Employment Agreement - Kellogg Co. and Alan F. Harris
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the day of , 2000 (this
"Agreement"), by and between Kellogg Company, a Delaware corporation (the
"Company"), and Alan F. Harris (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the current
Company and in the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements upon a Change
of Control that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the
first date during the Change of Control Period (as defined herein) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that, commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof, the "Renewal Date"), unless previously terminated, the
Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
(c) "affiliated company" means any company controlled by,
controlling or under common control with the Company.
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(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (A) 20%
or more of either (i) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then-outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities"), if
immediately following such acquisition the W.K. Kellogg Foundation Trust and
George Gund III together with the Gund family trusts that have a common trustee
(collectively, the "Trusts") do not own, in the aggregate, more than 35% of the
Outstanding Company Common Stock or Outstanding Company Voting Securities or (B)
30% or more of either (i) the Outstanding Company Common Stock or (ii) the
Outstanding Company Voting Securities, if immediately following such acquisition
the Trusts own, in the aggregate, more than 35% of the Outstanding Company
Common Stock or Outstanding Company Voting Securities; provided, however, that,
for purposes of this Section 1(d)(1), the following acquisitions shall not
constitute a Change of Control: (a) any acquisition directly from the Company,
(b) any acquisition by the Company, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any affiliated
company, (d) any acquisition by the Trusts or (e) any acquisition by any
corporation pursuant to a transaction that complies with Sections 1(d)(3)(A),
1(d)(3)(B) and 1(d)(3)(C); or
(2) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities that were the beneficial owners of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries)
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in substantially the same proportions as their ownership immediately prior to
such Business Combination of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the Executive was
employed immediately preceding the Effective Date or at any other location less
than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
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(b) COMPENSATION. (1) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary (the "Annual Base
Salary"), which Annual Base Salary shall be paid in 12 equal monthly
installments at an annual rate at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary that has been earned but
deferred, to the Executive by the Company and the affiliated companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually, beginning no more than 12 months after the
last salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base Salary" shall
refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's or an affiliated company's annual
incentive plans, or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years prior to the Effective Date
(annualized, in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies, and programs
applicable generally to other peer executives of the Company and the affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and the affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the affiliated
companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the
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most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
the affiliated companies.
(5) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and the affiliated companies in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the affiliated companies.
(6) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Company and the
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the affiliated companies.
(8) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and the affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and the affiliated companies.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY.
The Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days
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after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or any
affiliated company (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Board
or the Chief Executive Officer of the Company that specifically
identifies the manner in which the Board or the Chief Executive Officer
of the Company believes that the Executive has not substantially
performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a), or any other action
by the Company that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial
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and inadvertent action not taken in bad faith and that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(3) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 3(a)(1)(B) or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(4) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
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SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a)
GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the
Employment Period, the Company terminates the Executive's employment other than
for Cause or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (ii) the product of (x) the highest of (I) the Annual
Bonus equal to the product of (1) the Executive's Annual Base
Salary and (2) the Executive's target Annual Bonus percentage
in effect for the year in which the Effective Date occurs, or
if higher, the year in which the Date of Termination occurs,
(II) the Recent Annual Bonus and (III) the Annual Bonus paid
or payable, including any bonus or portion thereof that has
been earned but deferred (and annualized for any fiscal year
consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the
most recently completed fiscal year during the Employment
Period, if any and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date
of Termination and the denominator of which is 365, and (iii)
any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case, to the extent not
theretofore paid (the sum of the amounts described in
subclauses (i), (ii) and (iii), the "Accrued Obligations");
and
(B) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and (y) the
higher of (I) the Recent Annual Bonus and (II) the Annual
Bonus paid or payable, including any bonus or portion thereof
that has been earned but deferred (and annualized for any
fiscal year consisting of less than 12 full months or during
which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during
the Employment Period, if any; and
(C) an amount equal to the excess of (i) the actuarial
equivalent of the benefit under the Company's or an affiliated
company's qualified defined benefit retirement plan or plans,
including any plan or arrangement maintained or sponsored in a
jurisdiction other than the United States pursuant to statute
or otherwise, in which the Executive participates (the
"Retirement Plan") (utilizing actuarial assumptions no less
favorable to the Executive than those in effect under the
Retirement Plan immediately prior to the Effective Date) and
any excess or supplemental retirement plan or plans in which
the Executive participates, including any individual contract,
agreement, letter or other arrangement to which the Executive
is a party (taking into account, without limitation, any
additional age and/or service credit that would have been
earned
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thereunder) (collectively, the "SERP") that the Executive
would receive if the Executive's employment continued for
three years after the Date of Termination (and using the
additional three years of age and service for purposes of
determining actuarial equivalency), assuming for this
purpose that all accrued benefits are fully vested and
assuming that the Executive's compensation in each of the
three years is that required by Sections 3(b)(1) and
3(b)(2), over (ii) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP as of the Date of
Termination (for purposes of this Section 5(a)(1)(C),
actuarial equivalent shall mean the approximate basis at
which insured annuities could be purchased in the open
market on the Date of Termination or, in the case of plans
where such equivalency is explicitly defined, actuarial
equivalency shall be calculated on the basis specified in
the applicable plan document; furthermore, all currency
translations shall be made based on the rate in effect on
the Date of Termination, and such rate shall apply to both
the benefit accrued on the Date of Termination, as well as
to the value of the benefit calculated that includes the
additional three years of age and service; furthermore, for
purposes of calculating actuarial equivalence of a pension
benefit (with or without the additional three years of age
and service), the Executive's eligibility to receive, and
the amount of, an immediately commencing early retirement
benefit shall be reflected in the calculation of the
actuarial equivalent benefit);
(2) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Executive shall be
deemed to be on a leave of absence from the Company and the Company
shall continue to provide welfare benefits to the Executive and/or the
Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 3(b)(4) if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and the affiliated companies and their
families, provided, however, that, if the Executive becomes reemployed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of such
period;
(3) for all purposes of the vesting and exercisability of
equity-based awards granted under the Company's stock incentive plans
and the award agreements thereunder, the Executive shall be deemed to
be on a leave of absence from the
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Company for three years after the Date of Termination and the
Executive's termination of employment from the Company shall be deemed
to occur on the third anniversary of the Date of Termination;
(4) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and provider
of which shall be selected by the Executive in the Executive's sole
discretion; and
(5) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and the affiliated companies (such
other amounts and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of the Other Benefits. The
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
affiliated companies to the estates and beneficiaries of peer executives of the
Company and the affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with
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respect to other peer executives of the Company and the affiliated companies and
their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (1) the Executive's Annual Base Salary
through the Date of Termination, (2) the amount of any compensation previously
deferred by the Executive, and (3) the Other Benefits, in each case, to the
extent theretofore unpaid. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for the Accrued Obligations and the timely payment or provision of the
Other Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts or benefits that are vested or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right or action that the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
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SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) (1) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company or the affiliated
companies to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise but determined without regard to any additional payments required
under this Section 8) (the "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this Section 8(a)(1),
if it shall be determined that the Executive is entitled to the Gross-Up
Payment, but that the Payments do not exceed 110% of the greatest amount that
could be paid to the Executive such that the receipt of the Payments would not
give rise to any Excise Tax (the "Reduced Amount"), then no Gross-Up Payment
shall be made to the Executive and the Payments, in the aggregate, shall be
reduced to the Reduced Amount.
(2) Notwithstanding the provisions of Section 8(a)(1), if the
payment of the Gross-Up Payment as provided in Section 8(a)(1) would make a
transaction entered into in connection with a Change of Control that would
otherwise be eligible for pooling-of-interests accounting treatment under APB
No. 16 ineligible for such treatment, then the following conditions shall apply:
(A) no Gross-Up Payment shall be made unless it shall be determined that a
Gross-Up Payment would have been payable pursuant to the preceding sentence
(without regard to this sentence) if the Executive had not received any Payments
that are considered to be "parachute payments" as defined in Section 280G of the
Code that consist of, or relate to, common stock or other equity interest in the
Company or any of its affiliated companies ("Equity Payments"); and (B) if a
Gross-Up Payment is permitted to be made after application of clause (A) of this
sentence, the amount of such Gross-Up Payment shall be only that amount
necessary so that after payment of all taxes (including any interest or
penalties imposed with respect to such taxes), by the Executive with respect to
Payments other than the Equity Payments, including without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment (as computed in accordance with
this clause (B)), the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments other than the Equity Payments. In
determining the Gross-Up Payment pursuant to clause (B) of the preceding
sentence, the rules for allocation of the "base amount" set forth in Question
and Answer 38 of Proposed Treasury Regulation 1.280G-1, or any successor
provision in any proposed, temporary or final regulations that may hereinafter
be promulgated, shall be applied.
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(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young LLP or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
that shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments that will not
have been made by the Company should have been made (the "Underpayment"),
consistent with the calculations required to be made hereunder. In the event the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
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(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest, and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information,
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knowledge or data relating to the Company or the affiliated companies, and their
respective businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by the Company or
the affiliated companies and which information, knowledge or data shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified other than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Executive: At the last address on file on
the Company's records.
if to the Company: Kellogg Company
One Kellogg Square
Battle Creek, MI 49016-3599
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Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such United States federal, state or local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement; provided that this Agreement
may not be terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (1) was at the request of a third party that has
taken steps reasonably calculated to effect a Change of Control or (2) otherwise
arose in connection with or anticipation of a Change of Control. From and after
the Effective Date, this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof, provided that, this
Agreement shall not supersede any provisions in such other agreement to the
extent such provisions provide for rights or benefits in addition to those
provided herein (but in no event shall the Executive be entitled to duplicate
severance benefits upon termination of employment).
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
------------------------------------------------
ALAN F. HARRIS
KELLOGG COMPANY
By
-------------------------------------
Name: Carlos M. Gutierrez
Title: Chairman and Chief Executive Officer
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