EXHIBIT 10.28
KELLOGG COMPANY 2003 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 2003 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:
2.1 "AWARD" means an award or grant made to a Participant under Sections 6,
7, 8 and/or 9 of the Plan.
2.2 "AWARD AGREEMENT" means the agreement executed by a Participant
pursuant to Sections 3.2 and 16.7 of the Plan in connection with the granting
of an Award.
2.3 "BOARD" means the Board of Directors of Kellogg Company, as constituted
from time to time.
2.4 "CODE" means the Internal Revenue Code of 1986, as in effect and as
amended from time to time, or any successor statute thereto, together with
any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
2.5 "COMMITTEE" means the committee of the Board designated to administer
the Plan, as described in Section 3 of the Plan.
2.6 "COMMON STOCK" means the Common Stock, par value $.25 per share, of the
Company or any security of the Company issued by the Company in substitution
or exchange therefor.
2.7 "COMPANY" means Kellogg Company, a Delaware corporation, or any
successor corporation to Kellogg Company.
2.8 "DISABILITY" means disability as defined in the Participant's then
effective employment agreement, or if the Participant is not then a party to
an effective employment agreement with the Company which defines disability,
"Disability" means disability as determined by the Committee in accordance
with standards and procedures similar to those under the Company's long-term
disability plan, if any. Subject to the first sentence of this Section 2.8,
at any time that the Company does not maintain a long-term disability plan,
"Disability" shall mean any physical or mental disability which is determined
to be total and permanent by a physician selected in good faith by the
Company.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect
and as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or
with respect thereto.
2.10 "FAIR MARKET VALUE" means, with respect to any date, the average
between the highest and lowest sale prices per share on the New York Stock
Exchange--Composite Transactions Tape on such date, provided that if there
shall be no sales of shares reported on such date, the Fair Market Value of a
share on such date shall be deemed to be equal to the average between the
highest and lowest sale prices per share on such Composite Tape for the last
preceding date on which sales of shares were reported.
2.11 "INCENTIVE STOCK OPTION" means any stock option granted pursuant to
the provisions of Section 6 of the Plan (and the relevant Award Agreement)
that is intended to be (and is specifically designated as) an "incentive
stock option" within the meaning of Section 422 of the Code.
2.12 "NON-QUALIFIED STOCK OPTION" means any stock option granted pursuant
to the provisions of Section 6 of the Plan (and the relevant Award Agreement)
that is not an Incentive Stock Option.
2.13 "PARTICIPANT" means any individual who is selected from time to time
under Section 5 to receive an Award under the Plan.
2.14 "PERFORMANCE UNITS" means the units granted under Section 9 of the
Plan and the relevant Award Agreement.
2.15. "PERFORMANCE SHARE UNITS" means units granted under Section 9 of the
Plan and the relevant Award Agreement.
2.16 "PLAN" means this Kellogg Company 2003 Long-Term Incentive Plan, as
set forth herein and as in effect and as amended from time to time (together
with any rules and regulations promulgated by the Committee with respect
thereto).
2.17 "RESTRICTED SHARES" means an Award of restricted shares of Common
Stock granted pursuant to the provisions of Section 8 of the Plan and the
relevant Award Agreement.
2.18 "RESTRICTED SHARE UNITS" means an Award granted pursuant to the
provisions of Section 8 of the Plan and the relevant Award Agreement.
2.19 "RETIREMENT" means the voluntary retirement by the Participant from
active employment with the Company and its Subsidiaries on or after the
attainment of normal retirement age under Company-sponsored pension or
retirement plans, or any other age with the consent of the Board.
2.20 "STOCK APPRECIATION RIGHT" means an Award described in Section 7.2 of
the Plan and granted pursuant to the provisions of Section 7 of the Plan.
2.21 "SUBSIDIARY(IES)" means any corporation (other than the Company) in an
unbroken chain of corporations, including and beginning with the Company, if
each of such corporations, other than the last corporation in the unbroken
chain, owns, directly or indirectly, more than fifty percent (50%) of the
voting stock in one of the other corporations in such chain.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board.
3.2 PLAN ADMINISTRATION AND PLAN RULES. The Committee is authorized to
construe and interpret the Plan and to promulgate, amend and rescind rules
and regulations relating to the implementation, administration and
maintenance of the Plan. Subject to the terms and conditions of the Plan, the
Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan including, without
limitation, (a) selecting the Plan's Participants, (b) making Awards in such
amounts and form as the Committee shall determine, (c) imposing such
restrictions, terms and conditions upon such Awards as the Committee shall
deem appropriate, and (d) correcting any technical defect(s) or technical
omission(s), or reconciling any technical inconsistency(ies), in the Plan
and/or any Award Agreement. The Committee may designate persons other than
members of the Committee to carry out the day-to-day ministerial
administration of the Plan under such conditions and limitations as it may
prescribe, except that the Committee shall not delegate its authority with
regard to the selection for participation in the Plan and/or the granting of
any Awards to Participants who are subject to Section 16 of the Exchange Act.
The Committee may, in its sole discretion, delegate its authority to one or
more senior executive officers for the purpose of making Awards to
Participants who are not subject to Section 16 of the Exchange Act. The
Committee's determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are
similarly situated. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and
binding upon all Participants and any person(s) claiming under or through any
Participants. The Company shall effect the granting of Awards under the Plan,
in accordance with the determinations made by the Committee, by execution of
written agreements and/or other instruments in such form as is approved by
the Committee.
3.3 LIABILITY LIMITATION. Neither the Board, the Committee, nor any
delegatee described in Section 3.2 above, nor any member of either, shall be
liable for any act, omission, interpretation, construction or determination
made in good faith in connection with the Plan (or any Award Agreement), and
the members of the Board and the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including, without limitation, attorneys' fees)
arising or resulting therefrom to the fullest extent permitted by law and/or
under any directors and officers liability insurance coverage which may be in
effect from time to time.
4. TERM OF PLAN/COMMON STOCK SUBJECT TO PLAN.
4.1 TERM OF INCENTIVE STOCK OPTIONS. Incentive Stock Options may not be
granted following the ten-year anniversary of the Board's adoption of this
Plan.
4.2 COMMON STOCK. The maximum number of shares of Common Stock in respect
of which Awards may be granted or paid out under the Plan, subject to
adjustment as provided in this Section, Section 4.3 and Section 13.2 of the
Plan, shall not exceed the total of (a) 25 million shares; plus (b) the total
number of shares of Common Stock with respect to which no Awards have been
granted under the Kellogg Company 2001 Long-Term Incentive Plan (the "2001
Plan") on the Effective Date; plus (c) the total number of shares of Common
Stock as to which Awards granted under the 2001 Plan terminate or expire
without being fully exercised or used. In addition, in the event of a change
in the Common Stock of the Company that is limited to a change in the
designation thereof to "Capital Stock" or other similar designation, or to a
change in the par value thereof, or from par value to no par value, without
increase or decrease in the number of issued shares, the shares resulting
from any such change shall be deemed to be the Common Stock for purposes of
the Plan. Common Stock which may be issued under the Plan may be either
authorized and unissued shares or issued shares which have been reacquired by
the Company (in the open-market or in private transactions) and which are
being held as treasury shares. No fractional shares of Common Stock shall be
issued under the Plan.
4.3 COMPUTATION OF AVAILABLE SHARES. For the purpose of computing the total
number of shares of Common Stock available for Awards under the Plan, there
shall be counted against the limitations set forth in Section 4.2 of the Plan
(subject to the remainder of this Section and Section 13.2) the maximum
number of shares of Common Stock issued upon exercise or settlement of Awards
granted under Sections 6 and 7 of the Plan, the number of shares of Common
Stock issued under grants of Restricted Shares pursuant to Section 8 of the
Plan and the maximum number of shares of Common Stock issued under grants or
payments of Performance Units pursuant to Section 9 of the Plan, in each case
determined as of the date on which such Awards are granted, or issued, as
applicable. 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 theretofore 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. In addition, any shares of Common Stock exchanged
or otherwise used by a Participant as full or partial payment for an Award
(including any shares withheld or deducted for tax withholding purposes),
shall be added to the shares available for Awards under the Plan.
5. ELIGIBILITY. Individuals eligible for Awards under the Plan shall consist
of employees and officers, or those who will become 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.
6.1 TERMS AND CONDITIONS. Stock options granted under the Plan shall be in
respect of Common Stock and may be in the form of Incentive Stock Options or
Non-Qualified Stock Options (sometimes referred to collectively herein as the
"Stock Option(s))". Such Stock Options shall be subject to the terms and
conditions set forth in this Section 6 and any additional terms and
conditions, not inconsistent with the express terms and provisions of the
Plan, as the Committee shall set forth in the relevant Award Agreement.
6.2 GRANT. Stock Options may be granted under the Plan in such form as the
Committee may from time to time approve. Stock Options may be granted alone
or in addition to other Awards under the Plan or in tandem with Stock
Appreciation Rights. Special provisions shall apply to Incentive Stock
Options granted to any employee who owns (within the meaning of Section
422(b)(6) of the Code) more than ten percent (10%) of the total combined
voting power
of all classes of stock of the Company or its parent corporation or any
Subsidiary of the Company, within the meaning of Sections 424(e) and (f) of
the Code (a "10% Share Owner").
6.3 EXERCISE PRICE. The exercise price per share of Common Stock subject to
a Stock Option shall be determined by the Committee, including, without
limitation, a determination based on a formula determined by the Committee;
provided, however, that the exercise price of a Stock Option shall not be
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock on the grant date of such a Stock Option; provided, further, however,
that, in the case of a 10% Share Owner, the exercise price of an Incentive
Stock Option shall not be less than one hundred ten percent (110%) of the
Fair Market Value of the Common Stock on the grant date.
6.4 TERM. The term of each Stock Option shall be such period of time as is
fixed by the Committee; provided, however, that the term of any Stock Option
shall not exceed ten (10) years (five (5) years, in the case of a 10% Share
Owner receiving an Incentive Stock Option) after the date immediately
preceding the date on which the Stock Option is granted.
6.5 METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Secretary of the Company,
or the Secretary's designee, specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the exercise price in
cash, by certified check, bank draft, electronic transfer, or money order
payable to the order of the Company, if permitted by the Committee in its
sole discretion, by surrendering (or attesting to the ownership of) shares of
Common Stock already owned by the Participant for at least six (6) months (if
acquired in a transaction with the Company), or, if permitted by the
Committee (in its sole discretion) and applicable law, by delivery of, alone
or in conjunction with a partial cash or instrument payment, some other form
of payment acceptable to the Committee. Payment instruments shall be received
by the Company subject to collection. The proceeds received by the Company
upon exercise of any Stock Option may be used by the Company for general
corporate purposes. Any portion of a Stock Option that is exercised may not
be exercised again. The shares issued to an optionee for the portion of any
Stock Option exercised by attesting to the ownership of shares shall not
exceed the number of shares issuable as a result of such exercise (determined
as though payment in full therefor were being made in cash) less the number
of shares for which attestation of ownership is submitted. The value of owned
shares submitted (directly or by attestation) in full or partial payment for
the shares purchased upon exercise of a Stock Option shall be equal to the
aggregate Fair Market Value of such owned shares on the date of the exercise
of such Stock Option.
6.6 EXERCISABILITY. Any Stock Option granted under the Plan shall become
exercisable on such date or dates as determined by the Committee (in its sole
discretion) at any time and from time to time in respect of such Stock Option
and set forth in the Award Agreement. Notwithstanding anything to the
contrary contained in this Section 6.6, such Stock Option shall become one
hundred percent (100%) exercisable as to the aggregate number of shares of
Common Stock underlying such Stock Option upon the death, Disability or
Retirement of the Participant.
6.7 TANDEM GRANTS. If Non-Qualified Stock Options and Stock Appreciation
Rights are granted in tandem, as designated in the relevant Award Agreements,
the right of a Participant to exercise any such tandem Stock Option shall
terminate to the extent that the shares of Common Stock subject to such Stock
Option are used to calculate amounts or shares receivable upon the exercise
of the related tandem Stock Appreciation Right.
6.8 RELOAD PROVISION. The Committee may provide in any Award Agreement that
if the optionee exercises a Stock Option using shares (either actually or by
attestation) held for at least six (6) months (if acquired in a transaction
with the Company) and/or elects to have shares withheld to satisfy the
Company's withholding obligations, the optionee will then receive a new
option covering the number of shares used to exercise and/or satisfy
withholding obligations. Such option will have a per share exercise price
equal to the then Fair Market Value of the shares, and will be subject to
such terms and conditions as the Committee, in its sole discretion, may
determine. Nothing in this Section 6.8 will restrict the Committee's ability
to fix or limit in an Award Agreement the maximum number of shares available
under any new option granted pursuant to an Award Agreement.
7. STOCK APPRECIATION RIGHTS.
7.1 TERMS AND CONDITIONS. The grant of Stock Appreciation Rights under the
Plan shall be subject to the terms and conditions set forth in this Section 7
and any additional terms and conditions, not inconsistent with the express
terms and provisions of the Plan, as the Committee shall set forth in the
relevant Award Agreement.
7.2 STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an Award
granted with respect to a specified number of shares of Common Stock
entitling a Participant to receive an amount equal to the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Fair
Market Value of a share of Common Stock on the grant date of the Stock
Appreciation Right, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
7.3 GRANT. A Stock Appreciation Right may be granted in addition to any
other Award under the Plan or in tandem with or independent of a
Non-Qualified Stock Option.
7.4 DATE OF EXERCISABILITY. In respect of any Stock Appreciation Right
granted under the Plan, unless otherwise (a) determined by the Committee (in
its sole discretion) at any time and from time to time in respect of any such
Stock Appreciation Right, or (b) provided in the Award Agreement, a Stock
Appreciation Right may be exercised by a Participant, in accordance with and
subject to all of the procedures established by the Committee, in whole or in
part at any time and from time to time during its specified term.
Notwithstanding the preceding sentence, in no event shall a Stock
Appreciation Right be exercisable prior to the date which is six (6) months
after the date on which the Stock Appreciation Right was granted or prior to
the exercisability of any Non-Qualified Stock Option with which it is granted
in tandem. The Committee may also provide, as set forth in the relevant Award
Agreement and without limitation, that some Stock Appreciation Rights shall
be automatically exercised and settled on one or more fixed dates specified
therein by the Committee.
7.5 FORM OF PAYMENT. Upon exercise of a Stock Appreciation Right, payment
may be made in cash, in Restricted Shares or in shares of unrestricted Common
Stock, or in any combination thereof, as the Committee, in its sole
discretion, shall determine and provide in the relevant Award Agreement.
7.6 TANDEM GRANT. The right of a Participant to exercise a tandem Stock
Appreciation Right shall terminate to the extent such Participant exercises
the Non-Qualified Stock Option to which such Stock Appreciation Right is
related.
8. RESTRICTED SHARES AND RESTRICTED SHARE UNITS.
8.1 TERMS AND CONDITIONS. Grants of Restricted Shares and Restricted Share
Units shall be subject to the terms and conditions set forth in this Section
8 and any additional terms and conditions, not inconsistent with the express
terms and provisions of the Plan, as the Committee shall set forth in the
relevant Award Agreement. Restricted Shares and Restricted Share Units may be
granted alone or in addition to any other Awards under the Plan. Restricted
Share Units shall be similar to Restricted Shares, except that no shares will
be actually granted on the date of the Award. Subject to the terms of the
Plan, the Committee shall determine the number of Restricted Shares and
Restricted Share Units to be granted to a Participant and the Committee may
provide or impose different terms and conditions on any particular Restricted
Share or Restricted Share Units grant made to any Participant. With respect
to each Participant receiving an Award of Restricted Shares, there shall be
issued a stock certificate (or certificates) in respect of such Restricted
Shares. Such stock certificate(s) shall be registered in the name of such
Participant, shall be accompanied by a stock power duly executed by such
Participant, and shall bear, among other required legends, the following
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including,
without limitation, forfeiture events) contained in the Kellogg Company
2003 Long-Term Incentive Plan and an Award Agreement entered into between
the registered owner hereof and Kellogg Company. Copies of such Plan and
Award Agreement are on file in the office of the Secretary of Kellogg
Company, One Kellogg Square, Battle Creek, MI 49016. Kellogg Company will
furnish to the recordholder of the certificate, without charge and upon
written request at its principal place of business, a copy of such Plan and
Award Agreement. Kellogg Company reserves the right to refuse to record the
transfer of this certificate until all such restrictions are satisfied, all
such terms are complied with and all such conditions are satisfied."
Such stock certificate evidencing such shares shall, in the sole discretion
of the Committee, be deposited with and held in custody by the Company until
the restrictions thereon shall have lapsed and all of the terms and
conditions applicable to such grant shall have been satisfied.
8.2 RESTRICTED SHARE GRANTS. A grant of Restricted Shares is an Award of
shares of Common Stock granted to a Participant, subject to such
restrictions, terms and conditions as the Committee deems appropriate,
including, without limitation, (a) restrictions on the sale, assignment,
transfer, hypothecation or other disposition of such shares, (b) the
requirement that the Participant deposit such shares with the Company while
such shares are subject to such restrictions, and (c) the requirement that
such shares be forfeited upon termination of employment for specified reasons
within a specified period of time or for other reasons (including, without
limitation, the failure to achieve designated performance goals). A grant of
Restricted Share Units shall contain similar restrictions, terms and
conditions, to the extent appropriate.
8.3 RESTRICTION PERIOD. In accordance with Sections 8.1 and 8.2 of the Plan
and unless otherwise determined by the Committee (in its sole discretion) at
any time and from time to time, Restricted Shares and Restricted Share Units
shall only become unrestricted and vested in the Participant in accordance
with such vesting schedule relating to such Restricted Shares and Restricted
Share Units, if any, as the Committee may establish in the relevant Award
Agreement (the "Restriction Period"). During the Restriction Period, such
stock shall be and remain unvested and a Participant may not sell, assign,
transfer, pledge, encumber or otherwise dispose of or hypothecate such Award.
Upon satisfaction of the vesting schedule and any other applicable
restrictions, terms and conditions, the Participant shall be entitled to
receive payment of the Restricted Shares or a portion thereof, as the case
may be, as provided in Section 8.4 of the Plan. Restricted Share Units may be
paid in cash, shares of Common Stock or any combination thereof, as
determined by the Committee.
8.4 PAYMENT OF RESTRICTED SHARE GRANTS. After the satisfaction and/or lapse
of the restrictions, terms and conditions established by the Committee in
respect of a grant of Restricted Shares and Restricted Share Units, a new or
additional certificate, without the legend set forth in Section 8.1 of the
Plan, for the number of shares of Common Stock which are no longer subject
(or deemed subject) to such restrictions, terms and conditions shall, as soon
as practicable thereafter, be delivered to the Participant.
8.5 SHARE OWNER RIGHTS. A Participant shall have, with respect to the
shares of Common Stock underlying a grant of Restricted Shares (but not under
Restricted Share Units), all of the rights of a share owner of such stock
(except as such rights are limited or restricted under the Plan or in the
relevant Award Agreement). Any stock dividends paid in respect of unvested
Restricted Shares or unvested Restricted Share Units (if the Committee
determines, in its discretion, to award dividend equivalents on Restricted
Share Units) shall be treated as additional Restricted Shares or Restricted
Share Units and shall be subject to the same restrictions and other terms and
conditions that apply to the unvested Restricted Shares or unvested
Restricted Share Units in respect of which such stock dividends are issued.
9. PERFORMANCE UNITS AND PERFORMANCE SHARE UNITS.
9.1 TERMS AND CONDITIONS. Performance Units and Performance Share Units
shall be subject to the terms and conditions set forth in this Section 9 and
any additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Committee shall set forth in the relevant
Award Agreement.
9.2 PERFORMANCE UNIT GRANTS. A Performance Unit is an Award of units (with
each unit representing such monetary amount or value as is designated by the
Committee in the Award Agreement) granted to a Participant, subject to such
terms and conditions as the Committee deems appropriate, including, without
limitation, the requirement that the Participant forfeit such units (or a
portion thereof) in the event certain performance criteria or other
conditions are not met within a designated period of time. A Performance
Share Unit shall have an initial value equal to the Fair Market Value of a
share of Common Stock as of the date of grant.
9.3 GRANTS. Performance Units and Performance Share Units may be granted
alone or in addition to any other Awards under the Plan. Subject to the terms
of the Plan, the Committee shall determine the number of Performance Units
and Performance Share Units to be granted to a Participant and the Committee
may impose different terms and conditions on any particular Performance Units
and Performance Share Units granted to any Participant.
9.4 PERFORMANCE GOALS AND PERFORMANCE PERIODS. Participants receiving a
grant of Performance Units and Performance Share Units shall only earn into
and be entitled to payment in respect of such Awards if the Company and/or
the Participant achieves certain performance goals (the "Performance Goals")
during and in respect of a designated performance period (the "Performance
Period"). The Performance Goals and the Performance Period shall be
established by the Committee, in its sole discretion. The Committee shall
establish Performance Goals for each Performance Period prior to, or as soon
as practicable after, the commencement of such Performance Period. The
Committee shall also establish a schedule or schedules for Performance Units
and Performance Share Units setting forth the portion of the Award which will
be earned or forfeited based on the degree of achievement, or lack thereof,
of the Performance Goals at the end of the relevant Performance Period. In
setting Performance Goals, the Committee may use, but shall not be limited
to, such measures as total share owner return, return on equity, net earnings
growth, sales or revenue growth, cash flow, comparisons to peer companies,
individual or aggregate Participant performance or such other measure or
measures of performance as the Committee, in its sole discretion, may deem
appropriate. Such performance measures shall be defined as to their
respective components and meaning by the Committee (in its sole discretion).
During any Performance Period, the Committee shall have the authority to
adjust the Performance Goals and/or the Performance Period in such manner as
the Committee, in its sole discretion, deems appropriate at any time and from
time to time. At the discretion of the Committee, Participants holding
Performance Share Units may be entitled to receive dividend equivalents with
respect to the dividends declared, subject to any restrictions determined by
the Committee.
9.5 PAYMENT OF UNITS. With respect to each Performance Unit and Performance
Share Unit, the Participant shall, if the applicable Performance Goals have
been achieved, or partially achieved, as determined by the Committee in its
sole discretion, by the Company and/or the Participant during the relevant
Performance Period, be entitled to receive payment in an amount equal to the
designated value of each Performance Unit and Performance Share Unit times
the number of such units so earned. Payment in settlement of earned
Performance Units and Performance Share Unit shall be made as soon as
practicable following the conclusion of the respective Performance Period in
cash, in unrestricted Common Stock, or in Restricted Shares, or in cash, or
in any combination thereof, as the Committee in its sole discretion, shall
determine and provide in the relevant Award Agreement.
10. DEFERRAL ELECTIONS/TAX REIMBURSEMENTS/OTHER PROVISIONS.
10.1 DEFERRALS. The Committee may permit or require a Participant to elect
to defer receipt of any payment of cash or any delivery of shares of Common
Stock or other item that would otherwise be due to such Participant by virtue
of the exercise, earn out or settlement of any Award made under the Plan. If
any such election is permitted or required, the Committee shall establish
rules and procedures for such deferrals. The Committee may also provide in
the relevant Award Agreement for a tax reimbursement cash payment to be made
by the Company in favor of any Participant in connection with the tax
consequences resulting from the grant, exercise, settlement, or earn out of
any Award made under the Plan.
10.2 PERFORMANCE-BASED AWARDS. Performance Units, Restricted Shares, and
other Awards subject to performance criteria that are intended to be
"qualified performance-based compensation" within the meaning of Section
162(m) of the Code shall be paid solely on account of the attainment of one
or more pre-established, objective performance goals within the meaning of
Section 162(m) and the regulations thereunder. Until otherwise determined by
the Committee, the performance goals shall be the attainment of
pre-established levels of (or pre-established changes or improvements in) any
of net sales, net income, market price per share, earnings per share, return
on equity, return on capital employed, return on invested capital, cash flow,
discounted cash flow, cumulative cash flow, operating profit, gross or
pre-tax profits, post-tax profits, gross or net margins, consolidated net
income, unit sales volume, economic value added, costs, production, unit
production volume, improvements in financial ratings, regulatory compliance,
achievement of balance sheet or income statement objectives, market or
category share, total return to share owners (including both the market value
of the Company's stock and dividends thereon) and the extent to which
strategic and business goals are met. The payout of any such Award to a
Covered Employee may be reduced, but not increased, based on the degree of
attainment of other performance criteria or otherwise at the discretion of
the Committee. For purposes of the Plan, "Covered Employee" has the same
meaning as set forth in Section 162(m) of the Code.
10.3 MAXIMUM YEARLY AWARDS. The maximum annual Common Stock amounts in this
Section 10.3 are subject to adjustment under Section 13.2 and are subject to
the Plan maximum under Sections 4.2 and 4.3.
10.3.1 PERFORMANCE-BASED AWARDS. The maximum amount payable in respect of
Performance Units, performance-based Restricted Shares and other Awards in
any calendar year may not exceed 1,000,000 shares of Common Stock (or the
then equivalent Fair Market Value thereof) in the case of any individual
Participant. Further, the aggregate number of Performance Units,
performance-based Restricted Shares and other Awards (excluding Awards
granted under Section 6 and Section 7) granted to Participants under this
Plan shall not exceed 5,000,000 shares of Common Stock.
10.3.2 STOCK OPTIONS AND SARS. Each individual Participant may not receive
in any calendar year Awards of Options or Stock Appreciation Rights exceeding
2,000,000 underlying shares of Common Stock.
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.
13.1 NO CORPORATE ACTION RESTRICTION. The existence of the Plan, any Award
Agreement and/or the Awards granted hereunder shall not limit, affect or
restrict in any way the right or power of the Board or the share owners of
the Company to make or authorize (a) any adjustment, recapitalization,
reorganization or other change in the Company's or any Subsidiary's capital
structure or its business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue of bonds,
debentures, capital, preferred or prior preference stocks ahead of or
affecting the Company's or any Subsidiary's capital stock or the rights
thereof, (d) any dissolution or liquidation of the Company or any Subsidiary,
(e) any sale or transfer of all or any part of the Company's or any
Subsidiary's assets or business, or (f) any other corporate act or proceeding
by the Company or any Subsidiary. No Participant, beneficiary or any other
person shall have any claim against any member of the Board or the Committee,
the Company or any Subsidiary, or any employees, officers, share owners or
agents of the Company or any Subsidiary, as a result of any such action.
13.2 RECAPITALIZATION ADJUSTMENTS. If the Board determines that any
dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, Change of Control or exchange of Common Stock or
other securities of the Company, or other corporate transaction or event
affects the Common Stock such that an adjustment is determined by the Board,
in its sole discretion, to be necessary or appropriate in order to prevent
dilution or enlargement of benefits or potential benefits intended to be made
available under the Plan, the Board may, in such manner as it in good faith
deems equitable, adjust any or all of (i) the number of shares of Common
Stock or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted, (ii) the
maximum limitation upon Options, Performance Units and performance-based
Restricted Shares that may be granted to any individual participant, (iii)
the number of shares of Common Stock or other securities of the Company (or
number and kind of other securities or property) subject to outstanding
Awards, and (iv) the exercise price with respect to any Stock Option, or make
provision for an immediate cash payment to the holder of an outstanding Award
in consideration for the cancellation of such Award.
13.3 MERGERS. If the Company enters into or is involved in any merger,
reorganization, Change of Control or other business combination with any
person or entity (a "Merger Event"), the Board may, prior to such Merger
Event and effective upon such Merger Event, take such action as it deems
appropriate, including, but not limited to, replacing such Stock Options with
substitute stock options and/or stock appreciation rights in respect of the
shares, other securities or other property of the surviving corporation or
any affiliate of the surviving corporation on such terms and conditions, as
to the number of shares, pricing and otherwise, which shall substantially
preserve the value, rights and benefits of any affected Stock Options or
Stock Appreciation Rights granted hereunder as of the date of the
consummation of the Merger Event. Notwithstanding anything to the contrary in
the Plan, if any Merger Event or Change of Control occurs, the Company shall
have the right, but not the obligation, to cancel each Participant's Stock
Options and/or Stock Appreciation Rights and to pay to each affected
Participant in connection with the cancellation of such Participant's Stock
Options and/or Stock Appreciation Rights, an amount equal to the excess of
the Fair Market Value, as determined by the Board, of the Common Stock
underlying any unexercised Stock Options or Stock Appreciation Rights
(whether then exercisable or not) over the aggregate exercise price of such
unexercised Stock Options and/or Stock Appreciation Rights.
Upon receipt by any affected Participant of any such substitute stock
options, stock appreciation rights (or payment) as a result of any such
Merger Event, such Participant's affected Stock Options and/or Stock
Appreciation Rights for which such substitute options and/or stock
appreciation rights (or payment) were received shall be thereupon cancelled
without the need for obtaining the consent of any such affected Participant.
14. CHANGE OF CONTROL PROVISIONS.
14.1 IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred, and which
are not then exercisable and vested, shall become fully exercisable
and vested;
(ii) The restrictions and deferral limitations applicable to any
Restricted Shares shall lapse, and such Restricted Shares shall
become free of all restrictions and become fully vested and
transferable;
(iii) All Performance Units shall be considered to be earned and payable in
full, and any deferral or other restriction shall lapse and such
Performance Units shall be settled in cash (with the value being
determined by the Committee, in its sole discretion) as promptly as
is practicable; and
(iv) The Committee may also make additional adjustments and/or settlements
of outstanding Awards as it deems appropriate and consistent with the
Plan's purposes.
14.2 DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) An acquisition after the date hereof by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (b) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Company, other than
an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly
from the Company or approved by the Incumbent Board (as defined
below), (2) any acquisition by the Company, (3) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Company or any entity controlled by the Company, (4) any
acquisition by an underwriter temporarily holding Company securities
pursuant to an offering of such securities, or (5) any acquisition
pursuant to a transaction which complies with clauses (1), (2) and
(3) of subsection (iii) of this Section 14.2; or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section, that any individual
who becomes a member of the Board subsequent to the effective date of
the Plan, whose election, or nomination for election by the Company's
share owners, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of
the Incumbent Board (or deemed to be such pursuant to this proviso),
either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without written objection to such nomination shall be considered as
though such individual were a member of the Incumbent Board; but,
provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation (or similar
transaction), a sale or other disposition of all or substantially all
of the assets of the Company, or the acquisition of assets or stock
of another entity ("Corporate Transaction"); in each case, unless
immediately following such Corporate Transaction (1) all or
substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors, except to
the extent that such ownership existed prior to the Corporate
Transaction, and (3) individuals who were members of the Incumbent
Board at the time of the Board's approval of the execution of the
initial agreement providing for such Corporate Transaction will
constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the share owners of the Company of a complete
liquidation or dissolution of the Company.
14.3 CHANGE IN CONTROL OR OTHER CASH-OUT. Notwithstanding any other
provision of the Plan, during the 60-day period from and after a Change in
Control (the "Exercise Period"), if the Committee shall determine at the time
of grant or thereafter, a Participant shall have the right, whether or not
the Option is fully exercisable in lieu of the payment of the option price
for the shares of Common Stock being purchased under the Option and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all
or part of the Option to the Company and to receive cash, within 30 days of
such election, in an amount equal to the amount by which the Change in
Control Price (as defined below) per share of Common Stock on the date of
such election shall exceed the exercise price per share of Common Stock under
the Option (the "Spread") multiplied by the number of shares of Common Stock
granted under the Option as to which the right granted under this Section
14.3 shall have been exercised. In addition, the Committee shall also have
the authority to otherwise require that any option be surrendered by the
holder thereof for cancellation by the Company, with the holder to receive a
cash payment equal to the Spread.
14.4 CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way,
of a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed during the 60-day period prior to and including the date of a Change
in Control, or (ii) if the Change in Control is the result of a tender or
exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in
Control Price shall be in all cases the Fair Market Value of the Common Stock
on the date such Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration
shall be determined in the sole discretion of the Board.
15. AMENDMENT, SUSPENSION, AND TERMINATION.
15.1 IN GENERAL. The Board may suspend or terminate the Plan (or any
portion thereof) at any time and may amend the Plan at any time and from time
to time in such respects as the Board may deem advisable to 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 or any Subsidiary.
No such amendment, suspension or termination shall (a) subject to Section
16.6, materially adversely affect the rights of any Participant under any
outstanding Stock Options, Stock Appreciation Rights, Performance Units, or
Restricted Share grants, without the consent of such Participant, (b) make
any change that would disqualify the Plan, or any other plan of the Company
or any Subsidiary intended to be so qualified, from the benefits provided
under Section 422 of the Code, or any successor provisions thereto, or (c)
except as contemplated by Section 13, revise the exercise price of any
outstanding Stock Option or increase the number of shares available for
Awards pursuant to Section 4.2 without share owner approval. In addition, the
Company will obtain share owner approval of any modification of the Plan or
Awards to the extent required by applicable laws or regulations or the
regulations of any stock exchange upon which the Common Stock is then listed.
15.2 AWARD AGREEMENT MODIFICATIONS. Subject to Section 15.1, the Committee
may (in its sole discretion) amend or modify at any time and from time to
time the terms and provisions of any outstanding Stock Options, Stock
Appreciation Rights, Performance Units, or Restricted Share grants, in any
manner to the extent that the Committee under the Plan or any Award Agreement
could have initially determined the restrictions, terms and provisions of
such Stock Options, Stock Appreciation Rights, Performance Units, and/or
Restricted Share grants, including, without limitation, changing or
accelerating (a) the date or dates as of which such Stock Options or Stock
Appreciation Rights shall become exercisable, (b) the date or dates as of
which such Restricted Share grants shall become vested, or (c) the
performance period or goals in respect of any Performance Units. Subject to
Section 16.6, no such amendment or modification shall, however, materially
adversely affect the rights of any Participant under any such Award without
the consent of such Participant.
16. MISCELLANEOUS.
16.1 TAX WITHHOLDING. The Company shall have the right to deduct from any
payment or settlement under the Plan, including, without limitation, the
exercise of any Stock Option or Stock Appreciation Right, or the delivery,
transfer or vesting of any Common Stock or Restricted Shares, any domestic or
foreign federal, state, local or other taxes of any kind which the Committee,
in its sole discretion, deems necessary to be withheld to comply with the
Code and/or any other applicable law, rule or regulation. Shares of Common
Stock may be used to satisfy any such tax withholding. Such Common Stock
shall be valued based on the market value of such stock as of the date the
tax withholding is required to be made, such date to be determined by the
Committee. In addition, the Company shall have the right to require payment
from a Participant to cover any applicable withholding or other employment
taxes due upon any payment or settlement under the Plan.
16.2 NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan, the granting
of any Award, nor the execution of any Award Agreement, shall confer upon any
employee of the Company or any Subsidiary any right to continued employment
with the Company or any Subsidiary, as the case may be, nor shall it
interfere in any way with the right, if any, of the Company or any Subsidiary
to terminate the employment of any employee at any time for any reason.
16.3 UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets in connection with any Awards under the
Plan. Any liability of the Company to any person with respect to any Award
under the Plan or any Award Agreement shall be based solely upon the
contractual obligations that may be created as a result of the Plan or any
such Award Agreement. No such obligation of the Company shall be deemed to be
secured by any pledge of, encumbrance on, or other interest in, any property
or asset of the Company or any Subsidiary. Nothing contained in the Plan or
any Award Agreement shall be construed as creating in respect of any
Participant (or
beneficiary thereof or any other person) any equity or other interest of any
kind in any assets of the Company or any Subsidiary or creating a trust of
any kind or a fiduciary relationship of any kind between the Company, any
Subsidiary and/or any such Participant, any beneficiary thereof or any other
person.
16.4 PAYMENTS TO A TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements or similar
arrangements from which the Committee may make payments of amounts due or to
become due to any Participants under the Plan.
16.5 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's compensation for purposes of
the determination of benefits under any other employee welfare or benefit
plans or arrangements, if any, provided by the Company or any Subsidiary
unless expressly provided in such other plans or arrangements, or except
where the Board expressly determines in writing that inclusion of an Award or
portion of an Award should be included to accurately reflect competitive
compensation practices or to recognize that an Award has been made in lieu of
a portion of competitive annual base salary or other cash compensation.
Awards under the Plan may be made in addition to, in combination with, or as
alternatives to, grants, awards or payments under any other plans or
arrangements of the Company or its Subsidiaries. The existence of the Plan
notwithstanding, the Company or any Subsidiary may adopt such other
compensation plans or programs and additional compensation arrangements as it
deems necessary to attract, retain and motivate employees.
16.6 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards or shares
of the Common Stock shall be required to be issued or granted under the Plan
unless legal counsel for the Company shall be satisfied that such issuance or
grant will be in compliance with all applicable securities laws and
regulations and any other applicable laws or regulations. The Committee may
require, as a condition of any payment or share issuance, that certain
agreements, undertakings, representations, certificates, and/or information,
as the Committee may deem necessary or advisable, be executed or provided to
the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of the Restricted Shares and/or Common
Stock delivered under the Plan may be subject to such stock-transfer orders
and such other restrictions as the Committee may deem advisable under the
rules, regulations, or other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed,
and any applicable laws. In addition, if, at any time specified herein (or in
any Award Agreement or otherwise) for (a) the making of any Award, or the
making of any determination, (b) the issuance or other distribution of
Restricted Shares and/or Common Stock, or (c) the payment of amounts to or
through a Participant with respect to any Award, any law, rule, regulation or
other requirement of any governmental authority or agency shall require
either the Company, any Subsidiary or any Participant (or any estate,
designated beneficiary or other legal representative thereof) to take any
action in connection with any such determination, any such shares to be
issued or distributed, any such payment, or the making of any such
determination, as the case may be, shall be deferred until such required
action is taken. With respect to persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 promulgated under the Exchange Act. In
addition, the Company or Committee may, at the time of grant or thereafter,
impose additional or different conditions or take other actions with respect
to Awards made to Participants in countries outside of the United States of
America, to the extent required or made advisable by applicable laws and
regulations.
16.7 AWARD AGREEMENTS. Each Participant receiving an Award under the Plan
may enter into an Award Agreement with the Company in a form specified by the
Committee. Each such Participant shall then agree to the restrictions, terms
and conditions of the Award set forth therein and in the Plan. An Award
Agreement may provide that, notwithstanding any other provision in this Plan
to the contrary, if the Participant breaches provisions in the Award
Agreement during or after the Participant's employment, then the Participant
will forfeit and/or repay all Awards (whether unvested or vested) and profits
realized on the exercise of Stock Options.
16.8 DESIGNATION OF BENEFICIARY. Each Participant to whom an Award has been
made under the Plan may designate a beneficiary or beneficiaries to exercise
any Stock Option or to receive any payment which under the terms of the Plan
and the relevant Award Agreement may become exercisable or payable on or
after the Participant's death. At any time, and from time to time, any such
designation may be changed or cancelled by the Participant without the
consent of any such beneficiary. Any such designation, change or cancellation
must be on a form provided for that purpose by the Committee and shall not be
effective until received by the Committee. If no beneficiary has been
designated by a deceased Participant, or if the designated beneficiaries have
predeceased the Participant, the
beneficiary shall be the Participant's estate. If the Participant designates
more than one beneficiary, any payments under the Plan to such beneficiaries
shall be made in equal shares unless the Participant has expressly designated
otherwise, in which case the payments shall be made in the shares designated
by the Participant.
16.9 LEAVES OF ABSENCE/TRANSFERS. The Committee shall have the power to
promulgate rules and regulations and to make determinations, as it deems
appropriate, under the Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without limiting the
generality of the foregoing, the Committee may determine whether any such
leave of absence shall be treated as if the Participant has terminated
employment with the Company or any such Subsidiary. If a Participant
transfers within the Company, or to or from any Subsidiary, such Participant
shall not be deemed to have terminated employment as a result of such
transfers.
16.10 GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws thereof.
Any titles and headings herein are for reference purposes only, and shall in
no way limit, define or otherwise affect the meaning, construction or
interpretation of any provisions of the Plan.
16.11 EFFECTIVE DATE. 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 Sections 162(m) and 422 of the
Code. No Awards may be granted under the Plan after April 25, 2013.
KELLOGG COMPANY
One Kellogg Square
Battle Creek, MI 49016-3599