DEF 14A

SCHEDULE 14A
(Rule 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

      Filed by the registrant   

      Filed by a party other than the registrant   

      Check the appropriate box:

Preliminary proxy statement	Confidential, for use of the
	Commission only (as permitted by
	Rule 14a-6(e)(2).

         Definitive proxy statement.

         Definitive additional materials.

         Soliciting material pursuant to Rule 14a-12.

Kellogg Company

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

      Payment of filing fee (check the appropriate box):

         No fee required.

         Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

      (1) Title of each class of securities to which transaction applies:

      (2) Aggregate number of securities to which transaction applies:

      (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

      (4) Proposed maximum aggregate value of transaction:

      (5) Total fee paid:

         Fee paid previously with preliminary materials.

         Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

      (1) Amount Previously Paid:

      (2) Form, Schedule or Registration Statement No.:

      (3) Filing Party:

      (4) Date Filed:

KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599

Dear Share Owner:

It is my pleasure to invite you to attend the 2002 Annual Meeting of Share Owners of Kellogg Company. The meeting will be held at 1:00 p.m. on Friday, April 26, 2002, at the W. K. Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan.

The following pages contain the formal Notice of the Annual Meeting and the Proxy Statement. Please review this material for information concerning the business to be conducted at the meeting and the nominees for election as directors. Attendance at the Annual Meeting will be limited to Share Owners only. If you plan to attend the meeting, please detach the Admission Ticket attached to your proxy card and bring it to the meeting.

If you are a Share Owner whose shares are not registered in your own name or you will be receiving your materials electronically and you plan to attend, please request an Admission Ticket by writing to: Kellogg Company Share Owner Services, One Kellogg Square, Battle Creek, MI 49016-3599. Evidence of your stock ownership, which you may obtain from your bank, stockbroker, etc., must accompany your letter. Share Owners without tickets will only be admitted to the meeting upon verification of stock ownership.

Share Owners needing special assistance at the meeting are requested to contact Share Owner Services at the address listed above.

Your vote is important. Whether you plan to attend the meeting or not, I urge you to vote your shares as soon as possible. Please either sign and return the accompanying card in the postage-paid envelope or instruct us by telephone or via the Internet as to how you would like your shares voted. This will ensure representation of your shares if you are unable to attend. Instructions on how to vote your shares by telephone or via the Internet are on the proxy card.

Sincerely,

Carlos M. Gutierrez
Chairman of the Board,
President and Chief Executive Officer

March 20, 2002

KELLOGG COMPANY

One Kellogg Square

Battle Creek, Michigan 49016-3599

NOTICE OF ANNUAL MEETING OF SHARE OWNERS

TO BE HELD APRIL 26, 2002

TO THE SHARE OWNERS:

      The Annual Meeting of Share Owners of Kellogg Company, a Delaware corporation, will be held at 1:00 p.m. on Friday, April 26, 2002, at the W. K. Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan, for the following purposes:

1.	To elect four directors for a three-year term to expire at the 2005 Annual Meeting of Share Owners;
2.	To approve the Kellogg Company 2002 Employee Stock Purchase Plan;
3.	To approve the Kellogg Company Senior Executive Annual Incentive Plan; and
4.	To take action upon any other matters that may properly come before the meeting, or any adjournments thereof.

      Only Share Owners of record at the close of business on March 4, 2002, will receive notice of and be entitled to vote at the meeting or any adjournments thereof.

By Order of the Board of Directors,

Janet Langford Kelly

Executive Vice President — Corporate Development and Administration,

General Counsel and Secretary

March 20, 2002

ELECTRONIC VOTING:

You may now vote your shares by telephone or over the Internet.

Voting electronically is quick, easy, and saves the Company money.

Just follow the instructions on your proxy card.

ELECTRONIC DELIVERY:

Reduce paper mailed to your home and help lower the Company’s printing and postage costs!

The Company is pleased to offer the convenience of viewing Proxy Statements, Annual Reports to Share Owners, and related materials on-line. With your consent, we will stop sending paper copies of these documents until you notify us otherwise.

To participate, follow the easy directions below.

You will receive notification when the materials are available for review.

ACT NOW. . . . IT’S FAST AND EASY

Just follow these 4 easy steps:

1.	Log onto the internet at www.icsdelivery.com/kelloggs.
2.	Enter your Social Security or Tax I.D. Number (as printed on your check or statement)
3.	Enter your e-mail address
4.	Enter a PIN number of your choice which will be used for electronic voting.

TABLE OF CONTENTS

EX-99.1 Form of Proxy Card

EX-99.2 2002 Employee Stock Purchase Plan

EX-99.3 Senior Executive Annual Incentive Plan

KELLOGG COMPANY

ONE KELLOGG SQUARE

BATTLE CREEK, MICHIGAN 49016-3599

PROXY STATEMENT

FOR THE ANNUAL MEETING OF SHARE OWNERS

TO BE HELD ON FRIDAY, APRIL 26, 2002

Solicitation of Proxy

      This Proxy Statement and the accompanying Proxy are furnished to Share Owners of Kellogg Company in connection with the solicitation of proxies for use at the Annual Meeting of Share Owners of the Company to be held in Battle Creek, Michigan, on Friday, April 26, 2002, or any adjournments thereof. The enclosed Proxy is solicited by the Board of Directors of the Company.

Mailing Date

      The Annual Report of the Company for 2001 including financial statements, the Notice of Annual Meeting, this Proxy Statement, and the Proxy were first mailed to Share Owners on March 20, 2002.

Who Can Vote — Record Date

      The record date for determining Share Owners entitled to vote at the Annual Meeting is March 4, 2002. Each of the 407,680,563 shares of common stock of the Company issued and outstanding on that date is entitled to one vote at the Annual Meeting.

How to Vote — Proxy Instructions

      You may vote your shares either (1) over the telephone by calling a toll-free number, (2) by using the Internet, or (3) by mailing in your proxy card. Share Owners who hold their shares in “street name” must vote their shares in the manner prescribed by their brokers.

      The telephone and Internet voting procedures have been set up for your convenience and have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. If you would like to vote by telephone or by using the Internet, please refer to the specific instructions on the proxy card. The deadline for voting by telephone or via the Internet is 11:59 p.m. Eastern Daylight Time on Thursday, April 25, 2002. If you wish to vote using the proxy card, complete, sign, and date your proxy card and return it to us before the meeting.

      Whether you choose to vote by telephone, over the Internet, or by mail, you may specify whether your shares should be voted for all, some, or none of the nominees for director (Proposal 1 on the proxy card) and whether you approve, disapprove, or abstain from voting on the Kellogg Company 2002 Employee Stock Purchase Plan (Proposal 2 on the proxy card) and the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 3 on the proxy card).

      If you do not specify on your proxy card, or when giving your proxy by telephone or over the Internet, how you want to vote your shares, we will vote them “For” the election of all nominees for director as set forth under “Election of Directors” (Proposal 1) below, “For” Proposal 2, “For” Proposal 3, and otherwise at the discretion of the persons named in the proxy card.

      When a properly executed proxy is received, the shares represented thereby, including shares held under the Company’s Dividend Reinvestment Plan, will be voted by the persons named as the proxy according to each Share Owner’s directions. Proxies will also be considered to be voting instructions to the applicable Trustee with respect to shares held in accounts under the Company’s Savings and Investment Plans.

Revocation of Proxies

      You may revoke your proxy at any time before it is exercised in any of three ways:

(1)	by submitting written notice of revocation to the Company’s Secretary;
(2)	by submitting another proxy by telephone, via the Internet, or by mail that is later dated and, if by mail, that is properly signed; or
(3)	by voting in person at the meeting.

Quorum

      A quorum of Share Owners is necessary to hold a valid meeting. A quorum will exist if the holders of a majority of the votes entitled to be cast by the Share Owners at the Annual Meeting are present, in person or by proxy. Broker “non-votes” and abstentions are counted as present at the Annual Meeting for purposes of determining whether a quorum exists. A broker “non-vote” occurs when a nominee, such as a bank or broker, holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Under New York Stock Exchange rules, nominees would have discretionary voting power for the election of directors (Proposal 1) but not for approval of the Kellogg Company 2002 Employee Stock Purchase Plan (Proposal 2) or approval of the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 3).

Required Vote

      The nominees for director receiving a plurality of the votes cast at the Annual Meeting will be elected directors. “Plurality” means that the nominees who receive the largest number of votes cast are elected as directors. For that reason, any shares not voted for the election of nominees will not affect the outcome of the election of directors. Similarly, any shares voted against the election of nominees will result in those nominees receiving fewer votes, but will otherwise not affect the outcome of the election of directors. If any nominee is unable or declines to serve, proxies will be voted for the balance of those named and for such person as shall be designated by the Board to replace any such nominee. However, the Board does not anticipate this will occur.

      The affirmative vote of the holders of a majority of the shares present and entitled to vote at the Annual Meeting is necessary to approve the Kellogg Company 2002 Employee Stock Purchase Plan (Proposal 2) and the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 3). Shares present but not voted because of abstention will have the effect of a “no” vote on Proposal 2 and Proposal 3. Shares subject to a broker “non-vote” will not be considered as present with respect to Proposal 2 or Proposal 3 and will not affect the outcome on those proposals.

Other Business

      The Company does not intend to bring any business before the meeting other than that set forth in the Notice of Annual Meeting and described in this Proxy Statement. However, if any other business should properly come before the meeting, the persons named in the enclosed proxy card intend to vote in accordance with their best judgment on such business and on any matters dealing with the conduct of the meeting pursuant to the discretionary authority granted in the proxy.

Costs

      The Company pays for the preparation and mailing of the Notice of Annual Meeting and Proxy Statement. We have also made arrangements with brokerage firms and other custodians, nominees, and fiduciaries for forwarding proxy-soliciting materials to the beneficial owners of the common stock of the Company at our expense.

2

SECURITY OWNERSHIP

Five-Percent Holders

      The following table shows each person who, based upon their most recent filings with the Securities and Exchange Commission, beneficially owns more than five percent (5%) of the Company’s common stock.

				Percent of Class on
Beneficial Owner	Shares Beneficially Owned			December 31, 2001
W. K. Kellogg Foundation Trust(1) c/o The Bank of New York Company, Inc. One Wall Street New York, NY 10286		128,037,540 shares(2	)		31.4	%
George Gund III 39 Mesa Street San Francisco, CA 94129		37,958,748 shares(3	)		9.3	%
KeyCorp 127 Public Square Cleveland, OH 44114-1306		33,853,478 shares(4	)		8.35	%
Capital Group International, Inc. 11100 Santa Monica Boulevard Los Angeles, CA 90025		21,467,230 shares(5	)		5.3	%

(1)	The trustees of the W. K. Kellogg Foundation Trust (the “Trust”) are Carlos M. Gutierrez, William C. Richardson, Jonathan T. Walton, and The Bank of New York. The W. K. Kellogg Foundation, a Michigan charitable corporation (the “Foundation”), is the sole beneficiary of the Trust. Under the terms of the Trust, if a majority of the trustees of the Trust (which majority must include the corporate trustee) are unable to agree, the Foundation has the power to direct the voting of the common stock held in the Trust. With certain limitations, the Foundation also has the power to select successor trustees of the Trust and to remove any trustee. The Trust requires that at least one trustee of the Trust be a trustee of the Foundation.
(2)	The Bank of New York is a trustee of the Trust and shares voting and investment power with respect to shares owned by the Trust with the other three trustees. The Bank of New York and its subsidiaries hold shares for various persons in various fiduciary capacities. The Bank of New York has sole voting power for 210,217 shares, shared voting power for 129,027,868 shares (including those shares beneficially owned by the Trust), sole investment power for 136,292 shares, and shared investment power for 128,115,183 shares (including those shares beneficially owned by the Trust).
(3)	George Gund III has sole voting power for 224,000 shares, shared voting power for 37,734,748 shares, and shared investment power for 7,505,492 shares. Of the shares over which Mr. Gund has shared voting and investment power, 4,163,800 shares are held by a nonprofit foundation of which Mr. Gund is one of eight trustees and one of twelve members. Mr. Gund disclaims beneficial ownership as to all 4,163,800 of these shares. Gordon Gund, a director of the Company, is a brother of George Gund III and may be deemed to share voting or investment power over 3,117,692 shares shown as beneficially owned by George Gund III, as to which shares Gordon Gund disclaims beneficial ownership.
(4)	KeyCorp, as trustee for certain Gund family trusts included under (3) above, as well as other trusts, has sole voting power for 3,548,083 shares, shared voting power for 5,100 shares (including certain of the shares beneficially owned by George Gund III), sole investment power for 33,301,846 shares, and shared investment power for 551,632 shares.
(5)	Capital Group International, Inc. is the parent holding company of a group of investment management companies, including a bank, that hold sole voting power for 18,466,740 shares and sole investment power for 21,467,230 shares. Capital Group International, Inc. disclaims beneficial ownership over these shares.

3

Officer and Director Stock Ownership

      The following table shows the number of shares of common stock of the Company beneficially owned as of February 1, 2002 (except as otherwise indicated), by each director and nominee for director, each executive officer included in the Summary Compensation Table, and all directors, nominees, and executive officers as a group.

	Common Stock
Name	Shares Beneficially Owned(1)		Units(2)
Benjamin S. Carson, Sr.(3)		15,497		—
John T. Dillon(3)		13,079		—
Claudio X. Gonzalez(3)		24,178		9,370
Gordon Gund(3)(5)		37,698		32,784
Carlos M. Gutierrez(4)(6)		1,025,471		—
Alan F. Harris(7)		410,178		—
James M. Jenness(3)		112,079		2,557
Dorothy A. Johnson(3)		24,382		5,529
L. Daniel Jorndt(3)(8)		10,313		—
Ann McLaughlin Korologos(3)		24,574		8,685
A. D. David Mackay		245,418		—
William D. Perez(3)		13,555		—
King T. Pouw		151,857		—
Sam K. Reed		583,500		—
William C. Richardson(3)(4)		17,325		8,233
John L. Zabriskie(3)		20,574		5,928
All directors, nominees, and executive officers as a group(9)(10)		3,156,609		58,925

(1)	Includes the following number of shares which the named persons have the right to acquire through exercise of an option or otherwise by April 1, 2002: Dr. Carson, 10,000 shares; Mr. Dillon, 8,750 shares; Mr. Gonzalez, 10,000 shares; Mr. Gund, 10,000 shares; Mr. Gutierrez, 878,998 shares; Mr. Harris, 374,966 shares; Mr. Jenness, 108,750 shares; Ms. Johnson, 10,000 shares; Ms. McLaughlin Korologos, 10,000 shares; Mr. Mackay, 236,400 shares; Mr. Perez, 10,000 shares; Mr. Pouw, 134,346 shares; Mr. Reed, 583,500 shares; Dr. Richardson, 10,000 shares; Dr. Zabriskie, 10,000 shares; and all directors, nominees, and executive officers as a group, 2,775,220 shares.
(2)	Represents the number of common stock units held under the Deferred Compensation Plan for Non-Employee Directors as of February 1, 2002. The units have no voting rights.
(3)	Includes the following number of shares held in the Company’s Grantor Trust for Non-Employee Directors which are subject to restrictions on investment: Dr. Carson, 5,497 shares; Mr. Dillon, 3,328 shares; Mr. Gonzalez, 11,392 shares; Mr. Gund, 11,298 shares; Mr. Jenness, 3,329 shares; Ms. Johnson, 4,652 shares; Mr. Jorndt, 313 shares; Ms. McLaughlin Korologos, 11,096 shares; Mr. Perez, 3,555 shares; Dr. Richardson, 6,925 shares; Dr. Zabriskie, 8,574 shares; and all directors as a group, 70,096 shares.
(4)	Does not include shares owned by the W. K. Kellogg Foundation Trust as to which Mr. Gutierrez and Dr. Richardson, as trustees of the Trust, share voting and investment power or shares as to which the Trust or the Foundation have current beneficial interests.
(5)	Includes 10,000 shares owned by Mr. Gund’s wife. Gordon Gund disclaims beneficial ownership of the shares beneficially owned by George Gund III.
(6)	Includes 2,081 shares held for the benefit of Mr. Gutierrez’s children, over which he disclaims beneficial ownership, and 58,570 shares owned by Mr. Gutierrez’s wife.
(7)	Includes 2,725 shares owned by Mr. Harris’ wife.
(8)	As of March 1, 2002.

4

(9)  Includes 73,051 shares owned by spouses; 2,081 shares owned by, or held for the benefit of, children, over which the applicable director, nominee, or executive officer disclaims beneficial ownership; 33,460 shares held in the Company’s Savings and Investment Plans, which contain some restrictions on investment; and 48,516 restricted shares, which contain some restrictions on investment.

(10)  Represents less than one percent of the Company’s issued and outstanding common stock.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers, and greater-than-10% Share Owners to file reports with the Securities and Exchange Commission (“SEC”). SEC regulations require the Company to identify anyone who filed a required report late during the most recent fiscal year. Based on our review of these reports and written certifications provided to the Company, we believe that all of these reporting persons timely complied with their filing requirements, except that Dorothy A. Johnson, a director, failed to timely file two reports for the reinvestment of 23 shares in 2000 and the purchase for cash of 97 shares in 2001.

Report of the Audit Committee

      The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Committee is composed of five independent directors, met five times in 2001, and operates under a written charter originally approved by the Board of Directors in 2000. Certain revisions contained in the current version, attached as Exhibit A, have been approved by the Committee and will be submitted for approval to the Board of Directors at its next meeting. Management has the primary responsibility for the financial statements and the reporting process, including the Company’s systems of internal controls. As provided in the Charter, the Committee’s oversight responsibilities include monitoring the integrity of the Company’s financial statements (including reviewing financial information, the systems of internal controls, the audit process and the independence and performance of the Company’s internal and external auditors) and the company’s compliance with legal and regulatory requirements. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements to be included in the Annual Report on Form 10-K with management, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls.

      The Committee reviewed with the independent auditors, PricewaterhouseCoopers LLP, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality and acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the Committee under generally accepted auditing standards. In addition, the Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communications With Audit Committees.

      The Committee has discussed with the independent auditors the auditors’ independence from the Company and its management, including matters in the written disclosures and the letter from the independent auditors required by Independent Standards Board Standard No. 1, Independence Discussions With Audit Committees. The Committee also has considered whether the provision by the auditors of non-audit professional services (including professional services for financial information systems design and implementation and other services, the fees for which during 2001 are listed below) is compatible with maintaining the auditors’ independence. In this regard, the Committee considered the representation of PricewaterhouseCoopers LLP that they will be spinning off their consulting unit as soon as practicable.

      The Committee also discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Committee meets periodically with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

      In reliance on the reviews and the discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year

5

ended December 31, 2001, for filing with the SEC. The Committee also evaluated and recommended to the Board the reappointment of the Company’s independent auditors for the Company’s 2002 fiscal year.

AUDIT COMMITTEE (as of February 21, 2002)

Ann McLaughlin Korologos, Chairman
John T. Dillon
Dorothy A. Johnson
William D. Perez
John L. Zabriskie

Audit Fees

      The aggregate amount of fees billed to the Company by PricewaterhouseCoopers LLP for professional services rendered for the audit of the Company’s consolidated financial statements for 2001 and for reviews of the Company’s financial statements included in the Company’s Quarterly Reports on Form 10-Q during 2001 was approximately $1,800,000.

Financial Information Systems Design and Implementation Fees

      The aggregate amount of fees billed to the Company by PricewaterhouseCoopers LLP for professional services described in Paragraph (c)(4)(ii) of Rule 2-01 of SEC Regulation S-X which were rendered to the Company for 2001 was approximately $14,300,000.

All Other Fees

      The aggregate amount of all other fees billed to the Company by PricewaterhouseCoopers LLP for services which were rendered to the Company for 2001 was $7,720,000. These other fees include services provided in connection with required SEC filings and other acquisition procedures, debt offerings, benefit plan audits, income tax consulting and compliance, and accounting advisory services.

Proposal 1.

ELECTION OF DIRECTORS

      The Amended Restated Certificate of Incorporation and the Bylaws of the Company provide that the Board of Directors shall be comprised of not less than seven nor more than fifteen directors divided into three classes as nearly equal in number as possible and that each director shall be elected for a term of three years with the term of one class expiring each year.

      Four directors are to be elected at the Annual Meeting to serve for a term ending at the 2005 Annual Meeting of Share Owners, and the proxies cannot be voted for a greater number of persons than the number of nominees named. There are currently thirteen members of the Board. Mr. Sam K. Reed is not standing for re-election and will be resigning as Vice Chairman effective March 26, 2002. The Board thanks him for his service.

      The Board of Directors recommends that the Share Owners vote “FOR” the following nominees: Claudio X. Gonzalez, Carlos M. Gutierrez, William C. Richardson, and John L. Zabriskie. Each nominee was proposed by the Nominating and Corporate Governance Committee for consideration by the Board and presentment to the Share Owners.

Nominees for Election for a three-year term expiring at the 2005 Annual Meeting

CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 67, has served as a director of the Company since 1990. In 1973, he was named Chairman of the Board and Chief Executive Officer of Kimberly-Clark de Mexico, S.A. de C.V., a producer of consumer disposable tissue products and writing and other papers. He is also a director of Kimberly-Clark Corporation; General Electric Company; The Home Depot; Investment Co. of America; Grupo ALFA; Grupo Modelo; Grupo Carso; Grupo Televisa; America Movil; and The Mexico Fund. Mr. Gonzalez is also an advisory director of Unilever NV/ PLC and is on the J. P. Morgan Chase International Advisory Council.

6

CARLOS M. GUTIERREZ. Mr. Gutierrez, age 48, has served as a director of the Company since January 1999. Mr. Gutierrez is Chairman of the Board, a position he has held since April 2000, and President and Chief Executive Officer of the Company, positions he has held since April 1999. Mr. Gutierrez joined Kellogg de Mexico in 1975. He was appointed Executive Vice President and President, Kellogg Asia-Pacific in 1994, Executive Vice President-Business Development in 1996, and President and Chief Operating Officer in 1998. He is also a director of Colgate-Palmolive Company and a trustee of the W. K. Kellogg Foundation Trust.

WILLIAM C. RICHARDSON. Dr. Richardson, age 61, has served as a director of the Company since 1996. He is President and Chief Executive Officer and a member of the Board of Trustees of the W. K. Kellogg Foundation, and a trustee of the W. K. Kellogg Foundation Trust. He is also a director of CSX Corporation and The Bank of New York Company, Inc.

JOHN L. ZABRISKIE. Dr. Zabriskie, age 62, has served as a director of the Company since 1995. In 2001, he became President of Lansing Brown Investments, LLC, a firm which makes investments in start-up life science companies, as well as Chairman of the Board of Directors of MacroChem Corporation. In 1999, he retired as Chief Executive Officer of NEN Life Science Products, Inc., a position he had held since 1997. From November 1995 to January 1997, Dr. Zabriskie served as President and Chief Executive Officer of Pharmacia & Upjohn, Inc. Dr. Zabriskie is also a director of Biomira, Inc.; Cubist Pharmaceuticals, Inc.; Mimeon, Inc.; Biospecific, LLC; Nanopharma; Telenome; Puretech Ventures; Array Biopharma; and MacroChem Corporation.

Continuing Directors to serve until the 2003 Annual Meeting

JOHN T. DILLON. Mr. Dillon, age 63, has served as a director of the Company since 2000. He has been Chairman of the Board and Chief Executive Officer of International Paper Company since 1996. He is also a director of Caterpillar Inc. He is the Chairman of the Business Roundtable and National Council on Economic Education. He is a member of the Advisory Committee for Trade Policies and Negotiation and a former Chairman of the American Forest and Paper Association.

JAMES M. JENNESS. Mr. Jenness, age 55, has served as a director of the Company since 2000. He is Chief Executive Officer of Integrated Merchandising Systems, LLC, a leader in outsource management of retail promotion and branded merchandising. Before joining Integrated Merchandising Systems in 1997, Mr. Jenness served as Vice Chairman and Chief Operating Officer of the Leo Burnett Company from 1996 to 1997 and, before that, as Global Vice Chairman North America and Latin America from 1993 to 1996. Mr. Jenness is also a director of International Multifoods Corporation, Schwarz Company, and Integrated Merchandising Systems.

L. DANIEL JORNDT. Mr. Jorndt, age 60, was appointed a director of the Company in 2002. Mr. Jorndt is Chairman of the Board of Walgreen Co., the drugstore chain, a position he has held since 1999. He previously was Chief Executive Officer of Walgreen Co. from 1998 to 2002 and Chief Operating Officer and President of Walgreen Co. from 1990 to 1999.

WILLIAM D. PEREZ. Mr. Perez, age 54, has served as a director of the Company since 2000. He is President and Chief Executive Officer of S. C. Johnson & Son, Inc., a position he has held since 1997. Mr. Perez joined S. C. Johnson & Son, Inc. in 1970 and has held a number of senior positions. Mr. Perez is also a director of The May Department Stores Company and Hallmark Cards, Incorporated.

Continuing Directors to serve until the 2004 Annual Meeting

BENJAMIN S. CARSON, SR. Dr. Carson, age 50, has served as a director of the Company since 1997. He is Professor and Director of Pediatric Neurosurgery, The Johns Hopkins Medical Institutions, a position he has held since 1984. Dr. Carson is also a director of Costco Wholesale Corporation.

GORDON GUND. Mr. Gund, age 62, has served as a director of the Company since 1986. He is Chairman and Chief Executive Officer of Gund Investment Corporation, which manages diversified investment activities. Mr. Gund is the principal owner of the Cleveland Cavaliers NBA team. He is also a director of Corning Incorporated.

DOROTHY A. JOHNSON. Ms. Johnson, age 61, has served as a director of the Company since 1998. Ms. Johnson is President of Ahlburg Company, a philanthropic consulting agency, a position she has held since February 2000. In January 2000, she retired as President and Chief Executive Officer of the Council of Michigan Foundations, a position she had held since 1975. She has been a member of the Board of Trustees of the W. K. Kellogg Foundation

7

since 1980. Ms. Johnson is also a director of National City Bank of Michigan/ Illinois and the Corporation for National Service.

ANN MCLAUGHLIN KOROLOGOS. Ms. McLaughlin Korologos, age 60, has served as a director of the Company since 1989. She is currently Senior Advisor to Benedetto, Gartland & Company, Inc.; Chairman Emeritus of The Aspen Institute, a nonprofit organization; Vice Chairman, RAND Board of Trustees; and former U.S. Secretary of Labor. She is also a director of Microsoft Corporation; AMR Corporation (and its subsidiary, American Airlines); Host Marriott Corporation; Fannie Mae; Harman International Industries, Inc.; and Vulcan Materials Company.

ABOUT THE BOARD OF DIRECTORS

      The Board of Directors has the following standing committees: Executive Committee, Audit Committee, Compensation Committee, Finance Committee, Nominating and Corporate Governance Committee, Consumer Marketing Committee, and Social Responsibility Committee.

      The Executive Committee is generally empowered to act on behalf of the Board. The Executive Committee did not meet in 2001. The members of the Executive Committee are Mr. Gutierrez, Chairman, Dr. Carson, Mr. Gonzalez, Mr. Gund, Ms. McLaughlin Korologos, Dr. Richardson, and Dr. Zabriskie.

      The Audit Committee monitors the integrity of the Company’s financial reporting process by reviewing financial information, internal controls, the audit process and the independence and performance of the Company’s internal and external auditors. The Audit Committee also monitors the Company’s compliance with legal and regulatory requirements. It met five times in 2001. The members of the Audit Committee are currently Ms. McLaughlin Korologos, Chairman, Mr. Dillon, Mr. Jorndt (as of February 22, 2002), Ms. Johnson, Mr. Perez, and Dr. Zabriskie.

      The Compensation Committee reviews recommendations for compensating management personnel; determines, subject to Board approval, the compensation of the Chief Executive Officer; and provides advice and recommendations to the Board on these subjects. It met four times in 2001. The members of the Compensation Committee are Mr. Gonzalez, Chairman, Mr. Gund, Ms. McLaughlin Korologos, Dr. Richardson, and Dr. Zabriskie.

      The Finance Committee reviews and makes recommendations to the Board regarding the financial and capital structure of the Company, borrowing commitments, and other significant financial matters. It met three times in 2001. The members of the Finance Committee are Dr. Zabriskie, Chairman, Mr. Dillon, Mr. Gonzalez, Mr. Gund, Mr. Jenness, Ms. Johnson, and Dr. Richardson.

      The Nominating and Corporate Governance Committee advises the Board on corporate governance issues, investigates and reviews the qualifications of candidates, recommends nominees to the Board, and reviews the functioning of the Board and the fulfillment of its duties and responsibilities. It met four times in 2001. The members of the Nominating and Corporate Governance Committee are Mr. Gund, Chairman, Dr. Carson, Mr. Gonzalez, Ms. McLaughlin Korologos, and Dr. Zabriskie.

      The Social Responsibility Committee investigates and reviews the manner in which the Company discharges its social responsibilities and recommends to the Board policies, programs, and procedures it deems appropriate to enable the Company to carry out and discharge fully its social responsibilities. It met two times in 2001. The members of the Social Responsibility Committee are Dr. Carson, Chairman, Mr. Jenness, Ms. Johnson, and Dr. Richardson.

      The Consumer Marketing Committee reviews and makes recommendations to the Board on the Company’s marketing activities. It met one time in 2001. The members of the Consumer Marketing Committee are Mr. Jenness, Chairman, Mr. Gonzalez, Mr. Gund, Ms. Johnson, Ms. McLaughlin Korologos, Mr. Perez, and Dr. Richardson.

      The Board held eight meetings in 2001. All of the incumbent directors attended at least 75% of the total number of meetings of the Board and of all Board committees of which the directors were members during 2001.

Non-Employee Director Compensation and Benefits

      Each non-employee director receives an annual retainer fee of $25,000; $1,000 for each meeting of the Board or committee of the Board attended; $4,000 if he or she served as Chairman of a committee; and reimbursement for all expenses incurred in attending such meetings.

      Under the Non-Employee Director Stock Plan approved by Share Owners, each eligible non-employee director annually is granted options to purchase 5,000 shares of common stock and awarded 1,700 shares of common stock.

8

These shares are placed in the Kellogg Company Grantor Trust for Non-Employee Directors (the “Grantor Trust”). Under the terms of the Grantor Trust, shares are available to a director only upon termination of service on the Board.

      Under the Deferred Compensation Plan for Non-Employee Directors, non-employee directors may each year irrevocably elect to defer all or a portion of their cash compensation payable for the ensuing year. The amount deferred is credited to an account in the form of units equivalent to the fair market value of the Company’s common stock. If dividends are declared by the Board, a fractional unit representing the dividend is credited to the account of each participating director. A participant’s account balance is paid in cash upon termination of service as a director, over a period from one to ten years, at the election of the director.

      The Company maintains Director and Officer Liability Insurance, individually insuring the directors and officers of the Company against losses that they become legally obligated to pay resulting from their actions while performing duties on behalf of the Company. The Company also maintains travel accident insurance for each director.

      Prior to December 1995, the Company had a Director’s Charitable Awards Program, in which each director could name up to four organizations to which the Company would contribute an aggregate of $1 million upon the death of the director. In 1995, the Board voted to discontinue this program for directors first elected after December 1995.

      In addition to the standard benefits described above, James M. Jenness was granted a non-qualified stock option to purchase what is now 100,000 shares of the Company’s common stock at $27 per share, the fair market price of the stock on July 27, 2000. This option was initially for 300,000 shares and was to have vested in three installments, but only so long as Mr. Jenness provided specified consulting services to the Company. During 2001, the Company and Mr. Jenness agreed to terminate the consulting relationship and, consequently, the unvested portion of the option terminated. The option contains the AOF feature described in footnote (4) of the Summary Compensation Table.

9

EXECUTIVE COMPENSATION

Summary Compensation Table

      The following table provides information for the last three years concerning the compensation of the Company’s Chief Executive Officer and its four other most highly compensated executive officers.

										Long-Term Compensation
				Annual Compensation
										Restricted		Securities		Long-Term
								Other Annual		Stock		Underlying		Incentive		All Other
				Salary		Bonus		Compensation		Awards		Options		Plan Payouts		Compensation
Name and Principal Position		Year		($)		($)		($)(2)		($)(3)		(#)(4)		($)		($)(5)
Carlos M. Gutierrez			2001		887,500		1,277,600		—		382,500		789,763		-0-		10,880
	Chairman, President		2000		806,250		127,500		—		-0-		250,000		-0-		11,847
	and Chief		1999		638,750		461,700		—		-0-		83,037		-0-		11,647
	Executive Officer
Sam K. Reed(1)			2001		607,500		970,000		—		-0-		667,000		-0-		4,275,620
	Vice Chairman
A. D. David Mackay			2001		504,000		660,000		83,442		188,980		649,400		-0-		10,880
	Executive Vice		2000		346,667		63,000		187,067		16,498		160,000		-0-		10,680
	President		1999		243,750		94,050		251,179		-0-		24,200		-0-		10,400
Alan F. Harris			2001		515,000		275,000		39,538		210,000		163,545		-0-		10,880
	Executive Vice		2000		453,300		70,000		308,956		-0-		110,000		-0-		11,553
	President		1999		405,960		210,000		203,055		-0-		77,129		-0-		13,749
King T. Pouw			2001		360,075		425,000		30,882		134,520		96,127		-0-		10,880
	Executive Vice		2000		260,667		44,850		126,987		-0-		36,000		-0-		10,680
	President		1999		226,750		97,200		213,897		-0-		24,075		-0-		10,400

(1)	Sam K. Reed joined the Company and the Board in March 2001 upon the completion of the Keebler Foods Company acquisition.
(2)	Represents payments to or on behalf of Messrs. Harris, Mackay, and Pouw, primarily under the Company’s Expatriate Compensation Program and their relocation and moving expenses.
(3)	Messrs. Gutierrez, Mackay, Harris, and Pouw were awarded 13,947, 6,892, 7,657, and 4,906 shares, respectively, of restricted stock in February 2001 under the Company’s 2001 Long-Term Incentive Plan. These awards are valued at approximately $419,800, $207,450, $230,500, and $147,670, respectively, based on the closing price of Kellogg Company common stock on December 31, 2001. Mr. Mackay was also awarded 630 shares of restricted stock in March 2000 under the Company’s 1991 Key Employee Long Term Incentive Plan. This award is valued at approximately $18,963 based on the closing price of Kellogg Company common stock on December 31, 2001.
(4)	All the options granted contained an accelerated ownership option feature (“AOF”), including the AOF options described below. Under the terms of the original option grant, an AOF option is generally received when Company stock is surrendered to pay the exercise price of a stock option and related taxes. The holder of the option receives an AOF option for the number of shares surrendered. For AOF options, the expiration date is the same as the original option, and the option price is the fair market value of the Company’s stock on the date the AOF option is granted. During 2001 and 1999, respectively, Messrs. Gutierrez, Harris, and Pouw received the following amounts of AOF options, included in the Summary Compensation Table, from their surrender of Kellogg Company stock to exercise an original option: Mr. Gutierrez, 222,128 and 3,037; Mr. Harris, 50,445 and 31,129; and Mr. Pouw, 21,127 and 8,375.
(5)	Mr. Reed will receive $4,269,500 as part of a change in control bonus payment on the first anniversary of the acquisition of Keebler Foods Company, pursuant to the terms of his employment agreement. The other amounts represent Company matching contributions on behalf of each named individual to the Kellogg Company Salaried Savings and Investment Plan.

10

Employment and Change in Control Agreements

      The named executive officers have agreements with the Company which become operative only if a “change of control” (as defined therein) of the Company occurs. The agreements provide that, during the three-year period after the change of control, the officers are entitled to receive a monthly base salary at least equal to the highest monthly salary earned during the twelve months before the agreements became operative, as well as annual bonuses at least equal to the highest annual bonus received during the three years before the agreements became operative. The agreements also provide for their continued participation in benefit plans during the three-year period, with those plans to generally be no less favorable, in the aggregate, than those in effect during the one hundred twenty day period before the agreements became operative.

      In addition, if during the three-year period, any of such executive officers terminates his or her employment for “good reason” (as defined), or if the Company terminates his or her employment for reasons other than “cause” or “disability”, he or she will generally be entitled to receive, within thirty days after termination: (a) any unpaid salary through the date of termination, as well as a pro-rata bonus for the year of termination at target or, if higher, the bonus amount described below (the “Bonus Amount”); (b) three times the sum of his or her annual base salary and the Bonus Amount; and (c) the actuarial equivalent of the benefit that he or she would have received for three years of additional participation under the Company’s retirement plans. The bonus amounts used to determine the amounts described in clauses (a) and (b) above are both equal to the highest of (1) the highest annual bonus earned for the three most recent years ended before the agreement became operative, and (2) the most recent bonus (if any) earned for a year ended after the agreement became operative. A terminated executive officer would also continue to participate in the Company’s welfare benefit plans for three years after termination, would be eligible for continued vesting of his or her equity awards during this three-year period, and would receive outplacement benefits.

      In addition, under these agreements, the Company is obligated to pay each such executive officer a “gross up” payment to make him or her whole for any federal excise taxes on “excess parachute payments” owed on such severance payments and benefits or any other payments and benefits from the Company.

      Mr. Harris has an agreement with the Company providing that if his employment is terminated by the Company under certain conditions, or if he is required to relocate outside the United States, prior to July 1, 2004, he would be entitled to receive severance pay equal to the greater of two times the average of his prior two years’ base pay and actual bonus, or two times his salary and target bonus for the year in which the termination occurs, less applicable deductions. In the event a “change of control” occurs, Mr. Harris would generally receive the benefits described in the first two paragraphs of this Section in lieu of the payments described in this paragraph.

      Mr. Mackay has an agreement with the Company providing that if his employment is terminated by the Company under certain conditions prior to August 1, 2005, he would be entitled to severance pay equal to two years of salary and target bonus for the year in which the termination occurs. In the event of a “change in control,” Mr. Mackay would generally receive the benefits described in the first two paragraphs of this Section in lieu of the payments described in this paragraph.

      Mr. Reed, current Vice Chairman of the Company, has an agreement with the Company entered into in connection with the acquisition of Keebler Foods Company. Under the agreement, Mr. Reed was to be eligible to receive a base salary of at least $810,000, be eligible for a target annual bonus of 80% of his base salary, and receive the change in control bonus payment shown in the Summary Compensation Table one year after completion of the acquisition. He also received an option to purchase 500,000 shares of the Company’s common stock at the fair market value on the grant date, with portions of those options to vest on specified dates if certain performance measures were achieved, but with all of the options to vest one year after completion of the acquisition if his employment had not previously terminated. These options have the right to receive an AOF option described on page 10 only to the extent he is an active employee when exercised. The agreement also provided that, if during the one-year period after completion of the acquisition, Mr. Reed’s employment was terminated by the Company for reasons other than “cause” (as defined) or by Mr. Reed for “good reason” (as defined), he was to receive specified amounts and certain other benefits. The agreement also provides that Mr. Reed is to receive a “gross up” payment to make him whole for any federal excise taxes on “excess parachute payments” owed on any such amounts.

11

Option Grants in Last Fiscal Year

      The following table provides information regarding stock options granted during 2001 to the persons named in the Summary Compensation Table.

	Individual Grants
	Number of		% of Total
	Securities		Options
	Underlying		Granted to							Grant Date
	Options		Employees in		Exercise					Present
	Granted		Fiscal		Price		Expiration			Value
Name	(#)(1)		Year (%)		($/Share)		Date			($)(3)
C. M. Gutierrez		110,000		0.6	$	26.30		1/31/10	(2)	$	818,000
		567,400		3.3	$	27.425		2/16/11			4,403,000
		112,128		0.7	$	29.825		1/31/10	(2)		946,000
S. K. Reed		167,000		1.0	$	26.19		3/26/11		$	1,237,000
		500,000		2.9	$	26.19		3/26/11			3,705,000
A. D. D. Mackay		149,000		0.9	$	27.425		2/16/11		$	1,156,000
		500,000		2.9	$	26.19		3/26/11			3,705,000
A. F. Harris		113,100		0.7	$	27.425		2/16/11		$	878,000
		26,634		0.2	$	30.00		1/31/10	(2)		226,000
		23,811		0.1	$	27.40		1/31/10	(2)		185,000
K. T. Pouw		75,000		0.4	$	27.425		2/16/11		$	582,000
		9,626		0.1	$	27.40		1/31/10	(2)		75,000
		11,501		0.1	$	30.00		1/31/10	(2)		98,000

(1)	These stock options were granted under the Kellogg Company 2001 Long-Term Incentive Plan (the “2001 Incentive Plan”). The options have an exercise price equal to the fair market value of the common stock on the date of grant, generally expire ten years and one day after grant (if non-qualified options), and generally include (a) the right to pay the exercise price in cash or, subject to approval, with shares of stock previously acquired by the optionee; (b) the right to have shares of stock withheld by the Company to pay tax withholding obligations due in connection with the exercise; and (c) the right to receive an AOF option, which is described in footnote (4) on page 10 of this Proxy Statement. The options generally vest as follows: 50% of the options granted vest one year after the date of grant and 50% vest two years after the date of grant, with Mr. Reed’s options having slightly different terms, as described on page 11 of this Proxy Statement.
(2)	These are AOF options.
(3)	Grant date present value is determined using the Black-Scholes model. The model makes assumptions about future variables, so the actual value of the options may be greater or less than the values stated in the table. For new options, the calculations assume a dividend yield of 3.3%, volatility of approximately 28.6%, and a risk-free rate of return of approximately 4.8% based on the U. S. Treasury bill rate for three-year maturities on the grant date. In view of the Company’s experience and the inherent motivation to exercise options early in their terms because of the accelerated ownership feature, options were assumed to be outstanding for three years at the time of exercise. Optionees may decide to exercise their options either earlier or later than this assumed period, resulting in different values from those shown in the table. No downward adjustments were made to the resulting grant date option value to account for potential forfeiture of these options.

12

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

      The following table provides information regarding the pretax value realized from the exercise of stock options during 2001 and the value of in-the-money options held at December 31, 2001, by the persons named in the Summary Compensation Table.

					Number of Shares Underlying				Value of Unexercised,
					Unexercised Options at				In-the-Money Options at
	Shares				Fiscal Year-End(#)				Fiscal Year-End($)(1)
	Acquired on		Value
Name	Exercise(#)		Realized($)		Exercisable		Unexercisable		Exercisable		Unexercisable
C. M. Gutierrez		235,235	$	683,576		470,298		692,400	$	30,835	$	2,252,920
S. K. Reed		-0-		-0-		-0-		667,000	$	-0-	$	2,607,970
A. D. D. Mackay		-0-		-0-		111,700		729,400	$	400,160	$	2,754,805
A. F. Harris		55,125	$	252,427		268,343		168,100	$	64,230	$	626,000
K. T. Pouw		22,751	$	89,907		81,380		93,008	$	15,676	$	306,483

(1)  Based on the $30.10 per share closing price of Kellogg Company common stock on December 31, 2001.

Long-Term Incentive Plans-Awards in Last Fiscal Year

      The following table provides information regarding performance units granted during 2001 to the persons named in the Summary Compensation Table.

					Estimated Future Payouts Under
					Non-Stock Price-Based Plans
	Number of Shares,		Performance or Other
	Units or Maximum		Period Until Maturation		Threshold		Target		Maximum
Name	Other Rights(#)(1)		or Payout($)(2)		($)(3)		($)		($)
C. M Gutierrez		2,293,016		3 years	$	1,146,500	$	2,293,000	$	4,586,000
S. K. Reed		-0-		-0-		-0-		-0-		-0-
A. D. D. Mackay		603,800		3 years		301,900		603,800		1,207,600
A. F. Harris		457,200		3 years		228,600		457,200		914,400
K. T. Pouw		212,800		3 years		106,400		212,800		425,600

(1)	Awards were made in February 2001 under the 2001 Long-Term Incentive Plan of the Company for the achievement of cumulative cash flow targets for a three-year period ending on December 31, 2003. The award of units represents the right to receive shares of the Company’s common stock equal to the dollar award valued on the vesting date if the performance objectives are achieved.
(2)	The awards will be earned and vest in February 2004 according to the terms of the Plan and relevant documents. The 2001 Long-Term Incentive Plan contains a “change in control” provision.
(3)	No awards are earned unless the minimum threshold is attained.

Kellogg Company Retirement Plans

      Retirement benefits under the Kellogg Company Salaried Pension Plan (the “Pension Plan”), a defined benefit plan qualified under Section 401(a) of the Internal Revenue Code (the “Code”), are payable to salaried employees who have vested upon retirement at age 65 or in reduced amounts upon earlier retirement prior to age 65 in accordance with the Pension Plan. Benefits are based upon credited years of service and average annual compensation (salary and bonus) for the three consecutive years during the last ten years of employment producing the greatest average. Benefits are reduced by a portion of the retiree’s Social Security-covered compensation and, for retirees who were participants of a previous profit sharing plan, by certain amounts accrued pursuant to that plan. The Company also maintains a Supplemental Retirement Plan and an Excess Benefit Retirement Plan that provide for payment of benefits to all participants in the Pension Plan equal to the benefits that would have been payable under the Pension Plan but for certain limitations imposed by the Code. Estimated annual benefits payable upon retirement to persons of the specified compensation and years of credited service classifications, as reduced by Social Security benefits (assuming their present levels), are as shown in the following table. Such amounts assume payments in the form of a

13

straight life annuity and include the payment of benefits under the Company’s Supplemental Retirement Plan and Excess Benefit Retirement Plan.

      At December 31, 2001, the credited years of service under the Pension Plan for the executive officers named in the Summary Compensation Table were as follows: Mr. Gutierrez, 26 years; Mr. Mackay, 10 years; Mr. Harris, 17 years; and Mr. Pouw, 23 years. Mr. Reed is not covered by the Pension Plan. The compensation covered by the Pension Plan is equal to the amounts shown in the Summary Compensation Table as Salary and Bonus.

	Years of Service
Remuneration	10		15		25		35		45
$  300,000	$	43,828	$	65,742	$	109,570	$	153,397	$	198,397
$  500,000	$	73,828	$	110,742	$	184,570	$	258,397	$	333,397
$  750,000	$	111,328	$	166,992	$	278,320	$	389,647	$	502,147
$1,000,000	$	148,828	$	223,242	$	372,070	$	520,897	$	670,897
$1,500,000	$	223,828	$	335,742	$	559,570	$	783,397	$	1,008,397
$2,000,000	$	298,828	$	448,242	$	747,070	$	1,045,897	$	1,345,897

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

      The Compensation Committee of the Board of Directors is composed of non-employee, independent directors and is responsible for the establishment and oversight of executive compensation policies. The Company’s executive compensation program is significantly linked to Share Owner return. The emphasis is on pay for performance with individual, business unit, and corporate performance rewarded on a short- and long-term basis.

      The Company’s objective is to attract, retain, and motivate high-caliber executives who will deliver superior performance that enhances Share Owner value. To support this objective the Company has developed performance-based executive compensation plans with compensation opportunities targeted at the 50th percentile (base salary and annual bonus) and between the 50th and 65th percentiles (long-term incentives) of the Company’s peer group of companies. Awards will vary above or below the targets of the peer group based on performance.

Compensation Principles

      To achieve the Company’s objectives, the Committee’s review of executive compensation incorporates the following compensation principles:

•  Compensation should encourage behavior that exemplifies the values that the Company believes are essential in building long-term growth in sales and profit, enhancing its worldwide leadership position, and providing increased value for Share Owners. These shared values are being passionate about our business, brands, and food; having the humility and hunger to learn; striving for simplicity; acting with integrity and respect; being accountable; and loving success.

•  Compensation should be competitive with comparable organizations and should reward performance and contribution to the Company’s objectives.

•  As employees assume greater responsibilities, a larger proportion of their total compensation will be “at-risk” incentive compensation (both short- and long-term), subject to individual, business unit, and corporate performance measures.

•  Continuous improvement is expected in the defined targets and measures.

•  Equity-based incentives are an effective method of aligning the interests of employees and Share Owners and encouraging employees to think and act like owners.

      The Committee believes that a compensation program guided by these basic principles should work to ensure present and future leadership performance that will result in optimal returns to the Company’s Share Owners over time.

14

Total Compensation

      An executive’s total compensation is comprised of salary, annual bonus, long-term incentives, perquisites, and benefits. The target for total compensation for executives ranges between the median and the 65th percentile of a select group of eighteen companies (the “peer group”) varying by type of compensation as described below. These companies were chosen as a benchmark for establishing executive pay levels because of their superior reputation and performance and their relevance to Kellogg Company. Most of the companies that comprise the S&P Foods Group Index are included in this group.

Salaries

      Executive salaries are established through a survey of the peer group conducted by an independent compensation consultant. Executive salaries are targeted at the median of this group of companies.

      The Company’s Executive Compensation Deferral Plan is intended to ensure that compensation is deductible under Section 162(m) of the Internal Revenue Code. Pursuant to this plan the portion of any executive’s salary that is over $950,000 is automatically deferred. The deferred amount is credited to an account in the form of units that are equivalent to the fair market value of the Company’s common stock. The units are payable upon retirement.

Annual Bonuses

      Target bonuses are a percentage of the executive’s base salary and are targeted at the median of the peer group. The target bonus is adjusted for appropriate corporate, business unit, and individual performance factors, given the functions of the particular executive. Corporate performance was determined based on net sales, cash flow, and operating profit. In 2001, bonuses could range from 0% to 200% of the target bonus.

      In addition, the Company is asking the Share Owners to adopt a Senior Executive Annual Incentive Plan (the “Incentive Plan”), a performance-based plan intended to meet the deductibility requirements of IRC Section 162(m). The Compensation Committee administers the Incentive Plan. Awards are based on the achievement of pre-established performance goals, which may include long-term financial and non-financial objectives. With respect to the Chief Executive Officer (“CEO”), the factors are the same as those utilized by the Committee in its annual determination of his performance. The total of all bonuses granted under the Incentive Plan shall not exceed 1% of the Net Income (as defined in the Incentive Plan) of the Company and its subsidiaries. The maximum annual bonus that may be awarded to any participant under the Incentive Plan is $3,000,000.

Long-Term Incentives

      The Company’s long-term incentive program currently consists of grants of options to purchase shares of the Company’s common stock, stock appreciation rights, restricted shares, or performance units under the 2001 Long-Term Incentive Plan. The 2001 Long-Term Incentive Plan is designed to attract, retain, and reward key employees of the Company and strengthen the mutuality of interest between key employees and the Share Owners of the Company. Long-term incentives are targeted between the 50th and the 65th percentiles of the peer group.

      The Company believes that option grants under the 2001 Long-Term Incentive Plan meet the requirements for deductible compensation under Section 162(m). The Committee reserves the flexibility to award compensation outside of any plan qualifying under Section 162(m) should circumstances arise under which payment of such additional compensation would be in the best interests of the Company and its Share Owners.

      Pursuant to the 2001 Long-Term Incentive Plan, the Committee approved a program in early 2001 under which senior executives of the Company may receive a portion of their long-term incentives in performance units. This program is intended to focus senior management on critical multi-year operational goals, including cash flow and sales growth. The number of units earned would be based on the Company’s cumulative performance over a three-year period compared against one or more key performance measures and would be settled in shares of the Company’s common stock. The Committee has approved a second three-year cycle of this program commencing in 2002.

Chief Executive Officer Compensation

      For 2001, the Committee determined the salary, bonus, and long-term incentive awards of the CEO substantially in conformance with the policies described above for all other executives of the Company.

15

      The Committee evaluated the performance of the CEO based on the Company’s achievement of its long-term financial and non-financial objectives. The Committee has determined that the accountabilities for the CEO are business performance, strengthening the organization, and creating the future. The accountability for business performance includes stock price performance, operating profit and earnings per share growth, sales growth, and cash flow. The accountability for strengthening the organization includes developing the strongest possible senior management team, the strongest possible talent in core jobs within the organization, continuous upgrade of talent, and diversity in the workforce. Creating the future includes developing, monitoring, updating, and implementing long-term business strategies.

      In connection with the business performance metric, the Committee considered that Kellogg’s total Share Owner return was 18.8% in 2001, compared to a 4.8% rise in the S&P food index and an 11.9% decline in the S&P 500 index. Net sales (assuming the Company had owned Keebler in 2000) were below last year, due to a variety of factors related to implementing the Company’s new strategic plan, including the Keebler integration. The Company’s operating profit performance in 2001 also reflected the costs associated with the integration of Keebler. Earnings per share, while down versus last year due to increased amortization of goodwill and interest expense associated with the Keebler acquisition, significantly exceeded expectations. The Company generated an all-time record performance in cash flow, exceeding 2000’s results by 32% in spite of the cash outlays required to integrate Keebler and the increase in interest expense associated with the Keebler acquisition. The Committee determined that Mr. Gutierrez made significant progress in strengthening the organization, starting with the Executive Management Committee and including all levels of the Company’s leadership. The Committee believes that the actions that Mr. Gutierrez has taken during the year — as well as future plans he has discussed with the Committee — will create a stronger future for the Company. In this regard, the Committee took special note of the acquisition and integration of Keebler and the implementation of significantly different approaches to managing the business — including initiatives to stress value over volume and to manage for cash flow.

      The Committee does not assign relative weights or rankings to the foregoing factors, but instead makes a subjective determination based upon a consideration of all such factors. The Committee believes that Mr. Gutierrez’s total compensation for 2001 appropriately reflects the Company’s performance as measured against all factors described in the preceding two paragraphs.

COMPENSATION COMMITTEE

Claudio X. Gonzalez (Chairman)

Gordon Gund

Ann McLaughlin Korologos

William C. Richardson

John L. Zabriskie

February 21, 2002

16

Stock Performance Graph

      The following graph compares the yearly change in the Company’s cumulative, five-year total Share Owner return with the Standard and Poor’s 500 Stock Index (the “S&P 500”) and the Standard and Poor’s Foods Group Index (the “S&P Foods”). The graph assumes that $100 was invested on December 31, 1996, in each of the Company’s common stock, the S&P 500, and the S&P Foods, and assumes that all dividends were reinvested.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*

AMONG KELLOGG COMPANY, THE S&P 500 INDEX

AND THE S&P FOODS INDEX

	Cumulative Total Return
	12/96	12/97	12/98	12/99	12/00	12/01
KELLOGG COMPANY	100.00	154.53	108.95	101.06	89.64	106.47
S&P 500	100.00	133.36	171.47	207.56	188.66	166.24
S&P FOODS	100.00	143.32	155.10	122.01	154.45	157.41

*  $100 Invested on 12/31/1996 in Stock or Index — including reinvestment of dividends. Fiscal year ending December 31.

Copyright © 2002, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P%20Indexes.htm

17

Proposal 2.

APPROVAL OF KELLOGG COMPANY 2002 EMPLOYEE STOCK PURCHASE PLAN

      Upon the recommendation of the Compensation Committee (the “Committee”) of the Board of Directors, the Board of Directors has adopted, and is submitting for Share Owner approval, the Kellogg Company 2002 Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”) and is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. The ESPP was created to enable employees to become Share Owners through the purchase of shares of common stock, thereby correlating their interest in the Company’s growth, productivity, and profitability to that of all Share Owners. Under the ESPP, a maximum of 2,500,000 shares of common stock may be issued, with that number being subject to adjustment for corporate transactions affecting the common stock. The following summary of the ESPP is qualified in its entirety by reference to the full text of the ESPP as set forth as an exhibit to the Company’s Annual Report on Form 10-K for 2001 filed with the SEC.

      The affirmative vote of the holders of a majority of all shares present in person or by proxy at this Annual Meeting and entitled to vote is required to approve the ESPP. No purchase rights have been or will be offered pursuant to the ESPP unless the ESPP is approved by the Company’s Share Owners.

      The ESPP shall be administered by the Committee. Each employee, including any officer or director who is an employee, of the Company, and such subsidiaries as are designated by the Committee, will be eligible to participate in the ESPP, except for an employee who is covered by a collective bargaining agreement and whose decision not to participate in the ESPP was the subject of good faith negotiations between the Company, or a designated subsidiary, and a labor organization. To be eligible to participate in the ESPP, an employee must have been employed by the Company, or a designated subsidiary, as of the first date of a “purchase period” (as defined below). As of March 4, 2002, there were approximately 18,000 employees, including officers or directors who were employees, all of whom were expected to be eligible to participate. The number and amount of awards to be received or allocated to eligible employees under the ESPP in the future cannot now be determined.

      The ESPP permits participants to specify a fixed whole percentage of their compensation (up to ten percent) to be withheld during each payroll period during a calendar quarter (a “purchase period”). A participant may not change the percentage of compensation to be withheld during a purchase period. Payroll deductions are credited to an account established for each participant. No interest is credited to a participant’s account. At the end of each purchase period, funds withheld by the Company under the ESPP for the account of each participant will be used to purchase that number of shares of the Company’s common stock determined by dividing the amount in the participant’s account by the purchase price for that purchase period, subject to any applicable limits under the ESPP. The purchase price for the shares will be equal to the lesser of: (a) 85% of the fair market value of the common stock on the first day of the purchase period, and (b) 85% of the fair market value of the common stock on the last day of the purchase period (the “purchase price”).

      During any calendar year, no employee will be permitted to purchase under the ESPP shares of common stock with a fair market value in excess of $25,000, determined as of the first day of the purchase period. Furthermore, no employee will be permitted to purchase shares of common stock under the ESPP if following such purchase the employee would own stock possessing 5% or more of the total combined voting power or value of all classes of the Company’s stock outstanding. Rights to purchase shares under the ESPP are not transferable.

      A participant may voluntarily terminate his or her participation in the ESPP at any time, and his or her participation shall automatically terminate upon his or her termination of employment. Participants who voluntarily terminate participation may not rejoin the ESPP until the start of the next purchase period. Upon a participant’s termination of employment, all funds withheld by the Company under the ESPP for the account of each participant will be returned to the participant in cash without interest. Notwithstanding the foregoing, if a participant’s employment terminates as a result of his or her death, “disability,” or “retirement” (as such terms are defined in the ESPP), or if the Company terminates his or her employment without cause (as determined in good faith by the Company or a designated subsidiary), funds withheld prior to termination of employment may still be used to purchase shares under the ESPP. In addition, if a “change in control” (as such term is defined in the ESPP) occurs, withheld funds may be used to purchase shares of the Company’s common stock or the stock of a successor entity.

18

      Upon purchase, shares will be credited to an account established on behalf of each participant. In addition, unless a participant elects otherwise, any dividends paid with respect to shares of the Company’s common stock purchased by a participant under the ESPP and credited to his or her account will be reinvested in shares of the Company’s common stock. Physical stock certificates will be issued on request. However, if a participant sells or disposes of ESPP shares within one year of the applicable purchase date, then that participant shall be ineligible to participate in the ESPP for the next two full purchase periods.

      The ESPP may be amended by the Committee at any time, although no amendment shall be made to increase or decrease the number of shares authorized for issuance under the ESPP (other than for certain adjustments, as provided in the ESPP) and no amendment shall be made that would cause the ESPP to fail to satisfy the requirements of Section 423 of the Code. The ESPP will terminate upon the earliest to occur of: July 1, 2007, the date no more shares of common stock remain to be purchased under the ESPP, and the termination of the ESPP by the Board. The Board may terminate the ESPP at any time.

      The following is a summary of the U.S. federal income tax consequences that generally will arise with respect to participation in the ESPP and with respect to the sale of shares of the Company’s common stock acquired thereunder. This summary is not exhaustive, and an employee who is eligible to participate in the ESPP is advised to consult his or her own tax advisor with respect to the specific applicable tax consequences.

      A participant will not realize any taxable income upon enrollment in the ESPP or upon purchase of shares of the Company’s common stock thereunder. A participant will recognize income upon the sale or other disposition of shares purchased under the ESPP. If the participant sells or otherwise disposes of such shares within two years from the first day of the purchase period during which such shares were purchased, the participant will recognize ordinary income, and the Company will be entitled to a tax deduction, in an amount equal to the excess of the market price of the shares when sold over the purchase price. If a participant sells or otherwise disposes of such shares after this two-year period, the participant will recognize ordinary income in an amount equal to the lesser of (a) the excess of the fair market value of the shares on the first day of the applicable purchase period over the purchase price or (b) the excess of the fair market value of the shares at the time of disposition over the purchase price. The balance of any gain will be capital gain.

      The ESPP is to become effective July 1, 2002, if Share Owner approval is received. The closing price of a share of Company common stock on March 1, 2002, was $34.50.

      THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE KELLOGG COMPANY 2002 EMPLOYEE STOCK PURCHASE PLAN.

19

Proposal 3.

APPROVAL OF THE KELLOGG COMPANY SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN

      Pursuant to a recommendation of the Compensation Committee (the “Committee”) of the Board of Directors, the Board adopted the Kellogg Company Senior Executive Annual Incentive Plan (the “Plan”), subject to Share Owner approval. The Share Owners are now requested to approve the adoption of the Plan. The summary of the Plan which follows is qualified in its entirety by reference to the full text of the Plan as set forth as an exhibit to the Company’s Annual Report on Form 10-K for 2001 filed with the SEC.

      The affirmative vote of the holders of a majority of all shares present in person or by proxy at the Annual Meeting and entitled to vote is required to approve the Plan.

      The purposes of the Plan are to specifically motivate the Company’s selected senior executive officers toward achievement of performance goals; to encourage teamwork; and to reward performance with cash bonuses that vary in relation to the achievement of the pre-established performance goals.

      The Plan will be administered by the Committee, whose members qualify as “outside directors” as that term is defined under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Under the Plan, the Committee has the authority to select participants from senior executive officers holding the following titles: (i) Chairman, Vice Chairman, Kellogg Company Chief Executive Officer, or Kellogg Company President; (ii) Kellogg Company Executive Vice President; or (iii) Kellogg Company Senior Vice President. There currently are ten officers who hold one or more of these titles. The Committee also has the authority to determine the financial and other performance criteria (“Performance Goals”), and other terms and conditions, applicable to each participant’s bonus under the Plan (“Award”) which the participant may receive for services during the Measurement Period. The Measurement Period is one fiscal year, unless otherwise established by the Committee at the time the Performance Goals are established. With respect to each participant, the Committee will establish ranges of Performance Goals which correspond to various levels of Award amounts (“Award Opportunities”) for the Measurement Period. Once established, Performance Goals and Award Opportunities may be adjusted only to mitigate the unbudgeted impact of unusual or nonrecurring gains and losses, accounting changes, or other extraordinary events not foreseen at the time of establishment of such Performance Goals and Award Opportunities.

      The Performance Goals may be based on any one or more of the following measures (or the relevant change for any such measure): the Company’s earnings per share, return on equity, return on assets, return on invested capital, growth in sales and earnings, net sales, cash flow, discounted cash flow, cumulative cash flow, operating profits, pre-tax profits, post-tax profits, consolidated net income, unit sales volume, economic value added, costs, production, unit production volume, improvements in financial ratings, regulatory compliance, achievement of balance sheet or income statement objectives, market share and total return to stockholders (including both the market value of the Company’s stock and dividends thereon), and the extent to which strategic and business goals are met. Awards will be based on the achievement of such Performance Goals. The Committee has the authority to review and certify the achievement of the Performance Goals; interpret the Plan; and establish, amend, or rescind guidelines, rules, and regulations for the Plan’s administration. Negative discretion may be used by the Committee to reduce an Award. In no event, however, will an exercise of negative discretion to reduce the Award of a participant have the effect of increasing the amount of an Award otherwise payable to any other participant. There is no obligation to treat participants uniformly under the Plan.

      The total of all Awards payable to all participants for any Measurement Period shall not under any circumstances exceed one percent of the income from continuing operations of the Company and its subsidiaries, determined on a consolidated basis, and adjusted to exclude restructuring and disposition-related charges or credits, net of tax effects, and incremental and non-recurring integration costs and other financial impacts, net of tax, related to the business operations of an entity acquired by the Company (the “Maximum Bonus Awards Pool”). No participant can receive an Award for any Measurement Period greater than $3,000,000. In the event that the total of all Awards payable to participants should exceed the Maximum Bonus Awards Pool, the Award of each participant will be proportionately reduced such that the total of all such Awards paid is equal to the Maximum Bonus Awards Pool.

      In general, participants must remain employed by the Company through the last day of a fiscal period to be eligible to receive an Award payment. However, if a participant dies, becomes disabled, or retires, that participant’s Award will be based on the portion of the fiscal period during which the participant is employed. The Committee also may, in its discretion, pay a pro-rated Award to other participants who leave the employment of the Company or its

20

subsidiaries for other reasons during a fiscal period. If a participant’s employment terminates after completion of the fiscal period, but before payment of the Award, the terms of the grant will provide whether the Award shall be paid to a participant or forfeited.

      The Plan will replace the Company’s current Senior Executive Officer Performance Bonus Plan, which has expired, and will terminate on December 31, 2006. The Board and the Committee may generally amend or terminate the Plan at any time, although no amendment or termination may impair the rights of a participant under an outstanding award without that participant’s consent.

      The Awards payable under the Plan for services to be rendered in 2002 are not determinable. Had the Plan been in effect in 2001, the Awards that would have been paid would equal the 2001 bonuses shown in the Summary Compensation Table on page 10 of this Proxy Statement.

      If the required Share Owner approval is not obtained, the Committee will consider alternative incentive compensation arrangements which may or may not qualify under Section 162(m) as performance-based compensation.

      THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN.

Share Owner Recommendations for Director Nominees

      The Nominating and Corporate Governance Committee will consider Share Owner nominations for membership on the Board of Directors. For the 2003 Annual Meeting of Share Owners, nominations may be submitted to the Office of the Secretary, Kellogg Company, One Kellogg Square, Battle Creek, Michigan 49016-3599, which will forward them to the Chairman of the Nominating and Corporate Governance Committee. Recommendations must be in writing and must be received by the Company not earlier than December 1, 2002, and not later than January 30, 2003. Recommendations must also include certain other requirements specified in the Company’s Bylaws.

Share Owner Proposals for the 2003 Annual Meeting

      Share Owner proposals submitted for inclusion in the Company’s proxy statement for the 2003 Annual Meeting of Share Owners must be received by the Company no later than November 20, 2002. If a Share Owner raises a matter at the 2003 Annual Meeting of Share Owners, the Company may exercise discretionary authority (vote the shares in the discretion of the persons named in the proxy card) unless the Share Owner notifies the Company of the matter before February 5, 2003.

“Householding” of Proxy Materials

      The Securities and Exchange Commission adopted new rules that permit companies and intermediaries (e.g. brokers) to satisfy the delivery requirements for proxy statements with respect to two or more Share Owners sharing the same address by delivering a single proxy statement addressed to those Share Owners. This process, which is commonly referred to as “householding,” potentially means extra convenience for Share Owners and cost savings for companies.

      This year, a number of brokers with accountholders who are Share Owners will be “householding” our proxy materials. As indicated in the notice previously provided by these brokers to Share Owners, a single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from an affected Share Owner. Once you have received notice from your broker or the Company that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise.

      Share Owners who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker or, if a Share Owner is a direct holder of shares of common stock, he or she should submit a written request to Wells Fargo Shareowner Services, the Company’s transfer agent, at 161 North Concord Exchange, South St. Paul, MN 55075.

Independent Public Accountants

      PricewaterhouseCoopers LLP is the independent auditor for the Company. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting with the opportunity to make a statement if

21

he or she desires to do so. The PricewaterhouseCoopers LLP representative is also expected to be available to respond to appropriate questions at the meeting.

Annual Report on Form 10-K; No Incorporation by Reference

      Upon written request, the Company will provide any share owner, without charge, a copy of the Company’s Annual Report on Form 10-K for 2001 filed with the SEC, including the financial statements and schedules, but without exhibits. Direct requests to the Consumer Affairs Office, Kellogg Company, P.O. Box CAMB, Battle Creek, Michigan 49016-1986. You may also obtain this document and certain other of the Company’s SEC filings through the Internet at www.sec.gov.

      Notwithstanding any general language which may be to the contrary in any document filed with the SEC, the information in this proxy statement under the captions “REPORT OF THE AUDIT COMMITTEE, and “REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION (including the Stock Performance Graph)”, shall not be incorporated by reference into any document filed with the SEC.

By Order of the Board of Directors,

Janet Langford Kelly

Executive Vice President — Corporate Development and Administration,

General Counsel and Secretary

March 20, 2002

22

EXHIBIT A

KELLOGG COMPANY

BOARD OF DIRECTORS

AUDIT COMMITTEE

CHARTER

March 1, 2002

Organization

      There shall be a Committee of the Board of Directors to be known as the Audit Committee. The Audit Committee shall be composed of at least three (3) Directors, all of whom are “independent directors” as defined in the NYSE Listed Company Manual, as amended, and who possess an adequate level of “financial literacy” within a reasonable period of time after their appointment to the Audit Committee. “Financial literacy” means the ability to read and understand the Company’s fundamental financial statements. At least one member of the Audit Committee must have accounting or related financial management expertise.

Statement of Policy

      The Audit Committee shall assist the Board in fulfilling its oversight responsibilities by monitoring (1) the integrity of the Company’s financial statements, including reviewing financial information, the systems of internal controls, the audit process and the independence and performance of the Company’s internal and external auditors; and (2) the Company’s compliance with legal and regulatory requirements. In doing so, it is the responsibility of the Audit Committee to maintain free and open means of communication between the Directors, the independent auditors, the internal auditors and the financial management of the Company.

      The Committee generally will meet six times annually with members of the Company’s management, representatives of the independent auditors and internal auditing. Four of such meetings are expected to be by conference call prior to the release of the Company’s interim financial statements. The Committee may hold additional meetings with any of the above-named groups as appropriate.

Responsibilities

      In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible in order to best react to changing conditions and to ensure to the Directors and share owners that the corporate accounting and reporting practices of the Company are in accordance with all requirements and are of the highest quality.

      In carrying out these responsibilities, the Audit Committee will:

1)

Review and recommend to the Directors the independent auditors to be selected to audit the financial statements of the Company and its divisions and subsidiaries. The independent auditors are ultimately accountable to the Board and the Audit Committee, as representatives of the Company’s share owners. The Board and the Audit Committee have the ultimate authority and responsibility to select, evaluate, and, where appropriate, replace the independent auditors. The Audit Committee is responsible for actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services which may impact the objectivity and independence of the auditors and for taking or recommending to the Board appropriate action to ensure the independence of the auditors. The Audit Committee will review annually a written report from the independent auditors describing all relationships between the independent auditors and the Company.

2)

Meet with the independent auditors and financial management of the Company to review the scope and fees of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including the matters required to be discussed under Auditing Standards No. 61 relating to the conduct of the audit, and any comments or recommendations of the independent auditors. The Audit Committee will have a quarterly conference call prior to the filing of the relevant Report on

A-1

	Form 10-Q to review the Company’s interim financial results with the independent auditors and management.
3)	Review with the independent auditors, the Company’s internal auditor, and financial and accounting personnel, the adequacy and effectiveness of the accounting and financial controls of the Company, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable.
4)	Review the internal audit function of the Company including the independence and authority of its reporting obligations, the proposed audit plans for the coming year, the budget and qualifications of internal auditors and the coordination of such plans with the independent auditors.
5)	Receive a summary of completed internal audits and audit results, and a progress report on the proposed internal audit plan, with explanations for any deviations from the original plan.
6)	Review internal audit personnel and succession planning within the Company.
7)	Review the financial statements contained in the annual report to share owners with management and the independent auditors, including major issues regarding accounting and auditing principles and practices, to determine that the independent auditors are satisfied with the disclosure and content of the financial statements to be presented to the share owners. Review with management and the independent auditors the effect of regulatory and accounting initiatives, off-balance sheet structures, and changes in accounting principles and practices on the Company’s financial statements.
8)	Review with the independent auditors significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including an analysis of the effect of alternative GAAP methods on the Company’s financial statements and a description of any transactions as to which management obtained Statement on Auditing Standards No. 50 letters.
9)	Meet periodically with management and the independent auditors to review the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
10)	Provide sufficient opportunity for the internal and independent auditors to meet with the members of the Audit Committee without members of management present. Among the items to be discussed in these meetings are the independent auditors’ evaluation of the Company’s financial, accounting, and auditing personnel; any changes to the scope of the planned internal audit; any disputes or disagreements with management; and the cooperation that the independent auditors received during the course of the audit.
11)	Adopt guidelines for the Company’s hiring of employees of the independent auditors who were engaged on the Company’s account.
12)	The Committee shall approve the retention of the independent auditors for any non-audit service if the fees for such service exceed $500,000. The Chairperson of the Committee shall approve the retention of the independent auditors for any non-audit service if the fees for such service exceed $100,000 and are less than or equal to $500,000. The Company shall be permitted to retain the independent auditors for any non-audit service if the fees for such service are equal to or less than $100,000. The Committee shall review annually a description of all non-audit services performed by the independent auditors and the fees paid for such services.
13)	Review with the Company’s General Counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or governmental agencies.
14)	Review with management and the independent auditors any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company’s financial statements or accounting policies.
15)	Review with management and advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Conduct.
16)	Submit the minutes of all meetings of the Audit Committee to, or discuss the matters discussed at each Committee meeting with, the Board of Directors.

A-2

17)	Investigate any matter brought to its attention within the scope of its duties, with the power to retain and/or consult with special legal, accounting (including the national office of the independent auditors) or other consultants to advise the Committee for this purpose if, in its judgment, that is appropriate.
18)	Review and assess the adequacy of the Audit Committee Charter on an annual basis.

A-3

KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599

recycled

Exhibit No.		Description
	99.1	Form of Proxy Card
	99.2	Kellogg Company 2002 Employee Stock Purchase Plan
	99.3	Kellogg Company Senior Executive Annual Incentive Plan

EX-99.1

EXHIBIT 99.1

KELLOGG COMPANY ONE KELLOGG COMPANY BATTLE CREEK, MI 49016-3599	VOTE BY PHONE – 1-800-690-8903
	Use any touch-tone telephone to transmit your voting instructions anytime before 11:59 p.m. Eastern Daylight Time on April 25, 2002. Have your proxy card in hand when you call. You will be prompted to enter your 12-digit Control Number which is located below and then follow the simple instructions the Vote Voice provides you.
	VOTE BY INTERNET – www.proxyvote.com
	Use the Internet to transmit your voting instructions anytime before 11:59 p.m. Eastern Daylight Time on April 25, 2002. Have your proxy card in hand when you access the web site. You will be prompted to enter your 12-digit Control Number which is located below to obtain your records and create an electronic voting instruction form.
	VOTE BY MAIL –
	Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Kellogg Company, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

KELLOGG COMPANY To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.

The Kellogg Company Board of Directors recommends a vote FOR the following proposal. If you sign and return this card without marking, this proxy card will be treated as being FOR the following proposal. For
All Withhold
All For All
Except

1.	Election of Directors (terms expiring in 2005) Nominees:
	01) Claudio Gonzalez, 02) Carlos Gutierrez, 03)     William Richardson, 04) John Zabriskie

The Board of Directors also recommends a vote FOR the following two proposals. If you sign and return this card without marking, this proxy card will be treated as being FOR such proposals. NOTE: Please sign exactly as name(s) appear hereon. When signing as attorney, executor, administrator, trustee, or guardian, please give full name as such.

	For	Against	Abstain
2. Kellogg Company 2002     Employee Stock Purchase Plan
3. Kellogg Company     Senior Executive     Annual Incentive Plan

If you do not wish
to have your material householded as described in the enclosed document, please check the box to the right.
For address changes and/or comments, please check the box to the right.

Signature                          Date Signature (Joint Owners) Date

KELLOGG COMPANY
ADMISSION TICKET

You are cordially invited to attend the Annual Meeting of Share Owners of Kellogg Company to be held on Friday, April 26, 2002 at 1:00 p.m. at the W. K. Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan.

You should present this admission ticket in order to gain admittance to the meeting. This ticket admits only the Share Owner(s) listed on the reverse side and is not transferable. If your shares are held in the name of a broker, trust, bank or other nominee, you should bring a proxy or letter from the broker, trustee, bank or nominee confirming your beneficial ownership of the shares.

KELLOGG COMPANY
PROXY FOR ANNUAL MEETING OF SHARE OWNERS APRIL 26, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

     The undersigned appoints C. M. Gutierrez and W. C. Richardson, or each one or both of them as shall be in attendance at the meeting, as proxy or proxies, with full power of substitution, to represent the undersigned at the Annual Meeting of Share Owners of Kellogg Company to be held on April 26, 2002 and at any adjournments of the meeting, and to vote as specified on this Proxy the number of shares of common stock of Kellogg Company as the undersigned would be entitled to vote if personally present, upon the matters referred to on the reverse side hereof, and, in their discretion, upon any other business as may properly come before the meeting.

IMPORTANT – This Proxy is continued and must be signed and dated on the reverse side.

EX-99.2 4 k67869ex99-2.txt EX-99.2 2002 EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 99.2 KELLOGG COMPANY 2002 EMPLOYEE STOCK PURCHASE PLAN 1. Purpose. Kellogg Company (the "Company") has established this Kellogg Company 2002 Employee Stock Purchase Plan (the "Plan") to encourage and enable its eligible employees and the eligible employees of its Subsidiaries to acquire the Company's Common Stock, and to align more closely the interests of those individuals and the Company's share owners. The Company intends that the Plan qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. 2. Definitions. Unless the context clearly indicates otherwise, for purposes of the Plan, the following terms shall have the following meanings: (a) "Board" means the Board of Directors of Kellogg Company, as constituted from time to time. (b) "Beneficiary" means (i) the person designated by the Participant to receive benefits under a Company-sponsored and Company-paid life insurance program, if any, or (ii) the Participant's estate. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means the Compensation Committee of the Board. (e) "Common Stock" means the Common Stock, par value $0.25 per share, of the Company or any security of the Company issued by the Company in substitution or exchange therefor. (f) "Company" means Kellogg Company, a Delaware corporation, or any successor corporation to Kellogg Company. (g) "Compensation" means with respect to a Participant, the portion of the Participant's base salary, commissions or wages paid to the Participant during the applicable payroll period. (h) "Custodian" means the individual or organization appointed by the Plan Administrator to maintain custody of Participants' payroll deductions, purchase Common Stock under the Plan, and allocate Common Stock among Participants. (i) "Designated Subsidiary" means any Subsidiary that the Board has designated from time to time, in its sole discretion, as eligible to participate in the Plan. (j) "Disability" means disability as determined by the Committee in accordance with standards and procedures similar to those under the long-term disability plan of the Company or Designated Subsidiary, if any, or if the Participant is then a party to an effective employment agreement with the Company or Designated Subsidiary that defines disability, "Disability" means disability as defined in the Participant's then effective employment agreement. Subject to the first sentence of this paragraph, at any time that the Company or Designated Subsidiary does not maintain a long-term disability plan, "Disability" shall mean any physical or mental disability that is determined to be total and permanent by a physician selected in good faith by the Company or Designated Subsidiary. (k) "Effective Date" means July 1, 2002. (l) "Eligible Employee" means each Employee of the Company or a Designated Subsidiary. Notwithstanding the foregoing, any Employee who is covered by a collective bargaining agreement and whose decision not to participate in the Plan was the subject of good faith negotiations between the Company or a Designated Subsidiary and a labor organization will not be eligible to participate in the Plan, unless the decision not to participate in the Plan is revoked by the labor organization upon reasonable notice to the Company. (m) "Employee" means each and every person employed by the Company or a Designated Subsidiary, and whom the Company or Designated Subsidiary classifies as a common law employee; provided that, only individuals who are paid as common law employees from the payroll of the Company or a Designated Subsidiary shall be deemed to be Employees for purposes of the Plan. For purposes of this definition of Employee, and notwithstanding any other provisions of the Plan to the contrary, individuals who are not classified by the Company or by a Designated Subsidiary, in its discretion, as employees under Code Section 3121(d) (including, but not limited to, individuals classified by the Company or a Designated Subsidiary as independent contractors and non-employee consultants) and individuals who are classified by the Company or by a Designated Subsidiary, in its discretion, as employees of any entity other than the Company or a Designated Subsidiary, do not meet the definition of Employee and are ineligible for benefits under the Plan, even if the classification by the Company or Designated Subsidiary is later determined to be erroneous, or is retroactively revised. In the event the classification of an individual who is excluded from the definition of Employee under the preceding sentence is determined to be erroneous or is retroactively revised, the individual shall nonetheless continue to be excluded from the definition of Employee and shall be ineligible for benefits for all periods prior to the date the Company or Designated Subsidiary determines its classification of the individual is erroneous or should be revised. (n) "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- (o) "Fair Market Value" means, with respect to any date, the closing price per share 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 equal to the closing price per share on such Composite Tape for the last preceding date on which sales of shares were reported. (p) "Offering Date" means the first day of a Purchase Period, each January 1, April 1, July 1 and October 1. (q) "Option" means an option to purchase shares of Common Stock under the Plan, pursuant to the terms and conditions thereof. (r) "Participant" means an Eligible Employee who is participating in the Plan pursuant to Section 4. (s) "Plan" means the Kellogg Company 2002 Employee Stock Purchase Plan, as set forth herein, as in effect, and as amended from time to time (together with any rules and regulations promulgated by the Committee with respect thereto). (t) "Plan Account" means an account maintained by the Plan Administrator for each Participant to which the Participant's payroll deductions are credited, against which funds used to purchase shares of Common Stock are charged, and to which shares of Common Stock purchased are credited. (u) "Plan Administrator" means such other person or persons, including a committee, as the Committee may appoint to administer the Plan. (v) "Purchase Date" means, except as provided in Sections 13 and 18, the last day of a Purchase Period, each March 31, June 30, September 30 and December 31. (w) "Purchase Period" means each calendar quarter. (x) "Purchase Price" means, with respect to each Purchase Period, the lesser of 85% of the Fair Market Value of Common Stock on the Offering Date, and 85% of the Fair Market Value of a share of Common Stock on the Purchase Date. (y) "Retirement" means the voluntary retirement by the Participant from active employment with the Company and its Designated Subsidiaries on or after the attainment of early or normal retirement age under the pension or retirement plan sponsored by the Company or Designated Subsidiary in which he or she participates, or any other age with the consent of the Company or Designated Subsidiary. -3- (z) "Subsidiary" means any corporation, domestic or foreign, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Notwithstanding the foregoing, the term "Subsidiary" shall include a limited liability company that is disregarded as an entity separate from a Subsidiary. 3. Stock Subject to the Plan. Subject to Section 14, the aggregate number of shares of Common Stock that may be sold under the Plan is 2,500,000. Shares of Common Stock to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open-market or in private transactions) and that are being held as treasury shares, or a combination thereof. 4. Participation in the Plan. Each Eligible Employee may participate in the Plan effective as of any Offering Date, by completing and delivering a payroll deduction authorization to the Plan Administrator at least 20 days in advance of the applicable Offering Date in the manner specified by the Plan Administrator. The Offering Date as of which an Eligible Employee commences or recommences participation in the Plan, and each Offering Date as of which an Eligible Employee renews his or her authorization under paragraph (a), is an Offering Date with respect to that Eligible Employee. A Participant's payroll deductions under the Plan shall commence on his or her initial Offering Date, and shall continue, subject to paragraph (a), until the Eligible Employee terminates participation in the Plan, is no longer an Eligible Employee, or the Plan is terminated. (a) A Participant's payroll deduction authorization shall be automatically renewed effective on the Offering Date following the conclusion of his or her initial Purchase Period and each subsequent Purchase Period, unless the Participant otherwise notifies the Plan Administrator in the manner specified by the Plan Administrator at least 20 days in advance of such date. (b) Notwithstanding the foregoing, an Eligible Employee shall not be granted an Option on any Offering Date if such Eligible Employee, immediately after the Option is granted, owns stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary. For purposes of this paragraph (b), the rules of Code Section 424(d) shall apply in determining the stock ownership of an individual, and stock that an Eligible Employee may purchase under outstanding options shall be treated as stock owned by the Eligible Employee. (c) Notwithstanding the foregoing, an Eligible Employee shall not be permitted to elect participation in the Plan for the next two full Purchase Periods immediately following his or her sale, transfer (including transfer to a different brokerage account or withdrawal from the Participant's Plan Account), or other disposition of Common Stock that was acquired within one year of the Purchase Date applicable to that Common Stock. -4- 5. Payroll Deductions. An Eligible Employee may participate in the Plan only through payroll deductions. After-tax payroll deductions shall be made from the Compensation paid to each Participant for each Purchase Period in such whole percentage from 1% to 10% as the Participant shall authorize in his or her election form. No Eligible Employee may be granted an Option that permits his or her rights to purchase Common Stock under the Plan, and any other stock purchase plan of the Company or any Subsidiary that is qualified under Code Section 423, to accrue at a rate that exceeds $25,000 of Fair Market Value of such stock (determined on the Offering Date of such Option) for each calendar year of the Company in which the Option is outstanding at any time. 6. Changes in Payroll Deductions. A Participant may not increase or decrease the amount of his or her payroll deductions during a Purchase Period. A Participant may change his or her payroll deductions effective as of a subsequent Purchase Period by notifying the Plan Administrator in the manner specified by the Plan Administrator at least 20 days in advance of the next Offering Date. 7. Termination of Participation in Plan. (a) A Participant may, for any reason and at any time prior to each Purchase Date, voluntarily terminate participation in the Plan by notifying the appropriate payroll office in the time and manner specified by the Plan Administrator. Such Participant's payroll deductions under the Plan shall cease as soon as practicable following delivery of such notice. If the former Participant remains employed by the Company or any Designated Subsidiary after termination of his or her participation in the Plan, any payroll deductions credited to such Participant's Plan Account may be used to purchase shares of Common Stock on the next Purchase Date or refunded, without interest, to the Participant, at the election of the Participant. An Eligible Employee whose participation in the Plan is terminated may rejoin the Plan no earlier than the beginning of the Purchase Period next following his or her withdrawal, by delivering a new payroll deduction authorization in accordance with Section 4. (b) A Participant's participation in the Plan shall terminate upon termination of his or her employment with the Company and its Designated Subsidiaries, or termination of status as an Eligible Employee, for any reason. If a former Participant is no longer employed by the Company or any Designated Subsidiary, any payroll deductions credited to his or her Plan Account shall be paid to the former Participant in cash, without interest, as soon as practicable following his or her termination of employment. If the Company or a Designated Subsidiary terminated the Participant's employment without cause (as determined in good faith by the Company or Designated Subsidiary), the Participant's termination was due to death, Disability or Retirement, or the former Participant remains employed by the Company or any Designated Subsidiary after termination of his or her participation in the Plan, any payroll deductions credited to such Participant's Plan Account may be used to purchase shares of Common Stock on the next Purchase Date or refunded, without interest, to the Participant, at the election of the Participant (or, in the event of the Participant's death or Disability, the Participant's Beneficiary). -5- 8. Purchase of Shares. (a) On each Offering Date, each Participant shall be deemed to have been granted an Option. In no event will a Participant be deemed to have been granted more than one Option during any Purchase Period. (b) On the Purchase Date of a Purchase Period, each Participant shall be deemed, without any further action, to have purchased that number of whole shares of Common Stock determined by dividing the balance in the Participant's Plan Account on the Purchase Date by the Purchase Price. Any amount remaining in the Participant's Plan Account shall be carried forward to the next Purchase Date unless the Plan Account is closed. Except as provided in Sections 13 and 18, in no event may a Participant purchase shares of Common Stock prior to the Purchase Date of a Purchase Period. (c) As soon as practicable after each Purchase Date, a statement shall be delivered to each Participant that shall include the number of shares of Common Stock purchased on the Purchase Date on behalf of such Participant under the Plan. (d) As of the Purchase Date of each Purchase Period, the Common Stock purchased by each Participant shall be considered to be issued and outstanding to his or her credit as a bookkeeping entry maintained by the Custodian in the Participant's Plan Account. Subject to the restrictions of Section 4(c) above, a stock certificate for whole shares of Common Stock credited to a Participant's Plan Account shall be issued upon request of the Participant at any time. Stock certificates under the Plan shall be issued, at the election of the Participant, in the Participant's name or in his or her name and the name of another person as joint tenants with right of survivorship or as tenants in common. A cash payment shall be made for any fraction of a share in such Plan Account, if necessary to close the Plan Account. 9. Rights as a Share Owner. A Participant shall not be treated as the owner of Common Stock until the Purchase Date of such stock under the Plan. As of the Purchase Date a Participant shall be treated as the record owner of his or her shares purchased on such date pursuant to the Plan. Unless the Participant elects otherwise in the time and manner specified by the Plan Administrator, any dividends paid in respect of Common Stock purchased by a Participant under the Plan and credited to his or her Plan Account will be reinvested in Common Stock in accordance with procedures established by the Company. 10. Rights Not Transferable. Rights under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution, and are exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative. No rights or payroll deductions of a Participant shall be subject to execution, attachment, levy, garnishment or similar process. 11. Application of Funds. All funds of Participants received or held by the Company under the Plan before purchase of the shares of Common Stock shall be held by the Company without liability for interest or other increment. -6- 12. Administration of the Plan. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have authority to make rules and regulations for the administration of the Plan, and its interpretations and decisions with regard to the Plan and such rules and regulations shall be final and conclusive. It is intended that the Plan shall at all times meet the requirements of Code Section 423, if applicable, and the Plan Administrator shall, to the extent possible, interpret the provision of the Plan so as to carry out such intent. 13. Change of Control Provisions. (a) Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control, each Option outstanding under the Plan shall be assumed or an equivalent option shall be substituted by the successor corporation or a parent or subsidiary of such successor corporation. If the successor corporation refuses or is unable to assume or substitute for outstanding Options, each Purchase Period then in progress shall be shortened and a new Purchase Date shall be set (the "New Purchase Date"), as of which date any Purchase Period then in progress will terminate. The New Purchase Date shall be on or immediately before the effective time of the Change in Control, and the Plan Administrator shall notify each Participant in writing, at least 10 days before the New Purchase Date, that the Purchase Date for his or her Option has been changed to the New Purchase Date, and that the Participant's Option will be exercised automatically on the New Purchase Date unless the Participant has withdrawn from the Purchase Period before the New Purchase Date, as provided in Section 7. (b) For purposes of the Plan, a "Change in Control" shall mean the happening of any of the following events: (i) An acquisition after the Effective Date 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 that complies with clauses (1), (2) and (3) of subsection (iii) of this Section 13; or -7- (ii) A change in the composition of the Board such that the individuals who, as of the Effective Date, 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 13, that any individual who becomes a member of the Board subsequent to the Effective Date, 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 -8- (iv) The approval by the share owners of the Company of a complete liquidation or dissolution of the Company. 14. Adjustments in Case of Changes Affecting Shares. In the event of 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 in Control or exchange of Common Stock or other securities of the Company, or other corporate transaction or event that affects the Common Stock: (a) the number of shares of Common Stock approved for the Plan shall be increased or decreased proportionately, and (b) the Board may determine, in its sole discretion, that an adjustment is necessary or appropriate in order to prevent dilution or enlargement of benefits or potential benefits intended to be made available under the Plan. 15. No Corporate Action Restriction. The existence of the Plan and/or the Options granted hereunder shall not limit, affect or restrict in any way the right or power of the Board or the Company's share owners 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 Participant, Employee, 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. 16. Notices. All notices or other communications by an Employee or Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 17. Amendments to the Plan. The Committee may, at any time, or from time to time, amend or modify the Plan; provided, however, that no amendment shall be made increasing or decreasing the number of shares authorized for the Plan (other than as provided in Section 14), and that, except to conform the Plan to the requirements of the Code, no amendment shall be made that would cause the Plan to fail to meet the applicable requirements of Code Section 423. 18. Termination of Plan. The Plan shall terminate upon the earlier of (a) the tenth anniversary of the Effective Date, (b) the date no more shares of Common Stock remain to be purchased under the Plan, or (c) the termination of the Plan by the Board as specified below. The Board may terminate the Plan as of any date. The date of termination of the Plan shall be deemed a Purchase Date. If on such Purchase Date Participants in the aggregate have Options to purchase more shares of Common Stock than are available for purchase under the Plan, each Participant shall be eligible to purchase a reduced number of shares of Common Stock on a pro rata basis, and any excess payroll deductions shall be returned to Participants, without interest, all as provided by rules and regulations adopted by the Plan Administrator. -9- 19. Costs. All costs and expenses incurred in administering the Plan shall be paid by the Company. Any costs or expenses of selling shares of Company Stock acquired pursuant to the Plan shall be borne by the holder thereof. 20. Governmental Regulations. The Company's obligation to sell and deliver its Common Stock pursuant to the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such stock. Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, state securities laws, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 21. Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the United States of America and, to the extent not inconsistent therewith, by the laws of the State of Delaware, without reference to the principles of conflict of laws thereof. This Plan is not to be subject to the Employee Retirement Income Security Act of 1974, as amended, but is intended to comply with Code Section 423. Accordingly, the provisions of the Plan shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. Any provisions required to be set forth in this Plan by such Code section are hereby included as fully as if set forth in the Plan in full. 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. 22. Effect on Employment. The provisions of this Plan shall not affect the right of the Company or any Designated Subsidiary or any Participant to terminate the Participant's employment with the Company or any Designated Subsidiary. 23. Withholding. The Company reserves the right to withhold from stock or cash distributed to a Participant any amounts that it is required by law to withhold. 24. Other Company Benefit and Compensation Programs. For purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Designated Subsidiary (a) any amounts deducted from a Participant's Compensation pursuant to the Participant's payroll deduction election under Section 4 shall be deemed a part of a Participant's compensation, and (b) payments and other benefits received by a Participant under an Option shall not be deemed a part of a Participant's compensation, unless expressly provided in such other plans or arrangements, or except where the Board expressly determines in writing. The existence of the Plan notwithstanding, the -10- Company or any Designated Subsidiary may adopt such other compensation plans or programs and additional compensation arrangements as it deems necessary to attract, retain and motivate employees. 25. Effective Date. The Plan shall become effective July 1, 2002, provided that the Company's share owners approve it within 12 months after the date the Plan was adopted by the Board. -11- EX-99.3 5 k67869ex99-3.txt EX-99.3 SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN EXHIBIT 99.3 KELLOGG COMPANY SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN SECTION 1 Establishment and Purpose Kellogg Company (the "Company") hereby establishes the "Kellogg Company Senior Executive Annual Incentive Plan" (the "Plan"). The Plan will be submitted to the stockholders of the Company for approval at the 2002 Annual Meeting of Stockholders of the Company scheduled to be held on April 26, 2002, and will be effective retroactively to January 1, 2002 (the "Effective Date"). The purposes of the Plan are to motivate selected senior executives toward achievement of performance goals; encourage teamwork in various segments of the Company; and reward performance with cash bonuses that vary in relation to the achievement of the preestablished performance goals. The Plan replaces the Kellogg Company Senior Executive Officer Performance Bonus Plan, which has expired. SECTION 2 Eligibility The individuals who are assigned one or more of the following titles by the Company are eligible to participate in the Plan, as determined and selected by the Committee (as defined in Section 3 hereof): (i) Chairman, Vice Chairman, Kellogg Company Chief Executive Officer, or Kellogg Company President; (ii) Kellogg Company Executive Vice President; or (iii) Kellogg Company Senior Vice President. Each individual selected for participation will be known as a "Participant". SECTION 3 Administration The Plan will be administered by the Compensation Committee of the Company's Board of Directors (the "Board"), or such other committee as the Board may from time to time select (the "Committee"). The Committee will at all times be composed of two or more members of the Board, each of whom qualifies as an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)"). Except as limited by law or the Company's Amended and/or Restated Certificate of Incorporation or Bylaws, and subject to the provisions herein, the Committee will have full power and authority, to the fullest extent required to comply with Section 162(m), to select Participants (as defined in Section 2 hereof); determine the size of bonus awards; determine the terms, conditions, restrictions and other provisions of bonus awards, including the establishment of the Performance Goals (as defined in Section 4 hereof); interpret the Plan; establish, amend or rescind guidelines, rules and regulations for the Plan's administration; review and certify the achievement of Performance Goals; and, subject to Section 9 hereof and the restrictions under Section 162(m), amend the terms and conditions of the Plan, including outstanding Award Opportunities (as defined in Section 4 hereof). Further, the Committee will make all other determinations which may be necessary or advisable for the administration and operation of the Plan. Except as to the extent prohibited by applicable law, the Committee may delegate all or any portion of its responsibilities and powers granted under the Plan to such other person or entity it deems appropriate, including, but not limited to, senior management of the Company. Any such delegation may be revoked by the Committee at any time. All determinations and decisions of the Committee arising under the Plan will be final, binding and conclusive upon all parties. By accepting any benefits under the Plan, each Participant, and each person claiming under or through such Participant, will be conclusively deemed to have indicated acceptance and ratification of, and consent to, all provisions of the Plan and any determination or decision under the Plan by the Company, the Board or the Committee. SECTION 4 Participation and Performance Goals The Committee will have the authority to select Participants (as defined in Section 2 hereof) for cash bonus awards under the Plan for each Measurement Period and the financial and other performance criteria ("Performance Goals") upon which such awards will be based. For purposes of the Plan, the term "Measurement Period" means the period of one fiscal year, unless an alternate period (such as a portion of a fiscal year or multiple fiscal years) is otherwise selected and established in writing by the Committee at the time the Performance Goal is established. No later than the earlier of ninety (90) days after the commencement of the applicable Measurement Period or the completion of 25% of such Measurement Period, the Committee will, in its discretion, determine the Participants for such Measurement Period and establish the Performance Goals applicable to each Participant's award. Performance Goals need not be the same for all Participants. The Performance Goals may be based on any one or more of the following measures (or the relative change for any such measure): the Company's earnings per share, return on equity, return on assets, return on invested capital, growth in sales and earnings, net sales, cash flow, discounted cash flow, cumulative cash flow, operating profits, pre-tax profits, post-tax profits, consolidated net income, unit sales volume, economic value added, costs, production, unit production volume, improvements in financial ratings, regulatory compliance, achievement of balance sheet or income statement objectives, market share and total return to stockholders (including both the market value of the Company's stock and dividends thereon) and the extent to which strategic and business plan goals are met. With respect to each Participant, the Committee will establish ranges of Performance Goals which correspond to various levels of cash bonus amounts ("Award Opportunities") for the Measurement Period. Each range of Performance Goals will include a level of performance at which one hundred percent (100%) of the targeted bonus award ("Target Bonus Award") may be earned. In addition, each range of Performance Goals will include levels of performance above and below the one hundred percent (100%) performance level. The Committee may establish minimum levels of Performance Goal achievement, below which no bonus payment will be made to the Participant. Once established, Performance Goals and Award Opportunities may be adjusted during the Measurement Period only to mitigate the unbudgeted 2 impact of unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time such Performance Goals and Award Opportunities were established. SECTION 5 Final Bonus Award Determination Awards are based on the achievement of the preestablished Performance Goals. After the Performance Goals are established as described in Section 4 hereof, the Committee will align the achievement of the Performance Goals with Award Opportunities, such that the level of achievement of the Performance Goals at the end of the Measurement Period will determine the Participant's actual annual bonus award ("Final Bonus Award"). Final Bonus Awards may vary above or below the Target Bonus Award, based on the level of achievement of the preestablished Performance Goals. Negative discretion may be used by the Committee to reduce the Final Bonus Award. In no event, however, will an exercise of negative discretion to reduce the Final Bonus Award of a Participant have the effect of increasing the amount of a Final Bonus Award otherwise payable to any other Participant. SECTION 6 Final Bonus Award Limit The total of all Final Bonus Awards payable to Participants for performance in any Measurement Period will not under any circumstances exceed one percent (1%) of the Net Income of the Company (the "Maximum Bonus Awards Pool") for such period. For purposes of the Plan, the term "Net Income" means the income from continuing operations of the Company and its subsidiaries, as determined on a consolidated basis in accordance with generally accepted accounting principles, adjusted to exclude the following: (i) all restructuring and disposition-related charges or credits for the fiscal year, net of related tax effect; and (ii) incremental and non-recurring integration costs and other financial impacts, net of tax, related to the business operations of an entity acquired by the Company. The maximum Final Bonus Award any Participant can receive for performance in any Measurement Period is three million dollars ($3,000,000). In the event that the total of all Final Bonus Awards payable to Participants should exceed the Maximum Bonus Awards Pool as specified above, the Final Bonus Award of each Participant will be proportionately reduced such that the total of all such Final Bonus Awards paid is equal to the Maximum Bonus Awards Pool. SECTION 7 Payment of Awards If the Performance Goals established by the Committee are satisfied and upon written certification by the Committee that the Performance Goals have been satisfied, payment will be made in cash as soon as practicable in accordance with the terms of the award, unless the Committee determines in its sole discretion to reduce or eliminate Final Bonus Award 3 determinations for any or all Participants, based upon any objective or subjective criteria it deems appropriate. There is no obligation for uniformity of treatment of Participants under the Plan. SECTION 8 Termination of Employment Each Participant must remain employed with the Company or a subsidiary through the last day of the Measurement Period to be considered for a Final Bonus Award; provided, however, in the event of a Participant's death, disability or retirement (as defined in the Kellogg Company Salaried Pension Plan or any other retirement plan of the Company or a subsidiary in which the individual participates) during the Measurement Period, the Participant's bonus award will based on the portion of the Measurement Period in which the Participant was employed, computed as determined by the Committee. In the event that a Participant's employment is terminated for any reason other than death, disability or retirement, the Participant's rights to a Final Bonus Award will be forfeited; provided, however, the Committee may, in its sole discretion, pay a prorated bonus award to the Participant for the portion of the Measurement Period in which the Participant was employed, computed as determined by the Committee. In the event that a Participant's employment with the Company or a subsidiary terminates for any reason after the completion of the Measurement Period but prior to the actual payment of the cash bonus, the balance of any bonus which remains unpaid at the time of such termination will be payable to the Participant, or forfeited by the Participant, in accordance with the terms of the award granted by the Committee. SECTION 9 Amendment and Termination The Board and the Committee each has the right to amend or terminate the Plan at any time and in any respect, except that, unless otherwise determined by the Board or the Committee, no amendment may be made without stockholder approval if, and to the extent that, such approval would be required to comply with any applicable provisions of Section 162(m). Similarly, no amendment or termination of the Plan may alter or impair the rights of any Participant pursuant to an outstanding award without the consent of the Participant. This Plan will expire on December 31, 2006, unless terminated earlier by the Board or the Committee. No further awards will be made under the Plan after termination, but termination will not affect the rights of any Participant under any award made prior to termination. SECTION 10 Miscellaneous Bonus payments will be made from the general funds of the Company and no special or separate fund will be established or other segregation of assets made to assure payment. No Participant or other person will have under any circumstances any interest in any particular property or assets of the Company. The Plan will be governed by and construed in 4 accordance with the laws of the State of Delaware, without regard to its principles of conflict of laws. Neither the establishment of this Plan nor the payment of any award hereunder nor any action of the Company, the Board or the Committee with respect to this Plan will be held or construed to confer upon any Participant any legal right to be continued in the employ of the Company or to receive any particular rate of cash compensation other than pursuant to the terms of this Plan and the determination of the Committee, and the Company expressly reserves the right to discharge any Participant whenever the interest of the Company may so permit or require without liability to the Company, the Board or the Committee, except as to any rights which may be expressly conferred upon a Participant under this Plan. The adoption of this Plan will not affect any other compensation plans in effect for the Company or any subsidiary or affiliate of the Company, nor will the Plan preclude the Company or any subsidiary or affiliate thereof from establishing any other forms of incentive or other compensation for the Participants. 5 GRAPHIC 6 k67869pi5-178.gif GRAPHIC begin 644 k67869pi5-178.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 7 k67869pi5-110.gif GRAPHIC begin 644 k67869pi5-110.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end GRAPHIC 8 k67869kellogre.gif GRAPHIC begin 644 k67869kellogre.gif M1TE&.#EA%0%D`*(``/____UE:_P9(?Q26/V,D/ZRM?[%Q____R'Y!`$```<` M+``````5`60`0`/_>+K<_C#*"8.X-]#-N_]@*(YD:9X*@:ULBZ)JRQ)O;=]X M&,O7M/,R$]`%^0U;AIQRR0P=>9+!,83(%;'I/UVKM>A%C&\:AN)3& M.+ID0N9:SR1CV00H8`-L%!H,J.;!+R>>@U/;T>2D\)GQ1N^ M*P[*P%U_(QBI7-GT"#DO"HR0H\ MH4CM$/V5M*G3IQDQ1'PY2^C2,E"SUKPJ`:#4$5<_/?QTDJ-6+_)*-B'H,E0) M>8STE0NB#M)9E>Y7"F&9.IE"SG%APZ:+@B8S=?84SY3'/H#Y('?N M;Y$O!S^,L3+MWJPE-Z3J&D+JA$_4;D,&<,#5=*%#J_)I/%81A=FAA-XRJQ4_ MP(\I9CZZ`+(^KP:]ZNR^`CTS]HF?$DB]8N&#QO^6*77)?C.YMTQ^-M6Q@#D1 M9*)+9PA&**$'\A4W03ZU39A?=!IVZ"%4\F5%UX2%^+Q3IRF['O77E6#U02"H,J:03.&)YA&7J)%2`QJU\Z64@[((:**B'"D#(9XT>(0\I,9I(42F M5D-J0,.6::MFPVZYXVK_,6YD#9N!&ELD8#G2*AN/_NUZ'SK%*HI:J&G ML1Y;:;15HAL7D_2U^(1+X#!DJKB,!IFKG68ERT&%WP[GY:5FG@9KISC.EX=( M!%MK;,`"4YJ+;3P$(/%WCSX9DHQ`D`/?/A2EM!^Q?.$3AL/]*5P/FE7\&]Z! MOBC;(\:4"A;\<,!^%ZY2X!"/:RY6^AKN^%H03BIM^[4TTTQ[?KLB<<85":THWXR M4ESFKJ$E(%4+E/"^1^@PN<230'(RL\Q=?%.X"ZZ>7O-VF^_S^K$K+^P?A$7Q M[MCK1Q1ZLZ#=;I!J>^MZ&JN:^)>N+[IMSV;(5H\YJC456=O%@3D)7#&GV;R1HA@=+U)V+!V`@F?V6KE M@SX!;UNS`J)JKN*\3CAPAC/0VK7HA$+%,="`2BR&//^2<)6R24QBDH+9PDAX MQ8](,8B.DY@B!M"^[@!FAQ72Q0FG(8$"AE&)]--&,198Q\:PKB/Y$@0F/-)$ MEWE'>+CCS<`X&$/9G/",3'FD&%DFASL6*A;<<%X!K8B\:J4H)YP9@B4AB32. MP"6/)8L>YQ0ULSU!"V-JX"*[MBBD2"P+GA;RQ3IE:"UW6`Z* M-&PD09'9N5[I`(*X7)0I&]C_-UC^$)<"@%="Y;0152C2G6;$I47#F3>(^FIP M)80D2$<(PCU]SUTO[-9+T6F[73+%$Q%1Y>@JBE'5L$(GVAMI,KLU4-C@%$S- M.@4#-EF%`F:HID)-DT*UX24D4E.9KXPJ225I4Y)8#V`R.\`FBW//1?:NJY>2 MCS6N'9*LQ[?XU8,SJN'@5&L"`94NU'Q/#%.H%`91\E@0``#L_ ` end GRAPHIC 9 k67869gutiercm.gif GRAPHIC begin 644 k67869gutiercm.gif M1TE&.#EA_`!)`*+_`/___S\_/P```']_?U555;^_O____P```"'Y!`$```8` M+`````#\`$D`0`/_:+K<_C#*25L0HNK-N_]@*([><&�&@$%GCG0,YT;=^W M*0Q`[_]`E2,E",@VQ!=N.6FM)KJBP<2LUH@\H';;N[RB*@+AA'$-SMFD=5WR MLM^D5(!+YQ:\OL*@\+L+^$!N#RT<8T\21!E-3A4#+1@0CTH28H^*-HYE4G`. M+8!U=IIE64`%17V:1@N2"E&38$<-46*BH@1'9$]B9`&WEIIB#;^C@[:'D2YB ML8BWG!X8=7Z]9)NM&,$3O#*/AX[.2UC?XN-3*"%RY)SHZ>QP@NWP\?+MD//V M]_CY^K(Q'L?[``-N:!'@DY8`DQ[TX[!0(`TP"1W>>&00E(\4L1(MJW`B_Z)$ M$!H9>/QX#J%%.J9J[3A9ZL)&DC"*O(19PR1+E"K_H#K5IV&KCC^+'',U4\&8 M5!N/UOJWBMHU&8ZG0%FH5J)K44!JQ6B..`[$'\;2YXL,BWE MRY@SXY"46+/GSPI.],UF#K3I-X*U,(Z0I+/"TJ<[N8@-@F#<@R/#SBYTC38_ MPKY98+B-\Y_H#JPR[Y``5,'RX)2&L_T160V42F>3!3\.70.>Z7EF)T)!RF+D MX.&Z-^()?OQ4XJ!,Y3;]6#TB]N"IN^@BW<>)BO\IS=3<%!<,T=%H4_S25R:V ML*;5,4II\A*#J2!H5(3$8(5A&4R)-55&V4GX00OE@9=260#VUX,?L)73FVXR M,<`9!&!PV!2'%'8H%5IE\/=49:DL=558.R9C7$Z]Q*+@D#)64D,+^9VH"7'? ML7B4$CJ`E8@N2#4YU2&_]`*!D`ZZMH`<9MJ'3(EV7""6$A=35BYIYD>:?-M3'@1S*G.8HHVNL$T*+H&%*Z1J3 M/FK8IJ#2T&FHI)+C4ZFHIHI)AJJVZLR`KL9:Z:"/NBDKJ3DB<2H%UMU*:9:D MK,8R&A+/0N2*KLC@5U9JGG_KVRZ+VZ0`?*@)J2MIS MC1$BG$P(M?H=2P7*`NUZV2K&R'WFN%5JEN"E"R2W=I+KVRQX\1L;OOE58ZQW M[PZ<<*GKYOM<Z.<\>VHGQV,Z@7?@I(+724?Y"]M M@KDJ1WXKJL3F2?();'&\N.+7'B#[U6%3(#A;@0TXK($LSM#MO`SS3G,`X(=! M1*08;Q2-6-*97M8.TQF%,)U3B25L)JN!68._[#]8MC@A6.)N0K?UX18%I,T1D#RTCZ*4F)* M_TU?Q*I1M,)*5`1:+1,A-7U)+)3I1G#(325W[EDAZX_GM0*&TP##^)>WOTXQ MY%BMS=:.<:4$M8A!,;:EC+1V(I417?UHR5"F6[4-DDSQQ?M;5EV/9^,SS6DS MH#.?M#P7ZTKC[+4P:IG+$,\3^/ GRAPHIC 10 k67869k6786901.gif GRAPHIC begin 644 k67869k6786901.gif M1TE&.#EA40()`:+_`/___U5557]_?P```#\_/[^_O____P```"'Y!`$```8` M+`````!1`@D!0`/_:+K<_C#*2:N]..O-N_]@*(YD:9YHJH:!L`2#,@A!L`RV M`J]\[__`H'!(+!J/R$PNR6PZG]"H=,I;4B_6JW;+[7J_X$DVS!B3S^BT>LVF MF,_OMGS.%0P&!+I>&@<*"#@W2SN!.C%E>XF**357C0PT+HN3?6"5DYAI`8"' MF7YWH)V>*Y=>I:.H59PMJ:T9-*Q[IQAW"X`_LZZZ.I*[OIHPH:(]N15_>08$ M!+U5OR7"=\4DF\@CP<+2SDB;\.:>-PZ9]#4]`A#!OR,0U"Y=)L#.#_P(G MA#@"=@!Y48X`D5U01H0CIV248&,>29")$1"^E>AVV!)6K1Q.G"[)Y;CI(RB/ MA;$>Y`OY$T-&E4VCMC*ZT]U&AGCR2UPX+$72:HS6#72ML.7=IV; M=E_-BJ$'BBVSL+A:RMW+%P3::W?8NGT++0+:NFFC?JT%*&X$QWTC2Y[,R,2? MAY"54M[,N7.2KR<'$_-,NK3IRE-FR)0G*O/IU[#WN@XR.[;MV]IJY\7-N_=K MW45]"Q^^&?AHXLB32S4.@K7RY]"CH[$#B1LS?`O'"N2DD0E10X$;8.?N`K!/ M)]3-X8$4X]H@4,R-BT58+\NCP/_E>L"[[_O_GN1=%>B_X)U![\(D7GW0, M-NC@@Q!&*.&$%%9H(1L"`*#AAAQVZ.&'((8HXH@DEFCBB2BFJ.**++;HXHLP MQBCCC#36:..-)R[80X8M%G#2CS^J:$>&!=CDXPP_#@#`D!P624`!'A9Y$@$= M`GG2AE;RV.2/RFRXS!]0+JEDE4\Z.668`(SI)95>SH!'F("@B6.,)2+/F:Y9XE!EFKJE::J^B.:KWH89)57@C@KG[>>%&:@NI8:IJY8 M"@`EL'P&>RJB0K;:(['_'!+KHYR^1LGLDL+B>BRRV*JZ8K0=EAKLEM72>FRL MS3)K);33OBCJA>RVZ^Z[\,:;2E9M]4>7/5SI(^^^_):PK@G_]BOPT((MT-!%]A.!OTCH`YWR,,>^O"'0#S:M;!% MQ"(:\8A(3*(2E\C$)AXQAQ<88K=,)3>`9*E.'G)3G?\J52LU?:M<64R3II[D M12?!ZEA>U!"KQ+@D:JD15#RJE1H!4(`!#(M/=G2BAER5I5#WJ#0# M.I[*4G+\D[>6P)0.!KT2@QOJ M()C(I$3\DLE,CBVSF=!#*?43#E-4<4LK$Y^`4L*(5YHS(*LTPE:(P;(''>T@-$K,;E,H"\=D,X!PN!R M9%@9/RU44/S=,P1,D&Z,BP%;;+!:$9%1B]74$5U MU*M>+8<$"6`J-*5\,`'/GM8,'WK.CR/-R=TB\$'DL2`:FX"I-][GMYR>X*:_ MK.DT3Z,ZT2#A=!T0T,&%9DB:VM4E@K%*1%5@N)T^T')@JSB*H/M0O*;>6P ML,M)_V1$N!`=JP^1*Q#5;N$IEK-*&62[VN4:U9K@I`(&RW);V-!'K=^E@F.T M&S@FT`QS^9A0Q^SZ,=55<9?`LR5("C,Y@QV4%DNHW0OUF@*D1H.[S/P+75)7 MWJNI!3Z/C>D(+%NO"IPCH"4')? M")M8,3(]!`P0K(04"[/#L#%>?Y+67AO[&&`B_;&07RO3[L1UR$@>:@FJ,4.E M)OG)-0XOE*>L,"K@-Q;W>P&5M^P&>(7TMXFDPMO[WOC.M[[WS>]^^_O?`#>+*F=)\((;_.`(3[C"H3MPA3O\X1"/ MN,0GCB*&N\C`:331F,+%R`]E_)&/TM22ZI0ACL\Q3U4B5)T,I4ECJ5%+&P\Y ME@QU\DSYJ.!S>U&FVIC%1X*QXU[_TM+--\DI+$8\+$:W%9O&9<>DR]&+:93Y M'I\TJ*D#W9,^6OJ,+-XBC*]H3'5$4]1)N<=$0BF-K*IZVG^.]2:!TI,G;SHH MS8XFFO.')D'F6ERFJQZ>;AJCK%[XNB<"7RZ8I_.8@R MCO8,5?[J>!^YY$^Y![]3_/.@#[WH1Z]$Z';X]*A/O>I7S_K6N_[UL(^][&=/ M^]K;_O:XS[WN=\_[WOO^]R@-N/"'3WR^N>4OO0!;\9>_GKP:T!;-7K[P#5O" M>^'5UR\`OO:WS_WN>__[X`^_^,=/_O*C/F+@3LHM/JBX84L?G4C`,7R_AC,T MOS^;>[Y__S3SK_]F\K__R?1_`!A,`CB`MU2`!EA+")B`0+2`##A=2#FQ6!#_5ZA"'!B-EWT5<\I4Q9O&&R'1@"4,/?"@&=GB` M3:8["Q:'A+A#6$@^I.8Q:19="F`Q5P5$F],/T00T$38%.F8O?/_60_O%,QD% M5'0(9,_0"9GU#C^4)'V79./`$:M89:V80,"1B(NU.9`&&$?FAY1X;U44?:$C MC*QSA;R8/$AUBXIH&:%XC**0%%8U:"!0:=F62MOH%LJG M9:]!C7((5=:`CN[25LS`6(R5#@(Q&/*8`L5H75'%$*_H``ER`P35"3AX&N?E M1RE#6IE(;P?)/)NVC%OP'OS%5,^0-.`(%DN00A-3:$Z8D:>W"JS'#;;GD6UQ M,TE88AI9DB9YDD5H&;&34O+0"^M7#>U'&7P%'MZ5'Y6S4,&0C4;@6K?!D]*A M,?M4CN489K)AB>I!D$')"MA%$CKY,`;_&2&12`DUV5IK03B]@%VIP)!U57]E M&#F&!A13V5LO4%2X9(B/X8NM\)3Z$Y;N0EV,=A:-AHH6Q%X;XY8DM(F8,)/V@Y#F(#?&Z"^' M&1%&Z0,(H3U160>\E1.=E9?NE9F;95PB`(B>N8A?(%H.@4K]@)AI,%%M$1`^ M:5`E$)CXB`9QR8^%F1-!3X98!I`:]:3EQ()O:M)F^<%_&*1G( MJ5EZN9P3L`K.N3N4F0GT,9W'Z9>9N)M2H)LT`6O%`9UB2)2IV53;R9Y3,#@S M^1"(50X*%HW+__>9*$`ZZH"6Q#&0ZIEBIT>>18-//O%BQ#%?@D%B2)E?WM2- M/48"="6.8.A19E`P@,&1%%*<[6E?61-\$]9A[\D9#Q8-$`J+`*.)$]"/-9@' M-_B"/Q`6W0F"3>58'<:.PS$0B,&5*.B@WJADBKFB`49/8/9JW==B*)FD2JJD M]\46,GIE2UJ$'QJE`PH[!P)NAK,$5$B%@A8/'46+.(I+(;F$/(H1)8I?AQ9_ M&4-_%[J>B#.F<"5B1B`\.SJBCL":;MHT*]:@+3-?.@6,^!D\_@)4;.DO>3H' M2Z&0:1-CQU.*AZJ<7[JHK4A9!/JH\,2HMEBIENH^)\4T0]DVFPJ!R/\8JAR( MIZ3Z/%]!%&7*BJ>:@2:@'YK:JJN9F^!AG;):JL\P%'8*GK<*%*;:JX^CG\#: MF%EX@BP3$\-ZJ:GQC]#7IU MKOXJ,/T:L.PRL`3+4`![L/)BL`HK7PG;L/\:KQ![6I:@@G^9:+*0IHFP@O'1 M/R]:A9#9EXN&L1E+LC^:&D4Z?]NZLBS;LB[[LB=II]\(D^(ZL66XJC:;LSJ; M3*:E!SVK:(GPLR)KLLD!$@>B;+_D)NFFBP?_^1DLU!7==@-@1&*U#()K6%L`-3RY@J\[32IK4MH&XGY+;H<;4'F;5,UK;X M@FFA:1N-.+87JEEE8ZE[:%;5M6$$+D9#-9Z"-M15^ M*PD&\;P.CF[+Q-Q^H&;OIE[BM:P6O6QVN9CG7UX:T^VY60$+RD#2E2Z*N MJ%8R(54T23*T4QC3RZ+7]Q*E5AC%!JO4ZVXTZ6)IQ1H!ZFP!YKWJX9#/6Q3= MVPVMH;W;N[/T6[_V_WN_^)N_^KN__-N__ON_`!S``CS`!%S`%D!)JY+`"KS` M#-S`#OS`$!S!$CS!%%S!%GS!&)S!&KS!'-S!'OS!()PE7$=Z)%S")GS"*,PB M(YS"+-S"+OS"%+?",#S#-%S#-MQ$,GS#.AQZ/K?#3?0L*)S#C1<67^2(G-%=U>0)1Y?,(FA:1W<70IA_?$;81Q M)T=X5N?%>B=Y721Z=<03C5?&:'PMM2)U9:1R2XS'1HQY75(KGD!X""&ITQ5\D6Y4RUO7>1='Q"JB)&''RWL$S&^GQ'!W>9?W1:$TQVY4+`L M#*2R1Z@,Q6$7>'#,7Q4LR*%P\=;\")Y=2+2&W GRAPHIC 11 k67869pi32-78.gif GRAPHIC begin 644 k67869pi32-78.gif M1TE&.#EA*``G`/<``/___\S__YG__V;__S/__P#____,_\S,_YG,_V;,_S/, M_P#,__^9_\R9_YF9_V:9_S.9_P"9__]F_\QF_YEF_V9F_S-F_P!F__\S_\PS M_YDS_V8S_S,S_P`S__\`_\P`_YD`_V8`_S,`_P``____S,S_S)G_S&;_S#/_ MS`#_S/_,S,S,S)G,S&;,S#/,S`#,S/^9S,R9S)F9S&:9S#.9S`"9S/]FS,QF MS)EFS&9FS#-FS`!FS/\SS,PSS)DSS&8SS#,SS``SS/\`S,P`S)D`S&8`S#,` MS```S/__F("`@(B(B)"0D)B8F*"@ MH*BHJ+"PL+BXN,#`P,C(R-#0T-C8V.#@X.CHZ/#P\/CX^``````````````` M`````````````````````"'Y!`$`````+``````H`"<`!PC_``$('$BPH,&# M"!,J7,BPH<.'$"-*G$B1H#PKZ#)JW&B%7D6"5MC1N^CN(#UT'P6B\SC0R@J3 M5CZZ*UD0Y4%W\@#(LPF1)\&3",NA*Y<3XLR;*TT"\.F0Z4!V`&(>3&J49L&. M`-R]+`@THE,`]*`*E$KP*T,K6,L./,E2H#RQ[MHV);N"IKQP&S7J1.?.+`!V M[&8*GDDO9-2%A<7636C88LF=11&R2SM6;D%W8EM:-G@RLEJ$7S,G-+O8X,6; M6Q.>GLH:(5G&F\&*5HDT(T.S3K_:C(NP:&F+LW7.9N2%896^!OT.,+*_3[?"%*Z01Q-J0\=35Z MA_"/+TTH\N'YF@#\)Y!Z$-'W&7Q4%8A==@.Z=%UTY:64E1562;A0.15:J%J& &&GX4$``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.2

                                                                    EXHIBIT 99.2

                KELLOGG COMPANY 2002 EMPLOYEE STOCK PURCHASE PLAN

         1. Purpose. Kellogg Company (the "Company") has established this
Kellogg Company 2002 Employee Stock Purchase Plan (the "Plan") to encourage and
enable its eligible employees and the eligible employees of its Subsidiaries to
acquire the Company's Common Stock, and to align more closely the interests of
those individuals and the Company's share owners. The Company intends that the
Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended.

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

                  (a) "Board" means the Board of Directors of Kellogg Company,
         as constituted from time to time.

                  (b) "Beneficiary" means (i) the person designated by the
         Participant to receive benefits under a Company-sponsored and
         Company-paid life insurance program, if any, or (ii) the Participant's
         estate.

                  (c) "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (d) "Committee" means the Compensation Committee of the Board.

                  (e) "Common Stock" means the Common Stock, par value $0.25 per
         share, of the Company or any security of the Company issued by the
         Company in substitution or exchange therefor.

                  (f) "Company" means Kellogg Company, a Delaware corporation,
         or any successor corporation to Kellogg Company.

                  (g) "Compensation" means with respect to a Participant, the
         portion of the Participant's base salary, commissions or wages paid to
         the Participant during the applicable payroll period.

                  (h) "Custodian" means the individual or organization appointed
         by the Plan Administrator to maintain custody of Participants' payroll
         deductions, purchase Common Stock under the Plan, and allocate Common
         Stock among Participants.

                  (i) "Designated Subsidiary" means any Subsidiary that the
         Board has designated from time to time, in its sole discretion, as
         eligible to participate in the Plan.




                  (j) "Disability" means disability as determined by the
         Committee in accordance with standards and procedures similar to those
         under the long-term disability plan of the Company or Designated
         Subsidiary, if any, or if the Participant is then a party to an
         effective employment agreement with the Company or Designated
         Subsidiary that defines disability, "Disability" means disability as
         defined in the Participant's then effective employment agreement.
         Subject to the first sentence of this paragraph, at any time that the
         Company or Designated Subsidiary does not maintain a long-term
         disability plan, "Disability" shall mean any physical or mental
         disability that is determined to be total and permanent by a physician
         selected in good faith by the Company or Designated Subsidiary.

                  (k) "Effective Date" means July 1, 2002.

                  (l) "Eligible Employee" means each Employee of the Company or
         a Designated Subsidiary. Notwithstanding the foregoing, any Employee
         who is covered by a collective bargaining agreement and whose decision
         not to participate in the Plan was the subject of good faith
         negotiations between the Company or a Designated Subsidiary and a labor
         organization will not be eligible to participate in the Plan, unless
         the decision not to participate in the Plan is revoked by the labor
         organization upon reasonable notice to the Company.

                  (m) "Employee" means each and every person employed by the
         Company or a Designated Subsidiary, and whom the Company or Designated
         Subsidiary classifies as a common law employee; provided that, only
         individuals who are paid as common law employees from the payroll of
         the Company or a Designated Subsidiary shall be deemed to be Employees
         for purposes of the Plan.

                  For purposes of this definition of Employee, and
         notwithstanding any other provisions of the Plan to the contrary,
         individuals who are not classified by the Company or by a Designated
         Subsidiary, in its discretion, as employees under Code Section 3121(d)
         (including, but not limited to, individuals classified by the Company
         or a Designated Subsidiary as independent contractors and non-employee
         consultants) and individuals who are classified by the Company or by a
         Designated Subsidiary, in its discretion, as employees of any entity
         other than the Company or a Designated Subsidiary, do not meet the
         definition of Employee and are ineligible for benefits under the Plan,
         even if the classification by the Company or Designated Subsidiary is
         later determined to be erroneous, or is retroactively revised. In the
         event the classification of an individual who is excluded from the
         definition of Employee under the preceding sentence is determined to be
         erroneous or is retroactively revised, the individual shall nonetheless
         continue to be excluded from the definition of Employee and shall be
         ineligible for benefits for all periods prior to the date the Company
         or Designated Subsidiary determines its classification of the
         individual is erroneous or should be revised.

                  (n) "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-


                  (o) "Fair Market Value" means, with respect to any date, the
         closing price per share 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 equal to the closing price per share
         on such Composite Tape for the last preceding date on which sales of
         shares were reported.

                  (p) "Offering Date" means the first day of a Purchase Period,
         each January 1, April 1, July 1 and October 1.

                  (q) "Option" means an option to purchase shares of Common
         Stock under the Plan, pursuant to the terms and conditions thereof.

                  (r) "Participant" means an Eligible Employee who is
         participating in the Plan pursuant to Section 4.

                  (s) "Plan" means the Kellogg Company 2002 Employee Stock
         Purchase Plan, as set forth herein, as in effect, and as amended from
         time to time (together with any rules and regulations promulgated by
         the Committee with respect thereto).

                  (t) "Plan Account" means an account maintained by the Plan
         Administrator for each Participant to which the Participant's payroll
         deductions are credited, against which funds used to purchase shares of
         Common Stock are charged, and to which shares of Common Stock purchased
         are credited.

                  (u) "Plan Administrator" means such other person or persons,
         including a committee, as the Committee may appoint to administer the
         Plan.

                  (v) "Purchase Date" means, except as provided in Sections 13
         and 18, the last day of a Purchase Period, each March 31, June 30,
         September 30 and December 31.

                  (w) "Purchase Period" means each calendar quarter.

                  (x) "Purchase Price" means, with respect to each Purchase
         Period, the lesser of 85% of the Fair Market Value of Common Stock on
         the Offering Date, and 85% of the Fair Market Value of a share of
         Common Stock on the Purchase Date.

                  (y) "Retirement" means the voluntary retirement by the
         Participant from active employment with the Company and its Designated
         Subsidiaries on or after the attainment of early or normal retirement
         age under the pension or retirement plan sponsored by the Company or
         Designated Subsidiary in which he or she participates, or any other age
         with the consent of the Company or Designated Subsidiary.



                                      -3-


                  (z) "Subsidiary" means any corporation, domestic or foreign,
         other than the Company, in an unbroken chain of corporations beginning
         with the Company if, at the time of the granting of the Option, each of
         the corporations other than the last corporation in the unbroken chain
         owns stock possessing 50% or more of the total combined voting power of
         all classes of stock in one of the other corporations in such chain.
         Notwithstanding the foregoing, the term "Subsidiary" shall include a
         limited liability company that is disregarded as an entity separate
         from a Subsidiary.

         3. Stock Subject to the Plan. Subject to Section 14, the aggregate
number of shares of Common Stock that may be sold under the Plan is 2,500,000.
Shares of Common Stock to be issued under the Plan may be authorized and
unissued shares, issued shares that have been reacquired by the Company (in the
open-market or in private transactions) and that are being held as treasury
shares, or a combination thereof.

         4. Participation in the Plan. Each Eligible Employee may participate in
the Plan effective as of any Offering Date, by completing and delivering a
payroll deduction authorization to the Plan Administrator at least 20 days in
advance of the applicable Offering Date in the manner specified by the Plan
Administrator. The Offering Date as of which an Eligible Employee commences or
recommences participation in the Plan, and each Offering Date as of which an
Eligible Employee renews his or her authorization under paragraph (a), is an
Offering Date with respect to that Eligible Employee. A Participant's payroll
deductions under the Plan shall commence on his or her initial Offering Date,
and shall continue, subject to paragraph (a), until the Eligible Employee
terminates participation in the Plan, is no longer an Eligible Employee, or the
Plan is terminated.

                  (a) A Participant's payroll deduction authorization shall be
         automatically renewed effective on the Offering Date following the
         conclusion of his or her initial Purchase Period and each subsequent
         Purchase Period, unless the Participant otherwise notifies the Plan
         Administrator in the manner specified by the Plan Administrator at
         least 20 days in advance of such date.

                  (b) Notwithstanding the foregoing, an Eligible Employee shall
         not be granted an Option on any Offering Date if such Eligible
         Employee, immediately after the Option is granted, owns stock
         possessing 5% or more of the total combined voting power or value of
         all classes of stock of the Company or any Subsidiary. For purposes of
         this paragraph (b), the rules of Code Section 424(d) shall apply in
         determining the stock ownership of an individual, and stock that an
         Eligible Employee may purchase under outstanding options shall be
         treated as stock owned by the Eligible Employee.

                  (c) Notwithstanding the foregoing, an Eligible Employee shall
         not be permitted to elect participation in the Plan for the next two
         full Purchase Periods immediately following his or her sale, transfer
         (including transfer to a different brokerage account or withdrawal from
         the Participant's Plan Account), or other disposition of Common Stock
         that was acquired within one year of the Purchase Date applicable to
         that Common Stock.



                                      -4-


         5. Payroll Deductions. An Eligible Employee may participate in the Plan
only through payroll deductions. After-tax payroll deductions shall be made from
the Compensation paid to each Participant for each Purchase Period in such whole
percentage from 1% to 10% as the Participant shall authorize in his or her
election form. No Eligible Employee may be granted an Option that permits his or
her rights to purchase Common Stock under the Plan, and any other stock purchase
plan of the Company or any Subsidiary that is qualified under Code Section 423,
to accrue at a rate that exceeds $25,000 of Fair Market Value of such stock
(determined on the Offering Date of such Option) for each calendar year of the
Company in which the Option is outstanding at any time.

         6. Changes in Payroll Deductions. A Participant may not increase or
decrease the amount of his or her payroll deductions during a Purchase Period. A
Participant may change his or her payroll deductions effective as of a
subsequent Purchase Period by notifying the Plan Administrator in the manner
specified by the Plan Administrator at least 20 days in advance of the next
Offering Date.

         7. Termination of Participation in Plan.

                  (a) A Participant may, for any reason and at any time prior to
         each Purchase Date, voluntarily terminate participation in the Plan by
         notifying the appropriate payroll office in the time and manner
         specified by the Plan Administrator. Such Participant's payroll
         deductions under the Plan shall cease as soon as practicable following
         delivery of such notice. If the former Participant remains employed by
         the Company or any Designated Subsidiary after termination of his or
         her participation in the Plan, any payroll deductions credited to such
         Participant's Plan Account may be used to purchase shares of Common
         Stock on the next Purchase Date or refunded, without interest, to the
         Participant, at the election of the Participant. An Eligible Employee
         whose participation in the Plan is terminated may rejoin the Plan no
         earlier than the beginning of the Purchase Period next following his or
         her withdrawal, by delivering a new payroll deduction authorization in
         accordance with Section 4.

                  (b) A Participant's participation in the Plan shall terminate
         upon termination of his or her employment with the Company and its
         Designated Subsidiaries, or termination of status as an Eligible
         Employee, for any reason. If a former Participant is no longer employed
         by the Company or any Designated Subsidiary, any payroll deductions
         credited to his or her Plan Account shall be paid to the former
         Participant in cash, without interest, as soon as practicable following
         his or her termination of employment. If the Company or a Designated
         Subsidiary terminated the Participant's employment without cause (as
         determined in good faith by the Company or Designated Subsidiary), the
         Participant's termination was due to death, Disability or Retirement,
         or the former Participant remains employed by the Company or any
         Designated Subsidiary after termination of his or her participation in
         the Plan, any payroll deductions credited to such Participant's Plan
         Account may be used to purchase shares of Common Stock on the next
         Purchase Date or refunded, without interest, to the Participant, at the
         election of the Participant (or, in the event of the Participant's
         death or Disability, the Participant's Beneficiary).



                                      -5-


         8. Purchase of Shares.

                  (a) On each Offering Date, each Participant shall be deemed to
         have been granted an Option. In no event will a Participant be deemed
         to have been granted more than one Option during any Purchase Period.

                  (b) On the Purchase Date of a Purchase Period, each
         Participant shall be deemed, without any further action, to have
         purchased that number of whole shares of Common Stock determined by
         dividing the balance in the Participant's Plan Account on the Purchase
         Date by the Purchase Price. Any amount remaining in the Participant's
         Plan Account shall be carried forward to the next Purchase Date unless
         the Plan Account is closed. Except as provided in Sections 13 and 18,
         in no event may a Participant purchase shares of Common Stock prior to
         the Purchase Date of a Purchase Period.

                  (c) As soon as practicable after each Purchase Date, a
         statement shall be delivered to each Participant that shall include the
         number of shares of Common Stock purchased on the Purchase Date on
         behalf of such Participant under the Plan.

                  (d) As of the Purchase Date of each Purchase Period, the
         Common Stock purchased by each Participant shall be considered to be
         issued and outstanding to his or her credit as a bookkeeping entry
         maintained by the Custodian in the Participant's Plan Account. Subject
         to the restrictions of Section 4(c) above, a stock certificate for
         whole shares of Common Stock credited to a Participant's Plan Account
         shall be issued upon request of the Participant at any time. Stock
         certificates under the Plan shall be issued, at the election of the
         Participant, in the Participant's name or in his or her name and the
         name of another person as joint tenants with right of survivorship or
         as tenants in common. A cash payment shall be made for any fraction of
         a share in such Plan Account, if necessary to close the Plan Account.

         9. Rights as a Share Owner. A Participant shall not be treated as the
owner of Common Stock until the Purchase Date of such stock under the Plan. As
of the Purchase Date a Participant shall be treated as the record owner of his
or her shares purchased on such date pursuant to the Plan. Unless the
Participant elects otherwise in the time and manner specified by the Plan
Administrator, any dividends paid in respect of Common Stock purchased by a
Participant under the Plan and credited to his or her Plan Account will be
reinvested in Common Stock in accordance with procedures established by the
Company.

         10. Rights Not Transferable. Rights under the Plan are not transferable
by a Participant other than by will or the laws of descent and distribution, and
are exercisable during the Participant's lifetime only by the Participant or by
the Participant's guardian or legal representative. No rights or payroll
deductions of a Participant shall be subject to execution, attachment, levy,
garnishment or similar process.

         11. Application of Funds. All funds of Participants received or held by
the Company under the Plan before purchase of the shares of Common Stock shall
be held by the Company without liability for interest or other increment.


                                      -6-


         12. Administration of the Plan. The Plan shall be administered by the
Plan Administrator. The Plan Administrator shall have authority to make rules
and regulations for the administration of the Plan, and its interpretations and
decisions with regard to the Plan and such rules and regulations shall be final
and conclusive. It is intended that the Plan shall at all times meet the
requirements of Code Section 423, if applicable, and the Plan Administrator
shall, to the extent possible, interpret the provision of the Plan so as to
carry out such intent.

         13. Change of Control Provisions.

                  (a) Notwithstanding any other provision of the Plan to the
         contrary, in the event of a Change in Control, each Option outstanding
         under the Plan shall be assumed or an equivalent option shall be
         substituted by the successor corporation or a parent or subsidiary of
         such successor corporation. If the successor corporation refuses or is
         unable to assume or substitute for outstanding Options, each Purchase
         Period then in progress shall be shortened and a new Purchase Date
         shall be set (the "New Purchase Date"), as of which date any Purchase
         Period then in progress will terminate. The New Purchase Date shall be
         on or immediately before the effective time of the Change in Control,
         and the Plan Administrator shall notify each Participant in writing, at
         least 10 days before the New Purchase Date, that the Purchase Date for
         his or her Option has been changed to the New Purchase Date, and that
         the Participant's Option will be exercised automatically on the New
         Purchase Date unless the Participant has withdrawn from the Purchase
         Period before the New Purchase Date, as provided in Section 7.

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

                           (i) An acquisition after the Effective Date 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
                  that complies with clauses (1), (2) and (3) of subsection
                  (iii) of this Section 13; or



                                      -7-


                           (ii) A change in the composition of the Board such
                  that the individuals who, as of the Effective Date, 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 13, that any individual who becomes a member of
                  the Board subsequent to the Effective Date, 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



                                      -8-


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

         14. Adjustments in Case of Changes Affecting Shares. In the event of
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 in Control or exchange of Common Stock or other
securities of the Company, or other corporate transaction or event that affects
the Common Stock: (a) the number of shares of Common Stock approved for the Plan
shall be increased or decreased proportionately, and (b) the Board may
determine, in its sole discretion, that an adjustment is necessary or
appropriate in order to prevent dilution or enlargement of benefits or potential
benefits intended to be made available under the Plan.

         15. No Corporate Action Restriction. The existence of the Plan and/or
the Options granted hereunder shall not limit, affect or restrict in any way the
right or power of the Board or the Company's share owners 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 Participant, Employee, 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.

         16. Notices. All notices or other communications by an Employee or
Participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

         17. Amendments to the Plan. The Committee may, at any time, or from
time to time, amend or modify the Plan; provided, however, that no amendment
shall be made increasing or decreasing the number of shares authorized for the
Plan (other than as provided in Section 14), and that, except to conform the
Plan to the requirements of the Code, no amendment shall be made that would
cause the Plan to fail to meet the applicable requirements of Code Section 423.

         18. Termination of Plan. The Plan shall terminate upon the earlier of
(a) the tenth anniversary of the Effective Date, (b) the date no more shares of
Common Stock remain to be purchased under the Plan, or (c) the termination of
the Plan by the Board as specified below. The Board may terminate the Plan as of
any date. The date of termination of the Plan shall be deemed a Purchase Date.
If on such Purchase Date Participants in the aggregate have Options to purchase
more shares of Common Stock than are available for purchase under the Plan, each
Participant shall be eligible to purchase a reduced number of shares of Common
Stock on a pro rata basis, and any excess payroll deductions shall be returned
to Participants, without interest, all as provided by rules and regulations
adopted by the Plan Administrator.


                                      -9-


         19. Costs. All costs and expenses incurred in administering the Plan
shall be paid by the Company. Any costs or expenses of selling shares of Company
Stock acquired pursuant to the Plan shall be borne by the holder thereof.

         20. Governmental Regulations. The Company's obligation to sell and
deliver its Common Stock pursuant to the Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such stock. Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as amended,
the Exchange Act, state securities laws, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

         As a condition to the exercise of an Option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.

         21. Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the United States of
America and, to the extent not inconsistent therewith, by the laws of the State
of Delaware, without reference to the principles of conflict of laws thereof.
This Plan is not to be subject to the Employee Retirement Income Security Act of
1974, as amended, but is intended to comply with Code Section 423. Accordingly,
the provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code. Any provisions required to be set forth in this Plan by such Code
section are hereby included as fully as if set forth in the Plan in full. 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.

         22. Effect on Employment. The provisions of this Plan shall not affect
the right of the Company or any Designated Subsidiary or any Participant to
terminate the Participant's employment with the Company or any Designated
Subsidiary.

         23. Withholding. The Company reserves the right to withhold from stock
or cash distributed to a Participant any amounts that it is required by law to
withhold.

         24. Other Company Benefit and Compensation Programs. For purposes of
the determination of benefits under any other employee welfare or benefit plans
or arrangements, if any, provided by the Company or any Designated Subsidiary
(a) any amounts deducted from a Participant's Compensation pursuant to the
Participant's payroll deduction election under Section 4 shall be deemed a part
of a Participant's compensation, and (b) payments and other benefits received by
a Participant under an Option shall not be deemed a part of a Participant's
compensation, unless expressly provided in such other plans or arrangements, or
except where the Board expressly determines in writing. The existence of the
Plan notwithstanding, the


                                      -10-


Company or any Designated Subsidiary may adopt such other compensation plans or
programs and additional compensation arrangements as it deems necessary to
attract, retain and motivate employees.

         25. Effective Date. The Plan shall become effective July 1, 2002,
provided that the Company's share owners approve it within 12 months after the
date the Plan was adopted by the Board.












                                      -11-

EX-99.3

                                                                    EXHIBIT 99.3


                                 KELLOGG COMPANY
                     SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN


                                    SECTION 1
                            Establishment and Purpose

                  Kellogg Company (the "Company") hereby establishes the
"Kellogg Company Senior Executive Annual Incentive Plan" (the "Plan"). The Plan
will be submitted to the stockholders of the Company for approval at the 2002
Annual Meeting of Stockholders of the Company scheduled to be held on April 26,
2002, and will be effective retroactively to January 1, 2002 (the "Effective
Date"). The purposes of the Plan are to motivate selected senior executives
toward achievement of performance goals; encourage teamwork in various segments
of the Company; and reward performance with cash bonuses that vary in relation
to the achievement of the preestablished performance goals. The Plan replaces
the Kellogg Company Senior Executive Officer Performance Bonus Plan, which has
expired.

                                    SECTION 2
                                   Eligibility

                  The individuals who are assigned one or more of the following
titles by the Company are eligible to participate in the Plan, as determined and
selected by the Committee (as defined in Section 3 hereof): (i) Chairman, Vice
Chairman, Kellogg Company Chief Executive Officer, or Kellogg Company President;
(ii) Kellogg Company Executive Vice President; or (iii) Kellogg Company Senior
Vice President. Each individual selected for participation will be known as a
"Participant".

                                    SECTION 3
                                 Administration

                  The Plan will be administered by the Compensation Committee of
the Company's Board of Directors (the "Board"), or such other committee as the
Board may from time to time select (the "Committee"). The Committee will at all
times be composed of two or more members of the Board, each of whom qualifies as
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended ("Section 162(m)").

                  Except as limited by law or the Company's Amended and/or
Restated Certificate of Incorporation or Bylaws, and subject to the provisions
herein, the Committee will have full power and authority, to the fullest extent
required to comply with Section 162(m), to select Participants (as defined in
Section 2 hereof); determine the size of bonus awards; determine the terms,
conditions, restrictions and other provisions of bonus awards, including the
establishment of the Performance Goals (as defined in Section 4 hereof);
interpret the Plan; establish, amend or rescind guidelines, rules and
regulations for the Plan's administration; review and certify the achievement of
Performance Goals; and, subject to Section 9 hereof and the restrictions under
Section 162(m), amend the terms and conditions of the Plan, including
outstanding Award





Opportunities (as defined in Section 4 hereof). Further, the Committee will make
all other determinations which may be necessary or advisable for the
administration and operation of the Plan. Except as to the extent prohibited by
applicable law, the Committee may delegate all or any portion of its
responsibilities and powers granted under the Plan to such other person or
entity it deems appropriate, including, but not limited to, senior management of
the Company. Any such delegation may be revoked by the Committee at any time.
All determinations and decisions of the Committee arising under the Plan will be
final, binding and conclusive upon all parties. By accepting any benefits under
the Plan, each Participant, and each person claiming under or through such
Participant, will be conclusively deemed to have indicated acceptance and
ratification of, and consent to, all provisions of the Plan and any
determination or decision under the Plan by the Company, the Board or the
Committee.

                                    SECTION 4
                       Participation and Performance Goals

                  The Committee will have the authority to select Participants
(as defined in Section 2 hereof) for cash bonus awards under the Plan for each
Measurement Period and the financial and other performance criteria
("Performance Goals") upon which such awards will be based. For purposes of the
Plan, the term "Measurement Period" means the period of one fiscal year, unless
an alternate period (such as a portion of a fiscal year or multiple fiscal
years) is otherwise selected and established in writing by the Committee at the
time the Performance Goal is established. No later than the earlier of ninety
(90) days after the commencement of the applicable Measurement Period or the
completion of 25% of such Measurement Period, the Committee will, in its
discretion, determine the Participants for such Measurement Period and establish
the Performance Goals applicable to each Participant's award.

                  Performance Goals need not be the same for all Participants.
The Performance Goals may be based on any one or more of the following measures
(or the relative change for any such measure): the Company's earnings per share,
return on equity, return on assets, return on invested capital, growth in sales
and earnings, net sales, cash flow, discounted cash flow, cumulative cash flow,
operating profits, pre-tax profits, post-tax profits, consolidated net income,
unit sales volume, economic value added, costs, production, unit production
volume, improvements in financial ratings, regulatory compliance, achievement of
balance sheet or income statement objectives, market share and total return to
stockholders (including both the market value of the Company's stock and
dividends thereon) and the extent to which strategic and business plan goals are
met.

                  With respect to each Participant, the Committee will establish
ranges of Performance Goals which correspond to various levels of cash bonus
amounts ("Award Opportunities") for the Measurement Period. Each range of
Performance Goals will include a level of performance at which one hundred
percent (100%) of the targeted bonus award ("Target Bonus Award") may be earned.
In addition, each range of Performance Goals will include levels of performance
above and below the one hundred percent (100%) performance level. The Committee
may establish minimum levels of Performance Goal achievement, below which no
bonus payment will be made to the Participant. Once established, Performance
Goals and Award Opportunities may be adjusted during the Measurement Period only
to mitigate the unbudgeted


                                       2



impact of unusual or nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time such Performance Goals and Award
Opportunities were established.

                                    SECTION 5
                         Final Bonus Award Determination

                    Awards are based on the achievement of the preestablished
Performance Goals. After the Performance Goals are established as described in
Section 4 hereof, the Committee will align the achievement of the Performance
Goals with Award Opportunities, such that the level of achievement of the
Performance Goals at the end of the Measurement Period will determine the
Participant's actual annual bonus award ("Final Bonus Award"). Final Bonus
Awards may vary above or below the Target Bonus Award, based on the level of
achievement of the preestablished Performance Goals.

                  Negative discretion may be used by the Committee to reduce the
Final Bonus Award. In no event, however, will an exercise of negative discretion
to reduce the Final Bonus Award of a Participant have the effect of increasing
the amount of a Final Bonus Award otherwise payable to any other Participant.

                                    SECTION 6
                             Final Bonus Award Limit

                  The total of all Final Bonus Awards payable to Participants
for performance in any Measurement Period will not under any circumstances
exceed one percent (1%) of the Net Income of the Company (the "Maximum Bonus
Awards Pool") for such period. For purposes of the Plan, the term "Net Income"
means the income from continuing operations of the Company and its subsidiaries,
as determined on a consolidated basis in accordance with generally accepted
accounting principles, adjusted to exclude the following: (i) all restructuring
and disposition-related charges or credits for the fiscal year, net of related
tax effect; and (ii) incremental and non-recurring integration costs and other
financial impacts, net of tax, related to the business operations of an entity
acquired by the Company.

                  The maximum Final Bonus Award any Participant can receive for
performance in any Measurement Period is three million dollars ($3,000,000). In
the event that the total of all Final Bonus Awards payable to Participants
should exceed the Maximum Bonus Awards Pool as specified above, the Final Bonus
Award of each Participant will be proportionately reduced such that the total of
all such Final Bonus Awards paid is equal to the Maximum Bonus Awards Pool.

                                    SECTION 7
                                Payment of Awards

                  If the Performance Goals established by the Committee are
satisfied and upon written certification by the Committee that the Performance
Goals have been satisfied, payment will be made in cash as soon as practicable
in accordance with the terms of the award, unless the Committee determines in
its sole discretion to reduce or eliminate Final Bonus Award



                                       3



determinations for any or all Participants, based upon any objective or
subjective criteria it deems appropriate. There is no obligation for uniformity
of treatment of Participants under the Plan.

                                    SECTION 8
                            Termination of Employment

                  Each Participant must remain employed with the Company or a
subsidiary through the last day of the Measurement Period to be considered for a
Final Bonus Award; provided, however, in the event of a Participant's death,
disability or retirement (as defined in the Kellogg Company Salaried Pension
Plan or any other retirement plan of the Company or a subsidiary in which the
individual participates) during the Measurement Period, the Participant's bonus
award will based on the portion of the Measurement Period in which the
Participant was employed, computed as determined by the Committee. In the event
that a Participant's employment is terminated for any reason other than death,
disability or retirement, the Participant's rights to a Final Bonus Award will
be forfeited; provided, however, the Committee may, in its sole discretion, pay
a prorated bonus award to the Participant for the portion of the Measurement
Period in which the Participant was employed, computed as determined by the
Committee. In the event that a Participant's employment with the Company or a
subsidiary terminates for any reason after the completion of the Measurement
Period but prior to the actual payment of the cash bonus, the balance of any
bonus which remains unpaid at the time of such termination will be payable to
the Participant, or forfeited by the Participant, in accordance with the terms
of the award granted by the Committee.

                                    SECTION 9
                            Amendment and Termination

                  The Board and the Committee each has the right to amend or
terminate the Plan at any time and in any respect, except that, unless otherwise
determined by the Board or the Committee, no amendment may be made without
stockholder approval if, and to the extent that, such approval would be required
to comply with any applicable provisions of Section 162(m). Similarly, no
amendment or termination of the Plan may alter or impair the rights of any
Participant pursuant to an outstanding award without the consent of the
Participant.

                  This Plan will expire on December 31, 2006, unless terminated
earlier by the Board or the Committee. No further awards will be made under the
Plan after termination, but termination will not affect the rights of any
Participant under any award made prior to termination.

                                   SECTION 10
                                  Miscellaneous

                  Bonus payments will be made from the general funds of the
Company and no special or separate fund will be established or other segregation
of assets made to assure payment. No Participant or other person will have under
any circumstances any interest in any particular property or assets of the
Company. The Plan will be governed by and construed in



                                       4




accordance with the laws of the State of Delaware, without regard to its
principles of conflict of laws.

                  Neither the establishment of this Plan nor the payment of any
award hereunder nor any action of the Company, the Board or the Committee with
respect to this Plan will be held or construed to confer upon any Participant
any legal right to be continued in the employ of the Company or to receive any
particular rate of cash compensation other than pursuant to the terms of this
Plan and the determination of the Committee, and the Company expressly reserves
the right to discharge any Participant whenever the interest of the Company may
so permit or require without liability to the Company, the Board or the
Committee, except as to any rights which may be expressly conferred upon a
Participant under this Plan.

                  The adoption of this Plan will not affect any other
compensation plans in effect for the Company or any subsidiary or affiliate of
the Company, nor will the Plan preclude the Company or any subsidiary or
affiliate thereof from establishing any other forms of incentive or other
compensation for the Participants.




                                       5