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Severance Agreement - Kellogg Co. and Gary E. Costley

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                       AGREEMENT BETWEEN THE COMPANY  AND

            G. E. COSTLEY, MADE AND ENTERED INTO AS OF JULY 7, 1994
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                           Leave Of Absence Agreement

         This Agreement (the "Agreement") made and entered into this 1st day of
July, 1994, by and between Kellogg Company, a Delaware corporation, and Gary E.
Costley, an individual ("Costley"). Kellogg Company, and its subsidiaries,
divisions and affiliates are collectively referred to herein as the "Company."

         The purpose of this Agreement is to set forth the arrangements with
respect to Costley's resignation as an officer of Kellogg Company, effective
July 1, 1994, and related matters. As of that date, Costley is relieved of all
of his titles, duties, responsibilities and authority as an officer and
otherwise with respect to the Company.

         Except as otherwise provided in this Agreement, for the period
beginning July 1, 1994, and continuing through October 31, 1998, Costley will
be an employee on a paid leave-of-absence. During Costley's paid
leave-of-absence, Costley will receive the salary continuation payments as
described herein, but Costley shall not hold any title or position with the
Company, and Costley shall have no titles, duties, responsibilities or
authority with respect to the Company, its business and/or operations.

         As more fully provided hereinbelow, the salary continuation and
supplemental pension payments described herein are in consideration of
Costley's release of any and all cause or causes of action he has, has had or
may have against the Company and also in consideration of Costley's agreement
not to compete.

         Commencing July 1, 1994 and ending December 31, 1994, Costley will
receive salary continuation payments equal to $39,583.33 per month.  Commencing
January 1, 1995 and ending October 31, 1998, Costley shall receive salary
continuation payments equal to $18,478.26 per month. The amounts payable to
Costley under this Agreement are in lieu of any amounts which may be payable to
Costley for termination pay. Prior to July 31, 1994, Kellogg Company will pay
to Costley that sum which is equivalent to all unused, earned and accrued
vacation of Costley as of July 1, 1994. Costley shall not be entitled to any
future vacation pay accruals from and after the date of this Agreement.

         Usual and customary withholding for tax purposes will be withheld from
all monthly salary continuation payments through October 31, 1998, and from any
other payments made to Costley, to the extent required by law. All tax
liability, with respect to any and all payments or services received by Costley
under this Agreement (other than employer withholding and employer payroll
taxes), will be Costley's responsibility.

         Costley will be eligible to participate in the Second Restated Kellogg
Company Salaried Savings and Investment Plan, subject to the terms and
provisions thereof, including any amendment or alteration thereof after the
date of this Agreement, throughout Costley's paid leave-of-absence. Usual and
customary withholding for personal designated deductions, including
participation in such Savings Plan, will be withheld throughout Costley's paid
leave-of-absence.

         Costley's right to exercise nonqualified stock options that Costley
received pursuant to the Kellogg Company 1982 Stock Option Plan and the 1991
Key Employee Long-Term Incentive Plan will be administered in accordance with
and be subject to the respective provisions of those Plans, and shall continue
so long as Costley is employed by Kellogg Company and for such period of time
as provided by such Plans upon Costley's retirement. Costley shall repay to
Kellogg Company all sums due under the terms of his existing loans related to
stock options, the





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exercise thereof and taxes related thereto, in accordance with his existing
loans agreements with Kellogg Company.

         Kellogg Company will continue Costley's coverage under the existing
Kellogg Company Executive Survivor Income Plan, based upon Costley's most
recent compensation rate of $725,000.

         Costley will be eligible, at Kellogg Company's expense, for
outplacement assistance by an outplacement agency mutually agreeable to Costley
and Kellogg Company. Arrangements for these services will be coordinated by R.
L. Creviston of Kellogg Company.

         Except as otherwise provided herein, benefits for Costley and his
eligible dependents, as outlined in "A Guide To Your Health Care and Pension
Benefits" effective April 1, 1990, and under the Executive Income Survivor
Plan, subject to the respective terms and provisions thereof, including any
amendment or alteration thereof after the date of this Agreement, will be
continued for Costley as an employee, and, to the extent provided in such
plans, upon Costley's retirement. However, at such time as Costley is eligible
for coverage by the health plan of another employer, such health insurance
shall be deemed the primary health insurance coverage for Costley and his
eligible dependents.

         Price Waterhouse will provide to Costley, at Kellogg Company's
expense, for the tax year 1994 only, not to exceed $10,000 in fees and costs of
Price Waterhouse, tax preparation and tax counseling services.

         Costley shall and does hereby irrevocably elect to retire upon
reaching age 55 and then be eligible for pension benefits through the Kellogg
Company Salaried Pension Plan, the Kellogg Company Excess Benefit or
Supplemental Retirement Plan (collectively the "Pension Plans").  Pension
benefits for which Costley will be eligible will be based upon Costley's
highest consecutive three-year earnings during his last ten years of employment
with Kellogg Company. Kellogg Company agrees to supplement such pension benefit
so as to provide Costley with an annual pension of $250,000 based upon a
single-life annuity payout election; provided, however, that no such payments,
including such payments as may have accrued under the Pension Plans, shall
qualify for lump sum payments to Costley. Years of service for this program
will include the period while Costley is on leave-of-absence. At the time
Costley elects to begin receiving such benefits, he should contact the Employee
Benefits Department of Kellogg Company.

         In further consideration of the foregoing, Costley agrees that, for the
respective Restricted Periods (as hereinafter defined), Costley shall not (i)
directly or indirectly, accept any employment, consult for or with, or
otherwise provide or perform any services of any nature to, for or on behalf of
any person, firm, partnership, corporation or other business or entity that
manufactures, produces, distributes, sells or markets any of the Products (as
hereinbelow defined) in the Geographic Area (as hereinafter defined), or (ii)
directly or indirectly, permit any business firm which Costley, individually or
jointly with others, may own, manage, operate or control, to engage in the
manufacture, production, distribution, sale or marketing of any of the Products
in the Geographic Area. For purposes of this paragraph, the term "Products"    
shall mean ready-to-eat cereal products, toaster pastries, cereal bars, granola
bars, and frozen waffles, and the term "Geographic Area" shall mean any country
in the world where Kellogg Company (including any subsidiary, division or
affiliate thereof) manufactures, produces, distributes, sells or markets any of
the Products at any time during the applicable Restricted Period (as defined
below). For purposes of this paragraph, the Restricted Period with respect to
ready-to-eat cereal products,






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toaster pastries and cereal bars shall be five (5) years from the date of this
Agreement. For purposes of this paragraph, the Restricted Period with respect
to granola bars and frozen waffles shall be two (2) years from the date of this
Agreement, provided, however, said Restricted Period shall not apply in the
case of granola bars and frozen waffles with respect to a partnership,
corporation or other business or entity which is engaged in the granola bar or
frozen waffle business if, and only if, total sales throughout the Restricted
Period of such products by such partnership, corporation or other business or
entity constitute three percent (3%) percent or less of the total sales (unit
and dollar volume) of such products in the United States as measured by I.R.I.
InfoScan, and provided, further, that Costley is not involved in, does not
devote any time to, and does not otherwise consult with or provide any
information to any person with respect to any such product or products for the
period ending two (2) years from the date of this Agreement.

         As a result of this extension of salary and benefits eligibility,
Kellogg Company, its subsidiaries, divisions and affiliates (including the
directors, officers and employees of any of them) shall have no further
obligations of any kind or nature to Costley, including, without limitation,
obligations for any termination, severance or vacation pay, except as
specifically provided herein and except as may be provided under Kellogg
Company benefit plans in accordance with their terms. Costley agrees not to
divulge any confidential or proprietary information regarding the Company as
provided in Costley's Confidentiality Agreement with Kellogg Company dated
January 16, 1970, and Costley further agrees to and shall immediately return to
Kellogg Company all files, documents, correspondence, memoranda, customer and
client lists, prospect lists, subscription lists, contracts, pricing policies,
operational methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans, employee records, technical
processes, designs and design projects, inventions, research projects
presentations, proposals, quotations, data, notes, records, photographic
slides, chromes, photographs, posters, manuals, brochures, internal
publications, books, films, drawings, videos, sketches, plans, outlines,
computer disks, computer files, work plans, specifications, credit cards, keys
(including elevator, pass, building and door keys), identification cards,
equipment, supplies and any other documents, writings and materials that
Costley came to possess or otherwise acquire as a result of and/or in
connection with Costley's employment with Kellogg Company or any of its
subsidiaries, divisions and affiliates. Costley may keep the computer,
third-party computer software, and facsimile machine in his possession which
were previously provided to him by Kellogg Company. Costley agrees to conduct
himself in a manner that reflects positively on the Company. Similarly, the
Company agrees to conduct itself in a manner that reflects positively on
Costley.  Nothing contained in this Agreement, nor any actions taken by Kellogg
Company, its subsidiaries, divisions and/or affiliates (including the
directors, officers and employees of any of them) constitute any admission of
fault, liability or wrongdoing of any kind, and Kellogg Company, its
subsidiaries, divisions and affiliates (including the directors, officers and
employees of any of them) each specifically denies any liability to Costley on
any theory.

         It is understood that the monthly salary continuation payments as
provided in this Agreement shall continue to be made to Costley through October
31, 1998, whether or not Costley secures new employment. For purposes of this
Agreement, Costley will be deemed to have secured new employment upon being
employed by another company and becoming eligible for coverage under the health
plan of that company, whereupon such company's health coverage shall be and be
deemed to be the primary health coverage for Costley and his eligible
dependents. Costley will not be deemed to have secured new employment as a
result of business activities or services rendered by Costley to others on a
part-time basis or otherwise as an independent contractor; provided, however,
that nothing herein shall release Costley of Costley's obligation hereunder not
to render such activities or services in connection with the manufacture,
production, distribution, sale or marketing the Products in the Geographical
Area, as above provided.





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         Costley hereby acknowledges and agrees that these arrangements set
forth the sole and entire obligations of Kellogg Company, its subsidiaries,
divisions and affiliates (including the directors, officers and employees of
any of them) to Costley. Costley's signature in the space below shall
conclusively evidence his acceptance of the terms set forth herein. Costley
hereby resigns all of his titles, offices and positions with Kellogg Company
and its subsidiaries, divisions and affiliates, effective July 1, 1994.
Costley's signature also releases, remises and discharges Kellogg Company, its
subsidiaries, divisions and affiliates (including the directors, officers and
employees of any of them), fully, absolutely and unconditionally, of and from
any and all claims, demands, actions, cause or causes of action, known or
unknown, which Costley has, has had or may have against any of them, including,
but not limited to, the Age Discrimination in Employment Act, from the
beginning of time to the day and date of these presents, except for matters
arising under or contemplated by this Agreement. Execution on behalf of Kellogg
Company releases, remises and discharges Costley fully, absolutely and
unconditionally, of and from any and all claims, demands, actions, cause or
causes of action, known or unknown, which Kellogg Company, its subsidiaries,
divisions and affiliates has, has had or may have against him, from the
beginning of time to the day and date of these presents, except for matters
arising under or contemplated by this Agreement.

         This Agreement shall be construed and interpreted under the laws of
the State of Michigan, including conflict of laws. It is agreed that any
controversy, claim or dispute between the parties, directly or indirectly,
concerning this Agreement or the breach thereof shall only be resolved in the
Circuit Court of Calhoun County, or the United States District Court for the
Western District of Michigan, whichever court has jurisdiction over the subject
matter thereof, and the parties hereby submit to the jurisdiction of said
courts.

         Costley acknowledges that he has reviewed this Agreement with his own
independent counsel of his choosing and has been advised by such counsel with
respect thereto.

         For purposes of any construction or interpretation of this Agreement,
all terms and provisions thereof shall be deemed to have been mutually drafted
by both of the parties.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and date first above written in Battle Creek, Michigan.


Kellogg Company


By:  s/Richard M. Clark                    s/ Gary E. Costley   
     ---------------------------           ----------------------
Richard M. Clark                           Gary E. Costley,
Senior Vice President,                     an individual 7/7/94
General Counsel and
Secretary

Approved as to form:                       Approved as to form:

s/ Frederick P. Furth                      s/Daniel R. Shulman       
-------------------------------            ---------------------------
Frederick P. Furth,                        Daniel R. Shulman,
Counsel to                                 Counsel to
Kellogg Company                            Gary E. Costley





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