or cancelled by the Non-Employee Director without the
consent of any such beneficiary. Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until received by the
Committee. If no beneficiary has been designated by a deceased Non-Employee Director, or if the
designated beneficiaries have predeceased the Non-Employee Director, the beneficiary shall be the
Non-Employee Director’s estate. If the Non-Employee Director designates more than one beneficiary,
any payments under the Plan to such beneficiaries shall be made in equal shares unless the
Non-Employee Director has expressly designated otherwise, in which case the payments shall be made
in the shares designated by the Non-Employee Director.

     13.4 OBLIGATION TO REELECT. Nothing in this Plan shall be deemed to create any obligation on
the part of the Board of Directors to nominate any Director for reelection by the Company’s share
owners.

     13.5 GOVERNING LAW. The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Delaware, without reference to the principles
of conflict of laws thereof. Any titles and headings herein are for reference purposes only, and
shall in no way limit, define or otherwise affect the meaning, construction or interpretation of
any provisions of the Plan.

     14. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be effective upon its approval by the
Board and adoption by the Company, subject to the approval of the Plan by the Company’s share
owners in accordance with the Internal Revenue Code. If share owner approval is not obtained at the
2000 Annual Meeting of Share Owners, the Plan shall be nullified. The Plan shall terminate on
February 17, 2010, unless terminated earlier by the Board.

As adopted by the Board on February 18, 2000.

	 	 	 
	 

	 	KELLOGG COMPANY
	 

	 	One Kellogg Square
	 

	 	Battle Creek, MI 49016-3599

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