SCHEDULE 14A
(Rule14a-101)14A-101)INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
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[ ] Definitive additional materials
Kellogg Company
[ ] Soliciting material pursuant to Rule
14a-11(c) or Rule 14a-12
(Name of Person(s) Filing Proxy Statement if other thanOther Than the Registrant)
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[KELLOGG’S LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
Dear Share Owner:
It is ourmy pleasure to invite you to attend the 20002001 Annual Meeting of Share Owners of Kellogg Company. The meeting will be held at 1:00 p.m. on Friday, April 28, 2000,27, 2001, 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.
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, weI 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,
/s/ CARLOS M. GUTIERREZ
Carlos M. Gutierrez
President
Chief Executive Officer
/s/ ARNOLD G. LANGBO
Arnold G. Langbo
Chairman of the Board,
President and Chief Executive Officer
March 17, 2000
16, 2001
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
TO BE HELD APRIL 28, 200027, 2001
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 28,
2000,27, 2001, at the W. K. Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan, for the following purposes:
| 1. | To elect | |
| 2. | ||
| To consider and act upon a share owner proposal, if presented at the meeting; and | ||
| To take action upon any other matters that may properly come before the meeting and any adjournments of the meeting. |
Only share owners of record at the close of business on February 29, 2000,28, 2001, will receive notice of and be entitled to vote at the meeting or any adjournments of the meeting.
By Order of the Board of Directors,
Janet Langford Kelly
March 17, 2000
16, 2001
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.
ONE KELLOGG SQUARE
FOR THE ANNUAL MEETING OF SHARE OWNERS
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 28, 2000,27, 2001, and any adjournments of the meeting. The enclosed Proxy is solicited by the Board of Directors of the Company.
Mailing Date
The Annual Report of the Company for 19992000 including financial statements, the Notice of Annual Meeting, this Proxy Statement, and the Proxy were mailed to share owners beginning on March 17, 2000.
16, 2001.
Who can vote —Can Vote — Record Date
The record date for determining share owners entitled to vote at the Annual Meeting is February 29, 2000.28, 2001. Each of the 405,459,024405,696,507 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 —Vote — Proxy Instructions
You may vote your shares either (i)(1) over the telephone by calling a toll-free number, (ii)(2) by using the Internet, or (iii)(3) by mailing in your proxy card. Share owners who hold their shares in “street name”“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 set forth 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 27, 2000.26, 2001. 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). You may also specify whether you approve, disapprove, or abstain from each of 4 additional proposals.
ProposalsProposal 2, 3, and 4 will be presented at the meeting by
management, and Proposal 5which may be presented by a share owner.
If you do not specify on your proxy card, (oror when giving your proxy by telephone or over the Internet)Internet, how you want to vote your shares, we will vote them “For”“For” the election of all nominees for director as set forth under “Election“Election of Directors”Directors” (Proposal 1) below; “For”below, “Against” Proposal 2; “For” Proposal 3; “For”
Proposal 4;2, and “Against” Proposal 5.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’sCompany’s Dividend Reinvestment Plan, will be voted by the persons named as the proxy according to each share owner’sowner’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’sCompany’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 Secretary;
| (1) | by submitting written notice of revocation to the Company 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. |
(3) by voting in person at the meeting.
Quorum
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”“non-votes” and abstentions are counted as present at the Annual Meeting for purposes of determining whether a quorum exists. A broker “non-vote”“non-vote” occurs when a nominee 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.
Required Vote
Persons receiving a plurality of the votes cast at the Annual Meeting will be elected directors. “Plurality”“Plurality” means that the nominees who receive the largest number of votes cast are elected as directors. Shares not voted (whether by abstention, broker “non-votes,”“non-votes,” or otherwise) have no effect on the election.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.
A majority of the votes cast at the Annual Meeting are necessary to approve Proposal 2 (the Kellogg Company 2000 Non-Employee
Director Stock Plan), Proposal 3 (the Kellogg Company 2001
Long-Term Incentive Plan), and Proposal 5 (a share owner proposal). Adoption of Proposal 4 (increasing the authorized
number of shares of the Company’s common stock) requires
the affirmative vote of the holders of a majority of the
outstanding shares of common stock entitled to vote at the Annual
Meeting. Shares not voted (whether by abstentions, or broker “non-votes,”“non-votes,” or otherwise) will have no effect on the election of directors (Proposal 1), Proposal 2,
Proposal 3, or Proposal 5, but will have the effect of a “no”“no” vote on Proposal 4.
2.
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 hired Morrow && Co., a professional soliciting organization, to assist in soliciting proxies from brokerage firms, custodians, and other fiduciaries. We expect the fees and expenses for Morrow && Co. to be approximately $10,000.$8,000. 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
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’sCompany’s common stock.
| Percent of Class on | ||||||||
| Beneficial Owner | Shares Beneficially Owned | December 31, | ||||||
| W. K. Kellogg Foundation Trust(1) c/o The Bank of New York Company, Inc. One Wall Street New York, NY 10286 | ) | % | ||||||
| George Gund III San Francisco, CA | 41,578,147 shares(3 | ) | 10.3 | % | ||||
| KeyCorp 127 Public Square Cleveland, OH 44114-1306 | 34,844,407 shares(4 | ) | 8.6 | % | ||||
| Capital Group International, Inc. 11100 Santa Monica Boulevard Los Angeles, CA 90025 | 31,142,460 shares(5 | ) | 7.7 | % | ||||
| (1) | The trustees of the W. K. Kellogg Foundation Trust (the |
| (2) | Does not include 721,920 shares held in a trust in which |
| The Bank of New York is a trustee of the Trust and shares voting and investment power with respect to shares owned by the |
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 has sole
voting power for 277,782 shares, shared voting power for
134,035,751 shares (including those shares beneficially owned by
the Trust), sole investment power for 195,792 shares, and shared
investment power for 132,446,633 shares (including those shares
beneficially owned by the Trust). The aggregate amount
beneficially owned by The Bank of New York is 134,313,533 shares.
| (3) | George Gund III has sole voting power |
KeyCorp, as trustee for certain Gund family trusts, as well as
other trusts, has sole voting power for 3,066,494 shares, shared
voting power for 23,855 shares (including certain of the shares
beneficially owned by George Gund III), sole investment power for
37,086,937 shares, and shared investment power for 725,961
shares. The aggregate amount beneficially owned by KeyCorp is
37,813,074
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Officer and Director Stock Ownership
The following table shows the number of shares of common stock of the Company beneficially owned as of February 10, 2000,January 31, 2001, by each continuing director and nominee for director, each executive officer included in the Summary Compensation Table, and all directors, nominees, and executive officers as a group.
| Shares of Common | ||||||||||||
| Name | ||||||||||||
| Benjamin S. Carson, Sr.(2) | ||||||||||||
| John | ||||||||||||
| Claudio X. Gonzalez(1)(2) | ||||||||||||
| Gordon Gund(1)(2)(5) | ||||||||||||
| Carlos M. | ||||||||||||
| Alan F. | ||||||||||||
| James M. Jenness(1)(2) | 105,281 | |||||||||||
| Dorothy A. Johnson(1)(2) | ||||||||||||
| Janet L. Kelly | 103,200 | |||||||||||
| Ann | ||||||||||||
| J. Richard Munro(1)(2) | ||||||||||||
| William D. | ||||||||||||
| Michael J. Teale | 350,165 | |||||||||||
| William C. Richardson(1)(2)(4) | ||||||||||||
| John L. Zabriskie(1)(2) | ||||||||||||
| All directors, nominees, and executive officers as a | 2,237,912 | |||||||||||
| (1) | Does not include the following number of common stock units held |
| (2) | 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, 3,626 shares; Mr. Dillon, 1,531 shares; Mr. Gonzalez, 9,322 shares; Mr. Gund, 9,230 shares; Mr. Jenness, 1,531 shares; Ms. Johnson, 2,810 shares; Ms. McLaughlin Korologos, 9,035 shares; Mr. Munro, 9,910 shares; Mr. Perez, 1,749 shares; Dr. Richardson, 5,006 shares; Dr. Zabriskie, 6,599 shares; and all directors as a group, 60,348 shares. |
| (3) | Includes the following number of shares which the named persons have the right to acquire through exercise of an option or otherwise by March 31, 2001: Dr. Carson, 5,000 shares; Mr. Dillon, 3,750 shares; Mr. Gonzalez, 5,000 shares; Mr. Gund, 5,000 shares; Mr. Gutierrez, 495,694 shares; Mr. Harris, 276,191 shares; Mr. Jenness, 103,750 shares; Ms. Johnson, 5,000 shares; Ms. Kelly, 94,000 shares; Ms. McLaughlin Korologos, 5,000 shares; Mr. Munro, 5,000 shares; Mr. Perez, 5,000 shares; Mr. Teale, 303,492 shares; Dr. Richardson, 5,000 shares; Mr. Webb, 81,500 shares; Dr. Zabriskie, 5,000 shares; and all directors, nominees, and executive officers as a group, 1,913,643 shares. |
| (4) | Does not include shares owned by the W. K. Kellogg Foundation Trust as to which Mr. |
| Gordon Gund disclaims beneficial ownership of 3,092,692 shares beneficially owned by George Gund III. |
4
| (6) | Includes 4,753 shares held for the benefit of Mr. Gutierrez’s children, over which he disclaims beneficial ownership, and 51,328 shares owned by Mr. Gutierrez’s wife. |
| (7) | Includes 2,700 shares owned by Mr. Harris’ wife. |
| (8) | Includes 88,951 shares owned by spouses; 6,471 shares owned by, or held for the benefit of, children, over which the applicable director, nominee, or executive officer disclaims beneficial ownership; 3,048 shares owned jointly, over which the director, nominee, or executive officer shares voting and investment power; and 59,997 shares held in the Company’s Savings and Investment Plans, which contain some restrictions on investment. |
| (9) | Represents less than one percent of the |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sCompany’s directors, executive officers, and greater-than-10% share owners to file reports with the Securities and Exchange Commission (“SEC”(“SEC”) and the New York Stock
Exchange.. 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 complied with their filing requirements for 1999,2000, except that Dr. Donna J. Banks and
Mr. Alan F. Harris were late in filing a Form 4
relating3 for Mr. Martinez, who was an executive officer for part of 2000, contained an error, which was subsequently corrected in an amendment filed after the Form 3 due date.
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 2000, and operates under a written charter (Exhibit A) approved by the Board. Management has the primary responsibility for the financial statements and the reporting process, including the Company’s systems of internal controls. 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 exercisequality and acceptability of options,the Company’s financial reporting and Mr. Jacobus Grootsuch 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 auditors’ independence from management and the Company, and the matters in the auditors’ written disclosures received from the auditors and required by the Independence Standards Board, including those required by Statement on Auditing Standards No. 61.
The Committee 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 2000 are listed on the next page) is compatible with maintaining the auditors’ independence.
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 ended December 31, 2000, 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 2001 fiscal year.
| AUDIT COMMITTEE | |
| Ann McLaughlin Korologos, Chairman | |
| John T. Dillon | |
| Dorothy A. Johnson | |
| William D. Perez | |
| John L. Zabriskie |
5
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 2000 and for reviews of the Company’s financial statements included in the Company’s Quarterly Reports on Form 10-Q during 2000 was late$1,400,000.
Financial Information Systems Design and Implementation Fees
The aggregate amount of fees billed to the Company by Pricewaterhouse Coopers LLP for professional services described in filing a Form 3.
Paragraph (c)(4)(ii) of Rule 2-01 of SEC Regulation S-X which were rendered to the Company for 2000 was $200,000.
4
All Other Fees
The aggregate amount of all other fees billed to the Company by Pricewaterhouse Coopers LLP for services which were rendered to the Company for 2000 was $7,000,000.
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Proposal 1.
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. There are
currently fourteen members of the Board. Three current directors,
William E. LaMothe, Arnold G. Langbo, and
Harold A. Poling will not be seeking re-election to the
Board. The Company would like to thank Mr. LaMothe,
Mr. Langbo, and Mr. Poling for their many years of
dedicated service.
ThreeFour directors are to be elected at the Annual Meeting to serve for a term ending at the 20032004 Annual Meeting of Share Owners.
Owners and the proxies cannot be voted for a greater number of persons than the number of nominees named. Carleton S. Fiorina resigned from the Board on January 10, 2001, and J. Richard Munro will resign immediately before the Annual Meeting. The Company would like to thank them for their years of dedicated service. There are currently twelve members of the Board.
The Board of Directors recommends that the share owners vote “FOR”“FOR” the following nominees:CarletonBenjamin S. Fiorina, J. Richard Munro,Carson, Sr., Gordon Gund, Dorothy A. Johnson, and William D. Perez.Ann McLaughlin Korologos. 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 yearthree-year term expiring at the 20032004 Annual Meeting
CARLETON S. FIORINA. Mrs. Fiorina, age 45, has served
as a director of the Company since 1997. She is President and
Chief Executive Officer of Hewlett-Packard Company, a position
she has held since July 1999. Prior to that she was Group
President, Global Service Provider Business, Lucent Technologies
Inc., a communications systems and technology company. She had
held this position since October 1997. From October 1996 to
October 1997, she was President of Lucent Technologies Consumer
Products business. From January 1996 to October 1996, she was
Executive Vice President, Corporate Operations. From January 1995
to January 1996, she was President, North America in the Network
Systems Group of AT&T. Lucent Technologies was created in
1996 when AT&T split into three separate companies.
Mrs. Fiorina is a director of Hewlett-Packard Company and
Merck & Co., Inc.
J. RICHARD MUNRO. Mr. Munro, age 69, has served as a
director of the Company since 1990. From 1996 to September of
1999, he served as Chairman of Genentech Inc., a biotechnology
company. Prior thereto, he was Co-Chairman and Co-Chief Executive
Officer of Time Warner Inc. Mr. Munro is a director of
ExxonMobil Corporation, Sensormatic Electronics, and Kmart
Corporation.
WILLIAM D. PEREZ. Mr. Perez, age 52, was elected a
director of the Company in December 1999, effective February
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 a
director of The May Department Stores Company and Hallmark Cards,
Incorporated.
Continuing Directors to serve until the 2002 Annual Meeting
CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 65, 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, writing and other papers, and pulp.
He is a director of Kimberly-Clark Corporation; General Electric
Company; Planet Hollywood International, Inc.; Banco Nacional de
Mexico; Grupo Industrial ALFA; Grupo Modelo; Grupo Carso; Grupo
Televisa; Telefonos de Mexico; and The Mexico Fund.
Mr. Gonzalez is also an advisory director of Unilever PLC
and he is on the J. P. Morgan International Advisory Council.
CARLOS M. GUTIERREZ. Mr. Gutierrez, age 46, has
served as a director of the Company since January 1999.
Mr. Gutierrez is President and Chief Executive Officer of
the Company, a position 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.
WILLIAM C. RICHARDSON. Dr. Richardson, age 59, 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. Before joining the Foundation in 1995,
Dr. Richardson had been President of The Johns Hopkins
University in Baltimore, Maryland. He is a director of CSX
Corporation and The Bank of New York Company, Inc.
5
JOHN L. ZABRISKIE. Dr. Zabriskie, age 60, has served
as a director of the Company since 1995. He is Chairman of NEN
Life Science Products, Inc., a manufacturer of specialty
biochemicals. In 1999, he retired as Chief Executive Officer of
NEN, a position he had held since 1997. From January 1994 to
November 1995, Dr. Zabriskie served as Chairman of the
Board and Chief Executive Officer of The Upjohn Company, and
from November 1995 to January 1997, Dr. Zabriskie
served as President and Chief Executive Officer of Pharmacia
& Upjohn, Inc. Dr. Zabriskie is a director of NEN Life
Science Products, Inc.; Biomira, Inc.; AlphaGene, Inc.; and
Cubist Pharmaceuticals, Inc.
Continuing Directors to Serve Until the 2001 Annual
Meeting
BENJAMIN S. CARSON, SR.Dr. Carson, age 48,49, has served as a director of the Company since 1997. He is 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 60,61, 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, and principal owner
and Chairman of Nationwide Advertising Service, Inc., a
recruitment advertising agency.team. He is also a director of Corning Incorporated.
DOROTHY A. JOHNSON.Ms. Johnson, age 59,60, 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 since 1980. Ms. Johnson is also a director of National City Corporation and the Corporation for National Service.
ANN MCLAUGHLIN. MCLAUGHLIN KOROLOGOS.Ms. McLaughlin,Korologos, age 58,59, has served as a director of the Company since 1989. She is currently Senior Advisor to Benedetto, Gartland & Company, Inc. and Chairman Emeritus of The Aspen Institute, a nonprofit organization.organization, and former U.S. Secretary of Labor. She served as
President of the Federal City Council in Washington, D.C., a
nonprofit organization, from 1990 to 1995. She is also a director of Microsoft Corporation; AMR Corporation (the parent company of(and its subsidiary, American Airlines); General Motors Corporation; Nordstrom, Inc.; Host Marriott Corporation; Fannie Mae; Harman International Industries, Incorporated; Vulcan Materials Company; andInc.; Donna Karan International Inc.; and Vulcan Materials Company.
Continuing Directors to serve until the 2002 Annual Meeting
CLAUDIO X. GONZALEZ.Mr. Gonzalez, age 66, 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; Planet Hollywood International, Inc.; Banco Nacional de Mexico; Grupo Industrial ALFA; Grupo Modelo; Grupo Carso; Grupo Televisa; America Movil; and The Mexico Fund. Mr. Gonzalez is also an advisory director of Unilever PLC and is on the J. P. Morgan International Advisory Council.
CARLOS M. GUTIERREZ.Mr. Gutierrez, age 47, 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 trustee of the W. K. Kellogg Foundation Trust.
WILLIAM C. RICHARDSON.Dr. Richardson, age 60, 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
7
JOHN L. ZABRISKIE.Dr. Zabriskie, age 61, has served as a director of the Company since 1995. 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.; AlphaGene, Inc.; Cubist Pharmaceuticals, Inc.; Callisto Pharmaceuticals; Array Biopharma; and Macrochem Inc.
Continuing Directors to serve until the 2003 Annual Meeting
JOHN T. DILLON.Mr. Dillon, age 62, was appointed a director of the Company in 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 Chairman of the Board of The National Council on Economic Education, a member of The Business Roundtable, and the Advisory Committee for Trade Policies and Negotiation, and Chairman of The American Forest and Paper Association.
JAMES M. JENNESS.Mr. Jenness, age 54, was appointed a director of the Company in 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 Schwarz Company, Group II Communications, and Integrated Merchandising Systems.
WILLIAM D. PEREZ.Mr. Perez, age 53, was elected a director of the Company in 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.
The Board of Directors has the following standing committees: Executive Committee, Audit Committee, Social Responsibility
Committee, Compensation Committee, Finance Committee, and
Nominating and Corporate Governance Committee, and Social Responsibility Committee.
The Executive Committee is generally empowered to act on behalf of the Board. The Executive Committee met two timesdid not meet in 1999.2000. The members of the Executive Committee are Mr. Gutierrez, Chairman, Mr. Gonzalez, Mr. Gund, Ms. McLaughlin Korologos, Mr. Poling,Munro, Dr. Richardson, and Dr. Richardson.
Zabriskie.
The Audit Committee reviews the accounting principles, the controls and scope of the audit practices of the Company, and makes reports and recommendations to the Board on those matters and with respect to the independent auditor and internal auditors. It met twofive times in 1999.2000. The members of the Audit Committee are Ms. McLaughlin Korologos, Chairman, Mr. Dillon, Ms. Johnson, Mr. Perez, and Dr. Zabriskie.
The Compensation Committee reviews recommendations for compensating management personnel, determines compensation of the Chief Executive Officer, and provides advice and recommendations to the Board on these subjects. It met seven times in 2000. The members of the Compensation Committee are Mr. Gonzalez, Chairman, Mr. Gund, Mr. Munro, 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 four times in 2000. The members of the Finance Committee are Dr. Zabriskie, Chairman, Mr. Dillon, Mr. Gonzalez, Mr. Gund, Ms. Johnson, Mr. Perez, 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 three times in 2000. The members of the Nominating and Corporate Governance Committee are Mr. Gund, Chairman, Dr. Carson, Mr. Gonzalez, Ms. Johnson, Mr. LaMothe,McLaughlin Korologos, and Mr. Perez.
Dr. Zabriskie.
8
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 one time in 1999.2000. The members of the Social Responsibility Committee are Mr. Munro, Chairman, Dr. Carson, Mr. Jenness, Ms. Johnson, Ms. McLaughlin Korologos, and Dr. Richardson.
The Compensation Committee reviews recommendations for
compensating management personnel, determines compensation of the
Chief Executive Officer, and provides advice and recommendations
to the Board on these subjects. It met three times in 1999. The
members of the Compensation Committee are Mr. Gonzalez,
Chairman, Mr. Gund, Mr. Munro, 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 five times in 1999. The members of the Finance
Committee are Dr. Zabriskie, Chairman, Mrs. Fiorina,
Mr. Gonzalez, Mr. Perez, Mr. Poling, and
Dr. Richardson.
6
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 1999. The members of the Nominating and Corporate Governance
Committee are Mr. Gund, Chairman, Mr. Gonzalez,
Mr. LaMothe, Ms. McLaughlin, and Mr. Poling.
The Board held ninesixteen meetings in 1999.2000. 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 1999,2000, except that Mrs. FiorinaDr. Carson attended 65%68% of the total number of such meetings.
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 Compensation Program for Non-Employee Directors,
1,000Plan approved by share owners in 2000, each eligible non-employee director annually is granted options to purchase 5,000 shares of common stock areand awarded to all eligible
non-employee directors following each annual meeting.1,700 shares of common stock. These shares are placed in the Kellogg Company Grantor Trust for Non-Employee Directors (the “Grantor Trust”“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’sCompany’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’sparticipant’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’sDirector’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.
7
In addition to the standard benefits described above, James M. Jenness was granted a non-qualified stock option to purchase 300,000 shares of the Company’s common stock at $27 per share, the fair market price of the stock on July 27, 2000. In connection with this option, Mr. Jenness has agreed to devote fifty percent of his working time to consulting with the Company on such matters as the Chief Executive Officer may direct. The option vests in three equal annual installments and further vesting terminates immediately if Mr. Jenness is no longer willing to devote fifty percent of his working time to consult with the Company or if the Company notifies Mr. Jenness that it no longer wishes to receive such consulting services. The option contains the AOF provisions described in footnote (4) of the Summary Compensation Table. In addition, if Mr. Jenness attempts to provide consulting services to a direct competitor within one year after he exercises any part of this option, he must return the gain received upon such exercise and any portion which remains unexercised will be immediately cancelled.
9
Summary Compensation Table
The following table provides information for the last three years concerning the compensation of the Company’sCompany’s Chief Executive Officer and certainits four other most highly compensated executive officers for the last three years.
officers.
| Long-Term | |||||||||||||||||||||||||||||
| Compensation Awards | |||||||||||||||||||||||||||||
| Annual Compensation | |||||||||||||||||||||||||||||
| Restricted | Securities | ||||||||||||||||||||||||||||
| Other Annual | Stock | Underlying | All Other | ||||||||||||||||||||||||||
| Salary | Bonus | Compensation | Awards | Options | Compensation | ||||||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($)(2) | ($)(3) | (#)(4) | ($)(5) | ||||||||||||||||||||||
| Carlos M. Gutierrez | 2000 | 806,250 | 127,500 | — | -0- | 250,000 | 11,847 | ||||||||||||||||||||||
| Chairman, President and Chief | 1999 | 638,750 | 461,700 | — | -0- | 83,037 | 11,647 | ||||||||||||||||||||||
| Executive Officer | 1998 | 467,500 | 59,890 | — | -0- | 220,517 | 11,493 | ||||||||||||||||||||||
| Michael J. Teale | 2000 | 369,800 | 340,000 | — | 31,425 | 66,000 | 11,216 | ||||||||||||||||||||||
| Executive Vice President | 1999 | 344,000 | 152,900 | — | -0- | 77,303 | 10,680 | ||||||||||||||||||||||
| 1998 | 338,250 | 82,560 | — | -0- | 96,275 | 10,713 | |||||||||||||||||||||||
| Thomas J. Webb | 2000 | 375,900 | 260,000 | 85,125 | -0- | 163,000 | 612,000 | ||||||||||||||||||||||
| Executive Vice President | |||||||||||||||||||||||||||||
| Alan F. Harris | 2000 | 453,300 | 70,000 | 308,956 | -0- | 110,000 | 11,553 | ||||||||||||||||||||||
| Executive Vice President | 1999 | 405,960 | 210,000 | 203,055 | -0- | 77,129 | 13,749 | ||||||||||||||||||||||
| 1998 | 329,750 | 80,106 | 75,565 | -0- | 82,464 | 5,303 | |||||||||||||||||||||||
| Janet L. Kelly | 2000 | 412,000 | 67,600 | 1,919 | 31,425 | 63,000 | 402,845 | ||||||||||||||||||||||
| Executive Vice President | 1999 | 133,000 | (1) | 260,000 | 71,912 | -0- | 125,000 | -0- | |||||||||||||||||||||
| (1) | |
| (2) | |
| Represents payments to or on behalf of Mr. Harris, | |
| (3) | Ms. Kelly and Mr. Teale were each awarded 1,200 shares of restricted stock on March 15, 2000, under the 1991 Key Employee Long Term Incentive Plan, when the closing price of Kellogg Company common stock was $26.1875 per share. These awards were valued at $31,425 on December 29, 2000, based on the closing price of Kellogg Company common stock on that date. Messrs. Gutierrez and Harris and Ms. Kelly were also awarded 13,947, 7,657, and 7,395 shares, respectively, of restricted stock in February 2001, under the Company’s 2001 Long-Term Incentive Plan. These awards were valued at approximately $382,500, $210,000, and $202,800, respectively, based on the closing price of Kellogg Company common stock on February 16, 2001, the grant date. The named executive officers have received no other awards of restricted stock. |
| (4) |
8
| (5) |
10
| other events specified in his employment agreement occurred. The other amounts represent Company matching contributions on behalf of each named individual to the Kellogg Company Salaried Savings and Investment Plan. | |
Employment and Change in Control Agreements
The named continuing 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 terminate 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; (b) three times the sum of his or her annual base salary and a 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. If Mr. Webb’s or Ms. Kelly’s employment terminated for any such reason, he or she would receive the payments described in this paragraph in lieu of the severance payments described below.
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. Webb has an agreement entered into with the Company effective
August 1, 1999, Mr. Thomason was paid a one-time lump sum
severance of $259,897.
Employment Agreements
Mr. Cook’s employment agreement with the Company, effective February 16,December 30, 1999, callsproviding for a starting salary of $600,000$400,000 per year. He receivedyear and a lump-sumtargeted bonus of 65% of base pay, with the bonus for 2000 being guaranteed. The agreement also provides for a sign-on payment of $500,000 in
March 1999$300,000 (less applicable deductions) and received another lump-suman additional sign-on payment of $500,000 in
February 2000. Mr. Cook’s bonus target is 65% of his
salary, but for 1999 the Company guaranteed a bonus equal to 65%
of his base pay ($390,000). Mr. Cook receivedif other events occur, a sign-on stock option grant of 100,000 options and an option to purchase
an additionalacquire 100,000 shares pursuant toof the executive option
plan. The strike price for the options ($39.125) was set based on
the price of Kellogg CompanyCompany’s common stock, onand a guaranteed stock option award of 63,000 shares of the Company’s common stock for 2000, along with specified pension arrangements. It also provides that, if his first day of
employment. Mr. Cookemployment is terminated under certain conditions, he would be entitled to additional benefits
includingseverance pay equal to two years of base pay and target bonuses, so long as he executes a pension, participation inrelease, as well as continuation of health care benefits.
Mr. Harris has a revised agreement with the Kellogg Company, Salaried Savings and Investment Plan, life insurance, medical
insurance, and other similar benefits, all according to the terms
and conditions of the respective plans. If Mr. Cook’seffective July 26, 2000, 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 March 19, 2004, he would be entitled to receive his base salary through July 1, 2002, and severance pay equal to the greater of the average of his prior two yearsyears’ base pay and actual bonus, or two times his salary and target bonus for the year in which the termination occurs.
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, except that Mr. Harris would also receive his base salary through July 1, 2001, if his employment is terminated, or if Mr. Harris resigns, under certain conditions after a “change of control” occurring before that date.
Ms. Kelly has an agreement with the Company, effective March 19,August 30, 1999, providing that if his employment is
terminated by the Company prior to March 19, 2004, under
certain conditions he would be entitled to severance pay equal to
the greater of 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.
Mr. Groot’s employment agreement with the Company,
effective January 4, 1999, calls for a starting salary of $350,000$400,000 per year. Mr. Groot’syear and a targeted bonus target is 60% of his salary, but65% of base pay, with the bonus for 1999 the Company guaranteed a bonus equal to
60%being guaranteed. The agreement also provides for two sign-on payments of his base pay ($210,000). Mr. Groot received$400,000 each (less applicable deductions), a sign-on stock option grantto acquire 125,000 shares of 45,000 options and an option to purchase
an additional 35,000 shares pursuant to the executive option
plan. The strike price for the options ($34.625) was set based on
price of Kellogg CompanyCompany’s common stock, on his first day of
employment. Mr. Groot received certain benefits and perquisites due to his overseas assignment and he is entitled to
additional benefits including participation inspecified service credits under the Kellogg
Company Salaried Savings and Investment Plan, life insurance,
medical insurance, and other similar benefits, all according to
the terms and conditions of the respective plans. If
Mr. Groot’spension plan. It also provides that, if her employment is terminated by the Company,
under certain conditions, heshe would be entitled to severance pay equal to two years pay, determined by averaging his prior two
yearsof base pay and actual bonus.
target bonuses, so long as she executes a release, as well as continuation of health care benefits.
9
11
Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted during 19992000 to the persons named in the Summary Compensation Table.
| Individual Grants | ||||||||||||||||||||
| Number of | % of Total | |||||||||||||||||||
| Securities | Options | |||||||||||||||||||
| Underlying | Granted to | Grant Date | ||||||||||||||||||
| Options | Employees in | Exercise | Present | |||||||||||||||||
| Granted | Fiscal | Price | Expiration | Value | ||||||||||||||||
| Name | (#)(1) | Year (%) | ($/Share) | Date | ($)(2) | |||||||||||||||
| C. M. Gutierrez | 250,000 | 3.9% | $ | 24.219 | 1/31/10 | $ | 1,125,000 | |||||||||||||
| M. J. Teale | 66,000 | 1.0% | $ | 24.219 | 1/31/10 | $ | 297,000 | |||||||||||||
| T. J. Webb | 100,000 | 1.6% | $ | 24.5625 | 1/24/10 | $ | 457,000 | |||||||||||||
| 63,000 | 1.0% | $ | 24.219 | 1/31/10 | 283,500 | |||||||||||||||
| A. F. Harris | 110,000 | 1.7% | $ | 24.219 | 1/31/10 | $ | 495,000 | |||||||||||||
| J. L. Kelly | 63,000 | 1.0% | $ | 24.219 | 1/31/10 | $ | 283,500 | |||||||||||||
| (1) |
10
| after the date of | |
| (2) | 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 |
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 19992000 and the value of unexercised in-the-money options held at December 31, 1999,29, 2000, 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 | -0- | -0- | 325,822 | 290,000 | -0- | $ | 588,990 | |||||||||||||||||
| M. J. Teale | -0- | -0- | 252,492 | 84,000 | -0- | $ | 170,604 | |||||||||||||||||
| T. J. Webb | -0- | -0- | -0- | 163,000 | -0- | $ | 296,703 | |||||||||||||||||
| A. F. Harris | -0- | -0- | 198,191 | 133,000 | -0- | $ | 223,410 | |||||||||||||||||
| J. L. Kelly | -0- | -0- | 62,500 | 125,500 | -0- | $ | 127,953 | |||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| (1) |
Kellogg Company Retirement Plans
Retirement benefits under the Kellogg Company Salaried Pension Plan (the “Pension Plan”“Pension Plan”), a defined benefit plan qualified under Section 401(a) of the Internal Revenue Code (the “Code”“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’sretiree’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 straight life annuity and include the payment of benefits under the Company’sCompany’s Supplemental Retirement Plan and Excess Benefit Retirement Plan.
At December 31, 1999,2000, the credited years of service under the Pension Plan (as affected by certain supplemental pension arrangements described below) for the executive officers named in the Summary Compensation Table were:were as follows: Mr. Gutierrez, 2425 years; Mr. Cook, 1 year; Mr. Harris, 15Teale, 34 years; Mr. Groot,Webb, 3 years; Mr. Teale, 33 years;
Mr. Langbo, 43Harris, 16 years; and Ms. Kelly, 6 years. Under Mr. Thomason,
33 years. Although Mr. Groot has been with the Company
one year,Webb’s employment agreement, he has three yearsis generally to receive credit, for purposes of credited service under the
Pension Plan. This is because in addition
11
| Years of Service | ||||||||||||||||||||
| Remuneration | 10 | 15 | 25 | 35 | 45 | |||||||||||||||
| $ 300,000 | $ | 43,894 | $ | 65,842 | $ | 109,736 | $ | 153,630 | $ | 198,630 | ||||||||||
| $ 500,000 | $ | 73,894 | $ | 110,842 | $ | 184,736 | $ | 258,630 | $ | 333,630 | ||||||||||
| $ 750,000 | $ | 111,394 | $ | 167,092 | $ | 278,486 | $ | 389,880 | $ | 502,380 | ||||||||||
| $1,000,000 | $ | 148,894 | $ | 223,342 | $ | 372,236 | $ | 521,130 | $ | 671,130 | ||||||||||
| $1,500,000 | $ | 223,894 | $ | 335,842 | $ | 559,736 | $ | 783,630 | $ | 1,008,630 | ||||||||||
| $2,000,000 | $ | 298,894 | $ | 448,342 | $ | 747,789 | $ | 1,046,130 | $ | 1,346,130 | ||||||||||
The Company has an International Retirement Plan
(“IRP”) to provide supplemental death, disability, and
retirement benefits to certain Company employees who, at the
Company’s request, serve with one or more of the
Company’s international subsidiaries and, consequently, do
not otherwise accrue the same level of benefits which would have
accrued had their employment with the Company been continuous in
the United States. Participants in the IRP are those designated
by the Company or any participating subsidiary if approved by a
committee appointed by the Chairman of the Board. Covered
compensation and the calculation of average annual compensation
under the IRP are generally the same as under the Pension Plan.
At December 31, 1999, Mr. Langbo had 43 years of
credited service under the IRP. Annual benefits payable under the
IRP are offset by the value of certain other Company or
subsidiary pension programs, government-sponsored benefits, e.g.,
Social Security or state-mandated termination benefits, and
Company or subsidiary contributions to savings or thrift
programs. Estimated annual benefits payable upon retirement of
Mr. Langbo assuming the specified compensation and years of
credited service, without the offsets described above, are as
shown in the following table. Such amounts assume payments in the
form of a straight life annuity.
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’sCompany’s executive compensation program is significantly linked to share owner return. The emphasis is on pay for performance with individual, operational area, and corporate performance rewarded on a short- and long-term basis.
The Company’sCompany’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 (base salary, annual bonus,
and long-term incentives) targeted at the 50th percentile (base salary and annual bonus) and 65th percentile (long-term incentives) of the Company’sCompany’s peer group of companies. Awards will vary above or below the 50th percentile (median)targets of the peer group based on performance.
12
Compensation Principles
To achieve the Company’sCompany’s objectives, the Committee’sCommittee’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 profit and growth, people, consumer satisfaction and quality, integrity and ethics, and social responsibility. | ||
| Compensation should be competitive with comparable organizations and should reward performance and contribution to the | ||
| As employees assume greater responsibilities, a larger proportion of their total compensation will be | ||
| Continuous improvement is expected in the defined targets and measures. | ||
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’sCompany’s share owners over time.
Total Compensation
An executive’sexecutive’s total compensation is comprised of salary, annual bonus, long-term incentives, perquisites, and benefits. The target for total compensation for executives is the median (50th to 55th percentile) of a select group of twentyeighteen companies (the “peer group”“peer group”). The twentyThese 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&P Foods Group Index are included in this group. The Committee has confirmed through survey data supplied by a compensation consultant that total compensation for executives is equivalent todoes not exceed the median of this group.
Salaries
Executive salaries are established through a survey of the peer group conducted by a compensation consultant. Executive salaries are targeted at the median of this group of companies.
The Company’sCompany’s Executive Compensation Deferral Plan is designed to ensure that compensation is deductible under Section 162(m) of the Internal Revenue Code. Pursuant to this plan the portion of any executive’sexecutive’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’sCompany’s common stock. The units are payable upon retirement.
14
Annual Bonuses
Target bonuses are a percentage of the executive’sexecutive’s base salary and are targeted at the median of the peer group. The target bonus is adjusted for appropriate corporate, operational area, and individual performance factors, given the functions of the particular executive. Corporate performance was determined based on net sales and operating profit budgets. In 1999,2000, bonuses could range from 0% to 200% of the target bonus.
In addition, the Company has a Senior Executive Officer Performance Bonus Plan (the “Performance“Performance Bonus Plan”Plan”) that is a performance-based plan intended to meet the deductibility requirements of Section 162(m). The Compensation Committee administers the Performance Bonus Plan. Awards are based on the achievement of pre-established performance factors, including long-term financial and non-financial objectives. With respect to the Chief Executive Officer (“CEO”(“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 Performance Bonus Plan shall not exceed 3/4 of 1% of the annual net income of the Company.
13
Long-Term Incentives
The Company’sCompany’s long-term incentive program currently consists of grants of options to purchase shares of the Company’sCompany’s common stock, stock appreciation rights, restricted shares, or performance units under the 19912001 Long-Term Incentive Plan. Compensation pursuant to stock
optionsthese grants is tied directly and exclusively to stock performance so that each share owner must benefit before the optioneerecipient can receive any benefit from the option.grant. The 19912001 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. Stock options are targeted at the median65th percentile of the peer group. Under the 19912001 Long-Term Incentive Plan, no individual may be granted options, stock appreciation rights, restricted shares, or performance units for more than onetwo million, optionssix hundred thousand shares in any fiscalcalendar year.
The Company believes that option grants under the 19912001 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 Company’sCompany’s Bonus Replacement Stock Option Plan, senior executives of the Company may annually elect to forego all, or a portion, of their annual bonus and receive stock options under the Company’sCompany’s 1991 Incentive Plan. The Committee determines the number of options each senior executive receives using a formula based on the fair market value of the Company’sCompany’s common stock on the date of grant.
Pursuant to the 19912001 Long-Term Incentive Plan, the Committee has 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. The number of units earned would be based on the Company’s cumulative cash flow over a three-year period and would be settled in shares of the Company’s common stock. This program is intended to help recruit and retain key employees.
The Committee previously approved a program under the Company’s 1991 Incentive Plan designed to award 10% of the bonus-eligible participants with approximately 10% of their salary in restricted stock. These grants arewere made in March 2000 and were intended to help retain key employees of the Company.
Chief Executive Officer Compensation
For 1999,2000, 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.
The Committee evaluated the performance of the CEO based on the Company’sCompany’s achievement of its long-term financial and non-financial objectives. The Committee has determined that the accountabilities for the CEO are business performance, organizational talent,strengthen the organization, and company reputation.create the future. The accountability for business performance includes long-term business strategy, stock price performance, earnings growth, sales growth, and capital allocation. The accountability for organizational talentstrengthening 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. Company reputationCreating the future includes enhancing the
Company’s reputation among the investment community,
employees, consumers, customers,developing, monitoring, updating, and the community.
implementing long-term business strategies.
15
While the performance of the Company’sCompany’s stock has been disappointing, the Committee believes that Mr. Gutierrez has developed a promising business strategy. The Company achieved
earnings growthstrategy that will take some time to implement. It believes that keeping a motivated management team intact to implement the strategy is in the top half of a comparable group of 12
United States-based packaged food companies, and sales growth in
the top quartile of this group (all 12 of the comparable
companies are included within the 13 companies that comprise the
S&P Foods Group Index, the performance of which is reflected
on the “Stock Performance Graph” on page 15 of
this Proxy Statement).Company’s long-term best interests. The Committee also determined that capital allocation has been successfully managed. In the area of organizational talent, Mr. Gutierrez has developed a strong management team and strengthened talent in core jobs within the organization. The Committee also believes that he has been successful in continuously upgrading talent, in part through the implementation of a new performance management system, in driving diversity, and in driving diversity.
enhancing the Company’s reputation among the investment community, employees, consumers, customers, and the community.
In addition, the Committee evaluated the performance of the CEO based upon a variety of short-term factors, including the Company’sCompany’s net sales, net earnings, earnings per share, economic profit, and the extent to which strategic and business plan goals are met. The Committee does not assign relative weights or rankings to each of such factors but instead makes a subjective determination based upon a consideration of all such factors. The Committee believes that Mr. Gutierrez’sGutierrez’s total compensation for 19992000 appropriately reflects the Company’sCompany’s performance as measured against these factors.
all factors described in this paragraph and the preceding one.
COMPENSATION COMMITTEE:
COMMITTEE
14
16
Stock Performance Graph
The following graph compares the yearly change in the Company’sCompany’s cumulative, five-year total share owner return with the Standard and Poor’sPoor’s 500 Stock Index (the “S&P 500”“S&P 500”) and the Standard and Poor’sPoor’s Foods Group Index (the “S&P Foods”“S&P Foods”). The graph assumes that $100 was invested on December 31, 1994,1995, in each of the Company’sCompany’s common stock, the S&P&P 500, and the S&P&P Foods, and that all dividends were reinvested.
Graph
| 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | |||||||
| KELLOGG | 100 | 87 | 134 | 95 | 88 | 78 | ||||||
| S&P 500 | 100 | 123 | 164 | 211 | 255 | 231 | ||||||
| S&P FOODS | 100 | 118 | 170 | 184 | 145 | 183 | ||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
15
17
Proposal 2.
The BoardComptroller of Directors adopted the Kellogg Company 2000
Non-Employee Director Stock Plan (the “Director Stock
Plan”) on February 18, 2000, subject to approval by the
share owners at the Annual Meeting.
The Board of Directors believes that the ownership of common
stock by directors supports the maximization of long-term share
owner value by aligning the interests of directors with those of
share owners. A summaryNew York City, as custodian and/or trustee of the Director Stock Plan is set forth
below. The summary is qualified in its entirety by the full text
of the Director Stock Plan, attached to this Proxy Statement as
Appendix A.
Purpose
The purpose of the Director Stock Plan is to promote the
long-term growth of Kellogg Company by increasing the proprietary
interest of non-employee directors in Kellogg Company and to
attract and retain highly qualified and capable non-employee
directors.
Shares Subject To The Director Stock Plan
Subject to adjustment as provided in Section 11 of the
Director Stock Plan, the aggregate number of shares available for
all grants of options and awards of shares under the Director
Stock Plan shall not exceed 1,000,000. Adjustments may occur in
the event of stock splits, stock dividends, or changes in
corporate structure affecting the Company’s common stock.
Administration of the Director Stock Plan
The Director Stock Plan will be administered by the Compensation
Committee of the Board (the “Committee”). The Board may
amend or terminate the Director Stock Plan at any time, but the
terms of an option granted under the Director Stock Plan may not
be adversely modified without the participant’s consent.
Options
If the Director Stock Plan is approved by the share owners,
effective as of the date of the Annual Meeting, each non-employee
director will be granted an option to purchase 5,000 shares of
common stock. Additionally, each non-employee director will be
granted an option to purchase 5,000 shares of common stock on
January 31, 2001, and each January 31st thereafter,
while the Director Stock Plan is in effect. If a non-employee
director begins service on a date other than the date of the
Annual Meeting of Share Owners in any year, the number of options
granted for the year shall be prorated.
The exercise price per share of all stock options granted under
the Director Stock Plan will be equal to the fair market value
per share of common stock on the grant date. Options granted
under the Director Stock Plan vest immediately or on such other
date as set by the Committee, and will have exercise dates as
determined by the Committee, but shall not be exercisable until
six months from the grant date. Options granted under the
Director Stock Plan may be exercised until the tenth anniversary
of the grant date. Options may be exercised either by the payment
of cash in the amount of the aggregate option price or by
surrendering (or attesting to ownership of)New York City Employees’ Retirement System, 1 Centre Street, New York, NY 10007-2341, which holds 289,350 shares of Kellogg Company common stock, owned by the participant for at least six
months prior to the date the option is exercised, or a
combination of both, having a combined value equal to the
aggregate option price of the shares subject to the option or
portion of the option being exercised. Any option or portion
thereof that is not exercised on or before the tenth anniversary
of the grant date shall expire.
Options granted under the Director Stock Plan will not be
transferable by the participant other than by court order, will,
or the laws of descent and distribution, except that the
Committee may provide for the transferability of any particular
option in the manner set forth in the related stock option
agreement.
16
Stock Grants
On May 1st of each year beginning in 2000, an annual award
of 1,700 shares will be made to each non-employee director.
Non-employee directors elected or appointed to the Board at any
time other than the date of the Annual Meeting shall receive a
pro-rated initial award.
Change of Control
If there is a “Change of Control” of the Company (as
defined in Section 11.4 of the Director Stock Plan), in
order to preserve the Non-Employee Directors’ rights, then
all options outstanding shall become fully exercisable.
U.S. Federal Income Tax Consequences
The grant of an option under the Director Stock Plan will not
result in income for the participant or in a deduction for the
Company. The exercise of an option will generally result in
compensation income for the participant and a deduction for the
Company, in each case measured by the difference between the
exercise price and the fair market value of the shares at the
time of exercise.
The receipt of shares of common stock under the Director Stock
Plan will generally result in compensation income for the
participant and a deduction for the Company, based on the fair
market value of the shares on the date awarded.
To become effective, the Kellogg Company 2000 Non-Employee
Director Stock Plan must be approved by the affirmative vote of a
majority of the votes cast at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE KELLOGG COMPANY 2000 NON-EMPLOYEE DIRECTOR STOCK
PLAN.
17
Proposal 3.
On February 18, 2000, the Board of Directors adopted the
Kellogg Company 2001 Long-Term Incentive Plan (the “2001
Plan”) subject to approval by the share owners at the Annual
Meeting.
The Company’s current incentive plan, the 1991 Key Employee
Long Term Incentive Plan, expires in 2001 and the Board believes
that the 2001 Plan is necessary because it will enable the
Company to attract, retain, and motivate employees and officers
and to align the interests of those individuals and the
Company’s share owners. A summary of the basic features of
the 2001 Plan is set forth below. The summary is subject to the
specific provisions contained in the full text of the 2001 Plan
set forth in Appendix B to this Proxy Statement.
Purpose
The purpose of the 2001 Plan is to further and promote the
interests of Kellogg Company and its share owners by enabling the
Company to attract, retain, and motivate employees and officers
and to align the interests of those individuals and the
Company’s share owners. To do this, the 2001 Plan offers
performance-based incentive awards and equity-based opportunities
providing such employees and officers with a proprietary
interest in maximizing the growth, profitability, and overall
success of the Company.
Administration
The 2001 Plan is administered by the Compensation Committee of
the Board of Directors (the “Committee”). The Committee
is currently composed of five non-employee directors of the
Company. Each member of the Committee is a “Non-Employee
Director” within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 (the “Exchange Act”)
and an “outside director” within the meaning of
Section 162(m) of the Internal Revenue Code of 1986
(the “Code”). No member of the Committee is eligible to
participate in the 2001 Plan. Under the terms of the 2001 Plan,
the Committee has the authority to select the participants, make
awards in such amounts and form as the Committee shall determine,
impose restrictions, terms, and conditions upon such awards as
the Committee shall deem appropriate, and correct any technical
defects or omissions in the 2001 Plan or any award agreement. The
Committee may designate persons other than members of the
Committee to carry out the day-to-day administration of the 2001
Plan. In addition, the Committee may, in its sole discretion,
delegate its authority to one or more senior executive officers
of the Company for the purpose of making awards to participants
who are not subject to Section 16 of the Exchange Act.
Eligibility
Key employees and officers, or those who will become key
employees or officers, of the Company and/or its subsidiaries are
eligible to receive awards under the 2001 Plan. Awards under the
2001 Plan will be made by the Committee or by a senior executive
officer who has been delegated authority to grant awards to
participants who are not subject to Section 16 of the
Exchange Act. No determination has been made as to future awards
which may be granted under the 2001 Plan, although it is
anticipated that recipients of awards will include the current
executive officers of the Company.
Section 162(m)
Section 162(m) of the Code generally limits to $1,000,000
the amount that a publicly held corporation is allowed each year
to deduct for the compensation paid to its Chief Executive
Officer and the four most highly compensated officers other than
the Chief Executive Officer. However, “qualified
performance-based compensation” is not subject to the
$1,000,000 deduction limit. Awards under the 2001 Plan are
designed to qualify as qualified performance-based compensation,
by satisfying the following requirements: (i) the
performance goals are determined by the Committee consisting
solely of outside directors; (ii) the material terms under
which the compensation is to be paid, including examples of the
performance goals, are approved by a majority of Kellogg Company
share owners; and (iii) if applicable, the Committee
certifies that the applicable performance goals and any other
material terms were satisfied before payment of any
performance-based compensation is made.
18
Awards
All awards will be evidenced by an award agreement between the
Company and the individual participant and approved by the
Committee. In the discretion of the Committee, an eligible
employee may receive awards from one or more of the categories
described below, and more than one award may be granted to an
eligible employee.
Types of awards under the 2001 Plan include:
Number of Shares
The maximum number of shares of Kellogg Company common stock for
which awards may be granted under the 2001 Plan may not exceed
26 million shares. The limits on the numbers of shares
described in this paragraph and the number of shares subject to
any award under the 2001 Plan are subject to proportional
adjustment as determined by the Committee, to reflect certain
stock changes, such as stock dividends and stock splits.
19
Change of Control
If there is a “Change of Control” of the Company (as
defined in Section 14 of the 2001 Plan), in order to
preserve the participants’ rights the following shall occur:
(a) all stock options and SARs become fully vested and
exercisable; (b) all restrictions on Restricted Shares shall
be deemed lapsed; and (c) the performance criteria for all
Performance Units shall be deemed completed.
U.S. Federal Income Tax Consequences of Stock Options
The grant of a stock option under the 2001 Plan will not result
in taxable income at the time of grant for the participant or the
Company. A participant will recognize taxable income (subject to
income tax withholding) upon exercise of a non-qualified stock
option equal to the excess of the fair market value of the shares
purchased over their exercise price, and the Company will be
entitled to a corresponding deduction. A participant will not
recognize income (except for purposes of the alternative minimum
tax) upon exercise of an incentive stock option. If the shares
acquired by exercise of an incentive stock option are held for
the longer of two years from the date the option was granted and
one year from the date it was exercised, any gain or loss arising
from a subsequent disposition of such shares will be taxed as
long-term capital gain or loss, and the Company will not be
entitled to any deduction. If, however, such shares are disposed
of within the above-described period, then in the year of such
disposition the participant will recognize taxable income equal
to the excess of the lesser of (i) the amount realized upon
such disposition and (ii) the fair market value of such
shares on the date of exercise over the exercise price, and the
Company will be entitled to a corresponding deduction.
The Term of the 2001 Plan and Matters relating to its
Amendment, Suspension and/or Termination
The term of the 2001 Plan is ten years from the date the first
award is granted. Awards outstanding at the end of the ten years
will be subject to their terms but no further awards shall be
granted after termination of the 2001 Plan. The Board may suspend
or terminate the 2001 Plan (or any portion thereof) at any time,
and may amend the 2001 Plan at any time and from time to time in
such respects as the Board may deem advisable to ensure that any
and all awards conform to or otherwise reflect any change in
applicable laws or regulations, or to permit the Company or the
participants to benefit from any change in applicable laws or
regulations or in any other respect the Board may deem to be in
the best interests of the Company. However, no such amendment,
suspension, or termination shall materially adversely affect the
rights of any participant and the Board may not make any change
that would disqualify the 2001 Plan or any other plan of the
Company from the benefits provided under Section 422 of the
Code. Finally, except as set forth in Section 13 of the 2001
Plan (pertaining to changes in capitalization and other
matters), the Board may not increase the number of shares
available for awards without share owner approval.
Effective Date
The 2001 Plan is effective on February 18, 2000, the date of
its adoption by the Board of Directors subject to share owner
approval.
Additional Information
To become effective, the Kellogg Company 2001 Long-Term Incentive
Plan must be approved by the affirmative vote of a majority of
the votes cast at the Annual Meeting.
Because the Committee does not intend to issue any awards under
the 2001 Plan until 2001, the Committee has made no
determinations as to any awards under the 2001 Plan.
The closing price per share of Kellogg Company common stock as
reported on the New York Stock Exchange on February 29, 2000
was $25.3125.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
APPROVAL OF THE KELLOGG COMPANY 2001 LONG-TERM INCENTIVE PLAN.
20
Proposal 4.
The Company’s Board of Directors has adopted a resolution
recommending that the share owners adopt an amendment to
Article FOURTH of the Company’s Amended Restated
Certificate of Incorporation (the “Certificate of
Incorporation”) in order to increase the authorized number
of shares of the Company’s common stock from
500 million to one billion (the “Amendment”).
If the Amendment is approved, the first sentence of the first
paragraph of Article FOURTH of the Certificate of
Incorporation, which sets forth the Company’s presently
authorized capital stock, will be deleted and replaced with the
following:
The Board believes that the authorized number of shares of common
stock should be increased to provide sufficient shares for such
corporate purposes as may be determined by the Board including,
without limitation: acquiring other businesses in exchange for
shares of the Company’s common stock; entering into
collaborative research and development arrangements with other
companies in which common stock or the right to acquire common
stock is part of the consideration; facilitating broader
ownership of the Company’s common stock by effecting a stock
split or issuing a stock dividend; providing flexibility for
possible future financings; and attracting and retaining valuable
employees and directors by the issuance of additional stock
options or awards.
Other than for the possibility of issuing new shares pursuant to
the Company’s option plans, the Company at present has no
commitments, agreements, or undertakings to issue any such
additional shares. The Board considers the authorization of
additional shares of common stock advisable to ensure prompt
availability of shares for issuance should the occasion arise. If
required by law or regulation, the Company will seek share owner
approval prior to any issuance of shares.
The Company intends to apply to the New York Stock Exchange, on
which the shares of the Company’s common stock are currently
listed, to list the additional shares to be issued and reserved
for future issuance as a result of the Amendment. Shares of the
Company’s common stock, including the additional shares
proposed for authorization, do not have preemptive or similar
rights. The issuance of additional shares of common stock could
have the effect of diluting existing share owner earnings per
share, book value per share, and voting power. Adoption of this
proposal requires the affirmative vote of a majority of the votes
entitled to be cast at the Annual Meeting. Shares not voted
(whether by abstention, broker “non-votes,” or
otherwise) have the effect of a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
PROPOSED AMENDMENT TO THE COMPANY’S AMENDED RESTATED
CERTIFICATE OF INCORPORATION.
21
Proposal 5.
The Sisters of St. Joseph, P.O. Box 34, Nazareth,
MI 49074, the holders of 8,000 shares of Kellogg
Company common stock, and the Retirement Plans For the Employees
of the Sisters of Mercy Regional Community of Detroit,
34605 Twelve Mile Road, Farmington Hills, MI 48331, the
holders of 1,100 shares of Kellogg Company common stock,
have informednotified the Company that they intendhe intends to present the following proposal at the Annual Meeting of Share Owners.
Adoption of the proposal will require the affirmative vote of holders of a majority of the shares of common stock represented in person or by proxy at the meeting. Securities and Exchange
CommissionSEC rules require that we reprint the proposal and
supporting statement as it was submitted to us. The proposal, as submitted, is as follows:
WHEREAS:
International markets for genetically engineered (GE) foods
are threatened by extensive resistance to gene protection
technology, transgenic technology and genetically altered foods;
There is increasing scientific concern that genetically
engineered agricultural products may be harmful to humans,
animals, or the environment;
| | ||
| negative impact on shareholder value, and |
In the U.S., we have a long tradition of citizens’
“Right to Know”; an expression of this includes the
current laws requiring nutritional labeling of foods;
| Whereas, a number of corporations have implemented independent monitoring programs with respected local human rights and religious organizations to strengthen compliance with international human rights norms in selected supplier factories, and | ||
| Whereas, these standards incorporate the conventions of the International Labor Organization (ILO) on workplace human rights which include the following principles: |
| | ||
| to Bargain collectively. (ILO Conventions 87 and 98) |
RESOLVED: Shareholders request the Board of Directors to adopt a
policy of removing genetically engineered crops, organisms, or
products thereof from all products sold or manufactured by the
company, where feasible, until long-term safety testing has shown
that they are not harmful to humans, animals, and the
environment; with the
22
We believe that this technology involves significant social,
economic, and environmental risks. Our company should take a
leadership position in delaying market adoption of genetically
engineered crops and foods. Failure to do so could leave our
company financially liable, should detrimental effects to public
health or the environment appear in the future.
Kellogg Company has provided high quality, healthy food products
to consumers for over 90 years. Kellogg has, and always will
have, the greatest concern for food safety. Although we
recognize that the issues of biotechnology and genetically
engineered foods raise concerns with certain consumers,
Kellogg’s management and Board of Directors believe that the
share owner proposal set forth above should be rejected.
| 2. Workers representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to enable them to carry out their representation functions. (ILO Convention 135) | ||
| 3. There shall be no discrimination or intimidation in employment. Equality of opportunity and treatment shall be provided regardless of race, color, sex, religion, political opinion, age, nationality, social origin, or other distinguishing characteristics. (ILO Convention 100 and 111) | ||
| 4. Employment shall be freely chosen. There shall be no use of force, including bonded or prison labor. (ILO Conventions 29 and 105) | ||
| 5. There shall be no use of child labor. (ILO Convention 138), and, |
| Whereas, independent monitoring of corporate adherence to these standards is essential if consumer and investor confidence in our company’s commitment to human rights is to be maintained, | |
| Therefore, be it resolved that the company commit itself to the full implementation of the aforementioned human rights standards by its international suppliers and in its own international production facilities and commit to a program of outside, independent monitoring of compliance with these standards.” | |
| | |
| Kellogg Company has strongly supported employee and human rights in the workplace, and has demonstrated social corporate responsibility, for years. We support the right of our employees to organize in accordance with applicable labor laws. And our employees have done so in many of our plant locations. | |
| Our Global Code of Ethics describes our “enthusiastic” support for laws which prohibit unjustified discrimination based on a person’s race, color, gender, national origin, age, religion, disability, veteran status, marital status, or other protected characteristics. Another Kellogg policy also promotes fairness of employment opportunity regardless of sexual orientation. |
18
| Under our Global Code of Ethics, we evaluate our suppliers’ commitment to these rights as part of the selection process. We favor competitive suppliers who are proactive in contributing to the continued education and betterment of employees, and who provide equal opportunity to all. | |
| We also have our suppliers demonstrate their own continued commitment to these rights. Our Global Code of Ethics provides that Kellogg Company will not knowingly do business with suppliers who employ non-family members under the age of 15, employ forced labor, or use corporal punishment to discipline employees, regardless of whether such practices are permitted by applicable law. Kellogg Company then exercises diligence to determine whether suppliers conform to these standards. Kellogg Company additionally has a long heritage of corporate social responsibility, beginning with our founder, W.K. Kellogg, who donated significant sums to charities and established foundations for the betterment of people. Our social responsibility efforts, including the volunteer hours of our dedicated employees, are focused on three major areas: Health and Human Services (including disaster relief and support of a national network of food banks); Child and Youth Development (including support of organizations promoting continued education and reading skills, as well as several organizations dedicated to significantly improving the conditions and lives of children around the world); and Community Development (including the NAACP, National Council of La Raza, and the United Way). And Kellogg’s corporate contributions, including donations of product, supplies, and equipment, exceed U.S. $40 million annually, which make Kellogg one of the “Most Generous Companies in America” according toWorth Magazine. | |
| Because of our long history in demonstrating corporate social responsibility and in visibly supporting worker and human rights, the Company does not |
Kellogg needs the flexibility to quickly adjust our product and
ingredient mix, depending on consumer needs and preferences.
Kellogg’s best interest is not served by a complete
prohibition on certain products. The proposal seeks to remove
“genetically engineered crops, organisms, or products
thereof” from all products sold or manufactured by Kellogg
and to label all products that contain these ingredients. The
decision to remove or label products should be a business
decision based on the considerations of financial costs, consumer
acceptance, and product safety. A hard and fast rule of
prohibition is inappropriate. Because it would not allow Kellogg
to sell such products and respond to consumer preferences,
adopting the proposal could place Kellogg at a competitive
disadvantage.
| |
Based upon all of the scientific data available to date, Kellogg
firmly believes that all of the products that we sell, including
those that contain ingredients developed through biotechnology,
are safe. The food industry is highly regulated on a world-wide
basis, and Kellogg products meet or exceed the consumer safety
and quality requirements in every country in which they are sold.
The United States Department of Agriculture is one of three
federal agencies, along with the Environmental Protection Agency
and the U.S. Food and Drug Administration, primarily responsible
for regulating biotechnology in the United States. For further
information on the regulation and benefits of biotechnology we
suggest that you visit the USDA website at www.usda.gov
and click on the heading “Biotechnology”.
Government leaders, scientists, religious leaders, and a wide
range of individuals around the world believe that the use of
biotechnology in foods could give us great benefits, including:
the ability to save and improve human lives by increasing food
production; providing increased nutrients and possibly vaccines
in food; and allowing for the reduced use of pesticides, helping
to better preserve our environment for future generations. The
proponents do not address these considerations.
The proponents also do not address the great progress made by
farmers and scientists who have been improving products through
cross-pollination and other breeding techniques for well over
100 years. This has led to an ever-improving food supply,
producing crops that are larger, more resistant to insects and
diseases, and more plentiful. We believe that Kellogg share
owners will be better served if this progress continues while
your Company remains sensitive to consumer concerns and product
acceptance.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST”
THE PROPOSAL.
23
Share Owner Recommendations for Director Nominees
The Nominating and Corporate Governance Committee will consider share owner recommendations for nominees for membership on the Board of Directors. For the 20012002 Annual Meeting of Share Owners, recommendations 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, 2000,2001, and not later than January 30, 2001.2002. Recommendations must also include certain other requirements specified in the Company’sCompany’s Bylaws.
Share Owner Proposals for the 20012002 Annual Meeting
Share owner proposals submitted for presentation atinclusion in the 2001Company’s proxy statement for the 2002 Annual Meeting of Share Owners must be received by the Company no later than November 17, 2000.16, 2001. If a share owner raises a matter at the 20012002 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 January 31, 2001.
30, 2002.
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 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-K10-K; No Incorporation by Reference
Upon written request, the Company will provide any share owner, without charge, a copy of the Company’sCompany’s Annual Report on Form 10-K for 19992000 filed with the Securities and Exchange
Commission,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’sCompany’s SEC filings through the Internet atwww.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”, “REPORT
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By Order of the Board of Directors,
Janet Langford Kelly
March 16, 2001
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Exhibit A
KELLOGG COMPANY
AUDIT COMMITTEE
February 17, 2000
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1. Purpose. The purposeThere shall be a Committee of the KelloggBoard 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 2000 Non-Employee Director Stock PlanManual, 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 reviewing financial information, the systems of internal controls and the audit process. In doing so it is the responsibility of the Audit Committee to promotemaintain free and open means of communication between the long-term growthDirectors, the independent auditors, the internal auditors and the financial management of Kellogg Companythe 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 increasingconference call prior to the proprietary
interestrelease of Non-Employee Directorsthe 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 Kellogg Companyorder to best react to changing conditions and to attractensure to the Directors and retain highly qualifiedshareholders that the corporate accounting and capable Non-Employee
Directors.
2. Definitions. Unless the context
clearly indicates otherwise, for the purposesreporting practices of the Plan,Company are in accordance with all requirements and are of the following terms shall havehighest quality.
In carrying out these responsibilities, the following meanings:
Audit Committee will:
| Review and recommend to | ||
3. Administration.
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| • | Meet with the independent auditors and financial management of the Company to | |
| • | 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 |
| • | ||
| • | Receive a | |
| • | Review the financial statements contained in the annual report to shareholders with management and independent auditors to determine that the independent auditors are satisfied with the disclosure and content of the | |
| • | Provide sufficient opportunity for the internal and | |
4. Awards. Awards in the form of
Options shall be granted to Non-Employee Directors in accordance
with Section 8. Awards in the form of Shares shall be
granted to Non-Employee Directors in accordance with
Section 9. Each Option granted under the Plan shall be
evidenced by a Stock Option Agreement.
| • | Review, internal auditing personnel and | |
| • | Meet with the General Counsel to | |
| • | Submit the |
5. Eligibility. Non-Employee Directors
of the Company shall be eligible to participate in the Plan in
accordance with Sections 8 and 9.
6. Shares Subject to the Plan. Subject
to adjustment as provided in Section 11, the aggregate
number of Awards available for all grants of Options and awards
of Shares under the Plan shall not exceed 1,000,000. Further,
subject to adjustment as provided in Section 11, the
aggregate number of Shares available for Awards pursuant to
Section 9 shall not exceed 250,000. If any Awards expire
unexercised or are forfeited, surrendered, cancelled, terminated
or settled in cash in lieu of common stock, the shares of common
stock which were thereto subject (or potentially subject) to such
Awards shall again be available for Awards under the Plan to the
extent of such expiration, forfeiture, surrender, cancellation,
termination or settlement of such Awards.
7. Transferability of Options. Unless
otherwise provided in the Stock Option Agreement, no Option
granted under the Plan, and no rights or interests herein or
therein, shall or may be assigned, transferred, sold, exchanged,
encumbered, pledged, or otherwise hypothecated or disposed of by
an Optionee or any beneficiary(ies) of any Optionee, except by
testamentary disposition by the Optionee or the laws of intestate
succession. No such interest shall be subject to execution,
attachment or similar legal process, including, without
limitation, seizure for the payment of the Optionee’s debts,
judgments, alimony, or separate maintenance. Unless otherwise
provided in the Stock Option Agreement, during the lifetime of
the Optionee, Options are exercisable only by the Optionee.
8. Options. Each Non-Employee Director
shall be granted Options, subject to the following terms and
conditions:
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9. Shares.
10. Amendment, Suspension, and Termination.
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11. Changes in Capitalization and Other Matters.
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12. Foreign Directors. Without amending
the Plan, Awards granted to Non-Employee Directors who are
foreign nationals may have such terms and conditions different
from those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable to foster and promote
achievement of the purposes of the Plan and, in furtherance of
such purposes, the Committee may make such modifications,
amendments, procedures, subplans and the like as may be necessary
or advisable to comply with provisions of laws in other
countries or jurisdictions in which the Company or its
Subsidiaries operate or have Non-Employee Directors.
13. Miscellaneous.
14. Effective Date and Term of Plan. The Plan
shall be effective upon its approval by the Board and adoption
by the Company, subject to the approval of the Plan by the
Company’s share owners in accordance with the Internal
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As adopted by the Board on February 18, 2000.
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1. Purpose. The purpose of the 2001 Long-Term
Incentive Plan (the “Plan”) is to further and promote
the interests of Kellogg Company, its Subsidiaries and its share
owners by enabling the Company and its Subsidiaries to attract,
retain and motivate employees and officers or those who will
become employees or officers, and to align the interests of those
individuals and the Company’s share owners. To do this, the
Plan offers performance-based incentive awards and equity-based
opportunities providing such employees and officers with a
proprietary interest in maximizing the growth, profitability and
overall success of the Company and its Subsidiaries.
2. Definitions. Unless the context clearly
indicates otherwise, for purposes of the Plan, the following
terms shall have the following meanings:
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3. Administration.
| Investigate any matter brought to | ||
4. Term of Plan/ Common Stock Subject to Plan.
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5. Eligibility. Individuals eligible
for Awards under the Plan shall consist of key employees and
officers, or those who will become key employees or officers, of
the Company and/or its Subsidiaries whose performance or
contribution, in the sole discretion of the Committee, benefits
or will benefit the Company or any Subsidiary.
6. Stock Options.
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7. Stock Appreciation Rights.
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8. Restricted Shares.
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9. Performance Units.
10. Deferral Elections/ Tax Reimbursements/ Other
Provisions.
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11. Dividend Equivalents. In addition to the
provisions of Section 8.5 of the Plan, Awards of Stock
Options, and/or Stock Appreciation Rights, may, in the sole
discretion of the Committee and if provided for in the relevant
Award Agreement, earn dividend equivalents. In respect of any
such Award which is outstanding on a dividend record date for
Common Stock, the Participant shall be credited with an amount
equal to the amount of cash or stock dividends that would have
been paid on the shares of Common Stock covered by such Award had
such covered shares been issued and outstanding on such dividend
record date. The Committee shall establish such rules and
procedures governing the crediting of such dividend equivalents,
including, without limitation, the amount, the timing, form of
payment and payment contingencies and/or restrictions of such
dividend equivalents, as it deems appropriate or necessary.
12. Non-transferability of Awards. Unless
otherwise provided in the Award Agreement, no Award under the
Plan or any Award Agreement, and no rights or interests herein or
therein, shall or may be assigned, transferred, sold, exchanged,
encumbered, pledged, or otherwise hypothecated or disposed of by
a Participant or any beneficiary(ies) of any Participant, except
by testamentary disposition by the Participant or the laws of
intestate succession. No such interest shall be subject to
execution, attachment or similar legal process, including,
without limitation, seizure for the payment of the
Participant’s debts, judgments, alimony, or separate
maintenance. Unless otherwise provided in the Award Agreement,
during the lifetime of a Participant, Stock Options and Stock
Appreciation Rights are exercisable only by the Participant.
13. Changes in Capitalization and Other Matters.
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B-8
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15. Amendment, Suspension, and Termination.
16. Miscellaneous.
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| • | Review and | |
As adopted by the Board on February 18, 2000.
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[KELLOGG’S LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
THE BEST TO YOU EACH MORNING®
[LOGO]
 | ||
| KELLOGG COMPANY PROXY SERVICES P.O. BOX 9112 FARMINGDALE, NY 11735 | VOTE BY PHONE – 1-800-690-8903 Use any touch-tone telephone to transmit your voting instructions anytime before 11:59 p.m. on April 26, 2001. 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. on April 26, 2001. 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 – | ||
| Important Notice Regarding Delivery of Shareholder Documents | 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 AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS | |
| DETACH AND RETURN THIS PORTION ONLY | ||
| KELLOGG COMPANY | |||||||||||||||||
| 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 | To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below. | |||||||||||||
| 1. | ELECTION OF DIRECTORS (terms expiring in 2004) Nominees: 01) Benjamin S. Carson, Sr., 02) Gordon Gund, 03) Dorothy A. Johnson, 04) Ann McLaughlin Korologos | [ ] | [ ] | [ ] | |||||||||||||
| The Board of Directors recommends a vote AGAINST the following share owner proposal. If you sign and return this card without marking, this proxy card will be treated as being AGAINST such proposal. | 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. | International Labor Standards and Human Rights | [ ] | [ ] | [ ] | |||||||||||||
| If you do not wish to have your material household 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 [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||||||||||||
– This Proxy is continued and must be signed and dated on the reverse side.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
28, 200027, 2001 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.
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PROXY FOR ANNUAL MEETING OF SHARE OWNERS APRIL28, 200027, 2001THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned appoints
A.G. Langbo, C.M.C. M. Gutierrez andW.C.W. C. Richardson, or each one ormoreboth 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 April28, 200027, 2001 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. - --------------------------------------------------------------------------------
[KELLOGG'S LOGO] VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting PROXY SERVICES instructions anytime before 11:59 p.m. on April 27, P.O. BOX 9139 2000. Have your proxy card in hand when you call. FARMINGDALE, NY 11735 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. on April 27, 2000. 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 AS FOLLOWS: /X/ KEEP THIS PORTION FOR YOUR RECORDS - -------------------------------------------------------------------------------- DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. - -------------------------------------------------------------------------------- KELLOGG COMPANY The Kellogg Company Board of Directors recommends a vote FOR the following actions or proposals. If you sign and return this card without marking, this proxy card will be treated as being FOR each proposal. FOR WITHHOLD FOR ALL ALL ALL EXCEPT 1. ELECTION OF DIRECTORS (terms expiring in 2003) / / / / / / Nominees: 01) Carleton S. Fiorina, 02) J. Richard Munro, 03) William D. Perez. TO WITHHOLD AUTHORITY TO VOTE, MARK "FOR ALL EXCEPT" AND WRITE THE NOMINEE'S NUMBER ON THE LINE BELOW. FOR AGAINST ABSTAIN - ---------------------------------------------------- FOR AGAINST ABSTAIN 2. To approve the Kellogg Company 2000 Non-Employee Director Stock Plan. / / / / / / 3. To approve the Kellogg Company 2001 Long-Term Incentive Plan. / / / / / / 4. To approve an amendment to the Company's Amended Restated Certificate of incorporation to increase the authorized number of shares of common stock. / / / / / / The Board of Directors recommends a vote AGAINST the following share owner proposal. If you sign and return this card without marking, this proxy card will be treated as being AGAINST such proposal. FOR AGAINST ABSTAIN 5. Genetic Engineering in Food / / / / / / Products. NOTE: Please sign exactly as name(s) appear hereon. When signing as attorney, executor, administrator, trustee, or guardian, please give full name as such. - --------------------------------------- ------------------------------------ - --------------------------------------- ------------------------------------ Signature Date Signature (Joint Owners) Date (PLEASE SIGN WITHIN BOX) - --------------------------------------------------------------------------------