<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WHIRLPOOL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
WHIRLPOOL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WHIRLPOOL LOGO
WHIRLPOOL CORPORATION
Administrative Center
2000 North M63
Benton Harbor, Michigan
49022-2692
To Our Stockholders:
The annual meeting of stockholders will be held on Tuesday, April 16, 1996, at
9:30 A.M., Chicago time, at The Assembly Room (8th floor) of Harris Trust and
Savings Bank, 111 West Monroe Street, Chicago, Illinois. You are cordially
invited to be present at the meeting.
At this meeting, stockholders will vote on the election of three directors, the
approval of the 1996 Omnibus Stock and Incentive Plan and the approval of an
amendment to the Nonemployee Director Stock Ownership Plan and will transact any
other business that may properly come before the meeting.
A stockholder may revoke a proxy at any time prior to the stockholder vote
thereof by filing with the Secretary of the Company a written revocation or duly
executed form of proxy bearing a later date, or by voting in person at the
meeting.
Whether or not you expect to attend the meeting, please complete and return the
enclosed Proxy. The prompt return of your Proxy will be appreciated as it will
save further mailing expense. Proxies of stockholders who attend the meeting and
vote in person will not be voted.
Your vote is important and much appreciated!
DAVID R. WHITWAM
DAVID R. WHITWAM
Chairman of the Board
and Chief Executive Officer March 11, 1996
<PAGE> 3
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of WHIRLPOOL CORPORATION will be held at The
Assembly Room (8th floor) of Harris Trust and Savings Bank, 111 West Monroe
Street, Chicago, Illinois, on Tuesday, April 16, 1996, at 9:30 A.M., Chicago
time, for the following purposes:
1. to elect three persons to the Company's Board of Directors; and
2. to approve the 1996 Omnibus Stock and Incentive Plan; and
3. to approve an amendment to the Nonemployee Director Stock Ownership
Plan; and
4. to transact such other business as may properly come before the meeting.
By Order of the Board of Directors
DANIEL F. HOPP
DANIEL F. HOPP
VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
MARCH 11, 1996
<PAGE> 4
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Whirlpool Corporation (the "Company") for the Annual
Meeting of stockholders to be held on April 16, 1996. Only stockholders of
record at the close of business on March 4, 1996 are entitled to notice of, and
to vote at, the meeting. The Company had 74,568,897 outstanding shares of Common
Stock as of the close of business on March 4, 1996. The Company has no other
voting securities. Stockholders are entitled to one vote per share on each
matter. Under a policy adopted by the Board of Directors in 1992, the votes of
all stockholder are to be kept permanently confidential and not disclosed except
when disclosure is required by law, when a stockholder expressly consents to
disclosure or when the proponent filing the opposition statement in a contested
election does not agree to abide by this policy. This proxy statement and the
accompanying proxy form are first being mailed to stockholders on or about March
11, 1996.
If the accompanying proxy form is signed and returned, the shares it represents
will be voted as directed on the proxy form. In the absence of direction, it is
intended that such shares will be voted FOR the nominees named herein, FOR a
proposal to approve the 1996 Omnibus Stock and Incentive Plan and FOR a proposal
to amend the Nonemployee Director Stock Ownership Plan.
A stockholder may revoke a proxy at any time prior to the voting thereof by
submitting to the Secretary of the Company a written revocation or duly executed
form of proxy bearing a later date, or by voting in person at the meeting.
The three directors to be elected at the Annual Meeting will be elected by a
plurality of the votes cast by the stockholders present in person or by proxy
and entitled to vote. Votes may be cast for or withheld for each nominee but a
withheld vote will have no effect on the outcome of the election. The
affirmative vote of holders of a majority of the outstanding Common Stock
present (whether in person or by proxy) and voting at the Annual Meeting will be
required to approve the proposal to adopt the 1996 Omnibus Stock and Incentive
Plan and the proposal to amend the Nonemployee Director Stock Ownership Plan. As
to these proposals, the calculation of the number of holders who are considered
present and voting at the meeting will include abstentions but will not include
broker non-votes.
DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors of the Company (the "Board") is presently composed of one
class of three, one class of four and one class of five directors. One class is
elected each year for a term expiring at the annual meeting in the third year
after its election. This year, there are three nominees for the class of three
directors being elected. The nominees for election this year are William D.
Marohn, Miles L. Marsh and Paul G. Stern.
------------------------
NOMINEES FOR A TERM TO EXPIRE IN 1999
<TABLE>
<S> <C>
WILLIAM D. MAROHN, 55, President and Chief Operating Officer
of the Company. Director of the Company since 1992 and [MAROHN PHOTO]
director of Rubbermaid, Inc.
</TABLE>
------------------------
<PAGE> 5
<TABLE>
<S> <C>
MILES L. MARSH, 48, Chairman of the Board and Chief Executive [MARSH PHOTO]
Officer of James River Corporation (consumer paper products).
Director of the Company since 1990 and director of GATX
Corporation and Hartmarx Corporation.
------------------------
PAUL G. STERN, 57, Partner, Thayer Capital Partners, L.L.P. [STERN PHOTO]
(private investment company). Director of the Company since 1990
and director of The Dow Chemical Company, General Instrument Corp.
and LTV Steel Corporation.
------------------------
DIRECTORS WHOSE TERM EXPIRES IN 1998
- ------------------------------------
ROBERT A. BURNETT, 68, director and former Chairman of the Board [BURNETT PHOTO]
of Meredith Corporation (publishing, television broadcasting and
residential real estate marketing and franchising; retired 1992).
Director of the Company since 1980 and director of ITT
Corporation, ITT Hartford, ITT Industries and Mid-American
Energy.
------------------------
HERMAN CAIN, 50, President and Chief Executive Officer of [CAIN PHOTO]
Godfather's Pizza, Inc. (food service industry). Director of the
Company since 1992, director of Nabisco Holdings Corp., SUPERVALU,
INC. and UtiliCorp United, Inc. and Chairman of the Federal
Reserve Bank of Kansas City.
------------------------
ALLAN D. GILMOUR, 61, former Vice Chairman of Ford Motor Company [GILMOUR PHOTO]
(cars and trucks, related parts and accessories and financial
services; retired 1995). Director of the Company since 1990 and
director of The Dow Chemical Company, DTE Energy Company, The
Prudential Insurance Company of America and US WEST, Inc.
------------------------
JANICE D. STONEY, 55, former Executive Vice President, US WEST [STONEY PHOTO]
Communications Group, Inc. (telecommunications products and
services; retired 1992). First became a director of the Company in
1987 and served until April 1994 and was then reappointed to the
Board on December 12, 1994, following a bid for political office.
Director of Premark International, Inc. and Guarantee Life
Company.
------------------------
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
DAVID R. WHITWAM, 54, Chairman of the Board and Chief Executive [WHITWAM PHOTO]
Officer of the Company. Director of the Company since 1985 and
director of PPG Industries, Inc.
------------------------
DIRECTORS WHOSE TERM EXPIRES IN 1997
- ------------------------------------
VICTOR A. BONOMO, 66, former Executive Vice President of PepsiCo, [BONOMO PHOTO]
Inc. (soft drinks, snack foods, food services and restaurants;
retired 1985). Director of the Company since 1976.
------------------------
KATHLEEN J. HEMPEL, 45, Vice Chairman and Chief Financial Officer [HEMPEL PHOTO]
of Fort Howard Corporation (paper products). Director of the
Company since 1994.
------------------------
ARNOLD G. LANGBO, 58, Chairman of the Board and Chief Executive [LANGBO PHOT0]
Officer of Kellogg Company (cereal products). Director of the
Company since 1994 and director of Johnson & Johnson.
------------------------
PHILIP L. SMITH, 62, Former Chairman and Chief Executive Officer [SMITH PHOTO]
of the Board of The Pillsbury Company (consumer foods and
beverages and other products). Director of the Company since 1982
and director of ECO Lab Corporation and U.S. Trust Corporation.
------------------------
</TABLE>
The directors have served their respective companies indicated above in various
executive or administrative positions for at least the past five years, except
for Mr. Marsh and Dr. Stern. Mr. Marsh was Chairman and Chief Executive Officer
of Pet Incorporated, a producer of specialty foods until it was acquired by The
Pillsbury Company, a subsidiary of Grand Metropolitan PLC, in February 1995.
Until October 1995, Mr. Marsh was employed by Pet as a special advisor on the
integration of Pet with Pillsbury. From 1989 to 1991 he served as President,
Chief Operating Officer and a director of Whitman Corporation, a diversified
holding company. Dr. Stern served as a director of and in various other
capacities, including as Chairman, President and Chief Executive Officer
beginning in April 1990, with Northern Telecom Limited (telecommunications
equipment and integrated office systems) until July 1994. Dr. Stern served as a
Special Partner of Forstmann Little & Co. beginning in October 1993 until
January 1996.
3
<PAGE> 7
BOARD OF DIRECTORS
The Board held six meetings during 1995. During 1995, each director attended at
least 75% of the total number of meetings of the Board and the Board committees
on which he or she served.
The Audit Committee (Mr. Marsh (Chair), Ms. Hempel, Ms. Stoney and Dr. Stern)
annually recommends independent public accountants for appointment by the Board
as auditors of the Company and certain of its majority-owned subsidiaries, makes
recommendations to the Board on the auditing process, control systems and
compliance matters and examines and makes recommendations to the Board
concerning the scope of audits and approves audit services. The Audit Committee
held four meetings in 1995.
The Human Resources Committee (Messrs. Burnett (Chair), Gilmour and Langbo and
Dr. Stern) determines the terms of employment of the Company's officers,
determines the terms and recipients of awards under the Company's 1989 Omnibus
Stock and Incentive and Performance Excellence Plans and makes recommendations
to the Board with respect to the Company's compensation plans and policies. If
the stockholders approve the 1996 Omnibus Stock and Incentive Plan, this
Committee will administer the plan. This committee held five meetings in 1995.
The Corporate Governance Committee (Messrs. Smith (Chair), Burnett, Cain and
Langbo) reviews with the Chairman of the Board recommendations concerning board
committee assignments and, with input from all Board members, the effectiveness
of overall governance practices and guidelines. This Committee also considers
new nominees proposed for the Board and will consider individuals whose names
are sent to the Committee (in care of the Chairman of the Board) by stockholders
in accordance with the provisions set forth in the Company's By-laws. This
committee held two meetings in 1995.
SECURITY OWNERSHIP
The following table presents the beneficial ownership of the only persons known
by the Company to beneficially own more than 5% of its Common Stock, based upon
a statement on Schedule 13G filed by such persons with the Securities and
Exchange Commission. Such persons have reported shared voting and dispositive
power with respect to all such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ----------------------------- ------------------ ----------
<S> <C> <C>
FMR Corp. 8,636,871 11.7%
82 Devonshire Street
Boston, Massachusetts 02109
INVESCO PLC 7,459,151 10.1%
11 Devonshire Square
London, EC2M 4YR
England
</TABLE>
4
<PAGE> 8
The following table reports beneficial ownership of Common Stock by each
director, the Chief Executive Officer and the four other most highly compensated
executive officers, and all directors and executive officers of the Company as a
group, as of February 16, 1996. Beneficial ownership includes, unless otherwise
indicated, all shares with respect to which each director or executive officer,
directly or indirectly, has or shares the power to vote or to direct voting of
such shares or to dispose or direct the disposition of such shares.
<TABLE>
<CAPTION>
SHARES SHARES UNDER
BENEFICIALLY EXERCISABLE
OWNED(1) OPTIONS(2) TOTAL PERCENTAGE
------------ ------------ ------- ----------
<S> <C> <C> <C> <C>
Victor A. Bonomo 2,400 1,800 4,200 *
Robert A. Burnett 4,160 1,200 5,360 *
Herman Cain 1,264 1,200 2,464 *
Allan D. Gilmour 3,600 1,800 5,400 *
Robert I. Frey 35,150 33,080 68,230
Kathleen J. Hempel 1,600 -0- 1,600 *
Ronald L. Kerber 35,434 25,600 61,034 *
Arnold G. Langbo 1,624 -0- 1,624 *
William D. Marohn 69,750 38,640 108,390 *
Miles L. Marsh 3,705 1,200 4,905 *
Paul D. Miller 27,428 19,520 46,948 *
Philip L. Smith 2,268 2,400 4,668 *
Paul G. Stern 3,200 1,200 4,400 *
Janice D. Stoney 1,900 2,400 4,300 *
David R. Whitwam 183,448 82,300 265,748 *
All directors and executive officers as a group
(18 persons) 457,539 255,340 712,879 *
</TABLE>
- ------------
*Represents less than 1% of the outstanding Common Stock.
(1) Does not include shares subject to currently exercisable options, which
information is set forth separately in the second column. Also, does not
include 1,246,749 shares (as of December 31, 1995) held by the Whirlpool
Savings Trust (approximately 3,380 of which are held for the accounts of
executive officers). Three individuals serve as trustees with shared voting
and investment powers.
(2) Includes shares subject to options which will become exercisable within 60
days.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The table below provides a summary of annual and long-term compensation for the
last three years of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE (1993-1995)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------- ----------
OTHER LTIP ALL OTHER
ANNUAL OPTIONS PAYOUTS COMPENSATION
NAME PRINCIPAL POSITION YEAR SALARY BONUS COMP.(1) (#) ($)(2) ($)(3)
- ------------------ ------------------------ ---- -------- ---------- -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David R. Whitwam Chairman and Chief 1995 $900,000 $ 550,000 $ -0- 45,000 $ 578,493 $ 17,004
Executive Officer 1994 850,000 1,500,000 -0- 40,000 1,072,142 16,735
1993 800,000 1,300,000 -0- 35,000 3,480,984 16,542
William D. Marohn President and Chief 1995 481,250 204,600 -0- 22,000 266,636 1,548
Operating Officer 1994 448,750 381,500 -0- 23,000 491,484 876
1993 410,000 536,300 -0- 20,000 1,662,209 691
Ronald L. Kerber Executive Vice President 1995 301,833 151,000 -0- 12,500 143,440 6,198
and Chief Technology 1994 275,500 275,500 -0- 11,000 253,169 5,437
Officer 1993 243,000 359,000 -0- 9,000 1,240,259 4,746
Robert I. Frey Executive Vice 1995 292,708 125,600 147,026 11,500 140,392 6,060
President, Chairman 1994 266,250 266,300 109,499 12,000 260,419 5,368
and Chief Executive 1993 230,417 283,700 55,332 10,000 271,006 4,792
Officer, Whirlpool
Asia Appliance Group
Paul D. Miller Executive Vice 1995 278,292 139,200 -0- 11,500 132,007 3,480
President, Latin 1994 251,792 274,900 94,141 10,000 222,320 2,993
American Appliance 1993 214,167 257,200 90,643 6,900 184,013 2,687
Group
</TABLE>
- ------------
(1) Amounts paid to Messrs. Frey and Miller represent primarily travel
reimbursement and foreign service relocation expenses, except for $63,221
received by Mr. Miller in 1994 for income tax equalization.
(2) The amounts represent payouts under long-term, equity-based compensation
programs based on long-term financial performance and stock price
appreciation as described under the caption Long-Term Incentives beginning
on page 12.
(3) Amounts represent group term life insurance premiums.
6
<PAGE> 10
STOCK OPTION GRANTS AND RELATED INFORMATION
The table below provides information on grants of stock options during 1995 for
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company.
OPTION GRANTS IN 1995
ASSUMED STOCK PRICE APPRECIATION
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR 10-YEAR
INDIVIDUAL GRANTS IN 1995 OPTION TERM(4)
--------------------------------------------------- ----------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE EXPIRATION
NAME GRANTED EMPLOYEES(1) PRICE(2) DATE(3) 0% 5%(5) 10%(6)
---- --------- ------------ -------- ---------- - -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Whitwam 45,000 6.22 $ 55.81 8-15-05 0 $ 1,579,437 $ 4,002,604
William D. Marohn 22,000 3.04 55.81 8-15-05 0 772,169 1,956,829
Ronald L. Kerber 12,500 1.72 55.81 8-15-05 0 438,733 1,111,835
Robert I. Frey 11,500 1.59 55.81 8-15-05 0 403,634 1,022,888
Paul D. Miller 11,500 1.59 55.81 8-15-05 0 403,634 1,022,888
All Optionees(7) *772,600 -- *55.78 (Avg) *2005 25,349,548 64,238,470
All Stockholders N/A N/A N/A N/A 2,693,070,253 6,824,533,818
All Optionee Gain as a % of 0.9% 0.9%
All Stockholder Gain
</TABLE>
- ------------
(1) Based on 722,600 options granted to all employees in 1995.
(2) Fair market value on the date of grant.
(3) Options generally become exercisable in installments of 40% one year after
date of the grant, 40% after two years and 20% after three years, with all
installments becoming exercisable upon a Change in Control as defined in the
1989 Omnibus Stock and Incentive Plan. A Change in Control is defined to
include the acquisition by any person or group of 25% or more of the
Company's voting securities, a change in the composition of the Board such
that persons who constituted the Board on January 1, 1992 or persons who
were approved by a majority of such Board members, or their successors,
cease to constitute a majority of the Board and approval by the stockholders
of an acquisition or liquidation of the Company.
(4) Potential pre-tax realizable value is based on the assumption that the stock
price appreciates from the exercise price at the annual rates of
appreciation shown in the table over the option term (10 years). This is a
theoretical value. The actual realized value depends on the market value of
the Company's stock at the exercise date. All calculations are based on
shares outstanding as of December 31, 1995.
(5) Per share price of Common Stock would be $90.86 assuming no stock splits or
stock dividends.
(6) Per share price of Common Stock would be $144.68 assuming no stock splits or
stock dividends.
(7) No gain to the optionees is possible without an increase in the Common Stock
price.
*707,600 shares granted 8-15-95 @ $55.81 expiration date 8-15-05
*15,000 shares granted 12-12-95 @ $54.44 expiration date 12-12-05
7
<PAGE> 11
STOCK OPTION EXERCISES AND HOLDINGS
The table below provides information on shares underlying options exercisable at
the end of 1995 and options exercised during 1995 for the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE FOR 1995
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Whitwam -0- -0- 82,300 76,000 $ 839,827 -0-
William D. Marohn -0- -0- 38,640 39,800 288,816 -0-
Ronald L. Kerber -0- -0- 25,600 20,900 280,542 -0-
Robert I. Frey 3,000 $ 87,369 33,080 20,700 443,288 -0-
Paul D. Miller -0- -0- 19,520 18,880 181,230 -0-
</TABLE>
LONG-TERM INCENTIVE AWARDS
The table below provides information regarding grants of long-term incentive
compensation awards in 1995 for the Chief Executive Officer and the four other
most highly compensated executive officers of the Company.
LONG-TERM INCENTIVE PLAN AWARDS IN 1995
<TABLE>
<CAPTION>
PERFORMANCE
PERIOD FROM ESTIMATE FUTURE PAYOUTS
GRANT UNTIL UNDER NON-STOCK PRICE BASED PLANS(3)
NUMBER MATURATION ---------------------------------------
NAME OF SHARES(1) OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ------------------------------- ------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
David R. Whitwam
Performance shares 10,043 3 years 5022 10,043 20,086
William D. Marohn
Performance shares 4,818 3 years 2409 4,818 9,636
Ronald L. Kerber
Performance shares 2,565 3 years 1283 2,565 5,130
Phantom stock(2) 30,000 8 years
Robert I. Frey
Performance shares 2,511 3 years 1256 2,511 5,022
Phantom stock(2) 20,000 8 years
Paul D. Miller
Performance shares 2,392 3 years 1196 2,392 4,784
Phantom stock(2) 20,000 13 years
</TABLE>
- ------------
(1) Performance share target awards are for a number of "contingent shares" and
are based on a participant's base salary and the market price of the Common
Stock. Final awards are determined by multiplying the number of contingent
shares by 0% to 200%, based on the return on equity during the performance
cycle. At the time of payout the value of contingent shares is based on the
market price of Common Stock. All awards identified in this table were made
pursuant to the Company's 1989 Omnibus Stock and Incentive Plan.
(2) Shares of phantom stock were awarded under the Career Stock Plan pursuant to
the 1989 Omnibus Stock and Incentive Plan as described on page 13.
8
<PAGE> 12
(3) Estimated future payouts on performance shares are predicated upon the
achievement of corporate return on equity goals over the period from January
1, 1995 to December 31, 1997. For each performance cycle, performance goals
are identified at which 100% of target awards are paid. In addition, the
achievement of performance levels below target (down to 50%) result in
payment of the threshold amount and the achievement of performance levels
above target (up to 200%) results in payment of the maximum amount. Future
payouts, if any, will be made in Common Stock, cash or a combination of
both, as determined by the Human Resources Committee of the Board of
Directors. If all or any portion of the award is paid in cash, the amount
will be determined by multiplying the final number of shares earned by the
percentage of the award to be paid in cash and multiplying this calculation
by the market price of the Common Stock at the end of the performance
period. Payments may be deferred with the Committee's consent.
The Company has agreements with its executive officers which provide severance
benefits if, within two years following a Change in Control, the executive
officer's employment is terminated (other than by reason of death or retirement)
either by the Company, other than for cause (as defined) or disability, or by
the officer for good reason (as defined). Benefits include continuation of
salary for at least 90 days after notification of termination of employment,
severance pay equal to 2.90 times includible compensation (generally, average
annual gross income from the Company for the five years preceding the Change in
Control) and under certain circumstances, continued participation for up to
three years in the 401(k) Plan and in retirement, insurance and other employee
benefit plans. The agreements may be terminated at the end of any year upon 90
days notice, but not for 24 months after a Change in Control. A Change in
Control is defined to include the acquisition by any person or group of 25% or
more of the Company's voting securities, a change in the composition of the
Board such that persons who constituted the Board on January 1, 1992 ("the
Incumbent Board") or persons who were approved by a majority of such Board
members or their successors on the Incumbent Board cease to constitute a
majority of the Board and approval by the stockholders of an acquisition or
liquidation of the Company.
The Company's non-contributory defined benefit retirement plan (the "Retirement
Plan") covers substantially all of its U.S. based salaried employees. Upon
reaching the normal retirement age of 65, each vested participant is eligible to
receive monthly installments for life equal to 2% of annual base salary,
averaged over the 60 consecutive calendar months during which pay was highest
out of the last 120 months completed before age 65, for each year of credited
service (up to a maximum of 30 years). For participants with five or more years
of service reduced benefits are payable upon early retirement or termination of
employment after 55. For five years following a Change in Control, the Company
may not terminate the plan or amend or merge it with another plan in a manner
which would reduce benefits. If the Retirement Plan is terminated (including a
termination by operation of law) during this five-year period, any assets held
under the plan in excess of the amount needed to fund accrued benefits would be
used to provide additional benefits to plan participants. The Company also has
supplemental retirement plans which (i) provide to certain employees, including
executive officers, additional benefits generally similar to those under the
Retirement Plan but based upon an average of the five highest total amounts of
bonuses paid from the Company's bonus plans during the ten years prior to
retirement and (ii) maintain benefits at the levels set forth in the table below
which are otherwise limited under the Retirement Plan by the Employment
Retirement Income Security Act of 1974.
9
<PAGE> 13
RETIREMENT BENEFITS
The following table sets forth the estimated annual pension benefits payable
under the Retirement Plan and supplemental plans (as described above) upon
retirement at age 65 after selected periods of service.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFITS AT AGE 65*
- ----------------------------------------------------------------------------------------------
COVERED 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 600,000 $ 60,000 $120,000 $180,000 $240,000 $ 300,000 $ 360,000
800,000 80,000 160,000 240,000 320,000 400,000 480,000
1,000,000 100,000 200,000 300,000 400,000 500,000 600,000
1,200,000 120,000 240,000 360,000 480,000 600,000 720,000
1,400,000 140,000 280,000 420,000 560,000 700,000 840,000
1,600,000 160,000 320,000 480,000 640,000 800,000 960,000
1,800,000 180,000 360,000 540,000 720,000 900,000 1,080,000
2,000,000 200,000 400,000 600,000 800,000 1,000,000 1,200,000
</TABLE>
- ------------
*The amounts set forth in the table are on the basis of a straight life
annuity and are not subject to reduction for Social Security benefits or
other payments. The maximum number of years of service for which pension
benefits accrue is 30. Messrs. Whitwam, Marohn, Kerber, Frey and Miller had
approximately 28, 32, 5, 12 and 8 years, respectively, of eligible service
at December 31, 1995, and their covered compensation under the plans for
1995 was equal to the base salary and bonus set forth in the Summary
Compensation Table.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual fee of $24,000
and $1,000 for each Board and committee meeting attended ($1,500 if
chairperson). A nonemployee director may elect to defer any portion of director
compensation until he or she ceases to be a director, at which time payment is
made in a lump sum or in monthly or quarterly installments. Interest on deferred
amounts accrues quarterly at a rate equal to the prime rate in effect from time
to time. Each director may elect to relinquish all or a portion of the annual
fee, in which case the Company may at its sole discretion then make an award of
up to $1 million to a charitable organization upon the director's death. Under
the program, the election to relinquish compensation is irrevocable and the
Company may choose to make contributions in the director's name to as many as
three charities. Each director may also elect to have a portion of the annual
fee used to purchase term life insurance in excess of that described in the next
paragraph.
Each nonemployee director, following retirement from the Board at age 70, or
earlier if approved by the Board, receives a monthly retirement benefit of
one-tenth of the annual director's fee in effect at the time of such retirement,
for a period of months equal to such director's months of service (not to exceed
120). This benefit is paid in a lump sum or on a monthly or quarterly basis at
the election of the director. The Company provides each nonemployee director who
elects to participate with term life insurance while a director in an amount
equal to one-tenth of the annual director's fee times the same number of months
and a related income tax reimbursement payment. The Company also provides each
nonemployee director with travel accident insurance of $1 million with the
premiums paid by the Company and directors are reimbursed for the related income
tax. For evaluation purposes, appliances sold by the Company, are made available
to each nonemployee director for use at home, and the director receives an
income tax reimbursement payment to compensate for any additional tax
obligation. The cost to the Company of this arrangement in 1995 (based on
distributor price of products and delivery, installation, and service charges)
did not exceed $6,500 for any one nonemployee director or $10,000 for all
nonemployee directors as a group.
The Company also has a Nonemployee Director Stock Ownership Plan the material
terms of which are described under the caption "Nonemployee Director Stock
Ownership Plan" beginning on page 23.
10
<PAGE> 14
HUMAN RESOURCES COMMITTEE REPORT ON COMPENSATION AWARDS
The Human Resources Committee of the Board of Directors has furnished the
following report on executive compensation for 1995:
Whirlpool Corporation is dedicated to global leadership and to delivering
superior stockholder value. The Company has established an overall objective to
drive high total stockholder returns by performing consistently in the top 25
percent of large publicly-held corporations and by achieving and sustaining high
levels of return on equity. The Company believes attaining these objectives will
result in significant stockholder value creation during the 1990s and beyond.
Whirlpool's executive compensation philosophy is designed to support the
attainment of these objectives by attracting and retaining the best possible
management talent and by motivating these employees to achieve business and
financial goals which create value for stockholders. The philosophy is centered
around the following three points:
- Compensation should be incentive driven with both short- and long-term
focus;
- More pay should be at risk than with the average company (i.e., lower
base salaries with higher incentive rewards for outstanding performance);
and
- Components of compensation should be tied to increasing stockholder
value.
The Committee is responsible for the design, administration and effectiveness of
the compensation plans for management employees, including senior executives.
SALARY
Salary levels and salary increase guidelines are based on competitive market
reviews conducted with the assistance of outside consultants. Comparison
companies are blue chip companies that are similar to the Company in a variety
of respects, such as companies that compete with the Company; tend to have
national and international business operations; or are similar in sales volumes,
market capitalizations, employment levels, lines of business, and business
organization and structure. This group ("peer group") of companies is used to
define the market for each component of pay as well as total compensation. The
peer companies chosen for the competitive market review are not entirely the
same as those that comprise the S&P Household Furniture and Appliance Group
shown in the Performance Graph because the Committee believes that the Company's
most direct competitors for executive talent are not necessarily limited to the
companies included in the published industry index. Base salary for Mr. Whitwam
and other executive officers is targeted such that the midpoint of the salary
range is approximately 90% of the base salaries of officers in the peer group
companies. Base salary increases for the year ranged between 5.3 and 9.1% for
the named executive officers. Mr. Whitwam received a 5.9% salary increase on
January 1, 1995. The increases reflected both moves in market salaries as well
as the executives' individual performance (as discussed below) against specific
objectives. With respect to Mr. Whitwam's individual performance objectives
during 1994, the Committee assessed his performance in the areas of leadership,
managerial and organizational effectiveness, value creation, the Corporation's
overall financial performance and executive talent development. The Committee
determined that Mr. Whitwam's overall performance in these areas was strong. No
specific weight was attributed to any specific objectives in determining the
base salary increases for Mr. Whitwam and the other executives.
ANNUAL INCENTIVE COMPENSATION
The Performance Excellence Plan ("PEP") provides all regular full-time exempt
employees with an annual incentive designed to focus their attention on
stockholder value creation, drive performance in support of this goal and other
business goals, and reflect individual performance (except for designated
executive officers). Target awards ranging from 10% to 100% of base salary are
established by the Committee.
11
<PAGE> 15
The current primary financial performance measures are return on equity ("ROE")
and return on net assets based on the Committee's belief that improving such
measures correlates to increasing value to stockholders. The Committee has the
discretion to adopt performance goals in place of or in addition to those
disclosed above.
Except for designated executive officers, achievement of individual performance
goals is a factor in determining PEP payouts. Financial performance and
individual performance are utilized in calculating final awards. For employees
who are not executive officers, the maximum bonus using this formula is 2.25
times incentive target.
Unlike other employees, individual performance cannot be recognized under PEP
for designated executive officers because of Section 162(m) of the Internal
Revenue Code (discussed further at the end of this report). Because the
Committee strongly believes that individual performance assessment has been and
will continue to play a critical role in driving the Company's successful
performance, the Committee adopted in 1994 the Executive Officer Bonus Plan
("EOBP") which provides the Committee with discretion to grant bonus payouts to
designated executive officers in recognition of strong individual performance.
In 1995, only Messrs. Whitwam and Marohn were designated as executive officers
for purposes of PEP and eligible to participate in EOBP.
The PEP plan is designed to provide total direct compensation that is 10% above
the median of the peer group when the target level of stretch performance is
achieved. The plans utilized for designated executive officers are designed to
achieve the same compensation objective.
No PEP payout was made to Mr. Whitwam for 1995 because ROE failed to meet the
threshold level set for him by the Committee at the beginning of the year. Mr.
Whitwam did receive an award from EOBP based on the Committee's assessment that
his individual performance in the areas of leadership, managerial and
organizational effectiveness, value creation, strategy deployment and executive
talent development was strong. However, the Committee required this award to be
deferred in order to preserve the deductibility of the compensation under
Section 162(m). The financial performance measures used to determine PEP payouts
for Messrs. Marohn, and Kerber were based 100% on ROE. The PEP payouts for
Messrs. Frey and Miller were based 50% on ROE and 50% on business unit results.
The Committee determined that ROE was at threshold for all individuals except
Mr. Whitwam. Business unit results for Mr. Frey were slightly above threshold
and business unit results for Mr. Miller were at threshold.
LONG-TERM INCENTIVES
Our long-term incentive programs are comprised of stock options, the Executive
Stock Appreciation and Performance Program and the Career Stock Plan, all
pursuant to the Company's 1989 Omnibus Stock and Incentive Plan. Grants under
both the stock option and Executive Stock Appreciation and Performance programs
are typically made each year. The long-term incentive programs are intended to
provide rewards to executives only if significant additional value is created
for stockholders over time. Further, these stock-based plans are designed to
encourage a significant ownership interest in the Company, to help assure that
the interests of the executives are closely aligned to those of other
stockholders and to provide incentives for the executives to remain with the
Company.
STOCK OPTIONS--Option grants in 1995 were made based on our analysis of
competitive award sizes, along with adjustments reflecting individual
performance as evaluated by the Committee with respect to the Chief Executive
Officer, and by the Chief Executive Officer as approved by the Committee with
respect to the other four named executive officers. In making final awards, the
Committee considered the optionee's scope of responsibility and opportunity to
affect the Company's future success, strategic and operational goals, individual
contributions and the number of options previously awarded and currently held.
Grants were calculated based on the fair market value of stock at the time of
grant.
12
<PAGE> 16
Mr. Whitwam's 1995 option grant, as noted in the Summary Compensation Table, was
made separately and at the sole discretion of the Committee primarily based on
its competitiveness with the marketplace, but also taking into account the
Committee's assessment of his individual performance.
EXECUTIVE STOCK APPRECIATION AND PERFORMANCE PROGRAM ("ESAP")--ESAP provides
senior management with incentives to significantly improve the long-term
performance of Whirlpool and increase stockholder value over time. The
compensation opportunities under the Program are tied directly to the financial
performance of Whirlpool over a preset period, normally three-year periods
beginning each January 1. In combination with other elements of compensation,
award sizes are designed to provide competitive total compensation that exceeds
the market by approximately 10% when stretch target performance is met. Payouts
are based on achieving certain ROE targets over the performance period.
The contingent shares granted to Mr. Whitwam in 1995 as disclosed in the
Long-Term Incentive Plan Awards table were calculated based on the competitive
objective for ESAP target award sizes and will result in a payout after December
31, 1997 if pre-established ROE goals are achieved. For the cycle that began in
1993 and ended in 1995, Whirlpool performance, using ROE, was slightly below the
target established at the beginning of the performance cycle. As a result,
payouts disclosed in the Summary Compensation Table are also slightly below
target.
CAREER STOCK PLAN--In 1995, the Career Stock Plan (the "Plan") was established
pursuant to the Company's 1989 Omnibus Stock and Incentive Plan. Under the Plan,
one-time grants of phantom stock were awarded to select key executives as a
means of encouraging long-term retention. Recipients and award sizes were based
on subjective determinations relating to a broad range of factors affecting
retention. The shares do not represent an equity interest in the Company and no
voting rights attach to the shares until and unless they are distributed to the
participant. The value of a share of Career Stock on any given date is equal to
the fair market value of a share of Common Stock on that date. Recipients of
Career Stock will receive one share of Common Stock for each share of phantom
stock on a one-for-one basis upon retirement after attaining the age of 60 and
subject to certain non-competition provisions in the contract. The ages of
Messrs. Kerber, Frey and Miller, who were recipients of phantom stock awards,
were 52, 52 and 47, respectively, as of December 31, 1995.
OWNERSHIP GUIDELINES
In 1995, management adopted with the Committee's approval, stock ownership
guidelines to support the objective of increasing the amount of stock owned by
the most senior group of executives (approximately 100 individuals). The
guidelines for stock ownership are based on an individual's level in the
organization and range from seven times base salary for the CEO to one times
base salary for other executives. Currently, ownership by Mr. Whitwam and the
other executive officers exceeds their minimum guidelines.
TAX CODE LIMITATION ON EXECUTIVE COMPENSATION DEDUCTIONS
In 1993, Congress amended the Internal Revenue Code to impose a $1 million
deduction limit on compensation paid to executives named in the compensation
section of the proxy statements of public companies, subject to certain
transition rules and exceptions for non-discretionary performance based plans
approved by stockholders.
The Committee intends to preserve the tax deductibility of executive
compensation to the extent practicable while focusing on consistency with its
compensation policies, the needs of the Company and stockholder interests. To
that end, the Company sought and received stockholder approval of PEP in 1994
and is currently seeking shareholder approval of a new Omnibus Plan.
13
<PAGE> 17
In addition, the Committee retains the discretion to reward strong individual
performance of designated executive officers under the EOBP. The Committee
believes this ability to exercise discretion is in the best interest of the
Company and its stockholders and outweighs the need to qualify the EOBP so that
amounts paid from this plan are exempt from the deductibility limits of Section
162(m). Accordingly, pay for individual performance under EOBP will generally
not qualify under Section 162(m), and may not be fully deductible. However,
because Mr. Whitwam's 1995 EOBP award was deferred, this award will be fully
deductible by the Company if paid in a year in which Mr. Whitwam is not a
covered participant at the end of such year.
SUMMARY
We, the Human Resources Committee of Whirlpool, believe a strong link exists
between executive pay and performance at Whirlpool.
Mr. Robert A. Burnett (Chairman)
Mr. Allan D. Gilmour
Mr. Arnold G. Langbo
Dr. Paul G. Stern
14
<PAGE> 18
PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative total
stockholder return on the Company's Common Stock with the cumulative total
return of Standard & Poor's ("S&P") Composite 500 Stock Index and the cumulative
total return of the S&P Household Furniture & Appliance Group Index for the
years 1991 through 1995.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
WHIRLPOOL CORPORATION, S&P 500 INDEX AND
S&P HOUSEHOLD FURNITURE & APPLIANCE GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P HOUSE-
(FISCAL YEAR COVERED) WHIRLPOOL S&P 500 HOLD
<S> <C> <C> <C>
12/31/90 100.00 100.00 100.00
12/31/91 170.81 130.34 147.38
12/31/92 201.43 140.25 165.94
12/31/93 306.29 154.33 238.82
12/31/94 236.78 156.42 195.15
12/31/95 259.16 214.99 237.71
</TABLE>
Assumes $100 invested on December 31, 1990 in Whirlpool Common Stock, S&P 500
and S&P Household Furniture & Appliance Group.
- ------------
* Cumulative total return is measured by dividing (1) the sum of (a) the
cumulative amount of the dividends for the measurement period, assuming
dividend reinvestment, and (b) the difference between share price at the end
and the beginning of the measurement period.
15
<PAGE> 19
1996 OMNIBUS STOCK AND INCENTIVE PLAN
On February 20, 1996, the Board of Directors adopted, subject to shareholder
approval, the 1996 Omnibus Stock and Incentive Plan (the "1996 Plan") to allow
the Company to continue making stock based awards as part of the Company's
compensation. The 1996 Plan is intended to succeed the 1989 Omnibus Stock and
Incentive Plan (the "1989 Plan") which has an insufficient number of issuable
shares remaining to support the Company's compensation needs. The number of
shares of the Company's Common Stock issuable under the 1996 Plan is 4,000,000.
The 1996 Plan is generally consistent in substance with the 1989 Plan. The 1996
Plan also provides for deferral of payment of performance awards at the election
of participants. The 1996 Plan continues to provide for incentive stock options,
non-statutory stock options and stock appreciation rights.
The Board believes that, like the 1989 Plan, the 1996 Plan will successfully
advance the Company's long-term financial success by permitting it to attract
and retain outstanding executive talent and motivate superior performance by
encouraging and providing a means for executives to obtain an ownership interest
in the Company.
The affirmative vote of the holders of a majority of the shares of Common Stock
present at the annual meeting of stockholders, in person or by proxy, is
necessary for approval of the 1996 Plan. Unless such vote is received, the 1996
Plan will not become effective.
The complete text of the 1996 Plan is set forth in Exhibit A hereto and should
be read in its entirety by stockholders. The following description of the 1996
Plan is qualified in its entirety by reference to Exhibit A.
ADMINISTRATION AND ELIGIBILITY
The 1996 Plan will be administered by a committee (the "Committee") which shall
consist of two or more directors designated by the Board of Directors of the
Company, each of whom shall be a "disinterested person" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act") or any similar rule which may subsequently be in effect ("Rule 16b-3") and
each of whom is an "outside director" within the meaning of Internal Revenue
Code Section 162(m)(4)(c)(i) and the regulations promulgated thereunder. Since
the Human Resources Committee currently satisfies such requirements, the Board
intends to appoint the Human Resources Committee to administer the 1996 Plan.
The 1996 Plan provides that the Company will fully indemnify members of the
Committee against losses, costs, expenses and liabilities arising from actions
taken or failure to act under the 1996 Plan. The Committee is authorized from
time to time to grant awards under the 1996 Plan to such key employees
(including executive officers) of the Company and its subsidiaries as the
Committee, in its discretion, selects. The Committee is authorized to delegate
any of its authority under the 1996 Plan to such persons as it deems appropriate
(such as officers of the Company) to the extent such action would not prevent
the 1996 Plan from complying with Rule 16b-3 or Internal Revenue Code Section
162(m)(4)(c)(i). Such shares will be made available from authorized but unissued
stock or from stock held in the treasury.
For each of 1993, 1994 and 1995, the Company made awards to an average of 424
employees, covering an average of approximately 581,800 shares per year under
the 1989 Original Plan. However, these awards are not necessarily indicative of
the number of participants or the number of awards which might be made under the
proposed 1996 Plan. Therefore, it is not possible at this time to identify the
persons to whom awards will be granted, or would have been granted if the 1996
Plan had been in effect during 1995, or to state the form or value of any such
awards.
The aggregate number of shares of the Company's Common Stock issuable under all
awards under the 1996 Plan is 4,000,000. The maximum number of shares of Common
Stock issuable pursuant to the exercise of stock options under the Plan is
3,750,000. The maximum number of shares of Common Stock issuable under
restricted stock or restricted stock equivalent awards under the Plan
16
<PAGE> 20
is 1,000,000. The maximum number of shares of Common Stock that a participant
may receive upon exercise of all stock options and stock appreciation rights
under the Plan is 600,000. The maximum number of shares of Common Stock that a
participant may receive in any calendar year pursuant to performance awards,
restricted stock awards, and restricted stock equivalent awards is 300,000.
OPTIONS AND APPRECIATION RIGHTS
The 1996 Plan authorizes the Committee to grant to key employees options to
purchase the Company's Common Stock which may be in the form of statutory stock
options ("ISOs", which term includes "incentive stock options", as defined in
the Internal Revenue Code of 1986 (as it may be amended from time to time), and
any type of tax-qualified option which may subsequently be authorized) or in the
form of non-statutory options. The exercise price of options granted under the
1996 Plan (subject to amendment as discussed herein under the caption "Terms of
the 1996 Plan; Amendment and Adjustment") may not be less than 100% of the fair
market value of such stock at the time the option is granted. Fair market value
on any given date for this and other purposes of the 1996 Plan will be the mean
between the highest and the lowest sale prices reported on the New York Stock
Exchange Composite Transactions Table on such date or the last previous date
reported (or, if not so reported, on any domestic stock exchange on which the
Company's Common Stock is then listed); or, if the Company's Common Stock is not
listed on a domestic stock exchange, the mean between the closing high bid and
low asked prices thereof as reported by the Nasdaq Stock Market on such date or
the last previous date reported (or, if not so reported, by the system then
regarded as the most reliable source of such quotations); or, if the foregoing
do not apply, the fair value as determined in good faith by the Committee or the
Board of Directors.
The 1996 Plan permits optionees, with certain exceptions, to pay the exercise
price of options in cash, Common Stock of the Company (valued at its fair market
value on the date of exercise and including stock received upon exercise of
options or stock appreciation rights under any Company option plan) or a
combination thereof. Accordingly, any optionee who owns any Company Common Stock
may generally, by using stock in payment of the exercise price of an option,
receive, in one transaction or a series of essentially simultaneous
transactions, without any cash payment of the purchase price, (i) Company Common
Stock equivalent in value to the excess of the fair market value of the shares
subject to exercised option rights over the purchase price specified for such
shares in the option, plus (ii) a number of shares equal to that used to pay the
purchase price. Cash received by the Company upon exercise of options will
constitute general funds of the Company.
In the event that a participant ceases to be an employee of the Company or its
subsidiaries due to death, disability or retirement, or with the consent of the
Committee, each outstanding option held by such participant which is then
exercisable will remain exercisable for the period set forth in the option
grant; provided that non-statutory options may be exercised up to one year after
the death of a participant, despite any earlier expiration date set forth in the
option grant. In all other cases, all options (whether or not then exercisable)
will expire upon termination of a participant's employment.
The 1996 Plan also authorizes the Committee to grant appreciation rights to key
employees (including executive officers). An appreciation right entitles the
grantee to receive upon exercise the excess of (a) the fair market value of a
specified number of shares of the Company's Common Stock at the time of exercise
over (b) a price specified by the Committee which may not be less than 100% of
the fair market value of the Common Stock at the time the appreciation right was
granted (subject to amendment as discussed herein under the caption "Terms of
the 1996 Plan, Amendment and Adjustment"). The Company will pay such amount to
the holder in the form of the Company's Common Stock (valued at its fair market
value on the date of exercise), cash or a combination thereof, as determined by
the Committee.
Appreciation rights may be either unrelated to any option or an alternative to a
previously or contemporaneously granted option. Appreciation rights granted as
an alternative to a previously or
17
<PAGE> 21
contemporaneously granted option will entitle the optionee, in lieu of
exercising the option, to receive the excess of the fair market value of a share
of the Company's Common Stock on the date of exercise over the option price
multiplied by the number of shares as to which such optionee is exercising the
appreciation right. If an appreciation right is an alternative to an option,
such option shall be deemed canceled to the extent that the appreciation right
is exercised and the alternative appreciation right shall be deemed canceled to
the extent that such option is exercised.
PERFORMANCE AWARDS
The 1996 Plan authorizes the Committee to grant performance awards to key
employees in the form of either grants of performance shares (each performance
share representing one share of the Company's Common Stock) or performance units
representing an amount established by the Committee at the time of the award
(which amount may, without limitation, be equal to the fair market value of one
share of the Company's Common Stock). Performance awards are credited to a
participant's performance account when awarded and are earned over a performance
period (which shall not be less than one year) determined by the Committee at
the time of the award. There may be more than one performance award in existence
at any one time and the performance periods may differ. At the time a
performance award is made, the Committee will establish superior and
satisfactory performance targets measuring the Company's performance over the
performance period. The portion of the performance award earned by the
participant will be determined by the Committee, based on the degree to which
the superior performance target is achieved. No performance awards will be
earned by the participant unless the satisfactory performance targets are met.
When earned, performance awards will be paid in a lump sum or installments in
cash, Common Stock or a combination thereof as the Committee may determine.
Participants may elect during the performance period to defer payments of
performance awards. The Committee is authorized to determine yields for any
deferred amounts and to establish a trust to hold any deferred amounts or
portions thereof for the benefit of the participants.
In the event that a participant ceases to be an employee of the Company or its
subsidiaries during the performance period due to death, disability or
retirement, or with the consent of the Committee, the Committee may authorize
payment of all or a portion of the amount the participant would have been paid
if such participant had continued as an employee to the end of the performance
period. In all other cases, all unearned performance awards will be forfeited.
RESTRICTED STOCK OR RESTRICTED STOCK EQUIVALENTS
The 1996 Plan authorizes the Committee to grant restricted Common Stock of the
Company or restricted stock equivalents to key employees with such restriction
periods as the Committee may designate at the time of the award; provided,
however, that such restriction periods shall be at least three years for
time-based restrictions and one year for performance-based restrictions. Stock
certificates evidencing restricted shares will be held by the Company and
restricted shares may not be sold, assigned, transferred, pledged or otherwise
encumbered during the restriction period for restricted shares. It is presently
anticipated that the terms of the award agreement will provide that during the
restriction period, the Committee will retain custody of any distributions
(other than regular cash dividends) made or declared with respect to restricted
shares. Other than these restrictions on transfer, the participant will have all
the rights of a holder of such shares of restricted stock. In lieu of restricted
stock the Committee may grant restricted stock equivalents. Each restricted
stock equivalent would represent the right to receive an amount determined by
the Committee at the time of award, which value may be equal to the full
monetary value of one share of Common stock.
In the event that a holder of restricted stock or restricted stock equivalent
ceases to be employed by the Company or any subsidiary due to death, disability,
or with the consent of the Committee, the
18
<PAGE> 22
restrictions will lapse on a number of shares or share equivalents determined by
the Committee, but not less than a pro rata number of shares or share
equivalents based on the portion of the restriction period for which the
participant remained an employee. In all other cases, all restricted shares or
restricted stock equivalents will be forfeited to the Company. The maximum
number of shares of Common Stock which may be issued pursuant to restricted
stock or restricted stock equivalent awards under the Plan is 1,000,000 shares
or the cash equivalent thereof.
LOANS
The Committee may provide in any option grant that the Company or one of its
subsidiaries may make loans to finance the exercise of such option. The
principal amount of any loan will not exceed the purchase price of the shares of
Common Stock to be acquired upon exercise of any option plus the estimated or
actual amount of taxes payable by the optionee as a result of such exercise. The
Committee may in its discretion prescribe, or may empower the Company or any
such subsidiary to prescribe, the other terms and conditions (including but not
limited to the interest rates, maturity date and whether the loan will be
secured or unsecured) of any loan. Interest rates on such loans will be
comparable to generally prevailing rates charged by unaffiliated lenders for
loans of a similar nature and maturity.
TERMS OF GRANTS
The term of each stock option and appreciation right will be as determined by
the Committee on the date of the awards. ISOs may be granted for terms of not
more than ten years from the date of grant, and the term of non-statutory
options will be determined by the Committee at the time of the award (subject to
amendment as discussed herein under the caption "Terms of the 1996 Plan;
Amendment and Adjustment").
Awards granted under the 1996 Plan generally will not be transferable, except by
will and the laws of descent and distribution. However, the Committee may grant
to participants awards that may be transferrable (other than incentive stock
awards) subject to terms and conditions established by the Committee.
Participants who leave the Company holding unexercised stock options or
appreciation rights, unearned performance awards or shares of restricted stock
may forfeit such awards if they fail to honor consulting or noncompetition
obligations to the Company.
The 1996 Plan authorizes the Committee to grant awards to participants who are
employees of foreign subsidiaries or foreign branches of the Company in
alternative forms, other than stock options, appreciation rights, performance
awards or awards of restricted stock described above, that approximate the
benefits such participant would have received if the award were made in the
forms described above.
AWARD CONTRACTS
All awards granted under the 1996 Plan will be evidenced by written agreements
between the Company and the participant which may include such additional terms
and conditions not inconsistent with the 1996 Plan as the Committee may specify.
It is presently anticipated that the option and stock appreciation right forms
to be used in granting options and appreciation rights under the 1996 Plan will
be substantially the same as those currently approved for use under the 1989
Plan, subject to the Committee's right to change such forms at any time. Under
the terms of the option and stock appreciation right forms currently in use
under the 1989 Plan, options, in general, become exercisable in installments of
40% of the shares subject to the option one year after the date of grant, an
additional 40% after two years and the final 20% after
19
<PAGE> 23
three years. However, such option forms provide for all installments of
outstanding options to become exercisable in certain circumstances if (i) any
person becomes a beneficial owner (including proxies to vote for the election of
directors) of 25% or more of the voting power of the Company's outstanding stock
or (ii) there is a solicitation of proxies which results in certain
extraordinary transactions or events. In addition, under the terms of the 1989
Plan, a holder may not exercise options and appreciation rights after
termination of employment with the Company or any of its subsidiaries for any
reason other than death, disability or retirement, or with the consent of the
Committee, in which case the holder's representative or the holder may exercise
an option at any time prior to its expiration date.
TERMS OF THE 1996 PLAN; AMENDMENT AND ADJUSTMENT
No awards may be granted under the 1996 Plan after December 31, 2005. The 1996
Plan may be terminated by the Board of Directors of the Company or by the
Committee at any time with respect to options and appreciation rights which have
not been granted. In addition, the Board of Directors or the Committee may amend
the 1996 Plan from time to time, without the authorization or approval of the
Company's stockholders, but no amendment shall impair the rights of the holder
of any award without such holder's consent. Any such amendment could increase
the cost of the 1996 Plan to the Company. However, neither the Board nor the
Committee may amend the 1996 Plan without the approval of the Company's
stockholders (to the extent such approval is required by law, agreement or the
rules of any exchange upon which the Company's Common Stock is listed) to (i)
materially increase the maximum amount of shares of Common Stock subject to the
1996 Plan (other than pursuant to adjustment provisions discussed below), (ii)
materially modify the requirements as to eligibility for participation in the
1996 Plan, (iii) materially increase the benefits accruing to participants under
the 1996 Plan or (iv) extend the term of the 1996 Plan.
The 1996 Plan provides that in the event of a stock dividend or stock split, or
a combination or other increase or reduction in the number of issued shares of
the Company's Common Stock, the Board of Directors or the Committee may, in
order to prevent dilution or enlargement of rights under awards make such
adjustments in the number and type of shares authorized by the 1996 Plan and
covered by outstanding awards under the 1996 Plan and the price thereof. The
Committee may provide in any award agreement that in the event of a merger,
consolidation, reorganization, sale or exchange of substantially all assets or
dissolution of the Company, any of which could involve a change in control of
the Company, the rights under outstanding awards may be accelerated or
adjustments may be made in order to prevent the dilution or enlargement of
rights thereunder. However, the 1996 Plan does not permit the acceleration of
benefits of elected officers (and other participants who may be designated by
the Committee) in connection with certain change in control transactions (unless
a majority of the disinterested directors approve of such accelerations) in
which the officer receives securities of the successor entity which represent
either (i) more than 0.5% of the successor's common stock and a greater
percentage than the officer owned of the Company's Common Stock or (ii) a
greater amount of successor securities per share of Common Stock owned by the
officer than other stockholders of the Company will receive.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to stock options, appreciation rights, performance
awards, restricted stock and supplemental cash payments. These rules are highly
technical and subject to change. The following discussion is limited to the
federal income tax rules relevant to the Company and to individuals who are
citizens or residents of the United States. The discussion does not address the
state, local or foreign income tax rules relevant to stock options, appreciation
rights, performance awards, restricted stock and supplemental cash payments.
Employees are urged to consult their personal tax advisors with respect to the
federal, state, local and foreign tax consequences relating to stock options,
appreciation rights, performance awards, restricted stock and supplemental cash
payments.
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ISOs. A participant who is granted an ISO recognizes no income upon grant or
exercise of the option. However, the excess of the fair market value of the
shares of the Company's Common Stock on the date of exercise over the option
exercise price is an item includible in the optionee's alternative minimum
taxable income. An optionee may be required to pay an alternative minimum tax
even though the optionee receives no cash upon exercise of the ISO with which to
pay such tax.
If an optionee holds the Common Stock acquired upon exercise of the ISO for at
least two years from the date of grant and at least one year following exercise
(the "Statutory Holding Periods"), the optionee's gain, if any, upon a
subsequent disposition of such Common Stock, is taxed as long-term capital gain.
If an optionee disposes of Common Stock acquired pursuant to the exercise of an
ISO before satisfying the Statutory Holding Periods (a "Disqualifying
Disposition"), the optionee may recognize both compensation income and capital
gain in the year of disposition. The amount of the compensation income generally
equals the excess of (1) the lesser of the amount realized on disposition or the
fair market value of the Common Stock on the exercise date over (2) the exercise
price. The balance of the gain realized on such a disposition, if any, is long-
or short-term capital gain depending on whether the Common Stock has been held
for more than one year following exercise of the ISO.
Special rules apply for determining an optionee's tax basis in and holding
period for Common Stock acquired upon the exercise of an ISO if the optionee
pays the exercise price of the ISO in whole or in part with previously-owned
shares of Company Common Stock. Under these rules, the optionee does not
recognize any income or loss from delivery of shares of Common Stock (other than
shares previously acquired through the exercise of an ISO and not held for the
Statutory Holding Periods) in payment of the exercise price. The optionee's tax
basis in and holding period for the newly-acquired shares of Common Stock will
be determined as follows: as to a number of newly-acquired shares equal to the
previously-owned shares delivered, the optionee's tax basis in and holding
period for the newly-acquired shares will be equal to the previously-owned
shares delivered, the optionee's basis in and holding period (for capital gain,
but not Disqualifying Disposition, purposes) for the previously-owned shares
will carry over to the newly-acquired shares on a share-for-share basis; as to
each remaining newly-acquired share, the optionee's basis will be zero (or, if
part of the exercise price is paid in cash, the amount of such cash divided by
the number of such remaining newly-acquired shares) and the optionee's holding
period will begin on the date such share is transferred. Under proposed
regulations, any Disqualifying Disposition is deemed made from shares with the
lowest basis first.
If an optionee pays the exercise price of an ISO in whole or in part with
previously-owned shares that were acquired upon the exercise of an ISO and that
have not been held for the Statutory Holding Periods, the optionee will
recognize compensation income (but not capital gain) under the rules applicable
to Disqualifying Dispositions.
The Company is not entitled to any deduction with respect to the grant or
exercise of an ISO or the subsequent disposition by the optionee of the shares
acquired if the optionee satisfies the Statutory Holding Periods. If these
holding periods are not satisfied, the Company is entitled to a deduction in the
year the optionee disposes of the Common Stock in an amount equal to the
optionee's compensation income.
Non-statutory Stock Options. A participant who is granted a non-statutory stock
option recognizes no income upon grant of the option. At the time of exercise,
however, the optionee recognizes compensation income equal to the difference
between the exercise price and the fair market value of the shares of Company
Common Stock received on the date of exercise. This income is subject to income
and employment tax withholding. The Company is entitled to an income tax
deduction corresponding to the compensation income recognized by the optionee.
When an optionee disposes of Common Stock received upon the exercise of a
non-statutory stock option, the optionee will recognize capital gain or loss
equal to the difference between the sales proceeds received and the optionee's
basis in the stock sold. The optionee's capital gain will be
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long- or short-term, depending upon whether the stock sold was held more than
one year. The Company will not receive a deduction for any gain recognized by
the optionee.
If an optionee pays the exercise price for a non-statutory option entirely in
cash, the optionee's tax basis in the Common Stock received equals the stock's
fair market value on the exercise date, and the optionee's holding period begins
on the day after the exercise date. If however, an optionee pays the exercise
price of a non-statutory option in whole or in part with previously-owned shares
of Common Stock, then the optionee's tax basis in and holding period for the
newly-acquired shares will be determined as follows: as to a number of newly
acquired shares equal to the previously-owned shares delivered, the optionee's
basis in and holding period for the previously-owned shares will carry over to
the newly-acquired shares on a share-for-share basis; as to each remaining
newly-acquired share, the optionee's basis will equal the share's value on the
exercise date, and the optionee's holding period will begin on the day after the
exercise date.
Special Treatment of Certain Officers. An optionee who is an executive officer
of the Company is considered an "insider" for purposes of Section 16 of the
Exchange Act and thus is subject to suit under Section 16(b) of the Exchange Act
for sales of property occurring within six months of receipt of such property
(the "Section 16(b) Restriction"). Under current SEC rules, in the case of stock
received pursuant to the exercise of an option, such six month period begins on
the date the option is granted. Under the Internal Revenue Code regulations, the
Section 16(b) Restriction is considered a "substantial risk of forfeiture" with
respect to stock received by an insider.
As a result of the Section 16(b) Restriction, an optionee who is an executive
officer of the Company recognizes taxable income six months after the grant of a
non-statutory stock option (i.e., on the date the Section 16(b) restriction
lapses) if the optionee exercises such option within such six month period
unless the optionee files a Section 83(b) Election with the Internal Revenue
Service within 30 days of exercise to recognize taxable income on the exercise
date. A "Section 83(b) Election" is an election to recognize income on the date
that property subject to a substantial risk of forfeiture is received rather
than on the date such substantial risk of forfeiture lapses. If an optionee
exercises an option more than six months after the date it was granted (i.e.,
after the Section 16(b) Restriction has lapsed), the optionee recognizes income
on the exercise date.
The measure of the optionee's compensation income is the difference between the
fair market value of the shares of the Company's Common Stock on the date the
optionee recognizes income with respect to such shares, and the option exercise
price. The Company is entitled to an income tax deduction for its fiscal year
with which or in which ends the taxable year of the optionee in which the
optionee is taxed. Any gain the optionee realizes on the subsequent disposition
of the Common Stock will receive long or short-term capital gain treatment
depending (except in the case of shares the holding period of which is
determined by reference to the holding period of previously-owned shares
exchanged therefor) on whether the Common Stock has been held for more than one
year following the date upon which the amount of his or her compensation income
was determined.
Optionees who are insiders are also subject to special treatment with respect to
ISOs. For alternative minimum tax purposes, if an ISO is exercised by an insider
within six months of the date it was granted, the insider's alternative minimum
taxable income is measured on the value of the Common Stock on the date such six
months period lapses, rather than such value on the exercise date.
Appreciation Rights. A participant who is granted an appreciation right
recognizes no income upon grant of the appreciation right. At the time of
exercise, however, the participant shall recognize compensation income equal to
any cash received and the fair market value of any Company Common Stock
received. This income is subject to withholding. The Company is entitled to an
income tax deduction corresponding to the ordinary income recognized by the
participant.
Performance Awards. The grant of a performance award does not generate taxable
income to the participant or an income tax deduction to the Company. Any cash
and the fair market value of any
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Company Common Stock received as payment in respect of a performance award will
constitute ordinary income to the participant (in the case of a participant who
is an insider, the fair market value of the shares six months after receipt will
be used to measure income, unless a Section 83(b) Election is filed). The
participant's income is subject to income and employment tax withholding. The
Company will be entitled to an income tax deduction corresponding to the
ordinary income recognized by the participant.
Restricted Stock. A participant who is granted restricted stock may make a
Section 83(b) Election to have the grant taxed as compensation income at the
date of receipt, with the result that any future appreciation (or depreciation)
in the value of the shares of Common Stock granted shall be taxed as capital
gains (or loss) upon a subsequent sale of the shares. However, if the
participant does not make a Section 83(b) Election, then the grant shall be
taxed as compensation income at the full fair market value on the date that the
restrictions imposed on the shares expire. Unless a participant makes a Section
83(b) Election, any dividends paid on Common Stock subject to the restrictions
is compensation income to the participant and compensation expense to the
Company. Any compensation income a participant recognizes from a grant of
restricted stock is subject to income and employment tax withholding. The
Company is entitled to an income tax deduction for any compensation income taxed
to the participant.
Payment of Withholding Taxes. The Company shall have the power to withhold, or
require a participant to remit to the Company an amount sufficient to satisfy,
any Federal, state, local or foreign withholding tax requirements on any grant
or exercise made pursuant to the 1996 Plan. However, to the extent permissible
under applicable tax, securities and other laws, the Committee may, in its sole
discretion, permit the participant to satisfy a tax withholding requirement by
delivering shares of Common Stock previously owned by the participant or
directing the Company to apply shares of Common Stock to which the participant
is entitled as a result of the exercise of an option or the lapse of a period of
restriction, to satisfy such requirement.
The Board of Directors recommends a vote FOR this proposal appearing at Item 2
on the accompanying proxy form.
NONEMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
The Board of Directors believes that a program fostering stock ownership by
nonemployee directors promotes the long-term financial success of the Company by
attracting and retaining outstanding nonemployee directors and by providing
incentives to such nonemployee directors through grants of stock and stock
options linked to continued improvements in the Company's earnings. In 1989, the
Board adopted and the shareholders approved the Nonemployee Director Stock
Ownership Plan (the "Plan") to allow directors to participate in the growth of
the Company. In 1993, the Board adopted and the shareholders approved an
amendment to the Plan which replaced grants of restricted Common Stock with
annual outright grants of 400 shares of Common Stock per year to each
nonemployee director then serving on the Board.
The Board believes that the Plan has been successful in increasing the stock
ownership of directors and in closely aligning nonemployee directors'
compensation to the interests of shareholders. The Board also believes that
these purposes will be further advanced by amending the Plan to more closely
align the financial conditions for a stock option grant under the Plan with the
financial targets used in the Company's Performance Excellence Plan ("PEP")
(described under the caption "Annual Incentive Compensation" in the Human
Resources Committee Report).
On February 20, 1996, the Board adopted an amendment to Section 3.1 of the Plan
to provide that the conditions for stock option awards under the Plan would be
satisfied if during the immediately preceding fiscal year (the "Prior Year") the
Company's earnings from continuing operations ("Earnings") exceeded by at least
10% the Earnings for the year immediately preceding the Prior Year. The Plan as
amended would define Earnings as the Corporation's consolidated earnings from
continuing operations before the after-tax effects of: (i) extraordinary items;
(ii) changes in accounting principles; (iii) gains and losses from business
dispositions shown separately on the
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Company's published earnings statement; and (iv) restructuring charges shown
separately on the Company's published earnings statement. Restructuring charges
means costs related to the elimination or reduction of product lines or the
consolidation of plant facilities, including losses from asset impairments and
disposals relating thereto, and costs of severance and termination benefits
relating to the foregoing or to reductions in personnel. The Board believes that
so amending the Plan will result in an even greater linkage between nonemployee
director compensation, the financial goals of the Company and shareholder value.
The affirmative vote of the holder of a majority of the shares of Common Stock
present at the annual meeting of stockholders, in person or by proxy, is
necessary for approval of such amendment. Unless such vote is received, the Plan
will not be amended.
The complete text of the Plan, amended to contain the proposed amendments, is
set forth in Exhibit B hereto. The description of the Plan contained in this
proxy statement is qualified in its entirety by reference to Exhibit B.
ADMINISTRATION AND ELIGIBILITY: ADJUSTMENT, AMENDMENT AND TERMINATION
The Plan is largely self-administered because the awards are automatic and
nondiscretionary. To the extent necessary, the Board is authorized to administer
the Plan. In the event of a stock dividend, stock split, stock combination or
other reduction in issued shares, merger, consolidation, recapitalization or
sale or exchange of all of the assets of or dissolution of the Company, the
Board is required to adjust the number and type of shares authorized by the Plan
and subject to outstanding grants of Common Stock or stock options, as well as
the option prices of any outstanding stock options, to prevent enlargement or
dilution of rights. No stock or stock options will be granted under the Plan
after April 30, 1999. The Board may suspend or terminate the Plan at any time or
amend the Plan from time to time without stockholder approval, but no amendment,
suspension or termination shall impair the rights of any director under
outstanding grants of stock or stock options. However, no amendment made without
stockholder approval (to the extent required by law, agreement or the rules of
any exchange upon which the Company's Common Stock is listed) shall (a)
materially increase the number of shares of Company Common Stock issuable under
the Plan (other than pursuant to the adjustment provisions described above), (b)
materially modify the requirements as to eligibility for participation, (c)
materially increase the benefits accruing to directors under the Plan or (d)
extend the termination date of the Plan.
Eligibility for awards under the Plan is limited to directors of the Company
who, at the time of an award of stock or stock options, are not, and have not
been for at least one year, either an employee or officer of the Company or any
of its subsidiaries or a person eligible for selection as a person to whom stock
may be allocated or to whom options or appreciation rights may be granted
pursuant to any plan of the Company or its subsidiaries. The aggregate number of
shares of the Company's Common Stock issuable under the Plan is 200,000 (subject
to adjustments in order to prevent enlargement or dilution as described above).
As of February 20, 1996, 156,200 shares remained available for future grants of
stock and stock options under the Plan.
GRANTS OF STOCK
The Plan provides for the annual unrestricted grant of 400 shares of the
Company's Common Stock to each nonemployee director who is a member of the Board
at the conclusion of the annual meeting of stockholders. Each director has all
rights accruing to an owner of the Company's Common Stock, including the right
to vote the shares at stockholders' meetings, receive dividends, and sell,
assign, transfer or otherwise encumber the Common Stock (subject to restrictions
imposed on insider trading under the federal securities laws).
Pursuant to an amendment to the Plan in 1993, grants of restricted stock were
replaced with outright grants of Common Stock as described above. The
replacement of grants of restricted Common Stock by outright grants of Common
Stock is phased in so that a nonemployee director receives
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only 200 shares of Common Stock in each year where that director will also have
restrictions lapse on 200 shares of restricted Common Stock previously granted
under the Plan. As of February 20, 1996, no shares of restricted Common Stock
remain outstanding under the Plan.
STOCK OPTIONS AND AMENDMENT OF GRANT CONDITIONS
The Plan currently provides that effective on the date of each annual meeting of
stockholders, each nonemployee director automatically is awarded a stock option
to purchase 600 shares of the Company's Common Stock if the Company's
consolidated earnings from continuing operations before extraordinary items and
before changes in accounting principles ("Earnings") for the immediately
preceding fiscal year (the "Prior Year") exceed Earnings for the fiscal year
immediately prior to the Prior Year (the "Base Year") by at least 10%. Based on
the current plan, each nonemployee director will receive an option grant on the
date of the 1996 Annual Meeting. As amended, the Plan would define Earnings as
the Company's consolidated earnings from continuing operations before the
after-tax effects of: (i) extraordinary items; (ii) changes in accounting
principles; (iii) gains and losses from business dispositions shown separately
on the Company's published earnings statement; and (iv) restructuring charges
shown separately on the Company's published earnings statement. Restructuring
charges is defined as costs related to the elimination or reduction of product
lines or the consolidation of plant facilities, including losses from asset
impairments and disposals relating thereto, and costs of severance and
termination benefits relating to the foregoing or to reductions in personnel.
This definition is comparable to the one used to measure financial performance
under the PEP Plan described earlier and would not have resulted in an option
grant on the date of the 1996 Annual Meeting. The Company's public accountants
will resolve any questions arising as to the Company's Earnings for any year.
The purchase price for shares of the Company's Common Stock under these options
is the average market price of the Common Stock for the third through fifth
trading days after public announcement of the Company's earnings data for the
Base Year. As of February 20, 1996, a total of 25,200 stock options have been
awarded under the Plan and 11,400 have been exercised.
Stock options granted under the Plan are exercisable for twenty years or, if
earlier, two years after a nonemployee director ceases to serve on the Company's
Board of Directors, provided that no option is exercisable within the first six
months of its term, unless death or disability of the director occurs. In the
event of a nonemployee director's death, such stock options will be exercisable
for one year from the date of death. Payment of the exercise price may be made
in cash or, if permitted by law, Common Stock of the Company, valued at its
market price at the time of exercise.
FEDERAL TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to stock and stock options. These rules are highly
technical and subject to change. The following discussion is limited to the
federal income tax rules relevant to the Company and to nonemployee directors
who are citizens or residents of the United States. The discussion does not
address the state, local or foreign income tax rules relevant to stock and stock
options.
A nonemployee director is considered an "insider" for purposes of Section 16 of
the Exchange Act and cannot freely sell shares of Common Stock acquired upon
grant within six months after the grant date. Consequently, a nonemployee
director will generally recognize ordinary compensation income on the date six
months after the grant of shares of Common Stock (or, if earlier, the date the
nonemployee director is no longer subject to liability under Section 16 of the
Exchange Act) equal to the fair market value of the shares on that date. Any
cash dividends a nonemployee director receives with respect to shares of Common
Stock before his or her ordinary compensation income is determined under the
foregoing rule will also be treated as compensation income. If, however, a
nonemployee director files a Section 83(b) Election with the Internal Revenue
Service within 30 days following the grant of Common Stock, he or she will
recognize ordinary compensation income on the date of the grant of shares of
Common Stock equal to the fair market value of the shares on
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the grant date. If a nonemployee director makes a Section 83(b) Election, the
director does not recognize any additional compensation income when the
restrictions under Section 16 of the Exchange Act lapse, and any dividends the
director receives on the shares covered by the election are treated as dividend
(rather than compensation) income. The Company receives a deduction equal to the
ordinary compensation income recognized by the nonemployee director.
A nonemployee director's tax basis in the shares of Common Stock granted
pursuant to the Plan equals the fair market value of the shares on the date his
or her ordinary compensation income is determined under the foregoing rules, and
the director's holding period begins on such date. Upon a subsequent sale or
exchange of the shares, the nonemployee director recognizes capital gain or loss
equal to the difference between the proceeds received and the director's basis
in the shares. Such capital gain will be short- or long-term, depending upon
whether the nonemployee director has held the shares for more than one year. An
individual's "net capital gain" means his or her long-term capital gains for the
year reduced by (i) his or her long-term capital losses for the year and (ii)
the excess, if any, of his or her short-term capital losses over his or her
short-term capital gains for the year. The Company will not receive a deduction
for any capital gain recognized by the nonemployee director.
A nonemployee director who is granted a stock option recognizes no income upon
grant of the option. Nonemployee directors are considered insiders and are
subject to the special tax treatment rules described earlier. The Company is
entitled to an income tax deduction corresponding to the income recognized by
the nonemployee director.
When a nonemployee director disposes of Common Stock received upon the exercise
of a stock option, the nonemployee director will recognize capital gain or loss
equal to the difference between the sales proceeds received and the director's
basis in the stock sold. The nonemployee director's capital gain will be long-
or short-term, depending upon whether the stock sold was held more than one
year. The Company will not receive a deduction for any capital gain recognized
by the nonemployee director.
If a nonemployee director pays the exercise price for a stock option entirely in
cash, the director's basis in the Common Stock received equals the stock's fair
market value on the exercise date, and the director's holding period begins on
the day after the exercise date. If, however, a nonemployee director pays the
exercise price of a stock option in whole or in part with previously-owned
shares of Common Stock, then the director's tax basis in and holding period for
the previously-owned shares will carry over to the newly-acquired shares on a
share-for-share basis; as to each remaining newly-acquired share, the director's
basis will equal the share's value on the exercise date, and the director's
holding period for capital gains treatment will begin on the day after the
exercise date.
The ordinary compensation income a nonemployee director recognizes under the
foregoing rules is not subject to withholding. However, a nonemployee director
must take such income into account in determining the estimated tax payments
such director is required to make.
The Board of Directors recommends a vote FOR the amendment of the Nonemployee
Director Stock Ownership Plan appearing at Item 3 on the accompanying proxy
form.
MISCELLANEOUS
The expenses of the solicitation will be paid by the Company. The Company
expects to pay fees of approximately $9,000, plus certain expenses, for
assistance by Georgeson & Company Inc. in the solicitation of proxies. Proxies
may be solicited by directors, officers and employees of the Company and by
Georgeson & Company Inc. personally and by mail, telegraph, telephone, or other
electronic means.
If any nominee named herein for election as a director is not available to
serve, the accompanying proxy may be voted for a substitute person. The Company
expects all nominees to be available and
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knows of no matter to be brought before the meeting other than those referred to
in the accompanying notice of meeting. If, however, any other matter properly
comes before the meeting, it is intended that the accompanying proxy will be
voted thereon in accordance with the judgment of the persons voting such proxy.
AUDITORS
Representatives of Ernst & Young LLP, the Company's auditors, are expected to be
present at the Annual Meeting to respond to questions and may make a statement
if they so desire.
STOCKHOLDERS PROPOSAL
Any proposal which a stockholder intends to present at the annual meeting of
stockholders in 1997 must be received by the Company by November 12, 1996 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting.
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EXHIBIT A
WHIRLPOOL CORPORATION
1996 OMNIBUS STOCK AND INCENTIVE PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE
Whirlpool Corporation, a Delaware corporation (the "Corporation"), hereby
adopts, subject to stockholder approval, this plan which shall be known as the
WHIRLPOOL CORPORATION 1996 OMNIBUS STOCK AND INCENTIVE PLAN (the "Plan"). The
Corporation and its Subsidiaries are severally and collectively referred to
hereinafter as the "Company." The purpose of the Plan is to foster and promote
the long-term financial success of the Company and materially increase
stockholder value by: (a) strengthening the Company's capability to develop,
maintain, and direct an outstanding management team; (b) motivating superior
performance by means of long-term performance related incentives; (c)
encouraging and providing for obtaining an ownership interest in the Company;
(d) attracting and retaining outstanding executive talent by providing incentive
compensation opportunities competitive with other major companies; and (e)
enabling executives to participate in the long-term growth and financial success
of the Company.
1.2 ADMINISTRATION
(a) The Plan shall be administered by the Human Resources Committee of the Board
of Directors of the Corporation or such other committee of directors as is
designated by the Board of Directors of the Corporation (the "Committee"), which
shall consist of two or more members. Each member shall be a "disinterested
person," as that term is defined by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") or any similar rule which may
subsequently be in effect ("Rule 16b-3") and shall be an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of
1986, as it may be amended from time to time (the "Code"). The members shall be
appointed by the Board of Directors, and any vacancy on the Committee shall be
filled by the Board of Directors.
(b) Subject to the limitations of the Plan, the Committee shall have the sole
and complete authority to: (i) select from the regular, full-time employees of
the Company, those who shall participate in the Plan (a "Participant" or
"Participants"); (ii) make awards in such forms and amounts as it shall
determine; (iii) impose such limitations, restrictions and conditions upon such
awards as it shall deem appropriate; (iv) interpret the Plan and adopt, amend,
and rescind administrative guidelines and other rules and regulations relating
to the Plan; (v) correct any defect or omission or reconcile any inconsistency
in this Plan or in any award granted hereunder; and (vi) make all other
determinations and take all other actions deemed necessary or advisable for the
implementation and administration of the Plan. The Committee's determinations on
matters within its authority shall be conclusive and binding upon the Company
and all other persons.
(c) All expenses associated with the Plan shall be borne by the Corporation
subject to such allocation to its Subsidiaries and operating units as it deems
appropriate.
(d) The Committee may, to the extent that any such action will not prevent the
Plan from complying with Rule 16b-3 or the outside director requirement of Code
Section 162(m), delegate any of its authority hereunder to such persons as it
deems appropriate.
(e) The provisions of this Plan are intended to qualify awards made to certain
Participants (hereinafter identified as "Covered Participants") under the Plan
under the "performance-based" exception to the Code Section 162(m) deduction
limitation.
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1.3 SELECTION FOR PARTICIPATION
Participants shall be selected by the Committee from the employees who occupy
responsible managerial or professional positions and who have the capacity to
contribute to the success of the Company. In making this selection and in
determining the form and amount of awards, the Committee may give consideration
to the functions and responsibilities of the employee; the employee's past,
present, and potential contributions to the Company's profitability and sound
growth; the value of the employee's services to the Company; and other factors
deemed relevant by the Committee. Grants may be made to the same individual on
more than one occasion.
1.4 TYPES OF AWARDS UNDER PLAN
Awards under the Plan may be in the form of any one or more of the following:
(a) Statutory stock options ("ISOs", which term shall be deemed to include
Incentive Stock Options as defined in Section 2.5 and any future type of
tax-qualified option which may subsequently be authorized), Non-statutory Stock
Options ("NSOs" and, collectively with ISOs, "Options"), and Stock Appreciation
Rights ("SARs") as described in Article II; (b) Performance Units and
Performance Shares ("Performance Units" and "Performance Shares") as described
in Article III; and (c) Restricted Stock and Restricted Stock Equivalents
("Restricted Stock" and "Restricted Stock Equivalents") as described in Article
IV (collectively, "Awards").
1.5 SHARES SUBJECT TO THE PLAN
Shares of stock covered by Awards under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
$1.00 par value per share, or such other shares as may be substituted pursuant
to Section 6.2 ("Common Stock"). The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be 4 million shares
(subject to adjustment pursuant to Section 6.2). The maximum number of shares of
Common Stock which may be issued pursuant to the exercise of Options awarded
under the Plan shall be 3,750,000 shares (subject to adjustment pursuant to
Section 6.2). Any shares of Common Stock subject to an Option which for any
reason is canceled (excluding shares subject to an Option canceled upon the
exercise of a related SAR to the extent shares are issued upon exercise of such
SAR) or terminated without having been exercised, or any shares of Restricted
Stock or Performance Shares which are forfeited, shall again be available for
Awards under the Plan. The maximum number of shares of Common Stock which may be
issued pursuant to Restricted Stock or the cash paid with respect to Restricted
Stock Equivalent awards under the Plan shall be 1,000,000 shares (subject to
adjustment pursuant to Section 6.2) or the cash equivalent thereof. No
fractional shares shall be issued, and the Committee shall determine the manner
in which fractional share value shall be treated.
1.6 MAXIMUM AWARDS PER PARTICIPANT
(a) The aggregate number of shares of Common Stock (including any cash
equivalents thereof) that a Covered Participant may receive upon exercise of all
of the Options and SARs awarded to such Covered Participant under the Plan
(including those already exercised by the Covered Participant) shall not exceed
600,000 shares or the cash equivalent thereof.
(b) The aggregate number of (i) all Performance Units and Performance Shares and
(ii) all Restricted Stock and Restricted Stock Equivalents awarded to a Covered
Participant in any calendar year shall not exceed the equivalent of 300,000
shares or the cash equivalent thereof.
1.7 GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine gender
when used in the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
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ARTICLE II
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 AWARD OF STOCK OPTIONS
The Committee may, from time to time, subject to the provisions of the Plan and
such other terms and conditions as the Committee may prescribe, award to any
Participant ISOs and NSOs to purchase Common Stock.
2.2 STOCK OPTION AGREEMENTS
The award of an Option shall be evidenced by a signed written agreement (a
"Stock Option Agreement") containing such terms and conditions as the Committee
may from time to time determine.
2.3 OPTION PRICE
The purchase price of Common Stock under each Option (the "Option Price") shall
be the Fair Market Value of the Common Stock on the date the Option is awarded.
2.4 EXERCISE AND TERM OF OPTIONS
(a) Options awarded under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall approve,
either at the time of grant of such Options or pursuant to a general
determination, and which need not be the same for all Participants, provided
that no such Option shall be exercisable within the first twelve months of its
term. Each Option which is intended to qualify as an ISO pursuant to Section 422
of the Code, and each Option which is intended to qualify as another type of ISO
which may subsequently be authorized by law, shall comply with the applicable
provisions of the Code pertaining to such Options.
(b) The Committee shall establish procedures governing the exercise of Options
and shall require that written notice of exercise be given and that the Option
Price be paid in full in cash (including check, bank draft or money order) at
the time of exercise; provided, however, that such Option Price may be paid
within six business days of the time of exercise, if the Participant instructs
the Corporation to sell shares delivered on exercise as the Participant's agent
pursuant to a "cashless exercise" program or other similar program established
by the Committee. The Committee may permit a Participant, in lieu of part or all
of the cash payment, to make payment in Common Stock already owned by that
Participant, valued at Fair Market Value on the date of exercise, as partial or
full payment of the Option Price; provided, however, that the Committee may, in
any instance, in order to prevent any possible violation of law, require the
Option Price to be paid in cash. As soon as practicable after receipt of each
notice and full payment, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Common Stock.
The exercise of an Option shall cancel any related SAR to the extent of the
number of shares as to which the Option is exercised.
2.5 LIMITATIONS ON ISOS
Notwithstanding anything in the Plan to the contrary, to the extent required
from time to time by the Code, the following additional provisions shall apply
to the grant of Options which are intended to qualify as ISOs (as such term is
defined in Section 422 of the Code):
(a) The aggregate Fair Market Value (determined as of the date the Option is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company) shall not exceed $100,000 or such other amount
as may subsequently be specified by the Code; provided that, to the extent that
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such limitation is exceeded, any excess Options (as determined under the Code)
shall be deemed to be NSOs.
(b) Any ISO authorized under the Plan shall contain such other provisions as the
Committee shall deem advisable, but shall in all events be consistent with and
contain or be deemed to contain all provisions required in order to qualify the
Options as ISOs.
(c) All ISOs must be granted within ten years from the earlier of the date on
which this Plan was adopted by the Board of Directors or the date this Plan was
approved by the stockholders.
(d) Unless sooner exercised, terminated, or canceled, all ISOs shall expire no
later than ten years after the date of grant.
2.6 TERMINATION OF EMPLOYMENT
In the event the Participant ceases to be an employee with the consent of the
Committee or upon the Participant's death, retirement or disability, each of the
Participant's outstanding Options shall be exercisable by the Participant (or
the Participant's legal representative or designated beneficiary), to the extent
that such Option was then exercisable, at any time prior to an expiration date
established by the Committee at the time of award (which may be the original
expiration date of such Option or such earlier time as the Committee may
establish), but in no event after its respective expiration date; provided that
NSOs may be exercised up to one year after the death of a Participant even if
this is beyond their expiration date. If the Participant ceases to be an
employee for any other reason, all of the Participant's then outstanding Options
shall terminate immediately.
2.7 AWARD OF STOCK APPRECIATION RIGHTS
(a) GENERAL. A SAR is a right to receive, without payment (except for applicable
withholding taxes) to the Company, a number of shares of Common Stock, cash, or
a combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 2.7(e). A SAR may be granted (i) with respect to any Option
granted under this Plan, either concurrently with the grant of such Option, or
at such later time as determined by the Committee (as to all or any portion of
the shares of Common Stock subject to the Option); (ii) with respect to any
stock option currently outstanding under other incentive plans of the
Corporation (as to all or any portion of the shares subject to the stock
option), on terms established by the Committee; or (iii) alone, without
reference to any related stock option. Each SAR granted by the Committee under
this Plan shall be subject to the terms and conditions of this Section.
(b) NUMBER. Each SAR granted to any Participant shall relate to such number of
shares of Common Stock as shall be determined by the Committee, subject to
adjustment as provided in Section 6.2. In the case of a SAR granted with respect
to a stock option, the number of shares of Common Stock to which the SAR
pertains shall be reduced in the same proportion that the holder of the option
exercises the related stock option.
(c) DURATION. The term of each SAR shall be determined by the Committee but in
no event shall a SAR be exercisable during the first year of its term. Subject
to the foregoing, unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is exercisable.
(d) EXERCISE. A SAR may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of SARs which the holder wishes to
exercise. Upon receipt of such written notice, the Company shall, within 90 days
thereafter, deliver to the exercising holder a certificate for the shares of
Common Stock or cash or both, as determined by the Committee, to which the
holder is entitled. No SAR granted to an Officer may be exercised in whole or in
part for cash except during the period described in Section 6.3(c)(ii)(1)
hereof.
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(e) PAYMENT. Subject to the right of the Committee to deliver cash in lieu of
shares of Common Stock, the number of shares of Common Stock which shall be
issuable upon the exercise of a SAR shall be determined by dividing:
(i) the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this
purpose, the "appreciation" shall be the amount by which the Fair Market
Value of a share of Common Stock subject to the SAR on the exercise date
exceeds (A) in the case of a SAR related to a stock option, the purchase
price of a share of Common Stock under the stock option or (B) in the case
of a SAR granted alone, without reference to a related stock option, an
amount which shall be determined by the Committee at the time of grant,
provided, however, such amount is at least equal to the Fair Market Value
of the Common Stock on the date the SAR is awarded, (subject to adjustment
under Section 6.2); by
(ii) the Fair Market Value of a share of Common Stock on the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the exercise date of any or all of the shares which would otherwise be
issuable. No fractional shares of Common Stock shall be issued upon the exercise
of a SAR; instead, the holder of the SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market Value of a share of
Common Stock on the exercise date or to purchase the portion necessary to make a
whole share at its Fair Market Value on the date of exercise.
(f) AGREEMENT. SARs awarded under the Plan shall be evidenced by either a Stock
Option Agreement or a separate signed written agreement between the Company and
a Participant.
ARTICLE III
PERFORMANCE SHARES AND UNITS
3.1 AWARD OF PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee may award to any Participant Performance Shares and Performance
Units ("Performance Awards"). Each Performance Share shall represent one share
of Common Stock. Each Performance Unit shall represent the right of a
Participant to receive an amount equal to the value determined in the manner
established by the Committee at the time of award, which value may, without
limitation, be equal to the Fair Market Value of one share of Common Stock.
3.2 PERFORMANCE UNIT AND PERFORMANCE SHARE AGREEMENTS
Each Performance Award under the Plan shall be evidenced by a signed written
agreement containing such terms and conditions as the Committee may from time to
time determine.
3.3 ESTABLISHMENT OF PERFORMANCE ACCOUNTS
At the time of award, the Company shall establish an account (a "Performance
Account") for each Participant. Performance Units and Performance Shares awarded
to a Participant shall be credited to the Participant's Performance Account.
3.4 PERFORMANCE PERIOD AND TARGETS
(a) The performance period for each award of Performance Shares and Performance
Units shall be of such duration as the Committee shall establish at the time of
award; provided, however, that in no event will the performance period be less
than one year (the "Performance Period"). There may be more than one award in
existence at any one time and Performance Periods may differ.
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(b) The Committee shall set performance targets relating to Performance Units
and Performance Shares which shall be based on one or more of the following
performance measures: stock price, market share, increase in sales, earnings per
share, return on equity, cost reductions, economic value added, or any similar
performance measure established by the Committee. Such performance targets shall
be established in writing by the Committee no later than the earlier of (i) 90
days after the commencement of the Performance Period with respect to which the
award of Performance Units or Performance Shares is made and (ii) the date as of
which twenty-five percent (25%) of such Performance Period has elapsed. At the
time of setting performance targets, the Committee shall establish superior and
satisfactory performance targets to be achieved within the Performance Period.
Failure to meet the satisfactory performance target will earn no Performance
Award. Performance Awards will be earned as determined by the Committee in
respect of a Performance Period in relation to the degree of attainment of
performance between the superior and satisfactory performance targets.
3.5 PAYMENT RESPECTING PERFORMANCE AWARDS
(a) Performance Awards shall be earned to the extent that their terms and
conditions are met. Notwithstanding the foregoing, Performance Awards and any
other amounts credited to the Participant's Performance Account shall be payable
to the Participant only in accordance with the related written agreement or
otherwise when, if, and to the extent that the Committee determines to make such
payment. All payment determinations shall be made by the Committee during the
first four months following the end of the Performance Period.
(b) The Participant may elect to defer any payment respecting a Performance
Award pursuant to Article V hereof.
(c) Payment for Performance Awards may be made in a lump sum or in installments,
in cash, Common Stock or in a combination thereof as the Committee may
determine.
3.6 TERMINATION OF EMPLOYMENT
In the event the Participant ceases to be an employee before the end of any
Performance Period with the consent of the Committee, or upon the Participant's
death, retirement or disability before the end of any Performance Period, the
Committee, taking into consideration the performance of such Participant and the
performance of the Company over the Performance Period, may authorize the
payment to such Participant (or the Participant's legal representative or
designated beneficiary) of all or a portion of the amount which would have been
paid to the Participant had the Participant continued as an employee to the end
of the Performance Period. In the event a Participant ceases to be an employee
for any other reason, any unpaid amounts for outstanding Performance Periods
shall be forfeited.
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK EQUIVALENTS
4.1 AWARD OF RESTRICTED STOCK
The Committee may award to any Participant shares of Common Stock, subject to
this Article IV and such other terms and conditions as the Committee may
prescribe (such shares being herein called "Restricted Stock"). Each certificate
for Restricted Stock shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation.
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4.2 RESTRICTED STOCK AGREEMENT
Shares of Restricted Stock awarded under the Plan shall be evidenced by a signed
written agreement containing such terms and conditions as the Committee may from
time to time determine.
4.3 RESTRICTION PERIOD
At the time of award there shall be established for each Participant, subject to
Paragraph 4.6, a restriction period (the "Restriction Period") which shall lapse
(a) upon the completion of a period of time ("Time Goal") as shall be determined
by the Committee, or (b) upon the achievement of stock price goals within
certain time limitations ("Price/Time Goal") as shall be determined by the
Committee, provided that such Time Goal shall last at least until the third year
anniversary of the date of the award or such Price/Time Goal shall last at least
until the first year anniversary of the date of the award. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, during the Restriction Period. Except for such
restrictions on transfer, the Participant as owner of such shares of Restricted
Stock shall have all the rights of a holder of Common Stock. With respect to
shares of Restricted Stock which are issued subject to a Time Goal, the
Corporation shall redeliver to the Participant (or the Participant's legal
representative or designated beneficiary) the certificates deposited pursuant to
Section 4.1 at the expiration of the Restriction Period. With respect to shares
of Restricted Stock which are issued subject to a Price/Time Goal, the
Corporation shall redeliver to the Participant (or the Participant's legal
representative or designated beneficiary) the certificates deposited pursuant to
Section 4.1 upon the achievement of the goal on or before the close of the
Restriction Period. With respect to shares of Restricted Stock which are issued
subject to a Price/Time Goal which fail to meet the goal before the end of the
restriction period, all such shares shall be forfeited, and the Corporation
shall have the right to complete a blank stock power in order to return such
shares to the Corporation.
4.4 TERMINATION OF EMPLOYMENT
(a) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Time Goal, the restrictions imposed under this Article IV shall
lapse with respect to such number of those shares subject to a Time Goal as
shall be determined by the Committee, but, in no event less than a number equal
to the product of (a) a fraction, the numerator of which is the number of
completed months elapsed after the date of award of the Restricted Stock subject
to a Time Goal to the Participant to the date of termination and the denominator
of which is the number of months in the Restriction Period multiplied by (b) the
number of shares of Restricted Stock subject to a Time Goal; provided, however,
that notwithstanding the foregoing, no restrictions shall lapse if the
Participant ceases to be an employee prior to the three year anniversary of the
date upon which the award was granted.
(b) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Price/Time Goal, the restrictions imposed under this Article IV
shall lapse upon the achievement of the Price/Time Goal within two years of the
Participant's termination of employment with respect to such number of those
shares subject to a Price/Time Goal as shall be determined by the Committee,
but, in no event, less than a number equal to the product of (a) a fraction, the
numerator of which is the number of completed months elapsed after the date of
award of the Restricted Stock subject to a Price/Time Goal to the Participant to
the date of termination and the denominator of which is the number of months
elapsed after the date award of the Restricted Stock subject to a Price/Time
Goal to the Participant to the date of achievement of the Price/Time Goal
multiplied by (b) the number of shares of Restricted Stock subject to a
Price/Time Goal; provided, however, that notwithstanding the foregoing, no
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restrictions shall lapse if the Participant ceases to be an employee prior to
the first year anniversary of the date upon which the award was granted.
(c) In the event the Participant ceases to be an employee for any other reason,
all shares of Restricted Stock theretofore awarded to that Participant which are
still subject to restrictions shall be forfeited and the Corporation shall have
the right to complete the blank stock power.
4.5 AWARD OF RESTRICTED STOCK EQUIVALENTS
In lieu of or in addition to the foregoing Restricted Stock Awards, the
Committee may award to any Participant restricted stock equivalents, subject to
the terms and conditions of Paragraphs 4.2, 4.3, and 4.4 of this Article IV
being applied to such awards as if those awards were for Restricted Stock and
subject to such other terms and conditions as the Committee may prescribe
("Restricted Stock Equivalents"). Each Restricted Stock Equivalent shall
represent the right of the Participant to receive an amount determined in the
manner established by the Committee at the time of award, which value may,
without limitation, be equal to the Fair Market Value of one share of Common
Stock. Payment for Restricted Stock Equivalents may be made in a lump sum or in
installments, in cash, Common Stock, or in a combination thereof as the
Committee may determine.
4.6 RESTRICTED STOCK AND RESTRICTED STOCK EQUIVALENTS AWARDED TO COVERED
PARTICIPANTS
Any Restricted Stock or Restricted Stock Equivalent awarded to a Covered
Participant which the Committee intends to qualify for the performance-based
exception under Code Section 162(m) shall be subject to a Price/Time Goal. With
respect to any such award, the stock price goals upon which the restrictions
imposed will lapse shall consist of one or more of the following performance
goals: stock price, market share, sales increases, earnings per share, return on
equity, cost reductions, economic value added, or any similar performance
measure established by the Committee. Such measures shall be established in
writing by the Committee no later than the earlier of (a) 90 days after the
commencement of the performance period with respect to which the award of
Restricted Stock or restricted stock equivalent is made and (b) the date as of
which twenty-five percent (25%) of such performance period has elapsed.
ARTICLE V
DEFERRAL OF PAYMENTS
5.1 ELECTION TO DEFER
A Participant may elect, with the consent of the Committee, no later than
December 31 of the last full calendar year of the Performance Period, to defer
all or a portion of the Participant's Performance Award within deferral limits
established by the Committee (the "Deferred Amount"). The Committee may permit
amounts now or hereafter deferred or available for deferral under any present or
future incentive compensation program or deferral arrangement of the Company to
be deemed Deferred Amounts and to become subject to the provisions of this
Article. All Deferred Amounts will be subject to such terms and conditions, and
shall accrue such yield thereon (which may be measured by the Fair Market Value
of the Common Stock and dividends thereon) as the Committee may from time to
time establish.
5.2 DEFERRAL PERIOD
The Participant may, with the consent of the Committee, elect to receive payment
of Deferred Amounts and any yield thereon either before or after retirement in a
lump sum or in installments. Upon the death of a Participant, payments of any
amounts hereunder shall be made to the Participant's designated beneficiary
(pursuant to Section 6.13) or estate (in the absence of a designated
beneficiary) in the manner elected by the Participant or (in the event the
Participant
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made no election) in the manner determined by the Committee. The period between
the date the Participant's Deferred Amount becomes payable and the final payment
of such Deferred Amount hereunder shall be known as the "Deferral Period."
5.3 PARTICIPANT REPORTS
Annually, each Participant who has a Deferred Amount will receive a report
setting forth all then Deferred Amounts and the yield thereon to date.
5.4 PAYMENT OF DEFERRED AMOUNTS
Unless otherwise agreed by the Corporation and the Participant, payment of
Deferred Amounts may be in cash, Common Stock, or partly in cash and partly in
Common Stock, as the Committee shall determine.
5.5 ESTABLISHMENT OF TRUST
The Committee, in its sole discretion, may establish a trust to hold Deferred
Amounts or any portion thereof for the benefit of Participants.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 NON-TRANSFERABILITY
Except as provided below, no Award under the Plan (including any Deferred
Amount), and no interest therein, shall be transferable by the Participant
otherwise than by will or, if the Participant dies intestate, by the laws of
descent and distribution. All Awards shall be exercisable or received during the
Participant's lifetime only by the Participant or his legal representative.
Notwithstanding the foregoing, the Committee may from time to time permit Awards
to be transferable subject to such terms and conditions as the Committee may
impose. Any transfer contrary to this Section 6.1 will nullify the Award.
6.2 ADJUSTMENTS UPON CERTAIN CHANGES
In the event of a stock dividend or stock split, or combination or other
increase or reduction in the number of issued shares of Common Stock, the Board
of Directors or the Committee may, in order to prevent the dilution or
enlargement of rights under Awards (including Deferred Amounts), make such
adjustments in the number and type of shares authorized by this Plan, the number
and type of shares covered by, or with respect to which payments are measured
under, outstanding Awards and the exercise prices specified therein as may be
determined to be appropriate and equitable. The Committee may, notwithstanding
any other provision of the Plan to the contrary, provide in the agreement
evidencing any Award (including Deferred Amounts) for adjustments to such Award
in order to prevent the dilution or enlargement of rights thereunder or to
provide for acceleration of benefits thereunder in the event of a change in
control, merger, consolidation, reorganization, recapitalization, sale or
exchange of substantially all assets or dissolution of or spin-off or similar
transaction by the Corporation; provided, however, that no such provision shall
require such acceleration of benefits in connection with a change in control as
to any Award (including Deferred Amounts) held by either (a) a Participant who
is an elected officer of the Corporation immediately prior to the transaction or
series of transactions in which the change in control (the "Transaction") is to
occur or (b) any other Participant who is designated by the Committee at the
time the Award is made or subsequently thereto and, in either such case, who
will hold an "Excess Equity Interest" in the Corporation, its successor or any
of its affiliates after such change in control, unless a majority of the
disinterested members of the Board of Directors approves such acceleration prior
to the change in control. An "Excess Equity Interest" means that (i) the
percentage interest in the
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Common Stock and similar securities of the Corporation, its successor, or any of
its affiliates to be beneficially owned by the Participant after the change in
control ("Post-Change Securities") will exceed (A) one-half of one percent
(0.5%) and (B) the percentage interest in the Common Stock of the Corporation
beneficially owned by the Participant immediately prior to the Transaction, such
percentages to be determined on a fully-diluted basis, or (ii) the Participant
will receive in connection with the change in control (in exchange for his
Common Stock, as compensation and otherwise) a greater amount of Post-Change
Securities, per share of Common Stock of the Corporation beneficially owned by
him (including shares which may be acquired under stock options) immediately
prior to the Transaction than stockholders of the Corporation who are not
employed by the Company will have the right to receive, per share of Common
Stock of the Corporation held by such stockholders.
6.3 TAX WITHHOLDING
(a) The Company shall have the power to withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy any withholding or other
tax due from the Corporation with respect to any amount payable and/or shares
issuable under the Plan, and the Corporation may defer such payment or issuance
unless indemnified to its satisfaction.
(b) Subject to the consent of the Committee, due to (i) the exercise of a NSO,
(ii) lapse of restrictions on a Restricted Stock Award, or (iii) the issuance of
any other stock award under the Plan, a Participant may make an irrevocable
election (an "Election") to (A) have shares of Common Stock otherwise issuable
under (i) withheld, or (B) tender back to the Corporation shares of Common Stock
received pursuant to (i), (ii), or (iii), or (C) deliver back to the Corporation
pursuant to (i), (ii), or (iii) previously-acquired shares of Common Stock of
the Corporation having a Fair Market Value sufficient to satisfy all or part of
the Participant's estimated tax obligations associated with the transaction.
Such Election must be made by a Participant prior to the date on which the
relevant tax obligation arises (the "Tax Date"). The Committee may disapprove of
any Election, may suspend or terminate the right to make Elections, or may
provide with respect to any Award under this Plan that the right to make
Elections shall not apply to such Awards.
(c) If a Participant is an officer, as that term is used in Rule 16a-1
promulgated under the Exchange Act or any similar rule which may subsequently be
in effect (an "Officer"), then an Election must be made and must be effective
either (1) during a period beginning on the third business day following the
date of release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date or (2) at least six months prior to the Tax Date.
6.4 CONDITIONS ON AWARDS
In the event that the employment of a Participant holding any unexercised Option
or SAR, any unearned Performance Award, any unearned shares of Restricted Stock,
or any unearned Restricted Stock Equivalents shall terminate with the consent of
the Committee or by reason of retirement or disability, the rights of such
Participant to any such Award shall be subject to the conditions that until any
such Option or SAR is exercised, or any such Performance Award, share of
Restricted Stock or Restricted Stock Equivalent is earned, the Participant shall
(a) not engage, either directly or indirectly, in any manner or capacity as
advisor, principal, agent, partner, officer, director, employee, member of any
association or otherwise, in any business or activity which is at the time
competitive with any business or activity conducted by the Company and (b) be
available, unless the Participant shall have died, at reasonable times for
consultations (which shall not require substantial time or effort) at the
request of the Company's management with respect to phases of the business with
which the Participant was actively connected during the Participant's
employment, but such consultations shall not (except in the case of a
Participant whose active service was outside of the United States) be required
to be performed at any place or places outside of the
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United States of America or during usual vacation periods or periods of illness
or other incapacity. In the event that either of the above conditions is not
fulfilled, the Participant shall forfeit all rights to any unexercised Option or
SAR, Performance Award, shares of Restricted Stock or Restricted Stock
Equivalents held as on the date of the breach of condition. Any determination by
the Board of Directors of the Corporation, which shall act upon the
recommendation of the Chairman, that the Participant is, or has, engaged in a
competitive business or activity as aforesaid or has not been available for
consultations as aforesaid shall be conclusive.
6.5 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board of Directors may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board of
Directors may deem advisable in order that any Awards thereunder shall conform
to or otherwise reflect any change in applicable laws or regulations, or to
permit the Company or its employees to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
such amendment shall, without stock-holder approval to the extent required by
law, agreement, or the rules of any exchange upon which the Common Stock is
listed, (i) except as provided in Section 6.2, materially increase the number of
shares of Common Stock which may be issued under the Plan, (ii) materially
modify the requirements as to eligibility for participation in the Plan, (iii)
materially increase the benefits accruing to Participants under the Plan, or
(iv) extend the termination date of the Plan. No such amendment, suspension or
termination shall (A) impair the rights of Participants under outstanding
Options, SARs, Performance Awards, awards of Restricted Stock or Restricted
Stock Equivalents, Performance Accounts or Deferred Amounts without the consent
of the Participants affected thereby or (B) make any change that would
disqualify the Plan, or any other plan of the Corporation intended to be so
qualified, from the exemption provided by Rule 16b-3.
6.6 FOREIGN ALTERNATIVES
Notwithstanding the other provisions of the Plan, in the case of any Award
(including any Deferred Amount) to any Participant who is an employee of a
foreign Subsidiary or foreign branch of the Company or held by a Participant who
is in any other category specified by the Committee, the Committee may specify
that such Award shall not be represented by shares of Common Stock or other
securities but shall be represented by rights approximately equivalent (as
determined by the Committee) to the rights that such Participant would have
received if shares of Common Stock or other securities had been issued in the
name of such Participant otherwise in accordance with the Plan (such rights
being hereinafter called "Stock Equivalents"). The Stock Equivalents
representing any such Award may subsequently, at the option of the Committee, be
converted into cash or an equivalent number of shares of Common Stock or other
securities under such circumstances and in such manner as the Committee may
determine.
6.7 DEFINITIONS AND OTHER GENERAL PROVISIONS
(a) The terms "retirement" and "disability" as used under the Plan shall be
construed by reference to the provisions of the pension plan or other similar
plan or program of the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock on any given date
means (i) the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the Composite Tape of the New York Stock Exchange (or, if
not so reported, on any domestic stock exchanges on which the Common Stock is
then listed); or (ii) if the Common Stock is not listed on any domestic stock
exchange, the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the Nasdaq Stock Market on such date or the last previous
date
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reported (or, if not so reported, by the system then regarded as the most
reliable source of such quotations) or, if there are no reported sales on such
date, the mean of the closing bid and asked prices as so reported; or (iii) if
the Common Stock is listed on a domestic exchange or quoted in the domestic
over-the-counter market, but there are not reported sales or quotations, as the
case may be, on the given date, the value determined pursuant to (i) or (ii)
above using the reported sale prices or quotations on the last previous date on
which so reported; or (iv) if none of the foregoing clauses apply, the fair
value as determined in good faith by the Corporation's Board of Directors or the
Committee.
(c) The term "Subsidiary" shall mean, unless the context otherwise requires, any
corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation if each of the corporations other than the last
corporation in such chain owns stock possessing at least 20% of the voting power
in one of the other corporations in such chain.
(d) The adoption of the Plan shall not preclude the adoption by appropriate
means of any other stock option or other incentive plan for employees.
6.8 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan, including without limitation, (a)
the determination of the Participants to receive Awards, (b) the form, amount
and timing of such Awards, (c) the terms and provisions of such Awards and (d)
the agreements evidencing the same, need not be uniform and may be made by it
selectively among Participants who receive, or who are eligible to receive,
Awards under the Plan, whether or not such Participants are similarly situated.
6.9 SUSPENSIONS, LEAVES OF ABSENCE, AND TRANSFERS
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any
suspension of employment or leave of absence from the Company granted to a
Participant. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (a) whether or not any such suspension or leave
of absence shall be treated as if the Participant ceased to be an employee and
(b) the impact, if any, of any such suspension or leave of absence on Awards
under the Plan. In the event a Participant transfers within the Company, such
Participant shall not be deemed to have ceased to be an employee for purposes of
the Plan.
6.10 LISTING, REGISTRATION, AND LEGAL COMPLIANCE
Each Award (including Deferred Amounts) shall be subject to the requirement that
if at any time the Committee shall determine, in its discretion, that the
listing, registration, or qualification of such Award, or any shares of Common
Stock or other property subject thereto, upon any securities exchange or under
any foreign, federal, or state securities or other law or regulation, or the
consent or approval of any governmental body or the taking of any other action
to comply with or otherwise with respect to any such law or regulation, is
necessary or desirable as a condition to or in connection with the granting of
such Award or the issue, delivery or purchase of shares of Common Stock or other
property thereunder, no such Award may be exercised or paid in Common Stock or
other property unless such listing, registration, qualification, consent,
approval, or other action shall have been effected or obtained free of any
conditions not acceptable to the Committee and the holder of the Award will
supply the Corporation with such certificates, representations and information
as the Corporation shall request and shall otherwise cooperate with the
Corporation in effecting or obtaining such listing, registration, qualification,
consent, approval or other action. In the case of Officers and other persons
subject to Section 16(b) of the Exchange Act, the Committee may at any time
impose any limitations upon the exercise, delivery, or payment of any Award
(including Deferred Amounts) which, in the discretion of the Committee, are
necessary or desirable
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in order to comply with Section 16(b) and the rules and regulations thereunder.
If the Corporation, as part of an offering of securities or otherwise, finds it
desirable because of foreign, federal, or state legal or regulatory requirements
to reduce the period during which Options or SARs may be exercised, the
Committee may, in its discretion and without the holders' consent, so reduce
such period on not less than 15 days' written notice to the holders thereof.
6.11 LOANS
The Committee may provide for the Corporation or any Subsidiary to make loans to
finance the exercise of any Option as well as the estimated or actual amount of
any taxes payable by the holder as a result of the exercise or payment of any
Option and may prescribe, or may empower the Corporation or such Subsidiary to
prescribe, the other terms and conditions (including but not limited to the
interest rate, maturity date and whether the loan will be secured or unsecured)
of any such loan; provided, however, that notwithstanding the foregoing, all
loans made pursuant to this provision shall include an interest rate on the
outstanding balance of the loan at a rate of at least the then prevailing rate
the Corporation would be charged by an unaffiliated lender for a loan of a
similar nature and maturity.
6.12 INDEMNIFICATION
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Corporation against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
that person in connection with or resulting from any claim, action, suit, or
proceeding to which that person may be a party or in which that person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by that person in settlement thereof,
with the Corporation's approval, or paid by that person in satisfaction of any
judgment in any such action, suit, or proceeding against that person, provided
that person shall give the Corporation an opportunity, at its own expense, to
handle and defend the same before that person undertakes to handle and defend it
on that person's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
6.13 BENEFICIARY DESIGNATION
Each Participant under the Plan may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of the Participant's death before
the Participant receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
6.14 RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant's employment at any time, nor confer upon
any Participant any right to continue in the employ of the Company for any
period of time or to continue the Participant's present or any other rate of
compensation. No employee shall have a right to be selected as a Participant,
or, having been so selected, to be selected again as a Participant.
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6.15 COMPLIANCE WITH PROVISIONS OF TAX AND SECURITIES LAW
It is the intent of the Corporation that the Plan comply in all respects with
Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, that any
ambiguities or inconsistencies in construction of the Plan be interpreted to
give effect to such intention and that if any provision of the Plan is found not
to be in compliance with Rule 16b-3 or Section 162(m), such provision shall be
deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3 or Section 162(m), as the case may be.
6.16 REQUIREMENTS OF LAW, GOVERNING LAW
The granting of Awards and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
The Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware. The provisions of the Plan
shall be interpreted so as to comply with the conditions or requirements of Rule
16b-3 under the Exchange Act, unless a contrary interpretation of any such
provisions is otherwise required by applicable law.
6.17 EFFECTIVE DATE
The Plan shall, subject to the approval of the holders of a majority of the
shares of Common Stock present at the 1996 annual meeting of the Corporation's
stockholders, be deemed effective as of January 1, 1996. No awards of Options,
SARs, Performance Units, Performance Shares or shares of Restricted Stock or
Restricted Stock Equivalents shall be made hereunder after December 31, 2005.
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EXHIBIT B
WHIRLPOOL CORPORATION
NONEMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
(AS AMENDED FEBRUARY 20, 1996)
ARTICLE 1
GENERAL
1.1 PURPOSE
Whirlpool Corporation a Delaware corporation (the "Corporation"), hereby adopts
this Nonemployee Director Stock Ownership Plan (the "Plan"). The purpose of the
Plan is to foster and promote the long-term financial success of the Corporation
by attracting and retaining outstanding nonemployee directors by enabling them
to participate in the Corporation's growth through automatic, nondiscretionary
awards of Common Stock (as defined in Section 1.3) and Options (as defined in
Article III). Common Stock awards and Options are collectively and
interchangeably referred to herein as "Awards".
1.2 PARTICIPATION
Only directors of the Corporation who at the time an Award is made meet the
following criteria ("Directors") shall receive Awards under the Plan: (a) the
director is not, and has not been for at least one year, an employee or officer
of the Corporation or any subsidiary of the Corporation and (b) the director is
a "disinterested person" as such term is defined in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act") or any similar rule
which may subsequently be in effect ("Rule 16b-3").
1.3 SHARES SUBJECT TO THE PLAN
Shares of stock covered by Awards under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
$1.00 par value per share, or such other shares as may be substituted pursuant
to Section 4.2 ("Common Stock"). The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be 200,000 (subject to
adjustment pursuant to Section 4.2). Any shares of Common Stock subject to an
Option which for any reason is canceled or terminated without having been
exercised, or any shares of Restricted Stock (as defined in Section 2.2) which
are forfeited, shall again be available for Awards under the Plan. No fractional
shares shall be issued.
1.4 GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine gender
when used in the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
ARTICLE II
STOCK AWARDS
2.1 AWARD OF COMMON STOCK
Effective on the date of each Annual Meeting beginning in 1993, each Director in
office at the conclusion of such meeting will automatically be awarded 400
(subject to adjustment pursuant to Section 4.2) shares of Common Stock, less the
number of shares of Restricted Stock, if any, owned by such Director which
ceased to be Restricted Stock on the day prior to such Annual Meeting
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pursuant to Section 2.2. In addition, if a person first becomes a Director more
than six months before the first anniversary of the immediately preceding Annual
Meeting, such person will automatically be awarded 400 (subject to adjustment
pursuant to Section 4.2) shares of Common Stock on the date he or she becomes a
Director. The shares of Common Stock awarded pursuant to this Section 2.1 will
not be subject to any restriction under the Plan, provided that no such shares
of Common Stock may be sold within the first six months after they are awarded,
unless the death of the Director occurs during such period.
2.2 RESTRICTIONS
(a) On the day preceding each of the succeeding Annual Meetings after an Award
of Common Stock under the Plan prior to 1993 (the shares covered by any such
Award being referred to as "Restricted Stock"), if the Director is still a
Director on such day, 200 (subject to adjustment pursuant to Section 4.2) of the
shares shall cease to be Restricted Stock. Promptly after shares cease to be
Restricted Stock the Corporation shall deliver a certificate or certificates for
such shares to the holder of such Restricted Stock. Shares of Restricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered. The
Corporation will retain custody of all distributions made or declared with
respect to Restricted Shares other than regular cash dividends ("Retained
Distributions"). Retained Distributions will be subject to the same restrictions
as the Restricted Shares with respect to which they are made or declared and
will not bear interest or be segregated in separate accounts. Except for such
restrictions on transfer, the Director as owner of shares of Restricted Stock
shall have all the rights of a holder of Common Stock as to such Restricted
Stock, including the right to vote such shares and the right to receive regular
cash dividends thereon. In the event a Director ceases to be a Director for any
reason or violates the foregoing restrictions, any Restricted Stock then owned
by him and any Retained Distributions related thereto shall be forfeited and the
Corporation shall have the right to complete the blank stock power as to such
shares.
(b) Upon the occurrence of any Change in Control, all shares of Restricted Stock
shall cease to be Restricted Stock and, promptly thereafter, the Corporation
shall deliver a certificate or certificates for such shares and any Retained
Distributions related thereto to the holder of such Restricted Stock. A "Change
in Control" shall be defined as set forth in Section 10.6(d) of the Whirlpool
Salaried Employees Retirement Plan, as amended.
(c) After all shares issued as Restricted Stock Awards have ceased to be
Restricted Stock, this Section 2.2 and all other references in the Plan to
Restricted Stock shall be deemed to be deleted and no longer part of the Plan.
ARTICLE III
STOCK OPTION AWARDS
3.1 AWARD OF STOCK OPTIONS
Effective on the date of each Annual Meeting commencing with the Annual Meeting
in 1990, if the "Grant Condition" for the immediately preceding fiscal year (the
"Prior Year") was satisfied, each Director then in office will automatically be
awarded a stock option (an "Option") under the Plan to purchase 600 (subject to
adjustment pursuant to Section 4.2) shares of Common Stock. The Grant Condition
for any Prior Year will be satisfied if the "EFCO" for the Prior Year is 110% or
more of the EFCO for the fiscal year before the Prior Year (the "Base Year").
EFCO means the Corporation's consolidated earnings from continuing operations
before the after-tax effects of: (a) extraordinary items; (b) changes in
accounting principles; (c) gains and losses from business dispositions shown
separately on the corporation's published earnings statement, (d) restructuring
charges shown separately on the Corporation's published earnings statement.
Restructuring charges means
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costs related to the elimination or reduction of product lines or the
consolidation of plant facilities, including losses from asset impairments and
disposals relating thereto, and costs of severance and termination benefits
relating to the foregoing or to reductions in personnel. If there shall be any
change in the Corporation's fiscal year, the EFCO from any resulting fiscal year
which contains less or more than 12 months shall be adjusted by multiplying the
EFCO for such shorter or longer year by a fraction equal to 12 divided by the
number of months in such shorter or longer year. Any question as to the
computation of EFCO and whether the Grant condition is satisfied for any year
shall be resolved by the Corporation's independent public accountants.
3.2 STOCK OPTION CERTIFICATES
The award of an Option shall be evidenced by a certificate executed by an
officer of the Corporation.
3.3 OPTION PRICE
The purchase price for Common Stock under each Option (the "Option Price")
granted as of the Annual Meeting following any Prior Year shall be the average
Fair Market Value of the Common Stock for the third through the fifth days for
which trading in the Common Stock is published after the date on which the
Corporation makes a public release of its earnings data for the Base Year.
3.4 EXERCISE AND TERM OF OPTIONS
(a) Options may be exercised by the delivery of written notice of exercise and
the Option Price for the shares to be purchased to the Corporate Secretary of
the Corporation. The Option Price may be paid in cash (including check, bank
draft or money order) or, unless in the opinion of counsel to the Corporation to
do so may result in a possible violation of law, by delivery of Common Stock
already owned by the Director (other than Restricted Stock as to which the
restrictions in Article II have not been satisfied), valued at Fair Market Value
on the date of the exercise. As soon as practicable after receipt of each notice
and full payment, the Corporation shall deliver to the Director a certificate or
certificates representing the acquired shares of Common Stock.
(b) Each Option may be exercised at any time after the date it is awarded until
(subject to Section 4.1) the first to occur of the twentieth anniversary of the
date such Option was awarded or the second anniversary of the date the Director
ceases to be a Director, provided that no Option shall be exercisable within the
first six months of its term, unless death or disability of the Director occurs
during such period. In the event that the death or disability of the Director
does occur and an Option is exercised in that period, any shares of Common Stock
issued on such exercise may not be sold until the sixth month anniversary of the
date of the grant of the Option.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 NON TRANSFERABILITY; BENEFICIARIES
No Option awarded under the Plan shall be transferable by the Director otherwise
than by will or, if the Director dies intestate, by the laws of descent and
distribution. All Awards shall be exercisable or received during the Director's
lifetime only by the Director or his legal representative. Any transfer contrary
to this Section 4.1 will nullify the Option. In the event of a Director's death
prior to the exercise of any Options which were then exercisable, such Options
may be exercised within one year after the Director's death (regardless of the
expiration date of such Options under Section 3.4(b)) by the Director's
beneficiary, designated as provided below, or, in the absence of any such
designation, his estate. Any certificates for shares of Common Stock which
ceased to be Restricted Stock and were not delivered to a Director prior to his
death and any Retained Distributions related thereto and not so delivered will
be delivered to such beneficiary or, if no designation was made, his estate.
Each Director may name, from time to time, any beneficiary or
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<PAGE> 48
beneficiaries (who may be named contingently or successively) who may exercise
such Options and receive such certificates and Retained Distributions. Each
designation will revoke all prior designations by such Director, will be in
writing and will be effective only when filed with the Corporate Secretary of
the Corporation during his lifetime.
4.2 ADJUSTMENT UPON CERTAIN CHANGES
In the event of a stock dividend or stock split, or combination or other
reduction in the number of issued shares of Common Stock, a merger,
consolidation, reorganization, recapitalization, sale or exchange of
substantially all assets or dissolution of the Corporation, the Board of
Directors shall, in order to prevent the dilution or enlargement of rights under
Options or awards of Restricted Stock make such adjustments in the number and
type of shares authorized by this Plan, the number and type of shares covered by
outstanding Options and grants of Restricted Stock and Option Prices specified
therein as may be determined to be appropriate and equitable. In the event
fractional shares would otherwise result from any such adjustment, the number of
shares so authorized and covered and the prices thereof shall be further
adjusted so as to eliminate such fractions.
4.3 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board of Directors may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board of
Directors may deem advisable in order that any Awards thereunder shall conform
to or otherwise reflect any change in Applicable laws or regulations, or to
permit the Corporation or the Directors to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
such amendment shall, without stockholder approval to the extent required by
law, agreement or the rules of any exchange upon which the Common Stock is
listed, (a) except as provided in Section 4.2, materially increase the number of
shares of Common Stock which may be issued under the Plan, (b) materially modify
the requirements as to eligibility for participation in the Plan, (c) materially
increase the benefits accruing to Directors under the Plan or (d) extend the
termination date of the Plan. No such amendment, suspension or termination shall
(x) impair the rights of Directors under any outstanding Option or awards of
Restricted Stock without the consent of the Directors affected thereby or (y)
make any change that would disqualify the Plan, or any other plan of the
Corporation intended to be so qualified, from the exemption provided by Rule
16b-3. No provision of the Plan which states the amount and price of securities
to be awarded, specifies the timing of awards or sets forth the formula that
determines the amount, price and timing of awards may be amended more than once
every six months, except to comport with changes in the Internal Revenue Code of
1986, as amended, or the Employee Retirement Income Security Act, or the rules
thereunder.
4.4 DEFINITION OF FAIR MARKET VALUE
The term "Fair Market Value" as it relates to Common Stock on any given date
means (a) the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the Composite Tape of the New York Stock Exchange (or, if
not so reported, on any domestic stock exchanges on which the Common Stock is
then listed); or (b) if the Common Stock is not listed on any domestic stock
exchange, the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the National Association of Securities Dealers Automated
Quotation System (or, if not so reported, by the system then regarded as the
most reliable source of such quotations) or, if there are no reported sales on
such date, the mean of the closing bid and asked prices as so reported; or (c)
if the Common Stock is listed on a domestic exchange or quoted in the domestic
over-the-counter market, but there are not reported sales or quotations, as the
case may be, on the given date, the value determined pursuant to (a) or (b)
above using the reported sale prices or quotations on the last previous date on
which so reported; or (d) if none of the foregoing clauses apply, the fair value
as determined in good faith by the Corporation's Board of Directors.
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<PAGE> 49
4.5 PLAN NOT EXCLUSIVE
The adoption of the Plan shall not preclude the adoption by appropriate means of
any other stock option or other incentive plan for Directors.
4.6 REPORTS
The Corporation shall supply each Director, not less frequently than once each
year, a report stating whether the Grant Condition was satisfied for the
preceding year, the number of shares of Common Stock covered by Options held by
such Director, the Option Prices thereof, the number of shares of Restricted
Stock held by such director and any Retained Distributions with respect thereto
and the dates on which such shares will cease to constitute Restricted Stock if
such Director continues to be a Director.
4.7 LISTING, REGISTRATION AND LEGAL COMPLIANCE
Each Option and award of Restricted Stock shall be subject to the requirement
that if at any time counsel to the Corporation shall determine that the listing,
registration or qualification thereof or of any shares of Common Stock or other
property subject thereto upon any securities exchange or under any foreign,
federal or state securities or other law or regulation, or the consent or
approval of any governmental body or the taking of any other action to comply
with or otherwise with respect to any such law or regulation, is necessary or
desirable as a condition to or in connection with the award of such Option or
Restricted Stock or the issue, delivery or purchase of shares of Common Stock
other property thereunder, no such Award may be exercised or paid in Common
Stock or other property unless such listing, registration, qualification,
consent, approval or other action shall have been effected or obtained free of
any conditions not acceptable to the Corporation, and the holder of the award
will supply the Corporation with such certificates, representations and
information as the Corporation shall request and shall otherwise cooperate with
the Corporation in effecting or obtaining such listing, registration,
qualification, consent, approval or other action. The Corporation may at any
time impose any limitations upon the exercise, delivery or payment of any Award
which, in the opinion of the Board of Directors, are necessary or desirable in
order to cause the Plan or any other plan of the Corporation to comply with Rule
16b-3. If the Corporation, as part of an offering of securities or otherwise,
finds it desirable because of foreign, federal or state legal or regulatory
requirements to reduce the period during which Options may be exercised, the
Board of Directors may, without the holders' consent, so reduce such period on
not less than 15 days' written notice to the holders thereof.
4.8 RIGHTS OF DIRECTORS
Nothing in the Plan shall confer upon any Director any right to serve as a
Director for any period of time or to continue his present or any other rate of
compensation.
4.9 REQUIREMENTS OF LAW; GOVERNING LAW
The granting of Awards and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
The Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware. The provisions of this Plan
shall be interpreted so as to comply with the conditions or requirements of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, unless a contrary
interpretation of any such provision is otherwise required by applicable law.
4.10 FINAL DATE FOR AWARDS
No Awards shall be made hereunder after April 30, 1999.
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It is important that your stock be represented so that the presence of a quorum
at the meeting may be assured. Accordingly, whether or not you expect to attend
in person, please sign and date the enclosed proxy and mail it PROMPTLY in the
enclosed envelope. Your postage is prepaid if mailed in the United States.
<PAGE> 51
PROXY PROXY
WHIRLPOOL CORPORATION
ADMINISTRATIVE CENTER, 2000 M63, BENTON HARBOR, MICHIGAN 49022-2692
The undersigned hereby appoints David R. Whitwam, William D. Marohn and Daniel
F. Hopp, and each of them, proxies, with power of substitution and revocation,
acting by a majority of those present and voting or if only one is present and
voting then that one, to vote the stock of Whirlpool Corporation which the
undersigned is entitled to vote, at the annual meeting of stockholders to be
held on April 16, 1996 and at any adjournment thereof, with all the powers the
undersigned would possess if present, with respect to the election of all named
directors, the approval of the 1996 Omnibus Stock and Incentive Plan, the
approval of an amendment to the Nonemployee Director Stock Ownership Plan, and
such other business as may properly come before the meeting.
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS AS MAY BE GIVEN
ON THE REVERSE SIDE OF THIS PROXY CARD. IF NO INSTRUCTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR A PROPOSAL TO APPROVE
THE 1996 OMNIBUS STOCK AND INCENTIVE PLAN, FOR A PROPOSAL TO AMEND THE
NONEMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN, AND UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING. PLEASE VOTE, SIGN THIS PROXY AS INDICATED
BELOW AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, AND 3.
For All,
1. ELECTION OF DIRECTORS For Withhold Except 2. To approve the 1996 Omnibus For Against Abstain
Nominees: William D. Marohn, Miles L. Marsh / / / / / / Stock and Incentive Plan. / / / / / /
and Paul G. Stern
3. To approve an amendment to For Against Abstain
the Nonemployee Director / / / / / /
________________________________ Stock Ownership Plan.
(Except Nominee(s) written above)
Dated:________________,1996
Signature(s)_______________________________
Signature(s)_______________________________
Please sign exactly as name(s) appear(s) on
this Proxy. Joint owners should indicate
capacity in which they are signing.
Trustees, Executors, etc. should indicate
capacity in which they are signing.
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