<PAGE> 1
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11 (c) or Section
240.14a-12
KELLOGG COMPANY
(Name of Registrant as specified in its charter)
KELLOGG COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2), or Item
22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: _______________________________
(4) Proposed maximum aggregate value of transaction: __________________
(5) Total fee paid: ___________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ___________________________________________
(2) Form, Schedule or Registration Statement No.: _____________________
(3) Filing Party: _____________________________________________________
(4) Date Filed: _______________________________________________________
=============================================================================
<PAGE> 2
[LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
Dear Stockholder:
It is my pleasure to invite you to attend the 1995 Annual Meeting of
Stockholders of Kellogg Company to be held at 1 p.m., local time, on Friday,
April 21, 1995. The meeting will be held at the W.K. Kellogg Auditorium, 60 West
Van Buren Street, Battle Creek, Michigan.
ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO STOCKHOLDERS ONLY. IF YOU
PLAN ON ATTENDING THE MEETING, PLEASE COMPLETE AND RETURN THE TICKET REQUEST ON
THE INSIDE BACK PAGE OF THE PROXY STATEMENT. STOCKHOLDERS WHO ARE NOT
PRE-REGISTERED WILL ONLY BE ADMITTED TO THE MEETING UPON VERIFICATION OF STOCK
OWNERSHIP.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting and the nominees for
election as directors.
Your vote is important. Whether you plan to attend the meeting or not, we urge
you to complete, sign and return your Proxy as soon as possible in the envelope
provided. This will ensure representation of your shares in the event you are
unable to attend. You may, of course, revoke your Proxy and vote in person at
the meeting if you so desire.
Sincerely,
Arnold G. Langbo
Chairman of the Board
Chief Executive Officer
March 13, 1995
<PAGE> 3
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MI 49016-3599
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1995
TO THE STOCKHOLDERS:
Please take notice that the Annual Meeting of Stockholders of Kellogg
Company, a Delaware corporation, will be held at 1 p.m., local time, on Friday,
April 21, 1995, at the W.K. Kellogg Auditorium, 60 West Van Buren Street, Battle
Creek, Michigan, for the following purposes:
1. To elect four (4) directors for a three-year term to expire at the
1998 Annual Meeting of Stockholders;
2. To consider and act upon the proposed Senior Executive Officer
Performance Bonus Plan;
3. To consider and act upon a proposed amendment to the Company's
Amended and Restated Certificate of Incorporation which would reduce the
maximum and minimum number of directors of the Company;
4. To take action upon any other matters that may properly come before
the meeting or any adjournments thereof.
In accordance with the Bylaws and action of the Board of Directors, only
stockholders of record at the close of business on March 1, 1995, will receive
notice of and be entitled to vote at the meeting or any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
RICHARD M. CLARK
Senior Vice President
General Counsel and Secretary
March 13, 1995
<PAGE> 4
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, APRIL 21, 1995
This Proxy Statement and the accompanying Proxy are furnished to
stockholders of Kellogg Company (the "Company") in connection with the
solicitation of proxies for use at the Annual Meeting of Stockholders of the
Company to be held on Friday, April 21, 1995, at the time and place and for the
purposes set forth in the accompanying Notice of Annual Meeting or at any
adjournment thereof. The Annual Report of the Company for 1994 including
financial statements, the Notice of Annual Meeting, this Proxy Statement and the
enclosed form of Proxy were initially mailed to stockholders on or about March
13, 1995.
The enclosed Proxy is solicited by the Board of Directors of the Company.
The cost of preparing, assembling and mailing the Notice of Annual Meeting
and Proxy Statement is to be borne by the Company. It may be necessary to
conduct a certain amount of solicitation by telephone and in person. Such
solicitation will be conducted in part by directors, officers and regular
employees of the Company without special compensation. The Company has also
retained the services of Morrow & Co., a professional soliciting organization,
to assist in soliciting proxies from brokerage houses, custodians, nominees and
other fiduciaries. The fees and expenses of that firm for their services in
connection with such solicitation are expected to be approximately $12,500.
Arrangements have also been made with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of proxy soliciting material to the
beneficial owners of the common stock of the Company at the Company's expense.
It is important that your stock be represented at the Annual Meeting.
Please complete and sign the enclosed Proxy and return it to the Company. Any
person giving a Proxy has the power to revoke it at any time before it is voted,
by delivery of a later-dated duly executed Proxy or in person at the Annual
Meeting. Unless so revoked, all Proxies which are properly executed and received
at or prior to the meeting will be voted in accordance with their
specifications. If no contrary instruction is indicated in the Proxy, it will be
voted "FOR" the election of directors as nominated, "FOR" the approval of the
proposal concerning the Senior Executive Officer Performance Bonus Plan, "FOR"
the proposal to amend the Company's Certificate of Incorporation, and in the
discretion of the person(s) named as the proxy if any other business should
properly come before the meeting.
When a Proxy is returned properly dated and signed, the shares represented
thereby, including shares held under the Company's Dividend Reinvestment Plan,
will be voted by the person(s) named as the proxy in accordance with each
stockholder's directions. Proxies will also be considered to be voting
instructions to the applicable Trustee with respect to shares held in accounts
under the Company's Savings and Investment Plans.
Both abstention votes and any broker non-votes (i.e., votes withheld by
brokers on non-routine proposals in the absence of instructions from beneficial
owners) will be counted as present or represented at the Annual Meeting for
purposes of determining whether a quorum exists.
VOTING SECURITIES AND OWNERSHIP THEREOF
BY CERTAIN PERSONS
The record date for determining stockholders entitled to vote at the Annual
Meeting is March 1, 1995. Each of the shares of common stock of the
Company issued and outstanding on that date is entitled to one vote at the
Annual Meeting.
<PAGE> 5
The W.K. Kellogg Foundation Trust (the "Trust") was, at December 31, 1994,
the owner of 74,848,320 shares (33.8%) of the outstanding common stock of the
Company. The Trust also had present or contingent beneficial interests under
other trusts which held, as of such date, 360,960 shares (.16%) of the
outstanding common stock of the Company. The trustees of the Trust are Charles
H. Ludlow, Russell G. Mawby, William E. LaMothe and The Bank of New York.
The W.K. Kellogg Foundation, a charitable corporation organized under the
laws of Michigan (the "Foundation"), is the sole beneficiary of the Trust. The
Foundation, in addition to its beneficial interests under the Trust, had on such
date present or contingent beneficial interests under other trusts which held
719,460 shares (.32%) of the outstanding common stock, which number includes the
360,960 shares in which the Trust had present or contingent interests.
Under the terms of the Trust, in the event that a majority of the trustees
of the Trust (which majority must include the corporate trustee) are unable to
agree, the Foundation has the power to direct the voting of the common stock of
the Company held in the Trust. With certain limitations, the Foundation also has
the power to select or veto the selection of successor trustees of the Trust and
to remove any trustee or successor trustee thereunder. Moreover, the Trust
requires that a trustee of the Foundation be a trustee of the Trust. Russell G.
Mawby, a director of the Company and a trustee of the Trust, also serves as
Chairman of the Board and Chief Executive Officer of the Foundation. William E.
LaMothe, who is a director and Chairman Emeritus of the Company, also serves as
a trustee of the Trust and the Foundation.
The following table shows each person who, at the close of business on
December 31, 1994, was known by the Company to beneficially own more than five
percent (5%) of the common stock of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS ON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP DECEMBER 31, 1994
- --------------------------------------------------- --------------------- --------------------
<S> <C> <C>
W. K. Kellogg Foundation Trust
c/o The Bank of New York
One Wall Street 74,848,320 shares
New York, NY 10286 as fiduciary(1) 33.8
The Bank of New York
One Wall Street 77,050,138 shares
New York, NY 10286 as fiduciary(2) 34.7
George Gund III
1821 Union Street
San Francisco, CA 94123 25,245,200 shares(3) 11.4
KeyCorp
127 Public Square 25,566,340 shares
Cleveland, OH 44114-1306 as fiduciary(4) 11.5
</TABLE>
- ---------------
(1) Does not include 360,960 shares held in certain other trusts in which both
the Trust and the Foundation have present or contingent beneficial interests
and does not include an additional 358,500 shares held in trusts in which
the Foundation has present or contingent beneficial interests. The
Foundation has a beneficial or possible beneficial interest in an aggregate
of 75,567,780 shares including the shares shown in the table for the Trust.
All 74,848,320 shares beneficially owned by the Trust are also included in
the shares shown in the table above as beneficially owned by the Bank of New
York.
(2) Of the shares beneficially held, The Bank of New York has sole voting power
for 91,914 shares, shared voting power for 76,958,224 shares (including
those shares beneficially owned by the Trust), sole investment power for
43,608 shares and shared investment power for 74,897,520 shares (including
those shares beneficially owned by the Trust). The Bank 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.
(3) George Gund III has sole power to vote or direct the vote and shared power
to dispose or direct the disposition of 112,000 of these shares; shared
power to vote or direct the vote of 25,133,200 of these shares; and shared
power to dispose or direct the disposition of 7,349,546 of these shares.
6,291,200 of the shares which Mr. Gund has shared power to vote and to
dispose are held by a nonprofit foundation of
2
<PAGE> 6
which George Gund III is one of five trustees and one of nine members as to
which shares Mr. Gund disclaims beneficial ownership. Gordon Gund, a
director of the Company, is a brother of George Gund III and does not have
any voting or investment power in any of the shares shown as beneficially
owned by George Gund III.
(4) Of the shares beneficially held, KeyCorp, the parent company of Society
Corporation, has sole voting power for 251,668 shares; shared voting power
for 7,399,693 shares (including certain of the shares beneficially owned by
George Gund III); sole investment power for 18,175,567 shares; and shared
investment power for 7,366,153 shares.
The following table sets forth the number of shares of common stock of the
Company beneficially owned as of February 1, 1995, by each continuing director
and nominee for director; each executive officer included in the Summary
Compensation Table; and all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL OWNERSHIP
NAME (1)(2)
--------------------------------------------------------- --------------------
<S> <C>
William A. Camstra....................................... 131,085
Gary E. Costley.......................................... 142,786
Charles W. Elliott....................................... 129,073
Claudio X. Gonzalez...................................... 1,016
Gordon Gund.............................................. 3,000
Thomas A. Knowlton....................................... 114,422
William E. LaMothe(3)(4)................................. 692,718
Arnold G. Langbo(5)...................................... 477,873
Russell G. Mawby(3)...................................... 3,400
Ann McLaughlin........................................... 1,667
J. Richard Munro......................................... 1,200
Harold A. Poling......................................... 1,000
Donald Rumsfeld.......................................... 8,000
Timothy P. Smucker(6).................................... 3,000
Donald W. Thomason....................................... 120,826
Dolores D. Wharton....................................... 6,051
John L. Zabriskie........................................ 500
All executive officers and directors as a group,
consisting of
26 persons, including those named above(7)............. 2,416,429
</TABLE>
- ---------------
(1) The percentage of shares beneficially owned by all executive officers and
directors of the Company as a group was one percent (1%) of the Company's
issued and outstanding common stock.
(2) The number of shares shown in the table includes the following respectively
indicated shares which individual directors and all executive officers and
directors of the Company, as a group, may presently elect to acquire by
exercising options granted them under Company-sponsored stock plans and
which remain unexercised on February 1, 1995: William A. Camstra, 70,382;
Gary E. Costley, 101,232; Charles W. Elliott, 97,550; Thomas A. Knowlton,
91,366; William E. LaMothe, 272,770; Arnold G. Langbo, 407,835; Donald W.
Thomason, 95,106; all directors and executive officers as a group, including
the above named individuals, 1,578,464.
(3) Does not include 74,848,320 shares owned by the Trust as to which Russell G.
Mawby and William E. LaMothe, as trustees of such Trust, share voting and
investment power with the other trustees, or shares of the Company's common
stock as to which the Trust or the Foundation has present or contingent
interests. Dr. Mawby is Chairman of the Board and Chief Executive Officer of
the Foundation and Mr. LaMothe is a trustee of the Foundation, which, under
certain circumstances, has the power to direct the voting of the common
stock of the Company held by the Trust.
3
<PAGE> 7
(4) Does not include 48,400 shares held by Mr. LaMothe's wife in a living trust,
33,000 shares he holds in a grantor retained income trust, and 33,000 shares
held by Mr. LaMothe's wife in a grantor retained income trust, as to which
Mr. LaMothe has neither voting nor investment power, or 54,610 shares held
by the Patricia A. and William E. LaMothe Foundation, a charitable
foundation organized under the laws of the state of Michigan. Mr. LaMothe
disclaims beneficial ownership of all such shares.
(5) Does not include 20,300 shares held by Mr. Langbo's wife in a nonrevocable
trust, as to which Mr. Langbo has neither voting nor investment power, or
8,780 shares held by the Arnold G. and Martha M. Langbo Foundation, a
charitable foundation organized under the laws of the state of Michigan. Mr.
Langbo disclaims beneficial ownership of all such shares.
(6) Does not include 500 shares held by Mr. Smucker's wife as custodian for the
benefit of Mr. Smucker's minor child under the Uniform Gift to Minors Act,
as to which Mr. Smucker has neither voting nor investment power. Mr. Smucker
disclaims beneficial ownership of such shares.
(7) Shares shown as beneficially owned include those that may be held either
individually, jointly or pursuant to a trust arrangement.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation and the Bylaws of the
Company provide that the Board of Directors shall be comprised of not less than
twelve (12) nor more than eighteen (18) directors divided into three (3) classes
as nearly equal in number as possible and that each director shall be elected
for a term of three (3) years with a term of one class expiring each year. There
are currently thirteen (13) members of the Board. At the Annual Meeting, the
stockholders will be asked to consider a proposal to reduce the minimum number
of directors to seven (7) and the maximum to fifteen (15). See "Proposal
3 -- Proposal to Approve an Amendment to the Certificate of Incorporation."
Four (4) directors are to be elected at the Annual Meeting to serve for a
term ending at the 1998 Annual Meeting of Stockholders or until their respective
successors are elected and qualified. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE FOLLOWING NOMINEES: Gordon Gund, William E. LaMothe,
Russell G. Mawby and Ann McLaughlin. Each nominee was proposed by the Nominating
Committee for consideration by the Board of Directors and presentment to the
stockholders. Each nominee has previously been elected by the stockholders to
serve as a director of the Company. Effective December 31, 1994, Dr. John L.
Zabriskie was appointed by the Board of Directors to fill the vacancy created by
the retirement of Dr. Norman A. Brown.
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected directors. "Plurality" means that the individuals who receive the
largest number of votes cast are elected as directors. Consequently, shares not
voted (whether by abstention, broker non-votes or otherwise) have no impact on
the election of directors. It is intended that, unless authority is withheld,
the Proxies given will be voted "FOR" all the four (4) nominees. In case 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 of Directors
to replace any such nominee. However, the Board of Directors does not anticipate
this will occur.
Pursuant to the Company's Bylaws, written notice of other qualifying
nominations by stockholders for election to the Board of Directors must have
been received by the Secretary no earlier than December 1, 1994 and no later
than January 30, 1995. As no notice of any such other nominations was received,
no other nominations for election to the Board of Directors may be made by
stockholders at this year's Annual Meeting of Stockholders.
Background information with respect to the four (4) nominees for election
and the continuing directors of the Company, including their business
experience, age, years of service as a director and photographs,
4
<PAGE> 8
appears below grouped by the date of the Annual Meeting of Stockholders at which
their respective term of office is scheduled to expire.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE
1998 ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
GORDON GUND. Mr. Gund, age 55, has served as a director of the
Company since 1986. He is President and Chief Executive
Officer of Gund Investment Corporation, which manages
diversified investment activities. Mr. Gund is a member of the
Board of Governors of the National Hockey League and the
National Basketball Association and is principal owner of the
[PHOTO] Cleveland Cavaliers NBA team and the Gund Arena, home of the
Cavaliers. He is also Co-Owner of the San Jose Sharks, a
National Hockey League team. He is a director of Corning,
Incorporated; general partner of GUS Enterprises, a real
estate development company; and principal owner and Chairman
of Nationwide Advertising Service, Inc., a recruitment
advertising agency. Mr. Gund is also Chairman and co-founder
of the Foundation Fighting Blindness.
- --------------------------------------------------------------------------------
WILLIAM E. LAMOTHE. Mr. LaMothe, age 68, has served as a
director of the Company since 1972. He retired as Chairman of
the Board and Chief Executive Officer of Kellogg Company on
December 31, 1991. He had been employed by the Company since
1950 and was elected a Vice President in 1962. He was named
[PHOTO] President and Chief Operating Officer in 1973, became Chief
Executive Officer in January 1979 and Chairman of the Board in
December 1979. Mr. LaMothe is a director of The Allstate
Insurance Co.; Sears, Roebuck & Co.; and The Upjohn Company.
He is a member of the Board of Trustees of the W.K. Kellogg
Foundation and the W.K. Kellogg Foundation Trust.
- --------------------------------------------------------------------------------
RUSSELL G. MAWBY. Dr. Mawby, age 67, has served as a director
of the Company since 1974. He is Chairman of the Board of
Trustees of the W.K. Kellogg Foundation and a trustee of the
W.K. Kellogg Foundation Trust. Dr. Mawby has been employed by
[PHOTO] the Foundation since 1964 and was named Chief Executive
Officer in 1970. He is a director of The J. M. Smucker Company
and a member of the Board of Trustees of Starr Commonwealth
Schools, Michigan Nonprofit Forum and Michigan State
University.
- --------------------------------------------------------------------------------
ANN MCLAUGHLIN. Ms. McLaughlin, age 53, has served as a
director of the Company since 1989. She is President of the
Federal City Council in Washington, D.C., a nonprofit,
nonpartisan organization dedicated to improving the nation's
capital, and a member of the Boards of The Public Agenda
Foundation and The Conservation Fund. Ms. McLaughlin is Vice
Chairman of The Aspen Institute and a trustee of the
Center for Strategic and International Studies and The Urban
Institute. She was President and Chief Executive Officer of
[PHOTO] New American Schools Development Corporation, a private,
nonprofit education reform organization, from July 1992 until
April 1993. From 1989 to 1992, she was a Visiting Fellow at
the Urban Institute, a private, nonprofit policy research and
educational organization. Ms. McLaughlin was Chairman of the
President's Commission on Aviation Security and Terrorism
between 1989 and 1990. She was Secretary of Labor from 1987
through 1989 and served as Under Secretary of the Department
of Interior from 1984 through 1987. She is a member of the
Board of Directors of AMR Corporation (the parent company of
American Airlines); General Motors Corporation; Nordstrom,
Inc.; Potomac Electric
5
<PAGE> 9
Power Company; Host Marriott Corporation; Union Camp
Corporation; Vulcan Materials Company; and FANNIE MAE (Federal
National Mortgage Association).
CONTINUING DIRECTORS OF THE COMPANY
DIRECTORS TO SERVE UNTIL THE
1996 ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
CHARLES W. ELLIOTT. Mr. Elliott, age 63, has served as a
director of the Company since 1989. He is Executive Vice
President -- Administration and Chief Financial Officer of the
Company. Mr. Elliott joined Kellogg in 1987, having previously
been employed for thirty years by Price Waterhouse, an
[PHOTO] independent accounting firm. Mr. Elliott is a member of the
Board of Directors of Stanhome, Inc.; Steelcase Financial
Corporation, a subsidiary of Steelcase, Inc.; and EMPHESYS
Financial Group, Inc. He is also a member of the Advisory
Board of Comerica Bank of Battle Creek, Michigan; a trustee of
Ambassador Funds; and a member of the Board of Trustees of the
Western Michigan University Foundation.
- --------------------------------------------------------------------------------
CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 60, 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
[PHOTO] pulp. He is a director of Kimberly-Clark Corporation; General
Electric Co.; Banco Nacional de Mexico; Grupo Industrial ALFA;
Grupo Industrial Saltillo; Grupo Carso; IBM Latin America;
Synkro; Telefonos de Mexico; and The Mexico Fund. He is also a
member of the Advisory Council of the Stanford University
Graduate School of Business.
- --------------------------------------------------------------------------------
DONALD RUMSFELD. Mr. Rumsfeld, age 62, has served as a
director of the Company since 1985. In 1993, Mr. Rumsfeld
retired as Chairman and Chief Executive Officer of General
Instrument Corporation, an international electronics company,
a position which he had held since 1990. Mr. Rumsfeld was
senior advisor to William Blair & Co. (an investment banking
firm) from 1985 until 1990. Previously, Mr. Rumsfeld served as
[PHOTO] Chief Executive Officer of G. D. Searle & Co. and in a variety
of government posts, including U.S. Congressman, Ambassador to
NATO, White House Chief of Staff, Special Presidential Envoy
and Secretary of Defense. Mr. Rumsfeld is a member of the
Board of Directors of ABB; The Allstate Insurance
Co.; Amylin Pharmaceuticals, Inc.; Gilead Sciences, Inc.;
Metricom, Inc.; Sears, Roebuck & Co.; and the Tribune Company.
- --------------------------------------------------------------------------------
JOHN L. ZABRISKIE. Dr. Zabriskie, age 55, has served as a
director of the Company since December 31, 1994, when he was
appointed by the Board of Directors to fill a vacancy on the
Board. He is Chairman of the Board and Chief Executive Officer
of The Upjohn Company, a leading prescription drug
manufacturer. Prior to joining Upjohn, Dr. Zabriskie was
Executive Vice President of Merck & Co., Inc., a leading
[PHOTO] international pharmaceutical company, and President of its
Manufacturing Division. Before assuming his position as
Executive Vice President of Merck in 1993, he had served as
Senior Vice President of Merck since 1991. Prior to 1991, he
was President of Merck Sharp & Dohme, Merck's U.S.
pharmaceutical business. Dr. Zabriskie is a Director of
First of America Bank Corp. and a member of the U.S.
Healthcare Leadership Council.
6
<PAGE> 10
DIRECTORS TO SERVE UNTIL THE
1997 ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
ARNOLD G. LANGBO. Mr. Langbo, age 57, has served as a director
of the Company since 1990 and was elected Chairman of the
Board and Chief Executive Officer effective January 1, 1992.
Mr. Langbo has been employed by the Company since 1956 and was
elected a Vice President in 1979. He was named Executive Vice
[PHOTO] President in 1981 and President, Kellogg International in
1986. He served as President and Chief Operating Officer of
the Company from 1990 through 1991. Mr. Langbo is a Director
of Johnson & Johnson and Whirlpool Corporation. He is also a
member of the Board of Trustees of Albion College and the
Advisory Board of the J. L. Kellogg Graduate School of
Management at Northwestern University.
- --------------------------------------------------------------------------------
J. RICHARD MUNRO. Mr. Munro, age 64, has served as a director
of the Company since 1990. He is Chairman of the Executive
Committee of Time Warner Inc., a publishing and entertainment
company. Prior to serving in this position, he was Co-Chairman
and Co-Chief Executive Officer of Time Warner Inc. Mr. Munro
is a director of Time Warner Inc.; Mobil Corporation; K Mart
Corporation and Genentech, Inc. He is a member of the Council
[PHOTO] on Foreign Relations and the Juvenile Diabetes Foundation's
Council on Research Development. He is also Chairman of the
Points of Light Foundation. Mr. Munro is a trustee of Teachers
College, Columbia University, Hamilton College and St.
Lawrence University. He is also a member of the Board of
Visitors of The Graduate School and University Center of the
City University of New York and a director of the United Negro
College Fund, Inc.
- --------------------------------------------------------------------------------
HAROLD A. POLING. Mr. Poling, age 69, has served as a director
of the Company since 1993. In 1993, Mr. Poling retired as
Chairman of the Board and Chief Executive Officer of Ford
Motor Company, an automobile manufacturing company, a position
he had held since 1990. Mr. Poling had served in a variety of
capacities with Ford Motor Company since 1951. He is a
[PHOTO] director of Shell Oil Company, LTV Corporation, Chicago and
North Western Holdings Corporation and Flint Ink Corporation.
He is a director of Monmouth (Ill.) College Senate, Chairman
of the Business-Higher Education Forum and Chairman of the
Dean's Advisory Council-Indiana University School of Business.
Mr. Poling is a member of the Board of Directors and a trustee
of Beaumont Hospital. He also serves as a member of The
Business Council, BHP International Advisory Council and
International Board of VIAG.
- --------------------------------------------------------------------------------
TIMOTHY P. SMUCKER. Mr. Smucker, age 50, has served as a
director of the Company since 1989. He is Chairman of The J.
M. Smucker Company, a leading manufacturer of preserves,
jellies, ice cream toppings, natural juice drinks and pies. He
[PHOTO] has been employed by The J. M. Smucker Company since 1969 and,
after serving in a variety of capacities, was named President
and Chief Operating Officer in 1981 and Chairman in 1987. Mr.
Smucker is a member of the Board of Huntington Bancshares Inc.
He also serves on the Committee for Economic Development and
the Board of Second Harvest. He is an emeritus life member of
the Board of Trustees of The College of Wooster.
- --------------------------------------------------------------------------------
7
<PAGE> 11
- --------------------------------------------------------------------------------
DOLORES D. WHARTON. Mrs. Wharton, age 67, has served as a
director of the Company since 1976. She is Chairman and Chief
Executive Officer of The Fund for Corporate Initiatives, Inc.,
[PHOTO] a private operating foundation devoted to strengthening the
role of minorities and women in the corporate world. Mrs.
Wharton is a director of Gannett Co., Inc. and Communication
Satellite Corporation (COMSAT).
- --------------------------------------------------------------------------------
ABOUT THE BOARD OF DIRECTORS
The Board of Directors has the following standing committees: Executive
Committee, Audit Committee, Committee on Social Responsibility, Compensation
Committee, Employee Benefits Advisory Committee, Finance Committee, and the
Nominating Committee.
The Executive Committee is generally empowered to act on behalf of the
Board. The Executive Committee met one (1) time during 1994. The members of the
Executive Committee are Mr. Langbo, Chairman, Mr. Gund, Dr. Mawby and Mr.
Poling.
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 of Directors on those matters and with respect to
the independent auditor and internal auditors. It met two (2) times in 1994. The
members of the Audit Committee are Mr. Gonzalez, Chairman, Ms. McLaughlin, Mr.
Munro, Mr. Smucker and Dr. Zabriskie.
The Committee on Social Responsibility investigates and reviews the manner
in which the Company discharges its social responsibilities and recommends to
the Board of Directors policies, programs and procedures it deems appropriate to
enable the Company to carry out and discharge fully its social responsibilities.
It met one (1) time in 1994. The members of the Committee on Social
Responsibility are Ms. McLaughlin, Chairman, Mr. Elliott, Mr. LaMothe, Dr.
Mawby, Mrs. Wharton and Dr. Zabriskie.
The Compensation Committee reviews recommendations for compensating
management personnel, determines compensation of the Chief Executive Officer,
reviews trends in management compensation, and provides advice and
recommendations to the Board of Directors on these subjects. It met four (4)
times in 1994. The members of the Compensation Committee are Dr. Mawby,
Chairman, Mr. Gund, Mr. Munro, Mr. Poling, Mr. Rumsfeld and Mrs. Wharton. See
pages 15 through 18 of this Proxy Statement for the Compensation Committee's
Report on Executive Compensation.
The Employee Benefits Advisory Committee reviews the financial performance
of the Company's employee benefits plans and reports to the Board of Directors
with respect thereto. It met one (1) time in 1994. The members of the Employee
Benefits Advisory Committee are Mrs. Wharton, Chairman, Mr. Elliott, Mr.
Gonzalez, Mr. Smucker and Dr. Zabriskie.
The Finance Committee reviews and makes recommendations to the Board of
Directors regarding the financial and capital structure and programs of the
Company, borrowing commitments, and other significant financial matters,
including significant deployment and redeployment of assets of the Company. It
met two (2) times in 1994. The members of the Finance Committee are Mr.
Rumsfeld, Chairman, Mr. Elliott, Mr. Gonzalez, Mr. LaMothe, Mr. Langbo and Mr.
Smucker.
The Nominating Committee advises the Board on corporate governance issues,
investigates and reviews the qualifications of candidates and recommends
nominees to the Board of Directors. It met three (3) times in 1994. The members
of the Nominating Committee are Mr. Gund, Chairman, Mr. LaMothe, Ms. McLaughlin,
Mr. Munro, Mr. Poling and Mr. Rumsfeld. Stockholder recommendations for nominees
for membership on the Board of Directors will be considered by the Nominating
Committee. Such recommendations may be submitted to the Office of the Secretary,
Kellogg Company, One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan
49016-3599, which will forward them to the Chairman of the Nominating Committee.
8
<PAGE> 12
With respect to the 1996 Annual Meeting of Stockholders, a stockholder will
be permitted to nominate at such meeting one or more persons for election as
director only if written notice of such stockholder's intent to make such
nomination or nominations is received by the Company not earlier than December
1, 1995, and not later than January 30, 1996, and such stockholder complies with
certain other requirements specified in the Company's Bylaws.
During 1994, the Board of Directors held seven (7) meetings. Each of the
directors attended at least 75% or more of the total number of meetings of the
Board and of all Board committees of which the director was a member during
1994.
NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS
Each director who is not an employee of the Company or its affiliates
receives an annual retainer fee of $25,000; $1,000 for each meeting of the Board
of Directors or committee of the Board of Directors attended; $4,000 if he or
she served as Chairman of a committee; reimbursement for all expenses incurred
in attending such meetings; and, pursuant to the Stock Compensation Program for
Non-Employee Directors (the "Program"), 200 shares of the Company's common
stock.
Under the Program, 200 shares of common stock will be granted to each
eligible non-employee director following the annual meeting each year until
April 1999, when the Program will expire. All non-employee directors participate
in the Program on a non-discretionary basis. The shares of stock are granted as
part of the directors' regular compensation. The directors also receive a
payment each year to compensate them for the taxes incurred as a result of
receiving the shares of stock. 189,200 shares of stock are available for
issuance under the Program.
Pursuant to a plan amended and restated as of August 1, 1986, non-employee
directors of the Company may each year make an irrevocable election to defer
receipt of all or a specified portion of cash compensation otherwise payable for
services rendered for the ensuing year as a member of the Company's Board of
Directors. A participating director's deferred compensation shall be credited to
an account in the form of Units and fractional Units, and each Unit shall be
initially valued in an amount equal to one hundred percent (100%) of the fair
market value of one share of the common stock of the Company on the date the
Unit is so credited. In the event that dividends may be declared by the
Company's Board of Directors, a fractional Unit representing the dividend paid
per share of common stock shall be credited for each whole Unit then allocated
to the account of a participating director. A participant's account balance is
paid in cash upon his or her termination of service as a director, over a period
from one to ten years, depending on the election of the director made at the
time of the irrevocable election.
A director who is not an employee of the Company and meets certain other
qualifications is entitled to be paid an annual retirement benefit for a maximum
period of up to ten (10) years in an amount equal to the standard annual
retainer payable to non-employee directors of the Company at the time of such
director's retirement. Should the retired director not survive the maximum
period, the surviving spouse will receive 75% of the benefit for the remainder
of the period.
The Company maintains Director and Officer Liability Insurance which
individually insures the directors and officers of the Company against losses
which they become legally obligated to pay resulting from their actions while
performing duties on behalf of the Company. Travel accident insurance is also
maintained for each director of the Company.
All directors of the Company are eligible to participate in the Director's
Charitable Awards Program, in which each director is entitled to name up to four
education-related, tax-exempt organizations to which the Company would
contribute an aggregate of $1 million upon the death of the director. A director
will be vested in the Program upon completion of seven (7) years of service as a
director or upon the death or disability of such director.
9
<PAGE> 13
OTHER TRANSACTIONS
Timothy P. Smucker, a director of the Company, is a director and Chairman
of The J.M. Smucker Company ("JMS"). JMS is a supplier to the Company of several
products. The Company purchased $28,294,274 of product from JMS during 1994.
In 1994, the Company sold the business and assets of the Mrs. Smith's
frozen pie business to JMS for $83,800,000 in cash plus the assumption of
certain liabilities. The business was sold following a competitive auction
process conducted by the Company with the assistance of an investment banking
firm. The purchaser was selected based upon the price offered and other factors
deemed relevant by management in order to secure a transaction in the best
interest of the Company and its stockholders. Neither Dr. Mawby, a director of
the Company and a director of JMS, nor Mr. Smucker, a director of the Company
and a director and Chairman of JMS, participated in the selection of the
successful bidder by the Company.
PROPOSAL 2.
PROPOSAL TO APPROVE ADOPTION OF THE
SENIOR EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
Pursuant to a recommendation of the Compensation Committee (the
"Committee") of the Board of Directors of the Company, on February 17, 1995 the
Board adopted the Senior Executive Officer Performance Bonus Plan (the
"Performance Bonus Plan" or the "Plan"), subject to stockholder approval. The
stockholders are now requested to approve the adoption of this Plan.
The summary of the Performance Bonus Plan which follows is subject to the
specific provisions contained in the official text as set forth in Appendix A to
this Proxy Statement.
PURPOSE AND ELIGIBILITY
The purpose of the Performance Bonus Plan is to specifically motivate the
Company's executive officers through awards of annual cash bonuses to achieve
strategic, financial and operating objectives; to reward their contribution
toward improvement in financial performance; to provide the executive officers
with an additional incentive to contribute to the success of the Company; to
offer a total compensation package that is competitive in the industry; and to
include a bonus component which is intended to qualify as performance-based
compensation deductible by the Company under the Internal Revenue Code of 1986,
as amended. Such executive officers of the Company as determined by the
Compensation Committee of the Board will be eligible to receive payments
hereunder.
ADMINISTRATION AND CALCULATION OF AWARDS
The Performance Bonus Plan will be administered by the Committee, whose
members qualify as "outside directors" as that term is defined under Section
162(m) of the Internal Revenue Code ("Section 162(m)"). Under the Plan, the
Committee has the authority to determine eligibility of executive officers and
the financial and other performance criteria applicable to the maximum potential
recommended bonus (the "Award") which a participating executive officer may
receive for services during that year. The Committee will evaluate performance
by pre-established performance factors, including long-term financial and
non-financial objectives, Company performance as measured by the Corporate
Incentive Factor (as defined), and with respect to the Chief Executive Officer,
the factors described in Section 3 of the Plan. Awards will be based on the
achievement of such performance criteria. Negative discretion may be used by the
Committee to reduce the Award. In no event, however, will an exercise of
negative discretion to reduce the Award of a participating executive officer
have the effect of increasing the amount of an Award otherwise payable to any
other participating executive officer.
10
<PAGE> 14
MAXIMUM BONUS AWARDS
The total of all Awards payable to any "covered employee" within the
meaning of Section 162(m) (i.e., the CEO and four most highly compensated
officers of the Company, other than the CEO, as of the end of a performance
year) shall not under any circumstances exceed 3/4 of 1 percent (.0075) of the
net income of the Company (the "Maximum Bonus Awards Pool") and no one
individual may receive more than 60% of such pool. Net income is defined in the
Plan as "net income available for common stockholders as reported in the
Company's audited financial statements, but not including extraordinary items
and the cumulative effect of accounting changes." In the event that the total of
all Awards payable to covered employees should exceed the Maximum Bonus Awards
Pool as specified above, the Award of each covered employee will be
proportionately reduced such that the total of all such Awards paid is equal to
the Maximum Bonus Awards Pool.
REASONS FOR STOCKHOLDER APPROVAL
Under recently enacted Section 162(m), the Company desires to deduct from
its corporate income for the purpose of computing the Company's Federal
corporate income tax liability compensation in excess of $1 million received by
"covered employees" from the Company.
The Company intends that for fiscal year 1995 and beyond, Awards under the
Performance Bonus Plan qualify as performance-based compensation. Given the
absence of final regulations, decided cases or revenue rulings, however, the
effect of Section 162(m) on the deductibility of the executive officers'
compensation cannot be ascertained with certainty. As a result, notwithstanding
the foregoing discussion, no assurance can be given as to the deductibility of
the executive officers' compensation under Section 162(m), any future temporary
or final regulations, interpretations, decided cases or revenue rulings.
The Awards payable under the Plan for services to be rendered in 1995 are
not determinable. Had the Performance Bonus Plan been in effect in 1994, the
Awards that would have been paid would equal the 1994 bonuses shown in the
Summary Compensation Table on page 13 of this Proxy Statement.
REQUIRED VOTE FOR APPROVAL
Approval of the Performance Bonus Plan will require the affirmative vote of
stockholders holding a majority of the Company's shares present in person or by
Proxy and entitled to vote at the Annual Meeting of Stockholders. Proxies
solicited by the Board of Directors will be voted "FOR" this proposal unless
stockholders specify to the contrary in their proxies or specifically abstain
from voting on this matter. Under Delaware law, while broker "non-votes," if
any, are not counted in determining the total number of votes cast on this
proposal (and thus have no effect on the outcome), abstentions are counted and
have the effect of a vote against the proposal. If the required stockholder
approval is not obtained, the Committee will consider alternative incentive
compensation arrangements which may or may not qualify under Section 162(m) as
performance-based compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF THE PERFORMANCE BONUS PLAN.
PROPOSAL 3.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
NUMBER OF DIRECTORS
On October 21, 1994, the Board of Directors unanimously approved, subject
to stockholder approval, an amendment to the Company's Amended and Restated
Certificate of Incorporation (the "Certificate") to provide that the size of the
Board of Directors shall not be less than seven (7) nor more than fifteen (15)
persons, with the exact number of directors to be determined from time-to-time
by resolution of the Board. The Board of Directors has currently set the number
of directors at thirteen (13).
11
<PAGE> 15
REASONS FOR THE AMENDMENT
In December 1985, the stockholders of the Company approved certain
amendments to the Certificate including a provision fixing the Board of
Directors at not less than twelve (12) nor more than eighteen (18) persons, with
the exact number of directors to be determined from time-to-time by resolution
of the Board.
The Board believes that a minimum and a maximum as high as twelve (12) and
eighteen (18), respectively, is unnecessarily large and that a reduced board
size is more appropriate for the following reasons:
- The ability to select a smaller Board size will promote efficiencies in
providing direction of the Company's affairs.
- The ability to select a smaller Board size will facilitate communications
and decision-making.
- The lower minimum number of Directors could help to avoid having to fill
Board vacancies on short notice and thereby preserve the high quality of
the Board while maintaining its diversity of experience and points of
view.
- The present maximum of eighteen (18) directors is high and unlikely to be
utilized in light of the current size of the Company's Board and the
current sizes of the boards of other publicly traded food companies.
The Board has concluded that adoption of the proposed amendment to the
Certificate will be beneficial to and in the best interests of the Company and
its stockholders. In addition, it is believed that the proposed reduction in the
size of the Board of Directors is appropriate for the present day operations and
business of the Company. Accordingly, the Board is proposing that Article TENTH
of the Certificate be amended to specify a range of directors of between seven
(7) and fifteen (15) directors.
The full text of the first paragraph of Article TENTH of the Certificate,
as currently in effect and as proposed to be amended, is set forth in Appendix B
to this Proxy Statement. Dated historical references have also been deleted from
this same paragraph. The preceding description of the proposed amendment to the
Certificate is qualified in its entirety by reference to Appendix B.
REQUIRED VOTE FOR APPROVAL
Approval of the proposed amendments by the stockholders requires the
affirmative vote of the holders of not less than two-thirds of the voting power
of all outstanding shares of the Company's common stock. Proxies solicited by
the Board of Directors will be voted "FOR" this proposal unless stockholders
specify to the contrary in their proxies or specifically abstain from voting on
this matter. Abstention and broker "non-votes" will have the same effect as a
vote "against" this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THIS PROPOSAL TO AMEND THE CERTIFICATE TO REDUCE THE
MINIMUM AND MAXIMUM NUMBERS OF DIRECTORS.
12
<PAGE> 16
EXECUTIVE COMPENSATION
The following table shows the annual compensation and the long-term
compensation paid to or earned by the Company's Chief Executive Officer and the
five (5) most highly compensated of its executive officers for the last three
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- ---------- PAYOUTS
OTHER SECURITIES --------
NAME AND ANNUAL UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSA- OPTIONS PAYOUTS COMPENSA-
POSITION YEAR ($) ($) TION($) (#)(2) ($)(3) TION($)(4)
- --------------------- ---- -------- -------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
A. G. Langbo 1994 $800,000 $688,500 0 83,000(7) 0 $ 9,967
CEO 1993 720,000 546,000 $ 3,920(1) 117,791(8) $122,847 10,154
1992 570,000 680,000 4,800(1) 196,950 0 9,889
T. A. Knowlton 1994 379,167 255,000 82,934(5) 18,500 0 10,034
Executive 1993 330,000 172,900 96,179(5) 16,000 0 11,380
Vice President 1992 280,000 200,000 125,626(5) 45,833 0 9,059
C. W. Elliott 1994 395,000 193,800 0 15,000 0 9,500
Executive 1993 385,000 145,600 0 27,550 0 9,254
Vice President 1992 370,000 170,000 0 62,000 0 9,022
D. W. Thomason 1994 345,000 234,600 0 20,000 0 9,634
Executive 1993 315,000 182,000 0 24,574 0 9,421
Vice President 1992 275,000 190,000 0 57,249 0 9,155
W. A. Camstra 1994 315,000 204,000 17,488(6) 13,000 0 9,514
Executive 1993 303,000 136,500 27,119(6) 11,000 0 9,090
Vice President 1992 278,000 151,500 0 60,945 0 9,417
G. E. Costley 1994 568,174(9) 0 0 27,000 0 9,634
Former Executive 1993 445,000 250,250 1,960(1) 24,000 100,385 9,388
Vice President 1992 410,000 285,000 2,400(1) 104,395 0 9,289
</TABLE>
- ---------------
(1) Represents dividend equivalents paid under the Company's Book Value
Unit/Share Incentive Plan (the "Book Value Plan"), a long-term compensation
plan that was discontinued in 1981.
(2) Includes new stock options and "reload options" (as defined below) granted
under the 1991 Incentive Plan. New stock options were granted in 1992, 1993
and 1994 for 70,000, 65,000 (including 10,000 shares granted in January 1994
in lieu of a portion of his bonus for 1993), and 83,000 shares (including
10,000 shares granted in January 1995 in lieu of a portion of his bonus for
1994) to Mr. Langbo; 12,000, 16,000, and 18,500 shares to Mr. Knowlton;
13,000, 13,500, and 15,000 shares to Mr. Elliott; 16,000, 17,000, and 20,000
shares to Mr. Thomason; 12,000, 11,000, and 13,000 shares to Mr. Camstra;
and 24,000, 24,000, and 27,000 shares to Dr. Costley, respectively. All
other options were reload options. A reload option (a) is an option to
purchase a number of shares of the Company's common stock equal to the
number of shares the employee returns to the Company as payment for the
exercise of a previously granted option (the aggregate of shares and options
owned by the employee is not increased); (b) has an exercise price equal to
the market value of the Company's common stock at the date the reload option
is granted (the employee receives no gain upon issuance of the reload
option); (c) has a term limited to the remaining term of the option that was
exercised; and (d) may not be granted within six months of a previous reload
option grant. The Company believes that the reload option feature of the
1991 Incentive Plan has increased key employee ownership of the Company's
common stock thereby further aligning the interests of the Company's key
employees and stockholders.
(3) These amounts were distributed to Messrs. Langbo and Costley upon
discontinuance of their outstanding Units under the Book Value Plan. Absent
the discontinuance of the Units by the Committee and the determination of
the Committee to make early payment, Messrs. Langbo and Costley would not
have been entitled under the Book Value Plan to receive the value of their
Units until the termination of their employment with the Company.
(4) The amounts in this column represent Company matching contributions on
behalf of each named individual to the Kellogg Company Salaried Savings and
Investment Plan, a defined contribution plan intended to qualify under the
Internal Revenue Code of 1986, as amended (the "Code").
13
<PAGE> 17
(5) These amounts represent allowances paid to or on behalf of Mr. Knowlton
primarily under the Company's Expatriate Compensation Program and include a
housing allowance (net of Mr. Knowlton's contribution) of $49,140 in 1992,
$30,704 in 1993 and $25,484 in 1994, and a schooling allowance of $22,811 in
1993 and $10,002 in 1994, and a company-paid automobile.
(6) These amounts represent allowances paid to or on behalf of Mr. Camstra
primarily under the Company's Expatriate Compensation Program and include a
housing allowance (net of Mr. Camstra's contribution) of $27,119 in 1993 and
$11,506 in 1994.
(7) Includes options for 10,000 shares which the Committee granted to Mr. Langbo
in January 1995, in lieu of a portion of his cash bonus which was earned in
1994. See "Report of the Compensation Committee on Executive Compensation --
Chief Executive Officer Compensation." Does not include options discussed in
footnote (8) below.
(8) Includes options for 10,000 shares which the Committee granted to Mr. Langbo
in January 1994, in lieu of a portion of his cash bonus which was earned in
1993.
(9) Pursuant to an agreement entered into with the Company effective July 1,
1994 (the "Agreement"), Dr. Costley resigned his position as an executive
officer of the Company. Under the Agreement, in consideration of, among
other things, a covenant not to compete, Dr. Costley was paid his salary
through December 31, 1994 and will be paid a salary at an annual rate of
$221,736 through October 31, 1998. The Agreement also provides for
supplemental pension payments of approximately $39,900 annually beginning
November 1, 1998.
OPTION GRANTS
The following table provides information regarding stock options granted to
the persons named in the Summary Compensation Table during 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#)(1) YEAR (%) ($/SHARE) DATE ($)(3)
- -------------------------------- ----------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
A. G. Langbo 73,000 4.54 $56.6250 1/21/04 $753,360
10,000(2) .58 55.5625 1/20/05 116,600
T. A. Knowlton 18,500 1.15 56.6250 1/21/04 190,920
C. W. Elliott 15,000 .93 56.6250 1/21/04 154,800
D. W. Thomason 20,000 1.24 56.6250 1/21/04 206,400
W. A. Camstra 13,000 .81 56.6250 1/21/04 134,160
G. E. Costley 27,000 1.68 56.6250 1/21/04 278,640
</TABLE>
- ---------------
(1) Stock options granted under the 1991 Incentive Plan. The options are
exercisable on the date granted, have an exercise price equal to the fair
market value of the common stock on the date of grant, generally expire ten
years and one day after grant and include (a) the right to pay the exercise
price in cash or with shares of stock previously acquired by the optionee;
(b) the right to have shares of stock withheld by the Company to pay tax
withholding obligations due in connection with the exercise; and (c) the
right to receive a "Reload Option" as described in footnote (2) to the
Summary Compensation Table on page 13 of this Proxy Statement.
(2) Represents 10,000 options which the Committee granted in January 1995 to Mr.
Langbo in lieu of a portion of his cash bonus for 1994. See "Report of the
Compensation Committee on Executive Compensation -- Chief Executive Officer
Compensation."
14
<PAGE> 18
(3) Grant date present value is determined using the Black-Scholes Model, a
mathematical formula used to value exchange traded options. Stock options
granted by the Company to its executives differ from exchange traded options
in several key respects: options granted by the Company to its executives
are long-term and nontransferable, while exchange traded options are
short-term and can be exercised or sold immediately in a liquid market. In
this presentation, the Black-Scholes Model has been adapted to estimate the
present value of the options set forth in the table, taking into
consideration a number of factors. Since the model makes assumptions about
future variables, the actual value of the options may be greater or less
than the values stated in the table. Except with respect to the 10,000
additional option shares issued to Mr. Langbo referred to in footnote (2)
above, the calculations assume a dividend yield of 2.25%, volatility of
approximately 24%, and a risk-free rate of return of 4.70% based on the U.S.
Treasury bill rate for three-year maturities on the grant date. The
calculations with respect to Mr. Langbo's additional 10,000 option shares
assume a dividend yield of 2.34%, volatility of approximately 21.5%, and a
risk-free rate of return of 7.82% based on the U.S. Treasury bill rate for
three-year maturities on the date of grant. In view of the Company's
experience and the inherent motivation to exercise options early in their
terms because of the reload option feature, new options were assumed to be
outstanding for three years at the time of exercise. Depending upon
fluctuations in the market price of the common stock, optionees may decide
to exercise their options either earlier or later than this assumed period
resulting in Black-Scholes values which would be lower or higher than those
shown in the table. No downward adjustments were made to the resulting grant
date option value to account for potential forfeiture or the nontransferable
nature of these options.
OPTION EXERCISES AND VALUES
The following table provides information regarding the pre-tax value
realized from the exercise of stock options during 1994 and the value of
unexercised in-the-money options held by the named individuals at December 31,
1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END($)
ACQUIRED ON VALUE ----------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. G. Langbo 0 0 257,835(1) 0 $ 145,250 0
T. A. Knowlton 0 0 56,366 0 32,375 0
C. W. Elliott 0 0 70,550 0 26,250 0
D. W. Thomason 0 0 68,106 0 35,000 0
W. A. Camstra 0 0 50,382 0 22,750 0
G. E. Costley 0 0 101,232 0 47,250 0
</TABLE>
- ---------------
(1) Does not include 10,000 options which the Committee granted in January 1995
to Mr. Langbo in lieu of a portion of his cash bonus for 1994. See "Report
of the Compensation Committee on Executive Compensation."
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely
of non-employee, independent directors and is responsible for the establishment
and oversight of executive compensation policies. The Company's executive
compensation program is significantly linked to stockholder return and the
emphasis is on pay for performance with individual, business unit, and corporate
performance on a short- and long-term basis as the major considerations.
15
<PAGE> 19
COMPENSATION PRINCIPLES
The Committee's review of executive compensation incorporates the following
basic compensation principles:
- Compensation should encourage behavior that exemplifies the Company's
shared values which the Company believes are essential in building
long-term growth in volume and profit, enhancing its worldwide leadership
position and providing increased value for stockholders. These shared
values are profit and growth, people, consumer satisfaction and quality,
integrity and ethics, and social responsibility.
- Compensation at all levels should be competitive with comparable
organizations and should reward performance and contribution to the
Company's strategic objectives.
- As employees assume greater responsibilities, a larger proportion of
their total compensation will be "at-risk" incentive compensation (both
short- and long-term), subject to individual and corporate performance
measures.
- Continuous improvement is expected in the defined targets and measures
used to determine compensation.
- Stock options are an effective method of aligning the interests of
employees and stockholders and encouraging employees to think and act
like owners.
It is the Committee's belief that a compensation program designed with
these five basic principles in mind should work to ensure present and future
leadership performance which will result in optimal returns to the Company's
stockholders over time. The executive compensation program is composed of three
key elements: base salary, annual bonus awards, and long-term equity-based
incentives. Each of these components is described below.
SALARIES
Salaries are determined by a process which includes evaluating the level of
responsibility for each position, utilizing competitive surveys to determine
appropriate salary ranges and evaluating individual performance to determine
appropriate salary increases. The Company utilizes a job evaluation process to
develop the relative value of each position, expressed in evaluation points.
Salary ranges are targeted at the 75th percentile of a compensation survey
covering over 700 companies (the "Compensation Survey") prepared by a national
outside compensation consultant. The companies included within the Compensation
Survey operated in numerous industries and included over 90 percent of the 16
companies which currently comprise the S&P Food Index, the performance of which
is reflected on the "Stock Performance Graph" at page 19 of this Proxy
Statement. Another compensation survey covering salary, bonus, long-term
incentives, benefits and perquisites (the "Second Survey") was also used for
1994 to ensure that the total remuneration package was competitive. This Second
Survey confirmed that the Company's compensation planning methodology, as
described in this Report, would result in competitive compensation packages at
not less than the median of such survey. The Second Survey consisted of 30
comparable organizations among which the Company competes for executive talent,
including over 75% of the companies comprising the S&P Food Index, and was
conducted by a national outside compensation consultant. For the purpose of
determining cash compensation, the Committee believes that the companies
included in both surveys provide an appropriate base of comparable
organizations.
Salary increases are calculated based on individual performance and
position in the salary range. Individual performance is determined through a
performance management process which involves the individual and his or her
supervisor mutually establishing key results which relate to near- and long-term
business objectives and periodically reviewing progress in achieving such
results. The performance ratings recommended by management are submitted to the
Committee for review.
16
<PAGE> 20
BONUS
Target bonuses, which are a percentage of the midpoint of the applicable
salary range, are determined using as an objective the 75th percentile of the
Compensation Survey. Recommended bonus awards are then determined by adjusting
the target bonus awards based on individual performance factors. The result is
then adjusted further based on the Company's earnings per share (as adjusted for
certain extraordinary or nonrecurring items) as compared to the target earnings
per share. This adjustment of the recommended bonus may result in a bonus
payment ranging from 0% to 150% of the recommended bonus.
LONG-TERM INCENTIVES
The Company's long-term incentive program currently consists of grants of
options to purchase shares of the Company's common stock under the 1991
Incentive Plan. Compensation pursuant to stock options is tied directly and
exclusively to stock price performance so that each stockholder must benefit
before the optionee can receive any benefit from the option. The 1991 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 stockholders
of the Company. Stock option targets are established by determining the 50th
percentile value of all long-term incentives provided at various levels of
responsibility based on the Second Survey. For the purpose of determining
long-term incentives, the Committee believes that the Second Survey is an
appropriate survey base of comparable companies providing long-term incentives
among which the Company competes for executive talent. Individual performance,
as determined by the performance management process, is used to modify the
target award. While the Committee does not consider an individual's total
current option or common stock holdings in determining such individual's award,
it does review the option grants made to the individual, if any, in the prior
year. The Committee reviews prior year option grants as a benchmark to ensure
that awards are appropriate. No adjustments were deemed necessary in grants for
1994 based on such review.
PERQUISITES
The Company does not generally grant significant perquisites to its
employees or officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
For 1994, the salary, bonus, and long-term incentive awards of the Chief
Executive Officer ("CEO") were determined by the Committee substantially in
conformance with the policies described above for all other executives of the
Company. The Committee evaluates the CEO's contribution to the Company's
achievement of its long-term financial and nonfinancial objectives on an ongoing
basis. In addition, the Committee evaluates performance of the CEO at least
annually based upon a variety of factors including the Company's earnings per
share, return on equity, return on assets, growth in sales and earnings, market
share and total return to stockholders (including both the market value of the
Company's stock and dividends thereon) and the extent to which strategic and
business plan goals are met. 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. In setting the CEO's 1994
compensation, the Committee noted the maintenance of positive sales growth,
rising dollar market share in the United States and satisfactory levels of
return on equity, return on assets, total return to stockholders (as evidenced
by the Stock Performance Graph on page 19) and global volume market share in the
face of intense global competition, inventory reductions by wholesale and retail
customers, and sluggish economies in many countries. The Committee also noted
that 1994 represented the 50th consecutive year of increased sales and the 42nd
time in 43 years that the earnings of the Company, excluding one-time events,
had increased.
In determining Mr. Langbo's compensation package for 1994, the Committee
specifically reviewed, in addition to the financial factors described in the
preceding paragraph, the Company's significant progress toward geographic
expansion of markets served including the recent commencement of operations in
Latvia and India, and progress toward planned operations in China; the
introduction of new products in 1993 and 1994; the continued implementation of
Company strategies to divest certain non-core businesses at a maximum return to
the Company and to reduce inefficient promotional spending while investing in
17
<PAGE> 21
brand-building advertising; the reorganization of the convenience foods division
to enhance opportunities for further growth in that product category; the
adoption of strategies to re-engineer, strengthen and make more cost effective
the Company's global management and organizational structure; the successful
creation of value for stockholders through the cost-efficient use of invested
capital; and the implementation of cost control initiatives.
The Committee further determined to grant Mr. Langbo additional options
under the 1991 Incentive Plan in lieu of a portion of his cash bonus for 1994.
Increasing Mr. Langbo's stock-based compensation further links his total pay
package to stockholder value and Company performance. In making this
determination, the Committee considered that such action would result in savings
in compensation expense for the Company and the fact that the cash proceeds and
tax benefits generated by exercise of such options would minimize any possible
dilution to stockholders' interests.
In summary, based on the performance of the Company in 1993 and 1994 and
the Committee's determination of the CEO's contribution to this performance and
to the positioning of the Company for future long-term growth, the Committee has
determined that the compensation paid to the CEO, as described in the Summary
Compensation Table accompanying this Report, serves the best interests of the
Company's stockholders.
The Committee has reviewed the Company's compensation plans with regard to
the deduction limitation contained in Section 162(m) of the Internal Revenue
Code, enacted as part of the Omnibus Budget Reconciliation Act of 1993 (the
"Act"). The Committee believes that option grants under the 1991 Incentive Plan
meet the requirements for deductible compensation. The Committee is submitting
for stockholder approval the Company's Senior Executive Officer Performance
Bonus Plan, which is intended to meet the deductibility requirements of the
proposed regulations promulgated under the Act. See "Proposal 2 -- Proposal to
Approve Adoption of the Senior Executive Officer Performance Bonus Plan." The
Committee nevertheless is reserving 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 stockholders.
COMPENSATION COMMITTEE:
Russell G. Mawby (Chairman)
Gordon Gund
J. Richard Munro
Harold A. Poling
Donald Rumsfeld
Dolores D. Wharton
February 17, 1995
18
<PAGE> 22
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative, five-year total stockholder return, including
dividends, with the Standard and Poor's 500 Stock Index (the "S&P 500 Index")
and the Standard and Poor's Food Group Index (the "S&P Food Index"). The graph
assumes that $100 was invested on December 31, 1989 in each of Kellogg common
stock, the S&P 500 Index and the S&P Food Index, and that all dividends were
reinvested. The following graph is not, nor is it intended to be, indicative of
future performance of the Company's common stock.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) S&P 500 S&P FOOD KELLOGG
<S> <C> <C> <C>
1989 100 100 100
1990 97 108 116
1991 126 157 203
1992 136 157 212
1993 150 144 184
1994 152 161 193
</TABLE>
19
<PAGE> 23
SELECTED BENEFIT PLANS AND AGREEMENTS
KELLOGG COMPANY SALARIED PENSION PLAN
Retirement benefits under the Kellogg Company Salaried Pension Plan (the
"Pension Plan"), a defined benefit plan qualified under Section 401(a) of the
Code, are payable to salaried employees who have vested (generally requiring the
completion of five years of service) upon retirement at age 65 or in reduced
amounts upon earlier retirement prior to age 65 in accordance with the Pension
Plan. A retiree's benefit amounts are based upon his or her 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. Such retirement benefits are reduced by a portion of the retiree's
Social Security-covered compensation and, for retirees who were participants of
a previous profit-sharing plan, by certain amounts accrued pursuant to that
plan.
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.
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS PAYABLE ON RETIREMENT
<TABLE>
<CAPTION>
AVERAGE AVERAGE YEARS OF SERVICE
ANNUAL ---------------------------------------------------------------
COMPENSATION
(AS DEFINED) 10 15 20 25 30 35 40 45
- ----------------------- -------- -------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000.............. $ 14,234 $ 21,351 $ 28,468 $ 35,585 $ 42,703 $ 49,820 $ 57,320 $ 64,820
$ 300,000.............. $ 44,234 $ 66,351 $ 88,468 $110,585 $132,703 $154,820 $ 177,320 $ 199,820
$ 500,000.............. $ 74,234 $111,351 $148,468 $185,585 $222,703 $259,820 $ 297,320 $ 334,820
$ 750,000.............. $111,734 $167,601 $223,468 $279,335 $335,203 $391,070 $ 447,320 $ 503,570
$1,000,000............. $149,234 $223,851 $298,468 $373,085 $447,703 $522,320 $ 597,320 $ 672,320
$1,350,000............. $201,734 $302,601 $403,468 $504,335 $605,203 $706,070 $ 807,320 $ 908,570
$1,700,000............. $254,234 $381,351 $508,468 $635,585 $762,703 $889,820 $1,017,320 $1,144,820
</TABLE>
Payment of the indicated benefits from the Pension Plan is subject to the
addition of such provisions as may be necessary to continue its qualified status
under the Code and, more particularly, subject to certain limits imposed by
Section 415 of the Code upon the annual benefit payable to a retiree from a
pension plan qualified under the Code. Where benefits otherwise payable under
the Pension Plan, as shown in the above table, are reduced to comply with
Section 415 of the Code, an amount equal to such reduction will be payable under
the Kellogg Company Excess Benefit Retirement Plan.
The Code prohibits compensation in excess of certain limits from being
taken into account in determining benefits payable under a pension plan that is
qualified under the Code. For years prior to 1994, compensation in excess of
$200,000, adjusted for cost of living ($235,840 for 1993), and effective in
1994, compensation in excess of $150,000, to be adjusted for cost of living in
the future, may not be considered. As a result, the Company adopted the Kellogg
Company Supplemental Retirement Plan (the "Supplemental Plan") for those
employees who are adversely affected by the Code. The Supplemental Plan provides
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 the
limitation on compensation imposed by the Code.
At December 31, 1994, credited years of service under the Pension Plan for
the executive officers named in the Summary Compensation Table were: Mr. Langbo,
38 years; Mr. Knowlton, 15 years; Mr. Elliott, 8 years; Mr. Thomason, 29 years;
Mr. Camstra, 38 years; and Dr. Costley, 25 years. The compensation covered by
the Pension Plan is equal to the amounts shown in the Summary Compensation Table
as Salary and Bonus. Covered compensation for Mr. Knowlton was $634,167.
20
<PAGE> 24
The Company has adopted an International Retirement Plan ("IRP") intended
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, would not otherwise
accrue the same level of benefits which would have accrued to such individuals
had their tenure of employment with the Company been continuous in the United
States. Participants in the IRP shall be those designated by the Company or any
participating subsidiary if approved within the discretion of a Committee
appointed by the Chairman of the Board. Covered compensation and the calculation
of average annual compensation under the IRP is generally the same as under the
Pension Plan. Mr. Langbo and Mr. Camstra were selected as participants in the
IRP by reason of their many years of previous service in the Company's
international operations. At December 31, 1994, Mr. Langbo and Mr. Camstra each
had 38 years of credited service under the Plan. Estimated annual benefits
payable upon retirement of Mr. Langbo and Mr. Camstra, assuming the specified
compensation and years of credited service, without the offsets described in the
paragraph below, are as shown in the following table. Such amounts assume
payments in the form of a straight life annuity.
PENSION PLAN TABLE
INTERNATIONAL RETIREMENT PLAN
ESTIMATED ANNUAL BENEFITS PAYABLE ON RETIREMENT
<TABLE>
<CAPTION>
AVERAGE AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------------------------------
COMPENSATION
(AS DEFINED) 10 15 20 25 30 35 40 45
- --------------------- -------- -------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000........... $ 20,000 $ 29,000 $ 38,000 $ 47,000 $ 56,000 $ 65,000 $ 74,000 $ 83,000
$ 300,000........... $ 60,000 $ 87,000 $114,000 $141,000 $168,000 $ 195,000 $ 222,000 $ 249,000
$ 500,000........... $100,000 $145,000 $190,000 $235,000 $280,000 $ 325,000 $ 370,000 $ 415,000
$ 750,000........... $150,000 $217,500 $285,000 $352,500 $420,000 $ 487,500 $ 555,000 $ 622,500
$1,000,000........... $200,000 $290,000 $380,000 $470,000 $560,000 $ 650,000 $ 740,000 $ 830,000
$1,350,000........... $270,000 $391,500 $513,000 $634,500 $756,000 $ 877,500 $ 999,000 $1,120,500
$1,700,000........... $340,000 $493,000 $646,000 $799,000 $952,000 $1,105,000 $1,258,000 $1,411,000
</TABLE>
Annual benefits payable under the IRP are offset by the value of all 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.
STOCK OPTION LOANS AND EXECUTIVE OFFICER INDEBTEDNESS
Effective December 7, 1990, the Company terminated the loan program that
had existed for the purpose of financing the exercise of key employee options
and the payment of any resultant taxes. As of December 31, 1994, the following
directors and executive officers, each of whom was indebted to the Company
during 1994 in an aggregate amount of at least $60,000, had outstanding loans,
bearing interest at 7.11% per year, from the Company in the respectively
indicated principal amounts to purchase shares of common stock pursuant to the
exercise of options and, in certain instances, to pay taxes incurred upon
exercise of options: A. G. Langbo, $183,332; W. A. Camstra, $180,016; G. E.
Costley, $218,913; C. W. Elliott, $151,938; C. E. French, $65,714; T. A.
Knowlton, $79,688; D. R. Schaller, $83,335; J. M. Stewart, $124,370. The largest
aggregate amount of such stock option indebtedness for each such person during
1994 was, respectively: $417,086; $254,876; $278,978; $175,905; $79,820;
$102,428; $98,608; and $150,277.
MANAGEMENT EMPLOYMENT AGREEMENTS
Effective January 30, 1987, the Company and Charles W. Elliott entered into
several agreements pertaining to Mr. Elliott's employment by the Company. The
agreements provide that Mr. Elliott will serve as the Company's Executive Vice
President-Administration until the earlier of (i) his reaching age 65, (ii)
permanent disability, (iii) death, or (iv) retirement or earlier termination of
Mr. Elliott's employment
21
<PAGE> 25
with the Company. In the course of performing certain designated
responsibilities, Mr. Elliott reports to the Company's Chief Executive Officer,
who may assign other duties from time to time, and who may adjust Mr. Elliott's
annual base salary consistent with practices and procedures of the Company
generally applicable to the review of executive officers of the Company. One of
the agreements also provides that, if the agreement is terminated without cause
by the Company or by Mr. Elliott with cause, the Company is obligated to pay to
Mr. Elliott a lump sum amount equal to his annual base salary at the date of
termination plus the highest annual bonus paid in any one of the last three full
years preceding his termination times the number of years (including portions of
a year) remaining until January 1997, when Mr. Elliott becomes 65 years of age.
In the event the agreement is terminated by the Company with cause or by Mr.
Elliott without cause, any and all further salary, compensation and other
benefits (with the exception of certain pension benefits discussed in the
immediately following sentence and, in the case of death or disability, benefits
under the Company's death and disability plans and policies) cease to be payable
or otherwise provided. The Company has agreed to pay to Mr. Elliott, or his
surviving spouse, if any, an annual supplemental retirement benefit equal to the
lesser of $100,000 or the product of $10,000 times the number of Mr. Elliott's
years of service with the Company, reduced, however, in either case by
retirement benefits, if any, payable to Mr. Elliott, or his surviving spouse,
under Company plans. The agreements contain no provision with respect to any
change in control of the Company.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent (10%) of any class of the Company's equity securities ("Reporting
Persons") to file certain reports concerning their beneficial ownership of the
Company's equity securities. The Company believes that during 1994 all Reporting
Persons complied with their Section 16(a) filing obligations, except that Ms.
McLaughlin and Mr. Fritz each failed to file Form 5 reports for the two previous
years, covering 67 shares and 40 shares respectively, related to their holdings
under certain dividend reinvestment plans.
SUBMISSION OF STOCKHOLDER
PROPOSALS FOR THE 1996 ANNUAL MEETING
Stockholder proposals submitted for presentation at the 1996 Annual Meeting
of Stockholders of the Company must be received by the Company no later than
November 14, 1995.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP is the independent auditor for the Company. A
representative of Price Waterhouse 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 Price Waterhouse LLP representative is also expected to be available to
respond to appropriate questions at the meeting.
22
<PAGE> 26
OTHER BUSINESS
It is not intended that any business other than that set forth in the
Notice of Annual Meeting and more specifically described in this Proxy Statement
will be brought before the meeting. However, if any other business should
properly come before the meeting, it is the intention of the persons named in
the enclosed form of Proxy 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.
By Order of the Board of Directors,
Richard M. Clark
Senior Vice President
General Counsel and Secretary
March 13, 1995
UPON WRITTEN REQUEST OF ANY PERSON WHOSE PROXY IS SOLICITED HEREIN, THE COMPANY
WILL, AFTER MARCH 31, 1995, PROVIDE, WITHOUT CHARGE, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR 1994 REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, BUT WITHOUT EXHIBITS. ALL SUCH
REQUESTS MAY BE DIRECTED TO THE CONSUMER AFFAIRS OFFICE, KELLOGG COMPANY, ONE
KELLOGG SQUARE, P.O. BOX CAMB, BATTLE CREEK, MICHIGAN 49016-1986.
23
<PAGE> 27
APPENDIX A
KELLOGG COMPANY
SENIOR EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
SECTION 1.
PURPOSE AND ELIGIBILITY
The purpose of this Plan is to motivate the Company's executive officers
through awards of annual cash bonuses to achieve strategic, financial and
operating objectives, reward their contribution toward improvement in financial
performance, provide the executive officers with an additional incentive to
contribute to the success of the Company and offer a total compensation package
that is competitive in the industry, and to include a bonus component which is
intended to qualify as performance-based compensation deductible by the Company
under the Code. Such executive officers of the Company as determined by the
Compensation Committee of the Board will be eligible to receive payments
hereunder.
SECTION 2.
DEFINITIONS
"Award" shall have the meaning set forth in Section 3.
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash award payable to a participant pursuant to the
terms of the plan, including an Award.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean Kellogg Company, a Delaware corporation, and its
subsidiaries.
"Compensation Survey" shall mean a survey of compensation practices of
comparable companies as selected by the Committee.
"Corporate Incentive Factor" shall mean the Company's earnings per share
(as adjusted for certain extraordinary or non-recurring items) as compared to
the pre-established target earnings per share.
"Covered Employees" shall mean participants designated by the Committee
prior to the award of a Bonus opportunity hereunder who are or are expected to
be "covered employees" within the meaning of Section 162(m) of the Code for the
Measurement Period in which a Bonus hereunder is payable.
"Disinterested Person" shall mean a member of the Board who qualifies as an
"outside director" for purposes of Section 162(m) of the Code.
"Measurement Period" shall mean a period of one fiscal year, unless a
shorter period is otherwise selected and established in writing by the Committee
at the time the Performance Goals are established with respect to a particular
Award.
"Net Income" shall mean net income available for common stockholders as
reported in the Company's audited financial statements, but not including
extraordinary items and the cumulative effect of accounting changes.
"Payment Date" shall mean the date following the conclusion of a particular
Measurement Period on which the Committee certifies that applicable Performance
Goals have been satisfied and authorizes payment of corresponding Bonuses.
"Performance Goals" shall have the meaning set forth in Section 3 hereof.
A-1
<PAGE> 28
SECTION 3.
ADMINISTRATION AND CALCULATION OF AWARDS
The Plan shall be administered by the Committee, consisting of
Disinterested Persons, in conformance with Section 162(m) of the Code ("Section
162(m)"). Any action by the Committee that would be violative of Section 162(m)
shall be void. The Committee shall have the authority to determine eligibility
of executive officers and the financial and other performance criteria
applicable to the maximum potential recommended bonus (the "Award") which a
participating executive officer may receive for services performed during that
year. Target awards, which are a percentage of the midpoint of the applicable
salary range, shall be determined using as an objective the 75th percentile of
the Compensation Survey. Recommended Awards shall be determined by adjusting the
target awards based on individual performance factors. The result is then
adjusted further based on the Corporate Incentive Factor. This adjustment of the
recommended bonus may result in a bonus payment ranging from 0% to 150% of the
recommended bonus. The Committee shall evaluate individual performance by such
performance factors as it deems appropriate. The performance factors shall be
determined by the Committee in advance of each Measurement Period or such period
as may be permitted by the regulations issued under Section 162(m), and may
include long-term financial and non-financial objectives and Company performance
("Performance Goals"). With respect to the Chief Executive Officer, the factors
shall be the same as those utilized by the Committee in its annual determination
of performance including the Company's earnings per share, return on equity,
return on assets, growth in sales and earnings, market share and total return to
stockholders (including both the market value of the Company's stock and
dividends thereon) and the extent to which strategic and business plan goals are
met. Awards are based on the achievement of such performance criteria. Negative
discretion may be used by the Committee to reduce the Award. In no event,
however, will an exercise of negative discretion to reduce the Award of a
participating executive officer have the effect of increasing the amount of an
Award otherwise payable to any other participating executive officer.
SECTION 4.
MAXIMUM BONUS AWARDS
The total of all Awards payable to any Covered Employee shall not under any
circumstances exceed 3/4 of 1 percent (.0075) of the Net Income of the Company
(the "Maximum Bonus Awards Pool") and no one individual may receive more than
60% of such pool. In the event that the total of all Awards payable to Covered
Employees should exceed the Maximum Bonus Awards Pool as specified above, the
Award of each Covered Employee will be proportionately reduced such that the
total of all such Awards paid is equal to the Maximum Bonus Awards Pool.
SECTION 5.
PAYMENT OF AWARDS
If the Performance Goals established by the Committee are satisfied and
upon written certification by the Committee that the Performance Goals have been
satisfied, payment shall be made on the Payment Date in accordance with the
terms of the Award unless the Committee determines in its sole discretion to
reduce the payment to be made.
SECTION 6.
TERMINATION OF EMPLOYMENT
In the event that a participating executive officer's employment with the
Company terminates for any reason prior to the Payment Date with respect to any
Bonus, the balance of any Bonus which remains unpaid at the time of such
termination shall be payable to the participant, or forfeited by the
participant, in accordance with the terms of the Award granted by the Committee;
provided, however, that no amount shall
A-2
<PAGE> 29
be payable unless the Performance Goals are satisfied unless the termination of
employment of the Covered Employee is due to death or disability. Participating
executive officers who remain employed through the Measurement Period but are
terminated prior to the Payment Date shall be entitled to receive Bonuses
payable with respect to such Measurement Period.
SECTION 7.
AMENDMENT AND TERMINATION
The Board shall have the right to modify the Plan from time to time but no
such modification shall, without prior approval of the Company's stockholders,
change Section 3 of this Plan, alter the business criteria on which the
Performance Goals may be based or to increase the amount set forth in Section 4,
materially increase the amount available for Awards, materially increase the
benefits accruing to participating executive officers, materially modify the
requirements regarding eligibility for participation in the Plan or, without the
consent of the participant affected, impair any Award made prior to the
effective date of the modification.
SECTION 8.
MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and no
special or separate fund shall be established or other segregation of assets
made to assure payment. No participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
The Plan shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to its principles of conflict of laws.
Neither the establishment of this Plan nor the payment of any Award
hereunder nor any action of the Company or the Committee with respect to this
Plan shall be held or construed to confer upon any participating executive
officer any legal right to be continued in the employ of the Company or to
receive any particular rate of cash Compensation other than pursuant to the
terms of this Plan and the determination of the Committee, and the Company
expressly reserves the right to discharge any participating executive officer
whenever the interest of the Company may so permit or require without liability
to the Company, the Board of Directors or the Committee, except as to any rights
which may be expressly conferred upon a participating executive officer under
this Plan.
The adoption of this Plan shall not affect any other compensation plans in
effect for the Company or any subsidiary or affiliate of the Company, nor shall
the Plan preclude the Company or any subsidiary or affiliate thereof from
establishing any other forms of incentive or other compensation for the
participating executive officers.
SECTION 9.
EFFECTIVE DATE
This Plan shall become effective upon approval by the stockholders.
A-3
<PAGE> 30
APPENDIX B
The full text of the first paragraph of Article TENTH of the Amended and
Restated Certificate of Incorporation of the Company, as currently in effect, is
set forth below:
"TENTH
The number of Directors of this Corporation shall be not less than twelve
(12) nor more than eighteen (18). The exact number of Directors within such
limitations shall be fixed from time-to-time by a resolution adopted by not less
than two-thirds of the Full Board (as defined in Article NINTH). At the 1986
Annual Meeting of Stockholders, the Directors shall be divided into three
classes, as nearly equal in number as possible, with the term of office of the
first class to expire at the 1987 Annual Meeting of Stockholders, the term of
office of the second class to expire at the 1988 Annual Meeting of Stockholders,
and the term of office of the third class to expire at the 1989 Annual Meeting
of Stockholders. At each Annual Meeting of Stockholders following such initial
classification and election, the class of Directors whose terms of office shall
expire at such time shall be elected to hold office for terms expiring at the
third succeeding Annual Meeting of Stockholders following their election. Each
Director shall hold office until his successor shall be elected and shall
qualify."
The full text of the first paragraph of Article TENTH of the Amended and
Restated Certificate of the Company, as proposed to be amended, is set forth
below:
"TENTH
The number of Directors of this Corporation shall be not less than seven
(7) nor more than fifteen (15). The exact number of Directors within such
limitations shall be fixed from time-to-time by a resolution adopted by not less
than two-thirds of the Full Board (as defined in Article NINTH). The Directors
shall be divided into three classes, as nearly equal in number as possible, with
a term of office of three years, one class to expire each year. At each Annual
Meeting of Stockholders, the class of Directors whose terms of office shall
expire at such time shall be elected to hold office for terms expiring at the
third succeeding Annual Meeting of Stockholders following their election. Each
Director shall hold office until his successor shall be elected and shall
qualify."
B-1
<PAGE> 31
REQUEST FOR ADMISSION TICKET
If you plan to attend the 1995 Annual Meeting of Stockholders of Kellogg Company
to be held at 1 p.m., local time, on Friday, April 21, 1995, this form should be
used to request an admission ticket. If your request is received by April 10,
1995, an admission ticket will be mailed to you. All other admission tickets can
be obtained at the registration area located in the W.K. Kellogg Auditorium
lobby beginning at 11:30 a.m. on the day of the Annual Meeting.
The envelope provided for return of your proxy card can be used to return this
form or you may mail the ticket request directly to Kellogg Company, Attn.
Barbara Auble, One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan
49016-3599.
Note: If your shares are currently held in the name of your broker, bank, or
other nominee and you wish to attend the meeting, you must provide proof of
ownership to obtain an admission ticket (e.g., a letter from your broker, bank
or other nominee indicating that you are the beneficial owner of Kellogg Company
stock as of March 1, 1995, the record date).
(cut on dotted line)
................................................................................
I (we) plan to attend the 1995 Annual Meeting of Stockholders of Kellogg
Company. (Attendance will be limited to stockholders only. If your shares are
held in a joint account and you would like more than one ticket sent, please
indicate both names of the stockholders of record on the form below.)
Name(s)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
- ------------------------------------------------ ----------------------------
Account Number (on Proxy Card) KL
----------------------------------------------------------------------------
<PAGE> 32
[LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
THE BEST TO YOU EACH MORNING(R)
N(LOGO)
recycled
<PAGE> 33
KELLOGG COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 21, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints A. G. Langbo and R. G. Mawby, or each one or more 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
Stockholders of Kellogg Company to be held on April 21, 1995, and at any
adjournment thereof, and to vote as specified on this Proxy the number of
shares of common stock of Kellogg Company 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.
IF NOT MARKED TO THE CONTRARY, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2
AND 3.
IMPORTANT: THIS PROXY IS CONTINUED AND MUST BE SIGNED AND
DATED ON THE REVERSE SIDE.
<PAGE> 34
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
1. ELECTION OF FOUR DIRECTORS - NOMINEES:
Gordon Gund, William E. LaMothe, Russell G. Mawby, and Ann McLaughlin
FOR ALL
FOR WITHHELD EXCEPT
/ / / / / /
(To withhold authority to vote for any individual nominee(s), strike a line
through the nominee's name to the left and fill in the "For All Except" oval).
2. APPROVAL OF SENIOR EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
FOR AGAINST ABSTAIN
/ / / / / /
3. APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO REDUCE MAXIMUM AND
MINIMUM BOARD SIZE
FOR AGAINST ABSTAIN
/ / / / / /
_______________________________________________ Dated:______________________
Signature(s) of holders of common stock should
agree with the name(s) shown on this Proxy.
For joint accounts, both owners should sign.
