Kellogg Company Key Employee Long Term Incentive Plan

EXHIBIT 10.07 KEY EMPLOYEE LONG TERM INCENTIVE PLAN ARTICLE I
Purpose The purpose of this Key Employee Long Term Incentive Plan (the " Plan" ) is to enable Kellogg Company (the " Company" ) to offer key employees of the Company and Designated Subsidiaries (defined below) performance-based stock incentives and other equity interests in the Company and other incentive awards, thereby attracting, retaining and rewarding such key employees, and strengthening the mutuality of interests between key employees and the Company' s shareholders. ARTICLE II
Definitions For purposes of this Plan, the following terms shall have the following meanings: 2.1 " Award" shall mean any award under this Plan of any Stock Option, Reload Option, Restricted Stock, Performance Shares, Performance Units or Other Stock-Based Award. 2.2 " Board" shall mean the Board of Directors of the Company. 2.3 " Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4 " Committee" shall mean the Compensation Committee of the Board consisting of three or more Directors, none of whom shall be eligible to receive any Award pursuant to this Plan. 2.5 " Common Stock" means the Common Stock, $0.25 par value per share, of the Company. 2.6 " Designated Subsidiary" shall mean one of such subsidiaries of the Company, 80 percent or more of the voting capital stock of which is owned, directly or indirectly, by the Company, which is designated from time to time by the Board. 2.7 " Disability" shall mean Total Disability as defined in the Company' s Long Term Disability Plan. 2.8 " Disinterested Person" shall have the meaning set forth in Rule 16b-3(d)(3) as promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, or any successor definition adopted by the Commission. 2.9 " Fair Market Value" for purposes of this Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, shall mean, with respect to any date, the officially quoted closing price of the Common Stock on the


New York Stock Exchange- Composite Transactions Tape on such date, provided that if there shall be no sales of a share of Common Stock reported on such date, the Fair Market Value of the Common Stock on such date shall be deemed to be the officially quoted closing price of the Common Stock on such Composite Tape for the last preceding date on which sales of Common Stock were reported. 2.10 " Incentive Stock Option" shall mean any Stock Option awarded under this Plan intended to be and designated as an " Incentive Stock Option" within the meaning of Section 422 of the Code. 2.11 " Non-Qualified Stock Option" shall mean any Stock Option awarded under this Plan that is not an Incentive Stock Option. 2.12 " Other Stock-Based Award" shall mean an Award under Article 11 of this Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock. 2.13 " Participant" shall mean an employee to whom an Award has been made pursuant to this Plan. 2.14 " Performance Cycle" shall have the meaning set forth in Section 10.1. 2.15 " Performance Period" shall have the meaning set forth in Section 9.1. 2.16 " Performance Share" shall mean an Award made pursuant to Article 9 of this Plan of the right to receive Common Stock or cash of an equivalent value at the end of a specified performance period. 2.17 " Performance Unit" shall mean an Award made pursuant to Article 10 of this Plan of the right to receive a fixed dollar amount, payable in cash or Common Stock or a combination of both. 2.18 " Reload Option" shall have the meaning set forth in Section 6.5. 2.19 " Restricted Stock" shall mean an Award of shares of Common Stock under this Plan that is subject to restrictions under Article 7. 2.20 " Restriction Period" shall have the meaning set forth in Subsection 7.3(a). 2.21 " Retirement" shall mean termination of employment by an employee who is at least 55 years of age after at least 5 years of employment by the Company and/or a Designated Subsidiary. 2.22 " Stock Option" or " Option" shall mean any option to purchase shares of Common Stock (including Restricted Stock and Performance Share, if the Committee so determines) granted pursuant to Article 6.


2.23 " Termination of employment" shall mean a termination of service for reasons other than a military or personal leave of absence granted by the Company. 2.24 " Withholding Election" shall have the meaning set forth in Section 13.4. ARTICLE III
Administration 3.1 The Committee. The Plan shall be administered and interpreted by the Committee. 3.2 Awards. The Committee shall have full authority to grant, pursuant to the terms of this Plan, to officers and other key employees eligible under Article 5: (i) Stock Options, (ii) Restricted Stock, (iii) Performance Shares, (iv) Performance Units, and (v) Other Stock-Based Awards. In particular, the Committee shall have the authority: (a) to select the officers and other key employees of the Company to whom Stock Options, Restricted Stock, Performance Shares, Performance Units and Other Stock-Based Awards may from time to time be granted hereunder; (b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock, Performance Shares, Performance Units and Other Stock-Based Awards, or any combination thereof, are to be granted hereunder to one or more eligible employees; provided, however, that the maximum number of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock, Performance Shares, Performance Units, and Other Stock-Based Awards that may be granted to any one individual in any fiscal year shall not exceed, individually or in the aggregate, Awards to purchase or receive more than one million (1,000,000) shares of common stock; (c) to determine the number of shares of Common Stock to be covered by each such Award granted hereunder; (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder (including, but not limited to, the share price, any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Stock Option or other Award and the shares of Common Stock relating thereto, based on such factors as the Committee shall determine, in its sole discretion); (e) to determine whether, to what extent and under what circumstances grants of Options and other Awards under this Plan are to operate on a tandem basis and/or in conjunction with or apart from other cash awards made by the Company outside of this Plan;


(f) to determine whether and under what circumstances a Stock Option may be settled in cash, Stock, and/or Restricted Stock under Subsection 6.4(k); and (g) to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant. 3.3 Guidelines. Subject to Article 11 hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements relating thereto); and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Award granted in the manner and to the extent it shall deem necessary to carry this Plan into effect. Notwithstanding the foregoing, no action of the Committee under this Section 3.3 shall impair the rights of any Participant without the Participant' s consent. 3.4 Decisions Final. Any decision, interpretation or other action made or taken in good faith by the Committee arising out of or in connection with the Plan shall be final, binding and conclusive on the Company and all employees and their respective heirs, executors, administrators, successors and assigns. ARTICLE IV
Share Limitation 4.1 Shares. The maximum aggregate number of shares of Common Stock which may be issued under this Plan shall not exceed six million (6,000,000) shares (subject to any increase or decrease pursuant to Section 4.2) which may be either authorized and unissued Common Stock or issued Common Stock reacquired by the Company. If any Option granted under this Plan shall expire, terminate or be cancelled for any reason without having been exercised in full, the number of unpurchased shares shall again be available for the purposes of the Plan; provided, however, that if such expired, terminated or cancelled Option shall have been issued in conjunction with another Award, none of such unpurchased shares shall again become available for purposes of this Plan to the extent that the related Award granted under this Plan is exercised. If an Option is exercised using Common Stock already owned by the Participant exercising the Option, the number of shares that shall be treated as issued under the Plan shall be (i) the number of shares issued minus (ii) the number of shares exchanged in satisfaction of the Option Price and the number of shares so exchanged shall be added to the total number of shares of Common Stock available under the Plan. Further, if any shares of Common Stock granted hereunder are forfeited or such Award otherwise terminates without the delivery of such shares upon the lapse of restrictions, the shares subject to such grant, to the extent of such forfeiture or termination, shall again be available under this Plan.


4.2 Changes. In the event of any merger, reorganization, consolidation, recapitalization, dividend (other than a dividend or its equivalent which is credited to a Plan Participant or a regular cash dividend), Stock split, or other change in corporate structure affecting the Common Stock, such substitution or adjustment shall be made in the maximum aggregate number of shares which may be issued under this Plan, in the number and option price of shares subject to outstanding Options granted under this Plan, and in the number of shares subject to other outstanding Awards (including but not limited to Awards of Restricted Stock, Performance Shares, Performance Units and Other Stock-Based Awards) granted under this Plan, as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any Award shall always be a whole number. ARTICLE V
Eligibility 5.1 Senior officers, senior management, and key employees of the Company and its Designated Subsidiaries are eligible to be granted Options and other Awards under this Plan. Eligibility under this Plan shall be determined by the Committee. ARTICLE VI
Stock Options 6.1 Options. Stock Options may be granted alone or in addition to other Awards granted under this Plan. Each Stock Option granted under this Plan shall be of one of two types: (i) an Incentive Stock Option or (ii) a Non-Qualified Stock Option. 6.2 Grants. The Committee shall have the authority to grant to any Participant one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify shall constitute a separate Non-Qualified Stock Option. 6.3 Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422. 6.4 Terms of Options. Options granted under this Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable:


(a) Option Price. The option price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Common Stock at grant if the Stock Option is intended to be an Incentive Stock Option and shall not be less than 85% of the Fair Market Value of the Common Stock at grant if the Stock Option is intended to be a Non-Qualified Stock Option. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than ten years after the date the Option is granted, and no Non-Qualified Stock Option shall be exercisable more than ten years and one day after the date the Option is granted. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant; provided, however, that, except as provided in subsections (f) and (g) below and Article 3, unless otherwise determined by the Committee and the Committee may waive such installment exercise provisions at any time at or after grant in whole or in part, based on such factors as the Committee shall determine, in its sole discretion. (d) Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, Stock Options may be exercised in whole or in part at any time during the option term, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price in such form as the Committee may accept. If and to the extent determined by the Committee in its sole discretion at or after grant, payment in full or in part may also be made in the form of Common Stock duly owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) or Restricted Stock, or by reduction in the number of shares issuable upon such exercise based, in each case, on the Fair Market Value of the Stock on the last trading date preceding payment as determined by the Committee (without regard to any forfeiture restrictions applicable to Restricted Stock). No shares of Stock shall be issued until payment, as provided herein, therefor has been made. A Participant shall generally have the rights to dividends or other rights of a shareholder with respect to shares subject to the Option when the optionee has given written notice of exercise, has paid for such shares as provided herein, and, if requested, has given the representation described in Section 14.1. Notwithstanding the foregoing, if payment in full or in part has been made in the form of Restricted Stock, an equivalent number of shares of Common Stock issued on exercise of the Option shall be subject to the same restrictions and conditions, and during the remainder of the Restriction Period, applicable to the shares of Restricted Stock surrendered therefor. (e) Non-Transferability of Options. No Stock Option shall be transferable by the Participant otherwise than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Participant' s lifetime, only by the Participant.


(f) Termination by Death. Except for Incentive Stock Options subject to subsection (j) below, if a Participant' s employment by the Company or a Designated Subsidiary term ...