KELLOGG CO
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex103_q32004-kellogg.txt
<TEXT>
                                                                 Exhibit 10.3

                               Retention Agreement

         This Retention Agreement (the "Agreement") is made and entered into as
of August 17, 2004 by and between Kellogg Company, a Delaware corporation
("Kellogg", together with its subsidiaries, divisions, affiliates and
successors, the "Company") and David Mackay ("Employee").

         NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.       Benefits.

     a.   Provided Employee remains employed with the Company through December
          31, 2005, Employee would be eligible to begin a leave of absence
          beginning December 31, 2005 and ending August 16, 2010 (the "Leave of
          Absence"), and said Leave of Absence shall commence when Employee's
          employment terminates with the Company, as provided in this Agreement.
          During the Leave of Absence, Employee would accrue vesting service
          (i.e., for retirement eligibility purposes only and not for purposes
          of calculating Employee's benefit amount) under the Kellogg Company
          Pension Plan; provided, however, that the additional pension benefit
          attributable to this provision shall be payable from the Kellogg
          Company Excess Benefit Retirement Plan. At the end of the Leave of
          Absence, Employee would be eligible to retire from the Company under
          the Kellogg Company Pension Plan, and if Employee elects to retire,
          Employee shall be eligible to receive retirement benefits which are
          provided at the time of Employee's retirement to salaried retirees of
          Kellogg in accordance with the terms of the benefit plans.

     b.   During the Leave of Absence, you would be eligible to receive the
          benefits) provided under the Kellogg Company Severance Benefit Plan,
          as amended from time to time (the "Severance Plan") at such time,
          provided that the severance pay shall be paid in equal installments
          over the Leave of Absence consistent with the Company's then-current
          payroll practices. Kellogg reserves the right to amend, modify, and/or
          terminate its benefits plans, and you shall be subject to any such
          changes, except as expressly otherwise provided in this letter. All
          other Kellogg-provided benefits (e.g., short term and long term
          disability, vacation accrual, option grants, and the Employee Stock
          Purchase Program) shall cease as of your termination date.

2.        Termination. Notwithstanding any to the contrary in this letter
agreement:

     a.   If Employee's employment is terminated by reason of Employee's death
          or disability, Employee's estate or Employee, as the case may be,
          shall be entitled to receive benefits provided under Kellogg's general
          policy for such events and, if such termination occurs after December
          31, 2005, the benefits specified in Paragraph 1 hereof.

     b.   The Company may, at any time, terminate Employee's employment under
          this Agreement with or without "Cause." Termination for "Cause" means
          termination by the Company because of (i) theft, embezzlement, or
          fraud by Employee pursuant to which the Company has suffered a loss,
          or conspiracy by Employee to commit any of the foregoing, (ii)
          incapacity on the job by reason of Employee's abuse of alcohol or
          drugs, (iii) commission by Employee of a crime involving moral
          turpitude, or an act of dishonesty by Employee in connection with the
          performance of Employee's duties hereunder, (iv) a willful and knowing
          violation by Employee of any law or regulation respecting the business
          of the Company, (v) a breach of any fiduciary duty owed by Employee to
          the Company in any material respect, (vi) breach by Employee of any of
          the provisions of this Agreement in any material respect, or (vii)
          failure of Employee to perform his duties in any material respect as
          required under this Agreement; provided, however, that in the case of
          clauses (vi) and (vii) hereof, if such breach or failure is capable of
          being cured within thirty (30) days, the Company must provide written
          notice of such breach or failure within thirty (30) days of its
          discovery thereof, and Employee shall have thirty (30) days from such
          written notice to cure such breach or failure. Upon termination of
          this Agreement pursuant to this Paragraph 2.b., Employee shall be
          entitled to receive any salary earned and not paid up to the date of
          termination, which shall be subject to set-off to the maximum extent
          permitted by law if the Company has encountered a loss by reason of
          the action permitting the Company to terminate Employee for Cause,
          and, notwithstanding any other Paragraph herein, Employee shall not be
          entitled to any further compensation. For avoidance of doubt, if
          Employee's employment is terminated for any reason prior to December
          31, 2005, Employee shall forfeit any benefits described in Paragraph
          1; provided, however, Employee shall be eligible to receive the
          benefits under the Severance Plan, subject to the terms and conditions
          thereof.

     c.   Notwithstanding any other provision in this Agreement, if (i)
          Employee's employment is terminated prior to December 31, 2005 and
          (ii) at the time of such termination, Employee qualifies for benefits
          under Section 5 of the Employment Agreement between Employee and
          Kellogg dated July 26, 2000 (the "Change of Control Agreement"), then
          Employee shall be eligible for the benefits described in Paragraph 1
          and shall immediately begin the Leave of Absence on the date of such
          termination.

3.        Covenants and Release.

     a.   Non-compete. (i) For a period of two years beginning with the date
          Employee's employment with the Company ends (the "Restricted Period"),
          Employee shall not:

          A.   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
               hereinafter defined) in the Geographic Area (as hereinafter
               defined).

          B.   directly or indirectly, permit any business, entity or
               organization which Employee, individually or jointly with others,
               owns, manages, operates, or controls, to engage in the
               manufacture, production, distribution, sale or marketing of any
               of the Products in the Geographic Area.

      (ii) For purposes of this Paragraph 3a.:

          A.   the term "Products" shall mean ready-to-eat cereal products,
               toaster pastries, cereal bars, granola bars, frozen waffles,
               crispy marshmallow squares, cookies, crackers, ice cream cones,
               fruit snacks, meat substitutes, any other grain-based convenience
               food or any other product which the Company manufactures,
               distributes, sells or markets;

          B.   the term "Geographic Area" shall mean any country in the world
               where the Company manufactures, produces, distributes, sells or
               markets any of the Products at any time during the applicable
               Restricted Period.

     b.   Non-solicitation. Employee agrees that during his employment and
          during the Leave of Absence and thereafter for a period of two years,
          Employee shall not, without the prior written consent of the General
          Counsel of Kellogg, directly or indirectly employ, or solicit the
          employment of (whether as an employee, officer, director, agent,
          consultant or independent contractor) any person who is or was at any
          time during the previous year an officer, director, representative,
          agent or employee of the Company.

     c.   Non-Disparagement. Employee agrees not to engage in any form of
          conduct or make any statements or representations that disparage,
          portray in a negative light, or otherwise impair the reputation,
          goodwill or commercial interests of the Company, or its officers,
          directors, attorneys, agents and employees. Certain Company Executives
          (as defined herein) agree not to engage in any form of conduct or make
          any statements or representations that disparage, portray in a
          negative light, or otherwise impair the reputation of Employee. For
          purposes of this Paragraph, "Certain Company Executives" means the
          members of the Executive Management Committee at the time of
          Employee's departure from the Company and for that period of time such
          individuals are employees of the Company.

     d.   Preservation of Company Confidential Information. Employee agrees that
          he shall not (without first obtaining the prior written consent in
          each instance from the Company) during the term of this Agreement or
          thereafter, disclose, make commercial or other use of, give or sell to
          any person, firm or corporation, any information received directly or
          indirectly from the Company or acquired or developed in the course of
          Employee's employment, including, by way of example only, trade
          secrets (including organizational charts, reporting relationships,
          employee information such as credentials, individual performance,
          skill sets, salaries and background information), ideas, inventions,
          methods, designs, formulas, systems, improvements, prices, discounts,
          business affairs, products, product specifications, manufacturing
          processes, data and know-how and technical information of any kind
          whatsoever unless such information has been publicly disclosed by
          authorized officials of the Company.

     e.   Release. In consideration of the compensation and benefits provided
          pursuant to this Agreement, the sufficiency of which is hereby
          acknowledged, Employee, for Employee and for any person who may claim
          by or through Employee, irrevocably and unconditionally releases,
          waives and forever discharges the Company and its respective officers,
          directors, attorneys, agents and employees, from any and all claims or
          causes of action that Employee had, has or may have, known or unknown,
          relating to Employee's employment with the Company up until the date
          of this Agreement, including but not limited to, any claims arising
          under Title VII of the Civil Rights Act of 1964, as amended, Section
          1981 of the Civil Rights Act of 1866, as amended, the Civil Rights Act
          of 1991, as amended, the Family and Medical Leave Act, the Age
          Discrimination in Employment Act, as amended by the Older Workers
          Benefit Protection Act of 1990, the Americans with Disabilities Act,
          the Employee Retirement Income Security Act; claims under any other
          federal, state or local statute, regulation or ordinance; claims for
          discrimination or harassment of any kind, breach of contract or public
          policy, wrongful or retaliatory discharge, defamation or other
          personal or business injury of any kind; and any and all other claims
          to any form of legal or equitable relief, damages, compensation or
          benefits (except rights Employee may have under the Employee
          Retirement Income Security Act of 1974 to recover any vested
          benefits), or for attorneys fees or costs. Employee additionally
          waives and releases any right Employee may have to recover in any
          lawsuit or proceeding against the Company brought by Employee, an
          administrative agency, or any other person on Employee's behalf or
          which includes Employee in any class.

4.        Miscellaneous.

     a.   Severability. If any provision of this Agreement is found by a court
          of competent jurisdiction to be unenforceable, in whole or in part,
          then that provision will be eliminated, modified or restricted in
          whatever manner is necessary to make the remaining provisions
          enforceable to the maximum extent allowable by law.

     b.   Controlling Law and Venue. Employee agrees that the laws of the State
          of Michigan shall govern this Agreement. Employee also agrees that any
          controversy, claim or dispute between the parties, directly or
          indirectly, concerning this Agreement or the breach of 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.

     c.   Entire Agreement; Amendment. Employee agrees that this Agreement, the
          Change of Control Agreement, and the Agreement between Employee and
          Kellogg dated September 1, 2003 (the "September Agreement") constitute
          the entire agreement between Employee and the Company, and that these
          agreements supersede any and all prior and/or contemporaneous written
          and/or oral agreements relating to Employee's employment with the
          Company and termination therefrom. In the event of any conflict or
          inconsistency between the terms of the September Agreement and this
          Agreement, this Agreement shall control. Employee acknowledges that
          this Agreement may not be modified except by written document, signed
          by Employee and the General Counsel of Kellogg.

     d.   Employment Relationship. Employee acknowledges and agrees that his
          employment with the Company described in this letter is an at-will
          employment relationship, and that only the General Counsel of Kellogg
          may modify this provision, and any modification must be in writing
          signed by both parties.

     e.   Taxes. Usual and customary withholding for tax purposes will be
          withheld from any payments made to Employee pursuant to this
          Agreement, to the extent required by law. All tax liability with
          respect to any and all payments or services received by Employee under
          this Agreement (other than employer withholding and employer payroll
          taxes) will be Employee's responsibility.

     f.   Counterparts. This Agreement may be executed simultaneously in one or
          more counterparts, any one of which need not contain the signatures of
          more than one party, but all such counterparts taken together shall
          constitute one and the same Agreement.

     IN WITNESS WHEREOF, the parties have executed and agreed to this
Employment Agreement on the dates provided below.

EMPLOYEE                                    KELLOGG COMPANY


By:   /s/David Mackay                       By:  /s/ Carlos M. Gutierrez
      ---------------                            -----------------------


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