<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
WHIRLPOOL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] 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:
-------------------------------------------------------------------------
Notes:
<PAGE>
WHIRLPOOL CORPORATION
Administrative Center
2000 N. M-63
Benton Harbor, Michigan 49022-
2692
To Our Stockholders:
It is my pleasure to invite you to attend the 1999 Whirlpool Corporation
annual meeting of stockholders to be held on Tuesday, April 20, 1999, at 9:30
A.M., Chicago time, at The Madison Room, 181 W. Madison Street (7th Floor),
Chicago, Illinois.
The formal notice of the meeting follows on the next page. At the meeting,
stockholders will vote on the election of three directors, approval of an
amended Nonemployee Directors Stock Ownership Plan, approval of an amended
Performance Excellence Plan, and one stockholder proposal and will transact
any other business that may properly come before the meeting. In addition, we
will discuss Whirlpool's solid 1998 performance, the outlook for this year,
and answer your questions.
Your vote is important. We urge you to please complete and return the enclosed
proxy whether or not you plan to attend the meeting. Promptly returning your
proxy will be appreciated as it will save further mailing expense. You may
revoke your proxy at any time prior to the proxy being voted by filing with
the Secretary of the Company a written revocation, by providing a proxy with a
later date, or by voting in person at the meeting. If you attend the meeting
and vote in person, your proxy will not be voted.
Your vote is important and much appreciated!
DAVID R. WHITWAM
Chairman of the Board
and Chief Executive Officer March 19, 1999
<PAGE>
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
The 1999 annual meeting of stockholders of WHIRLPOOL CORPORATION will be held
at The Madison Room, 181 W. Madison Street (7th Floor), Chicago, Illinois on
Tuesday, April 20, 1999, at 9:30 A.M., Chicago time, for the following
purposes:
1. to elect three persons to the Company's Board of Directors;
2. to approve an amended Nonemployee Director Stock Ownership Plan;
3. to approve an amended Performance Excellence Plan;
4. to vote on a shareholder proposal, if properly presented at the meeting,
requesting the Board of Directors to arrange for the prompt sale of the
Company to the highest bidder; and
5. to transact such other business as may properly come before the meeting.
By Order of the Board of Directors
ROBERT T. KENAGY
Associate General Counsel and
Corporate Secretary
March 19, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Information about Whirlpool Corporation................................... 1
Proxy Statement........................................................... 1
Directors and Nominees for Election as Directors.......................... 2
The Whirlpool Board of Directors.......................................... 5
Security Ownership........................................................ 5
Executive Compensation.................................................... 7
Stock Option Grants and Related Information............................... 8
Stock Option Exercises and Holdings....................................... 9
Long-Term Incentive Awards................................................ 9
Retirement Benefits....................................................... 11
Compensation of Directors................................................. 11
Human Resources Committee Report on Compensation Awards................... 12
Performance Graph......................................................... 16
Proposal to Amend the Nonemployee Director Stock Ownership Plan........... 17
Proposal to Amend the Performance Excellence Plan......................... 20
Stockholder Proposal...................................................... 22
Miscellaneous............................................................. 24
Auditors.................................................................. 24
Stockholder Proposals for 2000 Meeting.................................... 24
Exhibit A--Whirlpool Corporation Nonemployee Director Stock Ownership
Plan..................................................................... A-1
Exhibit B--Whirlpool Corporation Performance Excellence Plan.............. B-1
</TABLE>
<PAGE>
INFORMATION ABOUT WHIRLPOOL CORPORATION
Whirlpool is the world's leading manufacturer and marketer of major home
appliances. We manufacture in 13 countries and market products in about 170
countries under major brand names such as Whirlpool, KitchenAid, Roper,
Bauknecht, Ignis, Laden, Inglis, Brastemp, and Consul. We are also the
principal supplier to Sears, Roebuck and Co. of many major appliances marketed
under the Kenmore brand name. We have approximately 59,000 employees
worldwide. Our headquarters is located in Benton Harbor, Michigan and our
address is 2000 N. M-63, Benton Harbor, Michigan 49022-2692. Our telephone
number is (616) 923-5000.
PROXY STATEMENT
Our 1999 annual meeting of stockholders will be held on Tuesday, April 20,
1999 at 9:30 a.m., Chicago time, at The Madison Room, 181 W. Madison Street
(7th Floor), Chicago, Illinois. You are welcome to attend.
Information about this Proxy Statement
We are sending this proxy statement and the enclosed proxy card because
Whirlpool's Board of Directors is seeking your permission (or proxy) to vote
your shares at the annual meeting on your behalf. This proxy statement
presents information we are required to provide to you under the rules of the
Securities and Exchange Commission. It is intended to help you in reaching a
decision on voting your shares of stock. Only stockholders of record at the
close of business on March 1, 1999 are entitled to vote at the meeting. There
were 76,494,003 outstanding shares of common stock as of the close of business
on March 1, 1999. We have no other voting securities. Stockholders are
entitled to one vote per share on each matter. This proxy statement and the
accompanying proxy form are first being mailed to stockholders on or about
March 19, 1999.
Information about Voting.
Stockholders can vote their shares on matters presented at the annual meeting
in two ways.
1. By Proxy--If you sign and return the accompanying proxy form, your shares
will be voted as you direct on the proxy form. If you do not give any
direction on the proxy card, the shares will be voted FOR the nominees named
for director and FOR approval of proposals to amend the Nonemployee Director
Stock Ownership Plan and the Performance Excellence Plan (see pages 17 and 19)
and AGAINST the stockholder proposal to sell our company (see page 22). You
may revoke your proxy at any time before it is exercised by providing to
Whirlpool's Corporate Secretary, Robert T. Kenagy, a written revocation, by
providing a proxy with a later date, or by voting in person at the meeting.
2. In Person--You may come to the annual meeting and cast your vote there.
Whirlpool's Board of Directors has adopted a policy requiring all stockholder
votes to be kept permanently confidential and not disclosed except (i) when
disclosure is required by law, (ii) when a stockholder expressly consents to
disclosure or (iii) when there is a contested election and the proponent
filing the opposition statement does not agree to abide by this policy.
Stockholders representing at least 50% of the common stock issued and
outstanding must be present at the annual meeting, either in person or by
proxy, for there to be a quorum at the annual meeting. Abstentions and broker
non-votes are counted as present for establishing a quorum. A broker non-vote
occurs when a broker votes on some matter on the proxy card but not on others
because the broker has no authority to do so.
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. This means that the three nominees with the most votes
will be elected. Votes may be cast for or withheld from each nominee, but a
withheld vote will have no effect on the outcome of the election. For a
stockholder to nominate
1
<PAGE>
an individual for director at the meeting, the stockholder must give the
Company's Secretary written notice at least 90 days in advance of the annual
meeting of the stockholder's intent to make the nomination.
The affirmative vote of a majority of the outstanding common stock voting at
the annual meeting will be required to approve the proposal to amend the
Nonemployee Director Stock Ownership Plan to (i) increase the number of shares
that may be issued under the plan from 200,000 to 300,000, (ii) authorize the
annual granting of 400 deferred stock units to each nonemployee director, and
(iii) extend the final date that awards may be granted to April 30, 2009.
The affirmative vote of a majority of the outstanding common stock voting at
the annual meeting will be required to approve the proposal to amend the
Performance Excellence Plan to extend the term of the plan to December 31,
2003.
The affirmative vote of a majority of the outstanding common stock voting at
the annual meeting will be required to approve the stockholder proposal, if
properly presented at the meeting, requesting that the Board of Directors
arrange for the prompt sale of the Company to the highest bidder.
The Board of Directors does not know of any other matter that will be presented
at the annual meeting other than the proposals covered in this proxy statement.
DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS
----------------
Nominees For a Term to Expire in 2002
JAMES M. KILTS, 51, President and Chief Executive
Officer of Nabisco Holdings Corp. (food products).
Director of The May Department Stores Company.
PHOTO OF JAMES KILTS
----------------
MILES L. MARSH, 51, Chairman of the Board and Chief
Executive Officer of Fort James Corporation (consumer
paper products). Director of the Company since 1990 and
director of GATX Corporation and Morgan Stanley, Dean
Witter & Co.
----------------
PAUL G. STERN, 60, Partner, Thayer Capital Partners,
L.L.P. and Arlington Capital Partners, L.L.P. (private
investment companies). Director of the Company since
1990 and director of The Dow Chemical Company, MLC
Holdings Group, Inc., Aegis Communications, Inc., and
SAGA SOFTWARE, Inc.
----------------
2
<PAGE>
Directors Whose Terms Expire in 2001
ROBERT A. BURNETT, 71, director and former Chairman of
the Board 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 Industries,
Inc., and Hartford Financial Services Group, Inc.
[Photo of Mr. Burnett]
----------------
HERMAN CAIN, 53, Chairman of the Board of Godfather's
Pizza, Inc. and Chief Executive Officer and President,
National Restaurant Association (food service
industry). Director of the Company since 1992 and
director of Nabisco Holdings Corp., SUPERVALU, INC.,
and UtiliCorp United, Inc.
----------------
ALLAN D. GILMOUR, 64, former Vice Chairman of Ford
Motor Company (cars and trucks, related parts and
accessories and financial services; retired 1995).
Director of the Company since 1990 and director of AP
Automotive Systems, Inc., The Dow Chemical Company, DTE
Energy Company, The Prudential Insurance Company of
America, and MediaOne Group, Inc.
----------------
JANICE D. STONEY, 58, former Executive Vice President,
US WEST Communications Group, Inc. (telecommunications
products and services; retired 1992). Director of the
Company since 1987 (except for part of 1994 during a
bid for political office) and director of Premark
International, Inc. and Guarantee Life Company.
----------------
DAVID R. WHITWAM, 57, Chairman of the Board and Chief
Executive Officer of the Company. Director of the
Company since 1985 and director of PPG Industries, Inc.
----------------
3
<PAGE>
Directors Whose Terms Expire in 2000
GARY T. DICAMILLO, 48, Chairman of the Board and Chief
Executive Officer of Polaroid Corp. (photographic
products). Director of the Company since 1997 and
director of Pella Corporation and The Sheridan Group.
----------------
KATHLEEN J. HEMPEL, 48, former Vice Chairman and Chief
Financial Officer of Fort Howard Corporation (paper
products; retired 1997). Director of the Company since
1994 and director of Oshkosh Truck Corporation and A.O.
Smith Corporation.
----------------
ARNOLD G. LANGBO, 61, Chairman of the Board and Chief
Executive Officer of Kellogg Company (cereal products).
Director of the Company since 1994 and director of
Johnson & Johnson, and Atlantic Richfield Co.
----------------
PHILIP L. SMITH, 65, former Chairman of the Board and
Chief Executive Officer of The Pillsbury Company
(consumer foods and beverages and other products;
retired 1987). Director of the Company since 1982 and
director of Ecolab Inc. and U.S. Trust Corporation.
The directors have served their respective companies indicated above in various
executive or administrative positions for at least the past five years, except
for Messrs. DiCamillo, Kilts, and Marsh and Dr. Stern. From 1986 through 1995,
Mr. DiCamillo served in various capacities at Black & Decker Corp. (household
and commercial hardware products, including power tools and accessories and
other products and services), including President, Worldwide Power Tools and
Accessories. Mr. Kilts was Executive Vice President of the worldwide food
operations of the Philip Morris Companies from 1994 to 1997. Mr. Marsh was
Chairman and Chief Executive Officer of Pet Incorporated ("Pet"), 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.
Dr. Stern served as a director of and in various other capacities, including
Chairman, President and Chief Executive Officer, with Northern Telecom Limited
(telecommunications equipment and integrated office systems) until July 1994.
Dr. Stern served as a Special Partner of Forstmann Little & Co. from October
1993 until January 1996.
4
<PAGE>
BOARD OF DIRECTORS
The Board held seven meetings during 1998. During 1998, each director, except
for Mr. Marsh, 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 (Ms. Stoney (Chair), Mr. DiCamillo, Ms. Hempel, Mr. Marsh,
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 audit
engagements. The Audit Committee held three meetings in 1998.
The Human Resources Committee (Messrs. Langbo (Chair), Burnett, and Gilmour and
Ms. Stoney) determines the terms of employment of the Company's officers,
determines the terms and recipients of awards under the Company's Omnibus Stock
and Incentive and Performance Excellence Plans, and makes recommendations to
the Board with respect to the Company's compensation plans and policies. This
committee held four meetings in 1998.
The Corporate Governance Committee (Messrs. Smith (Chair), Burnett, Cain,
DiCamillo, 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 in Whirlpool's By-
laws. This committee held two meetings in 1998.
SECURITY OWNERSHIP
The following table presents the beneficial ownership of the only persons known
by us as of March 1, 1999 to beneficially own more than 5% of our common stock
based upon statements 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>
Sanford Bernstein Co., Inc. 6,997,698 9.2%
767 Fifth Avenue
New York, NY 10153
Dodge & Cox 4,974,678 6.5%
35th Floor
One Sansome Street
San Francisco, CA 94104
Amvescap PLC 4,622,119 6.08%
11 Devonshire Square
London, EC2M 4YR
England
Merrill Lynch & Co., Inc. 4,469,026 5.88%
250 Vesey St.
World Financial Center N. Tower
New York, NY 10281-1334
</TABLE>
The following table reports beneficial ownership of common stock by each
director, nominee for director, the Chief Executive Officer and the four other
most highly compensated executive officers, and all directors and executive
officers of Whirlpool as a group, as of March 1, 1999. Beneficial
5
<PAGE>
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>
Robert A. Burnett............... 5,739 2,400 8,139 *
Herman Cain..................... 2,617 2,400 5,017 *
Gary T. DiCamillo............... 1,422 600 2,022 *
Jeff M. Fettig.................. 32,094 79,900 111,994 *
Allan D. Gilmour................ 4,800 3,000 7,800 *
Ralph F. Hake................... 20,875 75,000 95,875 *
Kathleen J. Hempel.............. 2,800 1,200 4,000 *
James M. Kilts.................. 1,000 -0- 1,000 *
Arnold G. Langbo................ 2,942 1,200 4,142 *
William D. Marohn............... 83,160 16,000 99,160 *
Miles L. Marsh.................. 5,143 2,400 7,543 *
Paulo Periquito................. 8,630 57,500 66,130 *
Philip L. Smith................. 3,591 3,600 7,191 *
Paul G. Stern................... 4,400 2,400 6,800 *
Janice D. Stoney................ 3,100 3,600 6,700 *
David R. Whitwam................ 169,795 299,300 469,095 *
All directors and executive
officers as a group (20
persons)....................... 431,794 673,400 1,105,194 1.44%
</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 1,296,264 shares (as of December 31, 1998) held by the Whirlpool
401(k) Trust (approximately 6,883 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 that will become exercisable within 60
days.
6
<PAGE>
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 (1996-1998)
<TABLE>
<CAPTION>
Long-Term
Annual Compensation 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 1998 $1,000,000 $1,400,000 -0- 65,000 $1,254,280 $34,110
Chief Executive 1997 960,000 1,100,000 -0- 85,000 1,397,714 32,868
Officer 1996 925,000 475,000 -0- 70,000 81,600 17,004
William D. Marohn Vice Chairman (4) 1998 586,667 630,900 -0- -0- 1,108,762 2,115
1997 563,333 575,000 -0- 34,000 681,695 2,043
1996 533,333 227,000 -0- 29,000 40,800 1,710
Paulo Periquito Executive Vice 1998 500,000 735,000 188,385 15,000 387,004 24,100
President and 1997 119,981 87,318 -0- 20,000 -0- 5,020
President, Latin
America (5)
Ralph F. Hake Senior Executive 1998 426,250 526,000 -0- 20,000 338,192 5,394
Vice President 1997 390,125 406,000 -0- 30,000 376,552 4,301
and Chief Financial
Officer
Senior Executive 1996 319,750 277,000 -0- 17,500 24,480 4,092
Vice President,
Operations
Jeff M. Fettig Executive Vice 1998 355,068 407,000 280,534 18,000 333,141 245
President and 1997 328,333 329,000 334,911 20,500 371,387 224
President, Whirlpool 1996 308,333 123,500 182,003 17,500 20,400 157
Europe and Asia
</TABLE>
- --------
(1) The amount paid to Mr. Periquito includes $100,000 to compensate him for
increased living costs. The amounts paid to Mr. Fettig primarily relate to
reimbursement for expenses related to his foreign service. In 1998 and
1997, the Company paid foreign taxes of $177, 816 and $212,990 respectively
on his behalf. In 1996, the Company paid to Mr. Fettig $58,475 to
compensate him for increased living costs arising out of purchasing foreign
goods and services.
(2) The amounts represent payouts under long-term, equity-based compensation
programs based on the Company's financial performance as described under
the caption Long-Term Incentive Awards beginning on page 9. For 1998, the
payout under the Company's long-term incentive program reflected
achievement of a performance objective during the 1997 and 1998 performance
period relating to the awards. Amounts also include dividends received on
restricted stock awards issued in 1991.
(3) Amounts represent group term life insurance premiums.
(4) Mr. Marohn retired from the Company effective January 1, 1999.
(5) Mr. Periquito became an employee and officer as a result of the Company's
acquisition of a majority interest in Brasmotor S.A. in November 1997.
Pursuant to standard employment practice in Brazil, Whirlpool entered into an
employment agreement with Mr. Periquito on April 2, 1998 under which Mr.
Periquito's 1998 base salary compensation was established as reflected in the
Summary Compensation Table. Under the agreement, Mr. Periquito received a one
time bonus payment of $200,000 which is included in the bonus column of the
Summary Compensation Table and the cost of living adjustment shown in the
Summary Compensation
7
<PAGE>
Table. Mr. Periquito is entitled to receive a cost of living adjustment in
future years, with the 1999 and 2000 cost of living adjustments to be at least
$75,000 in each year. Mr. Periquito is entitled to participate in Whirlpool's
bonus plan, long-term incentive plans, and its stock option plan based on his
position as an Executive Vice President. Amounts awarded or earned in 1998 are
reflected in the appropriate tables. Whirlpool guaranteed a personal loan under
the agreement that Mr. Periquito repaid during the year. Whirlpool has agreed
to pay approximately 14 months base salary in the event it terminates the
agreement without just cause. The agreement also provides pension benefits as
described in this proxy and a life insurance policy and other benefits the
value of which are included in the Summary Compensation Table as required. The
agreement is for an indefinite period.
STOCK OPTION GRANTS AND RELATED INFORMATION
Stock Option Grants in 1998
The table below provides information on grants of stock options during 1998 for
the Chief Executive Officer and the four other most highly compensated
executive officers of the Company.
OPTION GRANTS IN 1998
ASSUMED STOCK PRICE APPRECIATION
<TABLE>
<CAPTION>
Individual Grants in 1998
----------------------------------------------- Potential Realizable Value at
Number of Assumed Annual Rates of Stock
Securities % of Total Price Appreciation for 10-year
Underlying Options Option Term(1)
Options Granted to Exercise Expiration -------------------------------
Name Granted Employees(2) Price(3) Date(4) 0% 5%(5) 10%(6)
---- ---------- ------------ -------- ---------- -- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Whitwam 65,000 7.08 $63.13 6-15-08 0 $ 2,580,638 $ 6,539,842
William D. Marohn 0 0 0 0 0 0 0
Paulo Periquito 15,000 1.63 63.13 6-15-08 0 595,532 1,509,194
Ralph F. Hake 20,000 2.18 63.13 6-15-08 0 794,042 2,012,259
Jeff M. Fettig 18,000 1.96 63.13 6-15-08 0 714,638 1,811,033
All Optionees(7) *918,200 -- *61.84(avg) *2008 35,711,399 90,496,512
All Stockholders N/A N/A N/A N/A 2,970,255,250 7,526,836,075
All Optionee Gain as a %
of all Stockholder Gain 1.2% 1.2%
</TABLE>
- --------
*134,000 shares granted 01/16/98 @ $54.44--expiration date 1/16/08
781,700 shares granted 06/15/98 @ $63.13--expiration date 6/15/08
2,500 shares granted 12/14/98 @ $56.09--expiration date 12/14/08
(1) 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, 1998.
(2) Based on 918,200 options granted to all employees in 1998.
(3) Fair market value on the date of grant.
(4) Options generally become exercisable in installments of 50% one year after
the date of grant and the remaining 50% two years after the grant date,
with all options becoming exercisable upon a Change in Control. A Change in
Control is generally defined to include the acquisition by any person or
group of 15% or more of Whirlpool's voting securities, a change in the
composition of the Board such that the existing Board or persons who were
approved by a majority of such Board members or their successors on the
existing Board cease to constitute a majority of the Board, and approval by
the stockholders of an acquisition or liquidation of Whirlpool.
(5) Per share price of common stock would be $100.73 assuming no stock splits
or stock dividends.
(6) Per share price of common stock would be $160.39 assuming no stock splits
or stock dividends.
(7) No gain to the optionees is possible without an increase in the common
stock price.
8
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
The table below provides information on shares underlying options exercisable
at the end of 1998 and options exercised during 1998 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 1998
<TABLE>
<CAPTION>
Securities Underlying Value of Unexercised In-
Unexercised Options Held the-Money Options Held at
Shares at 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 0 256,800 121,500 $1,613,874 $455,213
William D.
Marohn 102,640 $2,166,883 16,000 22,800 52,536 182,991
Paulo
Periquito 0 0 50,000 35,000 257,250 121,380
Ralph F.
Hake 0 0 60,000 38,500 185,878 154,136
Jeff M.
Fettig 800 28,177 69,650 31,750 471,278 110,346
</TABLE>
LONG-TERM INCENTIVE AWARDS
The table below provides information regarding grants of long-term incentive
compensation awards in 1998 for the Chief Executive Officer and the four other
most highly compensated executive officers of the Company.
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
Estimated Future
Performance Payouts
Period From Under Non-Stock
Grant Until Price Based Plan (2)
Number of Maturation ----------------------
Name Shares (1) or Payout Target (#) Maximum (#)
---- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
David R. Whitwam Performance
shares 36,650 1998-2001
William D. Marohn Performance
shares (3) 17,757 1998-2001
Paulo Periquito
Performance shares 7,845 1998-1999 7,845 15,690
Performance shares 7,845 1998-2000 7,845 15,690
Performance shares 6,597 1998-2001 6,597 13,194
Phantom Stock (4) 40,000 8 yrs.
Ralph F. Hake Performance shares 11,728 1998-2001
Jeff M. Fettig Performance shares 9,969 1998-2001
</TABLE>
- --------
(1) During 1998, Whirlpool made one award that has a three year performance
period under its Executive Stock Appreciation Program to each participant
except for Mr. Periquito who received three awards as set forth above.
Performance share 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. Whirlpool also made a Career Stock Award to Mr. Periquito under the
terms of that program as described in the Human Resources Committee report
that follows. All awards identified in this table were made pursuant to the
Company's 1989 and 1996 Omnibus Stock and Incentive Plans.
(2) Final awards for Messrs. Whitwam, Hake, and Fettig will not exceed the
contingent shares shown in column 1 and will be made based on the Company
achieving an improvement target in the economic value added ("EVA")
financial measurement. Final awards for Mr. Periquito will be determined by
multiplying the number of contingent shares by 0% to 200% (100% is the
target
9
<PAGE>
award amount and 200% is the maximum award amount) based on the Company
meeting certain financial, customer, and employee related objectives for
each cycle. 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.
(3) As a result of his retirement, Mr. Marohn received a pro rata payout of
this award based on his completing one year of service with respect to the
three year performance cycle. The payout is included in the LTIP Payouts
column of the Summary Compensation Table.
(4) Shares of phantom stock were awarded under the Career Stock Program of the
1989 Omnibus Stock and Incentive Plan as described in the Human Resources
Committee report that follows.
Whirlpool has agreements with its executive officers that provide severance
benefits if, within two years following a Change in Control, the executive
officer's employment is terminated either by Whirlpool (other than for cause,
as defined) or by the officer for good reason (as defined), or, voluntarily
during the 13th month following a Change in Control. Benefits include
continuation of salary for at least 90 days after notification of termination
of employment, severance pay equal to three times annual compensation,
(generally defined as base salary plus target annual bonus), plus an amount to
compensate the individual for excise taxes, if any, arising out of the
severance pay. Under certain circumstances, the agreements provide for
continuing participation for up to three years in insurance and other employee
welfare benefit plans and, in the case of defined benefit retirement plans,
provide for three years additional age and service credits for purposes of
vesting and computing benefits. The term of each agreement is two years and
thereafter the agreement may be terminated as of the end of any year upon 90
days prior notice but not for 24 months after a Change in Control. A Change in
Control is generally defined to include the acquisition by any person or group
of 15% or more of Whirlpool's voting securities, a change in the composition
of the Board such that the existing Board or persons who were approved by a
majority of such Board members or their successors on the existing Board cease
to constitute a majority of the Board, and approval by the stockholders of an
acquisition or liquidation of Whirlpool.
Whirlpool's non-contributory defined benefit retirement plan (the "Retirement
Plan") covers substantially all of our U.S. based salaried employees. Upon
reaching the normal retirement age of 65, each vested participant is eligible
to receive an annual pension 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 employement after age 55. For five years following a Change in
Control, Whirlpool may not terminate the retirement plan or amend or merge it
with another plan in a manner that 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. We also have supplemental retirement plans that (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 our 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.
10
<PAGE>
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
2,200,000 220,000 440,000 660,000 880,000 1,100,000 1,320,000
2,400,000 240,000 480,000 720,000 960,000 1,200,000 1,440,000
2,600,000 260,000 520,000 780,000 1,040,000 1,300,000 1,560,000
2,800,000 280,000 560,000 840,000 1,120,000 1,400,000 1,680,000
3,000,000 300,000 600,000 900,000 1,200,000 1,500,000 1,800,000
</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, Hake, and Fettig had approximately
31, 35, 12, and 17 years, respectively, of eligible service at December 31,
1998, and their covered compensation under the plans for 1998 was equal to
the base salary and bonus set forth in the Summary Compensation Table.
Mr. Periquito is entitled to a Brazilian pension benefit under the employment
agreement with Whirlpool that will provide him with a retirement payment of 85%
of his basic monthly salary at age 60 assuming he is a participant under the
relevant Brazilian pension plan for 10 years. Under that plan, Mr. Periquito
would receive a disability retirement payment of 70% of the value of the
retirement benefit, and if he dies, his widow would receive a pension payment
of 50% of the value of the retirement benefit. In addition, underage children
would receive 30% of the value of the retirement benefit in the event of Mr.
Periquito's death. Mr. Periquito is required to participate in the cost of his
pension benefit at the rate of 15% of the monthly cost of the plan, up to a
limit of 8% of his basic salary.
COMPENSATION OF DIRECTORS
Directors who are not employees of Whirlpool 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 Whirlpool 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 Whirlpool 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.
Whirlpool 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 such director's months of service (not to exceed
120) and a related income tax reimbursement payment. We also provide each
nonemployee director with travel accident insurance of $1 million with the
premiums paid by us, and directors are reimbursed for the related income tax.
For evaluation purposes, appliances sold by us
11
<PAGE>
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 Whirlpool of this arrangement in 1998
(based on distributor price of products and delivery, installation, and service
charges) did not exceed $5,800 for any one nonemployee director or $14,800 for
all nonemployee directors as a group.
Whirlpool also has a Nonemployee Director Stock Ownership Plan. This plan
provides, effective on the date of each annual stockholders meeting, for an
automatic grant to each nonemployee director of 400 shares of common stock and
an option to purchase 600 shares of common stock if our earnings from
continuing operations for the immediately preceding year increased by at least
10% over such earnings for the prior year. The exercise price under each option
is the average fair market value (as defined) of the common stock for the third
through fifth trading days after the public release of our earnings for such
prior year. Such options may be exercised for 20 years after issuance (except
that they must be exercised within two years after ceasing to be a director and
within one year after the death of the director). The exercise price may be
paid in cash or common stock. In addition, the Board of Directors has approved
an amendment to this plan, subject to stockholder approval at this meeting,
that would award each nonemployee director annually with 400 shares of phantom
common stock, payable on a deferred basis. The shares of phantom common stock
would earn phantom dividends and the total accumulated phantom stock awards and
phantom dividends would be converted into Whirlpool's common stock on a one-
for-one basis and paid out to the nonemployee director upon termination from
the Board. See page 17 for additional discussion regarding the proposed
amendment and required stockholder approval.
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 1998.
Whirlpool is dedicated to global leadership and to delivering superior
stockholder value. Whirlpool's executive compensation philosophy is designed to
support these objectives by attracting and retaining the best possible
management talent and by motivating these employees to achieve business and
financial goals that create value for stockholders in a manner consistent with
Whirlpool's focus on six fundamental shared values: respect, integrity,
teamwork, customer passion, learning to lead, and the spirit of winning. The
philosophy is centered around the following points:
. Compensation should be incentive driven with both short and long-term
focus;
. More pay should be at risk than with the average company;
. Components of compensation should be tied to increasing stockholder
value; and
. Compensation should be tied to a balanced evaluation of corporate and
individual performance measured against financial, customer, and employee
related objectives--a "balanced scorecard" approach.
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 Whirlpool in a variety of
respects, such as companies that compete with Whirlpool; 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 of companies ("peer group") is used to
define the market for each component of pay as well as total compensation. The
peer group companies chosen for the competitive market review are not entirely
the same as those that comprise Standard & Poor's Household Furniture and
Appliance Group shown
12
<PAGE>
in the Performance Graph because the Committee believes that Whirlpool'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 at the median of the base salaries for
officers in the peer group companies, after adjusting for size of the
companies. Base salary increases for the year ranged between 4.2% and 8.8% for
the named executive officers. Mr. Whitwam received a 4.2% salary increase on
January 1, 1998. 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 1998, the Committee assessed his performance in the areas of leadership,
managerial and organizational effectiveness, value creation, Whirlpool's
overall financial performance, and executive talent development. The Committee
determined that Mr. Whitwam had exceeded his objectives on balance in these
areas.
ANNUAL INCENTIVE COMPENSATION
The Performance Excellence Plan ("PEP") provides all regular exempt and some
non-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) as measured against financial, customer, and employee
related objectives. For 1998, target awards ranging from 5% to 100% of base
salary were established by the Committee.
For 1998, corporate and regional performance measures were established for the
following financial indicators: economic value added (EVA), net earnings, and
cash flow. The Committee established corporate and regional performance
measures addressing customer results in the areas of quality, market share,
customer satisfaction, and trade partner satisfaction. The Committee also
established corporate and regional measurements for employee results in the
areas of training and development, diversity, and the degree of success in
building Whirlpool's high performance culture. These performance measures were
selected 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 for 1998 or future years.
Achievement of individual financial and behavioral performance goals is also a
factor in determining PEP payouts for all employees other than designated
executive officers. For employees who are not executive officers, the maximum
bonus using both the company and individual performance factors is 3.0 times
the incentive target.
Unlike other employees, individual performance cannot be recognized under PEP
for designated executive officers except for purposes of reducing an award
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 1998, only Messrs. Whitwam,
Marohn, and Hake 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 mean 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.
For Messrs. Whitwam, Marohn, and Hake, a corporate performance target based on
return on equity was established. Because the Company exceeded this financial
performance target, these executive officers earned a PEP award for 1998 as set
forth in the Summary Compensation Table based on the Committee's evaluation of
the Company's performance measured against the financial, customer and
13
<PAGE>
employee objectives and the individual performance of the officer under the
Committee's balanced scorecard approach. No awards were made under EOBP for
1998.
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, pursuant
to the Company's 1989, 1996, and 1998 Omnibus Stock and Incentive Plans. 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 Whirlpool 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
Whirlpool.
Stock Options Option grants in 1998 were made under Whirlpool's 1996 Omnibus
Stock and Incentive Plan and were 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 Whirlpool's future
success, strategic and operational goals, individual contributions, and the
number of options previously awarded and currently held. Grants were issued
with an exercise price equal to the fair market value of the stock at the time
of grant.
Mr. Whitwam's 1998 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 years, 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. In 1998, a grant
was made under this program from Whirlpool's 1996 Omnibus Stock and Incentive
Plan. The grant is for a three-year cycle ending December 31, 2000, and payout
is contingent upon achieving a specific EVA target. Payouts under the most
recently ended 1997-1998 ESAP cycle were based on achieving certain corporate
EVA, cost reduction, and employee high performance culture building targets
over the performance period. As Whirlpool performance was above the targets
established at the beginning of the performance cycle, payouts under the cycle
exceeded target.
The contingent shares granted to Messrs. Whitwam, Marohn, and Hake in 1998
under the 1998-2000 ESAP cycle (as disclosed in the Long-Term Incentive Plan
Awards table) were calculated based on the competitive objective for ESAP
target award sizes. In addition, a payout was earned by these officers under
the 1997-1998 ESAP cycle based on the Company exceeding the EVA improvement
financial target established at the beginning of the performance period. The
final payout of this grant is included in the column labeled "LTIP Payouts" in
the Summary Compensation Table and is based on the Committee's evaluation of
Company performance against the financial, customer, and employee objectives
established for the Company and the individual effort of each officer. The
payout was made in 1999.
Restricted Stock Value Program (the "RSVP Program") Under the RSVP Program,
selected senior management employees are granted restricted stock to link their
performance with the long term financial success of the Company and the
creation of shareholder value. Recipients of restricted stock are selected by
the Committee based on their organizational level and ability to affect Company
14
<PAGE>
performance. The Committee can set restrictions based upon the lapse of time
and/or performance goals, and grants can be made under the 1989, 1996, and 1998
Omnibus Stock and Incentive Plans. There were no grants of restricted stock
under the RSVP Program to the named executive officers in 1998, and there were
20,000 shares of restricted stock granted to all executive officers as a group
in 1998.
Career Stock Plan The Career Stock Plan (the "Career Plan") was established
pursuant to Whirlpool's 1989 Omnibus Stock and Incentive Plan. Under the Career
Plan, one-time grants of phantom stock are awarded to select key executives as
a means of retaining those executives and encouraging long-term employment.
Recipients and award sizes are based on subjective determinations relating to a
broad range of factors. The shares do not represent an equity interest in
Whirlpool, 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. Phantom career stock dividends are invested in additional phantom
shares to be awarded in the same manner as the original awards. Mr. Whitwam
does not participate in this program.
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 Chief Executive
Officer to one times base salary for other executives.
TAX CODE LIMITATION ON EXECUTIVE COMPENSATION DEDUCTIONS
The Internal Revenue Code imposes 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 Whirlpool, and stockholder interests.
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 Whirlpool 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.
SUMMARY
We, the Human Resources Committee of Whirlpool, believe a strong link exists
between executive pay and performance at Whirlpool.
Mr. Arnold G. Langbo (Chairman)
Mr. Robert A. Burnett
Mr. Allan D. Gilmour
Ms. Janice D. Stoney
15
<PAGE>
PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative total
stockholder return on our 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
1994 through 1998.
Comparison of Five Year Cumulative Total Return*
Whirlpool Corporation, S&P 500 Index and
S&P Household Furniture & Appliance Group
[Performance chart appears here]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Whirlpool 152.06 117.55 127.67 114.83 138.84 94.08
- ----------------------------------------------------------------------
S&P 500 110.03 111.53 153.30 188.40 251.17 293.38
- ----------------------------------------------------------------------
S&P Household 143.91 117.59 143.24 132.57 194.83 180.56
</TABLE>
Assumes $100 invested on December 31, 1993 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 by (2) the share price at the
beginning of the measurement period.
16
<PAGE>
PROPOSAL TO AMEND THE 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 Whirlpool by
attracting and retaining outstanding nonemployee directors and by providing
incentives to such nonemployee directors through grants of stock and stock
options and deferred equity compensation. 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 Whirlpool. In 1993,
the Board adopted and the shareholders approved an amendment to the Plan that
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. In 1996, the Board adopted and the shareholders approved an
amendment to the Plan revising the conditions necessary for stock option awards
to be granted under the automatic provisions of the Plan.
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 these
purposes will be further strengthened by amending the Plan to (i) increase the
number of shares available under the Plan from 200,000 to 300,000, (ii)
authorize the annual granting of 400 shares of common stock phantom shares to
each nonemployee director with these phantom shares to be converted into common
stock of the Company on a one-for-one basis and paid out to the nonemployee
director at the time the nonemployee director leaves the Board, and (iii)
extend the final date that awards may be granted under the Plan to nonemployee
directors to April 30, 2009. On February 16, 1999, the Board adopted amendments
to the Plan to provide for these changes. The Board believes that these Plan
amendments will create an even greater linkage among nonemployee director
compensation, the financial goals of the Company, and shareholder value.
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 such amendment. The Plan will not be amended unless
this vote is received.
The complete text of the Plan with the proposed amendments is set forth in
Exhibit A to this proxy statement. You should read the complete text of the
Plan for more detail regarding the changes being proposed.
ADMINISTRATION, 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. If there is 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
Whirlpool, the Board generally is required to adjust the number and type of
shares authorized by the Plan to prevent enlargement or dilution of rights. No
stock, stock option, or deferred equity compensation will be granted under the
Plan after April 30, 2009. 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 common stock is listed) shall (a)
materially increase the number of shares of 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.
Awards under the Plan are limited to directors of the Company who are not, and
have not been for at least one year, either an employee or officer of the
Company or any of its subsidiaries. The aggregate number of shares of common
stock issuable under the Plan is 300,000 (subject to adjustments in order to
prevent enlargement or dilution as described above). As of March 1, 1999,
132,600 shares remained available for future grants of stock and stock options
under the Plan.
17
<PAGE>
STOCK GRANTS
The Plan provides for the annual unrestricted grant of 400 shares of 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 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).
STOCK OPTIONS
The Plan 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 common stock if Whirlpool'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%. The Plan defines Earnings as
Whirlpool'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. Our public
accountants will resolve any questions arising as to the Earnings for any year.
The purchase price for shares of Whirlpool'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 Whirlpool's earnings data for the
Base Year. As of March 1, 1999, a total of 37,200 stock options have been
awarded under the Plan and 12,000 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 Whirlpool'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, Whirlpool common stock, valued at its market
price at the time of exercise.
PROPOSED NEW DEFERRED EQUITY COMPENSATION
The Plan does not currently provide for any deferred stock compensation.
However, the Board approved an amendment to the Plan on February 16, 1999 that
would, if stockholders approve the amended Plan in April, provide each
nonemployee director with 400 shares of phantom common stock annually as of the
date of the annual meeting of stockholders. The units of phantom common stock
(called "Common Stock Equivalents") earned annually by nonemployee directors
would be credited to an account for each nonemployee director. In addition,
each nonemployee director would be credited with a number of Common Stock
Equivalents equal to the dollar value of the vested retirement benefit earned
by the director up to February 16, 1999 (when the Board terminated its
retirement policy for nonemployee directors) divided by the fair market value
of the Company's common stock on that date. Nonemployee Directors will be
credited under this formula with the following Common Stock Equivalents: Mr.
Burnett 5,538, Mr. Cain 1,856, Mr. DiCamillo 280, Mr. Gilmour 3,741, Ms. Hempel
1,059, Mr. Langbo 1,805, Mr. Marsh 2,240, Mr. Smith 4,596, Dr. Stern 3,157, and
Ms. Stoney 3,562.
The Common Stock Equivalents will earn phantom dividends equal to the dividends
paid on actual shares of common stock. The Common Stock Equivalents will be
converted into the common stock on a one-for-one basis upon the director
leaving the Board of Whirlpool and the common stock will be payable to the
director at that time.
18
<PAGE>
FEDERAL TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to stock, stock options, and deferred equity
compensation. 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.
Stock Grants. A nonemployee director will recognize ordinary compensation
income on the date shares of common stock are granted to the nonemployee
director in an amount equal to the fair market value of the shares on that
date. Whirlpool 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 twelve
months. We will not receive a deduction for any capital gain recognized by the
nonemployee director.
Stock Options. A nonemployee director who is granted a stock option recognizes
no income upon grant of the option. The nonemployee director will recognize
ordinary compensation income on the date the option is exercised, in an amount
equal to the difference between the fair market value of the shares of common
stock received pursuant to the option exercise on such date and the option
exercise price. Whirlpool is entitled to an income tax deduction corresponding
to the income 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 an equivalent number
of 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.
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. Whirlpool will not receive a deduction for any capital gain recognized by
the nonemployee director.
Deferred Equity Compensation. A nonemployee director will recognize ordinary
compensation income on the date the nonemployee director ceases to be a
director of the Company and thereby becomes entitled to receive the shares of
common stock held in his or her deferred compensation account. The rules for
determining the amount of income recognized by the nonemployee director, the
nonemployee director's basis and holding period in the shares received, and the
Company's deduction are similar to those described above under the heading
"Stock Grants."
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 2 on the accompanying proxy
form.
19
<PAGE>
PROPOSAL TO AMEND THE PERFORMANCE EXCELLENCE PLAN
Whirlpool's Performance Excellence Plan (the "PEP Plan") is an annual bonus
plan for regular employees that was first adopted in 1989. Stockholders
approved an amendment to the PEP Plan in 1994 that allowed the Board of
Directors to continue the PEP Plan without incurring increased cost under
changes in the federal tax laws affecting compensation for certain executive
officers. On February 16, 1999, the Board of Directors amended the PEP Plan so
that, subject to approval by the stockholders, Whirlpool could continue to make
awards under the PEP Plan through December 31, 2003 and continue to be eligible
for tax deductions under Section 162(m) of the Internal Revenue Code, as
amended.
The Board believes that the PEP Plan will further strengthen the commitment of
key management employees to create shareholder value by providing them with
short-term incentive compensation based on our ability to meet financial goals
that create stockholder value. Because the PEP Plan allows the Human Resources
Committee to retain the flexibility to choose appropriate business and
financial goals and to change the target level of these goals, the tax
regulations require that the PEP Plan be resubmitted to stockholders for
approval every five years.
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 amended PEP Plan. The PEP Plan will not be
continued unless this vote is received.
The complete text of the amended PEP Plan is set forth in Exhibit B to this
proxy statement. You should read the complete text of the PEP Plan for more
detail regarding the operation of the PEP Plan.
ADMINISTRATION OF THE PEP PLAN
The Human Resources Committee (the "Committee") of the Board is responsible for
administration of the PEP Plan. The Committee consists of three or more members
of the Board who are not officers or employees of the Company. Committee
members are also to be "outside directors" as required by and within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Subject to the Committee's approval, the Chief Executive Officer (the
"CEO") may assist in, and make recommendations regarding, the administration of
the PEP Plan. The Senior Vice President, Human Resources will be responsible
for the day-to-day administration of the PEP Plan following administrative
guidelines approved from time to time by the Committee.
ELIGIBILITY AND PARTICIPATION
In general, regular employees of Whirlpool are eligible to participate in the
PEP Plan if nominated by the CEO. However, to meet requirements of Code Section
162(m), there are several, generally more restrictive, PEP Plan provisions that
only apply to "Executive Officers." Executive Officers under the PEP Plan (up
to approximately 8) are defined as the Chairman of the Board and Chief
Executive Officer, President, and any Executive or Senior Vice President
designated by the Committee prior to the start of any PEP Plan year. The CEO
will make recommendations regarding participation in the PEP Plan subject to
Committee approval. Eligible exempt employees are notified of their
participation, their target award opportunity, and the relevant corporate and
business group performance measures (as described below) at the beginning of
each PEP Plan year. Nonexempt employees who participate in the PEP Plan
generally are eligible for a bonus under the PEP Plan of up to 5% of their
salary if designated performance goals are met.
AWARD OPPORTUNITIES, CALCULATION, AND INDIVIDUAL AWARDS
The levels of base salary and target annual bonuses for PEP Plan participants,
including Executive Officers, are approved by the Committee each year.
Consistent with the Committee's compensation philosophy, total direct pay (base
salary plus bonus) is targeted at 90%-110% of average total direct pay for
those companies in the competitive market review. In this way, competitive
total direct pay is achieved when target performance is met but with a larger
percent of pay at risk than is the case in comparison companies.
20
<PAGE>
Individual bonus award targets range from 5%-110% of base pay, with actual
base salary paid during the PEP Plan year being used to compute individual
awards for employees other than Executive Officers. For Executive Officers,
base salary in effect as of the first day of the PEP Plan year will be used to
compute awards. Target awards are intended to reflect an individual's job
responsibilities and ability to affect financial results of Whirlpool. For PEP
Plan participants other than Executive Officers, the percentage of the target
bonus actually paid is based equally on (i) the extent to which appropriate
corporate and/or business group financial measures are met and (ii) the extent
to which individual performance objectives are achieved. The performance
multipliers range from 0%-200%. Thus, if either financial performance or
individual performance does not meet the threshold, generally no bonus award
will be paid. The maximum bonus using this formula is 3.0 times base pay.
For Executive Officers, the target bonus is established by multiplying the
base salary times the target bonus percentage set for that salary grade times
two. The percentage of the target bonus actually paid is based only on
appropriate corporate or business group financial measures and does not
involve an evaluation of individual performance. Thus bonuses under the PEP
Plan for Executive Officers may range from 0-3.3 times base pay. The Committee
has the discretion to reduce (but not to increase) the bonus award calculated
under the PEP Plan for any Executive Officer based on factors it deems
relevant. The named Executive Officers each received an award under the PEP
Plan for 1998 as set forth in the Summary Compensation Table. All current
executive officers as a group earned a total of $4.7 million for 1998 under
the PEP Plan, and all employees as a group earned $73.6 million for 1998 under
the PEP Plan.
Financial performance measures for employees will be measured on Whirlpool's
overall corporate results, while employees in designated business groups may
also be measured on a combination of corporate and business group results.
Corporate financial performance will be measured based on return on equity
("ROE"). ROE will be calculated as the ratio of profit to average shareholder
equity. Profit refers to earnings from continuing operations before accounting
changes. Average shareholder equity refers to the sum of shareholder equity at
the beginning and end of the year, divided by two. Business group financial
performance will be measured by either return on assets ("ROA"), calculated
for each designated business group as the ratio of net operating earnings
generated by the business group to total assets of the group, or return on net
assets ("RONA"), calculated as net operating earnings after tax divided by
average monthly net assets. Net earnings refers to total revenues less total
expenses, on an after-tax basis. ROE, ROA, and RONA will be based on
calculations provided by Whirlpool's independent auditors. ROE, ROA, and RONA
performance goals are adopted each year by the Committee for corporate level
and various business groups.
For employees other than Executive Officers, the Committee has the discretion
to adopt performance goals other than those disclosed above.
The Committee also approves a range of performance above and below these goals
for establishing the financial performance multipliers. An important factor in
setting the financial performance goals is achieving results at a level
expected to create value for stockholders. Once approved by the Committee,
performance goals normally may not be changed during the PEP Plan year.
However, if external changes or other unanticipated business conditions have
materially affected the fairness of the goals, the Committee may approve
appropriate adjustments to the performance goals during the PEP Plan year. In
the case of Executive Officers, no adjustment may be made to the performance
goals that would have the effect of increasing the amount that would otherwise
be paid out pursuant to the PEP Plan.
Individual performance, the final factor in calculating awards for
participants other than Executive Officers, will be based on each employee's
performance rating resulting from a performance management process. In this
process each individual's objectives are to be tied to overall corporate
objectives which are designed to increase stockholder value. A formal
performance review is used to determine the individual performance multiplier
or other method of rewarding individual performance
21
<PAGE>
such as funding pools for exceptional contributors. While Executive Officers
will go through the same goal setting and review process (including the CEO
with the Committee), no individual performance multiplier is used to calculate
their bonus awards under the PEP Plan. However, the Committee has the
discretion to reduce the bonus award of any Executive Officer based on
individual performance or other factors.
PAYMENTS, DEFERRALS, TERMINATIONS, AND BENEFICIARIES
At the end of each PEP Plan year, the CEO will report the overall performance
results of Whirlpool and the various business group segments to the Committee.
The Committee will certify in writing the extent to which the performance goals
have been satisfied and then approve payment. Payments under the PEP Plan will
be made once a year as soon as administratively feasible following the release
of the Company's audited financial results for the previous year. Subject to
Committee consent, the CEO may select certain participants who may elect to
defer irrevocably up to 75% of their performance award. Upon termination of
employment due to death, disability, retirement, reduction in force, or
transfer to one of our affiliates, awards will be paid based on the amount
earned before such termination, in a lump sum or installments. Participants may
name a beneficiary or beneficiaries to whom any benefit under the PEP Plan is
to be paid in case of their death.
CHANGE IN CONTROL, AMENDMENTS, AND INDEMNIFICATION
If there is a change of control of Whirlpool, participants become entitled to
an award which is the greater of (i) a modified version of the standard formula
set forth above, but, in the case of participants other than Executive
Officers, applying an individual performance multiplier of not less than 1.0,
or (ii) their target award percentage times base salary paid in the PEP Plan
year up to the date of such change of control. In such an event, awards are to
be paid in cash promptly following the change in control. The Plan provides for
indemnification of members of the Committee or Board and participants for
actions brought against such persons in connection with the PEP Plan.
BOARD RECOMMENDATION
The Board believes that approving the amended PEP Plan should enable the
Company to continue to qualify PEP Plan payments for deduction under federal
tax laws while continuing appropriate short-term compensation incentives.
The Committee strongly believes that purely numeric formula incentive plans are
inadequate to drive the superior results that the Company is seeking. Removing
Committee discretion from incentive compensation severely limits the
Committee's ability to carry out its corporate governance responsibilities.
Good judgment and discretion are the essence of what shareholders expect from
Board members. As noted earlier, the Committee believes the discretion it has
been able to exercise under existing incentive plans for management employees
at all levels has played a critical role in recent years.
The Board of Directors recommends a vote FOR the amendment of the Performance
Excellence Plan appearing at Item 3 on the accompanying proxy form.
STOCKHOLDER PROPOSAL
Mr. Charles Miller, 23 Park Circle Drive, Great Neck, New York 11024, has
notified us that he is the beneficial owner of 165 shares of common stock and
that he intends to maintain such ownership through the date of the 1999 annual
meeting of stockholders. Mr. Miller has advised us that he intends to offer the
following proposal and supporting statement for consideration and approval at
the annual meeting.
Maximize Value Resolution
Resolved that the shareholders of Whirlpool Corporation urge the Whirlpool
Corporation Board of Directors to arrange for the prompt sale of Whirlpool
Corporation to the highest bidder.
22
<PAGE>
STOCKHOLDER'S SUPPORTING STATEMENT
The purpose of the Maximize Value Resolution is to give all Whirlpool
Corporation shareholders the opportunity to send a message to the Whirlpool
Corporation Board that they support the prompt sale of Whirlpool
Corporation to the highest bidder. A strong and or majority vote by the
shareholders would indicate to the board the displeasure felt by the
shareholders of the shareholder return over many years and the drastic
action that should be taken. Even if it is approved by the majority of the
Whirlpool Corporation shares represented and entitled to vote at the annual
meeting, the Maximize Value Resolution will not be binding on the Whirlpool
Corporation Board. The proponent however believes that if this resolution
receives substantial support from the shareholders, the board may choose to
carry out the request set forth in the resolution:
The prompt auction of Whirlpool Corporation should be accomplished by any
appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock, or a combination of both. It is
expected that the board will uphold its fiduciary duties to the utmost
during the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to
continue with its current management plan and strategies.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION.
----------------
Adoption of the foregoing stockholder proposal requires 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).
The Board of Directors recommends a vote AGAINST this stockholder proposal
appearing at Item 4 on the accompanying proxy form.
THE COMPANY'S STATEMENT IN OPPOSITION
The Board of Directors of Whirlpool is dedicated to long-term value creation
for its shareholders and reviews on a regular basis the strategic options for
Whirlpool to reach that objective. The Board must retain flexibility in making
decisions to achieve that objective based on a course of action that, in the
judgment of the Board, will create improved earnings over a sustained period of
time. In the Board's opinion, the proposed stockholder resolution will not
serve the stockholders' best interests, notwithstanding the nonbinding nature
of the resolution if approved by the stockholders.
Whirlpool has spent the last ten years successfully completing the strategic
transition from a U.S. company to a truly global enterprise, with major
operations in Europe and Latin America and increasing business in Asia and
elsewhere. Today, the majority of Whirlpool's sales occur outside of the United
States. The Board believes this transition to a global enterprise has created a
platform of unique competitive advantages for Whirlpool through worldwide
brands, technologies, products, processes, and the skills and capabilities of
our employees.
Today, the Board believes Whirlpool is poised to leverage this platform of
unique global competitive advantages into sustained value creation for our
stockholders over the long term. The Board and management believe that it would
be very unfortunate for stockholders if Whirlpool were to be sold and the
global platform so successfully developed were to be abandoned at this point.
Therefore, the Board firmly believes that it would not be in the best interests
of stockholders to adopt the stockholder proposal and urge you to vote against
the proposal.
23
<PAGE>
MISCELLANEOUS
Whirlpool will pay the expenses of the solicitation of proxies. We expect 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. Whirlpool
expects all nominees to be available and knows of no matter to be brought
before the annual meeting other than those referred to in the accompanying
notice of the annual meeting. If, however, any other matter properly comes
before the annual meeting, we intend 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, our auditors, are expected to be present
at the annual meeting to respond to questions and may make a statement if they
so desire.
STOCKHOLDER PROPOSALS FOR 2000 MEETING
Any proposal that a stockholder intends to present at the annual meeting of
stockholders in 2000 must be received by Whirlpool by November 18, 1999 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting.
24
<PAGE>
EXHIBIT A
WHIRLPOOL CORPORATION
NONEMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
(As amended February 16, 1999)
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), Options (as defined in Section 3.1), and Common Stock Equivalents (as
defined in Section 4.1). Common Stock awards, Options, and Common Stock
Equivalents 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 "Nonemployee Director" 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 5.2 ("Common Stock"). The maximum number of shares of Common Stock
that may be issued for all purposes under the Plan shall be 300,000 (subject
to adjustment pursuant to Section 5.2). Any shares of Common Stock subject to
an Option that for any reason is canceled or terminated without having been
exercised, 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.
A-1
<PAGE>
ARTICLE II
STOCK AWARDS
2.1 AWARD OF COMMON STOCK
Effective on the date of each annual meeting of stockholders, each Director in
office at the conclusion of such meeting will automatically be awarded 400
(subject to adjustment pursuant to Section 5.2) shares of Common Stock. 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
5.2) 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.
ARTICLE III
STOCK OPTION AWARDS
3.1 AWARD OF STOCK OPTIONS
Effective on the date of each annual meeting of stockholders, 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 5.2) 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, and (d)
restructuring charges shown separately on the Corporation's published earnings
statement. Restructuring charges mean 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.
A-2
<PAGE>
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, 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 5.1) 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
COMMON STOCK EQUIVALENTS AWARDS
4.1 AWARDS OF COMMON STOCK EQUIVALENTS
Effective on the date of each annual meeting of stockholders beginning in
1999, each Director in office at the conclusion of such meeting will
automatically be awarded 400 (subject to adjustment pursuant to Section 5.2)
hypothetical shares of Common Stock (each a Common Stock Equivalent). Each
Director's Common Stock Equivalents will be held in an account ("Account") and
the Director will not be entitled to receive the Common Stock represented by
the Common Stock Equivalents until the Director ceases to be a Director of the
Company.
4.2 INITIAL VESTED COMMON STOCK EQUIVALENTS
In addition to the award of Common Stock Equivalents set forth in Section 4.1
above, each Director in office at the conclusion of the 1999 annual meeting
shall immediately have credited to his Account the number of Common Stock
Equivalents equal to the net present dollar value of the Director's vested
retirement benefit as of February 16, 1999, divided by the Fair Market Value
of the Common Stock on February 16, 1999.
4.3 DIVIDEND EQUIVALENTS
In addition to the award of Common Stock Equivalents set forth above, the
Company shall credit to each Director's Account an additional number of Common
Stock Equivalents as of each dividend payment date declared with respect to
the Company's Common Stock. The additional number of Common Stock Equivalents
to be credited to each Account shall be equal to:
(a) the product of (i) the dividend per share of the Common Stock which is
payable as of the dividend payment date, multiplied by (ii) the number of
whole Common Stock Equivalents credited to the Account as of the
applicable dividend record date;
DIVIDED BY
(b) the closing price of a share of the Common Stock on the dividend payment
date (or if such stock was not traded on that date, on the next preceding
date on which it was traded), as reported in the New York Stock Exchange
Composite Transactions.
A-3
<PAGE>
4.4 STOCK CERTIFICATE
Within a reasonable time after a Director ceases to be a Director of the
Company, but in no event more than 60 days after receiving a written request
from the former Director, the Company will deliver to the former Director, or
his legal representative, a certificate for such shares of Common Stock as are
represented by the total number of Common Stock Equivalents in the former
Director's Account. Any fractional shares to which the former Director would
otherwise be entitled will be eliminated.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 NON TRANSFERABILITY; BENEFICIARIES
No Option or Common Stock Equivalent 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 5.1 will
nullify the Option or Common Stock Equivalent. 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 were not delivered to a Director prior to his death and any
dividends 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 beneficiaries (who may be named
contingently or successively) who may exercise such Options and receive such
certificates and dividends. Each designation will revoke all prior
designations by such Director, will be in writing and will be effective only
when filed during his lifetime with the Secretary of the Corporation.
5.2. 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 this Plan, make such adjustments in the number and type of shares of
Common Stock and Common Stock Equivalents authorized by the Plan, and the
number and type of shares of Common Stock covered by outstanding Options and
Option Prices specified therein as may be determined to be appropriate and
equitable. In the event fractional shares of Common Stock would otherwise
result from any such adjustment, the number of shares of Common Stock so
authorized and covered and the prices thereof shall be further adjusted so as
to eliminate such fractions.
5.3 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
Corporation; 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 5.2, 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
A-4
<PAGE>
Common Stock Equivalent 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 that 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.
5.4. 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.
5.5 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.
5.6 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, and the Option Prices thereof. The report shall also state
the number of Common Stock Equivalents in the Director's Account.
5.7 LISTING, REGISTRATION AND LEGAL COMPLIANCE
Each Option and Award of Common Stock Equivalents 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 Common Stock Equivalents 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
Corporation. 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 that, 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.
A-5
<PAGE>
5.8 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.
5.9 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 applicable law otherwise requires a contrary
interpretation of any such provision.
5.10 FINAL DATE FOR AWARDS
No Awards shall be made hereunder after April 30, 2009.
A-6
<PAGE>
EXHIBIT B
WHIRLPOOL CORPORATION
PERFORMANCE EXCELLENCE PLAN
ARTICLE 1
GENERAL
1.1 ESTABLISHMENT OF THE PLAN:
Whirlpool Corporation, a Delaware corporation, hereby adopts this Plan, which
shall be known as the WHIRLPOOL CORPORATION PERFORMANCE EXCELLENCE PLAN (the
"Plan").
1.2 PURPOSE:
The purpose of the Plan is to attract and retain the best possible employee
talent and to motivate employees to focus attention on shareholder value,
drive performance in support of this goal and other business goals, and reward
company and individual performance.
1.3 ADMINISTRATION:
(a) The Committee shall administer the Plan. Subject to the Committee's
approval, the Chief Executive Officer of the Company may assist in, and make
recommendations regarding, the administration of the Plan. The Vice President
Human Resources will be responsible for the day-to-day administration of the
Plan following administrative guidelines approved from time-to-time by the
Committee.
(b) Subject to the limitations of the Plan, the Committee shall, based on
recommendations by the Chief Executive Officer: (i) select from the Employees
of the Company, those who shall participate in the Plan; (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 the Plan or in any
award granted hereunder; and (vi) make all other necessary determinations and
take all other actions 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 Company
subject to such allocation to its subsidiaries and operating units as it deems
appropriate.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS:
Whenever used herein, the following terms shall have the meaning set forth
below, unless otherwise expressly provided. Certain terms which only apply to
Article IX are defined in Article IX.
(a) Except as provided in Article IX, "Base Salary" shall mean the regular
salary actually paid during a Plan Year to a Participant. Regular salary shall
include any salary reduction contributions made to the Company's 401(k) plan
or other deferred compensation plans, but shall be exclusive of any awards
under this Plan and of any other bonuses, incentive pay, or special awards.
B-1
<PAGE>
(b) "Board" shall mean the Board of Directors of Whirlpool Corporation.
(c) "Committee" shall mean the Human Resources Committee of the Board or such
other Committee as is designated by the Board, which shall consist of three or
more members of the Board who are not officers or employees of the Company and
who are "outside directors" as required by and within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Board shall appoint the members of the Committee and fill any vacancy on the
Committee.
(d) "Company" shall mean Whirlpool Corporation and its Subsidiaries.
(e) "Corporate" shall mean relating to Whirlpool Corporation.
(f) "Employee" shall mean a regular employee of the Company who is in a
position of meeting the defined eligibility criteria for participation in the
Plan, as stated in Section 3.1.
(g) "Executive Officers" shall mean the Chief Executive Officer, the
President, and any Executive or Senior Vice President designated by the
Committee.
(h) "Final Award" shall mean the award earned by a Participant based on a
comparison of actual year-end results against the performance goals
established for the Plan Year.
(i) "Individual Performance Multiplier" shall mean the factor associated with
the performance rating assigned to an Employee as part of the Performance
Management Process or other method(s) of adjustments intended to recognize
individual performance.
(j) "Noncorporate" shall mean a specified segment of Whirlpool's operations
designated as such by the Chief Executive Officer and approved by the
Committee for purposes of the Plan, such as a business unit, division, product
line, or other such segmentation.
(k) "Participant" shall mean an Employee who is approved by the Committee for
participation in the Plan for a specified Plan Year and an Executive Officer
as defined above.
(l) "Performance Management Process" shall mean the Company's process for
managing individual performance.
(m) "Plan Year" shall mean the Company's fiscal year.
(n) "Target Award" shall mean the award to be paid to a Participant for
meeting planned performance results.
(o) "Target Award Percentage" shall mean the percentage of a Participant's
Base Salary used in the calculation of the Target Award.
2.2 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 III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION:
Eligibility for participation in the Plan shall be limited to Employees of the
Company. Except with respect to the Chief Executive Officer, participation in
the Plan shall be based upon recommendations by the Chief Executive Officer,
subject to the approval of the Committee, from the Employees eligible for the
Plan. The Chief Executive Officer and the President shall automatically
participate in the Plan.
B-2
<PAGE>
3.2 PARTIAL PLAN YEAR PARTICIPATION:
Except as provided in Article IX, an Employee who becomes eligible after the
beginning of a Plan Year may participate in the Plan for that Plan Year. Such
situations may include, but are not limited to (i) new hires, (ii) when an
Employee is promoted from a position that did not meet the eligibility
criteria, or (iii) when an Employee is transferred from an affiliate that does
not participate in the Plan.
ARTICLE IV
INDIVIDUAL AWARDS
4.1 COMPONENTS OF INDIVIDUAL AWARDS:
(a) Except as provided in Article IX, individual awards shall be based on (i)
the Participant's Target Award and (ii) Corporate and/or Noncorporate
performance. In addition, individual performance will be a component of
individual awards if approved by the Committee.
(b) Except as provided in Article IX, for each Plan Year, the Chief Executive
Officer shall recommend, subject to the approval of the Committee, the Target
Award Percentages and performance goals for that Plan Year.
4.2 FINAL AWARD DETERMINATIONS:
At the end of each Plan Year, Final Awards shall be computed for each
Participant. Participants must be actively employed by the Company on the last
day of the Plan Year to receive an award for that Plan Year, except as
provided in Sections 8.1 and 10.1.
4.3 LIMITATIONS:
The amount payable to a Participant for any calendar year shall not exceed
$3,000,000.
ARTICLE V
TARGET AWARDS
5.1 ESTABLISHING TARGET AWARD PERCENTAGES:
Except with respect to the Chief Executive Officer, the Chief Executive
Officer shall recommend, subject to the approval of the Committee, the Target
Award percentage for each job, which will be based on the salary grade for
that job in most cases. The Committee shall establish the Target Award
Percentage for the Chief Executive Officer. Target Award Percentages shall
reflect the Participant's job responsibilities and opportunity and authority
to affect overall financial results.
5.2 MID-YEAR CHANGE IN TARGET AWARD PERCENTAGES:
Except as provided in Article IX, a Participant whose Target Award is changed
during the Plan Year shall receive a Final Award based on the amount of Base
Salary actually earned while in each Target Award category during the Plan
Year.
ARTICLE VI
PERFORMANCE COMPONENTS
6.1 PERFORMANCE MEASURES AND GOALS:
(a) Performance shall be measured based on Corporate and Noncorporate (if
appropriate) results and, if authorized by the Committee, individual
performance. If authorized by the Committee, individual performance goals
shall be set during the Company's Performance Management Process.
B-3
<PAGE>
(b) The Chief Executive Officer shall recommend, subject to the approval of
the Committee, the process for measuring Corporate and Noncorporate
performance. Such recommendation shall include:
(1) Organizational level of performance measurement, e.g., Corporate,
business unit, division, product line, or another level, either singly or
in combination;
(2) Specific measures of performance for each organizational level; and
(3) Specific performance goals for each organizational level.
(c) For each Plan year, the Chief Executive Officer shall recommend, subject
to the approval of the Committee, a range of performance goals for Corporate
and Noncorporate results and the Individual Performance Multipliers. Each
performance range and the range of Individual Performance Multipliers shall
include a level of performance at which one hundred percent (100%) of the
Target Award shall be earned. In addition, each range shall include levels of
performance above and below the 100% performance level.
6.2 PERFORMANCE BY ORGANIZATION LEVEL:
(a) For Participants at the Corporate level, performance shall be measured on
overall Company results. For other Participants, performance shall be measured
on a Corporate and/or applicable Noncorporate results as authorized by the
Committee.
(b) The performance measures to be used shall be chosen from among the
following: return on equity, return on assets, or return on net assets. Return
on equity will be calculated as the ratio of profit to average shareholder
equity. Profit refers to earnings from continuing operations before accounting
changes. Average shareholder equity refers to the sum of shareholder equity at
the beginning and end of the year, divided by two. Return on assets will be
calculated as net operating earnings after-tax divided by average monthly net
assets. Net earnings refers to total revenues less total expenses, on an
after-tax basis. Performance measures need not be the same within the Company.
(c) The Committee, in its sole discretion, may select among the performance
measures specified in this Section 6.2 from Plan Year to Plan Year. However
the Committee may approve performance measures that are not necessarily
specified in this Section 6.2 without obtaining shareholder approval of such
measures in the case of performance measures applicable only to Employees who
are not Executive Officers.
6.3 ADJUSTMENT OF PERFORMANCE GOALS:
(a) Once established, performance goals normally shall not be changed during
the Plan Year. However, except as provided in Article IX, if the Chief
Executive Officer determines that external changes or other unanticipated
business conditions have materially affected the fairness of the goals, then
the Chief Executive Officer may recommend and the Committee may approve
appropriate adjustments to the performance goals (either up or down) during
the Plan Year.
(b) Normally, Participants shall not receive any payout when the Corporate or
Noncorporate segment (if applicable) do not achieve at least minimum
performance goals. However, except as provided in Article IX, if the Corporate
or Noncorporate segment (if applicable) do not achieve the minimum performance
goals, the Chief Executive Officer may recommend, subject to the approval of
the Committee, payment of awards on a discretionary basis.
(c) Further, except as provided in Article IX, the Chief Executive Officer may
recommend, subject to the approval of the Committee, an adjustment of the
performance goals in the event of a Plan Year consisting of less than twelve
(12) months.
B-4
<PAGE>
6.4 INDIVIDUAL PERFORMANCE:
Individual performance shall be reflected in the Final Award based on the
performance rating assigned to an Employee as part of the Performance
Management Process if the Committee establishes individual performance as part
of the performance criteria for an award. However, individual performance will
not be considered in the Final Award earned by Executive Officers under
Article IX.
ARTICLE VII
PAYMENT OF FINAL AWARDS
7.1 TIMING AND FORM OF PAYMENT:
(a) At the end of each Plan Year, the Chief Executive Officer shall report the
overall Corporate and Noncorporate performance levels to the Committee, which
shall certify in writing the extent to which the performance goals specified
pursuant to Section 6.2 have been satisfied and approve the payment of Final
Awards. Payment of Final Awards shall be made as soon as administratively
feasible following the release of the Company's audited financial results.
(b) Payments shall be made in cash in a lump sum.
7.2 DEFFERAL OF PAYMENTS:
(a) The Chief Executive Officer may recommend Participants who may elect to
defer all or a portion of their performance award, subject to the approval of
the Committee. Elections to defer shall be made no later than deemed advisable
by the Company's tax counsel. All deferred amounts will be subject to such
terms and conditions, and shall accrue such yield thereon as the Chief
Executive Officer may from time to time establish, subject to the approval of
the Committee.
(b) The Participant may, with the approval 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,
a lump sum payment shall be made to the Participant's designated beneficiary
(pursuant to Section 11.5) unless otherwise expressly elected by the
Participant.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
8.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT, REDUCTION-
IN-FORCE, OR TRANSFER TO AFFILIATE NOT INCLUDED IN PLAN:
(a) If a Participant's employment is terminated by reason of death, total and
permanent disability, retirement, reduction-in-force, or a Participant is
transferred to an affiliate that does not participate in the Plan, the
Participant's Final Award shall be based on (i) Participant's actual Base
Salary paid through the date of termination, (ii) Participant's Target Award
Percentage, (iii) Corporate/Noncorporate performance as measured at the end of
the Plan Year, and (iv) if authorized by the Committee, individual performance
as determined under the Performance Management Process. The Final Award shall
be paid in accordance with Article VII.
(b) "Total and permanent disability" and "retirement" shall have the meanings
as defined in the Whirlpool Corporation Retirement Plan. "Reduction-in-force"
shall have the meaning as defined in the Whirlpool Corporation Personnel
Policy Manual.
8.2 TERMINATION FOR ANY OTHER REASON:
Except for terminations listed in Section 8.1 or a termination due to a Change
in Control as defined in Section 10.2, in the event a Participant's employment
is terminated for any other reason including voluntary and involuntary
termination, the Participant shall not be entitled to an award for the Plan
Year in which the termination occurs. However, the Chief Executive Officer may
recommend and the Committee approve an award for the Plan Year in which a
Participant's termination occurs.
B-5
<PAGE>
ARTICLE IX
EXECUTIVE OFFICERS
9.1 APPLICABILITY OF ARTICLE IX:
The provisions of this Article IX shall apply only to Executive Officers. In
the event of any inconsistencies between this Article IX and the other Plan
provisions, the provisions of this Article IX shall control.
9.2 DEFINITION APPLICABLE TO ARTICLE IX ONLY:
For purposes of this Article IX only, "Base Salary" shall mean as to any Plan
Year a Participant's actual regular salary rate as of the first day of the
Plan Year. Regular salary shall include any salary reduction contributions
made to the Company's Internal Revenue Code Section 401(k) Plan or other
deferred compensation plans, but shall be exclusive of any awards under this
Plan and of any other bonuses, incentive pay, or special awards.
9.3 NO PARTIAL PLAN YEAR PARTICIPANT:
An Executive Officer who becomes eligible after the beginning of a Plan Year
may participate in the Plan for the succeeding Plan Year, unless approved by
the Committee for participation in the current Plan Year.
9.4 COMPONENTS OF INDIVIDUAL AWARDS:
(a) Each individual award shall be based on (i) the Participant's Target Award
and (ii) Corporate and/or Noncorporate performance goals approved by the
Committee.
(b) The Committee shall determine the Target Award Percentages and performance
goals for the Plan Year no later than 80 days after the beginning of the Plan
Year.
9.5 NO MID-YEAR CHANGE IN TARGET AWARD PERCENTAGES:
Each Participant's Final Award shall be based on the Target Award category as
of the first day of the Plan Year.
9.6 NONADJUSTMENT OF PERFORMANCE GOALS:
Once established, performance goals normally shall not be changed during the
Plan Year. Participants shall not receive any payout when Corporate or
Noncorporate performance does not achieve at least minimum performance levels
established by the Committee.
9.7 INDIVIDUAL PERFORMANCE AND DISCRETIONARY ADJUSTMENTS:
Individual performance shall not be reflected in the Final Award. However, the
Committee retains the discretion to decrease or eliminate the amount of the
Final Award otherwise payable to a Participant.
9.8 POSSIBLE MODIFICATION:
If, on advice of the Company's tax counsel, the Committee determines that Code
Section 162(m) and the regulations thereunder will not adversely affect the
deductibility for federal income tax purposes of any amount paid under the
Plan by applying one or more of Sections 2.1(a), 2.1(g), 3.2, 4.1, 5.2, or 6.3
to any Executive Officer without regard to the exceptions to such Section or
Sections contained in this Article IX, then the Committee may, in its sole
discretion, apply such Section or Sections to the Executive Officer without
regard to the exceptions to such Section or Sections that are contained in
this Article IX.
B-6
<PAGE>
ARTICLE X
CHANGE IN CONTROL
10.1 CHANGE IN CONTROL:
(a) In the event of a Change in Control of Whirlpool Corporation, as defined
below, a Participant who is an Employee as of the date of the Change in
Control shall be entitled to, for the Plan Year in which the Change in Control
occurs, the greater of:
(1) The Final Award determined using:
(A)The Participant's actual Base Salary rate in effect on the date of
the Change in Control;
(B) The Participant's Target Award Percentage;
(C) Actual Corporate and Noncorporate (if applicable) performance
results to the date of the Change in Control; and
(D) The greater of the Participant's Individual Performance Multiplier
(if applicable) or 1.0; or
(2) The Participant's Target Award Percentage times his actual Base Salary
rate in effect on the date of the Change in Control.
(b) The Committee as constituted immediately prior to the Change in Control
shall determine how actual Corporate and Noncorporate performance should be
measured for purposes of the Final Award calculation in 10.1(a). The
Committee's determination shall be conclusive and final.
(c) Final Awards shall be paid in cash to the Participant as soon as
administratively possible but no later than 30 days following a Change in
Control.
10.2 DEFINITION OF CHANGE IN CONTROL:
A "Change in Control" shall be defined as set forth in Section 10.6(d) of the
Whirlpool Salaried Employees Retirement Plan, as amended.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 NONTRANSFERABILITY:
No right or interest of any Participant in this Plan shall be assignable or
transferable, or subject to any lien, directly, by operation of law or
otherwise, including execution, levy, garnishment, attachment, pledge, and
bankruptcy.
11.2 TAX WITHHOLDING:
The Company shall have the right to deduct from all payments under this Plan
any foreign, federal, state, or local taxes required by law to be withheld
with respect to such payments.
11.3 AMENDMENTS:
The Company, in its absolute discretion, without notice, at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of this Plan, or suspend or terminate it entirely; provided, that
no such modification, amendment, suspension, or termination may reduce the
rights of a Participant (or his beneficiary as the case may be) to a payment
or distribution in accordance with the provisions contained in this Plan or
change to the detriment of a Participant any potential rights in that Plan
Year created pursuant to Section 10.1 of this Plan.
B-7
<PAGE>
11.4 INDEMNIFICATION:
Each person who is or shall have been a member of the Committee or the Board
or who is or shall have been an Employee of the Company shall be indemnified
and held harmless by the Company. This indemnification and hold harmless
provision shall be against and from any loss, cost, liability, or expense,
including, without limitation, fees and expenses of legal counsel, that may
have been imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a
party or in which he may be involved by reason of any action taken or failure
to act under the Plan. In addition this indemnification and hold harmless
provision shall be against and from any and all amounts paid by him in
settlement thereof with the Company's approval, or paid by him in satisfaction
of any judgment in any such action, suit, or proceeding against him, provided
he shall give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own
behalf. This indemnification and hold harmless right shall not be exclusive of
any other rights of indemnification that the person may be entitled under the
Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify him or hold him
harmless.
11.5 BENEFICIARY DESIGNATION:
(a) 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 his death before
he 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
Company, and will be effective only when filed by the Participant in writing
with the Company during his lifetime. In the absence of any such designation,
or if the designated beneficiary is no longer living, benefits shall be paid
to the surviving member(s) of the following classes of beneficiaries, with
preference for classes in the order listed below:
(1) Participant's spouse (unless the parties were divorced or legally
separated by court decree);
(2) Participant's children (including children by adoption);
(3) Participant's parents (including parents by adoption); or
(4) Participant's executor or administrator.
(b) Payment of benefits, in accordance with Section 8.1, shall be made
exclusively to the member(s) of the first class, in the order listed above,
which has surviving member(s). If that class has more than one member, benefit
payments shall be made in equal shares among members of that class.
11.6 RIGHTS OF PARTICIPANTS:
Nothing in this Plan shall interfere with or limit in any way the right of the
Company to terminate or change a Participant's employment at any time; nor
does the Plan confer upon any Participant any right to continue as an employee
of the Company for any period of time or to continue his present or any other
rate of compensation. No Participant in a previous Plan Year, or other
Employee at any time, shall have a right to be selected for participation in a
current or future Plan Year.
11.7 GOVERNING LAW:
The Plan shall be construed in accordance with and governed by the laws of the
State of Michigan.
11.8 EFFECTIVE DATE:
The Plan shall remain effective through December 31, 2003.
B-8
<PAGE>
It is important that your stock be represented so that the presence of a
quorum at the annual 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>
- -------------------------------------------------------------------------------
P R O X Y
WHIRLPOOL CORPORATION
Administrative Center
2000 N. M-63
Benton Harbor, Michigan 49022-2692
The undersigned hereby appoints David R. Whitwam and Daniel F. Hopp, and each
of them, proxies, with power of substitution and revocation, acting unanimous-
ly, 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 20, 1999 and at any adjournment
thereof, with all the powers the undersigned would possess if present, with
respect to the election of directors, the approval of an amended Whirlpool
Corporation Nonemployee Director Stock Ownership Plan, the approval of an
amended Whirlpool Corporation Performance Excellence Plan, a shareholder pro-
posal, 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 as directors of the nominees listed on
the reverse side of this card, FOR the proposal to amend the Whirlpool Corpo-
ration Nonemployee Director Stock Ownership Plan, FOR the proposal to amend
the Whirlpool Corporation Performance Excellence Plan, and AGAINST the share-
holder proposal unless contrary instructions are specified, and in the prox-
ies' discretion upon such other business as may properly come before the meet-
ing. Please vote, sign, and date this proxy on the reverse side of this card
and return promptly in the enclosed envelope. This proxy is solicited on be-
half of the Board of Directors.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card.
-------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark your votes as in this example. 2679
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3 AND 5.
THE BOARD RECOMMENDS A VOTE "AGAINST" ITEM 4.
1. Election of Directors
Nominees: James A. Kilts, Miles L. Marsh, and Paul G. Stern
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
-----------------------------------------------------------------------------
2. To approve the amended Whirlpool Corporation Nonemployee Director Stock
Ownership Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To approve the amended Whirlpool Corporation Performance Excellence Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Shareholder proposal urging the Board of Directors to promptly sell the
Company to the highest bidder.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please sign exactly as name(s) appear(s) on this proxy. Joint owners,
trustees, executors, etc. should indicate capacity in which they are signing.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
