KELLOGG CO
SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
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<TYPE>EX-10.26
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<FILENAME>k67850ex10-26.txt
<DESCRIPTION>SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN
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                                                                   EXHIBIT 10.26


                                 KELLOGG COMPANY
                     SENIOR EXECUTIVE ANNUAL INCENTIVE PLAN


                                    SECTION 1
                            Establishment and Purpose

                  Kellogg Company (the "Company") hereby establishes the
"Kellogg Company Senior Executive Annual Incentive Plan" (the "Plan"). The Plan
will be submitted to the stockholders of the Company for approval at the 2002
Annual Meeting of Stockholders of the Company scheduled to be held on April 26,
2002, and will be effective retroactively to January 1, 2002 (the "Effective
Date"). The purposes of the Plan are to motivate selected senior executives
toward achievement of performance goals; encourage teamwork in various segments
of the Company; and reward performance with cash bonuses that vary in relation
to the achievement of the preestablished performance goals. The Plan replaces
the Kellogg Company Senior Executive Officer Performance Bonus Plan, which has
expired.

                                    SECTION 2
                                   Eligibility

                  The individuals who are assigned one or more of the following
titles by the Company are eligible to participate in the Plan, as determined and
selected by the Committee (as defined in Section 3 hereof): (i) Chairman, Vice
Chairman, Kellogg Company Chief Executive Officer, or Kellogg Company President;
(ii) Kellogg Company Executive Vice President; or (iii) Kellogg Company Senior
Vice President. Each individual selected for participation will be known as a
"Participant".

                                    SECTION 3
                                 Administration

                  The Plan will be administered by the Compensation Committee of
the Company's Board of Directors (the "Board"), or such other committee as the
Board may from time to time select (the "Committee"). The Committee will at all
times be composed of two or more members of the Board, each of whom qualifies as
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended ("Section 162(m)").

                  Except as limited by law or the Company's Amended and/or
Restated Certificate of Incorporation or Bylaws, and subject to the provisions
herein, the Committee will have full power and authority, to the fullest extent
required to comply with Section 162(m), to select Participants (as defined in
Section 2 hereof); determine the size of bonus awards; determine the terms,
conditions, restrictions and other provisions of bonus awards, including the
establishment of the Performance Goals (as defined in Section 4 hereof);
interpret the Plan; establish, amend or rescind guidelines, rules and
regulations for the Plan's administration; review and certify the achievement of
Performance Goals; and, subject to Section 9 hereof and the restrictions under
Section 162(m), amend the terms and conditions of the Plan, including
outstanding Award



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Opportunities (as defined in Section 4 hereof). Further, the Committee will make
all other determinations which may be necessary or advisable for the
administration and operation of the Plan. Except as to the extent prohibited by
applicable law, the Committee may delegate all or any portion of its
responsibilities and powers granted under the Plan to such other person or
entity it deems appropriate, including, but not limited to, senior management of
the Company. Any such delegation may be revoked by the Committee at any time.
All determinations and decisions of the Committee arising under the Plan will be
final, binding and conclusive upon all parties. By accepting any benefits under
the Plan, each Participant, and each person claiming under or through such
Participant, will be conclusively deemed to have indicated acceptance and
ratification of, and consent to, all provisions of the Plan and any
determination or decision under the Plan by the Company, the Board or the
Committee.

                                    SECTION 4
                       Participation and Performance Goals

                  The Committee will have the authority to select Participants
(as defined in Section 2 hereof) for cash bonus awards under the Plan for each
Measurement Period and the financial and other performance criteria
("Performance Goals") upon which such awards will be based. For purposes of the
Plan, the term "Measurement Period" means the period of one fiscal year, unless
an alternate period (such as a portion of a fiscal year or multiple fiscal
years) is otherwise selected and established in writing by the Committee at the
time the Performance Goal is established. No later than the earlier of ninety
(90) days after the commencement of the applicable Measurement Period or the
completion of 25% of such Measurement Period, the Committee will, in its
discretion, determine the Participants for such Measurement Period and establish
the Performance Goals applicable to each Participant's award.

                  Performance Goals need not be the same for all Participants.
The Performance Goals may be based on any one or more of the following measures
(or the relative change for any such measure): the Company's earnings per share,
return on equity, return on assets, return on invested capital, growth in sales
and earnings, net sales, cash flow, discounted cash flow, cumulative cash flow,
operating profits, pre-tax profits, post-tax profits, consolidated net income,
unit sales volume, economic value added, costs, production, unit production
volume, improvements in financial ratings, regulatory compliance, achievement of
balance sheet or income statement objectives, market share and total return to
stockholders (including both the market value of the Company's stock and
dividends thereon) and the extent to which strategic and business plan goals are
met.

                  With respect to each Participant, the Committee will establish
ranges of Performance Goals which correspond to various levels of cash bonus
amounts ("Award Opportunities") for the Measurement Period. Each range of
Performance Goals will include a level of performance at which one hundred
percent (100%) of the targeted bonus award ("Target Bonus Award") may be earned.
In addition, each range of Performance Goals will include levels of performance
above and below the one hundred percent (100%) performance level. The Committee
may establish minimum levels of Performance Goal achievement, below which no
bonus payment will be made to the Participant. Once established, Performance
Goals and Award Opportunities may be adjusted during the Measurement Period only
to mitigate the unbudgeted


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impact of unusual or nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time such Performance Goals and Award
Opportunities were established.

                                    SECTION 5
                         Final Bonus Award Determination

                    Awards are based on the achievement of the preestablished
Performance Goals. After the Performance Goals are established as described in
Section 4 hereof, the Committee will align the achievement of the Performance
Goals with Award Opportunities, such that the level of achievement of the
Performance Goals at the end of the Measurement Period will determine the
Participant's actual annual bonus award ("Final Bonus Award"). Final Bonus
Awards may vary above or below the Target Bonus Award, based on the level of
achievement of the preestablished Performance Goals.

                  Negative discretion may be used by the Committee to reduce the
Final Bonus Award. In no event, however, will an exercise of negative discretion
to reduce the Final Bonus Award of a Participant have the effect of increasing
the amount of a Final Bonus Award otherwise payable to any other Participant.

                                    SECTION 6
                             Final Bonus Award Limit

                  The total of all Final Bonus Awards payable to Participants
for performance in any Measurement Period will not under any circumstances
exceed one percent (1%) of the Net Income of the Company (the "Maximum Bonus
Awards Pool") for such period. For purposes of the Plan, the term "Net Income"
means the income from continuing operations of the Company and its subsidiaries,
as determined on a consolidated basis in accordance with generally accepted
accounting principles, adjusted to exclude the following: (i) all restructuring
and disposition-related charges or credits for the fiscal year, net of related
tax effect; and (ii) incremental and non-recurring integration costs and other
financial impacts, net of tax, related to the business operations of an entity
acquired by the Company.

                  The maximum Final Bonus Award any Participant can receive for
performance in any Measurement Period is three million dollars ($3,000,000). In
the event that the total of all Final Bonus Awards payable to Participants
should exceed the Maximum Bonus Awards Pool as specified above, the Final Bonus
Award of each Participant will be proportionately reduced such that the total of
all such Final Bonus Awards paid is equal to the Maximum Bonus Awards Pool.

                                    SECTION 7
                                Payment of Awards

                  If the Performance Goals established by the Committee are
satisfied and upon written certification by the Committee that the Performance
Goals have been satisfied, payment will be made in cash as soon as practicable
in accordance with the terms of the award, unless the Committee determines in
its sole discretion to reduce or eliminate Final Bonus Award



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determinations for any or all Participants, based upon any objective or
subjective criteria it deems appropriate. There is no obligation for uniformity
of treatment of Participants under the Plan.

                                    SECTION 8
                            Termination of Employment

                  Each Participant must remain employed with the Company or a
subsidiary through the last day of the Measurement Period to be considered for a
Final Bonus Award; provided, however, in the event of a Participant's death,
disability or retirement (as defined in the Kellogg Company Salaried Pension
Plan or any other retirement plan of the Company or a subsidiary in which the
individual participates) during the Measurement Period, the Participant's bonus
award will based on the portion of the Measurement Period in which the
Participant was employed, computed as determined by the Committee. In the event
that a Participant's employment is terminated for any reason other than death,
disability or retirement, the Participant's rights to a Final Bonus Award will
be forfeited; provided, however, the Committee may, in its sole discretion, pay
a prorated bonus award to the Participant for the portion of the Measurement
Period in which the Participant was employed, computed as determined by the
Committee. In the event that a Participant's employment with the Company or a
subsidiary terminates for any reason after the completion of the Measurement
Period but prior to the actual payment of the cash bonus, the balance of any
bonus which remains unpaid at the time of such termination will be payable to
the Participant, or forfeited by the Participant, in accordance with the terms
of the award granted by the Committee.

                                    SECTION 9
                            Amendment and Termination

                  The Board and the Committee each has the right to amend or
terminate the Plan at any time and in any respect, except that, unless otherwise
determined by the Board or the Committee, no amendment may be made without
stockholder approval if, and to the extent that, such approval would be required
to comply with any applicable provisions of Section 162(m). Similarly, no
amendment or termination of the Plan may alter or impair the rights of any
Participant pursuant to an outstanding award without the consent of the
Participant.

                  This Plan will expire on December 31, 2006, unless terminated
earlier by the Board or the Committee. No further awards will be made under the
Plan after termination, but termination will not affect the rights of any
Participant under any award made prior to termination.

                                   SECTION 10
                                  Miscellaneous

                  Bonus payments will be made from the general funds of the
Company and no special or separate fund will be established or other segregation
of assets made to assure payment. No Participant or other person will have under
any circumstances any interest in any particular property or assets of the
Company. The Plan will be governed by and construed in



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accordance with the laws of the State of Delaware, without regard to its
principles of conflict of laws.

                  Neither the establishment of this Plan nor the payment of any
award hereunder nor any action of the Company, the Board or the Committee with
respect to this Plan will be held or construed to confer upon any Participant
any legal right to be continued in the employ of the Company or to receive any
particular rate of cash compensation other than pursuant to the terms of this
Plan and the determination of the Committee, and the Company expressly reserves
the right to discharge any Participant whenever the interest of the Company may
so permit or require without liability to the Company, the Board or the
Committee, except as to any rights which may be expressly conferred upon a
Participant under this Plan.

                  The adoption of this Plan will not affect any other
compensation plans in effect for the Company or any subsidiary or affiliate of
the Company, nor will the Plan preclude the Company or any subsidiary or
affiliate thereof from establishing any other forms of incentive or other
compensation for the Participants.




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