<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:
[ ] Preliminary proxy statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11-12
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) 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 Rule 14a-6(i)(3)
(1) Title of each class of securities to which transaction
applies:
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(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:
---------------------------------------------
[ ] 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:
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<PAGE> 2
KELLOGG'S LOGO
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
Dear Stockholder:
It is my pleasure to invite you to attend the 1996 Annual Meeting of
Stockholders of Kellogg Company to be held at 1 p.m. on Friday, April 19, 1996.
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
Arnold G. Langbo
Chairman of the Board
Chief Executive Officer
March 13, 1996
<PAGE> 3
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MI 49016-3599
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 1996
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. on Friday, April 19,
1996, at the W.K. Kellogg Auditorium, 60 West Van Buren Street, Battle Creek,
Michigan, for the following purposes:
1. To elect four directors for a three-year term to expire at the 1999
Annual Meeting of Stockholders;
2. To consider and act upon a proposed amendment to the Company's
Amended Restated Certificate of Incorporation to increase the
authorized number of shares of common stock;
3. To consider and act upon proposed amendments to the Kellogg Company
1990 Stock Compensation Program for Non-Employee Directors;
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, 1996, 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, 1996
<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 19, 1996
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 in Battle Creek, Michigan, on Friday, April 19, 1996, or any
adjournments thereof. The Annual Report of the Company for 1995 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, 1996. The enclosed Proxy is solicited by the Board of Directors of the
Company. The record date for determining stockholders entitled to vote at the
Annual Meeting is March 1, 1996. Each of the 215,103,803 shares of common stock
of the Company issued and outstanding on that date is entitled to one vote at
the Annual Meeting.
The cost of preparing and mailing the Notice of Annual Meeting and Proxy
Statement is to be borne by the Company. The Company has 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 are expected to be
approximately $18,000. 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.
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" Proposal 2 and
Proposal 3, 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. Abstention votes and votes
withheld by brokers on non-routine proposals in the absence of instructions from
beneficial owners will be counted as present at the Annual Meeting for purposes
of determining whether a quorum exists.
Upon written request of any person whose Proxy is solicited herein, the
Company will, after March 29, 1996, provide, without charge, a copy of the
Company's Annual Report on Form 10-K for 1995 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.
<PAGE> 5
SECURITY OWNERSHIP
The following table shows each person who, based upon their most recent
filings with the Securities and Exchange Commission, beneficially owns more than
five percent (5%) of the Company's common stock.
<TABLE>
<CAPTION>
PERCENT OF CLASS ON
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED DECEMBER 31, 1995
- ------------------------------------------------------------ ------------------------- -------------------
<S> <C> <C>
W. K. Kellogg Foundation Trust(1)
c/o The Bank of New York Company, Inc.
One Wall Street
New York, NY 10286 72,978,020 shares(2) 33.7
George Gund III
1821 Union Street
San Francisco, CA 94123 25,245,200 shares(3) 11.6
</TABLE>
- ---------------
(1) The trustees of the W.K. Kellogg Foundation Trust (the "Trust") are William
C. Richardson, Russell G. Mawby, William E. LaMothe and The Bank of New
York. The W.K. Kellogg Foundation, a Michigan charitable corporation (the
"Foundation"), is the sole beneficiary of the Trust. Under the terms of the
Trust, in the event that a majority of the trustees of the Trust (which
majority must include the Bank of New York as corporate trustee) are unable
to agree, the Foundation has the power to direct the voting of the common
stock held in the Trust. With certain limitations, the Foundation also has
the power to select or reject the selection of successor trustees of the
Trust and to remove any trustee. Moreover, the Trust requires that a trustee
of the Foundation be a trustee of the Trust.
(2) 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 355,000 shares held in trusts in which
the Foundation has present or contingent beneficial interests. The Bank of
New York is a trustee of the Trust and shares voting and investment power
with respect to shares owned by the Trust with the other three trustees. The
Bank of New York has sole voting power for 90,446 shares, shared voting
power for 74,697,558 shares (including those shares beneficially owned by
the Trust), sole investment power for 29,500 shares and shared investment
power for 73,027,510 shares (including those shares beneficially owned by
the Trust). The aggregate amount beneficially owned by the Bank of New York
is 74,788,004.
(3) George Gund III has sole power to vote or direct the vote of 112,000 shares;
shared power to vote or direct the vote of 25,133,200 shares; and shared
power to dispose or direct the disposition of 7,349,546 shares. 6,291,200 of
the shares which Mr. Gund has shared power to vote and shared power to
dispose are held by a nonprofit foundation of 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.
KeyCorp, as trustee for certain Gund family trusts, as well as other trusts,
has sole voting power for 241,688 shares; shared voting power for 7,369,757
shares (including certain of the shares beneficially owned by George Gund
III); sole investment power for 18,170,394 shares; and shared investment
power for 7,318,872 shares. The aggregate amount beneficially owned by
KeyCorp is 25,526,514 shares.
2
<PAGE> 6
The following table shows the number of shares of common stock of the
Company beneficially owned as of February 1, 1996, 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>
SHARES BENEFICIALLY
NAME OWNED(1)
- -------------------------------- -------------------
<S> <C>
William A. Camstra.............. 123,805
Donald G. Fritz................. 83,249
Claudio X. Gonzalez............. 1,234
Gordon Gund(2).................. 3,200
Thomas A. Knowlton.............. 110,593
William E. LaMothe(3)........... 452,154
Arnold G. Langbo................ 460,421
Russell G. Mawby(3)............. 3,600
Ann McLaughlin(2)............... 1,885
J. Richard Munro................ 1,400
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED(1)
- -------------------------------- -------------------
<S> <C>
Harold A. Poling................ 1,200
William C. Richardson(3)........ 200
Donald Rumsfeld(2).............. 8,200
Timothy P. Smucker(2)(4)........ 3,200
Donald W. Thomason.............. 115,353
Dolores D. Wharton.............. 6,274
John L. Zabriskie............... 500
All executive officers and
directors as a group(5)....... 1,935,296
</TABLE>
- ---------------
(1) The number of shares shown in the table includes the following shares which
certain executive officers of the Company may acquire by exercising options
granted them under Company-sponsored stock plans and which remain
unexercised on February 1, 1996: William A. Camstra, 57,167; Donald G.
Fritz, 65,761; Thomas A. Knowlton, 82,149; Arnold G. Langbo, 374,356; Donald
W. Thomason, 85,020; all directors and executive officers as a group,
including the above named individuals, 1,037,007.
(2) Does not include the number of common stock units held at December 31, 1995
under the Deferred Compensation Plan for Non-Employee Directors as follows:
Mr. Gund 9,741; Ms. McLaughlin 1,713; Mr. Rumsfeld 3,782; and Mr. Smucker
4,765. The units have no voting rights.
(3) Does not include shares owned by the Trust as to which Mr. LaMothe and Drs.
Mawby and Richardson, as trustees of the Trust, share voting and investment
power or shares as to which the Trust or the Foundation has present or
contingent beneficial interests.
(4) Does not include 300 shares held by Mr. Smucker's wife as custodian as to
which Mr. Smucker has neither voting nor investment power. Mr. Smucker
disclaims beneficial ownership of such shares.
(5) Represents less than one percent of the Company's issued and outstanding
common stock.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Amended Restated Certificate of Incorporation and the Bylaws of the
Company provide that the Board of Directors shall be comprised of not less than
seven nor more than fifteen directors divided into three classes as nearly equal
in number as possible and that each director shall be elected for a term of
three years with a term of one class expiring each year. There are currently
twelve members of the Board.
Four directors are to be elected at the Annual Meeting to serve for a term
ending at the 1999 Annual Meeting of Stockholders. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE FOLLOWING NOMINEES: Claudio X.
Gonzalez, William C. Richardson, Donald Rumsfeld, and John L. Zabriskie. Each
nominee was proposed by the Nominating Committee for consideration by the Board
of Directors and presentment to the stockholders.
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected directors. "Plurality" means that the nominees who receive the
largest number of votes cast are elected as directors. Shares not voted (whether
by abstention, broker non-votes or otherwise) have no effect on the election. 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.
3
<PAGE> 7
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE
1999 ANNUAL MEETING
<TABLE>
<S> <C>
CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 61, has served as a director of the Company
PHOTO since 1990. In 1973, he was named Chairman of the Board and Chief Executive Officer of
Kimberly-Clark de Mexico, S.A. de C.V., a producer of consumer disposable tissue
products, writing and other papers, and pulp. He is a director of Kimberly-Clark
Corporation; General Electric Co.; Banco Nacional de Mexico; Grupo Industrial ALFA;
Grupo Industrial Saltillo; Grupo Carso; Telefonos de Mexico; and The Mexico Fund.
WILLIAM C. RICHARDSON. Dr. Richardson, age 55, has been nominated for election to the
PHOTO Board of Directors at the 1996 Annual Meeting. He is President and Chief Executive
Officer, and a member of the Board of Trustees of the W. K. Kellogg Foundation and a
trustee of the W. K. Kellogg Foundation Trust. Before joining the Foundation in August
1995, Dr. Richardson had been president of The Johns Hopkins University in Baltimore,
Maryland since 1990. He is a director of CSX Corporation and Mercantile Bankshares
Corporation.
DONALD RUMSFELD. Mr. Rumsfeld, age 63, has served as a director of the Company since
PHOTO 1985. He currently serves as Chairman of the Board of Trustees of the RAND
Corporation. 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 is a director of 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 56, has served as a director of the Company
PHOTO since January 1, 1995. He is President and Chief Executive Officer of Pharmacia &
Upjohn Inc., one of the largest drug manufacturers in the world. From 1993 to 1994,
Dr. Zabriskie was Executive Vice President of Merck & Co., Inc. Prior to 1993, Dr.
Zabriskie served as Senior Vice President of Merck.
</TABLE>
CONTINUING DIRECTORS TO SERVE UNTIL THE 1997 ANNUAL MEETING
<TABLE>
<S> <C>
ARNOLD G. LANGBO. Mr. Langbo, age 58, has served as a director of the Company since
PHOTO 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. 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.
J. RICHARD MUNRO. Mr. Munro, age 65, has served as a director of the Company since
PHOTO 1990. He is Chairman of the Executive Committee of Time Warner Inc., a publishing and
entertainment company. Prior thereto, 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.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
HAROLD A. POLING. Mr. Poling, age 70, has served as a director of the Company since
PHOTO 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. He is a director of Shell Oil Company, LTV Corporation and Flint Ink
Corporation.
TIMOTHY P. SMUCKER. Mr. Smucker, age 51, has served as a director of the Company since
PHOTO 1989. He is Chairman of The J. M. Smucker Company, a leading manufacturer of
preserves, jellies and ice cream toppings, a position he has held since 1987. Mr.
Smucker is a director of Huntington BancShares Inc.
DOLORES D. WHARTON. Mrs. Wharton, age 68, has served as a director of the Company
PHOTO since 1976. She is Chairman and Chief Executive Officer of The Fund for Corporate
Initiatives, Inc., 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.; Communication Satellite Corp. (COMSAT); and Capital Bank & Trust Company of
Albany, New York.
</TABLE>
CONTINUING DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING
<TABLE>
<S> <C>
GORDON GUND. Mr. Gund, age 56, has served as a director of the Company since 1986. He
PHOTO is Chairman and Chief Executive Officer of Gund Investment Corporation, which manages
diversified investment activities. Mr. Gund is the principal owner of the Cleveland
Cavaliers NBA team and the Gund Arena; general partner of GUS Enterprises, a real
estate development company; principal owner and Chairman of Nationwide Advertising
Service, Inc., a recruitment advertising agency; and a co- owner of the San Jose
Sharks NHL team. He is a director of Corning, Incorporated.
WILLIAM E. LAMOTHE. Mr. LaMothe, age 69, has served as a director of the Company since
PHOTO 1972. He retired as Chairman of the Board and Chief Executive Officer of the Company
in 1991, and had been employed by the Company since 1950. He is a member of the Board
of Trustees of the W.K. Kellogg Foundation and a trustee of the W.K. Kellogg
Foundation Trust. Mr. LaMothe is a director of The Allstate Insurance Co.; Sears,
Roebuck & Co.; and Pharmacia & Upjohn Inc.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
RUSSELL G. MAWBY. Dr. Mawby, age 68, has served as a director of the Company since
PHOTO 1974. He is Chairman Emeritus and a member of the Board of Trustees of the W.K.
Kellogg Foundation and a trustee of the W.K. Kellogg Foundation Trust. Dr. Mawby was
employed by the Foundation in 1964 and was named Chief Executive Officer in 1970. He
is a director of The J. M. Smucker Company.
ANN MCLAUGHLIN. Ms. McLaughlin, age 54, has served as a director of the Company since
PHOTO 1989. She is Vice Chairman of The Aspen Institute, a nonprofit organization. She
served as President of the Federal City Council in Washington, D.C., a nonprofit
organization, from 1990 to 1995. She was President and Chief Executive Officer of New
American Schools Development Corporation, a private, nonprofit education reform
organization, from July 1992 until April 1993. She is a director of AMR Corporation
(the parent company of American Airlines); General Motors Corporation; Nordstrom,
Inc.; Potomac Electric Power Company; Host Marriott Corporation; Union Camp
Corporation; Federal National Mortgage Association (Fannie Mae); Harman International
Industries, Inc.; Sedgwick Group plc.; and Vulcan Materials Company.
</TABLE>
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
Nominating Committee.
The Executive Committee is generally empowered to act on behalf of the
Board. The Executive Committee did not meet during 1995. 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 times in 1995. 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 time in 1995. The members of the Committee on Social Responsibility
are Ms. McLaughlin, Chairman, 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 and
provides advice and recommendations to the Board of Directors on these subjects.
It met one time in 1995. The members of the Compensation Committee are Dr.
Mawby, Chairman, Mr. Gund, Mr. Munro, Mr. Poling, Mr. Rumsfeld and Mrs. Wharton.
The Employee Benefits Advisory Committee reviews the financial performance
of the Company's employee benefit plans and reports to the Board of Directors
with respect thereto. It met one time in 1995. The members of the Employee
Benefits Advisory Committee are Mrs. Wharton, Chairman, Mr. Gonzalez, Mr.
Smucker and Dr. Zabriskie.
6
<PAGE> 10
The Finance Committee reviews and makes recommendations to the Board of
Directors regarding the financial and capital structure of the Company,
borrowing commitments, and other significant financial matters. It met two times
in 1995. The members of the Finance Committee are Mr. Rumsfeld, Chairman, Mr.
Gonzalez, Mr. LaMothe and Mr. Smucker.
The Nominating Committee advises the Board on corporate governance issues,
investigates and reviews the qualifications of candidates, recommends nominees
to the Board of Directors and reviews the functioning of the Board and the
fulfillment of its duties and responsibilities. It met two times in 1995. The
members of the Nominating Committee are Mr. Gund, Chairman, Mr. LaMothe, Ms.
McLaughlin, Mr. Munro, Mr. Poling and Mr. Rumsfeld.
During 1995, the Board of Directors held seven meetings. All of the
directors attended at least 75% of the total number of meetings of the Board and
of all Board committees of which the directors were members during 1995; except
that Dr. Zabriskie attended 73% of the total number of such meetings. Mr.
Charles Elliott, who retired as an Officer and Director of the Company in July
of 1995, failed to timely file one Form 4 in connection with one transaction in
November of 1995.
NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS
Each director who is not an employee of the Company 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; and reimbursement for all expenses incurred in
attending such meetings.
Under the Stock Compensation Program for Non-Employee Directors (the
"Program"), 200 shares of common stock are granted to all eligible non-employee
directors following the annual meeting. The directors also receive a payment
each year to compensate them for the taxes incurred as a result of receiving the
shares of stock. 187,200 shares of stock are available for issuance under the
Program. See Proposal 3 on page 15 of this Proxy Statement concerning proposed
amendments to the Program.
Under the Deferred Compensation Plan for Non-Employee Directors,
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 payable for
the ensuing year to be credited to an account in the form of units equivalent to
the fair market value of the Company's common stock. In the event that dividends
may be declared by the Board, 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.
Prior to February 16, 1996, non-employee directors were entitled to be paid
an annual retirement benefit for a maximum of up to ten years in an amount equal
to the standard annual retainer payable to non-employee directors at the time of
such directors' retirement. On February 16, 1996, the Board eliminated this
benefit. The actuarial equivalent of the amounts that would have been due to
non-employee directors upon retirement had the benefit not been eliminated,
assuming all directors had completed the vesting period, have been converted
into shares of common stock and placed in a trust for the benefit of each of the
directors. Under the terms of the trust, the shares will be made available to a
director only upon termination of his or her service on the Board. The number of
shares to be placed in trust for the benefit of the directors, in the aggregate,
is approximately 16,000, depending on the average share price of the Company's
stock for the 12 months ended April 30, 1996.
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.
The Company has a Director's Charitable Awards Program, in which each
director may name up to four organizations to which the Company would contribute
an aggregate of $1 million upon the death of the director. The Board has voted
to eliminate this program with respect to directors first elected after December
1, 1995.
OTHER TRANSACTIONS
The Company purchased $33,591,809 of products from The J. M. Smucker
Company during 1995. Timothy P. Smucker, a director of the Company, is Chairman
of The J. M. Smucker Company.
7
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers for the last three years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------- PAYOUTS
OTHER SECURITIES -------
NAME AND ANNUAL UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSA- OPTIONS PAYOUTS COMPENSA-
POSITION YEAR ($) ($) TION($) (#)(1) ($) TION($)(2)
- ------------------- ---- ------- ------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. G. Langbo 1995 880,000 765,000 0 294,149 0 10,213
Chief 1994 800,000 688,500 0 83,000 0 9,967
Executive Officer 1993 720,000 546,000 3,920(3) 117,791 122,847(3) 10,154
T. A. Knowlton 1995 470,000 362,100 12,323(4) 75,712 0 10,013
Executive 1994 379,167 255,000 82,934(4) 18,500 0 10,034
Vice President 1993 330,000 172,900 96,179(4) 16,000 0 11,380
D. G. Fritz 1995 380,000 280,500 141,786(4) 50,343 0 10,080
Executive 1994 285,000 178,500 200,325(4) 15,304 0 8,127
Vice President 1993 245,000 113,750 89,533(4) 19,372 0 9,388
D. W. Thomason 1995 380,000 260,100 0 71,446 0 9,913
Executive 1994 345,000 234,600 0 20,000 0 9,634
Vice President 1993 315,000 182,000 0 24,574 0 9,421
W. A. Camstra 1995 340,000 209,100 3,234(4) 76,502 0 9,847
Executive 1994 315,000 204,000 17,488(4) 13,000 0 9,514
Vice President 1993 303,000 136,500 27,119(4) 11,000 0 9,090
</TABLE>
- ---------------
(1) Includes new stock options and reload options granted under the 1991
Incentive Plan. New stock options were granted in 1993, 1994, and 1995 for
65,000, 83,000, and 150,000 shares to Mr. Langbo (including 10,000 shares
granted in January 1994, January 1995, and March 1996 in lieu of a portion
of his bonus for 1993, 1994 and 1995); 16,000, 18,500, and 35,000 shares to
Mr. Knowlton; 10,000, 11,500, and 28,000 shares to Mr. Fritz; 17,000,
20,000, and 27,000 shares to Mr. Thomason; and 11,000, 13,000, and 20,000
shares to Mr. Camstra, respectively. All other options granted to such
persons were reload options. A "Reload Option" is granted when Company stock
is surrendered to pay the exercise price of a stock option. The holder of
the option is granted a Reload Option for the number of shares surrendered.
For all Reload Options, the expiration date is not changed, but the option
price becomes the fair market value of the Company's stock on the date the
Reload Option is granted.
(2) Represents Company matching contributions on behalf of each named individual
to the Kellogg Company Salaried Savings and Investment Plan.
(3) Represents dividend equivalents paid under the Company's Book Value
Unit/Share Incentive Plan and the distribution of all accrued benefits to
Mr. Langbo in 1993 upon the discontinuance of the Plan.
(4) Represents allowances paid to or on behalf of Mr. Knowlton, Mr. Fritz and
Mr. Camstra primarily under the Company's Expatriate Compensation Program.
Mr. Knowlton's compensation included a housing allowance (net of Mr.
Knowlton's contribution) of $30,704 in 1993 and $25,484 in 1994, and a
schooling allowance of $9,991 in 1995. Mr. Fritz's compensation included a
housing allowance (net of Mr. Fritz's contribution) of $40,628 in 1993 and
$67,872 in 1995, a home leave allowance of $24,826 in 1993, and relocation
expenses of $80,016 in 1994. Mr. Camstra's compensation included a housing
allowance (net of Mr. Camstra's contribution) of $27,119 in 1993 and $11,506
in 1994, and a company-paid automobile in 1995.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted
during 1995 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#)(1) YEAR (%) ($/SHARE) DATE ($)(3)
- ------------------------------- --------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
A. G. Langbo New options
150,000(2) 5.77 55.5625 1/20/05 1,749,000
Reload options
69,783 2.68 63.5625 1/21/04 808,087
74,366 2.86 74.1875 1/20/05 934,037
T. A. Knowlton New options
35,000 1.35 55.5625 1/20/05 408,100
Reload options
16,480 .63 63.5625 1/21/04 190,838
24,232 .93 72.0625 1/20/05 298,296
D. G. Fritz New options
28,000 1.08 55.5625 1/20/05 326,480
Reload options
10,387 .40 62.6875 1/21/04 114,776
11,956 .46 74.1875 1/20/05 150,167
D. W. Thomason New options
27,000 1.04 55.5625 1/20/05 314,820
Reload options
17,817 .69 63.5625 1/21/04 206,321
2,568 .10 74.1875 11/30/98 32,254
20,221 .78 74.1875 1/20/05 253,976
3,840 .15 74.1875 1/29/03 48,230
W. A. Camstra New options
20,000 .77 55.5625 1/20/05 233,200
Reload options
11,581 .45 63.5625 1/21/04 134,108
10,783 .41 63.5625 1/29/03 124,867
14,978 .58 74.1875 1/20/05 188,124
9,922 .38 74.1875 1/21/04 124,620
9,238 .36 74.1875 1/29/03 116,029
</TABLE>
- ---------------
(1) Stock options granted under the 1991 Incentive Plan. The new 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 (1) to the Summary
Compensation Table.
(2) Includes 10,000 options which the Compensation Committee granted in January
1995 to Mr. Langbo in lieu of a portion of his cash bonus for 1994. Does not
include 10,000 options which the Compensation Committee granted in March
1996 to Mr. Langbo in lieu of a portion of his cash bonus for 1995.
(3) Grant date present value is determined using the Black-Scholes model. The
model makes assumptions about future variables, so the actual value of the
options may be greater or less than the values stated in the table. For new
options the calculations assume a dividend yield of 2.34%, volatility of
approximately 21.5%, and a risk-free rate of return of 7.8% based on the
U.S. Treasury bill rate for three-year maturities on the grant date. For
Reload Options the calculations assume a dividend yield of between 2.02% and
2.39%, volatility of approximately 19%, and a risk-free
9
<PAGE> 13
rate of return of between 5.5% and 7.0% based on the U.S. Treasury bill
rate for three-year maturities on the grant date. In view of the Company's
experience and the inherent motivation to exercise options early in their
terms because of the reload option feature, options were assumed to be
outstanding for three years at the time of exercise. Optionees may decide
to exercise their options either earlier or later than this assumed period
resulting in different values from those shown in the table. No downward
adjustments were made to the resulting grant date option value to account
for potential forfeiture or the nontransferable nature of these options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table provides information regarding the pre-tax value
realized from the exercise of stock options during 1995 and the value of
unexercised in-the-money options held at December 31, 1995 by the persons named
in the Summary Compensation Table.
<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(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. G. Langbo 177,628 2,392,805 374,356 0 4,614,278 0
T. A. Knowlton 49,929 646,922 82,149 0 785,145 0
D. G. Fritz 27,464 367,048 65,761 0 932,514 0
D. W. Thomason 54,532 724,963 85,020 0 868,024 0
W. A. Camstra 66,364 714,055 57,167 0 153,534 0
</TABLE>
- ---------------
(1) Share amounts reflected as acquired are gross amounts, not reduced for any
shares tendered by the individual as payment on exercise.
SELECTED BENEFIT PLANS
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
Internal Revenue Code (the "Code"), are payable to salaried employees who have
vested upon retirement at age 65 or in reduced amounts upon earlier retirement
prior to age 65 in accordance with the Pension Plan. Benefits are based upon
credited years of service and average annual compensation (salary and bonus) for
the three consecutive years during the last ten years of employment producing
the greatest average. Benefits are reduced by a portion of the retiree's Social
Security-covered compensation and, for retirees who were participants of a
previous profit-sharing plan, by certain amounts accrued pursuant to that plan.
The Company also maintains a Supplemental Retirement Plan and an Excess Benefit
Retirement Plan which provide for payment of benefits to all participants in the
Pension Plan equal to the benefits that would have been payable under the
Pension Plan but for certain limitations imposed by the Code. Estimated annual
benefits payable upon retirement to persons of the specified compensation and
years of credited service classifications, as reduced by Social Security
benefits (assuming their present levels), are as shown in the following table.
Such amounts assume payments in the form of a straight life annuity and include
the payment of benefits under the Company's Supplemental Retirement Plan and
Excess Benefit Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 15 25 30 40 45
- ------------------------------------------------------ -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000............................................. $ 66,275 $110,459 $132,551 $ 177,142 $ 199,642
$ 500,000............................................. $111,275 $185,459 $222,551 $ 297,142 $ 334,642
$ 750,000............................................. $167,525 $279,209 $335,051 $ 447,142 $ 503,392
$1,000,000............................................ $223,775 $372,959 $447,551 $ 597,142 $ 672,142
$1,500,000............................................ $336,275 $560,459 $672,551 $ 897,142 $1,009,642
$2,000,000............................................ $448,775 $747,959 $897,551 $1,197,142 $1,347,142
</TABLE>
At December 31, 1995, credited years of service under the Pension Plan for
the executive officers named in the Summary Compensation Table were: Mr. Langbo,
39 years; Mr. Knowlton, 16 years; Mr. Fritz, 17 years; Mr. Thomason, 30 years;
and Mr. Camstra, 39 years. The compensation covered by the pension plans is
equal to the amounts shown in the Summary Compensation Table as Salary and
Bonus. Covered compensation for Mr. Fritz was $660,500.
10
<PAGE> 14
The Company has an International Retirement Plan ("IRP") to provide
supplemental death, disability and retirement benefits to certain Company
employees who, at the Company's request, serve with one or more of the Company's
international subsidiaries and, consequently, do not otherwise accrue the same
level of benefits which would have accrued had their employment with the Company
been continuous in the United States. Participants in the IRP are those
designated by the Company or any participating subsidiary if approved by a
committee appointed by the Chairman of the Board. Covered compensation and the
calculation of average annual compensation under the IRP is generally the same
as under the Pension Plan. At December 31, 1995, Mr. Langbo and Mr. Camstra each
had 39 years of credited service and Mr. Fritz had 17 years of credited service
under the IRP. Annual benefits payable under the IRP are offset by the value of
certain other Company or subsidiary pension programs, government-sponsored
benefits, e.g., Social Security or state mandated termination benefits, and
Company or subsidiary contributions to savings or thrift programs. Estimated
annual benefits payable upon retirement of Mr. Langbo, Mr. Camstra, and Mr.
Fritz, assuming the specified compensation and years of credited service,
without the offsets described above, are as shown in the following table. Such
amounts assume payments in the form of a straight life annuity.
PENSION PLAN TABLE
INTERNATIONAL RETIREMENT PLAN
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
------------------------------------------------------------------
REMUNERATION 15 25 30 40 45
- ----------------------------------------------------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000............................................ $ 87,600 $141,600 $ 168,600 $ 222,600 $ 249,600
$ 500,000............................................ $146,000 $236,000 $ 281,000 $ 371,000 $ 416,000
$ 750,000............................................ $219,000 $354,000 $ 421,500 $ 556,500 $ 624,000
$1,000,000........................................... $292,000 $472,000 $ 562,000 $ 742,000 $ 832,000
$1,500,000........................................... $438,000 $708,000 $ 843,000 $1,113,000 $1,248,000
$2,000,000........................................... $584,000 $944,000 $1,124,000 $1,484,000 $1,664,000
</TABLE>
STOCK OPTION LOANS AND EXECUTIVE OFFICER INDEBTEDNESS
Effective December 7, 1990, the Company terminated a loan program that had
existed for financing the exercise of options and the payment of associated
taxes. As of December 31, 1995, the following executive officers had outstanding
loans, bearing interest at 7.11% per year, in the respectively indicated
principal amounts: A. G. Langbo, $126,961; W. A. Camstra, $116,097; T. A.
Knowlton, $63,408; D. R. Schaller, $68,354; J. M. Stewart, $80,130; and J. R.
Hinton, $34,171. The largest aggregate amount of such stock option indebtedness
for each such person during 1995 was, respectively: $183,332; $180,016; $79,688;
$83,335; $124,370 and $140,506.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of
non-employee, independent directors and is responsible for the establishment and
oversight of executive compensation policies. The Company's executive
compensation program is significantly linked to 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.
COMPENSATION PRINCIPLES
The Committee's review of executive compensation incorporates the following
basic compensation principles:
- Compensation should encourage behavior that exemplifies the 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 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.
11
<PAGE> 15
- 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 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 incentives. Each
of these components is described below.
SALARIES
Salaries are determined by a process which includes evaluating levels of
responsibility, utilizing competitive surveys to determine appropriate salary
ranges and evaluating individual performance to determine salary increases. The
Company uses a job evaluation process to develop the relative value of each
position. Salary ranges are targeted at the 75th percentile of a compensation
survey covering over 600 companies (the "Compensation Survey") prepared by a
national compensation consultant. The companies included within the Compensation
Survey operated in numerous industries and include most of the companies which
currently comprise the S&P Food Index, the performance of which is reflected on
the "Stock Performance Graph" on page 14 of this Proxy Statement. Another
compensation survey covering salary, bonus, long-term incentives, benefits and
perquisites (the "Second Survey") was also used for 1995 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 most of the companies
comprising the S&P Food Index, and was conducted by a national 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.
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 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. In
addition, the Company has a Senior Executive Officer Performance Bonus Plan (the
"Performance Bonus Plan") which is a performance based plan intended to meet the
deductibility requirements of Section 162(m) of the Internal Revenue Code. The
Performance Bonus Plan is administered by the Compensation Committee and awards
are based on the achievement of pre-established performance factors, including
long-term financial and non-financial objectives. With respect to the Chief
Executive Officer, the factors are the same as those utilized by the Committee
in its annual determination of his performance. The total of all bonuses granted
under the Performance Bonus Plan shall not exceed 3/4 of 1 percent of the net
income of the Company.
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.
PERQUISITES
The Company does not grant significant perquisites to its employees or
officers.
12
<PAGE> 16
CHIEF EXECUTIVE OFFICER COMPENSATION
For 1995, 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 the 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, total return to stockholders (based on 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 1995 compensation, the
Committee noted continued positive sales volume growth, the maintenance of
market share in the United States and globally, as well as continued emphasis on
cost containment and satisfactory levels of return on equity, return on assets
and total return to stockholders (as evidenced by the Stock Performance Graph on
page 14 of this Proxy Statement).
In determining Mr. Langbo's compensation package for 1995, the Committee
specifically reviewed, in addition to the financial factors described in the
preceding paragraph, the Company's global leadership in new market development
and the implementation of several initiatives to reduce excess manufacturing
capacity and to realign manufacturing and employee resources. 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 1995. Increasing Mr.
Langbo's stock-based compensation further links his total pay package to
stockholder value and Company performance.
In summary, based on the performance of the Company in 1995 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 on page 8 of this Proxy Statement, serves the best interests
of the Company's stockholders.
The Committee believes that option grants under the 1991 Incentive Plan
meet the requirements for deductible compensation under Section 162(m) of the
Internal Revenue Code. The Committee certified that the bonus granted to Mr.
Langbo under the Performance Bonus Plan met the requirements of the plan. The
Committee reserves the flexibility to award compensation outside of any plan
qualifying under Section 162(m) should circumstances arise under which payment
of such additional compensation would be in the best interests of the Company
and its stockholders.
COMPENSATION COMMITTEE:
Russell G. Mawby (Chairman)
Gordon Gund
J. Richard Munro
Harold A. Poling
Donald Rumsfeld
Dolores D. Wharton
February 15, 1996
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative, five-year total stockholder return 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,
1990 in each of the Company's common stock, the S&P 500 Index and the S&P Food
Index, and that all dividends were reinvested. The 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>
1990 100 100 100
1991 130 146 176
1992 140 146 184
1993 155 134 160
1994 157 149 168
1995 215 190 228
</TABLE>
PROPOSAL 2.
PROPOSED AMENDMENT TO THE COMPANY'S AMENDED
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Company's Board of Directors has adopted a resolution recommending that
the stockholders adopt an amendment to Article FOURTH of the Company's Amended
Restated Certificate of Incorporation, (the "Certificate of Incorporation") in
order to increase the authorized number of shares of the Company's common stock
from 330 million to 500 million (the "Amendment"). If the Amendment is approved,
the first sentence of the first paragraph of Article FOURTH of the Certificate
of Incorporation, which sets forth the Company's presently authorized capital
stock, will be deleted and the following will be substituted therefor:
"The total number of shares of capital stock which this Corporation shall
have authority to issue is 500,000,000 shares of common stock of the par
value of $0.25 per share."
The Board of Directors believes that the authorized number of shares of
common stock should be increased to provide sufficient shares for such corporate
purposes as may be determined by the Board of Directors including, without
limitation: acquiring other businesses in exchange for shares of the Company's
common stock; entering into collaborative research and development arrangements
with other companies in which common stock or the right to acquire common stock
are part of the consideration; facilitating broader ownership of the Company's
common stock by effecting a stock split or issuing a stock dividend; flexibility
for possible future financings; and attracting and retaining valuable employees
14
<PAGE> 18
and directors by the issuance of additional stock options or awards. The Company
at present has no commitments, agreements or undertakings to issue any such
additional shares. The Board of Directors considers the authorization of
additional shares of common stock advisable to ensure prompt availability of
shares for issuance should the occasion arise. If required by law or regulation,
the Company will seek stockholder approval prior to any issuance of shares.
The Company intends to apply to the New York Stock Exchange, on which the
shares of the Company's common stock are currently listed, for the listing
thereon of the additional shares to be issued and reserved for future issuance
as a result of the Amendment. Shares of the Company's common stock, including
the additional shares proposed for authorization, do not have preemptive or
similar rights. The issuance of additional shares of common stock could have the
effect of diluting existing stockholder earnings per share, book value per share
and voting power. Adoption of this proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of common stock entitled to vote
at the Annual Meeting. Shares not voted (whether by abstention, broker non-votes
or otherwise) have the effect of a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL.
PROPOSAL 3.
PROPOSED AMENDMENTS TO THE
KELLOGG COMPANY 1990 STOCK COMPENSATION PROGRAM
FOR NON-EMPLOYEE DIRECTORS
On February 16, 1996, the Board of Directors amended the Kellogg Company
1990 Stock Compensation Program for Non-Employee Directors (the "Program"),
subject to stockholder approval. The Program currently provides that non-
employee directors receive 200 shares of the Company's common stock following
the Annual Meeting. Under the proposed amendments (the "Amendments"), for 1996
and thereafter the number of shares granted will be increased to 500, while
other benefits, described below, will be eliminated. The Amendments are intended
to aid the Company in attracting, retaining and compensating highly qualified
individuals who are not employees of the Company for service as members of the
Board of Directors and to provide them with an additional ownership interest in
the Company's common stock. The Amendments will be beneficial to the Company and
its stockholders by giving non-employee directors a greater personal financial
stake in the Company through ownership of common stock in addition to
underscoring their common interest with stockholders in increasing the value of
the Company's stock over the long term.
The Amendments subject future awards of shares to restrictions that
prohibit participants from selling, transferring or otherwise encumbering the
shares during their term of service as a director and eliminate the tax
equalization provision which provided for payments to participants equal to the
increase in the participant's federal tax liabilities as a result of stock
grants under the Program.
As amended, the Program will permit non-employee directors of the Company
to participate in the Program on a non-discretionary basis. Each participant
will be fully vested in the shares awarded to him or her pursuant to the Program
on the date of grant. However, the participant may not sell, transfer or
otherwise encumber the shares and the shares shall be placed in a trust and will
not be available to the director until his or her service as a member of the
Board of Directors is terminated.
The Amendments were adopted as a substitution for all future annual
retirement benefit accruals and as an alternative to increasing the directors'
cash fees. (Effective with its approval of the Amendments, the Board voted to
terminate the annual retirement benefit program for non-employee directors. See
discussion on page 7 of this Proxy Statement.) If the Amendments are not
approved by the stockholders, the Company would consider increasing payment of
fees in cash so as to attract and retain highly qualified individuals. Approval
of the Amendments would mean that the Company would remain competitive with
respect to compensation paid to non-employee directors of similarly situated
companies and that the Company could keep pace with the growing number of
companies using stock as a method of non-employee director compensation. This
summary of the Amendments is subject to the specific provisions contained in the
official text of the Program set forth in Appendix A to this Proxy Statement.
The dollar value of the benefits that would be received by non-employee
directors as a result of the Amendments is not determinable at this time since
it is dependent upon the value of the Company's common stock at the date the
shares are granted to the directors. However, the following table shows the
dollar value of the benefits which would have been received by non-employee
directors in the last fiscal year if the Amendments had been in effect.
15
<PAGE> 19
NEW PLAN BENEFITS
KELLOGG COMPANY 1990 STOCK COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS (AS
AMENDED)
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS
- ----------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Non-Employee Director Group* $350,625 5,500 shares
</TABLE>
- ---------------
* There are 11 Non-Employee Directors who would have each received 500 shares of
the Company's common stock (300 shares more than the 200 they currently
receive). The dollar value was calculated based upon the share price on April
21, 1995.
Adoption of this proposal requires the affirmative vote of the holders of a
majority of the outstanding shares of common stock present or represented and
entitled to vote at the Annual Meeting. Shares not voted (whether by abstention
or broker non-votes) have the effect of a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL.
STOCKHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES AND
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Stockholder recommendations for nominees for membership on the Board of
Directors will be considered by the Nominating Committee. 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. With respect to the 1997 Annual Meeting of
Stockholders, a stockholder will be permitted to nominate 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, 1996, and not later than January 30, 1997, and such stockholder
complies with certain other requirements specified in the Company's Bylaws.
Stockholder proposals submitted for presentation at the 1997 Annual Meeting of
Stockholders of the Company must be received by the Company no later than
November 13, 1996.
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.
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, 1996
16
<PAGE> 20
APPENDIX A
STOCK COMPENSATION PROGRAM FOR
NON-EMPLOYEE DIRECTORS OF KELLOGG COMPANY (AS AMENDED)
This is the Stock Compensation Program for Non-Employee Directors of Kellogg
Company (the "Program").
1. Purpose. The purpose of the Program is to attract and retain outstanding
non-employee directors by enabling them to participate in the Company's growth
through automatic, non-discretionary awards of shares of common stock of the
Company.
2. Eligibility. Eligibility for participation in the Program is limited to
persons then currently serving as directors of the Company who are not
"employees" of the Company (or any of its subsidiaries) within the meaning of
the Employee Retirement Income Security Act of 1974 or for federal income tax
withholding purposes (the "Participants").
3. Stock Available for the Program. Shares of stock available for issuance
pursuant to the Program may be either authorized but unissued shares or shares
which have been or may be reacquired by the Company including Treasury shares of
the common stock of the Company, $0.25 par value (the "Stock"). An aggregate of
187,200 shares of the Stock shall be so available. No awards shall be made under
the Program after 1999.
4. Awards of Restricted Stock. Awards of 500 shares of Stock shall be made to
each Participant with at least one year of service as a member of the Board
following each Annual Meeting of Stockholders. All such Stock shall be
restricted, in that the Participants may not sell, transfer or otherwise
encumber the shares and the shares will be placed in a trust and will not be
available to a Participant until his or her service as a member of the Board of
Directors is terminated.
5. Rights of Participants. The Company shall establish a bookkeeping account in
the name of each Participant (the "Stock Account"). As of the date that shares
are awarded to a Participant, the Participant's Stock Account shall be adjusted
to reflect such shares and an aggregate number of shares credited to each
Participant on such date shall be transferred by the Company to the Kellogg
Company Grantor Trust for Non-Employee Directors. Except for the right to direct
the Trustee as to the manner which the shares are to be voted, a Participant
shall not have any rights with respect to any shares credited to the
Participant's Stock Account and transferred to the Trust until the date the
Participant ceases, for any reason, to serve as a director of the Company.
6. Changes in Capitalization or Organization. Nothing contained in this document
shall alter or diminish in any way the right and authority of the Company to
effect changes in its capital or organizational structure; provided, however,
that the following procedures shall be recognized.
6.1. Stock Split, Stock Dividend, or Extraordinary Distribution. In the event
the number of shares of common stock of the Company is increased at any time by
a stock split, by declaration by the Board of Directors of the Company of a
dividend payable only in shares of such stock, or by any other extraordinary
distribution of shares, the number of shares granted pursuant to Article 4 above
shall be proportionately adjusted.
6.2. Organizational Changes. In the event a merger, consolidation,
reorganization, or other change in corporate structure materially changes the
terms or value of the common stock of the Company, the number of shares granted
pursuant to Article 4 above shall be adjusted in such manner as the Board of
Directors in its sole discretion shall determine to be equitable and consistent
with the purposes of the Program. Such determination shall be conclusive for all
purposes with respect to the grant made in Article 4 above.
7. Listing, Registration, and Legal Compliance. Each award made pursuant to
Article 4 above shall be subject to the requirement that if at any time counsel
to the Company shall determine that the listing, registration or qualification
thereof or of any shares of the stock subject thereto upon any securities
exchange or under any foreign, federal or state securities or other law or
regulation, or the consent or approval of any governmental body or the taking of
any other action to comply with or otherwise with respect to any such law or
regulation, is necessary or desirable as a condition to or in connection with
such award or delivery of shares of the Stock thereunder, no such award may be
made or implemented unless such listing, registration, qualification, consent,
approval or other action shall have been effected or obtained free of any
conditions not acceptable to the Company. The holder of any such award shall
supply the Company with such certificates, representations and information as
the Company shall request and shall otherwise cooperate with the Company in
effecting or obtaining such listing, registration, qualification, consent,
approval or other action.
8. Obligation to Reelect. Nothing in this Program shall be deemed to create any
obligation on the part of the Board of Directors to nominate any director for
reelection by the Company's shareholders.
9. Termination or Amendment of the Program. The Board of Directors reserves the
right to terminate or amend the Program at any time; provided, however, that
such action shall not adversely affect the rights of any Participant under its
provisions with respect to awards of the Stock theretofore made, and provided
further that such action shall not increase the amount of authorized and
unissued shares of the Stock available for the Program as specified in Article 3
above or materially increase the benefits to Participants.
10. Effective Date. This Program shall become effective as of the date that it
is ratified by the stockholders and no award made hereunder shall be effective
unless the Program is so ratified.
A-1
<PAGE> 21
REQUEST FOR ADMISSION TICKET
If you plan to attend the 1996 Annual Meeting of Stockholders of Kellogg
Company to be held at 1 p.m. on Friday, April 19, 1996, this form should be used
to request an admission ticket. If your request is received by April 10, 1996,
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, 1996, THE RECORD DATE).
(cut on dotted line)
................................................................................
I (we) plan to attend the 1996 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)
--------------------------------------------------
<PAGE> 22
KELLOGG'S LOGO
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
THE BEST TO YOU EACH MORNING(R)
RECYCLED LOGO
<PAGE> 23
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 //
(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).
For All
For Withheld Except
1. ELECTION OF FOUR DIRECTORS-NOMINEES: // // //
Claudio X. Gonzalez, William C. Richardson,
Donald Rumsfeld, and John L. Zabriskie
For Against Abstain
2. APPROVAL OF AMENDMENT TO THE COMPANY'S // // //
AMENDED RESTATED CERTIFICATE OF INCORPO-
RATION TO INCREASE THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK.
For Against Abstain
3. APPROVAL OF AMENDMENTS TO THE // // //
KELLOGG COMPANY 1990 STOCK
COMPENSATION PROGRAM FOR NON-
EMPLOYEE DIRECTORS.
Signature(s) of holders of common stock should agree with the name(s) shown on
this Proxy. For joint accounts, both owners should sign.
Dated: ,1996
------------------------------------
Signature(s)
---------------------------------------------------
- ---------------------------------------------------------------
Please mark, sign, date and return the Proxy Card promptly using
the enclosed envelope.
<PAGE> 24
KELLOGG COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 19, 1996
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 19, 1996 and at any
adjournments 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.
